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FINEGLOW PTY LTD v ANASTASOPOULOS & ORS

Members:
Palmer J

Tribunal:
New South Wales Supreme Court

MEDIA NEUTRAL CITATION: [2002] NSWSC 1181

Decision date: 11 December 2002

Palmer J

By a Deed of Option dated 5 October 2000 the Defendants granted to the Plaintiff an option to purchase five properties in Audley Street, Petersham (``the Properties'') for a price of $1,470,000. In 2001 the Plaintiff purported to exercise the option but the Defendants disputed that the exercise was valid. The Plaintiff commenced proceedings No. 3360 of 2001 in the Equity Division (``the Prior Proceedings'') against the Defendants seeking specific performance of the Option Deed and of the Contract for Sale said to have arisen therefrom. Other parties were joined as Defendants and relief was sought against them arising from alleged misrepresentations.

2. The Prior Proceedings were settled on 10 July 2002, the terms being recorded in a handwritten document signed by the parties (``the Terms'') and later embodied in Short Minutes of Order. In brief outline, the Terms required payment by the Plaintiff of a specified sum to all Defendants in the Prior Proceedings by 18 September 2002 and provided that upon such payment the Defendants in these proceedings would convey the Properties to the Plaintiff in accordance with the Contract for Sale which had been appended to the Option Deed, mutatis mutandis.

3. On 18 September 2002 the Plaintiff tendered payment to the Defendants' solicitor of the sum specified but the Defendants refused to convey the Properties for a variety of reasons to be elaborated below.

4. The Plaintiff then commenced these proceedings, seeking specific performance of the Terms. The Defendants' Defence may broadly summarised thus:

  • - the contract sued upon is not enforceable at law or in equity because it is not stamped sufficiently or at all;
  • - the Plaintiff is not entitled to specific performance because it does not offer to perform its obligations to pay what, upon the true construction of the Terms, is payable as a pre-condition to entitlement to a conveyance;
  • - the Plaintiff is not ready, willing and able to perform the contract.

The stamp duty defence

5. The Deed of Option itself has not been stamped. Upon execution of the Terms, the form of contract which was appended to the Deed of Option was amended by the Plaintiff's solicitors so that the consideration for the sale was $1,400,000, as had been agreed and stipulated in the Terms, rather than $1,470,000, as had been originally provided in the Option Deed. That form of contract, so amended, was submitted to the Defendants' solicitors for signature by the Defendants, but the Defendants refused to sign it. The contract was therefore executed by the Plaintiff and was lodged for stamping at the Office of State Revenue (``OSR''). Stamp duty calculated on the consideration of $1,400,000 was paid in an amount of $62,494. A Transfer pursuant to the contract was also lodged for stamping and duty of $2 was assessed and paid on it in accordance with s. 18(2) of the Duties Act 1997 (NSW).

6. The stamped transfer was given to the Defendants' solicitor by the Plaintiff's solicitor on 18 September 2002 when the Plaintiff attempted to settle the conveyance. The Defendants' solicitor did not return the Transfer when the settlement broke down and has produced it during the trial in answer to a Notice to Produce. The stamped contract upon which $62,494 duty has been paid has been lost. Neither the Terms nor the Short Minutes of Order giving effect to the Terms has been stamped.

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7. At the commencement of the trial, Mr Smallbone of Counsel, who appears for the Defendants, objected to the tender of any document which evidenced the terms of the contract upon which the Plaintiff sues, including the Deed of Option, the Terms and the Short Minutes of Order. His objection was founded upon s. 304 Duties Act which, so far as is relevant, is in the following terms:

``(1) An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless:

  • (a) it is duly stamped, or
  • (b) it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner.

(2) A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1):

  • (a) if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or
  • (b) if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal.''

8. Mr Smallbone submits that:

  • - the Terms and the Contract for Sale incorporated therein by reference, singly or together, effected a ``dutiable transaction'' within the meaning of s. 8(1) and s. 304(1) Duties Act;
  • - the Terms has not been stamped at all and the Contract for Sale has not been ``duly stamped'' within the meaning of s. 304(1)(a) or stamped by, or in a manner approved by, the Chief Commissioner, within the meaning of s. 304(1)(b) Duties Act;
  • - the stamp duty of $62,494 which has been paid on the consideration expressed in the Contract for Sale does not result in an instrument effecting the transaction being ``duly stamped'' because, by s. 19 Duties Act, duty is charged on the ``dutiable value'' of the dutiable property, by s. 21(1) ``dutiable value'' is the greater of the consideration for the transaction and the unencumbered value of the dutiable property and in this case valuation evidence to be tendered by the Defendants would show that the unencumbered value of the Properties considerably exceeded the consideration for the sale;
  • - accordingly, by virtue of s. 304(1) there was no instrument effecting the contract sued upon which was admissible or of any effect in law or equity.

9. Mr Rares SC, who appears with Mr Faulkner of Counsel for the Plaintiff, submits that the contract sued upon has been ``duly stamped'' within the meaning of s. 304(1)(a) Duties Act. He relies upon s. 297 Duties Act which provides:

``For the purposes of this Act, the stamping of an instrument (excluding a return) by the Chief Commissioner is taken to be evidence of an assessment of the duty payable under this Act in respect of the instrument.''

10. Mr Rares also relies on s. 18(2) Duties Act, which provides:

``The duty chargeable in respect of a transfer of dutiable property made in conformity with an agreement for the sale or transfer of the dutiable property is $2 if the duty chargeable in respect of the agreement has been paid.''

Mr Rares submits that the stamping of the Transfer with $2 duty is evidence that the ``duty chargeable'' in respect of the contract for the sale of the Properties has been paid.

11. In addition, Mr Rares relies upon a statement on behalf of the Commissioner of State Revenue that all duty on the transaction has been paid in full. The circumstances giving rise to that statement are as follows.

12. On 8 November 2002 the Plaintiff's solicitor wrote to the Commissioner of State Revenue a letter which set out, accurately and in detail, the history of the transaction and of these proceedings, enclosed copies of the Option Deed, the Terms and the Short Minutes of Order and concluded thus:

``The Defendants have foreshadowed an argument based on the provisions of the

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Duties Act. We understand the argument to be that the Contract (or the Terms of Settlement) cannot be relied upon because the properties have increased in value from 5 December 2000 and thus stamp duty must be paid on that amount rather than the $1,400,000 agreed as the consideration.

... we are instructed that should any additional stamp duty be payable, our client will certainly pay same and has notified the Court that it is prepared to give an undertaking under the Act to this effect.

In the circumstances, we request your urgent determination as to whether any additional stamp duty is payable and, if so, the amount thereof. If stamp duty is payable, we respectfully request that you give consideration to waiving the duty payable.

Furthermore, for the avoidance of doubt as to the ability of the Terms of Settlement to be received into evidence, we request that same be stamped. Kindly advise us of the duty payable.''

13. The Plaintiff's solicitor, Mr Summerhayes, gave evidence, without objection, that on 18 November 2002 he had a telephone conversation with Mr Reid of the OSR in which he sought a reply to this letter. Mr Summerhayes again explained the transaction and the circumstances in which the assistance of the Commissioner was sought and answered Mr Reid's questions about the transaction. Mr Summerhayes again requested confirmation in writing of the Commissioner's position.

14. On 20 November 2002 the OSR provided to the Plaintiff's solicitors a letter in the following terms:

``To Whom it may concern

20th November 2002

Our Ref: App Id 110784

Dear Sir/Madam,

RE: Conveyance of Property 

   Parties: Fineglow Pty Ltd ACN 080 037 716 (Transferee)
            Olga Voukidis, Patricia Souleles & Georgina Anastasopoulos
            (Transferor)

I refer to the above matter and recent enquiries concerning same.

I confirm that $62,494.00 was paid on 10th September 2002 in regards to a conveyance of property between the above mentioned parties with regard to the properties known as 1/916845 , 1/917538 , C/900780 , A/900780 & 1/922047 .

I confirm that $62,494.00 duty was paid on a consideration of $1,400,000.00 and no further payment is required on this matter, as full duty has been paid.

Yours sincerely

[signature]

Jeff Hughes

Client Services Officer for the Chief Commissioner of State Revenue''

I admitted this letter into evidence as Exhibit P4 over Mr Smallbone's objection, for reasons to which I will come shortly.

15. Mr Rares submits that this evidence puts it beyond argument that the contract effecting the sale from the Defendants to the Plaintiff has been duly stamped and that no other instrument forming part of that contract is chargeable with duty under the Duties Act, so that s. 304(1) is no bar to their reception into evidence or to their effectiveness in law or equity for the purposes of these proceedings.

16. In my opinion, Mr Rares' submission is correct. The steps in reaching this conclusion may be summarised thus:

  • - by s. 8(1) Duties Act duty is charged on a ``dutiable transaction'', not upon ``instruments'', as was the case under s. 4 and Part 3 of the Stamp Duties Act 1920 (NSW), as amended;
  • - in the present case, the ``dutiable transaction'' is the sale of the Properties by the Defendants to the Plaintiff for the price of $1.4M and otherwise upon the terms set out in the Contract for Sale and in the Terms;
  • - the Commissioner has stamped the Contract for Sale with duty of $62,494;
  • - by his letter of 20 November 2002 (Exhibit P4), the Commissioner has issued an assessment under the Taxation Administration Act 1996 (NSW) (``the Administration Act'') that no duty is payable in respect of the Terms;
  • - the Defendants are not entitled in these proceedings to go behind the assessments

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    which the Commissioner has made in respect of the Contract for Sale and the Terms;
  • - the Terms is not an instrument chargeable with duty under the Duties Act within the meaning of those words in s. 304(1);
  • - the Contract for Sale has been ``duly stamped'' within the meaning of s. 304(1);
  • - consequently, s. 304(1) does not affect the admissibility and use in these proceedings of the Terms and the Contract for Sale.

My reasons for these conclusions are as follows.

17. The administration and enforcement of the Duties Act is governed by the Administration Act: Duties Act s. 5, Administration Act s. 4, s. 7(1). Section 8 of the Administration Act provides:

``(1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer.

(2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability.''

18. Section 14 of the Administration Act provides, in so far as is relevant:

``(1) The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment).

...

(5) The notice is to be in a form approved by the Chief Commissioner.''

19. If the Chief Commissioner makes a ``determination'' under s. 8(2) that no duty is payable (that ``determination'' being ``an assessment'' under s. 8(1)) and notifies the taxpayer of that ``assessment'', then that notification is a ``notice of assessment'' under s. 14(1). The ``notice of assessment'' will show ``the amount of the assessment'' as nil. Subsection (5) does not prescribe any particular form for an assessment, as long as the form is approved by the Chief Commissioner. In the case of ``an assessment'' made under s. 8(2), being a determination that no duty is payable, there is no reason why the Commissioner cannot approve the ``notice of assessment'' being in the form of a letter addressed ``To Whom It May Concern'', if the Commissioner thinks that that is appropriate in the circumstances of a particular assessment.

20. Section 16 of the Administration Act provides:

``The validity of an assessment is not affected because a provision of a taxation law has not been complied with.''

Clearly, that section applies just as much to an assessment under s. 8(2) as to an assessment under s. 8(1).

21. Section 67 of the Administration Act provides:

``The Chief Commissioner may delegate to any person any function of the Chief Commissioner under a taxation law, other than this power of delegation.''

The Chief Commissioner may, therefore, delegate to any person the making of an assessment under s. 8(2), the issuing of a notice of assessment under s. 14(1) and the approval under s. 14(5) of the form in which the notice of assessment is to be communicated.

22. Section 118 of the Administration Act provides:

``A document or a copy of a document bearing the written, printed or stamped signature or name of the Chief Commissioner or a person described in the document as a delegate of the Chief Commissioner is, in the absence of evidence to the contrary, taken to have been lawfully issued by the Chief Commissioner.''

23. Exhibit P4 bears the name of, and is signed by, Mr Hughes. That it was signed by Mr Hughes, who is an officer of the OSR, is proved by the evidence of Ms Davies, who actually obtained the letter from Mr Hughes. The document does not contain, under the signature of Mr Hughes, the words ``as delegate of the Chief Commissioner'' but the words ``Client Services Officer for the Chief Commissioner of State Revenue'' have exactly the same effect.

24. I do not think that in order to qualify as a document issued by the Chief Commissioner for the purposes of s. 118 a document must recite the very words ``as delegate of the Chief Commissioner'' as if they were a formula the slightest departure from which deprives the document of efficacy. Section 67 does not require any act of delegation by the Commissioner of any function under the Administration Act to be attended with formality such as, for example, an appointment under seal or by a resolution or even by any

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writing. The Commissioner's delegate may therefore be appointed informally and ad hoc. It would be giving an unduly narrow and restrictive construction to s. 118 to read it as requiring rigid adherence to the word ``delegate'' in the relevant document. In my opinion, all that is necessary is that the document represent, in effect, that it has been signed by a person who has been delegated by the Commissioner with authority to sign it. In my opinion, Exhibit P4 fulfils this requirement.

25. There is no evidence that Exhibit P4 was not ``lawfully issued'' by the Commissioner within the meaning of s. 118. The Court must, therefore, take it to have been lawfully issued.

26. Section 119 provides:

``Production of a notice of assessment, or of a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment, is:

  • (a) conclusive evidence of the due making of the assessment, and
  • (b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only.''

27. Exhibit P4 was issued after the Commissioner had been provided with the Terms, inter alia, and had been asked to give a determination on whether any further duty was payable in respect of the transaction. Exhibit P4 gives such determination and is, therefore, a ``notice of assessment'' that there is ``not a particular tax liability'' in respect of the Terms or otherwise in respect of the transaction. By reason of s. 119 coupled with s. 16, the Defendants cannot, in these proceedings, challenge the correctness of that assessment.

28. It might be said that, because the purpose of the Duties Act and the Administration Act is the raising of revenue, s. 16 and s. 119 should be construed as having conclusive effect only as between the taxpayer and the Commissioner so that a third party, such as the Defendants in these proceedings, is at liberty to challenge an assessment of duty in order to invoke the provisions of s. 304 of the Duties Act. I cannot think that such a proposition could be correct.

29. In my view, s. 119 makes a notice of assessment conclusive evidence of the matters stated for all purposes between all persons; the only exception is as between the taxpayer and the Commissioner for the purpose of an objection or a review proceeding. This is so because the purpose of the Duties Act and the Administration Act is manifestly to impose, and to collect as effectively as possible, a tax for the benefit of the State. Those Acts have nothing to do with the adjustment of private rights amongst citizens of the State. Section 304 of the Duties Act and its various predecessors affect the conduct of litigation between parties, not for the benefit of any of the parties, but in order to secure the effective collection of revenue by the State in accordance with the taxing legislation. Once the requirements of the taxing legislation have been fulfilled to the satisfaction of the revenue authority the Court has no further concern to scrutinise the transaction in the interests of a party to litigation who wishes to deprive an instrument of legal effect.

30. This has been the attitude of the Courts from the earliest times. The distant progenitors of s. 304 of the Duties Act are s. 11 of 5 Will. & M. c. 21 and s. 59 of 9 & 10 Will. 3 c. 25. As to those provisions, Lord Eldon said in
Huddleston v Briscoe (1805) 11 Ves 583, at 595 [ 32 ER 1215, at 1219]:

``If the agreement is one, upon which no action is to be brought unless it is stamped, it must be stamped before action brought: but if it is an agreement, which you may get stamped, paying the penalty, there pending the action it may be stamped; and a cause has been allowed to stand over here upon that distinction. The consequence is, that, if the Court is not to act, where there has not been an observance of the revenue laws, neither is it to turn the party round, if, before the suit is over, those laws are complied with.''

See also the authorities cited in
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, at 383ff.

31. For these reasons, I am of the view that by reason of s. 16 and s. 119 of the Administration Act a notice of assessment cannot be challenged by any person other than in proceedings for review between the taxpayer and the Commissioner. If it were otherwise, there could be no confidence in the enforceability of any dutiable transaction as between the parties thereto. Any person wishing to resist performance of a contractual obligation would be at liberty to contend that, notwithstanding the Commissioner's

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assessment, the correct amount of duty had not been paid so that no instrument effecting the transaction might be of avail or might be admissible under s. 304 Duties Act. In the case of a contract for the sale of land, any action upon the contract would probably require, as stage one, a valuation case, resulting in a judgment as to the dutiable value of the transaction which would not be binding on the Commissioner. That was exactly what Mr Smallbone submitted was required in the present case.

32. Further, in proceedings in which the Commissioner was not a party an unstamped contract might be excluded from evidence and specific performance of the contract refused because the Court held that the instrument was dutiable; the Commissioner might later decide, on a different view of the facts, that the instrument was not, in fact, dutiable, so that the instrument would have been wrongly excluded from evidence and denied legal effect. The converse is equally possible. That such a situation could arise would bring the law into discredit.

33. For these reasons, I did not accept Mr Smallbone's submission that it was open to the Defendants to contest in these proceedings the issue of whether the Commissioner had correctly assessed the duty paid in respect of the sale transaction between the parties and, accordingly, I rejected the proposed evidence from the Defendants' valuer as to the value of the Properties.

34. It will also be apparent from the above reasons that I did not accede to Mr Smallbone's objection that Exhibit P4 was inadmissible as hearsay and that I admitted the document as a notice of assessment for the purposes of s. 119 of the Administration Act.

35. In the result, the Defendants fail in their defence that the Contract for Sale and the Terms are inadmissible and that the contract upon which the Plaintiff sues is unenforceable by virtue of s. 304(1) of the Duties Act.

36. I should note in conclusion on this aspect of the case that at the commencement of the trial the Plaintiff proffered an undertaking in terms of s. 304(2) of the Duties Act and Part 36 r 10B of the Supreme Court Rules. Mr Smallbone contends that, even if the undertaking were accepted, on the true construction of s. 304(2), the result could only be that the Contract for Sale and the Terms would be admitted in evidence but would still not be ``available for use in law or equity for any purpose'', as provided in subsection (1).

37. The decision of Young CJ in Eq in Reliance Financial Services Pty Ltd v Baddock ([2002] NSWSC 857 at para 46) would support Mr Smallbone's submission. On the other hand, Campbell J in Weston & Cussen as liquidators of Karl Suleman Enterprizes Pty Ltd v Metro Apartments Pty Ltd & Anor ([2002] NSWSC 682 at para 20) was inclined to the opposite view. Both of those decisions were decisions on interlocutory applications and their Honours' differing opinions on the point were not essential to the ultimate result. In view of the conclusion to which I have come that s. 304(1) of the Duties Act is no bar to the reception and enforceability of the relevant documents, I do not think that this is the appropriate case in which to resolve this difference of opinion.

The GST issue

38. The Terms of Settlement as signed by the parties appear more legibly in the typed Short Minutes of Order and, for the sake of convenience, I will refer to the Terms using the paragraph numbers given in the Short Minutes.

39. The Terms provide as follows:

``6. Plaintiff is to pay First to Seventh Defendants the sum of $1,800,000.00 on or before 18 September 2002.

7. Upon payment of the monies in paragraph 6, the first to third defendants shall convey the properties 1, 3, 5, 9 and 11 Audley Street Petersham to the Plaintiff in accordance with the existing contract mutatis mutandis.

8. The parties acknowledge that the consideration for the conveyance is $1,400,000.00.

9. If the Plaintiff does not pay the sum referred to in 6 by 18 September 2002:

  • (a) The contract is deemed to be terminated forthwith, and all monies paid to the first to seventh Defendants forfeited.
  • (b) The Plaintiff is precluded from making any quantum meruit or any other claim against the first to seventh Defendants in respect of improvements or otherwise.

10. Any GST applicable is the responsibility of the Plaintiff.

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11. Plaintiff is entitled to immediate exclusive possession.

12. Plaintiff to be responsible for any further proper agents fees.

13. Mutual Releases (which incorporates existing Costs Orders).

14. Save as to the eighth Defendant:

  • (a) terms are not to be disclosed.
  • (b) terms are to be kept confidential except as required by law.''

Incorporated in the Short Minutes of Order by consent was the following paragraph, which did not appear in the handwritten terms signed by the parties:

``It is agreed that the amount referred to in paragraph 6 is intended to incorporate any interest which would otherwise be payable under the contract.''

40. The first issue between the parties is whether paragraph 10 of the Terms, construed in the light of the document as a whole, requires the Plaintiff to pay any GST arising on the sale of the Properties as a pre-condition of its entitlement to a conveyance. In this regard, it should be noted that the parties were in dispute on 18 September 2002 - and they remain in dispute - as to whether GST is payable in respect of the sale of the Properties and, if so, in what amount.

41. The Defendants say that GST is payable on the whole of the consideration of $1.8M stated in the Terms. On the other hand, the Plaintiff points to a statement on the front page of the Contract for Sale in the following words:

``NOTE: Subject to Clause 13 [which was deleted] the price INCLUDES goods and services tax (if any) payable by the vendor.''

The Plaintiff relies also on Special Condition 43.1 of the Contract for Sale, which says:

``To the best of the knowledge, information and belief of the Vendors the property is not subject to Goods and Services Tax.''

The Plaintiff says that the GST for which it is liable under Clause 10 of the Terms is, therefore, that which may be payable, not in respect of the sale of the Properties, but in respect of the additional consideration of $400,000 to be paid to all Defendants in the Prior Proceedings.

42. I am unable to accept this submission. The Note on the front page of the Contract for Sale stating that the price for the Properties is inclusive of GST appeared in the form of contract annexed to the Option Deed dated 5 October 2000. The settlement reached by the parties on 10 July 2002 and embodied in the Terms varied that form of contract in a number of respects, as was expressly recognised in paragraph 7 of the Terms by the reference to performance of the contract ``mutatis mutandis''. One of the variations was as to price; another, in my opinion, was as to the incidence of liability for GST. Paragraph 10 of the Terms does not distinguish between GST payable in respect of the sale of the Properties for a consideration of $1.4M and GST payable in respect of that part of the transaction which supported the additional consideration of $400,000. The plain, unqualified words of paragraph 10 of the Terms must be given their ordinary meaning, namely, that ``any'' i.e. ``all'' GST payable in respect of the transaction effected by the Terms, including the sale of the Properties, is for the account of the Plaintiff.

43. I should record that the Defendants sought to tender evidence to prove what is the amount of GST payable in respect of the transaction. I rejected the tender of this evidence because I regard the amount of GST payable in respect of the transaction, if any, as a false issue for the purpose of these proceedings. Clause 10 simply provides that `` any GST applicable'' - i.e. payable in respect of the transaction effected by the Terms - is payable by the Plaintiff. What the amount of that GST might be is ultimately a question for the Commissioner of Taxation. The Court is not required to decide that question for the purpose of construing and determining the obligations of the parties under the Terms, nor should the Court attempt to decide it, for its decision would not bind the Commissioner of Taxation and might cause great difficulty and injustice for the parties if the Commissioner were to come to a different conclusion. All that the Court has to decide for the purpose of these proceedings is when the Plaintiff is obliged to pay any GST which may ultimately be determined by the Commissioner to be payable.

44. Mr Smallbone submits that, as a matter of construction of the Terms, the Plaintiff must pay the relevant amount of GST to the Defendants at the same time as it pays the consideration of $1.8M. This must be so, he says, for the following reasons:

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``i. The Defendants if accounting on an accrual basis are obliged to remit the whole of the GST to the Commissioner of Taxation at the end of the next GST accounting period; and

ii. The defendants if accounting on a cash basis are obliged to remit GST on the amount collected at the end of the next GST accounting period;

iii. The express purpose of clause 10 is to ensure that the plaintiff and not the defendants bears the responsibility and burden of GST. The clause does not permit the plaintiff to require the defendants to bear this burden on an interim basis.

iv. Where a person agrees to be liable to pay an amount that liability, in the absence of any other factor affecting the construction of the agreement is normally immediate.

v. In the present case, however, the circumstance that the GST relates to a payment required to be made on a particular date and in connexion with settlement of a conveyance, together with the provision in clause 9 strongly points to a construction that the GST is payable on 18 September, 2002 or, in the event that settlement were postponed, then upon settlement.

vi. Another factor strongly pointing to the same construction is that it is unlikely that the paries intended that the plaintiff could take title without paying the GST, mortgage the properties and leave the defendants with no recourse but a vendor's lien or unsecured claim in respect of an amount payable at an indeterminate time.

vii. No contrary or other provision is made in the contract fixing the time for payment....''

45. I am unable to accept the Defendants' submissions. In my opinion, GST on the transaction effected by the Terms, if any, is payable by the Plaintiff to the Defendants at the time when it is properly payable by the Defendants to the Commissioner of Taxation. My reasons for this conclusion are as follows.

46. First, paragraph 10 of the Terms does not expressly say that GST is payable and that the Plaintiff must pay it on completion of the conveyance. As far as the GST implications were concerned, the sale of the Properties in this case was evidently not as straightforward as a sale of commonplace goods or services upon which GST is readily calculable. Special Condition 43.1 of the Contract for Sale annexed to the Option Deed contained a statement that the Defendants believed that no GST was payable. However, it is apparent that by the time that the parties concluded the settlement of their dispute on 10 July 2002 the GST position did not seem so clear. Paragraph 10 of the Terms, in referring to ``any GST applicable'', indicates that there must have been uncertainty as to whether GST was payable and, if it was, as to the amount payable.

47. That uncertainty could have been removed by 18 September 2002 - which was the time for settlement of the conveyance provided by paragraphs 6 and 7 of the Terms - if the Defendants had obtained by then a ruling from the Commissioner of Taxation as to GST liability. But the Defendants did not obtain such a ruling and there was no express obligation in the Terms for them to do so. Paragraph 10 simply leaves it at large as to when, by whom and how the existing uncertainty as to GST liability would be removed; all that the paragraph provides is that whatever the GST liability is, that liability is for the account of the Plaintiff.

48. Second, it is not possible, in my opinion, to imply a term in the Terms that the Plaintiff will pay GST upon, and as a precondition of, settlement of the conveyance of the Properties. Such a term is not necessary to give business efficacy to the Terms, nor is it so obvious that it goes without saying. GST is not payable to the Commissioner immediately upon settlement of the sale of the Properties; any GST payable on settlement of the Properties is payable 21 days after the end of the quarter in which the consideration for the sale is received. While the Defendants may wish to have the security of a payment by the Plaintiff to them of GST in advance of the time when they themselves have to make that payment to the Commissioner, it could not be said that paragraph 10 of the Terms is unworkable if it simply requires the Plaintiff to pay the GST at the time when the GST falls due for payment to the Commissioner. If the Plaintiff fails to perform its obligation under paragraph 10 after the conveyance has been completed, the Defendants will have to sue to enforce that obligation. No one suggests that the Plaintiff's promise in paragraph 10 will not enure for the

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benefit of the Defendants after completion. Whether the Defendants would have been wiser to secure the performance of the Plaintiff's promise in paragraph 10 by making payment of the GST a pre-condition to the Plaintiff's entitlement to completion of the conveyance is now beside the point.

49. For these reasons I conclude that on the true construction of the Terms any GST which may be payable in respect of the conveyance of the Properties or in respect of the whole of the transaction effected by the Terms is not payable by the Plaintiff upon settlement of the conveyance and as a pre-condition of the Plaintiff's entitlement to settlement.

The adjustments issue

50. The Defendants contend that the purchase price payable upon settlement of the conveyance of the Properties is subject to adjustment in their favour pursuant to clauses 14.1 and 14.2 of the Contract for Sale. Those clauses provide that after the ``adjustment date'' the purchaser is liable for rates, charges, taxes and outgoings in respect of the Properties and that the parties must make any necessary adjustment to the purchase price on completion of the contract. For present purposes, ``adjustment date'' is defined in clause 1 as ``the date of giving possession''.

51. The Defendants say that possession of the Properties was given to the Plaintiff on 20 September 2000 so that under clauses 14.1 and 14.2 of the Contract for Sale the Plaintiff was obliged to pay rates, taxes and charges calculated from that date until the date of completion, namely, 18 September 2002.

52. The Plaintiff says that clauses 14.1 and 14.2 have been superseded by the express provisions of the Terms. Mr Rares points to the words of paragraph 7, namely, ``upon payment of the moneys in paragraph 6 [$1.8M] the first to third defendants shall convey'', etc. He points as well to paragraph 13, which requires mutual releases between the parties, and to paragraph 15 which notes the parties' agreement that all interest payable under the Contract for Sale was incorporated in the sum of $1.8M.

53. Mr Rares says that the stipulation for a sum of $1.8M precisely, being a sum $400,000 in excess of the purchase price for the Properties, coupled with the provision of mutual releases and the absorption of interest under the contract in the payment of $1.8M, indicates that the sum of $400,000 was to be a final accord and satisfaction between the parties in respect of all claims and disputes between them arising out of the Contract for Sale and the Option Deed.

54. Mr Smallbone, on the other hand, submits that paragraph 6 and the other provisions of the Terms must be read in the light of paragraph 7, which requires the Defendants to convey ``in accordance with the existing contract mutatis mutandis''. He says that the Terms make no amendment to clauses 14.1 and 14.2 of the Contract for Sale so that the Defendants are obliged to convey only if the Plaintiff complies with its obligations under those clauses.

55. I am of the view that the Plaintiff's submission is correct, for the following reasons.

56. The Terms must be construed in the light of the circumstances in which they came into existence. The parties to the Terms had been in dispute as to the validity of the Plaintiff's exercise of the option and as to whether the Plaintiff had lawfully been in possession of the Properties. Litigation had ensued and the Terms reflected a compromise of that litigation reached during the course of the trial.

57. It is clear that the Terms were designed to bring to an end all disputes between the parties and to provide a clear and simple regime for the completion of the sale of the Properties to the Plaintiff. Paragraph 8 varied the purchase price; paragraph 10 provided for GST liability; paragraph 11 settled the dispute as to the Plaintiff's lawful possession of the Properties; paragraph 12 provided for liability for agents' fees; paragraph 15 dispensed with any need to calculate the interest which was payable under Special Condition 30.3 of the Contract from 1 May 2000 to the date of completion, regardless of whether completion occurred on 18 September 2002 or earlier. The provisions in paragraph 13 for mutual releases and the consent orders which were made whereby previous costs orders were vacated and each party was ordered to bear its own costs of the Prior Proceedings further indicate that the common intention of the parties was to ensure that one payment of $1.8M precisely put an end to all claims between them: the Defendants would have $1.8M clear of GST liability and clear of agents' fees, the Plaintiff would have title to the Properties on 18 September 2002 and each side of the dispute would walk away from

ATC 5168

the settlement on 18 September free of any further involvement with the other.

58. The express provisions of the Terms were thus intended to override the terms of the Contract for Sale which had been annexed to the Option Deed in so far as there was any inconsistency. This is recognised in the concluding words of paragraph 7 of the Terms. In my view, in the light of the common intention of the parties emerging from the provisions of the Terms as a whole and the circumstances in which they came into existence, the stipulation in paragraph 7 that the Defendants were to convey the Properties upon payment of $1.8M is inconsistent with the requirement that any further adjustments be made to that sum in accordance with clauses 14.1 and 14.2 of the Contract for Sale. Accordingly, pursuant to the direction in paragraph 7 that the Contract for Sale is to be amended as required, clauses 14.1 and 14.2 are to be regarded as deleted.

59. For these reasons I conclude that the Plaintiff was not obliged to tender to the Defendants on 18 September 2002 any sum in addition to $1.8M by way of adjustments under clauses 14.1 and 14.2 of the Contract for Sale.

Whether Plaintiff ready, willing and able to perform

60. The Defendants say that specific performance of the contract evidenced by the Terms should be refused as a matter of discretion because the Plaintiff is not financially able to complete the contract and to pay GST to a possible maximum of $180,000.

61. Mr Theodoridis, a director of the Plaintiff, has given evidence that the Plaintiff has arranged finance from Howard Mortgage Management Ltd in the sum of $2,180,500, of which $2,025,000 is available upon settlement and the balance upon completion of the redevelopment of the Properties. He says that the Plaintiff has now almost completed the redevelopment.

62. A letter from the financier dated 21 November 2002, admitted without objection, confirms that this finance has been arranged and is presently available, provided that the value of the Properties has not decreased. There is no suggestion in the evidence that the valuation of the Properties has decreased.

63. This evidence reveals that the finance available to the Plaintiff for settlement of the purchase of the Properties, after deduction for incidental costs and expenses, is some $174,000 in excess of the $1.8M which is payable under the Terms. This sum would be available to meet any liability which the Plaintiff might have to pay a maximum of $180,000 in GST under paragraph 10 of the Terms.

64. In addition, Mr Theodoridis has provided a bank statement for the Plaintiff showing that as at 15 November 2002 the Plaintiff had a credit balance of $76,584 which, Mr Theodoridis says, would be available to meet any GST liability. Further, Mr Theodoridis says that he owns properties in Newtown and Bankstown in which there is substantial equity. These properties, he says, could be utilised to provide any further funds necessary to pay the Plaintiff's GST liability under paragraph 10 of the Terms.

65. There was no serious challenge to this evidence and I accept it. I am amply satisfied that the Plaintiff has the financial resources available to complete the purchase of the Properties and to pay any GST liability which it may have under paragraph 10 of the Terms.

66. I find that the Plaintiff is ready, willing and able to complete the purchase and that there is no reason why the Court should, in the exercise of its discretion, refuse to make an order for specific performance.

Conclusion

67. The Plaintiff has established its claim to specific performance of the contract evidenced by the Terms and the Contract for Sale so that it is entitled to the orders sought in paragraphs 1 and 3 of the Summons.

68. For the avoidance of doubt as to the rights and entitlements of the parties upon completion of the contract, the Short Minutes of Order should provide for declarations of right as to the obligations of the Plaintiff to pay GST and as to the amount payable upon completion of the sale, in accordance with these reasons for judgment.

69. I will stand the proceedings over for a short time in order that the Plaintiff may bring in Short Minutes of Order. I will then hear argument as to costs.


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