VAT property payment ruling in conveyance case

Ref. CLP Holding Co Ltd V Singh and Kaur (2014) EWCA Civ 1103

The facts of this case are simple. On 29 August 2006 the Claimants agreed to sell to the defendants a freehold property at 72 Rolfe Street in Smethwick in the West Midlands (“the property”). Completion took place on that same day and the contract incorporated the Standard Conditions of Sale (Fourth Edition).

Condition 1.4.1 (part of the ‘general conditions’) states that ‘any obligation to pay money includes an obligation to pay any value-added tax chargeable in respect of that payment…’

Earlier in the contract within the ‘special conditions’, however, these clauses were included:

  1. The Seller [the claimant] will sell and the Buyer [the defendants] will buy the Property for the Purchase price.
  1. This Agreement incorporates the Standard Conditions of Sale (4thedition) (“the general conditions”). Where there is a conflict between the general conditions and this Agreement or the general conditions are not consistent with the express terms of this Agreement, this Agreement shall prevail. Terms used or defined in this Agreement have the same meaning as in the general conditions save as otherwise defined in this Agreement.

On appeal to the court of appeal, Judge Oliver-Jones noted there was a contradiction between the special conditions and the general conditions. In those circumstances, as clause 2 states,  the special conditions must prevail. In his summing up, he stated:

“The Deputy District Judge, in effect, concluded that there was no conflict between the Agreement [the special conditions] and the General Conditions. In my judgment he was wrong to do so (the appellant) and failed to have regard to the fact that the consideration for this transaction was clearly stated in the agreement to be £130,000. If the words ‘plus VAT’ had been added to the figure of £130,000 on the definitions-page of the Agreement which defined the purchase price, then there would have been no conflict with clause 1.4 of the General Conditions. Both the requisition on title and the transfer document submitted to the Land Registry make it clear that the consideration for the purchase was money in the sum of £130,000. Even if one were to ignore the requisition and Land Registry document, the purchase price is, as I say, defined in the agreement.”

A number of points have therefore been raised of interest to commercial conveyance specialists. Firstly, any special conditions of sale take precedence where they conflict with standard conditions. Further, purchase prices must explicitly state ‘+ VAT’ or the vendor must be prepared to be liable for that element.

The result is that the vendors of the property have been required, some 6 months after purchase, to pay a substantial VAT sum.

LCB / SJ                                                                                                                            07/10/14

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