Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue

The case of Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue dealt with the question of whether certain transactions entered into by the plaintiff, Favotto, were subject to duty. Favotto had acquired the right to operate two McDonald’s restaurants in Queensland and challenged the assessment of duty imposed by the Commissioner of State Revenue. The matter was determined in the Queensland Court of Appeal.

The central legal issue in this appeal was whether the transactions through which Favotto obtained the rights to operate the McDonald’s franchises constituted dutiable transactions under Queensland law. Specifically, the court had to determine whether these transactions involved the transfer of goodwill, which would render them subject to duty. Favotto contended that the transactions were limited licences and not transfers of goodwill, and therefore not dutiable.

The Court of Appeal held that the transactions in question were limited licences and not transfers of goodwill. The court found that the plaintiff did not acquire any proprietary interest in the McDonald’s business beyond the limited licence to use the McDonald’s trade name and operate the restaurants under the franchisor’s system. As a result, the transactions did not involve the transfer of goodwill, and thus, were not subject to duty. The appeal was allowed, and the assessment of duty was set aside.

The court’s decision effectively meant that Favotto’s acquisition of the right to operate the McDonald’s restaurants was not a dutiable transaction under the relevant legislation. The orders of the Court of Appeal reflected this conclusion by setting aside the Commissioner's assessment and any associated penalties or interest.