Commissioner of State Revenue (WA) v Placer Dome Inc - [2018] HCA 59

HIGH COURT OF AUSTRALIA
KIEFEL CJ,
BELL, GAGELER, NETTLE AND GORDON JJ
COMMISSIONER OF STATE REVENUE APPELLANT
AND
PLACER DOME INC (NOW AN AMALGAMATED
ENTITY NAMED BARRICK GOLD
CORPORATION) RESPONDENT
Commissioner of State Revenue v Placer Dome Inc
[2018] HCA 59
5 December 2018
P6/2018
ORDER
1. Appeal allowed.
2. The Order of the Court of Appeal of the Supreme Court of Western Australia made on 11 September 2017 be set aside and, in its place, it is ordered that the appeal to that Court be dismissed with costs.
3. The respondent pay the appellant's costs of this appeal.

On appeal from the Supreme Court of Western Australia
Representation
N C Hutley SC with B L Jones for the appellant (instructed by State Solicitor's Office (WA))
N J Young QC with A C Willinge for the respondent (instructed by Ernst & Young Law Pty Ltd)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS
Commissioner of State Revenue v Placer Dome Inc

Stamp duties – Land-holding corporations – Acquisition of controlling interest – Whether corporation a "listed land-holder corporation" within meaning of Pt IIIBA of Stamp Act 1921 (WA) – Whether value of land to which corporation entitled 60 per cent or more of value of property to which it was entitled – Valuation methodologies – Whether corporation had legal goodwill – Meaning of legal goodwill – "Added value" approach to goodwill considered – Going concern value and goodwill distinguished.
Words and phrases – "acquisition", "assessment", "controlling interest", "custom", "discounted cash flow methodology", "going concern value", "goodwill", "listed land-holder corporation", "net asset value multiple", "property", "sources of goodwill", "stamp duty", "synergies", "top down".
Stamp Act 1921 (WA), Pt IIIBA.
Taxation Administration Act 2003 (WA), ss 34, 37, 40.
State Administrative Tribunal Act 2004 (WA), s 29.

KIEFEL CJ, BELL, NETTLE AND GORDON JJ. Part IIIBA of the Stamp Act 1921 (WA) was introduced to prevent duty on transfers of land being avoided through schemes that involved the use of corporate structures and share sales. The purpose of the Part is to equalise duty in relation to conveyances of land so that the duty is the same whether the land is conveyed directly or as a result of a transfer of shares[1]. The Part ensures that the buyer of an entity will be subject to ad valorem duty if the entity's underlying value is principally derived from land.
[1]Commissioner of State Taxation v Nischu Pty Ltd (1991) 4 WAR 437 at 439-440, 448-449, 457; Commissioner of State Revenue v OZ Minerals Ltd (2013) 46 WAR 156 at 179 [108], 207 [286].
This appeal concerns one aspect of Pt IIIBA, Div 3b, which deals with "listed land-holder corporations". A listed land-holder corporation is an entity[2] entitled, at the time of acquisition, to land in Western Australia with an unencumbered value of not less than A$1 million and where 60 per cent or more of the value of all of its property[3] is land (regardless of the location of that land)[4].
[2]The entity must be a body corporate that is registered or incorporated outside Western Australia and is listed on a recognised financial market: s 76ATI(1) of the Stamp Act.
[3]Other than excluded property, being property defined in s 76ATI(4) of the Stamp Act as including, amongst others: cash or money in an account at call; negotiable instruments; rights or interests under a sales contract; money lent by the corporation or a trustee or a related corporation referred to in s 76ATI(6) to various defined persons; licences, patents or other intellectual property relating to, relevantly, the exploitation of minerals; stores, stockpiles or holdings of minerals or primary products (whether processed or unprocessed) produced by the corporation or a related person; and future tax benefits.
[4]s 76ATI(2) of the Stamp Act.
Placer Dome Inc ("Placer") was a substantial gold mining enterprise[5] with land and mining tenements around the world, including in Western Australia. In 2005, Barrick Gold Corporation ("Barrick") was the second largest global gold mining enterprise[6] assessed by market capitalisation and gold reserves, and the third largest by gold production. Barrick announced a hostile, and ultimately successful, takeover of Placer. The acquisition was the largest transaction of its kind in the gold industry. When Placer and Barrick were amalgamated in May 2006, the amalgamated entity became the world's largest gold mining business.
[5]Placer was listed on the Toronto, New York and Australian Stock Exchanges, amongst others.
[6]Barrick was listed on the Toronto and New York Stock Exchanges, amongst others.
After Barrick acquired a controlling interest in Placer[7], the Commissioner of State Revenue ("the Commissioner") issued an assessment to Barrick under the Stamp Act which stated, relevantly, that Placer was a "listed land‑holder corporation" and ad valorem duty of A$54,852,300 was payable. Barrick objected[8], the Commissioner disallowed the objection, and Barrick applied to the State Administrative Tribunal[9] for a review of the Commissioner's decision to disallow the objection.
[7]Within the meaning of s 76ATK(2) of the Stamp Act.
[8]Under s 34(1) of the Taxation Administration Act 2003 (WA).
[9]Under s 40(1) of the Taxation Administration Act 2003 (WA).
Whether Placer was a "listed land-holder corporation" caught by Div 3b of Pt IIIBA of the Stamp Act turned on a single issue – did the value of all of Placer's land, regardless of its location, meet or exceed 60 per cent of the value of all of Placer's property, namely 60 per cent of $12.8 billion ($7.68 billion)[10].
[10]All references are to US dollars except where noted.
Section 76ATI(2)(b) of the Stamp Act required a comparison to be drawn, at the date of acquisition, between the value of all the land to which Placer was entitled and the value of all the property to which Placer was entitled, other than certain excluded property.The statutory purpose for which the values were to be determined was to ascertain whether Placer's underlying value was principally in its land or non-land assets.
In undertaking that statutory valuation exercise, the parties did not agree on the valuation methodology to be used or whether the value of all of Placer's land met or exceeded the 60 per cent threshold. A key question was whether Barrick was correct to contend that the property of Placer, prior to its acquisition by Barrick, included goodwill with a value of $6.506 billion. If it did, then the value of Placer's land was less than the 60 per cent threshold.
The Commissioner contended that a "top down" valuation method should be adopted. A "top down" approach is a shorthand description of a valuation methodology which starts with the value of the total property, before subtracting the value of assets which are not land, in order to produce a residual value which is then attributed to land[11]. Adopting that methodology, the Commissioner contended that immediately before Placer's acquisition by Barrick, Placer had no material property comprising goodwill with the inevitable result that the value of Placer's land exceeded the 60 per cent threshold.
[11]See EIE Ocean BV v Commissioner of Stamp Duties [1998] 1 Qd R 36 at 38, 44‑45.
Barrick disagreed. It contended that Placer's land should be valued directly, using a discounted cash flow ("DCF") methodology, and that the resulting valuation of Placer's land was less than the 60 per cent threshold. Barrick further contended that even if a "top down" approach were adopted, the result would be no different because, immediately before the acquisition, Placer owned property being goodwill with a value of more than $6 billion.
The Tribunal dismissed Barrick's review application. The Tribunal concluded that, for the purposes of the Stamp Act, the value of Placer's land should be determined by adopting the "top down" method[12]; that the value of Placer's land was the residual of calculating the value of all of Placer's property less the value of its non-land assets[13]; and, further, that Placer's assets did not include any material legal goodwill[14].
[12]Placer Dome Inc (Now an amalgamated entity named Barrick Gold Corporation) and Commissioner of State Revenue [2015] WASAT 141 at [256]-[262], [265].
[13]Placer [2015] WASAT 141 at [265].
[14]Placer [2015] WASAT 141 at [377], [379].
Barrick appealed to the Court of Appeal of the Supreme Court of Western Australia. The Court of Appeal allowed Barrick's appeal on the basis that the Tribunal had failed to distinguish between the value of Placer's land and the value of its business as a going concern. The Court of Appeal held that Placer's land should be valued using the Spencer[15] valuation principles; that the "top down" method was unsuitable because Placer's non-land assets, including goodwill, could not be valued with any accuracy; and, further and in any event, that Placer had a substantial amount of legal goodwill[16].
[15]Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82.
[16]Placer Dome Inc v Commissioner of State Revenue (2017) 106 ATR 511 at 526 [57], 527 [60], 533 [91], 534 [95].
For the reasons that follow, the Commissioner's appeal should be allowed. A "top down" method was appropriate. At the date of acquisition by Barrick, Placer had no material property comprising legal goodwill. Placer was a land rich company. For the purposes of the statutory valuation exercise, Barrick did not establish that the value of all of Placer's land, as a percentage of the value of all of Placer's property, did not meet or exceed the 60 per cent threshold. Moreover, Barrick's contention that goodwill for legal purposes was or should be treated as synonymous with what it described as the "added value" concept of goodwill or "going concern value" should be rejected.
Statutory framework
In assessing value, the starting point is the particular statutory scheme. That scheme provides the legal context in which the valuation exercise is to be undertaken and that context determines the relevant principles of valuation to be applied[17].
[17]Federal Commissioner of Taxation v Resource Capital Fund III LP (2014) 225 FCR 290 at 302 [47] citing Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 and quoting Leichhardt Council v Roads and Traffıc Authority(NSW) (2006) 149 LGERA 439 at 447 [35]‑[36].
Where a person acquires a controlling interest in a listed land‑holder corporation, the corporation is obliged under the Stamp Act to lodge a dutiable statement with the Commissioner in respect of that acquisition[18]. A dutiable statement is chargeable with duty at a specified rate[19] – here, on the basis of the unencumbered value of the land and chattels in Western Australia to which the relevant corporation was entitled at the time of the acquisition[20].
[18]s 76ATG(1) of the Stamp Act. Section 76AB(1) provides that a person may, within two months after making an acquisition, request the Commissioner to determine whether a dutiable statement is required to be lodged. Placer made such a request and the Commissioner made a determination under s 76AB(3).
[19]s 76ATH of the Stamp Act.
[20]s 76ATL of the Stamp Act.
The statutory valuation exercise requires a comparison to be drawn, at the date of acquisition, between the value of all the land to which the corporation is entitled and the value of all the property to which the corporation is entitled, other than certain excluded property[21].
[21]s 76ATI(2)(b) of the Stamp Act.
A number of aspects of that statutory valuation exercise should be noted. The statutory context, and the purpose for which the values are to be determined, is directed to ascertaining whether an entity's underlying value is principally in its land or non-land assets. The valuation must take into account, and be consistent with, the relevant statutory definition of "land". That definition includes mining tenements, and also includes any interest or estate in land, or anything fixed to the land "including anything that is, or purports to be, the subject of ownership separate from the ownership of the land"[22].
[22]s 76(1) of the Stamp Act.
Next, in determining the value of all land and all property to which a corporation is entitled[23], the "ordinary principles of valuation" are to be applied[24]. There was no dispute that the "ordinary valuation principles" were those stated in Spencer: the value is the price which a hypothetical willing but not anxious seller could reasonably expect to obtain and a hypothetical willing but not anxious buyer could reasonably expect to pay after proper negotiations between them have concluded and without overlooking any ordinary business consideration[25].
[23]For the purposes of s 76ATI(2)(b) of the Stamp Act.
[24]s 33(1)(c) of the Stamp Act.
[25](1907) 5 CLR 418 at 441.
And there was no dispute that those ordinary valuation principles required both the seller and the buyer to be taken to be "perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property"[26].
[26]Spencer (1907) 5 CLR 418 at 441.
However, the Stamp Act modified the application of the ordinary valuation principles to the valuation of both land and property in two important respects. First, when applying the ordinary valuation principles, s 33(1)(c) of the Stamp Act stated that specific assumptions were to be adopted – relevantly, that:
"(i)… a hypothetical purchaser would, when negotiating the price of the land or other property, have knowledge of all existing information relating to the land or other property; and
(ii)no account is to be taken of any amount that a hypothetical purchaser would have to expend to reproduce, or otherwise acquire a permanent right of access to and use of, existing information relating to the land or other property."
Second, the Stamp Act stated that particular property was not to be included in the statutory valuation exercise[27]. One category of excluded property was "a licence or patent or other intellectual property (including knowledge or information that has a commercial value) relating to any process, technique, method, design or apparatus to … locate, extract, process, transport or market minerals"[28].
[27]s 76ATI(4) of the Stamp Act.
[28]s 76ATI(4)(f)(i) of the Stamp Act.
In the valuation of both land and property for the purposes of the Stamp Act, there were therefore two interconnected requirements – an assumption that a hypothetical purchaser knew how to exploit the land and property and that the value of knowledge comprising intellectual property was excluded. It will be necessary to return to consider these requirements later in these reasons.
Earlier authorities
Before turning to the particular circumstances of this appeal, it is necessary to say something further about the significance of the statutory context.
Consistently with a number of decisions of this Court[29], the Tribunal correctly stated that ordinary principles of valuation suggest "true value" is that which lies between the most the buyer is willing to pay and the least the seller is willing to accept – the price which a hypothetical willing but not anxious vendor could reasonably expect to obtain and a hypothetical willing but not anxious purchaser could reasonably expect to pay after proper negotiations between them have been concluded[30]. However, this Court has recognised the need for caution when taking valuation principles identified in one context and seeking to apply them to a different context[31].
[29]Spencer (1907) 5 CLR 418 at 441; Perpetual Trustee Co (Ltd) v Federal Commissioner of Taxation (1942) 65 CLR 572 at 579; [1942] HCA 4; Abrahams v Federal Commissioner of Taxation (1944) 70 CLR 23 at 29; [1944] HCA 32; Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 at 367; [1947] HCA 10; Executors of Estate of Crane v Commissioner of Taxation (Cth) (1974) 49 ALJR 1 at 2; 5 ALR 38 at 41.
[30]Placer [2015] WASAT 141 at [156]-[157].
[31]See Commissioner of Succession Duties (SA) (1947) 74 CLR 358 at 361, 370, 373‑374.
Spencer concerned a valuation dispute in the context of the compulsory acquisition of the plaintiff's land by the Commonwealth; the statutory context and focus was on the need to compensate the plaintiff for his loss[32]. The seminal passage from Isaacs J's judgment has already been cited[33].
[32](1907) 5 CLR 418 at 435, 441-442.
[33]Spencer (1907) 5 CLR 418 at 441. See [17] above.
The approach in Spencer was applied by the High Court in Abrahams v Federal Commissioner of Taxation[34], which concerned the valuation of shares for the purposes of estate duty. However, in a subsequent case, Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd, the Court sounded a note of caution[35]. Dixon J expressed it in these terms[36]:
"[T]here is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate." (emphasis added)
[34](1944) 70 CLR 23 at 29.
[35](1947) 74 CLR 358 at 361, 370, 373-374.
[36]Commissioner of Succession Duties (SA) (1947) 74 CLR 358 at 373-374.
That passage was cited with approval in 1974 by Stephen J in Executors of Estate of Crane v Commissioner of Taxation (Cth)[37], which also concerned the valuation of shares for the purposes of estate duty. His Honour said that the task of valuation in that appeal was "no more than to ascertain 'a proper measure of liability to tax' in respect of [the] shares"[38] and that that involved "the postulating of a hypothetical sale to a purchaser as at the date of death and in circumstances in which neither party is anxious but each is willing to become a party to such a sale; the value will be the price at which such a sale would, after proper negotiation between the parties, have been concluded"[39].
[37](1974) 49 ALJR 1; 5 ALR 38.
[38]Crane (1974) 49 ALJR 1 at 4; 5 ALR 38 at 45 citing Commissioner of Succession Duties (SA) (1947) 74 CLR 358 at 373.
[39]Crane (1974) 49 ALJR 1 at 2; 5 ALR 38 at 41.
The position under Pt IIIBA of the Stamp Act is analogous – the task is to determine if the entity's underlying value is principally derived from land, for the purpose of ascertaining liability to tax. It is in the specific statutory context of Div 3b of Pt IIIBA that the facts and the statutory valuation exercise in fact undertaken must be considered.
Facts and the statutory valuation exercise in fact undertaken
Placer
Before it was acquired by Barrick, Placer was the fifth largest global gold mining company assessed by market capitalisation, the third largest by gold reserves and the fourth largest by gold production. At the time of acquisition, it operated 16 gold mines, five development projects and seven exploration projects in North America, South America, Australasia and South Africa and employed approximately 13,000 people. It had land‑holdings, including mining, development and exploration interests, around the world. Placer's only material revenue was from the sale of gold, which it sold as refined elemental metal[40].
[40]Placer also produced and sold copper, though to a much lesser extent.
The acquisition

In October 2005, Barrick made an offer to acquire all of the ordinary shares of Placer.
Barrick's offer represented, approximately, a 27 per cent premium to the average closing stock price of Placer. Mr Sokalsky, at the time of the acquisition the Executive Vice President and Chief Financial Officer of Barrick (later appointed the Chief Executive Officer and President of Barrick), put forward the following points to the Barrick Board about the Placer acquisition (in the order they appeared in the slide presentation):
"–Transaction makes Barrick largest gold company with a political risk profile better able to handle subsequent acquisitions
–Considerable synergies make the deal accretive and provides a stronger development pipeline for growth".
In evidence before the Tribunal, Mr Sokalsky agreed that the ordering of these points ahead of the remaining points on the slide reflected the strongest aspects of the takeover for Barrick and that those matters had value not able to be precisely quantified. These matters are significant. It will be necessary to consider them further in the context of Barrick's contention that the property of Placer, prior to its acquisition by Barrick, included goodwill with a value of $6.506 billion.
In November 2005, Placer's Board recommended to Placer shareholders that they reject Barrick's offer. Mr Tomsett, then President and CEO of Placer, said:
"We have 16 operations in seven countries. We are truly global – possessing the skills and expertise required to operate around the world.
Our mines are located in some of the world's most prolific gold-producing areas. You can't replicate a portfolio that includes the Red Lake and Timmins Districts in Canada, South Carlin trends in the US, the Mara shear in Tanzania, and Kalgoorlie greenstone belts in Australia amongst others.
We've been building significant land positions around all our mines. It's been our quiet but determined strategy for the last five years. Those land positions have significantly contributed to reserve growth of 60% since 2001. Those land positions and talented people have made us the only senior gold-mining company to have replaced reserves from our operating mines in each of the last four years. And I'm confident that 2005 will mark the fifth consecutive year.
Quality land is what this business is all about, and we have lots of it. We also have growth – significant development projects – Cortez Hills, Pueblo Viejo, Donlin Creek, Mt Milligan and Sedibelo. Most companies are lucky to have one development project." (emphasis added)
In December 2005, Barrick agreed to make an increased offer to purchase all of Placer's shares. On 4 February 2006 ("the acquisition date"), Barrick acquired a controlling interest in Placer within the meaning of s 76ATK(2) of the Stamp Act, upon receiving acceptances of its revised offer in relation to at least 90 per cent of Placer's common shares. On 8 March 2006, Barrick became the sole shareholder of Placer by acquiring the remaining common shares of Placer. The price Barrick paid to acquire Placer (grossed up for liabilities) was $15.346 billion.
Statutory valuation exercise – areas of agreement and dispute
In undertaking the statutory valuation exercise – namely, ascertaining whether the value of all of Placer's land, regardless of its location, met or exceeded 60 per cent of the value of all of Placer's property, for the purposes of Pt IIIBA of the Stamp Act – the parties agreed that:
(1)the value of all of the property to which Placer was entitled at the acquisition date was $15.3 billion, being the price Barrick paid to acquire Placer;
(2)Placer was entitled to land in Western Australia with an unencumbered value of not less than A$1 million;
(3)the value of all property directed to be excluded by s 76ATI(4) of the Stamp Act was $2.5 billion;
(4)the capitalised value of the "synergies" to be derived from combining Placer's and Barrick's operations (expected to arise from savings in administration and the cost of operating various global offices, exploration, operations and technical services and from arrangements with respect to finance and tax) was between $1.6 billion and $2 billion (between $200 million and $250 million annually); and
(5)the ordinary principles of valuation were those set out in Spencer.
In order to understand the dispute about whether the value of all of Placer's land, regardless of its location, met or exceeded the 60 per cent threshold as well as why, in the circumstances of this appeal, the direct land valuation approach using a DCF methodology was inappropriate, it is necessary to understand Barrick's accounting for its acquisition of Placer.
Acquisition accounting
As a listed entity on the New York Stock Exchange and registrant, and as a Canadian foreign filing entity, Barrick was required to comply with the United States generally accepted accounting principles ("US GAAP").
Financial Accounting Standards Board ("FASB") standards establish US GAAP for financial accounting. The FASB Statement of Financial Accounting Standard ("FAS") No 141 – "Business Combinations" – applied to Barrick[41]. It applied because FAS No 141 contained the required basis of acquisition accounting for Barrick's acquisition of Placer – "the purchase accounting technique".
[41]FAS No 141 (and FAS No 142) applied by force of the Securities Exchange Act of 1934, 15 USC (especially §78m) and the applicable regulations, Commodity and Securities Exchanges, 17 CFR (especially §210.4-01).
The application of this technique entails the need, in every acquisition, for a purchase price allocation exercise to be undertaken, in which the identifiable assets and liabilities of the acquired business are ascribed their fair market value with the excess of purchase consideration over the net fair value of assets acquired being ascribed to goodwill. The operative definition of fair value, as identified by Barrick's expert, was "[t]he amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale".
Mr Patel of Ernst & Young LLP ("EY") was engaged by Barrick in 2006 (following the acquisition) to perform a "valuation analysis" to provide a "fair value" of Placer's tangible and intangible assets as at the time of the acquisition, for the purposes of Barrick's financial reporting obligations. EY's valuation work culminated in EY's purchase price allocation report dated 19 February 2007 ("the EY PPA Report"). The EY PPA Report was undertaken in accordance with US GAAP and, in particular, in accordance with FAS No 141.
The EY PPA Report valued the total property of Placer at $15.346 billion, the purchase price. Using a DCF methodology, EY valued Placer's land assets at $5.694 billion. EY valued Placer's assets in total at $8.84 billion[42]. To reconcile the amount of $8.84 billion with the amount of the purchase price ($15.346 billion), Mr Patel included in Placer's assets an item called "goodwill" with a value of $6.506 billion. That item was a "derivative" amount representing the residual amount of the purchase consideration after identification of the fair value of the acquired identifiable tangible and intangible assets or, in other words, the excess of the cost after deduction of all of the identified assets acquired. That approach to goodwill was in accordance with the requirements of the FASB and, in particular, the definition of goodwill in FAS No 141.
[42]Those assets were identified as property, plant and equipment, mining interests, development projects, exploration projects and "intangibles".
The EY PPA Report was then used as the basis for the value of goodwill reported in Barrick's 31 December 2006 financial statements, which were filed with the US Securities and Exchange Commission ("the US SEC"). On 8 November 2006, in a letter to the US SEC, Barrick explained the allocation of goodwill as follows:
"In conclusion the amount of value not captured in tangible and identifiable intangible assets on acquisition of a gold mining company is initially presumed to be captured in goodwill, the principal elements of which are the ability to sustain and grow reserves and the ability to realize synergies from the business combination. Barrick believes that the elements of goodwill described above in relation to the acquisition of [Placer] are most closely associated with the management of portfolios of mines and exploration properties. Barrick believes that the allocation of goodwill should reflect this association and the manner in which goodwill arises." (emphasis added)
Two matters should be noted about the fact that the letter records that the $6.506 billion allocated to goodwill reflected, at least in part, the expectation of future events: namely, the ability to "sustain and grow reserves" and "the ability to realize synergies from the business combination". First, the letter was consistent with the views expressed by Mr Sokalsky to the Barrick Board in October 2005 to which reference has been made[43] – that there was value in the synergies arising out of, or as a consequence of, the acquisition. Second, and no less significantly, Mr Sokalsky agreed in evidence that the fact that the transaction made Barrick the largest gold mining company with a political risk profile better able to handle subsequent acquisitions had a "tremendous amount of value". Thus, the $6.506 billion goodwill allocation included a value reflecting the expectation of these future events, which events did not exist prior to the acquisition date. Critically, there was a value in the goodwill allocation that was not value which inhered in Placer. It will be necessary to return to these matters later in these reasons when addressing Barrick's contention that those events were sources of goodwill to be included in the statutory valuation exercise.
[43]See [30] above.
Not only did the "goodwill" in the EY PPA Report, and in Barrick's financial statements, include the value of these future events, but the "goodwill" in the EY PPA Report was the single highest valued item, comprising more than 40 per cent of the total purchase price of Placer ($6.506 billion as a percentage of $15.346 billion) and more than 50 per cent of the value of all property to which Placer was entitled, for the purposes of s 76ATI(2)(b) of the Stamp Act ($6.506 billion as a percentage of $12.8 billion). As the Court of Appeal noted, such a result for a land rich company was surprising.
The DCF valuations
Barrick's contention that, immediately before its acquisition by Barrick, Placer owned property comprising goodwill with a value of $6.506 billion was a significant issue.
As stated earlier, the Commissioner contended that if the goodwill allocation did not represent goodwill at law then, a priori, the value of all land of Placer exceeded the statutory threshold and Placer was a "land-holder" within the meaning of s 76ATI(2) of the Stamp Act. On the other hand, Barrick contended that the sole statutory issue was whether the value of the land assets held by Placer at the time it was acquired by Barrick exceeded the statutory threshold in s 76ATI and that the appropriate valuation methodology was a DCF methodology. The difficulty for Barrick was that the DCF methodology of valuing the land assets, as applied by its experts, yielded a large gap between the valuation of Placer's land assets and the purchase price paid. That gap necessarily raised a question about the reliability of the DCF valuations and, in turn, a question about the content of the $6.506 billion allocated to goodwill in Barrick's accounts.
It is therefore necessary to consider the DCF valuations relied upon by the parties' experts to understand the need for, and significance of, a "top down" approach in addressing the statutory valuation question in the circumstances of this appeal.
Each valuer estimated the fair market value of the land assets based on the after-tax cash flows that the asset could be expected to generate over an appropriate remaining useful life, discounted to their present value – a DCF calculation – and each valuer used Placer's strategic business plans in their DCF calculations.
A critical integer in generating the cash flows was the estimated gold prices, which are set by transactions on international metals exchanges to which the identity of the parties – whether as vendor or as purchaser – is irrelevant[44]. Gold miners are price takers, not price makers; the reputation or capability of the miner, smelter or vendor is irrelevant. And the gold price is difficult to predict[45]. As one of Barrick's experts acknowledged in evidence before the Tribunal, estimates of future gold prices could be "quite dramatically wrong", predictions could be pretty unreliable and, as a result, his reports could turn out quite inaccurate.
[44]An expert for Barrick explained that "[i]n any commodity-based business it would be difficult to assert that value belonged to trademarks or trade names and similarly to customer relationships because no product differentiation exists in the marketplace".
[45]The gold prices used by (and therefore the DCF calculations of) the valuer called by the Commissioner were discredited in the Court of Appeal and may be put to one side.
Further, when a gold mining company is sold, the market price at which the company is sold is often a multiple, described as the "net asset value multiple" (or the "NAV multiple"), of the DCF value of the assets of the company. As Mr Patel stated in evidence, "[i]n the gold mining space this is likely to happen [but it] doesn't mean your [DCF] is wrong" if there are identifiable bases for the NAV multiple. Put in different terms, the DCF valuation may still yield a reliable estimate of value if the gap can otherwise be explained. Here, the gap could not be explained.
Of course, there may be instances where a DCF analysis of a gold mining company's assets, cross-checked against the market value of the entity, could yield a reliable estimate of value where the gap between those values could be explained. One example might be where the gold mining company was generating above-market returns. This was not such a case. After Barrick's acquisition of Placer, it was required to prepare and lodge consolidated financial statements. It adopted the conventional accounting practice of allocating to Placer's assets amounts nominated as their "fair value", and allocating the residual of the purchase price, $6.506 billion, to "goodwill".
When Barrick came to address the statutory valuation of Placer's land for the purposes of the Stamp Act, Barrick contended that the DCF calculation directed to valuing each mining tenement according to its best potential use was the standard, and not an inappropriate, methodology and that the residual accounting amount – the gap of $6 billion – was attributable to and equal to the value of Placer's legal goodwill. Barrick identified a number of "sources" for Placer's goodwill: personnel; technological capabilities; innovative mining techniques; management; size, structures and systems; ability to harvest efficiencies and economies of scale; ability to expand its business; "synergies"; and going concern value.
Barrick's contention that, in undertaking the statutory valuation exercise, the appropriate approach was directly valuing the land (with the residual allocated to goodwill) should be rejected on one or more of the following bases: the $6 billion was not legal goodwill; a number of the identified "sources" were excluded by the Stamp Act from the statutory valuation exercise; a number were of no material value separate from the land; and a number were of no material value. In undertaking the statutory valuation exercise in the circumstances of Barrick's acquisition of Placer, the direct valuation approach of valuing Placer's land using a DCF analysis was inappropriate. It was not a reliable method of valuing Placer's assets.
Goodwill
"'Goodwill' is notoriously difficult to define"[46]. It is a legal term as well as an accounting, or business, term[47]. That the legal definition of goodwill differs from that adopted by accountants and business persons[48] is not surprising.
[46]Hepples v Federal Commissioner of Taxation (1992) 173 CLR 492 at 519; [1992] HCA 3 quoted in Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 at 611 [12]; [1998] HCA 42.
[47]Murry (1998) 193 CLR 605 at 612 [13]. See generally Leake, Commercial Goodwill, 2nd ed (1930), Ch 1.
[48]Murry (1998) 193 CLR 605 at 612 [13].
As has been stated, "[g]oodwill, to accountants, clearly means something different than goodwill to lawyers. There is no concept of negative goodwill in law. Goodwill for accounting purposes is essentially subjective, reflecting the excess that a purchaser is willing to pay for a business or the discount a seller is willing to accept for the same. In this sense, it is essentially a balancing item. However, as a matter of law, the existence or otherwise of goodwill is objectively ascertained"[49].
[49]Bridge et al, The Law of Personal Property, 2nd ed (2018) at 196 [9-014] (footnote omitted).
The approach to goodwill adopted in the EY PPA Report was that of the accountants – a "derivative" amount representing the residual amount of the purchase consideration after identification of the fair value of the acquired identifiable tangible and intangible assets, or the excess of the cost after deduction of all of the identified assets.
By way of contrast, courts define, and identify, goodwill in differing factual and legal contexts. The definition in one context is more often than not inappropriate in another context. As the majority said in Federal Commissioner of Taxation v Murry[50], "the nature of goodwill as property may be the focus of the legal inquiry", "the value of the goodwill of a business may be the focus of the inquiry", or "identifying the sources or elements of goodwill may be the focus of the inquiry". That list is not exhaustive. Of particular significance in seeking to define goodwill as a legal term has been the importance of the varying statutory contexts in which the legal question has arisen[51]. This appeal is no different. The factual and legal context is both particular and specific.
[50](1998) 193 CLR 605 at 611 [12].
[51]See, eg, Minister for Home and Territories v Lazarus (1919) 26 CLR 159; [1919] HCA 12; The Commonwealth v Reeve (1949) 78 CLR 410; [1949] HCA 22; Murry (1998) 193 CLR 605.
There is no dispute that the foundations of goodwill for legal purposes rested on patronage. In the early English cases, goodwill was understood as a kind of customer loyalty[52]. As Lord Eldon LC said in Cruttwell v Lye[53], goodwill was "nothing more than the probability, that the old customers will resort to the old place" (emphasis added). The significant implication was, and remains, that goodwill is "intangible and ephemeral rather than tangible and permanent"[54].
[52]See Murry (1998) 193 CLR 605 at 612 [15]. See also Osborn, "Rethinking Goodwill: The Murry Legacy", (2012) 7(2) Journal of Applied Research in Accounting and Finance 31 at 33-34.
[53](1810) 17 Ves Jun 335 at 346 [34 ER 129 at 134].
[54]Hey, "Goodwill – Investment in the Intangible", in Currie, Peel and Peters (eds), Microeconomic Analysis: Essays in Microeconomics and Economic Development, (1981) 196 at 197.
In Inland Revenue Commissioners v Muller & Co's Margarine Ltd[55], Lord Lindley said:
"Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable from the business to which its [sic] adds value, and, in my opinion, exists where the business is carried on. Such business may be carried on in one place or country or in several, and if in several there may be several businesses, each having a goodwill of its own." (emphasis added)
[55][1901] AC 217 at 235.

In that same case, Lord Macnaghten gave another key definition of goodwill[56]:
"It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates." (emphasis added)
[56]Muller [1901] AC 217 at 223-224.
However, in subsequent years, the idea that goodwill rested on patronage – attracting customers through the door – came to be seen as too confined, but not irrelevant.
That can be most readily seen in the decision of the High Court in Box v Commissioner of Taxation[57]. The issue was whether a payment in relation to a restrictive covenant constituted goodwill for the purposes of the Income Tax Assessment Act 1936 (Cth). The plurality recognised that although at first the tendency was to place upon goodwill the limited meaning of nothing more than the probability that the customers would resort to the old place of business, a wider view then prevailed[58].
[57](1952) 86 CLR 387; [1952] HCA 61.
[58]Box (1952) 86 CLR 387 at 395-396.
The wider view was – and, as will be seen, remains – that "the real value of the goodwill had nothing to do with any particular site but consisted in the formation of a personal connection with a large number of purchasers"[59] (emphasis added). Custom was now recognised to encompass more than patronage, in the sense of customers frequenting a particular premises. The way in which business was conducted and custom was attracted now was far more sophisticated. As the plurality said in Box, those personal connections extended to "every positive advantage that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was carried on, or with the name of the firm, or with other matter carrying with it the benefit of the business"[60].
[59]Box (1952) 86 CLR 387 at 399.
[60](1952) 86 CLR 387 at 396 citing Trego v Hunt [1896] AC 7 at 17. See also Churton v Douglas (1859) Johns 174 at 188 [70 ER 385 at 391].
In relation to Lord Lindley's description of goodwill as "whatever adds value to a business"[61], the plurality recognised that "different businesses derive their value from different considerations"; that "[t]he goodwill of some businesses is derived almost entirely from the place where they are carried on, ... and partly from the reputation built up around the name of the individual or firm or company"; that "some goodwills are purely personal"; and that "some goodwills derive their value partly from the locality where the business is carried on"[62]. The plurality clearly did not suggest that "custom" was irrelevant to goodwill – rather, that the notion of custom as being confined to a customer resorting to the old site of a business had become too narrow.
[61]Muller [1901] AC 217 at 235.
[62]Box (1952) 86 CLR 387 at 397. See also Leake, Commercial Goodwill, 2nd ed (1930) at 14.
Thus, the notion of custom encompassed connections between a business identity and customers, however those connections were made. This expansion of the view of goodwill from being sourced in a place of business to recognising that there were other sources – such as the personality of those that ran the business or the way it was conducted – did not diverge from the idea that custom was central to goodwill. Custom was and remains central. What had occurred was that the law now recognised that custom could be generated by and from different sources.
That expansion of what might generate custom was addressed even before the decision in Box, by Rich J in Federal Commissioner of Taxation v Williamson[63]. His Honour discussed the "cats, dogs, rats and rabbits" categorical analysis of goodwill as follows:
"The cat prefers the old home to the person who keeps it, and stays in the old home although the person who has kept the home leaves, and so it represents the customer who goes to the old shop whoever keeps it, and provides the local goodwill. The faithful dog is attached to the person rather than to the place; he will follow the outgoing owner if he does not go too far. The rat has no attachments, and is purely casual. The rabbit is attracted by mere propinquity. He comes because he happens to live close by and it would be more trouble to go elsewhere. These categories serve as a reminder that the goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers being no doubt actuated by mixed motives in conferring their custom." (emphasis added)
The value of that categorical analysis of goodwill has been questioned as potentially misleading[64]. But there are two points to be made about that categorical analysis. First, neither in Box nor in Williamson was there divergence from the idea that custom was central to goodwill; and, second, those decisions (and the analysis) emphasise that goodwill – custom – could be generated from a number of sources.
[63](1943) 67 CLR 561 at 564; [1943] HCA 24 citing Whiteman Smith Motor Co v Chaplin [1934] 2 KB 35 at 42, 49.
[64]See, eg, Whiteman [1934] 2 KB 35 at 49-50 per Maugham LJ.
Murry
The decision of this Court in Murry in 1998 marked a watershed. It is therefore necessary to address the decision in some detail. It cannot, and should not, be understood by taking a few isolated passages out of their context and treating those passages as a comprehensive summary of what was decided. Moreover, the legal and factual context of the decision is significant.
The legal issue was whether, under the Income Tax Assessment Act 1936, by reason of an exempting provision, the capital gain from a disposal of a business or an interest in a business was deemed to be reduced by half because the disposal included the goodwill of the business. Goodwill was not defined in the Act. The factual context was the disposal of a licence to operate a taxi. The majority held that the taxpayer (and her husband) did not dispose of a business within the meaning of the exempting provision and nor did they dispose of an interest in a business which included the goodwill of the business.
In addressing that legal and factual context, the majority considered the nature of goodwill, goodwill as property, the sources of goodwill, and then the value of goodwill. It is instructive to consider the majority's reasons by reference to those matters.
Nature of goodwill[65]
[65]Murry (1998) 193 CLR 605 at 611-615 [12]-[22].
In considering the nature of goodwill, the majority stated that although goodwill is notoriously difficult to define, its existence "depends upon proof that the business generates and is likely to continue to generate earnings from the use of the identifiable assets, locations, people, efficiencies, systems, processes and techniques of the business"[66].
[66]Murry (1998) 193 CLR 605 at 611 [12].
Second, the majority restated that which had been addressed by the Court in Box and Williamson, that the legal definition of goodwill that emphasised patronage – that old customers will resort to the old place – had been expanded, and included that which Lord Lindley had described as "whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others"[67].
[67]Muller [1901] AC 217 at 235 quoted in Murry (1998) 193 CLR 605 at 613 [16].
Third, and of importance to understanding the reasoning in Murry, "the attraction of custom still remain[ed] central to the legal concept of goodwill"[68]. Fourth, it seemed "impossible to achieve a synthesis of the legal and the accounting and business conceptions of goodwill"[69]. And, finally, the legal concept of goodwill has three different aspects – property, sources and value – and what unites those aspects is the "conduct of a business"[70]. It was each of these aspects that the majority then addressed. As will become evident, for each aspect, the attraction of custom remained the critical focus of, and central to, the legal concept of goodwill.
[68]Murry (1998) 193 CLR 605 at 614 [20].
[69]Murry (1998) 193 CLR 605 at 614 [21].
[70]Murry (1998) 193 CLR 605 at 614-615 [22].
Goodwill as property[71]
[71]Murry (1998) 193 CLR 605 at 615 [23].
The majority accepted that goodwill for legal purposes is property because "it is the legal right or privilege to conduct a business in substantially the same manner and by substantially the same means that have attracted custom to it", being a "right or privilege that is inseparable from the conduct of the business"[72] (emphasis added). In other words, the law would seek to protect those rights or privileges in order to preserve the custom attracted to that business.
[72]Murry (1998) 193 CLR 605 at 615 [23] (footnote omitted).
The sources of goodwill[73]
[73]Murry (1998) 193 CLR 605 at 615-624 [24]-[47].
In seeking to identify the sources of goodwill, the starting point for the majority was, again, custom[74]: "[t]he goodwill of a business is the product of combining and using the tangible, intangible and human assets of a business for such purposes and in such ways that custom is drawn to it" (emphasis added). And, significantly, goodwill was identified as having sources, not elements[75]. That distinction was and remains important because the sources of goodwill have a unified purpose and result – to generate or add value (or earnings) to the business by attracting custom. And the sources of goodwill of a business were recognised as not being static: "[t]he sources of the goodwill of a business may change and the part that various sources play in maintaining the goodwill may vary during the life of the business"[76].
[74]Murry (1998) 193 CLR 605 at 615 [24].
[75]Murry (1998) 193 CLR 605 at 616 [24].
[76]Murry (1998) 193 CLR 605 at 623 [45].
Critically, the majority addressed what they described as the "[t]ypical sources of goodwill" – "manufacturing and distribution techniques, the efficient use of the assets of a business, superior management practices and good industrial relations with employees"[77]. The reason given for why they were "typical sources" was that "they motivate service or provide competitive prices that attract customers"[78] (emphasis added).
[77]Murry (1998) 193 CLR 605 at 616 [25].
[78]Murry (1998) 193 CLR 605 at 616 [25].
In addressing the sources of goodwill for legal purposes, the majority also recognised that in some businesses, price and service may have little effect on attracting custom. The goodwill may instead derive from custom being attracted because of location, statutory monopolies including patents and trademarks and expenditure such as advertising[79].
[79]Murry (1998) 193 CLR 605 at 616 [26]-[27].
Thus, recognising that there will be sources of goodwill that generate custom, and that there is a need to identify those sources[80], the majority reinforced the idea that goodwill for legal purposes is property and that "[t]o the extent that the proprietor of a business has the right or privilege to conduct the business in the manner and by the means which have attracted custom to the business, the courts will protect the sources of the goodwill of the business, so far as it is legally possible to do so"[81] (emphasis added).
[80]Murry (1998) 193 CLR 605 at 617-618 [30].
[81]Murry (1998) 193 CLR 605 at 617 [29].
Next, the majority recognised that goodwill has no existence independently of the conduct of a business and goodwill cannot be severed from the business which created it[82]. Thus, the sale of an asset of a business does not involve any sale of goodwill unless the sale of the asset is accompanied by or carries with it the right to conduct the business[83].
[82]Murry (1998) 193 CLR 605 at 620 [36] citing Muller [1901] AC 217, Bacchus Marsh Concentrated MilkCo Ltd (In liq) v Joseph Nathan & Co Ltd (1919) 26 CLR 410; [1919] HCA 18, Box (1952) 86 CLR 387, Geraghtyv Minter (1979) 142 CLR 177 at 193; [1979] HCA 42 and Hepples (1992) 173 CLR 492.
[83]Murry (1998) 193 CLR 605 at 618 [31].
The value of goodwill[84]
[84]Murry (1998) 193 CLR 605 at 624-625 [48]-[52].
As custom is central to the nature and sources of goodwill, the majority recognised that the value of the goodwill of a business varies with the earning capacity of the business and the value of the other identifiable assets and liabilities[85]. Unsurprisingly, the methodologies used to value goodwill vary between businesses and, further, the methodology adopted to value goodwill is fact specific.
[85]Murry (1998) 193 CLR 605 at 624 [48].
So, for example, the majority suggested that where a business is profitable and expected to continue to be so, goodwill may be valued by adopting the accounting approach[86]. But it is critical to understand the "accounting approach" being addressed. The accounting approach in Murry was described as "the difference between the present value of the predicted earnings of the business and the fair value of its identifiable net assets"[87]. That methodology is not the same as comparing the fair value of Placer's identifiable net assets to the purchase price of the business, the accounting approach adopted by Barrick.
[86]Murry (1998) 193 CLR 605 at 624 [49].
[87]Murry (1998) 193 CLR 605 at 624 [49].
The matter may be tested by reference to the facts in this appeal. Goodwill based on the Murry accounting approach would be valued by reference to the difference between the present value of the predicted earnings of Placer (a DCF calculation) and the fair value of Placer's identifiable net assets. That is not the same as valuing goodwill by ascertaining the difference between Placer's identifiable tangible and intangible assets and its purchase price.
Not only is the Murry accounting approach different from that adopted by Barrick in relation to Placer, but the majority in Murry advised caution in adopting the Murry accounting approach. The cautions were multilayered. First, although it might be appropriate to value goodwill in a profitable business as the difference between the projected earnings of the business and its net assets, it is essential that the net assets are not only properly identified but properly valued[88].
[88]Murry (1998) 193 CLR 605 at 624 [49].
The caution may be explained in these terms. Adopting the Murry accounting approach, goodwill is valued through a subtractive method: subtracting the value of the net assets from the projected earnings. If the net assets are not correctly identified and valued, then as a matter of logic, goodwill will not be properly valued. So, for example, if there are other intangible assets which are not goodwill, such as a trademark, and they are not properly identified and valued, there will be a failure to properly value the goodwill[89].
[89]See Murry (1998) 193 CLR 605 at 625 [51].
The second caution concerned businesses trading at a loss. In that situation, the Murry accounting approach was not appropriate for valuing goodwill[90]. That conclusion necessarily followed from the integers of the Murry accounting approach. Where a business is trading at a loss, there will be no gap between predicted earnings and the fair value of the net assets. But the absence of a gap does not necessarily mean there is no goodwill. For example, there may be goodwill derived from advertising in an unprofitable business. The question which then arises is how that goodwill is to be valued. Murry suggests that the value of the goodwill may be the difference between the revenues generated by the custom brought in from the advertising and the operating expenses (other than a share of fixed costs) incurred in earning those revenues, namely the price of the advertising[91].
[90]Murry (1998) 193 CLR 605 at 624-625 [50].
[91]Murry (1998) 193 CLR 605 at 625 [50].
A third, and related, caution was expressed in Murry in relation to the valuation of goodwill for legal purposes. Without being prescriptive (and, as this analysis demonstrates, that is impossible given the varying legal and factual contexts and the varying nature of the businesses being considered), the majority cautioned against attributing a value to goodwill which actually inhered in an asset which was a source of goodwill. As the majority stated, a purchaser of a business does not wish to pay twice for the same source of earning power[92].
[92]Murry (1998) 193 CLR 605 at 625 [51].
In considering the specific issue in Murry – whether a taxi licence was a source of goodwill (and it was not) – the majority recognised that goodwill distinguishes an established business from a new business. That is, once a business is operating, the business may develop certain advantages: the business might attract a regular clientele, it might enjoy a reputation for reliability or service, or it might employ highly skilled employees able to generate above‑average earnings. These advantages will constitute goodwill because they will generate custom greater than the industry average[93]. If the business is selling goods and services which are virtually indistinguishable from others sold in that same market, above-average earnings will be difficult to achieve. But if above‑average earnings are achieved, it suggests the existence of goodwill; it suggests that the business has attracted custom greater than the industry average. The measure of value of that goodwill is how much the earnings exceed the norm[94]. That is, the business is getting more value out of the assets than its competitors because the business is bringing in more custom. That is not the same as going concern value, another concept or approach, which exists as an intangible separate from goodwill even where there is no custom[95].
[93]Murry (1998) 193 CLR 605 at 627-628 [61].
[94]Murry (1998) 193 CLR 605 at 627-628 [61].
[95]See, eg, Omaha v Omaha Water Co 218 US 180 at 202-203 (1910); Des Moines Gas Co v Des Moines 238 US 153 at 164‑165 (1915); Haberle Crystal Springs Brewing Co v Clarke 30 F 2d 219 at 221-222 (2nd Cir 1929); Tele‑Communications Inc v Commissioner of Internal Revenue 95 TC 495 at 521‑522 (1990); Ithaca Industries Inc v Commissioner of Internal Revenue 97 TC 253 at 264 (1991); Corpus Juris Secundum (2008 ed), vol 38A, "Goodwill", §4.
Added value approach
Since Murry, a debate has ensued as to there being a distinction between what has been described as the "broad" and "narrow" views of what comprises goodwill for legal purposes. Dicta in a number of later decisions[96], as well as academic writings[97], have suggested that Murry, or at least some isolated passages in the majority's reasons in Murry, not only recognised, but adopted, a broader concept of goodwill which has been described as the added value approach. That debate was central to Barrick's contentions in this Court.
[96]Commissioner of Territory Revenue v Alcan (NT) Alumina Pty Ltd (2008) 24 NTLR 33 at 68 [112], 69 [114]; see also at 66‑67 [106]-[107]; Placer (2017) 106 ATR 511 at 532 [83], 535 [97], 562 [231], 563 [237], 564 [242]-[243], [246]. See also Hepples (1992) 173 CLR 492 at 542; cf Murry (1998) 193 CLR 605 at 614 [21]. See generally Transalta Corporation v The Queen 2012 DTC 5041 at 6758 [5], 6765‑6766 [51]‑[55], 6766-6767 [62]‑[63].
[97]See, eg, Osborn, "Rethinking Goodwill: The Murry Legacy", (2012) 7(2) Journal of Applied Research in Accounting and Finance 31.

Taking the view that going concern value where it exists is proprietary in character[198] – a view which for reasons already given I consider to be correct – the Court of Appeal found the Tribunal to have been wrong in fact to conclude that the evidence before it was insufficient to establish that Placer had significant going concern value[199] and wrong as a matter of valuation principle to apply a subtractive or top down approach in the circumstances of the case[200]. In both respects, I consider the reasoning of the Court of Appeal to be sound.
[198](2017) 106 ATR 511 at 524 [47].
[199](2017) 106 ATR 511 at 524-525 [49], 534 [95].
[200](2017) 106 ATR 511 at 526 [56]-[57], 533-534 [91]-[92].
As to the facts, the Court of Appeal in my opinion was correct to conclude from the evidence that the synergies available to and expected to be realised by Barrick would be available to and expected to be realised by a hypothetical purchaser of Placer's business and, on that basis, to treat the capitalised value of those synergies as a component of going concern value[201]. I reject the submission of the Commissioner that such synergies could not have added to the value of the entitlement to conduct Placer's business as a going concern because they represented inefficiencies in the conduct of that business in respect of which a hypothetical purchaser would benefit from changing the business rather than from continuing to conduct the business in substantially the same way as it had been conducted before. Accepting that synergies can in one sense be characterised as having been inefficiencies in the conduct of Placer's business, it is sufficient that the availability of the synergies from which the hypothetical purchaser could be expected to benefit added to the price which the hypothetical purchaser could have been expected to pay for the entitlement to continue to conduct that business.
[201](2017) 106 ATR 511 at 523-524 [45], 524 [48].
The Court of Appeal, in my opinion, was also correct to infer from the scale and scope of Placer's gold mining operations that substantial value inhered in its continuing business operations beyond the value of its existing portfolio of mining and exploration tenements[202]. I reject the submission of the Commissioner that all of the value of those continuing business operations necessarily inhered in its existing portfolio of mining and exploration tenements because gold production from those tenements was Placer's only material source of revenue, or that any significant additional value is necessarily attributable to the statutorily excluded category of property constituted by knowledge or information that has commercial value relating to processes, techniques and methods, and designs to locate, extract, process, transport or market gold. The submission in both respects conflates the value of presently existing property (Placer's portfolio of mining and exploration tenements, or its relevant knowledge or information of commercial value) with the value of the capacity to develop that property and to use it in such a way as to generate additional property in the future.
[202](2017) 106 ATR 511 at 523 [41]-[44].
As to the valuation methodology, there can be nothing inherently wrong with a subtractive approach to the determination of the statutory numerator in a case where it is possible to identify and to value property other than land with reasonable precision[203]. The approach, however, is problematic where the property other than land that can be identified cannot readily be valued with reasonable precision. More fundamentally, the approach is mathematically nonsensical where the property other than land that can be identified includes an entitlement to carry on a business having going concern value and where a part of that going concern value might lie in the existence of a portfolio of land. To subtract the total going concern value from the total value of "all property" to which the business-owner is entitled would not in such a case yield a result equivalent to the value of "all land". Tellingly, although the Commissioner argued for application of the subtractive methodology in closing submissions before the Tribunal, the Commissioner did not suggest that anything contained in the extensive valuation evidence before the Tribunal supported its application in the circumstances of the case.
[203]Cf EIE Ocean BV v Commissioner of Stamp Duties [1998] 1 Qd R 36 at 38.
To accept the soundness of the Court of Appeal's criticism of the Tribunal, however, is not to accept that Barrick is to be taken by reason of the evidence of Mr Lee and Mr Patel to have discharged its evidentiary onus before the Tribunal, or that (if not) the order of the Court of Appeal remitting the matter to the Tribunal for reconsideration was appropriate.
As the evidence of Mr Lee spelled out, at least a substantial part of the going concern value of Placer, including some part of the $1.6 billion to $2 billion in synergies available to and expected to be realised by a hypothetical purchaser of Placer's business, was attributable to the fact of Placer's gold mining and exploration tenements forming an assembled portfolio rather than being sold separately. Indeed, Placer's annual report described the goal of its business strategy in terms of having a high-quality, geographically balanced portfolio of mining operations.
On Barrick's own case, therefore, a substantial part of the going concern value of Placer's business was attributable to the assembled whole of Placer's portfolio of mining assets being more valuable to a hypothetical purchaser than the sum of the values of the individual mining operations were those mining operations to be acquired separately.
Yet the evidence of Mr Lee and Mr Patel on which Barrick relied to value Placer's gold mining and exploration tenements in the range of $5.3 billion to $5.7 billion valued those tenements only as the sum of the values of the individual mining operations each treated as a separate enterprise. Left entirely out of account was such additional amount as might be expected to have been paid by a hypothetical purchaser in order to purchase the assembled whole. Whether the hypothetical purchaser would have been inclined to adopt the industry practice of applying a "gold premium" in the form of a multiple in the range of 1.2 to 2.5 to Mr Lee's and Mr Patel's discounted cash flow calculations, it is inappropriate to speculate.
The extent to which a hypothetical purchaser would have attributed value to the assembled whole of Placer's portfolio of gold mining and exploration tenements was not explored in the evidence on which Barrick relied. That gap in the evidence is enough for the appeal to be decided in favour of the Commissioner.
That the going concern value of the entitlement to carry on a business as a going concern must be included in the denominator of the "land rich" ratio does not mean that the whole of the going concern value must be excluded from the numerator. The numerator, as has been explained, must be determined by inquiring into the price that would be negotiated in an arm's length transaction between a hypothetical seller and a hypothetical purchaser for the totality of the land to which the corporation in question was entitled at the time of acquisition.
The question required to be addressed in determining the statutory numerator was as to the value of the entire portfolio of Placer's gold mining and exploration tenements treated as a portfolio. The flaw in Barrick's case before the Tribunal was that Barrick failed to address that question.
Conclusion
The State Administrative Tribunal Act 2004 (WA)[204] read with the Taxation Administration Act 2003 (WA)[205], as the Court of Appeal held in an important aspect of its reasoning unchallenged in the appeal[206], placed on Barrick as taxpayer the onus of establishing that the assessment to which its objection related was "invalid or incorrect"[207].
[204]Section 29(1).
[205]Section 37(2).
[206](2017) 106 ATR 511 at 553-558 [188]-[214].
[207]Section 37(2) of the Taxation Administration Act.
Having contended that the assessment was incorrect in its entirety on the basis that Placer did not meet the "land rich" ratio, and having failed on the material placed before the Tribunal to establish that ground of objection, Barrick has not demonstrated any basis for an order of remitter which would provide another opportunity for it to attempt to make out that ground. It is also too late for Barrick now to complain that the assessment was incorrect for the reason that it proceeded on an incorrect determination of the unencumbered value of the land and chattels situated in Western Australia to which Placer was entitled.
For these reasons, I agree with the orders proposed by the plurality.