Commissioner of State Revenue v Placer Dome Inc (Now an Amalgamated Entity named Barrick Gold Corporation)

[2018] HCATrans 25

[2018] HCATrans 025

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth    No P58 of 2017

B e t w e e n -

COMMISSIONER OF STATE REVENUE

Applicant

and

PLACER DOME INC (NOW AN AMALGAMATED ENTITY NAMED BARRICK GOLD CORPORATION)

Respondent

Application for special leave to appeal

NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 16 FEBRUARY 2018, AT 10.34 AM

Copyright in the High Court of Australia

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friend, MR B.L JONES, for the applicant.  (instructed by State Solicitor’s Office (WA))

MR N.J. YOUNG, QC:   If your Honours please, I appear with my learned friend, MR A.C. WILLINGE, for the respondent.  (instructed by Ernst & Young Law Pty Ltd)

NETTLE J:   Yes, Mr Hutley.

MR HUTLEY:   Thank you, your Honour.  At application book 187, your Honours will find the orders made by the Western Australia Court of Appeal allowing the appeal and remitting the matter to the Tribunal with detailed directions as to the further consideration of the matter.  I can pass overall for the moment down to (f).  In (f) the court identified the evidence to be relied upon and particularly in (ii) to (iv) these directions reflected the reasons which rejected the approach adopted by the Tribunal, and your Honours can see that from the Court of Appeal’s reasons, paragraph 60 at page 131.

The Tribunal’s approach, as your Honours would appreciate, had involved a top‑down exercise where the value of all property was reduced by the value of identified items of property which had been valued, the residual value being the value of all the land.  That approach followed the method which had been adopted in respect to similar legislation in Queensland in the decision of EIE Ocean BV v Commissioner of Stamp Duties [1998] 1 Qd R 36 and your Honours will see that approach identified at page 69 of the application book, paragraph 256 and particularly the passage of Chief Justice Macrossan at paragraph 260.

The Tribunal was acutely aware of the significance of taking that approach, and your Honours will see that at application book 71, paragraph 268.  That approach, we submit, was the correct approach to the exercise mandated by section 76ATI(2)(b) of the relevant legislation and your Honour will find that at application book 14 at about lines 6 and following.  That approach was said by the Court of Appeal to entail error, that error being identified by the Court of Appeal at application book 133 in paragraphs 66 to 68.

Now, section 76ATI(2)(b) is a provision in a form which is quite common in relation to what these, in effect, land‑rich corporation legislative provisions which exist throughout the country, although the actual provision in Western Australia has now a sunset date and we have referred to that in our written submissions but the amount of tax even in question, still under that provision, is vast - some $200 million.  If I could take you to the section momentarily, although your Honours are no doubt familiar with the form of this legislation and the relevant provision is:

A corporation is a land‑holder for the purposes of this Division if at the time of an acquisition of a controlling interest –

. . . 

(b)the value of all land to which the corporation is entitled, whether situation in Western Australia or elsewhere, is 60% or more of the value of all property to which it is entitled, other than property directed to be excluded by subsection (4) -

Then there are exclusions in subsection (4) which we do not need trouble you with.  Now, in our respectful submission, the true construction of that provision is an important question of provisions in that form.  The Full Court of the Federal Court in Federal Commissioner of Taxation v Resource Capital Fund III (2014) 225 FCR 290 - we have copies, we have given you a list; your Honours have them electronically - that Court was dealing with the Income Tax Assessment Act 1997 and in point of detail, section 855‑10, which your Honours will find set out at paragraph [38] in the reasons - and that was dealing with what is called “taxable Australian real property”, what are called TARP assets.  The relevant subsection was subsection (2).  It says:

A membership interest held by an entity . . . in another entity . . . passes the principal asset test if the sum of the market values of the test entity’s assets that are taxable Australian real property exceeds the sum of the market values of its assets that are not taxable Australian real property.

GORDON J:   Commonwealth drafting at its best.

MR HUTLEY:   Yes.  In substance, we say it is the same, in effect, 51 per cent of all land assets in comparison to the value of all property.  We say in substance they are the same types of provision.  The approach of the construction adopted by the court is encapsulated at the paragraph [51] on page 303 of the report. 

That question is to be answered in the statutory context and by reference to the statutory purpose for which the values are to be determined:  that is, to ascertain whether SBM’s underlying value is principally in its TARP or non‑TARP assets.  In light of the statutory context and purpose, in our opinion it is implicit that to determine where the underlying value resides in SBM’s bundle of assets, the market values of the individual assets making up that bundle are to be ascertained as if they were offered for sale as a bundle, not as if they were offered for sale on a stand‑alone basis.  The reference to –

et cetera, and it goes on.

GORDON J:   Is not your short point that you have - whether you approach it by top‑down or whether you approach it by reference to Spencer’s Case, you have certainty here because you have sold a bundle of assets for a price between the usual willing but not anxious buyers and sellers?

MR HUTLEY:   Yes.

GORDON J:   And one has then taken a step by reference to a certainty which often you do not have, by excluding from it an identifiable part of those assets to give rise to the property assets.

MR HUTLEY:   Precisely, your Honour.  But I think the Full Court – the Court of Appeal, I do apologise – took the view that, unlike the Tribunal, one had to undertake what came to be described as with respect to each asset - the mining tenements land, relevantly – what is called the restoration method.  The restoration method, which is a very curious method, essentially pretends that although you value these assets on a DCF or a capacity to ‑ ‑ ‑

GORDON J:   Generate income.

MR HUTLEY:   ‑ ‑ ‑ generate income, you then have to in effect pretend that the person who is buying the asset buys it as in effect what the Tribunal described is in mothballs, and in effect then had to go through an exercise of developing personnel, developing skills, et cetera, and starting to run the asset, and that cost and that expense had to be – any cash flow or analysis of potential cash flows had to be adjusted for that fact, and we say that is just wholly wrong.  What one is trying to do is value this land at a moment in the position that it is in the corporation that it is running as it is.  We say that was a fundamental error.

NETTLE J:   Running as it is, surely, but not as it could be run.

MR HUTLEY:   Not in an idealised sense, i.e. it is ‑ ‑ ‑

NETTLE J:   No, not as if it could be run if all the resources that are available to the vendor were immediately made available to the purchaser; rather to be valued on the basis that if the purchaser were to put together the same sort of resources with which to exploit the land, it would produce the price that he is willing to pay.

MR HUTLEY:   We are content with that exercise but that ‑ ‑ ‑

GORDON J:   Because your complaint is they took into account synergies post‑acquisition as part of the valuation.  Is that not another one of your complaints?

MR HUTLEY:   The synergies in effect became a complete and utter diversion, with respect.  The agreed position was that this ‑ ‑ ‑

GORDON J:   I think that is what we are putting to you.

MR HUTLEY:   Your Honour, can I say that was my emotive way of embracing your Honour’s proposition.  The synergies were not property; could not be property.  They are not goodwill or could not be goodwill.

GORDON J:   Well, they were not synergies that existed when the sale and acquisition took place.  They were not there.

MR HUTLEY:   Somebody might have argued that the price was increased on the purchase because of the synergies, and all that would mean is that you would have come to a different agreement as to the property value.  The parties were agreed it was $12 billion, so the synergies, whatever they were, were an utter irrelevance; always were.  Now, then our position was - so we said the proper thing is a top‑down approach and not the ‑ ‑ ‑

NETTLE J:   Why are you so keen on that?  You can come either way, according to your argument, can you not?

MR HUTLEY:   Your Honour, what we are saying is - I do that for this reason.  I am not particularly concerned by the top‑down approach because it really all leads to one great point.  Is there any goodwill ‑ ‑ ‑

NETTLE J:   Yes.

GORDON J:   Yes.

MR HUTLEY:   ‑ ‑ ‑ in this organisation and that is what I was coming to.

NETTLE J:   If so, how much of it adheres to the land as opposed to anything else.

MR HUTLEY:   Exactly, and because of the court’s approach to this mothballing, that, in effect, would direct them to find goodwill being the time value of this notional build up.  It is not goodwill, of course.  It would not be goodwill even if you found that because it is a different sort of character.  It is not the attractive capacity of the business.  It is an ‑ ‑ ‑

GORDON J:   Well, there was no evidence about that, was there anyway?

MR HUTLEY:   Well, no, there was no evidence about it but, in effect and as a matter of principle it could not be that cost whatever it is, goodwill.  It has no attractive capacity in respect of this business and one of the issues we say at the heart of this case is this was a mining company which in effect, mined and sold doray - doray is semi‑refined gold.  It is into an international market.  Customers are utterly indifferent where they get it from.  The company is a price taker and we say in that circumstance, what was said by this Court at paragraph 51 in Murry is completely apposite.

The Court of Appeal went wrong because they failed to appreciate that whilst Murry clearly says the old law about attracting - keeping old customers is not the universe of goodwill, non constat, the goodwill does not centrally involve the attraction of custom.

GORDON J:   Well, it was saying there are a number of sources of goodwill.

MR HUTLEY:   Quite, but at the heart of goodwill, we say, the heart, a company does not have goodwill if it does not have something that attracts custom, just does not have it.

GORDON J:   Well, if goodwill is taken to be the extent to which it exceeds the norm ‑ ‑ ‑

MR HUTLEY:   Quite.

GORDON J:   But that is a consideration and here that is not been the analysis that has been undertaken, is your point.

MR HUTLEY:   Exactly, and we say, if one got tied up here in looking at what accountants were doing, and the accountants in effect - one of the problems with gold mining is that nobody - and there is quite a bit of evidence about DCFs into goldmining and how difficult they were and how hard they were to predict and it all depends upon the inputs and there are uncertainties as to how much is under the ground and all this material.

Now, our position, which was rejected at paragraph 8 in the Court of Appeal which the court dealt with at application book 168, paragraphs 180 to 183, our submission was the battle over the discounted cash flows was again a complete diversion.  What you have to ask yourself is identify property and the fundamental question is was there anything which indicated as a matter as a principle there was goodwill in respect of this company.  We say on analysis this case was a locus classicus of what the Court was referring to in Murry at paragraph 51. 

Now, the Court in a sense in its analysis of Murry failed to appreciate that - if you go to Murry, if I can take your Honours momentarily to it.  Perhaps the clearest statement of the approach of the Court in Murry to the difficult question is in the joint judgment at paragraph 20.  After referring to what was said by Judge Swan in the United States, in which he said, at 19:

“A going business has a value over and above the aggregate value of the tangible property employed in it.  Such excess of value is nothing more than the recognition that, used in an established business that has won the favour of its customers, the tangibles may be expected to earn in the future as they have in the past.  The owner’s privilege . . . 

This definition comes close to achieving a synthesis between the legal, accounting and business definitions of goodwill.  But it cannot be regarded as exhaustive.  A business may have goodwill for legal purposes . . . Once the courts rejected patronage as the touchstone of goodwill in favour of the “added value” concept, it might seem impossible for a business to have goodwill for legal purposes when its value –

et cetera, and goes on.  What we say is the Court thought that the - this Court was saying that the goodwill no longer involved the attraction of custom.  It was a much broader and different form of concept and we say, properly analysed, the attraction of custom still lies at the very heart of goodwill.  That is the very reason why at paragraph 51 – I see I am on orange and I will be short:

Where the goodwill of a business largely derives from using an identifiable asset or assets, the goodwill of the business, as such, when correctly identified, may be of small value.  That is because the earning power of the business will be largely commensurate with the earning power of the asset or assets.

GORDON J:   Is that not in a sense what Justices Isaacs and Rich said in Lazarus which is set out in paragraph 40 of Murry?

MR HUTLEY:   Yes, precisely, and that is what we say is – and one had to - instead of going as the court did, to the fact that they had 13,000 employees, et cetera, is analysing the true nature of a business which in effect sold doray, and that was our case, and a true analysis of that is

nobody cares where it comes from.  It is completely fungible.  Those are our submissions, if your Honours please.

NETTLE J:   Thank you, Mr Hutley.  Mr Young.

MR YOUNG:   May I ask the Court to go to the two special leave questions at page 191 of the application book, paragraphs 8 and 9.  In our submission, neither of those questions arises, having regard to the way in which the case was decided and conducted at both levels below.  The first point has not been mentioned by my learned friend orally.  It is an attempt to move away from Spencer Case valuation which was the agreed basis on which the case proceeded. That is apparent from application book 51 in the Tribunal, paragraphs 155 to 157, and at page 116 in the Court of Appeal, paragraph 15. 

The Tribunal could not have been clearer at paragraph 157, that the common basis on which the parties approached the matter and the evidence and the arguments was that it was the value in exchange and not the value in use which is to be ascertained.  So the first special leave question is a departure from the way in which the case was conducted.  The second special leave question is the goodwill point that my learned friend has centrally relied upon. That question does not arise.  It is extraneous to the statutory question and on the facts here, where there was direct valuation evidence as to the value of the land the value of goodwill was irrelevant to the statutory question.

So there is no question of legal principle in the case concerning goodwill and it does not arise in the face of the statutory question.  My learned friend took your Honours to the statutory question.  Can I elaborate our response to that?  What it requires is an ascertainment of whether the value of Placer’s land was greater than 60 per cent of the value of all of its property and the value of all of its property was agreed as being the enterprise value disclosed by the takeover price. 

So there was no issue about the value of total property.  The question was what was the value of the land and the value of the land was, on the evidence, valued directly.  There was no need to have recourse to some concept of goodwill and no need to attempt to apply any specific value to goodwill.

Both levels below recognised that; both said that no provision of the Act requires the attribution of any value to goodwill.  In the Tribunal, page 88, paragraph 354, second sentence of paragraph 354, the Court of Appeal made observations to the same effect - firstly, at paragraph 74 and then at 181, 244.  Paragraph 181 is at page 168 in the judgment of the Chief Justice.

NETTLE J:   Are we at 181 now?

MR YOUNG:   Paragraph 181, yes, your Honour, please, towards the bottom of page 168 of the application book:

neither s 76ATI of the Act nor this case are concerned with the valuation of goodwill.  The only live issue under the section, and in the proceedings before the Tribunal, was the value of PDI’s land assets.  All the valuers used DCF methodology to value those land assets.  The price adopted in the application of that methodology was critical to the valuations -

That was how the case was approached, conducted and decided.  The restoration evidence mentioned by my learned friend was not relied upon by the Tribunal as a basis for decision, nor by the Court of Appeal, so that is an irrelevant incidental observation.

Now, as to direct land valuations, there were direct land valuations advanced by experts on both sides.  Both judgments record that all of the valuers agreed that the critical difference between the valuations was the choice of gold prices to use in valuations.  The Tribunal said that at page 82, paragraph 323.  The Court of Appeal said it at paragraphs 14 and then 181 and 185.  It is worth looking at the latter.  Paragraph 181 is at page 168 and I have taken the Court to that, but can I refer to 185 as well, paragraph 185 at page 169.

Mr Lonergan, the only expert that was taken into account by the Tribunal from the Commissioner, used a gold futures price, which was a price only available for a short term of between 12 and five years.  Thereafter, he escalated prices year by year by two per cent every year into the future.  So, over the period of the DCF he had an ever increasing gold price.  That is what the Court of Appeal or Chief Justice there refers to.  Further, the Commissioner conceded that that gold futures price:

was not an estimate of the price at which gold would be sold in the future –

and it assumed inevitably and inexorably rising prices of gold.  Now, it is invalid to use in a DCF valuation in those circumstances.  It is not a price upon which you can base future projections of cash flows because, as the Commissioner conceded, it is not an estimate of the price at which gold would be sold in the future. 

Now, it was rejected by the Court of Appeal but accepted by the Tribunal, that is to say, Mr Lonergan’s gold futures price.  The Chief Justice lists a whole series of reasons for rejecting it on the evidence at paragraph 178 at page 167.  I invite the Court to run its eye down the bullet points at the foot of page 167, and all of that is a summary of the detailed evidence that the Chief Justice reviews.

So, gold futures prices were rejected as a matter of evidence.  There was no other course open, having regard to the Commissioner’s concession, that they could not be a basis for future cash flow projections.  Now, that was the direct evidence of the value of the land.  All you had to determine under the section was the value of the land.  Goodwill was irrelevant.  It might become relevant if for some reason you could not directly determine the value of the land, but that was not the way in which the case was conducted or decided.

What position are we now in?  The Commissioner does not seek to defend Mr Lonergan’s gold future prices.  The Commissioner does not seek to defend the rejection of the Commissioner’s valuations.  The argument advanced in writing is to this effect:  gold prices are of no moment.  Today orally Mr Hutley dismissed the land valuations on the basis that the DCFs were irrelevant.  That was the decisive basis for the resolution of the case below and goodwill was a divergence from the statutory question. 

For those reasons, no question of principle arises concerning goodwill and, in any event, having regard to the way in which the case was conducted and decided below where the direct valuations were decisive, this case would not be a suitable vehicle to reconsider Murry’s analysis of the precise ingredients of goodwill.

There are some further reasons for considering that goodwill does not raise any special leave point.  The central issue advanced – and it is spelt out in the reply in no uncertain terms at paragraph 1 – is that no mining company selling an homogeneous product such as gold can ever have legal goodwill of material value, and that is linked to the concept of repeat customers.  Now, that is not a principle of law.  It is one witness’ generalised hypothesis, namely, Mr Lonergan.

Both levels below, the Tribunal and the Court of Appeal, described it as one witness’ generalised hypothesis - the Chief Justice at 104 and 107 to 109 and 111, the Tribunal at 378.  Neither decision‑maker below accepted that proposition as a basis for the decision.  Can I turn to the Tribunal at page 92, paragraph 378?  This is the decisive passage about goodwill in the Tribunal:

It is unnecessary for me to make any finding on the correctness or otherwise of Mr Lonergan’s statement that a mining company will not have any material goodwill.

Rather, the basis for making the decision was an evidentiary one where the Tribunal says in the preceding paragraph in relation to goodwill:

there is no evidence to support that submission.

So, the Tribunal determined the goodwill matter as a matter of fact and evidence in the particular circumstances of the case.  In truth, it will always be a question of fact in every case whether a mining business has goodwill of a substantial extent or a lesser extent or whatever it may be because goodwill on both parties’ cases is whatever adds value now or in the future to the business. 

Your Honour Justice Nettle’s observation is correct.  It is a question of whether all of the positive advantages of the business – processing, techniques, workforce expertise and so forth – can be applied to the location of future assets and their exploitation in a way which will generate ongoing profits into the future.

That is part of the positive advantages that constitute goodwill, so by definition it cannot be limited to, and the whole value of goodwill cannot be loaded into the presently existing land assets.  That is anathema to the concept of goodwill as explained in Murry in a respect not questioned by our learned friends.

NETTLE J:   But you say the question does not arise in any event?

MR YOUNG:   We do, your Honour, yes.

NETTLE J:   It is one value in place of another on the basis of the gold prices selected?

MR YOUNG:   Yes, definitely.

NETTLE J:   That is the end of the case?

MR YOUNG:   Yes, and to complete the picture about goodwill being evidentiary, the Court of Appeal overturned the finding that there was no evidence.  It concluded there was ample evidence of substantial goodwill and the Chief Justice reviewed all of that evidence and Justice Murphy made observations to the same effect.  So, goodwill in this case was rejected as not being relevant to the statutory question, a diversion and, in any event, the whole debate to the extent it was relevant about goodwill, turned on evidentiary findings. 

So, for those reasons, in our submission, there is no point of principle concerning goodwill.  It was no basis of the decision below and this case would, on any view of things, not be a suitable vehicle to reconsider any aspect of the Murry decision.

Can I say something very briefly concerning the top‑down methodology?  That is also a factual issue in the way it was addressed by the Court of Appeal, and I will explain why that is so.  But it is a distraction from the statutory question and it raises no issue of legal principle either.  It is a distraction from the statute because the only task is to ascertain whether the value of all land is greater - on the agreed facts about total property - is greater than $7.68 billion.  That was the only question.  Where land has been valued directly, there is no need or occasion to resort to an indirect means of valuation which would only be available if you can ascribe a precise value to every positive advantage which lends added value to the ongoing enterprise.

If you cannot do that, then the top‑down method is a fallacious methodology, and that is exactly what the Chief Justice said at pages 129 to 131.  After referring to EIE at page 129, at 57 the Chief Justice contemplated the potential availability of top‑down but, as his Honour said at page 130 at the top, in some cases:

that task is not practicable or feasible.  This is such a case -

on the facts and his Honour went on to explain why, being the same reason given by the Full High Court in Murry, that is, where the value – I am looking at the line which has a reference to Spencer’s Case, where:

value attributed to components or attributes of the business which do not correspond to specific assets or identifiable items of property –

top‑down is not available, in effect.  So, the rejection of top‑down was on the facts.  It was simply not feasible on the facts of the case because the total business value was sourced in attributes that were not specific value, that were not specific assets that could not be separately valued. 

That explains why Murry was correct to say that for a profitable business, goodwill is conventionally and appropriately valued by a residual method.  But all of that really is beside the point for the reasons I have already given.  Now, for those reasons, the precise debate about what is meant by “custom” in Murry and what distinction is drawn when Murry rejected patronage as a basis for goodwill and said goodwill embraces every positive advantage that adds value, is not really a debate that can sensibly be had in the facts and circumstances of this case.

As to that point, we would say that Murry clearly uses “custom” in a broad sense, not to refer to repeat customers because patronage was expressly rejected but to refer to the generation now or in the future of earnings or earning power by virtue of the range of positive advantages of the business, seen as a whole.

NETTLE J:   Thank you.

MR YOUNG:   Now, for those reasons, if the Court pleases, we say this case does not throw up any special leave question.  The applicant’s arguments are not assisted by the Federal Court decision in Resource Capital Fund.  It was concerned with a different statutory scheme.

NETTLE J:   Mr Young, I see you are out of time.

MR YOUNG:   Yes, your Honour.

NETTLE J:   Thank you.

MR YOUNG:   If your Honour please.

NETTLE J:   Any reply, Mr Hutley?

MR HUTLEY:   Just shortly, your Honour.  The Court of Appeal did, we submit, adopt the restoration method.  That appears from page 133 of the book at paragraph 66 and is reflected - that is why I commenced and my learned friend did not address this, paragraph (f)(ii) and (iii) on page 180, which is what, in effect, that substantially involves.

The Tribunal found, as our learned friends took you to, that there was in fact no goodwill and we say they found that there was no goodwill because they found no evidence of attractive force.  That is at application book 91, paragraphs 376 to 377.  Our learned friend says the questions do not arise but it was this very debate which we are having here, and we say is for this Court, was the subject of the submissions at paragraphs 179 to 182 which was dealt with at application book 168.

NETTLE J:   But Mr Young is right, is he not, in saying that at first instance before the Tribunal the case was run on the basis and decided by reference to the competing valuations.

MR HUTLEY:   Yes, I accept that but it was debated in the Court of Appeal and accepted.  There has to be material error in the Tribunal.  What the case was run in the Court of Appeal, and that is what appears in 176 and following, the valuation, the DCFs do not matter.  They do not matter because if you analyse what this company is, properly in terms of what this Court said in Murry, there is no goodwill.

Therefore, since there was an agreement as to the value, the 12 billion, and all specific assets were identified and some were counted up and some were retracted, the only thing which could be left which was property was the land.  The only other thing, no one ever identified any other thing which could exist as property beyond the land or goodwill.  That is why goodwill became important.  That is why the Court of Appeal spent many pages debating whether there was goodwill because our learned friend’s case was this was $12 billion worth of property, $6 billion was real land and the rest was goodwill. 

That is what their case was; that is, that there was an agreed valuation and I will just get you the reference to that.  Our learned friend’s case was that the property was worth $12 billion, about $6 billion was land and the rest was goodwill.  So, the issue before the Court was, true it is it was the land but fundamental to that exercise was that whatever was not land would have to be goodwill.  I will just find out the reference.  I do apologise, I have lost that momentarily.

NETTLE J:   I do understand that the Chief Justice went to a great deal of trouble analysing the elements of goodwill as he conceived of them but as Mr Young points out, at paragraph 181 of the Chief Justice’s judgment, he made the point which it appears to me at least at the present, that the other judges agreed with, that the only live issue was the value and that value of goodwill was not an issue.

MR HUTLEY:   Quite, because if your Honour goes paragraph 167 at trial at page 54 ‑ ‑ ‑

NETTLE J:   Yes.

MR HUTLEY:   ‑ ‑ ‑ I found it:

The Commissioner says that the difference between the two parties in this matter is not about the total value of Placer Dome’s property.  The essential contest arises from each party’s account of the property owned by Placer Dome immediately before its takeover by Barrick.  While the applicant contends that it owned goodwill with a value of more than $6 billion –

The applicant’s case was ‑ ‑ ‑

NETTLE J:   Granted.  I understand that but the matter at trial, at least at the Tribunal hearing, was decided upon the basis of direct valuation of the tenements by the two valuers.

MR HUTLEY:   That was the evidence which was put.  An argument was put that because the company cannot have goodwill the top‑down method ‑ ‑ ‑

NETTLE J:   Put aside the top‑down method.  Did it play any part in the final determination of the value at the Tribunal?

MR HUTLEY:   No, the Tribunal found actual value but their case as run was also a case which was also run in the Court of Appeal that there could not be goodwill.

NETTLE J:   I see we are out of time but the Tribunal decided on the value of direct valuation.

MR HUTLEY:   Quite.

NETTLE J:   In issue before the Court of Appeal inter alia was the question of whether the gold price used by Mr Lonergan was aberrational.

MR HUTLEY:   I accept that, your Honour.

NETTLE J:   It was held that it was.

MR HUTLEY:   But also an alternate argument was put there is no ‑ ‑ ‑

NETTLE J:   Yes.

MR HUTLEY:   Sorry.

NETTLE J:   Sorry, was the result then, in the Court of Appeal, anything other than that the valuation is that to which one would come by direct valuation by the application of the proper gold values which the Commissioner ultimately conceded.

MR HUTLEY:   Yes, but your Honour, there was always an argument put and that is the argument which was advanced at – which I took your Honours to.  The DCFs do not matter because the only thing that can be other than land value according to the other side was goodwill and therefore, if there cannot be goodwill, the…..land must be $12 billion.

NETTLE J:   I follow, but in the end it was valued on the basis of DCF, was it not?

MR HUTLEY:   Quite.  But we say that we can run in the appeal the alternative argument we were putting there to show that the result at first instance was not incorrect.

GORDON J:   Is that because of what is set out at 377 to 380 of the Tribunal at page 92?

MR HUTLEY:   Yes.  I was going to say that one deals with that – there was a debate and a finding about that very matter.  So all we were saying is an alternate argument in the Court of Appeal – forget about the DCFs.  Since the other side’s contention that whatever was there other than the land value was goodwill, if there cannot be goodwill ‑ ‑ ‑

GORDON J:   Then the balance has to be value to land.

MR HUTLEY:   Has to be value to land, and that is why we said the Murry point raised directly, and we accepted there was – and they rejected Lonergan and we said, as we put at first instance, it does not matter because unless – and that is why the finding at first instance by the Tribunal is that there is no goodwill.

NETTLE J:   So your argument in the Court of Appeal was reject the taxpayer’s valuer because you can see by reference to an absence of goodwill that it is wrong?

MR HUTLEY:   Yes, all we ‑ ‑ ‑

NETTLE J:   It is a factual question, is it not?

MR HUTLEY:   Well, with respect, no.  We say if we are right as a matter of principle on the evidence before this Tribunal that what was in this company - there could not be goodwill, then, on the way the case was run, this had to be land.

GORDON J:   Is the argument in a sense picking up Mr Young’s point that this question is irrelevant to the statutory question, the question of principle, that is, does the statute itself dictate that you cannot undertake this top‑down approach?

MR HUTLEY:   No.  My learned friend does not say that you cannot.  He says you can, as long as you can identify with precision the property.  We say – we embrace that, and if we can say that there cannot be any substantial goodwill, all the properties as identified ‑ ‑ ‑

GORDON J:   Well, I do not know about that.  He says that goodwill is irrelevant to the top‑down approach.  That is the way I understood his submission.

MR HUTLEY:   But, with respect, I think goodwill was irrelevant to the choice of the top‑down approach, but it seems that having regard to the fact that their case was that everything that is not property – land, is goodwill ‑ ‑ ‑

GORDON J:   Your argument is, “If I can identify there’s no goodwill, I don’t need to go to the expense of valuing the land”.

MR HUTLEY:   Quite, or – and I can take your Honours to the detail.  There was a battle about a thing called the NAV multiple.  In goldmining, people in effect do DCFs and then multiply the result – many people – by a multiple because there are so many uncertainties with goldmining.  You do not know how much is under there.  You do not know in effect ‑ ‑ ‑

NETTLE J:   You are out of time.

MR HUTLEY:   Yes, your Honour, I have gone over time.

NETTLE J:   Thank you.  The Court will adjourn briefly to consider this matter.

AT 11.21 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.24 AM:

NETTLE J:   In this case there will be a grant of special leave.  What is your estimate of time, Mr Hutley?

MR HUTLEY:   There may be some little – a day, your Honour.  It can be dealt with in a day.

NETTLE J:   Do you agree with that, Mr Young?

MR YOUNG:   Yes, roughly a day, your Honour.

NETTLE J:   The parties will need to consult with the Registry as to the steps to be taken.  Thank you, gentlemen.

AT 11.24 AM THE MATTER WAS CONCLUDED