In this important decision, Bond J considered whether a seller was entitled to insist upon its version of transfer forms (forms 1 and 24 under the Land Title Act 1994), in particular as to the amount for “consideration”. The contract was for the purchase of commercial property and was a standard REIQ contract with special conditions, one of which was that the seller would pay to the buyer on settlement, by way of an adjustment to the “balance Purchase Price payable on settlement”, an amount equivalent to outstanding lease incentives. The seller’s stated concern was that by putting as the “consideration” the amount representing the purchase price less the rental incentives, rather than the unadjusted selling price, it would be executing documents that might misrepresent the true position in relation to duty payable to the Office of State Revenue and the Registrar of Titles. Bond J held that the seller was not entitled to insist upon its version of the transfer forms and could have inserted an enlarged panel to address its concerns.
19 October 2018
The plaintiff seller and the defendant buyer entered into a contract pursuant to which the defendant agreed to purchase commercial property. . The contract was a standard REIQ contract with additional special conditions. . The recorded purchase price was $81,200,000. .
A special condition of the contract provided that at settlement, the plaintiff would pay to the defendant, by way of an adjustment to the “balance Purchase Price payable on settlement”, an amount equivalent to outstanding lease incentives in relation to extant leases affecting the property. . The value of the outstanding incentives was $2,037,364.45 at the date of the contract and $2,003,050.67 at the date of settlement. .
A dispute arose between the plaintiff and the defendant in relation to the execution of the transfer forms (forms 1 and 24 under the Land Title Act 1994). . This was because, on the defendant’s case, the plaintiff as seller refused to execute the transfer forms which had been provided to it by the defendant. . Rather, the plaintiff “made it plain that it would only execute transfer forms in the form which it provided to the [defendant]”. .
The dispute concerned whether the “consideration” in forms 1 and 24 should be recorded as the $81,200,000, or as $81,200,000 less the amount obtained after deduction of the outstanding incentives, namely, $79,196,949.34. .
The plaintiff had indicated that it was concerned about executing the documents in a way which may misrepresent the true position for duty purposes to the Office of State Revenue and the Registrar of Titles. . In essence, the plaintiff contended that the consideration was $81,200,000, while the defendant contended that the consideration which it was paying was $79,196,949.34. .
As a result of this dispute, the contract did not settle as at the agreed date and time. . The plaintiff terminated the contract for the purported breach by the defendant of failing to tender the purchase price. . The defendant alleged that it was at all times ready, willing, and able to settle and that it was prevented from so doing by the seller’s conduct in relation to the transfer forms. .
In proceedings before Bond J, the plaintiff sought declaratory relief as to the validity of its termination of the contract and its entitlement to retain the deposit. . The defendant sought a declaration that the contract had not been validly terminated and sought an order for specific performance of the contract. . The “critical question … [was] whether the [plaintiff] was contractually entitled to insist on its version of the transfer forms”. .
Bond J found that the plaintiff was not entitled to insist on its version of the transfer forms. . As his Honour explained, on the proper construction of the contract, the maximum amount payable was $81,200,000 less the rental incentive deduction. . Moreover, “[t]he [plaintiff] could have dealt with its stated concerns about misrepresentation by filling out the forms in such a way as to provide further detail about the manner of calculation of consideration payable under the contract.” .
His Honour did not purport to determine what the dutiable value of the transaction was. . Indeed, his Honour considered that the proper dutiable value under the Duties Act 2001 was a “red herring”. . In explaining why the seller was not entitled to insist on its version of the transfer forms, his Honour said:
“neither the contract nor the forms 1 and 24 themselves require that the person completing the Land Title Act forms comes to the right answer on what might be a difficult legal question concerning the application of the Duties Act. They require the provision of correct factual information.” .
His Honour added:
“Situations might arise when a person filling out one of the forms has concerns as to whether, by executing the forms in a way which another party requests they do, they might become complicit in misleading either the Office of State Revenue or someone else. Such circumstances might well call for completion of the forms by the provision of greater factual detail than simply the insertion of a number. That is one reason why the instructions for completion of the forms provide for the provision of additional detail via a form 20 ‘enlarged panel’. But the seller did not insist upon the insertion of any additional information via such a mechanism.” .
In the result, his Honour found that the defendant was entitled to a declaration that the contract had not been validly terminated. . His Honour also held that the contract should be performed, and proposed to hear the parties as to the form of any order for specific performance. .