Hard cases make bad law
Authors: Chris Camillin, Partner and Jeremy Quah, Associate
24 November 2011
The case of Central Pacific Holdings Pty Ltd –v- State of Victoria (Supreme Court of Victoria Court of Appeal decision dated 28th October 2011) concerned the purchase of the Southern Cross Hotel site in Exhibition Street Melbourne from the State of Victoria by a company owned by the government of Nauru.
Prior to the sale the purchaser acquired Southern Cross Properties Pty Ltd which was tenant of the hotel site. It therefore had assembled both possession and occupation of the land for an intended development. Southern Cross Properties Pty Ltd had already been assessed to land tax of $3,275,000 for periods prior to the sale.
The contract contained a condition that the vendor would indemnify the purchaser or any related body corporate (as defined in s.9 of the Corporations Act 2001 (Cth)) against liability for payment of any land tax assessed on the hotel site by the Commissioner of State Revenue for the period prior to the settlement date.
This clause could have meant that the land tax liability (previously payable by the purchaser) would, instead, be payable by the Vendor (ie the Victorian government).
The Court of first instance decided that the relevant special condition was ambiguous and could have meant either that the State must indemnify any related body corporate or any related body corporate nominated as purchaser. The logic behind the latter interpretation was that the indemnity clause was inserted in the contract at the same time as the definition of purchaser was extended to include related bodies corporate as defined in s. 9 of the Corporations Act 2001 (Cth) ‘…nominated by the purchaser.’ The Court considered that such an interpretation was consonant with the overall scheme of the contract.
In it’s recent decision the State Court of Appeal upheld this decision relying on the facts that the State was unaware of the acquisition of the tenant and that the purpose of the indemnity was to protect the purchaser.
Commentary
It is difficult to see how the concept of ambiguity applies in this case but the draftsman could have avoided the construction applied by the Court by words such as ‘…whether or not such related body corporate becomes the owner of the land …’
In a hypothetical case; if the purchaser’s solicitors were ‘shadow-boxing’ with the vendor and deliberately withholding knowledge of the purchase of the tenant by the vendor then the use of such words may have revealed their hand and defeated the object of the indemnity. Such a view might also explain the strained use of the concept of ambiguity by the Court at first instance and on Appeal.
For advice on drafting land contracts in Victoria and all relevant property taxes please contact Chris Camillin or Jeremy Quah at our Melbourne Office for assistance.
Chris Camillin
Partner
T: +61 3 9691 1202
E: christopher.camillin@holmanwebb.com.au
Jeremy Quah
Associate
T: +61 3 9691 1205
E: jeremy.quah@holmanwebb.com.au