TalkTax

The NSW Supreme Court has recently handed down two decisions which consider when the contractual remedy of rectification for mistake is available in relation to GST clauses.

Both cases involved a sale of commercial/retail premises by auction where a dispute arose due to inconsistency between the written terms of the sale contract and the oral evidence regarding the intention of the parties as to whether the agreed price was GST inclusive or exclusive.  In both cases, the sale contracts contained no special conditions regarding GST so the standard GST provisions operated by default to make the price GST inclusive.

In the first case Tam v Mannall [2010] NSWSC 250, the Court disallowed rectification because the Vendor could not establish a ‘common intention’ that GST would be payable in addition to the contract price.  In the second case, Ashton v Monteleone [2010] NSWSC 258, the Court allowed rectification and increased the sale consideration by the amount of GST because it was persuaded that there was a ‘high level of corroboration’ in the evidence that the sale was intended to be plus GST .  This oral evidence justified overriding the terms of the written contract.

These cases are a useful reminder of the sort of avoidable disputes that can arise if the parties fail to understand and/or clearly communicate the GST terms in the contract.