Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd

Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd - [2005] NSWCA 280 - NSWCA 2005 case summary — Zoe

[16]

The contracts 5 The four contracts in question concerned four lots in Barden Ridge, being lots 13, 14, 15 and 16. Each contract was in the standard form of contract for the sale of land, 2000 edition, with certain additional special conditions. Apart from differences that are irrelevant to the dispute between the parties, the special conditions in the four contracts were the same. 6 The price of each lot was $562,500 and the deposit payable was $25,000. 7 A note appeared on the first page of each contract in the following terms: "NOTE: Subject to clause 13, the price INCLUDES Goods and Services Tax (if any) payable by the vendor" 8 Clause 13 of each contract (being part of the standard printed form) included the following provisions: "Goods and Services Tax (GST) … 13.2 Normally , if a party must the price or any other amount to the other party under this contract, GST is not to be added to the price or amount. … 13.10 On completion the vendor must give the purchaser a tax invoice for any taxable supply by the vendor by or under this contract." (emphasis in original) 9 Clause 1 of each contract provided that, in the contract, the term "normally" means "subject to any other provision of this contract". 10 Under the heading "FURTHER PROVISIONS" in each contract appeared the words, "THESE FURTHER PROVISIONS ARE ESSENTIAL TERMS OF THIS CONTRACT". Amongst the further provisions in each contract was a clause which read: "STAMP DUTY and OTHER CHARGES … (a) In addition to the purchase price the purchaser must pay to the vendor on completion an amount equal to any Goods and Services Tax (GST), value added tax or other tax of a similar nature which is payable or may be payable by the vendor in connection with the sale of the property to the purchaser. …" 11 At trial the appellant first contended that, as a matter of construction of the contracts, the purchase price of the land was inclusive of GST. Campbell J expressed his opinion on this issue as follows: "I conclude that the contracts, on their proper construction, stated a price on the front page which was exclusive of GST, and the Further Provision [quoted in [9] above] required the purchaser to pay an additional amount, concerning each of the four contracts, equal to the GST payable by the vendor." 12 There is no appeal against his Honour's finding as to the proper construction of the contracts.

[21]

The parties' basic contentions 18 On appeal, it was common ground that, at the time the contracts were exchanged, the intention of Mr Abboud and the appellant was that the selling price of $2.25m for all of the land was inclusive of GST. That, too, was the intention of Ms Kayes. 19 The respondent's intention was the crucial issue. The appellant contended that the intention of Allen and John Sammut and that of Ms Pilgrim was to bind the respondent contractually to a sale of the land at a price of $2.25m inclusive of GST. The appellant asserted that the four contracts mistakenly recorded that the selling price was exclusive of GST. The respondent contended that there had been no mistake, at least on its part. It contended that the intention of Allen and John Sammut and that of Ms Pilgrim was to enter into a contract whereby the respondent sold the land for $2.25m exclusive of GST. The implications of GST 20 Aspects of the law relating to the Goods and Services Tax (GST) as it applied at the relevant time in terms of A New Tax System (Goods and Services Tax) Act 1999 (Cth) bore on the parties' intentions as to the price of the land. At the time negotiations took place, the relevant individuals thought about and discussed the GST that might be payable on the land sold, but there was uncertainty as to the way in which it applied. 21 The general rule under the Act was that if land was sold by a developer, resulting in a "taxable supply", the vendor was obliged to pay the GST on the sale (sections 11-5, 11-10, 11-15). The Act provided in s 9-70: "The amount of GST on a taxable supply is 10% of the value of the taxable supply." 22 The GST payable could be included in the purchase price or it could be exclusive of the purchase price. When the vendor was obliged to pay the GST, it could recover the amount so paid as part of the purchase price (if that was provided by the contract of sale). If the purchaser paid GST as part of the purchase price, the vendor was required, by the Act, to give a tax invoice to the purchaser in respect of the GST (s 29-70) and the purchaser was able to reclaim that amount from the Commissioner of Taxation. 23 There were exceptions to the general rule that GST was payable on the taxable supply. One exception concerned the "margin scheme" and related to the sale of land (s 75-20). If the margin scheme applied, the GST was less. This made the margin scheme desirable to parties entering into contracts for the sale of land. 24 If the margin scheme applied, the vendor was not required to give the purchaser a tax invoice and the purchaser was not able to claim back the GST that was paid as part of the purchase price (s 75-30). Thus, according to the margin scheme, if the purchase price was inclusive of GST, the purchaser would pay the vendor the tax, which the vendor, in turn, would pay to the Commissioner of Taxation, and the purchaser would not be entitled to any reimbursement. If the margin scheme applied and the purchase price was exclusive of GST, the vendor would pay the tax and the purchaser had no liability in respect of it. 25 As Campbell J said: "Ordinarily, the amount of GST which a vendor of land must pay, and whether the purchaser will be entitled to an input tax credit for the amount of GST paid, will be factors which affect the price for which the land is sold." 26 In the present case the margin scheme was not applicable although the Sammuts, at least for a period prior to the sale to the appellant, thought that it would apply.

[22]

Negotiations up to 3 February 2004: the land is offered for sale at a purchase price inclusive of GST 27 In January 2004, John and Allen Sammut calculated that the respondent needed to realise $2.3m on the sale of the land to make an acceptable profit. John Sammut thought that the GST margin scheme was applicable and the GST payable would be about $91,000. He and his brother formed the view that, in broad terms, to realise $2.3m the purchase price would have to be $2.4m (that is, if the price were to be inclusive of GST). 28 On or prior to 11 January 2004, Allen Sammut, on behalf of the respondent, asked Ms Kayes to find a purchaser for the land. He told her that the land was to be offered for sale at a purchase price of $2.4m inclusive of GST. 29 On 3 February 2004 Ms Kayes told Mr Abboud that the respondent wanted $2.4m inclusive of GST for the land. She discussed the margin scheme with Mr Abboud. He told her that he did not understand it and would have to speak to his accountant about it. 30 That day, Ms Kayes informed Allen Sammut that an unnamed potential purchaser (who was in fact Mr Abboud) was interested in the land. She discussed the GST margin scheme with Mr Sammut and, according to her, Mr Sammut said that, if the purchaser wished, he could apply the margin scheme. She asked Mr Sammut how the margin scheme worked and he said that he did not know. Mr Sammut's diary recorded a conversation between himself and Ms Kayes on 3 February 2004 to the effect that Ms Kayes had informed him that she had an offer "and that he [the party interested] just wants to check on GST". 31 At about that time, Ms Kayes also discussed the margin scheme with John Sammut. In the cross-examination of Ms Kayes the following exchange occurred in connection with that conversation: "Q. Do you say that that is what John told you: 'he claims back on margin scheme and offsets against GST when he sells them'? A. That was part of the conversation. That was just one quote he had given me, yes. Q That is what you understood he said? A. He said that it was GST inclusive and he also claims back on the margin scheme and offsets it. That's correct. Q. Who claims back on the margin scheme? A. I just wrote it down. I was relaying it to Mr Abboud. I am not a tax expert. Q. It is true to say you really didn't understand how this margin scheme worked? A. That is correct, yes. I am not a tax expert." 32 The respondent's practise was for John Sammut to execute under its common seal numerous single page documents headed "Annexure A" and to leave them with Ms Pilgrim. These documents were intended, as a matter of convenience, to be annexed by Ms Pilgrim to a contract or transfer to be entered into by the respondent. This practice was intended to avoid the Sammuts having to come in to her office each time to execute a contract or transfer document. 33 On 3 February 2004 Ms Kayes asked Ms Pilgrim to send her draft contract forms relating to a potential sale of the land and Ms Pilgrim did so. The draft contracts Ms Pilgrim sent were in standard form and were incomplete.

[23]

Negotiations from 10 to 12 February 2004: the draft contracts are prepared 34 On 10 February 2004 Mr Abboud told Ms Kayes that the appellant would offer $2m for the land and on the same day told her that the offer was increased to $2.2m. Ms Kayes said that she could not recall whether these offers were expressed by Mr Abboud to be inclusive of GST but she understood that his offers were "always inclusive of GST". 35 On 10 February 2004 Ms Kayes had a number of discussions with Allen Sammut about the purchase price. She informed him of the offers the appellant had made. Allen Sammut testified that he then told Ms Kayes that any offers under $2.3m had to be exclusive of GST while offers over that amount could be inclusive of GST. This was put to Ms Kayes in cross-examination and she replied, "[a]bsolutely not". The respondent does not dispute that prior to this conversation "all of the discussions about price with Ms Kayes were in terms of offers inclusive of GST". 36 Allen Sammut rejected the offers of $2m and $2.2m. On 11 February 2004 Ms Kayes asked him to make a counter-offer. Ms Kayes testified that, in response, Allen Sammut told her to make a counter-offer of $2.25m. The following exchange occurred in the examination in chief of Ms Kayes in this connection: "Q. What did he say to you about a counter-offer of $2.25m? A. I went back to him with the offer of $2.2m and he said, no, he wouldn't accept, he would really like the $2.3m, and I said, indicated that there was no way I could get Mr Abboud up to $2.3m because of his concerns about the site. I said just give me a counter-offer of what you are prepared to take. Q. When you went back to him with an offer of $2.2m did you mention to him the GST? A. I can't recall. Q. Was it the case that you understood that the offers that you were making at that stage were inclusive of GST? A. That is correct. Q. You understood that the counter-offer made by Mr Allen Sammut was inclusive of GST. A. That is correct. … Q. When he [sic - you] said you understood that the counter-offer was inclusive of GST what led you to understand that? A. Because I was told that it included GST when he originally signed up for the property." 37 Ms Kayes was asked whether she calculated (for the purposes of conveying the counter-offer to Mr Abboud) "what GST was payable in respect of the $2.25 million which was inclusive of GST." She replied: "Well the offer was just $2.25 million inclusive of GST". 38 On 11 February 2004 Ms Kayes telephoned Mr Abboud. According to Mr Abboud, she said: "I have spoken to Sammut and his last figure is $2,250,000 inclusive of GST. From the purchase price you will receive back from the ATO around $200,000 and this will then mean each site will in reality only cost $255,000. If you spend $250,000 to build them, a sale price of $650,000 each would leave you $145,000 profit less the GST you have to pay on the selling price." 39 Also on 11 February 2004 Ms Kayes delivered to Allen Sammut a completed agency contract form signed by her. Ms Kayes said that she put the form in the letter-box of Allen Sammut's home. Allen Sammut said that she gave the form to him at the top of his driveway, but accepted that he had received it. The judge found that Ms Kayes put the form in Allen Sammut's letter-box. 40 The agency contract included the words: "Price at which the property is to be offered ( including GST if any ) $2,400,000 … " 41 On 11 February 2004 Mr Abboud told Ms Kayes that he would accept the counter-offer of $2.25m inclusive of GST. 42 According to Ms Kayes she then telephoned Allen Sammut. The following exchange occurred in her evidence in chief: "Q. Do you recall what you said to Mr Abboud about the counter offer you received from Mr Allen Sammut of $2.25m? A. I cannot remember word for word but I would have said that he had a counter offer of $2.25m and obviously we accepted that counter offer based on an eight week settlement and also there was going to be delay because of the other property that I was selling for Mr Abboud for exchange of contracts. Q. Did you discuss with him the question of the GST in that conversation? A. No, not that I recall. Q. You understood the counter offer was to be on the basis of being inclusive of GST? A. That is correct." 43 Allen Sammut, on the other hand, testified that Ms Kayes told him on 11 February 2004 that Mr Abboud had offered $2.25m plus GST. Allen Sammut made a file note on that date after that telephone conversation. The file note was made under the entry "Barden Ridge" (which was the way Mr Sammut referred to the land the subject of the sale). The note was in the following words: "Agreed to sale at BR at $2.250m plus GST subject to exchange straight away". 44 Allen Sammut was cross-examined about this note. It was put to him that it did not accurately record the conversation with Ms Kayes, a proposition that he denied. It was put to him that the file note contained a "false entry as to the terms of the conversation you say you had with Ms Kayes". He denied that. It was put to him that the file note was never made on 11 February 2004. He asserted that it was made on that date. It was put to him that he fabricated the diary note and he denied that. 45 Ms Pilgrim testified that on 11 February 2004 "Daniela from Abbey Lawyers" told her that she (Daniela) had received a call from Ms Kayes who wanted to collect four contracts for the purchaser. Ms Pilgrim said that Daniela informed her that Ms Kayes had collected the contracts that day. The contracts were in a standard form but the particulars of the transactions had been left blank. In this regard, Ms Pilgrim explained: "At exchange we fill the contracts in with the details but I had no details until [Ms Kayes] came to the office [on 17 February 2004] with signed contracts." 46 Mr Abboud testified that on the evening of 11 February 2004 he found the four contracts in his letter-box and read them. 47 Ms Kayes testified that she delivered the four contracts to Mr Abboud on 12 February 2004. This is contrary to Mr Abboud's evidence that he received and read the contracts the evening before. The conflict is not without significance for reasons that I later discuss. 48 Ms Kayes testified that, on 12 February 2004, she personally delivered a sales advice to Ms Pilgrim and collected from her the contracts that Ms Pilgrim had prepared. The sales advice recorded, "Sale Price $2,250,000 (inclusive of GST)". 49 Ms Pilgrim, in conflict with Ms Kayes' testimony, testified that she was not at the office on 12 February 2004 and denied that Ms Kayes had collected the blank contracts from her. Ms Pilgrim's testimony, as I have indicated, was that Daniela told her that Ms Kayes had called to collect the contracts on 11 February 2004. Ms Pilgrim testified that she did not see Ms Kayes on 12 February 2004 and she did not recall seeing the sales advice. Thus, there was a conflict between Ms Kayes and Ms Pilgrim as to whether Ms Kayes had delivered the sales advice to Ms Pilgrim. Campbell J accepted Ms Pilgrim's denial. 50 Although Mr Abboud made some alterations to the draft contracts, he still did not notice the terms that provided that the purchase price was exclusive of GST (this being the conclusion that, in the opinion of Campbell J, a careful reader would reach). As his Honour observed, Mr Abboud was not a careful reader. The judge found that Mr Abboud "did not appreciate the effect of the clauses requiring the purchaser to pay an additional amount equal to the GST payable by the vendor in connection with the sale of the four properties". 51 On 12 February 2004 Ms Kayes wrote a letter to the Sammut brothers confirming "offers which were conveyed to you prior to your acceptance of the final offer". One of the terms reflected in that letter was that the purchase price of $2.25m was "GST inclusive". Ms Kayes testified that after collecting the draft contracts from Ms Pilgrim (which she said she did on 12 February 2004) she deposited the letter and sales advice in the letter-box of Allen Sammut at his home. When doing this, she collected the agency contract which had been signed by John Sammut. She said the signed agency contract was "hanging" out of the letter-box. 52 Allen Sammut testified that he had not received the sale advice. In cross-examination it was put to him that this evidence was a lie, but he denied this. Campbell J accepted his denial. 53 Ms Pilgrim testified that she had a conversation with John Sammut on 12 February 2004 in which he told her: "The sale price was $562,500 per lot, making a total of $2,250,000.

[25]

17 February 2004: the contracts are exchanged 57 Ms Pilgrim and Ms Kayes agreed that the exchange of contracts would take place on 17 February 2004. They arranged that Ms Kayes would have the contracts executed by the appellant and would bring them to Ms Pilgrim's office as well as the cheque for the deposit. 58 Ms Pilgrim testified that, in the afternoon of 17 February 2004, before Ms Kayes came to exchange the contracts, she telephoned both John Sammut and Allen Sammut and obtained confirmation from each that the purchase price was $562,500 per lot plus GST. Ms Pilgrim produced a file note that recorded: "I telephoned John S and then Allen to let both know - they both confirmed price and told me to ring them when exchanged." 59 As regards her telephone call to John Sammut, she testified: "I then telephoned John and said 'Janet has advised me that she is on her way to do the exchange. The purchase price is $562,500 per lot plus GST, is that correct? I still do not know who the purchaser is.' John said: 'Yes, I wonder who it is, anyway ring me when it happens as I have to let the bank know because of the bank bills. Don't forget the price is $562,500 per lot, totalling $2,250,000 then plus GST'. I said 'Okay'. He said 'Anna if there are amendments to the contract just use your discretion as we need the sale. Ring me when you have finished'. I said: 'I will, you don't have to come in to sign because I will attach to the contracts, the executed Annexures that I have'." 60 According to Ms Pilgrim, she then telephoned Allen Sammut and told him that Ms Kayes was coming to do the exchange that afternoon and the purchase price was $562,500 plus GST. He expressed his pleasure at this and asked her to telephone him when the contracts had been exchanged. 61 On the late afternoon or evening of 17 February 2004 Ms Kayes arrived at Ms Pilgrim's office and handed her the contracts that Mr Abboud had signed. The contracts had been completed by hand. That is, the purchaser's details, the name of the purchaser's solicitor, the purchase price and the deposit were handwritten on the contracts. 62 Ms Pilgrim attached the contracts to "Annexure A" documents that she took from her stock, as it were, of Annexure A documents that John Sammut had executed. She then completed the vendor's contracts with the same details. 63 Ms Pilgrim and Ms Kayes went through the contracts to make sure that they were identical. Ms Pilgrim noticed that the deposit was $25,000 on each contract and she asked Ms Kayes if she aware of this. Ms Kayes confirmed that to be the case. 64 Ms Pilgrim testified that in Ms Kayes' presence she telephoned Allen Sammut. She was not able to speak to him so she left a message on his voice mail. She telephoned John Sammut and said: "I am doing the exchanges now. There have been a few changes to the contract: (1) The completion date is 56 days. (2) The deposit is $100,000 in total. (3) Price is $562,500 on each, total $2,250,000 exclusive of GST. (4) Purchaser is Igloo Homes Pty Ltd."

[29]

Events after the exchange of contracts 71 The respondent had mortgaged the four lots of land to the National Australia Bank (NAB) and had arranged with the NAB that it would receive the entire net proceeds of the sale. On 18 February 2004 John Sammut sent a fax to the NAB with a copy of the front page of each contract. The front page stated that the price for each lot was $562,500 and "Subject to clause 13, the price INCLUDES goods and services tax (if any) payable by the vendor". Mr Sammut did not say anything in the fax to point out that the price was $562,500 plus GST. 72 On 23 February 2004 Abbey Lawyers wrote four letters to the respondent confirming exchange of the contracts and recording that the selling price for each lot was "$562,500 plus GST". Ms Pilgrim testified that she had told other employees at the office to prepare those letters and send them to the respondent. 73 Several events occurred after the exchange of contracts that, as Campbell J pointed out, "are consistent with it having been the intention of the [respondent] to enter an agreement at a price of $562,500 inclusive of GST". His Honour described the events as follows: "First, transfers were sent by Mr Abboud to Abbey Lawyers, showing a price of $562,500 per lot, and no complaint was made to him that this was not the full consideration. Second, settlement figures were exchanged between Mr Abboud and Abbey Lawyers, on a basis that no amount of GST was payable on top of the purchase price named in the contracts. Third, a clerk instructed by Ms Pilgrim attended at settlement of the sales, and the sale proceeded by the clerk handing over transfers which stated a price of $562,500 per lot, to which still more of the " Annexure A " pages had been attached by way of execution on behalf of the [respondent]. Fourth, at the settlement, which occurred on Friday, 16 April 2004, Mr Abboud complained about the absence of a tax invoice for the GST. The clerk attending the settlement telephoned Ms Pilgrim, and then endorsed, on a letter from Abbey Lawyers to Mr Abboud giving settlement details and precise settlement amounts, the words ' we hereby undertake to forward to you a tax-invoice in the above matter '. Mr Abboud, after settlement, made several telephone calls to Abbey lawyers, seeking the tax invoice their agent had undertaken to give him. In response to such a telephone call, which had been taken by a more junior member of staff, Ms Pilgrim checked the figures, and realised that GST had not been collected at settlement. She immediately telephoned Mr John Sammut on 20 April 2004, and explained to him that no GST had been collected. He said that he did not realise that no GST had been collected either. On 23 April 2004 Ms Pilgrim told Mr Abboud, in the course of a telephone conversation, that there had been a mistake at settlement, and that he had forgotten to pay the GST. Mr Abboud disputed, loudly, that he had any liability to do so. By letter dated 4 May 2004 to Mr Abboud, Abbey Lawyers stated that they would honour their undertaking to provide a tax invoice, once the purchaser had paid the GST due under the contracts. The specific clauses which imposed this obligation on the purchaser were identified. It was upon receipt of that letter that Mr Abboud realised, for the first time, that there were such clauses in the contract. On 11 May 2004 the defendants lodged a caveat against the title to the land, claiming a vendor's lien for unpaid purchase monies pursuant to the Contract for Sale dated 17 February 2004. One of the orders which the plaintiff seeks in these proceedings is an order for removal of that caveat, and compensation pursuant to s 74P of the Real Property Act 1900 (NSW) for its lodgement."

[30]

The trial judge's reasons 74 In finding for the respondent, Campbell J reasoned succinctly as follows: "65. If the plaintiff is to obtain rectification of the contract, the plaintiff bears the onus of establishing that it was the intention of the vendor that the contract entered would be at a purchase price inclusive of GST. I am not satisfied it has discharged that onus. The way in which the Contract for Sale was prepared in an apparently executed form for exchange, by addition of one of the ' Annexure A ' documents, imposed a serious practical responsibility upon Ms Pilgrim to ensure that she understood the client's instructions about the essential commercial elements of any contract to which she attached one of the 'Annexure A' documents, and handed over by way of exchange. Her contemporaneous notes show that she carried out this responsibility, and ascertained that it was the client's wish to enter into a Contract for Sale at the price of $562,500 plus GST. 66. The conduct of Ms Pilgrim, in allowing the settlement to proceed on the basis that the price was inclusive of GST is suspicious. However, it seems to me more likely than not that the reason for her so doing was carelessness. She did not have exclusive control of this file - around the time of settlement some steps concerning it were being taken by a junior member of staff called Daniela. 67. Such was the lack of care which Abbey Lawyers showed concerning the settlement, that they did not even collect, upon settlement, the amount which would have been properly payable if the purchase price had been as shown on the front page of the contracts, inclusive of GST. All the settlement figures proceeded on the basis that the total purchase price for the four lots, before the usual conveyancing adjustments were made, was $2,225,000. In fact, the total purchase price, before making usual conveyancing adjustments, and before addition of GST, was $2,250,000. By the time the case began, the plaintiff realised that this error had been made, and its counsel stated in opening that if it were to be successful a condition of relief would inevitably be that the Court would require the payment of the amount of $25,000 which had been short-paid. The defendant did not seek any relief relating to this short payment of $25,000. It will, presumably, take advice about whether it is entitled to maintain its caveat over the land until not only the GST, but also the additional $25,000 is paid. 68. In these circumstances, the claim fails."

[31]

Was the intention of Ms Kayes that of the respondent? 75 I turn now to the first principal argument of the appellants, namely that Campbell J erred in failing to hold that the intention of Ms Kayes (that the purchase price for each property was inclusive of GST) "ought to have been treated as the intention of the respondent". 76 The notice of appeal asserts in this regard: "The trial judge erred in failing to hold that the intention of the respondent's agent, Ms Janet Kayes, was the relevant intention of the respondent in the circumstances where Ms Kayes was the only person on behalf of the respondent who negotiated the purchase price with the appellant." 77 Ms Kayes alone carried out all the pre-contractual negotiations on behalf of the respondent with the appellant and, as I have noted, at the conclusion of those negotiations she intended that the purchase price for each property should be inclusive of GST. 78 In Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 Handley JA (with whom Meagher JA and Powell JA agreed) after referring to a number of authorities, including Blackburn Low & Company v Vigors (1887) 12 App Cas 531, said that where an agent is authorised to commit the principal to a transaction and the agent's state of mind is relevant to that transaction, "the acts of the agent are the acts of the principal and the agent's state of mind must be the state of mind of the principal as well." 79 The decision of the Court of Appeal in Permanent Trustee Australia Co Ltd v FAI was reversed by the High Court on different grounds: (2003) 214 CLR 514. Gummow and Hayne JJ, however, (at 548 [87]) approved the following statement of Handley JA: "Where the agent acts within his authority with the knowledge and question present to his mind, the principal should be bound by that knowledge, however acquired. I see no basis for ignoring any part of the agent's knowledge, present to his mind, when he is doing the authorised act. The source of the knowledge seems irrelevant. What must matter is the agent's state of mind when doing the authorised act." 80 As is apparent from Permanent Trustee Australia Co Ltd v FAI, the same principle governs the intention of the agent. Thus, where the agent acts, with a particular intention, within his or her authority, that intention is attributed to the principal. 81 In Blackburn Low & Company v Vigors Lord Halsbury said at 537-538: "Some agents so far represent the principal that in all respects their acts and intentions, and their knowledge may truly be said to be the acts, intentions and knowledge of the principal. Other agents may have so limited and narrow an authority both in fact and in the common understanding of their form of employment that it would be quite inaccurate to say that such an agent's knowledge or intentions are the knowledge or intentions of his principal; and whether his acts are the acts of his principal depends upon the specific authority he has received." 82 As Lord Halsbury makes plain, where an agent acts, with a particular intention, outside his or her authority, that intention is not attributed to the principal. 83 The terms of Ms Kayes' authority are to be found in the agency contract. Clause 1 of that contract provided: "The Principal hereby grants to the Agent selling rights of the property for a period from 11/2/04 until such time as the property is sold or this agreement is terminated by either party giving notice in writing."

[33]

The identity of the persons whose intentions are to be attributed to the appellant 87 The appellant's second principal argument is encompassed by the following paragraphs of the notice of appeal: "4. The trial judge erred in finding that he was not satisfied that the intention of the respondent was that the agreed purchase price of $562,500 for each property was inclusive of GST. 5. The trial judge erred in failing to give proper weight to the following when considering the intention of the respondent: (a) the evidence of Ms Janet Kayes; (b) the price stated in the Agency Agreement between the respondent and the respondent's agent stated that the asking price of $2.4 million was inclusive of GST; (c) that sales advice sent by the respondent's agent to the appellant stated that the agreed price was inclusive of GST; (d) the respondent sent a letter to its mortgagee, NAB, enclosing a copy of the front page of the contracts which stated that the price was inclusive of GST; (e) the transfers for the sale of the properties sent to the appellant were for the sum shown on the contracts for sale and did not require any further amounts to be paid in respect of GST; (f) the settlement figures calculated between the solicitors for the appellant and respondent were calculated on the basis that no additional sum in addition to the agreed price would be paid for GST; (g) the sale proceeded at settlement by the respondent's clerk handing over transfers which stated the agreed price for each lot and did not state any additional amount for GST; (h) the respondent's solicitors gave an unconditional undertaking at settlement to provide the appellant with a tax invoice." 88 The essential basis of a claim for rectification is that, by mutual mistake, the parties' common intention has been incorrectly recorded in the written contract. It follows that the relevant time for assessing whether rectification should be ordered is the moment when the written contract was entered into, that is, when it was executed. 89 In Johns v Australian Securities Commission (1992) 35 FCR 146 Black CJ and Von Doussa J said (at 172): "Insofar as it may be relevant to consider the state of mind of officers of a corporate entity in determining whether an exercise of power on behalf of that entity was for a proper purpose, the primary consideration must be the state of mind of the person who acted: See Arthur Yates & Company Pty Ltd v Vegetable Seeds Committee (1945) 72 CLR 37 at 69, 76 and 82." 90 Their Honours were concerned with whether an exercise of power on behalf of a corporate entity was for a proper purpose, but I see no reason why the principles expressed should not apply equally to the determination of the intention of a corporate entity in entering into a written contract. 91 Ms Pilgrim on behalf of the respondent entered into the contracts for the sale of the land to the appellant. This occurred when she participated in the exchange of contracts with Ms Kayes. It is arguable that her intention was the sole relevant intention of the respondent as she was "the person who acted". On the other hand, it is arguable that she merely carried out mechanical tasks, namely, completing the details on the contract forms and exchanging the contracts, and the intention of the respondent is to be attributed to John and Allen Sammut who instructed Ms Pilgrim to proceed with entering into the contract. 92 Neither the appellant nor the respondent, however, advanced arguments in these terms, and both were prepared to accept that the relevant intention of the respondent was to be inferred from the intentions of John and Allen Sammut and Ms Pilgrim. I shall, accordingly, approach the matter in this way. 93 In any event, little purpose would be served in isolating the relevant intention to Ms Pilgrim alone or to the Sammut brothers alone. It is common ground that Ms Pilgrim acted in accordance with the instructions of John and Allen Sammut. The case of the appellant was that these three persons had the same intention and the respondent's approach was the same. The appellant argued that all three were lying and, to the extent that their evidence was supported by written documents, submitted that one or other of them had fabricated the documents. The respondent submitted that their evidence was truthful. On the way that the case was conducted, it would not reasonably be possible to find that the intention of one differed from the intentions of the other two. The crucial task is to determine the intention of all three. 94 As regards the approach of Campbell J to this issue, the appellant submitted: "The trial judge appears to have regarded the intention of Mr Allen Sammut and Mr John Sammut as the relevant intention of the respondent for the purposes of the rectification claim although he has not expressly stated as such: para 65 - judgment." 95 I do not think that this submission is correct. 96 In [65] of Campbell J's judgment he referred only to Ms Pilgrim in discussing "the intention of the vendor". He said that the way in which the contract of sale was prepared "imposed a serious practical responsibility upon Ms Pilgrim to ensure that she understood the client's instructions about the essential commercial elements of any contract to which she attached one of the 'Annexure A' documents, and handed over by way of exchange". His Honour said that Ms Pilgrim's contemporaneous notes showed that she carried out this responsibility. In doing so she "ascertained that it was the client's wish to enter into a Contract for Sale at the price of $562,500 plus GST". Thus, he found that Ms Pilgrim properly executed the instructions of John and Allen Sammut when she entered into the contracts on the respondent's behalf. The implication is that he regarded the intention of Ms Pilgrim, together with that of John and Allen Sammut, as being relevant. In [66] of his Honour's judgment he referred to Ms Pilgrim's subsequent conduct, which he regarded as "suspicious" but "more likely than not" to be careless. In [67] Campbell J detailed the later carelessness (after the exchange of contracts) of Ms Pilgrim and her firm. He took these matters into account as he regarded Ms Pilgrim's intention to be relevant to the respondent's intention. 97 Accordingly, Campbell J's judgment reveals that he determined the intention of the respondent at the relevant time (that is, when the contracts were exchanged) by reference to the intention of Ms Pilgrim and that of the two Sammut brothers.

[34]

The approach on appeal 98 The appellant correctly submitted, "[t]he trial judge appears to have accepted the evidence of Ms Pilgrim that she had ascertained that it was her client's wish to enter into the contract for sale at a price of $562,500 plus GST". It is implicit in his Honour's findings that this was Ms Pilgrim's intention when she exchanged the contracts on behalf of the respondent. 99 There was ample evidence that supported his Honour's acceptance of Ms Pilgrim's testimony. This evidence included three file notes by her and four letters dated 23 February 2004 that Abbey Lawyers wrote to the respondent confirming the exchange of each of the contracts relating to the four different lots of land and stating that the selling price was "$562,500 plus GST". 100 As I have mentioned, at the trial the appellant contended that Ms Pilgrim's evidence as to her intention at the time the contracts were entered into was false and that her file notes and the letters of 23 February 2004 were "fabricated". The trial judge, by his acceptance of Ms Pilgrim's evidence, rejected the submission. 101 Also, at the trial, the appellant contended that the evidence of Allen Sammut and John Sammut was deliberately false and, to the extent that their evidence was supported by written documentation (including file notes), that documentation was fabricated. 102 The respondent, on the other hand, did not suggest that Mr Abboud or Ms Kayes were giving false testimony. As regards Ms Kayes, the respondent's case was simply that she was mistaken. There was good reason for Mr Abboud to believe that the respondent was prepared to enter into the contracts on the basis that the price was inclusive of GST as this is what Ms Kayes told him. There was no suggestion that Mr Abboud had any other intention (although, had he read the contracts with care, he would have ascertained that they reflected a purchase price exclusive of GST). 103 Thus, the issue before his Honour was one requiring relatively straightforward credibility findings. This, I think, explains the brevity of his Honour's reasoning. He accepted the respondent's evidence and, to the extent that Ms Kayes' evidence was inconsistent with that of the Sammuts and Ms Pilgrim, he did not accept her testimony. Similarly, where Mr Abboud's testimony differed from that of Ms Pilgrim, he preferred Ms Pilgrim's evidence. 104 Accordingly, the appeal is to be governed by the principles set out in cases such as Abalos v Australian Postal Commission (1990) 171 CLR 167, Devries v Australian National Railways Commission (1993) 177 CLR 472, State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 160 ALR 588 and Fox v Percy [2003] 214 CLR 118. 105 In Devries v Australian National Railways Commission Brennan, Gaudron and McHugh JJ said at 479: "More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his [or her] advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'." 106 A court of appeal, nevertheless, is not precluded from concluding that, in the light of other evidence, the trial judge had too fragile a base to support the finding that a witness was unreliable. Thus, in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq), where the trial judge gave insufficient weight to documentary evidence that provided significant support to the allegations made by the principal witness, the factual findings of the trial judge were overturned. 107 Further, incontrovertible facts or uncontested testimony may demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings: Fox v Percy (at 128). But, an appellate court will only reverse a trial judge's findings based on demeanour where there is "something that points decisively and not merely persuasively to error on the part of the trial judge in acting on his or her impressions of the witness or witnesses" (per McHugh J in Fox v Percy (at 146-147). 108 It is necessary to examine the evidence in the light of these principles.

[40]

(e) Whether, on 17 February 2004, Ms Pilgrim, in Ms Kayes' presence, telephoned John Sammut and told him that the price was $2.25m exclusive of GST. 112 I turn firstly to the issue whether, on 10 February 2004, Allen Sammut told Ms Kayes that any offers under $2.3m had to be exclusive of GST while offers over $2.3m could be inclusive of GST. Campbell J did not deal expressly with this issue, presumably because it was not crucial to his Honour's overall finding. The essential question involved the parties' intentions at the time the contracts were exchanged and, while their intentions seven days previously was relevant, it was not essential to the decision. 113 Mr Martin submitted that Allen Sammut's evidence involved an "illogical and nonsensical proposal". Selling the land for $2.25m plus GST resulted in a higher selling price than the price of $2.4m including GST, the latter being the starting point of the negotiations. The price of $2.25m plus GST (which amounted to $225,000) equalled $2.475m. As Basten JA put it in the course of argument, the actual amount that was to be paid under the written contracts was greater than the price at which the respondent was willing to put the property on the market. 114 Mr Davies SC, who appeared for the respondent, submitted that the apparent absurdity of the proposal simply resulted from the negotiations between the parties. 115 Campbell J accepted that, before submitting the land for sale, the Sammuts calculated its profitability at a selling price of $2.4m assuming that GST would be paid on the margin scheme and would amount to approximately $91,000. On that basis the respondent would realise a net figure of about $2.3m. As I have mentioned, the Sammuts calculated that the land needed to realise a net amount of $2.3m to make the sale profitable. 116 Thus, the Sammuts believed that, if the land were to be sold for $2.3m exclusive of GST or for $2.4m inclusive of GST, the respondent would make a profit. If sold for less it would make a loss. Of course, if an offer exclusive of GST were significantly below $2.3m or if an offer inclusive of GST were only marginally over $2.3m, the acceptance of such an offer would mean that the respondent would not achieve its intended purpose. Nevertheless, it would be able to control its position by accepting only suitable offers subject to the guidelines indicated. The statement Allen Sammut said he made to Ms Kayes on this issue gave her a good practical indication of the respondent's general attitude to offers in which it might be interested. There was a rational basis for his proposal. It was not illogical or nonsensical. 117 It was open to his Honour to conclude that the two brothers simply did not apply their minds to the potential anomalies of their approach from a purchaser's point of view and to accept the evidence of Allen Sammut that he expressed the proposal to Ms Kayes when telling her what offers the respondent would be prepared to consider. 118 The fact that his Honour made no express credibility finding on this essentially collateral or ancillary issue does not show that he failed to use or palpably misused his advantage or acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable. It also does not establish that his Honour had too fragile a base to support the findings he eventually made. 119 Campbell J did not make an express finding as to whether, on 11 February 2004, Ms Kayes told Allen Sammut that Mr Abboud was offering $2.25m plus GST. 120 Ms Kayes, in her evidence in chief, was not able to recall if she discussed with Allen Sammut on 11 February 2004 whether the respondent's counter-offer of $2.25m was to be inclusive of GST. She said that she understood that it was inclusive of GST merely because she was told that the counter-offer included GST "when he originally signed up for the property". In cross-examination, it was put to her that on 11 February 2004 she told Mr Sammut "that Mr Abboud had come up to $2.25m plus GST". She replied "[a]bsolutely not". 121 It was open to his Honour to find for Allen Sammut on this conflict, particularly as Mr Sammut's version of the telephone call was supported by his file note of the same date. Of course, it was open to his Honour to find that the file note was fabricated. But when regard is had to his Honour's reasons as a whole it is quite obvious that he did not so find. Indeed, once it is accepted (as, in my view, it must be) that it was implicit in the judgment as a whole that Campbell J accepted that the file note was genuine, it follows that his Honour implicitly accepted Allen Sammut's evidence, in preference to that of Ms Kayes, on this issue. 122 In my view, in the particular circumstances, his Honour's omission to make an express credibility finding on this issue does not advance the appellant's case. Nor does his Honour's implicit acceptance of Allen Sammut's evidence (supported as it was by the file note). 123 The next conflict relating to Ms Kayes' testimony is whether she delivered the sales advice to Ms Pilgrim on 12 February 2004 (and on that date collected from her the contracts that she had prepared). 124 Ms Kayes testified that on 12 February 2004 she delivered the sales advice to Ms Pilgrim personally at the offices of Abbey Lawyers and, at the same time, collected the completed contracts that Ms Pilgrim had prepared. 125 Ms Pilgrim denied this evidence. She said that she was not at the offices of Abbey lawyers on 12 February when, according to Ms Kayes, she (that is, Ms Kayes) collected the contracts and delivered the sales advice. 126 Ms Pilgrim testified that she prepared the contracts on 11 February and later that day Daniela (the Abbey Lawyers' employee) told her that, in her absence, Ms Kayes had called and collected them. Campbell J accepted Ms Pilgrim's denial that Ms Kayes had delivered the sales advice to her personally and it must follow that his Honour accepted her testimony in regard to the circumstances surrounding this issue. 127 On Ms Pilgrim's evidence, Ms Kayes could not have delivered the sales advice to her on 11 February 2004 (as the sales advice was dated 12 February 2004). The accuracy of Ms Kayes' evidence that she delivered the sales advice to Ms Pilgrim must depend on whether, as Ms Kayes asserted, she delivered the document to Ms Pilgrim on 12 February 2004 (when - according to Ms Kayes - she collected the contracts). 128 Consistently with Ms Kayes' evidence, it was put to Ms Pilgrim in cross-examination that Ms Kayes had handed the sales advice to her on 12 February 2004 when calling to collect the four contracts. Ms Pilgrim said she had never seen the sales advice before. The cross-examiner put to Ms Pilgrim that she had had a conversation with Ms Kayes on that occasion about Ms Kayes' commission, and Ms Pilgrim said that she could not recall any such conversation. 129 A difficulty with Ms Kayes' version on this issue is that Mr Abboud testified that, during the evening of 11 February 2004, he found the four contracts in his letter-box together with "a copy of a letter dated 11 February 2004 from Abbey Lawyers addressed to Ms Kayes". Mr Abboud testified that on or shortly after 12 February 2004 he received a letter from Ms Kayes enclosing the "contracts and sales advice for your information". He said that, in fact, the letter enclosed a sales advice "but no contracts". 130 Ms Kayes testified that on 12 February 2004, after handing the sales advice personally to Ms Pilgrim and collecting the contracts from her, she put the contracts and the sales advice into Mr Abboud's letter-box. She said nothing about the accompanying Abbey Lawyers' letter of 11 February 2004. 131 I would note that, in the course of Ms Kayes' evidence in chief, counsel for the appellant sought to summarise her evidence on this issue by asking her a series of questions. He asked her whether the first step in the sequence of events was that she delivered to Ms Pilgrim a letter dated 12 February 2004 "containing the sales advice". She replied in the affirmative. She agreed that she then collected the contracts from Ms Pilgrim and agreed, further, that "the first stop after that was delivering to the letter-box of Allen Sammut the letter of 12 February 2004". It was then put to her: "Then you continued on your way down Kangaroo Point Road to Mr Abboud's residence where you put in his letter-box the letter of 12 February 2004 … and the sales advice …"

[42]

She did not explain or clarify the apparent inconsistency between "dropping [the letter] into your office" and her expressed intention to "put it in your letter-box [at your private house]". 137 In any event, what I have said about the conflicts in the evidence relating to Ms Kayes' delivery of the sales advice to Ms Pilgrim on 12 February 2004 in substance disposes of the appellant's argument on this point. Once it is questionable that Ms Kayes correctly testified that she delivered the sales advice to Ms Pilgrim on 12 February 2004, her evidence that, on the same date, she delivered the sales advice to Allen Sammut must also be open to doubt. 138 The next question relating to the judge's approach to Ms Kayes concerns Ms Pilgrim's evidence that, on 17 February 2004, in Ms Kayes' presence, she telephoned John Sammut and told him that the purchase price was $2.25m exclusive of GST. 139 There was powerful documentary evidence that supported Ms Pilgrim's oral testimony on this issue. This comprised her typed note of 17 February 2004 (which recorded her conversation with "Sammut" in which she was told that the price was to be "$2,250,000 exclusive of GST") and her actions in causing the four letters of 24 February 2004 to be sent recording the selling price as being $562,500. 140 Ms Kayes was not asked whether on 17 February 2004 Ms Pilglrim telephoned John Sammut in her presence and told him that the price was "total $2,250,000 exclusive of GST". She was not cross-examined on this issue (despite the fact that in Ms Pilgrim's affidavit of 29 July 2004 she testified as indicated in the preceding paragraph). Once Ms Kayes had been asked no questions about this conversation in her evidence in chief, there was no requirement for cross-examining counsel to put to her the respondent's case in this regard: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 per Handley JA. 141 Campbell J did not make any express finding as to the veracity of Ms Pilgrim's evidence concerning the telephone call to John Sammut in Ms Kayes' presence but it is implicit from his ultimate findings that he accepted that evidence. I am unable to discern any error in this approach. 142 It was contended on the appellant's behalf that Campbell J should have had regard to the fact that the respondent failed to cross-examine Ms Kayes on a number of issues. 143 The conduct of the trial by the respondent must be seen against the background that the respondent did not suggest that Ms Kayes was being untruthful. The respondent contended only that she was mistaken. Furthermore, the appellant did not attempt to make out a case based on unilateral mistake induced by the conduct of the respondent, and did not contend that Ms Pilgrim or Allen and John Sammut were aware that Mr Abboud was acting under a mistake of fact. There was no need to cross-examine in connection with any of the matters referred to in this paragraph. 144 A further relevant factor is that the respondent accepted that until 10 February 2004 John and Allen Sammut discussed a purchase price inclusive of GST. Therefore, there was no need to cross-examine in connection with anything that occurred before that date. 145 In my opinion, the cross-examination of Ms Kayes was sufficient to enable Campbell J to make the findings he did concerning her testimony. 146 On all the applicable tests, it has not been shown that this Court should interfere with the judge's findings concerning Ms Kayes' testimony. I would reject the ground of appeal based on them.

[44]

Paragraphs 5 (d) to (h) of the notice of appeal: Was the subsequent conduct of the respondent and Ms Pilgrim dishonest or only careless? 150 Paragraph 5(d) of the notice of appeal is based on the fact that, after the exchange of contracts, the respondent sent a letter to its mortgagee, National Australia Bank ("NAB"), enclosing a copy of the front page of the contracts that stated that the price was inclusive of GST. 151 This is a matter to which Campbell J expressly referred and took into account. It is an event which his Honour described as one of several "which are consistent with it having been the intention of the [respondent] to enter an agreement at a price of $562,000 [per lot] inclusive of GST". Despite his Honour expressly observing that the sending of the front page of the contracts to NAB advanced the case of the appellant, the weight he attached to this fact did not lead him to uphold the appellant's contentions. I am unable to discern any error in his approach. 152 Paragraphs (e) to (h) of the notice of appeal draw attention to the following matters. The transfers the respondent sent to the appellant were for the sum shown on the contracts for sale and did not require any further amounts to be paid in respect of GST (para (5)(e)). The settlement figures were calculated on the basis that nothing, in addition to the agreed price, would be paid for GST (para (5)(f)). At settlement, the respondent's clerk handed over transfers that stated the agreed price for each lot but did not provide for any additional amount for GST (para (5)(g)). At settlement, the respondent's solicitors gave an unconditional undertaking to provide the appellant with a tax invoice (para 5(h)). 153 Campbell J concluded that the conduct the appellant relied on in paras 5(e) to (h) of the notice of appeal is to be explained by carelessness on the part of Ms Pilgrim and Abbey Lawyers and not because, after settlement, the true intention of the relevant individuals prompted them to act in ways consistent with the purchase price being inclusive of GST. This again was largely a matter of assessment of the witnesses by his Honour. There was a substantial basis for the findings his Honour made. In my view, on the principles that govern appeals on factual issues, it is not open to this Court to intervene as contended for by the appellant. 154 During the course of argument, it was suggested that his Honour's finding that Ms Pilgrim was careless after the contracts were exchanged was inconsistent with the finding that she carried out the "serious responsibility" imposed on her to "ensure that she understood the client's instructions about the essential commercial elements of any contract to which she attached one of the 'Annexure A' documents and handed over by way of exchange". I do not accept that there was any inconsistency. Ms Pilgrim's duties in checking on the agreed terms of any contract she entered into on the respondent's behalf were very different to her responsibility to act as a settlement clerk once the contracts were exchanged. 155 The inference that the appellant submits should be drawn, namely, that the conduct of Ms Pilgrim and Allen and John Sammut was dishonest, is not compelling. In my view, the documentary evidence supporting the respondent's case gives rise to compelling inferences to the contrary.

[54]

Conclusion 170 In my opinion, the probabilities of the case are not against the judge's findings of fact. It has not been shown that the judge has failed to use or has palpably misused his advantage or has acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable. The judge did not have too fragile a base to support the credibility findings he made. His Honour did not give insufficient weight to the relevant documentary evidence (much of which provided significant support to the allegations made by the respondent's key witnesses). There are no incontrovertible facts or uncontested testimony capable of demonstrating that the judge's conclusions are erroneous. There is nothing that points decisively to error on the part of his Honour. 171 I would dismiss the appeal with costs. 172 BASTEN JA: The rectification case revolves around a single factual question, namely whether the Appellant has demonstrated that the Respondent intended that the sale price be inclusive of GST or whether it intended that a further amount be payable on account of GST. This raises a question as to the liability for GST on a commercial sale of real estate, under A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the GST Act"). 173 To establish its case, the Appellant accepted that it needed to demonstrate a common intention held by the contracting parties at the date they entered into their contract, which was not reflected in the terms of the written contract. As Ipp JA explains, the trial judge has made findings of fact, based in part on the credibility of the witnesses, which would seem to preclude such a common intention. For reasons set out below, I have some misgivings in relation to aspects of the facts, as found. Further, there are critical matters which have not been the subject of express findings. 174 In addition to the challenge to his Honour's conclusion that there was no basis for rectification of the agreement, the notice of appeal sought an order setting aside the judgment given on the cross-claim in favour of the Respondent for an amount which appears to have been the liability of the Respondent for GST calculated on a purchase price of $2.25 million, at the rate of 10% of that figure. The necessary findings of fact and reasons to support that conclusion are not apparent. On the other hand, the result is that the Respondent has obtained a judgment giving it an amount well in excess of its initial asking price for the property, which, on any view, was more than either party expected to pay or receive.

[61]

This material appears to have been filled out twice: the second form was not a photocopy of the first. In each case the telephone attendance note is circled to isolate it from the rest of the page. On one form the "plus" is in caps and underlined heavily. It was put in cross-examination to Ms Pilgrim that various entries were made on different dates and that the reference to the sale price "plus GST" was added later. 181 His Honour expressly accepted Ms Pilgrim's denial that she had received the "sales advice" from Ms Kayes, and appears to have implicitly rejected any suggestion that the file notes were later reconstructions. That gives rise to two areas of difficulty. On the one hand, it is not clear why Ms Pilgrim would have written three file notes purporting to confirm her instructions that the sale price did not include GST, unless there had been some doubt about it. (As his Honour found, the standard form of contract used by Ms Pilgrim required payment of GST.) On the other hand, if there were some importance to her in noting that an additional amount was to be obtained by way of GST, further difficulties arise. The first is that she appears to have made no calculations of the GST required to be paid; the second is that she permitted settlement figures to be exchanged which made no reference to any additional amount on account of GST; thirdly she permitted transfers to be handed over which stated a price without reference to the additional GST and fourthly she agreed that her clerk, who attended settlement, could give a written undertaking to forward a tax invoice, in recognition of the fact that GST was payable, without any hint that a further amount was to be forthcoming. Each of the last three matters was noted by the trial judge at [60]. 182 Each of these matters gave rise to a possible inference that she may have received the sales advice and only belatedly read it or only later realised that there might be a difference of approach between the parties. However, having held that her denial of receiving the sales advice should be accepted, before considering any of the latter matters and without expressly finding that the curious elements relating to the file notes did not suggest later reconstruction, his Honour was able to hold that her "contemporaneous notes show that she carried out" what had been identified as "a serious practical responsibility … to ensure that she understood the client's instructions about the essential commercial elements" of the contract. The post-exchange events were said to reveal "carelessness". On their face, they suggest more than carelessness: one would expect a person who had thought it necessary to note emphatically on no less than three occasions that the purchase price was "plus GST" would have either personally checked or given explicit instructions to a subordinate to check, that the settlement figures accorded with that important and frequently identified instruction. Accepting his Honour's assessment of the witness as someone who could be relied upon, both as to her denials and as to her attention to the detail of her instructions, there would appear to be some basis for the view that she did not have precise instructions in that respect prior to settlement, that the somewhat suspicious duplicated typewritten file note of 17 February may have been prepared by someone else at a later date and that her own handwritten file note was the true contemporaneous note by her of that conversation. 183 Nor should those matters readily be dismissed as mere carelessness. A person in a solicitor's office, whether an admitted practitioner or not, with responsibility for a file, should not be assumed to be so careless as to allow settlement of transfers of real estate for a price apparently $250,000 below that intended by her client, nor to allow transfers to be lodged for assessment of stamp duty showing a below-value transaction. 184 Whether, if Ms Pilgrim's evidence had been of critical importance, the principles set out by Ipp JA would permit this Court to interfere with findings of fact made by the trial judge, who had seen and assessed the witness, might be a question of some difficulty. However, there are two reasons why that question need not be resolved. First, the case does not turn upon the evidence of Ms Pilgrim. So far as the intention of the Respondent was concerned, it is clear that she was working upon instructions and that the intention of the company can be properly identified as that of Messrs John and Allen Sammut. Indeed, the case appears not to have been run on the basis that there was any material difference in the understanding of Ms Pilgrim and the Sammuts. 185 Secondly, the case run at trial for the Appellant was focused upon the evidence of Ms Kayes. It was her intention which was sought to be relied upon as the intention of the Respondent. For the reasons set out by Ipp JA at [76]-[86] above, I agree that Ms Kayes' intention was not that of the Respondent for the purposes of identifying the Respondent's intention with respect to the contract. However, Ms Kayes' state of mind, together with the information she conveyed to other officers or agents of the Respondent, may be of importance in reaching a conclusion as to the entitlement of the Respondent to payment of a further 10% of the purchase price on account of GST.

[62]

Absence of agreement on price 186 It was accepted that Mr Abboud, being the guiding mind of the Appellant, believed that he was contracting for a price "inclusive of GST". On the other hand, Messrs Allen and John Sammut, being the guiding minds of the Respondent, intended to enter into a contract for a price which did not include GST. However, it does not follow that the intention of the Sammuts was properly reflected in the written contract. In my view, it was not. In order to explain this conclusion, it is necessary to have regard not only to the findings made by the trial judge, but also to the course of the proceedings. 187 As the primary judge noted, because the sale was made for consideration, in the course of an enterprise carried on by the Respondent, it was a "taxable supply" for the purposes of s 9-10 of the GST Act: [2004] NSWSC 1213 at [4]. Liability for payment of the GST was that of the Respondent; the amount payable, absent an exception, was 10% of the value of the taxable supply or 1/11th of the price, if it included GST. 188 As his Honour further noted at [6], there was an exception available to a land developer, known as the "margin scheme": GST Act, s 75-20. In that case, the GST payable on a taxable supply is 1/11th of the margin, which, for the vendor, is the amount by which the sale price exceeds the acquisition price. Only the vendor could know this amount. 189 When the Respondent put the land on the market, it had a debt to the National Australia Bank in an amount of approximately $8.78 million, as both John and Allen Sammut agreed in their evidence. The full amount of the purchase price payable to the Respondent was to be paid to the National Australia Bank in reduction of that debt. The Sammuts were concerned to achieve an identified level of debt reduction. 190 It was undisputed that the Sammuts, having undertaken a calculation as to the anticipated balance after allowing for GST put the property on the market at a total sum of $2.4 million, inclusive of GST. Their calculation was based on the application of the "margin scheme" and involved an amount of GST of approximately $91,000: [2004] NSWSC 1213 at [30]. His Honour continued: "It has not been established whether or not it was correct to do this calculation on the basis that the Sammuts would be entitled to apply the 'margin scheme'. What matters, for present purposes, is that they actually did the calculation on that basis." 191 When these proceedings were commenced by way of summons in the Equity Division on 24 June 2004, the Appellant sought an order that a caveat over the property be withdrawn, together with various declarations and orders which were intended to establish its right to unconditional ownership of the property by virtue of the payment of $2.25 million. By way of cross-claim, the Respondent sought a declaration that the Appellant was required to pay $225,000 by way of GST on the purchase price. When his Honour gave judgment on 15 December 2004, he made no order with respect to the cross-claim. However, on 17 February 2005 his Honour gave a further judgment, dismissing an application for indemnity costs, but apparently giving judgment on the cross-claim for the amount of the GST plus interest: [2005] NSWSC 85. Although the judgment does not set out an order in those terms, the notice of appeal seeks to have a judgment in favour of the Respondent in the sum of $272,150.67 set aside. The relevant order in that respect appears to be order 1 made by his Honour on 17 February 2005 in Igloo Homes v Sammut Constructions [2005] NSWSC 85. That order, as it appears in the judgment at [14] refers to no sum of money nor to the basis on which it is calculated, but merely a paragraph in a notice of motion initialled and placed with the papers. The judgment does not indicate the basis on which the order was made. Nevertheless, a perusal of the Court file suggests that the order was intended to be a judgment in favour of the present Respondent for an amount of GST, being $225,000, together with interest. It follows that, as I understand the orders made, his Honour did ultimately resolve the question as to the amount of GST payable, and accepted the proposition that the margin scheme did not apply in relation to the sale by the Respondent. 192 Mr John Sammut gave evidence in cross-examination that he thought the price offered was not inclusive of GST. Q. You see, you say you understood the offer was $2.25 million plus GST? A. That's correct. Q. You're understanding of the GST that would be payable on that offer would be $225,000? A. That's right. Q. So that what was being offered to you at that stage as you understood it was an amount of approximately $2.47 million? A. That's right. Q. For the property. You understood that didn't you? A. That's right. Q. You understood that that offer exceeded the initial instructions you had given to Ms Kayes for the property to be offered for sale at $2.4 million inclusive of GST, didn't you? A. That's right. Q. I want to suggest to you that you knew at the time that the offer that was made to you of $2.25 million came below the initial instruction that you gave to Ms Kayes to set property at $2.4 million inclusive of GST? A. Can you rephrase that again? Q. You knew the offer of $2.25 million conveyed to you by your brother came below the initial instructions that you had given to Ms Kayes to sell the properties for $2.4 million inclusive of GST. A. That's right. 193 His Honour made no finding in relation to the suggestion put to Mr John Sammut that, if he believed that GST of 10% on the full sale price was payable, the offer being made was in excess of the price at which the property had been put on the market. On its face, as the cross-examiner no doubt intended, that suggestion does not reflect commercial reality. Absent any reasoned finding for a contrary conclusion, it should be inferred that, at no time prior to the exchange of contracts, or indeed prior to settlement did John Sammut have any such expectation. Rather the answer to the conundrum lies in his Honour's express finding that the Sammuts were working on the basis that GST was $90,909. On that basis, the sale price (including GST) would have been $2,341,000. That figure was below the asking price, but above the limit at which they had satisfied his Honour they were prepared to sell. 194 One factor, which was not explored with the witnesses, might be thought to be inconsistent with that conclusion. The standard form of contract used for each of the four blocks of land noted, in relation to clause 13, that the margin scheme did not apply to the property. However, neither Allen Sammut nor John Sammut, according to their evidence, read the written contracts at that time. Further, their lawyers appear not to have been conscious of the provision. After settlement, a dispute arose concerning the failure by the Respondent to supply a tax invoice with respect to GST. If the margin scheme had applied, no tax invoice would have been required. Consistently with that view, on 29 April 2004, the Respondent's lawyers wrote to Mr Abboud in the following terms: "We refer to your recent request for a Tax Invoice in this matter and advise that our client applied the margin scheme and that is why no GST was added to the sale price."

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Legal principles 198 For the reasons given by Ipp JA, it is generally necessary to establish a common intention, not reflected in the written contract, in order to effect rectification. On one view, the proper inference was that there was a common intention that no additional amount should be paid by way of GST in excess of the amount calculated under the margin scheme. However, that is the limit of the common intention and the authorities to which the Court was taken do not reveal whether rectification is generally available to give effect to a common negative intention in this manner. 199 However, in some circumstances rectification may be an available remedy because of a unilateral mistake. Such cases involve an element of sharp practice on the part of the non-mistaken party, in circumstances where it would be unconscionable for that party to take the benefit of the other party's mistake. An example is A. Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555. In that case Pennycuick J was satisfied that, prior to execution of the contract, the agent of the Council responsible for administering the project knew that the construction company was under a misapprehension as to the date for completion contained in the contract. The Council officers who accepted the tender had changed the date for completion (actually extending it by a year) for the benefit of the Council, without pointing out to the company that the change had been made. 200 The Court found no deliberate dishonesty on the part of the officer of the company, the only apparent motive for not correcting the company's misunderstanding being that it would have been extremely inconvenient for the Council if the contract were to go off. Nevertheless, rectification was ordered. 201 That reasoning was applied by the Full Court of the Supreme Court of Queensland in Johnston v Arnaboldi (1990) 1 Qd R 138. As explained by Connolly J at 144: "For one party to a contract to permit the other to execute it, knowing that he is mistaken about a particular term, the mistake being to the advantage for the former, has been categorised as dishonest and will entitle the mistaken party to rectification: A. Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555. … In Riverlate Properties Ltd v Paul [1975] Ch 133 the type of situation in A. Roberts was described as involving a degree of sharp practice." 202 Although I do not read A. Roberts as a case involving dishonesty, the circumstances in which relief can be given on this basis would appear to require a level of unconscionable or unconscientious conduct, by which one party, being aware of a mistake on the part of the other, for which the non-mistaken party is responsible, fails to point out the mistake, and then seeks to enforce that term to the detriment of the non-mistaken party. Accordingly, the question is whether the facts of the present case satisfy that test. 203 The difficulty faced by the Appellant is that no particular agent of the company, on the findings made by his Honour, had an actual awareness of the difference in the underlying assumptions of the respective parties. The need for such a unitary awareness was explained by Young J in Eighth SRJ Pty Ltd v Merity (unrep, BC 9701110, 25 March 1997), referring to Armstrong v Strain [1952] 1 KB 323 at 246 and Franich v Swannell (1993) 10 WAR 459. In Franich, a vendor aware of a defect in the property placed the property with an estate agent, to whom the vendor provided a sanitised engineer's report, so that the agent could sell without knowledge of the problem affecting the property. However, the statement by Ipp J in that case concerning the difficulty of attributing the conduct of the estate agent to the principal was made, not in relation to the question of knowledge, but in relation to an attempt to attach to the owner the "element of acting in trade or commerce", necessary to attract the operation of the Trade Practices Act. It may well be the case that, where the principal knows a representation to be false, but channels it through an innocent agent, the principal will nevertheless be liable for the misrepresentation: see Anglo-Scottish Beet Sugar Corporation Ltd v Spalding Urban District Council [1937] 3 All ER 335 at 343 (Atkinson J), referred to with approval in Armstrong v Strain [1952] 1 KB 232. 204 Furthermore, this line of authority is concerned with proceedings in which fraud or dishonesty is sought to be imputed as against the principal. Care must be taken in applying the relevant principles established in these cases to circumstances where it is sought to establish unconscientious behaviour on behalf of a corporation, in seeking to retain a benefit under a contract.

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when it was put to Ms Kayes that this was his reply, she responded: "Absolutely not." 207 Thirdly, Mr Allen Sammut stated in his affidavit that, on 11 February, Ms Kayes had telephoned and said that Mr Abboud "has come up to $2.25 million plus GST". Again, that conversation was put to Ms Kayes as a suggestion to which she replied: "Absolutely not." 208 None of these categorical conflicts of evidence was resolved by the trial judge. Given that the original proposition put forward by the Respondent was for a sale at $2.4 million inclusive of GST, and that Ms Kayes in her letter of confirmation of offers referred to the final offer as $2.25 million "GST inclusive", if Ms Kayes evidence were accepted, the most likely available inference is that Mr Allen Sammut knew that a different offer had been accepted from that set out in the contract. If that were the case, rectification might be available on the principles established in A. Roberts & Co Ltd and Johnston v Arnaboldi (supra). 209 There is a fourth problem with the evidential findings. The unequivocal evidence of Mr Allen Sammut was that he had no expectation that the total price should exceed $2.4 million, inclusive of GST. Because he was mistaken as to the company's liability for GST, that sum would have given the company $2.18 million, after accounting for GST. The inescapable inference is that, when the contract was executed by the Respondent, those whose minds formed its corporate intention had no expectation that the Appellant would pay a total amount in excess of $2.31 million. To claim that the Appellant was properly liable for an amount of approximately $2.47 million, in these circumstances, would appear to constitute unconscionable conduct on the part of the Respondent. If either the directors, or the solicitor for the Respondent who completed the contract, namely Ms Pilgrim, had a document from Ms Kayes expressly stating that the offer by the Appellant was inclusive of GST, but ignored or turned a blind eye to that material, rectification would be available. On the other hand, even in the absence of rectification, the knowledge of the directors as to the intention of the Appellant not to pay an amount in excess of $2.4 million inclusive of GST may make it unconscionable for the Respondent to require an additional payment in excess of the $90,909. On the other hand, on a full finding of material facts, the Respondent may be entitled to the full amount of its judgment, as ordered by the Court below. 210 In other circumstances, it might have been open to this Court to make findings of fact itself. However, in the circumstances of the present case, where findings in relation to the oral testimony of the witnesses appear to have turned to a considerable extent on issues of credit, that course is not properly open: compare Fox v Percy (2003) 214 CLR 118 at [25] and [27] (Gleeson CJ, Gummow and Kirby JJ). 211 Subject to one qualification, the absence of findings of fact critical to a resolution of these issues would require that the judgment be set aside and that the matter be remitted to the Equity Division for retrial, in accordance with the principles established in Mifsud v Campbell (1991) 21 NSWLR 728 E-F, applied by this Court in Day v Perisher Blue Pty Ltd [2005] NSWCA 110 at [35] (Sheller JA, McColl JA and Windeyer J agreeing) and in Hume v Walton [2005] NSWCA 148 at [69]-[71] (McColl JA, Tobias JA agreeing). The qualification is that, whatever the precise scope of the pleadings, it appears that the factual findings were not made because the case was not run in this way at trial, nor indeed, before this Court. At least implicitly, the Appellant appears to have relied on the commercially implausible result of accepting the Respondent's case and, in effect, eschewed the course which would have allowed a plausible resolution of the dispute, but not that most beneficial to the Appellant. Given that it adopted that course, I accept that the appeal to this Court must fail and the orders proposed by Ipp JA should follow. **********

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Cases Cited (18)