Nerang Subdivision Pty Ltd v Hutson [2024] QCA 174 involved a dispute between a property developer and the owner of land regarding the application of a GST gross-up clause in a development deed.
The issue concerned whether the amount to be paid to the owner on the sale of lots to third parties was to be reduced by an additional amount representing the GST that the developer was liable to pay for its development services. At first instance (Nerang Subdivision Pty Ltd & Ors v Hutson & Anor [2023] QSC 268]) , Cooper J found in favour of the owner, because the GST gross-up clause only applied where one of the parties made a ‘payment’ to the other. The mechanism for distributing sale proceeds under the deed did not involve the owner making a payment to the developer. Instead, the sale proceeds paid by the third party purchasers were collected by the developer or its nominee; with the developer or its nominee being the one obliged to make a payment to the owner and the developer/nominee being entitled to keep the balance after making such payment. Thus, the primary judge found that there was no ‘payment’ by the owner to the developer to trigger the gross-up clause.
The developer appealed, arguing that the developer or its nominee collected the proceeds as agent for the owner, and thus when the developer retained part of the proceeds, that retention as a matter of law involved a payment by the developer/nominee as the owner’s agent. The Court of Appeal rejected that argument and upheld the primary judge’s decision.
Damian Clothier KC and Michael May represented the first respondent, instructed by Cooper Grace Ward.
The judgment can be read by clicking here
