Does provision for a 10% deposit under a “plus GST” contract require the buyer to hand over 11%of the specified purchase price?
That proposition was put before Queensland’s Supreme Court in a contract termination dispute concerning the buy of a vacant industrial site in Loganholme signed up for in June 2015.
The standard REIQ commercial contract had the purchase price completed as “$750,000 + GST”.
It provided for an initial deposit of $10k with the “balance of 10% payable on acceptance of due diligence”.
The buyer’s payment of a further $65k after the DD date was rejected by seller International Palace Pty Ltd who argued that the total deposit that had to be paid – to get to 10% of the GST inclusive price – was $82.5k.
By its logic, the balance deposit required was therefore $72.5k, meaning the deposit was short and the buyer in substantial default.
Justice Martin Daubney rejected that contention, at least in circumstances where the contract included a GST tick box marked “No” so as to specify – by reference to the standard conditions – that “the purchase price does not include GST”.
“That part of the Items Schedule made it abundantly clear that the Purchase Price did not include GST”. Accordingly, 10% of the purchase price – the amount specified to be the deposit – was $75k.
In so ruling, he noted that the “+ GST” annotation to the description of the purchase price was confusing.
It was an “unnecessary and unfortunate adornment” that – although signifying GST would be payable in addition – was more properly (and already) dealt with via the standard conditions and tick box.
The seller’s crashing of the contract at 5pm on the DD date was nevertheless upheld because the buyer had not communicated either way as to its satisfaction with its investigations.
The relevant clause somewhat economically specified “this contract is subject to and conditional upon due diligence period to be satisfied on or before 27 July 2015.”
The buyer’s failure to notify acceptance, dissatisfaction or waiver allowed His Honour to conclude the “special condition must be regarded as having been unfulfilled …. and the contract then became voidable by either party” who was not otherwise in default.
The Seller obtained summary dismissal of the buyer’s specific performance suit but because the balance deposit was paid after its termination, it agreed to refund the whole of the deposit.