SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd

1. [1]

   The defendant, who I will call the “Vendor”, listed its industrial property at Wetherill Park for public auction on 19 August 2015.

2. [2]

   The plaintiff, who I will call the “Purchaser”, sent its agent, Mr Jody (referred to in the evidence as “Joe”) Parker, to the auction to bid on its behalf.

3. [3]

   Ultimately, Mr Parker bid $3.325 million to purchase the property. The auctioneer, Mr Jesse Davidson (who I will call the “Auctioneer”) accepted that bid.

4. [4]

   Contracts were executed and exchanged in the form of a draft that had been circulated prior to the auction.

5. [5]

   The box on the front page of the contract marked “GST: Taxable supply…yes in full” was crossed “X”.

6. [6]

   Clause 13.2 of the contract read:

7. [7]

   Clause 1 of the contract defined “normally” as “subject to any other provision of this contract”.

8. [8]

   There was no “other provision” in the contract modifying the effect of cl 13.2.

9. [9]

   Thus, the effect of the contract, as executed, was to provide for a purchase price of $3.325 million inclusive of GST.

10. [10]

    The Vendor alleges that, despite the form of the contract as executed, the “clear and common intention” of the parties was that the contract price be $3.325 million plus GST and seeks rectification of the contract accordingly.

11. [11]

    This case raises issues similar to those considered by Gzell J in Ashton v Monteleone [2010] NSWSC 258.

Test of rectification

1. [12]

   Rectification is available where there is “clear and convincing proof” (see the cases gathered at Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [451] per Campbell JA) that by reason of the common mistake of the parties, the document they have signed does not “embody the final intention of the parties” (per Wilson J in Pukallus v Cameron (1982) 180 CLR 447 at 452).

2. [13]

   In Pukallus v Cameron Wilson J also said at 452, citing Mason J’s familiar observations in Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350 amongst other cases:

Contested evidence as to what was said at the auction about GST

1. [14]

   I heard evidence from eight people about what happened at the auction.

2. [15]

   For the Vendor, these were the Auctioneer, the principal of the Vendor, Ms Chhay Hua Ung, and two agents engaged by the Vendor, Mr Elijah Shakir and Mr John Micallef.

3. [16]

   For the Purchaser, these were Mr Parker, and the two directors of the Purchaser, Messrs Mario Gallo and Mark Gallo (both of whom were on the telephone to Mr Parker during the critical parts of the auction).

4. [17]

   I also heard evidence from Mr Nick Messina, who had recently purchased a neighbouring property (from the Vendor, as it happens) and who attended the auction out of curiosity.

5. [18]

   Each witness gave evidence calmly and confidently. Each seemed to be confident of the accuracy of his or her recollection.

6. [19]

   Yet there is a sharp divide between the evidence given.

The evidence given on behalf of the Vendor

1. [20]

   For the Vendor, the critical evidence was given by the Auctioneer.

2. [21]

   The Auctioneer said he conducted many hundreds of auctions a year. Nonetheless, he said he had a clear recollection of this auction. He said this auction was the only one he conducted on 19 August 2015 and that he recalled it because it was “an onsite commercial auction” and that “they’re sort of one offs”.

3. [22]

   In his affidavit, the Auctioneer said that before the auction he saw a letter signed by Ms Ung stating that the reserve price of the property was “$3,500,000 + GST”. That letter is dated 18 August 2015. I will call this letter the “Reserve Price Letter”.

4. [23]

   The Auctioneer also said that it was his usual practice to look at the front page of the contract and that if, as here, the GST taxable supply box had been marked “yes” and if, as here, the property was vacant, he would announce at the auction:

5. [24]

   Although this was not explored in cross-examination, it seems obvious that the Auctioneer inferred from the form of the Reserve Price Letter, the fact that the property was vacant, and the form of the front page of the draft contract that the sale price would be exclusive of GST.

6. [25]

   Thus, in his affidavit, the Auctioneer said that, before the auction commenced, he made an announcement in the terms set forth at [23] above.

7. [26]

   Each of Ms Ung, Mr Shakir and Mr Micallef gave evidence that the Auctioneer said words to this effect. The detail of their evidence differs a little. However, in substance, each agrees that the Auctioneer announced that the purchase price, constituted by acceptance of the highest bid, would be exclusive of GST.

8. [27]

   So far as the contract itself is concerned, the Vendor admits, indeed asserts in its cross-claim that “no one from the [Vendor] read the Contract prior to the auction on 19 August 2015, and no one from the [Vendor] noticed that the Contract did not contain any special condition overriding clause 13.2 of the standard terms of the Contract”.

9. [28]

   Ms Ung said in cross-examination that, nonetheless, she understood from what her solicitor had told her that the effect of the contract was that the price was exclusive of GST.

10. [29]

    So much is also obvious from the terms of the Reserve Price Letter that she signed the day before the auction.

11. [30]

    After the auction, Mr Shakir prepared a “Sales Advice Notice” in which the “Purchase Price” was described as “$3,325,000 (excluding GST)”. That note is dated 19 August 2015 (the date of the auction). However, Mr Shakir did not send the note to the Vendor’s solicitors until 25 August 2015. By that date, the controversy between the parties as to whether the sale price was inclusive or exclusive of GST had arisen. Its weight must be assessed in light of that fact.

12. [31]

    More significantly, on 25 August 2015, six days after the auction, the Auctioneer sent an email to Mr Shakir, and to the Vendor’s solicitor, in the following terms:

13. [32]

    That email was admitted to evidence without objection.

14. [33]

    Mr George, who appeared with Mr Barrett for the Purchaser, did not ask the Auctioneer any questions about this email during cross-examination.

15. [34]

    At what appeared to be the conclusion of Mr George’s cross-examination, I asked the Auctioneer what had prompted him to write the email.

16. [35]

    The Auctioneer said he had received a call from Mr Shakir and that:

17. [36]

    The Auctioneer said that, in his email, he was describing what he actually recalled doing at the auction.

18. [37]

    Thereafter Mr George asked some further questions of the Auctioneer but did not challenge that evidence. I see no reason why I should not accept it. The email was sent only days after the auction. It was written after an open enquiry from Mr Shakir as to the Auctioneer’s recollection of events.

The evidence given on behalf of the Purchaser

1. [38]

   By 17 August 2015, Messrs Gallo were considering the purchase of the property.

2. [39]

   They engaged their solicitor, Mr Anthony Brischetto to review the draft contract.

3. [40]

   On 17 August 2015 Mr Brischetto sent to Messrs Gallo an email saying:

4. [41]

   The Purchaser was incorporated on 18 August 2015 for the purpose of, possibly, purchasing the property at the auction on 19 August 2015.

5. [42]

   Messrs Gallo became directors of the Purchaser on 19 August 2015.

6. [43]

   Messrs Gallo asked Mr Parker, who is a real estate agent with whom Messrs Gallo had previously had commercial dealings, to attend the auction on their behalf as they did not wish to reveal their identity at the auction. Mr Parker received no fee for this service. He said he did it as a favour for Messrs Gallo (perhaps to secure future work from them).

7. [44]

   On the morning on 19 August 2015, Mr Parker met with Mr Mario Gallo and they had the following conversation:

8. [45]

   A short time later Mr Mario Gallo met with Mr Mark Gallo and Mr Parker “to review” Mr Brischetto’s advice. The following conversation took place:

9. [46]

   Mr Mark Gallo said at the same meeting Mr Mario Gallo said to Mr Parker “we’ll go to $3.3 million with GST”.

10. [47]

    Mr George submitted that these conversations pointed to the following conclusions.

11. [48]

    First, that Messrs Gallo, as the directors of the Purchaser, were sensitive about the price they were prepared to pay for the property.

12. [49]

    Second, that at the auction, it is likely that Mr Parker was alert to the question of whether the bids at the auction, and the sale price if he were to be the successful bidder, were to be taken as inclusive or exclusive of GST.

13. [50]

    So much may be accepted.

14. [51]

    Nonetheless, despite his instructions, Mr Parker did not, at the auction, in terms, make any enquiry about the “GST treatment of the contract”.

15. [52]

    Instead, he said he waited until the Auctioneer started “going through the contract” and then arranged to have Messrs Gallo at the other end of the telephone.

16. [53]

    In his affidavit he described what he said happened as follows:

17. [54]

    In cross-examination, Mr Parker said that in light of what he said he heard the Auctioneer say about GST, he “didn’t need to” check whether GST was included in the sale price. He said that this was because he understood that what he said the Auctioneer said was consistent with Mr Brischetto’s advice as to the effect of the contract.

18. [55]

    Mr Parker denied that the Auctioneer said anything to the effect that the bids were “exclusive of GST” or that GST would be “in addition” to the final bid amount.

19. [56]

    Mr Parker then participated in the bidding. Ultimately, the property was knocked down to him (and thus the Purchaser) in response to a final bid of $3.325 million.

20. [57]

    Mr Mario Gallo gave a similar account of what Mr Parker told him the Auctioneer had said about GST and his instructions to Mr Parker to “go for it”. Mr Mario Gallo said that, in any event, he could, over the telephone, hear what the Auctioneer was saying.

21. [58]

    Mr Mark Gallo’s account of the matter differed a little. In cross-examination he said he could not hear what the Auctioneer said but, according to his affidavit, Mr Parker had said that the Auctioneer said:

22. [59]

    Mr Mark Gallo was the only witness who claimed to have heard anyone suggest that the Auctioneer had used the expression “GST inclusive”.

23. [60]

    Mr Messina swore an affidavit in which he made the positive assertion that the Auctioneer “made no statements to the effect that GST would be payable in addition to the purchase price or that any bids made by bidders excluded GST” and that the Auctioneer “did not say” the words that the Auctioneer swore he did say. However, in cross-examination, Mr Messina said no more than that he “did not hear” anything to this effect. It was obvious to me that, in his affidavit, he had been over-proofed. His evidence was of no assistance in determining the issue before me.

Did Mr Shakir show Mr Parker the Reserve Price Letter?

1. [61]

   At one stage in the auction, bidding stalled.

2. [62]

   In his affidavit, Mr Shakir said:

3. [63]

   According to Mr Shakir, the Reserve Price Letter still showed the reserve as “$3,500,000 + GST” (he later changed the figure to “$3,325,000” and arranged for Ms Ung to initial the changes). He said he showed the letter to Mr Parker to show what the reserve originally was.

4. [64]

   Ms Ung and Mr Micallef gave evidence that they saw Mr Shakir show Mr Parker the Reserve Price Letter.

5. [65]

   Mr Parker denied that Mr Shakir showed him the letter. In cross-examination he said, emphatically “I have never seen this letter, except in these proceedings”.

6. [66]

   However, this evidence cannot be correct.

7. [67]

   As I have set out above, Mr Shakir said that when he showed Mr Parker the letter, Mr Parker was on the telephone and that he said to the person to whom he was speaking on the telephone “the agent has shown me the reserve”.

8. [68]

   The person to whom Mr Parker was speaking was Mr Mario Gallo.

9. [69]

   In cross-examination Mr Gallo agreed, without hesitation, that shortly after the bidding had stalled, Mr Parker said to him “the agent has shown me the reserve”.

10. [70]

    That evidence satisfies me that, contrary to Mr Parker’s evidence, he did see the Reserve Price Letter at the auction.

11. [71]

    He could not have failed to see that it showed the reserve to be “+ GST”.

How to resolve the conflicting evidence?

1. [72]

   There is thus a striking difference between the recollections of the witnesses called by the parties.

2. [73]

   Their evidence cannot be reconciled.

3. [74]

   The auction took place on site, in a relatively small area. Ms Ung gave unchallenged evidence that she was standing “about 7-10 meters away from the auctioneer” and that “the bidders were also about 7-10 meters from the auctioneer”.

4. [75]

   Neither Mr Parker, nor Mr Mario Gallo suggested they had any difficulty hearing exactly what the Auctioneer said. Indeed, they were both adamant that they clearly heard what they contend he said.

5. [76]

   If the Auctioneer did say that bids were to be exclusive of GST, and that GST would be added to the “knockdown price” at the auction, Mr Parker and Mr Gallo must have heard it.

6. [77]

   The evidence I find to be decisive on this question is the Auctioneer’s email of 25 August 2015.

7. [78]

   It constitutes an almost contemporaneous note by the Auctioneer of what he said at the auction. As I have said, he prepared it in response to the open question asked of him by Mr Shakir to which I have referred.

8. [79]

   Although Mr George submitted that I should find “it’s Mr Davidson trying to reconstruct things essentially to save his own skin”, Mr George did not put that proposition to the Auctioneer in cross-examination. Indeed, as I have said, Mr George did not ask the Auctioneer any questions about the email.

9. [80]

   I accept the Auctioneer’s evidence that the email reflects his actual recollection of what occurred at the auction and, in particular, his actual recollection that at the auction “it was clearly stated that GST was payable above and beyond the sale price”.

10. [81]

    I also accept the Auctioneers evidence as to what he said at the auction concerning GST. That evidence was corroborated by his email and by the evidence of Ms Ung, and Messrs Shakir and Micallef and (perhaps a little less decisively) by Mr Shakir’s Sales Advice Notice.

11. [82]

    I find that Mr Parker and Mr Mario Gallo must have heard the Auctioneer say these words. I do not accept their evidence that they only heard the Auctioneer say “the sale is a taxable supply, with GST in full. Otherwise, you rely on the contract of sale”.

12. [83]

    I certainly do not accept Mr Mark Gallo’s evidence that Mr Parker told him that the Auctioneer had said that “it’s GST inclusive”. Not even Mr Parker asserts the Auctioneer said those words.

13. [84]

    Further, as I have found, by the time he made his final bid, Mr Parker had seen the Reserve Price Letter. From that he must have seen that the Vendor’s intention was that the sale price be “+ GST” and that his bids were being received by the Auctioneer on that basis.

14. [85]

    I find that Mr Parker, and Messrs Gallo knew that Mr Parker’s bids were being taken by the Auctioneer as being exclusive of GST and that Mr Parker was well aware that his final bid of $3.325 million was accepted by the Auctioneer on the basis that it was exclusive of GST.

15. [86]

    It follows that the common intention of the parties was that the sale price would be $3.325 million plus GST.

16. [87]

    The contract should be rectified accordingly.

17. [88]

    I will hear submissions as to interest and costs.