New South Wales Supreme Court CITATION : Ashton v Monteleone (No 2) [2010] NSWSC 745 HEARING DATE(S) : 2 July 2010 JUDGMENT OF : Gzell J EX TEMPORE JUDGMENT DATE : 2 July 2010 DECISION : Defendants ordered to pay 80% of plaintiffs' costs. CATCHWORDS : PROCEDURE - Costs - plaintiffs successful in having contract for sale of premises partly commercial and partly residential rectified by adding to the purchase price "+ GST" - defence alleged GST not payable because not a taxable supply under A New Tax System (Goods and Services Tax) Act 1999 (Cth) as plaintiffs were not carrying on an enterprise - order made for plaintiffs to seek a private indirect tax ruling from the Commissioner of Taxation - ruling made that not a taxable supply because GST turnover and projected GST turnover did not exceed the registration turnover threshold and no GST was payable - whether there should be a discount in the plaintiffs' costs for pyrrhic victory LEGISLATION CITED : A New Tax System (Goods and Services Tax) Act (1999) (Cth) CASES CITED : Ashton v Monteleone [2010] NSWSC 258 Simonetta Ashton (First Plaintiff) Robertino Serianni (Second Plaintiff) PARTIES : Joseph Monteleone (First Defendant) Always Fresh Fruit and Vegetable Merchants Pty Limited (Second Defendant) Giampiero Serianni (Third Defendant) FILE NUMBER(S) : SC 2009/291033 COUNSEL : R Newlinds SC with P Newton (Plaintiffs) A Street SC (First and Second Defendant) SOLICITORS : ERA Legal (Plaintiffs) Garland Hawthorn Brahe (First and Second Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J FRIDAY 2 JULY 2010 2009/291033 SIMONETTA ASHTON & ANOR v JOSEPH MONTELEONE & ORS (NO 2) EX TEMPORE JUDGMENT 1 In the principal proceedings Ashton v Monteleone [2010] NSWSC 258 I gave judgment in favour of the plaintiffs, in part, on their summons and statement of claim and dismissed the cross-claim. 2 Mr Street SC, who with Mr Emmett appeared for the defendants, argues that par 16 of the amended defence put in issue the question whether goods and services tax (GST) was payable on the sale by the plaintiffs to the second defendant of property comprising a retail shop on the ground floor and residential quarters on the first floor on the basis that there was no taxable supply for the purpose of A New Tax System (Goods and Services Tax) Act (1999) (Cth). 3 In those proceedings I ordered that an application be made to the Commissioner of Taxation for a private indirect tax ruling on the question whether or not the contract for sale included a taxable supply and if so the price of it. 4 On 18 May 2010 a Deputy Commissioner of Taxation ruled that neither the first plaintiff's current GST turnover nor her projected GST turnover exceeded the registration turnover threshold at the time of the supply and hence she was not required to be registered for GST and the supply was not a taxable supply. 5 The cross-claim sought declarations that the purchase price under the contract for sale was inclusive of GST. With respect to that claim the defendants lost because, notwithstanding that a Deputy Commissioner of Taxation subsequently ruled that no GST was payable, I had formed the view that the contract should be rectified and I had rectified it by substituting for the price "$1,060,000 + GST" so that while GST was not ultimately payable it is not correct, in my view, to say that the defendants won on the issue that had been raised by them in the cross-claim. 6 The second issue in the cross-claim turned on the construction of the contract and a submission that on settlement the plaintiffs were required to pay to the defendants 1/11th of the purchase price. For the reasons set out in my judgment that issue failed. I had said that I would, and I did, dismiss the cross-claim. 7 In my view costs in respect to the cross-claim should follow the event and the cross-claimants should pay the cross-defendants' costs and I so order. 8 So far as the claim is concerned an extensive part of the evidence in the case, indeed almost all the evidence in the case, was related to the question whether rectification should be granted. I ruled that it should and insofar as that ruling was concerned the plaintiffs were successful. 9 The plaintiffs also sought declarations with respect to the amount of GST payable on settlement to which I referred in my reasons for judgment at par 69 where I said: "In addition, Ms Ashton seeks a declaration stating the amount payable upon completion of the contract excluding adjustments for rates, water usage, registration fees and land tax and a declaration that she must give Always Fresh a tax invoice in a stated amount." 10 At par 79 I said that the first plaintiff was not entitled to these declarations unless there was a taxable supply in relation to the commercial portion of the premises. I stood over further consideration of the statement of claim. 11 With respect to the declarations sought by the plaintiffs there was a failure and the question I have to consider is whether in the light of that failure there should be a different order for costs from one following the event. 12 I had taken the view in the judgment that the plaintiffs were entitled to a declaration that the purchase price was plus GST even if it turned out that no GST was payable, perhaps a pyrrhic victory, but a victory nonetheless. 13 I was referred in submissions by Mr Street and by Mr Newlinds SC, who with Mr Newton appeared for the plaintiffs, to the origin of the suggestion that a tax invoice should be made available upon settlement and the negotiations between the parties suggesting that there would be little conflict in the evidence, following an indication of what the auctioneer would say at trial, and the suggestion that the matter be settled apart from the GST issue which could be determined separately and after settlement. 14 There is no doubt that the parties approached the matter at least initially on the basis that GST was a real issue. Indeed the conduct of the proceedings was based upon that assumption for otherwise there was no need to conduct a trial with considerable cross-examination of deponents of affidavits as to what was said at the auction thereby grounding the claim for rectification. 15 I do not think that the history alters my view that with respect to the major issue whether rectification should be granted, the plaintiffs were successful. 16 It is clear that in par 16 of the amended defence, delivered shortly before the trial, the question whether GST was payable was raised. It was pleaded that the plaintiffs were not registered nor required to be registered for GST purposes because they did not carry on an enterprise. In the end, however, the ruling of the Deputy Commissioner was on a different basis. 17 Nonetheless it does seem to me that there should be some discount for the fact that the plaintiffs were not entirely successful and the victory won was a pyrrhic one. I depart from the usual order of costs following the event by ordering the defendants to pay 80% of the plaintiffs' costs of the claim. 18 I say the "defendants" because I am against Mr Street in his submission that Mr Monteleone was not a necessary party, ought not to have been joined and no order for costs ought be made against him. 19 A caveat was lodged on the 29 September 2009 by Mr Monteleone in which he claimed an equitable interest as purchaser of an estate in fee simple in the land. Furthermore, he was a party to the cross-claim. In the circumstances where the principal of the purchaser named in the contract lodged a caveat alleging that he had an estate in fee simple in the land, it was not inappropriate for the plaintiffs to have joined him in the proceedings. And that joinder seems to have been accepted by his being party to the cross-claim. 20 I therefore decline to accept Mr Street's submission. ************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.