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Naylor v Simpson[2016] QCATA 87

CITATION:

Naylor & Anor v Simpson [2016] QCATA 87

PARTIES:

Denise Naylor

Duane Forward

(Appellant)

v

Robert Allan Simpson

(Respondent)

APPLICATION NUMBER:

APL463-15

MATTER TYPE:

Appeals

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Senior Member Brown

Member Hughes

DELIVERED ON:

3 June 2016

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The appeal is dismissed.

CATCHWORDS:

APPEAL – DOMESTIC BUILDING DISPUTE – BUILDING CONTRACT – GOODS AND SERVICES TAX – MEANING OF ‘ACTUAL COST OF THE WORKS’ – whether builder complied with contract conditions to claim GST – whether contract required builder to comply with GST law for GST to be payable – where builder mistakenly issued invoices with family trust ABN rather than him personally –   where ‘Actual Cost of the Works’ included GST – where inclusion of GST in ‘Actual Cost of the Works’ not expressed subject to compliance with any other clause or GST law – where Schedule part of the contract for an ABN is blank – where no contractual requirement to include ABN for GST – where question for the Tribunal was not whether as between builder and the Commissioner of Taxation, a GST liability arises, or whether builder had in fact paid GST to the Commissioner of Taxation but whether, as a matter of law, GST was included as part of the invoices under the contract – where inclusion of GST in the definition of ‘Actual Cost of the Works’ was not expressed as dependent on whether GST paid by builder or compliance with GST law – where upon consideration of the true construction of the contract as a whole, inclusion of GST in invoices under the Contract did not depend upon compliance with other clauses or GST law

A New Tax System (Goods and Services Tax) Act 1999 (Cth) ss 9.5, 9.10

Queensland Civil and Administrative Tribunal Act 2009 (Qld) ss 142, 146

Naylor and Forward v Simpson [2015] QCAT 403

Peet Limited v Richmond (No. 2) [2009] VSC 585

APPEARANCES:

This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld).             

REASONS FOR DECISION

Senior Member Brown

  1. [1]
    I have had the benefit of reading the draft reasons of Member Hughes. I agree with his reasons, conclusions and the order he proposes.

Member Hughes

What is this appeal about?

  1. [2]
    On 9 October 2015, the Tribunal ordered Denise Naylor and Duane Forward pay Robert Simpson the sum of $50,229.24 for building works. Ms Naylor and Mr Forward have appealed the order to the extent that the sum included a component for Goods and Services Tax (GST).

What are the grounds of appeal?

  1. [3]
    Ms Naylor and Mr Forward have appealed the decision on the grounds that the Tribunal made a mistake in law in ordering them to pay an amount that included GST, when Mr Simpson failed to comply with the contract conditions to claim the GST. They submitted in the hearing below that Mr Simpson was not “legally entitled” to claim or charge GST on any of his invoices under the contract because he did not comply with GST law.
  2. [4]
    The learned Member found that Ms Naylor’s and Mr Forward’s arguments concerning GST had no relevance to any of the claims.[1]
  3. [5]
    The appeal is about the correct construction of the contract and is therefore an appeal on a question of law. Because this is an appeal on a question of law, leave is not required.[2]

Background

  1. [6]
    Ms Naylor and Mr Forward commenced proceedings against Mr Simpson’s family trust. By consent, Mr Simpson was substituted as the respondent at the beginning of the hearing.[3]
  2. [7]
    During the original hearing, Mr Simpson conceded that he had mistakenly issued his invoices with the Australian Business Number (ABN) of his family trust, although the invoices were issued in his name.[4]

Was the Tribunal correct in ordering Ms Naylor and Mr Forward to pay an amount that included GST?

  1. [8]
    For the reasons below, the Appeal Tribunal is not satisfied that an error of law has been demonstrated.

What is the effect of Clause 29.15 of the contract?

  1. [9]
    Ms Naylor and Mr Forward focused their appeal on the operation of Clause 29.15 of the contract.
  2. [10]
    Clause 29.15 provides:

29.15 Goods and services tax

  1. For the purposes of the Contract, the terms “ABN”, “GST”, “GST Law”, “registered”, “tax invoice” and “taxable supply” have the meanings given to them in A New Tax System (Goods and Services Tax) Act 1999 (Cth);
  2. The Contractor warrants that the Contractor is:
  1. the holder of any ABN stated in the Schedule; and
  2. registered and will continue to be registered until the expiration of the     Defects Liability Period;
  1. The Actual Cost of the Works includes GST;
  2. Where the Works, or any part of the Works, constitute a taxable supply, the Contractor shall comply in every respect with the GST law;
  3. The payment claims that the Contractor submits under Clause 11.6, and the Practical Completion Stage claim that the Contractor submits, shall be in the form of a tax invoice.[5]
  1. [11]
    Importantly, Clause 29.15(c) provides that the actual cost of the works includes GST. It therefore specifically includes GST as part of the cost of the works. Clause 29.15(c) operates as a separate clause without qualification and is not expressed to be subject to or dependent upon compliance by the contractor with any other clause or GST law.
  2. [12]
    Ms Naylor and Mr Forward submitted that under Clause 29.15(d), where the works constitute a taxable supply, Mr Simpson was required to comply with GST law and he did not comply because:
  • His invoices incorrectly provided the ABN for the Simpson Family Trust; and
  • Their ABN searches failed to reveal any ABN for Mr Simpson.
  1. [13]
    However, as noted above, Clause 29.15(c) includes GST as part of the cost of the works and is not subject to Clause 29.15(d). Although Clause 29.15(d) requires Mr Simpson to comply with GST law, it does not mandate compliance as a prerequisite to him claiming or charging GST under the contract. Mr Simpson’s compliance with GST law does not determine whether he is contractually entitled to include it as part of his invoices. His compliance with GST law relates to his GST rights and obligations with the Commissioner of Taxation.
  2. [14]
    Ms Naylor and Mr Forward also submitted that Mr Simpson was not entitled to charge GST on any of his invoices because he failed to include an ABN in the contract as required by the Contract. However, Clause 29.15 does not say this. Clause 29.15(c) is not subject to Clause 29.15(b)(i). Moreover, Clause 29.15(b)(i) does not use mandatory language requiring Mr Simpson to provide an ABN. It merely warrants that the Contractor is the holder of “any” ABN in the Schedule. The Schedule part of the contract for an ABN is blank.[6] This means that no ABN has been provided for Mr Simpson to warrant.
  3. [15]
    Similarly, although Clause 29.15(b)(ii) warrants that Mr Simpson is registered, it does not require compliance as a prerequisite to the inclusion of GST under the Contract. Clause 29.15(c) is not subject to Clause 29.15(b)(ii).
  4. [16]
    Clause 29.15 is not expressed in language to prevent or fetter the inclusion of GST as the ‘Actual Cost of the Works’ under the Contract.
  5. [17]
    The question for the Tribunal was not whether as between Mr Simpson and the Commissioner of Taxation, a GST liability arises,[7] or whether Mr Simpson had in fact paid GST to the Commissioner of Taxation.
  6. [18]
    Rather, the question for the Tribunal was whether, as a matter of law, GST was included as part of the invoices under the contract. The answer to this requires consideration of the true construction of the contract as a whole.

What is the true construction of the contract about whether Ms Naylor and Mr Forward must pay GST to Mr Simpson?

  1. [19]
    Under the Contract, the Owner must pay the Contractor the ‘Total Cost of the Works’.[8]
  2. [20]
    ‘Contractor’ means the person stated in Item 2 of the Schedule.[9] The person stated in Item 2 of the Schedule is “Robert A Simpson”. Any money payable under the contract was payable to Mr Simpson personally. 
  3. [21]
    ‘Total Cost of the Works’ means the ‘Actual Cost of the Works’ plus the ‘Cost Plus Fee’.[10]
  4. [22]
    The ‘Actual Cost of the Works’ means the costs and expenses incurred by the Contractor and the Owner in the construction of the works whether paid for or not[11]  and  specifically includes all taxes and imposts imposed by authorities, including GST, legally payable on building materials or construction (my emphasis).[12]
  5. [23]
    This means that the cost of the works payable by Ms Naylor and Mr Forward included GST payable, regardless of whether Mr Simpson had in fact paid GST. As noted above, the question for the Tribunal was not whether as between Mr Simpson and the Commissioner of Taxation, a GST liability arises,[13] or whether Mr Simpson had in fact paid GST to the Commissioner of Taxation. The inclusion of GST in the definition of ‘Actual Cost of the Works’ is not expressed as dependent on Mr Simpson’s compliance with GST law.
  6. [24]
    As Owner, Ms Naylor and Mr Forward must pay the ‘Total Cost of the Works’, including GST. GST is payable on a ‘taxable supply’, including a supply of services.[14] GST is imposed on building works as a supply of services.
  7. [25]
    Mr Simpson’s invoices were rendered in the name of “R.A. Simpson Builder”. Because the ‘Total Cost of the Works’ under the contract included GST, it formed part of the invoices payable by Ms Naylor and Mr Forward. Whether or not Mr Simpson was registered for GST is immaterial to whether the contract price included GST.
  8. [26]
    The Appeal Tribunal is therefore satisfied that upon a true construction of the contract as a whole, the inclusion of GST in invoices under the Contract did not depend upon compliance with Clause 29.15 or GST law.
  9. [27]
    The Tribunal below did not err in law by ordering Ms Naylor and Mr Forward to pay an amount that included GST.

What are the appropriate Orders?

  1. [28]
    Because this is an appeal on a question of law, the Appeal Tribunal may make any order it considers appropriate,[15] including to confirm the decision[16] or set aside the decision and substitute its own decision.[17]
  2. [29]
    Having applied the relevant provisions of the contract as a whole, the Appeal Tribunal is satisfied that upon its true construction, the contract did not require compliance with Clause 29.15 or GST law to include GST in Mr Simpson’s invoices.
  3. [30]
    The Tribunal below did not err in ordering a sum based on invoices that included a component for GST.
  4. [31]
    Because no error of law had been demonstrated, the appropriate Order is to dismiss the appeal.

Footnotes

[1] Naylor and Forward v Simpson [2015] QCAT 403 at [54].

[2] Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 142.

[3]  Transcript, Day 1, pages 2 to 4.

[4]  Transcript, Day 2, pages 29 to 30.

[5]  Contract between Denise Naylor and Duane Forward as Owner and Robert A Simpson as Contractor dated 10 April 2012, Clause 29.15.

[6]  Contract Schedule, Item 2.

[7] Peet Limited v Richmond (No. 2) [2009] VSC 585 at [80].

[8]  Contract between Denise Naylor and Duane Forward as Owner and Robert A Simpson as Contractor dated 10 April 2012, Clause 11.4.

[9]  Contract, Clause 1.

[10]  Contract, Clause 1.

[11]  Contract, Clause 1.

[12]  Contract, Clause 29.2(p); and see Clause 29.15(c) specifically including GST as part of the ‘Actual Cost of the Works’.

[13]Peet Limited v Richmond (No. 2) [2009] VSC 585 at [80].

[14]A New Tax System (Goods and Services Tax) Act 1999 (Cth) ss 9.5, 9.10.

[15] Queensland Civil and Administrative Tribunal Act 2009 s 146(d).

[16]  Ibid s 146(a).

[17]  Ibid s 146(b).

Close

Editorial Notes

  • Published Case Name:

    Denise Naylor and Duane Forward v Robert Allan Simpson

  • Shortened Case Name:

    Naylor v Simpson

  • MNC:

    [2016] QCATA 87

  • Court:

    QCATA

  • Judge(s):

    Senior Member Brown, Member Hughes

  • Date:

    03 Jun 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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