Placer Dome Inc v Commissioner of State Revenue

[2017] WASCA 165

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION:   PLACER DOME INC -v- COMMISSIONER OF STATE REVENUE [2017] WASCA 165

CORAM:   MARTIN CJ

BUSS P
MURPHY JA

HEARD:   1 & 2 DECEMBER 2016

12, 19 & 23 DECEMBER 2016 (ON THE PAPERS)

DELIVERED          :   11 SEPTEMBER 2017

FILE NO/S:   CACV 4 of 2016

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

Appellant

AND

COMMISSIONER OF STATE REVENUE
Respondent

ON APPEAL FROM:

Jurisdiction              :  STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA

Coram  :JUDGE T SHARP (DEPUTY PRESIDENT)

Citation  :PLACER DOME INC (NOW AN AMALGAMATED ENTITY NAMED BARRICK GOLD CORPORATION) and COMMISSIONER OF STATE REVENUE [2015] WASAT 141

File No  :CC 871 of 2014

Catchwords:

Taxes and duty - Stamp duty - Whether corporation is a 'listed land-holder corporation' within the meaning of s 76ATI(2) of the Stamp Act 1921 (WA) - Approach to valuation of land to which corporation is entitled - Tribunal's failure to distinguish value of land from value of business as a going concern - Relevance of goodwill - Whether gold futures price a proper basis upon which to value gold producing assets
Taxes and duty - Stamp duty - Review of Commissioner's decision by State Administrative Tribunal - Onus of proof upon the taxpayer

Legislation:

Income Tax Assessment Act 1936 (Cth)
Stamp Act 1921 (WA)
Stamp Act 1984 (Qld)
State Administrative Tribunal Act 2004 (WA)
Taxation Administration Act 2003 (WA)

Result:

Appeal allowed

Category:    A

Representation:

Counsel:

Appellant:     Mr N J Young QC, Mr D R Williams QC & Mr A Willinge

Respondent:     Mr A H Slater QC & Mr B L Jones

Solicitors:

Appellant:     Ernst & Young Law

Respondent:     State Solicitor for Western Australia

Case(s) referred to in judgment(s):

Box v Commissioner of Taxation [1952] HCA 61; (1952) 86 CLR 387

Cheng v Commissioner of State Revenue [2008] WASAT 52 (S)

Churton v Douglas (1859) Johns 174; 70 ER 385

Commissioner of State Revenue v Oz Minerals Ltd [2013] WASCA 239; (2013) 46 WAR 156

Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82; (2008) 36 WAR 251

Commissioner of State Taxation v Nischu Pty Ltd [1991] WASC 129; (1991) 4 WAR 437

Commissioner of Taxation v Hornibrook [2006] FCAFC 170

Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation [2005] FCAFC 244; (2005) 148 FCR 427

Commonwealth v Reeve [1949] HCA 22; (1949) 78 CLR 410

Cruttwell v Lye (1810) 17 Ves Jun 335, 346; 34 ER 129

Currie v Dempsey (1967) 69 SR(NSW) 116

Dickinson v Minister of Pensions [1953] 1 QB 228

EIE Ocean BV v Commissioner of Stamp Duties [1996] QCA 524; (1998) 1 Qd R 36

Federal Commissioner of Taxation v Murry [1998] HCA 42; (1998) 193 CLR 605

Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492

Isaacs v Commissioner of Taxation [2006] FCAFC 105; (2006) 151 FCR 427

Liedig v Federal Commissioner of Taxation [1994] FCA 1058; (1994) 121 ALR 561

Minister for Home and Territories v Lazarus [1919] HCA 12; (1919) 26 CLR 156

Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475

Placer Dome Inc v Commission of State Revenue [2015] WASAT 141

Secretary, Department of Social Security v Hodgson [1992] FCA 338; (1992) 37 FCR 32

Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418

Trego v Hunt [1896] AC 7

MARTIN CJ: 

Summary

1. Placer Dome Inc (the appellant), which is now an amalgamated entity named Barrick Gold Corporation, appeals from a decision of the State Administrative Tribunal dismissing its application to review a determination made by the Commissioner of State Revenue (who is the respondent to the appeal) and affirming the decision of the Commissioner to disallow the appellant's objection to an assessment made pursuant to the provisions of the Stamp Act 1921 (WA) (the Act). The assessment arose from the acquisition by Barrick Gold Corporation (Barrick)[1] of a controlling interest in Placer Dome Inc (PDI)[2] on 4 February 2006.  Prior to the acquisition, each of Barrick and PDI were very large goldmining companies with interests in operating goldmines in many countries of the world including, in the case of PDI, significant goldmining interests in Western Australia.

   [1] Hereafter in these reasons 'Barrick' refers to the company which acquired PDI prior to the acquisition, rather than the merged entity after the acquisition.

   [2] Hereafter in these reasons 'PDI' refers to the company which was acquired by Barrick, prior to acquisition.

2. The assessment, the objection to the assessment, the appeal to the Tribunal and the appeal to this court all turn critically upon the question of whether PDI was, at the time of its acquisition by Barrick, a 'listed land-holder corporation' within the meaning of s 76ATI of the Act, and if so, the unencumbered value of PDI's interests in land in Western Australia.  The question of whether PDI was a 'listed handholder corporation' turns upon the question of whether the value of all the land to which it was entitled, whether situated in Western Australia or elsewhere, was 60% or more of the value of all the property to which it was entitled, other than property directed to be excluded from consideration by s 76ATI(4).  The Commissioner and the Tribunal each concluded that PDI was a listed land-holder corporation and that the value of its interest in land situated in Western Australia was $1,015,900,000, with the result that the duty payable under the Act was $54,852,300.  By this appeal, the appellant challenges both the conclusion that PDI was a listed land-holder corporation, and the value placed on its interests in land in Western Australia.

3. In the Tribunal the appellant contended PDI was not a listed land-holder corporation because the value of its land was less than 60% of the value of all its property, which was all the rights to conduct its business as a going concern, and which included intangible assets such as goodwill, in the sense in which lawyers use that expression.  On the other hand, the Commissioner contended that PDI had no goodwill of any value, because goodwill must give rise to future revenues expected to be derived from PDI's goldmining operations, and the value of those future revenues determines the value of the land from which the gold would be produced.  The Commissioner contended that the value of a mining company producing a fungible commodity like gold would generally correspond to the value of the land from which the commodity was produced, and in this case the value of that land was much more than 60% of the value of all PDI's property.  The Tribunal accepted the Commissioner's contentions, and the valuations of PDI's land, including PDI's land in Western Australia, undertaken in accordance with those contentions.

4. For the reasons which follow, the Tribunal erred in accepting the Commissioner's contentions, and the valuations of PDI's land undertaken in accordance with those contentions.  The critical fact which the Tribunal had to determine was the value of the land held by PDI at the time of the acquisition.  Although the Tribunal should have rejected the valuations of that land which the Commissioner propounded, it does not follow that the Tribunal was obliged to accept any of the valuations which the appellant advanced.  As the Tribunal has not made a determination with respect to that critical issue, the proper course is to allow the appeal and remit the matter to the Tribunal differently constituted for determination in accordance with the reasons of this court.

The acquisition

1. PDI was a Canadian company listed on the stock exchanges of Toronto, New York and Australia, amongst others.  In 2005 PDI was the fifth largest global goldmining company assessed by market capitalisation, the third largest assessed by gold reserves, and the fourth largest assessed by gold production.  It had over 100 years experience in operating goldmines.  As at the time of acquisition, in February 2006, it employed approximately 13,000 people who were responsible for operating 16 goldmines, five development projects and seven exploration projects in North America, South America, Australasia and South Africa.  PDI was profitable and had increased its net earnings from over $116 million[3] in 2002 to over $284 million in 2004.  It had forecast an increase in its profits for the year 2005.

   [3] Hereafter in these reasons dollars refer to US dollars unless specifically indicated otherwise.

2. Barrick was also a Canadian company listed on the Toronto and New York exchanges, amongst others.  In 2005 it was the second largest global goldmining company assessed by market capitalisation, also the second largest assessed by gold reserves, and the third largest assessed by reference to gold production.  Prior to the acquisition of PDI, Barrick was also a profitable goldmining company with approximately 20,000 employees responsible for the operation of a portfolio of mines and projects in North America, South America, Australia, Africa and Russia.

3. In October 2005 Barrick announced a hostile share and cash offer to acquire all of the ordinary shares of PDI.  In November 2005 the board of directors of PDI recommended to PDI shareholders that they reject Barrick's offer.  In December 2005 Barrick agreed to make an increased offer to purchase all of PDI's shares.  The board of directors of PDI unanimously recommended that shareholders accept the revised offer.  On 4 February 2006 Barrick received acceptances for more than 90% of the shares of PDI, and on 8 March 2006, Barrick acquired the remaining shares in PDI.  In May 2006 Barrick and PDI were amalgamated in accordance with Canadian law, with the result that Barrick assumed all of the rights, titles and liabilities of PDI.

4. The acquisition was the largest transaction of its kind in the gold industry and created the world's largest goldmining business.

The assessment

1. In April 2006 the appellant requested the Commissioner to determine, pursuant to s 76AB of the Act, whether a dutiable statement was required to be lodged in respect of the acquisition of PDI.  In April 2013 the Commissioner determined that:

   (a)PDI was a listed land-holder corporation within the meaning of s 76ATI of the Act, and the merged entity was therefore required to lodge a dutiable statement under s 76ATG of the Act; and

   (b)the value of the land and chattels in Western Australia to which PDI was entitled as at the date of acquisition was A$1,015,900,000 with the result that duty in the amount of A$54,852,300 was payable in respect of the acquisition (the assessment).

2. In June 2013 the appellant objected to the assessment and in April 2014 the Commissioner disallowed that objection.  The appellant then applied to the Tribunal for review of the Commissioner's decision to disallow its objection.  As I have noted, that application was dismissed and the assessment affirmed.

A brief overview of the Tribunal's reasons

1. It will be necessary to give detailed consideration to particular portions of the Tribunal's reasons in due course.  However, it is convenient to provide a brief overview of those reasons.

2. After referring to the acquisition, the assessment, and the relevant provisions of the Act, the Tribunal set out the grounds of objection to the assessment and the issues arising from those grounds, including the critical issue of whether PDI was a listed land-holder corporation within the meaning of s 76ATI of the Act.  The Tribunal noted that it was not in dispute that PDI was entitled to land in Western Australia with an unencumbered value of not less than A$1,000,000, so the critical issue turned upon whether the value of all the land to which PDI was entitled was 60% or more of the value of all its property, after excluding property required to be excluded by s 76ATI(4).  The Tribunal then summarised the evidence given by each of the witnesses.  This portion of the Tribunal's reasons contains no analysis of the extent to which that evidence was accepted or rejected, but is confined to a summary of the evidence given.

3. The Tribunal then identified a number of matters that were not in issue between the parties.  They included Barrick's estimate of the value of 'synergies' which would be derived from a combination of its operations with those of PDI, and which were estimated to produce costs savings of between $200 million and $250 million per year.  The capitalised value of those savings was estimated to lie between $1.6 billion and $2 billion.  The synergies were expected to arise from savings in administration and the cost of operating various global offices, exploration, operations and technical services, and from arrangements which were to be made with respect to finance and tax.

4. The Tribunal also noted that all valuers who had valued PDI's land assets had used discounted cash flow methodology to arrive at their values.  The Tribunal also noted that all valuers agreed that the outcome of this valuation methodology depended critically upon its various inputs, including the estimated revenues likely to be derived from future mining operations, which in turn depended critically upon estimates of future gold prices.

5. The Tribunal also noted that there was no significant contention between the parties with respect to the principles of valuation to be applied, drawing upon the principles enunciated in Spencer's case.[4]

   [4] Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418.

6. The Tribunal also noted that the parties generally accepted that the best evidence of the value of PDI at the time of acquisition was the price paid, given that the transaction was at arm's length.  The price paid was just over $10 billion.  However, as the acquirer was also taking on PDI's liabilities of approximately $5 billion, the price paid indicated that the total value of PDI was approximately $15.3 billion.  The Tribunal also noted that it was not contentious that the value of all property directed to be excluded from consideration by s 76ATI(4) was $2.5 billion.  It followed that the value of all PDI's property, for the purposes of s 76ATI of the Act, was $12.8 billion.  It further followed that, as it was agreed that PDI had an interest in land in Western Australia with an unencumbered value of more than A$1 million, the question of whether PDI was a listed land-holder corporation at the time of acquisition turned upon whether the value of all PDI's land, wherever situated, was $7.68 billion (60% of $12.8 billion) or more.

7. In that context the Tribunal summarised the approaches taken by the parties in general terms.  The Tribunal noted that the applicant contended that the value of all PDI's land was between $5.3 billion and $5.7 billion, with the result that PDI was not a land-holder corporation.  The applicant contended that the difference between the value of the land and the value of all PDI's property can largely be attributed to the value of PDI's goodwill, as a substantial going concern.

8. The Commissioner on the other hand contended that the value of PDI's land was either between $8.3 billion and $8.5 billion[5] or between $11.8 billion and $12.3 billion.[6]

   [5] Relying upon the valuations performed by Romar.

   [6] Relying upon the valuation by Mr Lonergan.

9. After summarising in greater detail the respective contentions of the parties, the Tribunal turned to the decision in Commissioner of State Taxation v Nischu Pty Ltd[7] and the amendment to s 33 of the Act which followed that decision, drawing certain conclusions from the decision and the amended section.  Those conclusions are said by the appellant to reveal error.  It will be necessary to return to that proposition.

   [7] Commissioner of State Taxation v Nischu Pty Ltd [1991] WASC 129; (1991) 4 WAR 437.

10. The Tribunal then turned to a more detailed analysis of the evidence given by the valuers, including their evidence with respect to the future gold prices used in their discounted cash flow (DCF) analysis.  In that context, after referring to the evidence given by the witnesses Messrs McKibben and Hall, and expressing a preference for the evidence given by the former, the Tribunal concluded that the appropriate input in a DCF model for valuing PDI's land was the future price of gold assessed by reference to gold futures contracts and, for the period for which no gold futures contract prices were available, the escalation of those prices on an annual basis (real, not nominal) of 2%, being the approach taken by Mr Lonergan.  The Tribunal drew support for that approach from the observation that the value produced corresponded substantially with the price actually paid.[8]

    [8] Tribunal's reasons - Placer Dome Inc v Commission of State Revenue [2015] WASAT 141 (Reasons) [347].

11. The Tribunal then turned to the question of goodwill, noting that while there is no requirement in the Act for a value to be attributed to goodwill, it is nevertheless desirable to identify with care all of the 'non-land' assets.[9]

    [9] Reasons [354].

12. After referring to the evidence given on the subject of goodwill, the Tribunal reviewed the decision of the High Court in Federal Commissioner of Taxation v Murry.[10]  The applicant contends that the Tribunal's analysis of Murry's case reveals error, as does the Tribunal's conclusion that there was no evidence to support the submission that PDI's assets included a substantial amount of goodwill.[11]

    [10] Federal Commissioner of Taxation v Murry [1998] HCA 42; (1998) 193 CLR 605.

    [11] Reasons [377].

13. Because the Tribunal accepted Mr Lonergan's valuations of PDI's land assets, including its interests in land in Western Australia, it followed that the value of PDI's land assets exceeded 60% of its total assets assessed in accordance with s 76ATI of the Act.  It also followed that the value of PDI's land in Western Australia corresponded to the value adopted by the Commissioner for the purposes of the assessment.  Accordingly, the application for review was dismissed and the assessment was affirmed.

The ambit of the appeal

1. Neither the constraint upon the ambit of an appeal to this court from the Tribunal imposed by s 105 of the State Administrative Tribunal Act 2004 (WA) (the SAT Act), nor the requirement for the grant of leave to appeal, apply to appeals to this court from the Tribunal exercising jurisdiction conferred upon it pursuant to the Taxation Administration Act 2003 (WA).[12]  Accordingly, this appeal can be brought as of right on a question of law, fact or mixed law and fact.[13]

   [12] Taxation Administration Act 2003 (WA) s 43A(1).

   [13] Taxation Administration Act 2003 (WA) s 43A(1). As it happens, the appeal was brought out of time, but an extension of time within which to appeal was granted without objection from the Commissioner.

The relevant provisions of the Act

1. As I have noted, the Tribunal considered s 33 of the Act to be particularly relevant to the issues it was required to determine.  That section relevantly provides that when determining the value of any land or other property for the purposes of the Act:

   33(1)…

   (c)when applying the ordinary principles of valuation -

   (i)it is to be assumed that 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.

   As I have also noted, this provision was introduced after the decision in Nischu, and had the effect that the approach taken by the court in Nischu was no longer applicable to valuations undertaken for the purposes of the Act.

2. Part IIIBA of the Act imposes duty in certain circumstances giving rise to a change in the control of certain land-owning corporations.  The many provisions contained within the part are somewhat arcane and convoluted, but fortunately the statutory provisions relevant to this appeal are relatively confined and straightforward.  Central to those provisions is s 76ATI, which relevantly provides:

   76ATI.            Meaning of 'listed land‑holder corporation'

   (1)In this Division a corporation is a listed land‑holder corporation if -

   (a)it is -

   (i)a body corporate that is taken to be registered outside Western Australia (for the purposes of the Corporations Act) or that is otherwise formed or incorporated outside Western Australia, not being a body corporate that is -

   (I)within paragraphs (a) to (d) of section 66A(4) of the Corporations Law; or

   (II)a subsidiary, within the meaning in section 76ATB(6), of a WA company to which Division 3a applies;

   or

   (ii)a WA company that would be a subsidiary, within the meaning in section 76ATB(6), of a body corporate referred to in subparagraph (i) if that body corporate were a WA company;

   and

   (b)it is a land‑holder within the meaning in subsection (2) and is listed on a recognised financial market.

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

   (a)it is entitled to land situated in Western Australia and the unencumbered value of the land is not less than $1 000 000, or it is entitled to land situated in Western Australia as a co‑owner of the freehold or of a lesser estate in the land and the value of the whole of the freehold or lesser estate is not less than $1 000 000; and

   (b)the value of all land to which the corporation is entitled, whether situated 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),

   or if the Commissioner determines that paragraphs (a) and (b) would have applied to the corporation at the time of the acquisition of the controlling interest but for a transaction, or series of transactions, which in the Commissioner’s opinion had as its purpose, or one of its purposes, the defeat of the object of this Division.

   …

   (4)The following property of a corporation, or of a trustee or another corporation referred to in subsection (6), shall not be included for the purpose of calculating the value of property under subsection (2)(b) -

   (a)cash or money in an account at call;

   (b)negotiable instruments, and money on deposit with any person;

   (c)property consisting of rights or interests under a sales contract (including a forward sales contract) relating to minerals, primary products or other commodities;

   (ca)an amount paid or payable to the corporation or the trustee or other corporation referred to in subsection (6) under a contract or agreement referred to in subsection (7)(b);

   (d)money lent by the corporation or a trustee or a related corporation referred to in subsection (6) to -

   (i)any person who in relation to the corporation is an associated person; or

   (ii)any person at call or in terms that require or allow full repayment to the corporation within 12 months after the money is lent;

   (e)in the case of the corporation, property consisting of a shareholding in another corporation referred to in subsection (6) or of a share or interest or entitlement under a trust referred to in that subsection;

   (f)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 -

   (i)locate, extract, process, transport or market minerals; or

   (ii)grow, rear, breed, maintain, produce, harvest, collect, process, transport or market primary products;

   (g)stores, stockpiles or holdings of minerals or primary products (whether processed or unprocessed) produced by the corporation or a related person;

   (h)future tax benefits (whether in the nature of tax losses, capital losses, foreign losses or foreign tax credits) under the Income Tax Assessment Act 1997 or Income Tax Assessment Act 1936 of the Commonwealth or similar benefits under the laws of another jurisdiction;

   (i)any property prescribed for the purposes of this subsection; and

   (j)any other property, whether of the same nature as or a different nature from the foregoing, in respect of which it is not shown to the Commissioner's satisfaction that a reason for ownership by the corporation or the trustee or other corporation referred to in subsection (6) is not for the purpose of defeating the object of this Division.

1. As I have noted, it was not in contention that PDI was a body corporate formed or incorporated outside Western Australia listed on a recognised financial market and which was entitled to land situated in Western Australia with an unencumbered value of not less than A$1 million.  Further, the value of the property of PDI to be excluded from consideration for the purposes of subsection (4) was accepted to be $2.5 billion.  Accordingly, in the context of this case, the critical question was whether:

   The value of all land to which [PDI was] entitled, whether situated in Western Australia or elsewhere, [was] 60% or more of the value of all property to which it [was] entitled, other than property [valued at $2.5 billion] directed to be excluded by subsection (4).

2. Section 76ATG provides that where a person acquires a controlling interest in a listed land-holder corporation, the corporation is obliged to lodge a dutiable statement with the Commissioner in respect of that acquisition.  Further, s 76AB 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.  As I have noted, that power was exercised in this case.

3. Section 76ATH provides that a dutiable statement lodged pursuant to s 76ATG is chargeable with duty at the rate for which provision is made in item 4(1) of the second schedule to the Act.  Section 76ATL has the effect, relevant to this case, that if duty is chargeable on the statement lodged, it is chargeable on the basis of the unencumbered value of the land and chattels situated in Western Australia to which the relevant corporation was entitled at the time of acquisition.

Relevant provisions of the Taxation Administration Act

1. As I have noted, the application to the Tribunal was for review of the Commissioner's decision on an objection to the assessment. That objection was made pursuant to s 34 of the Taxation Administration Act. Section 37(2) of that Act provides that:

   The onus of establishing that an assessment or decision to which an objection relates is invalid or incorrect lies on the taxpayer.

2. Before the Tribunal, the Commissioner submitted that the applicant carried the onus of establishing that the assessment was invalid or incorrect, and that the decision of Barker J rejecting that proposition in Cheng v Commissioner of State Revenue[14] is wrong and should not be followed.  The Tribunal rejected that submission.

   [14] Cheng v Commissioner of State Revenue [2008] WASAT 52 (S) [57] ‑ [59].

3. Although not addressed in the written submissions of either party relating to this appeal, the question of the onus of proof in relation to issues relevant to the assessment of duty arose during the course of oral argument, and it was agreed that written submissions would be exchanged on that subject following the conclusion of the appeal hearing.  I will address the issue later in these reasons.

Grounds of appeal

1. There are nine grounds of appeal which incorporate perhaps 17 separate grounds or subgrounds of appeal and more than 25 particulars.  They tend to be repetitive and argumentative.  Happily it is unnecessary to refer to the grounds in any detail because, in the written and oral submissions, all grounds (with one exception) were subsumed into two fundamental propositions.  Those propositions are that the Tribunal erred:

   (a)in its approach to the value of the land of PDI, and in particular failed to distinguish between the value of the land held by PDI and the value of the business which it conducted using that land; and

   (b)by accepting the evidence of value given by Mr Lonergan which relied upon his use of gold futures prices up to the point in time for which they were available, and thereafter escalating the price at 2% (real) each year for the purposes of valuing PDI's land assets, when the evidence clearly established that gold futures are in essence financial instruments and are not properly viewed as a reliable estimate of the future price of gold.

2. The one exception is ground 9, which asserts that, contrary to the decision of this court in Commissioner of State Revenue v Oz Minerals Ltd,[15] it was beyond the power of the Western Australian legislature to impose a liability to taxation on an acquisition of shares in a corporation where that liability is dependent upon the corporation owning property that has no territorial connection with the State of Western Australia, and equally beyond the power of the Commissioner to issue a notice of assessment which is dependent upon the ownership of property with no territorial connection with the State of Western Australia.  However, understandably, no argument was advanced in support of that ground which has been included for the purpose of preserving the applicant's position should the case go to a higher level of appeal.

The value of the land as compared to the value of the business as a going concern (including the land)

[15] Commissioner of State Revenue v Oz Minerals Ltd [2013] WASCA 239; (2013) 46 WAR 156.

1. As I have noted, the critical issue which the Tribunal was required to determine was whether the value of all the land to which PDI was entitled was 60% or more of the value of all the property to which PDI was entitled (other than property excluded from consideration by s 76ATI(4) of the Act).  As I have also noted, it was common ground that the value of all the property to which PDI was entitled should be assessed by reference to the price actually paid by Barrick for all of PDI's shares, in an arm's length transaction.  That price was adjusted to take account of PDI's liabilities, and the value of the property to be excluded from consideration pursuant to s 76ATI(4), in the manner I have described, resulting in a relevant total value for all of PDI's property of $12.8 billion.

2. By acquiring all the shares in PDI, Barrick acquired PDI as a going concern.  It follows that the price paid by Barrick, and the value of PDI's property assessed by reference to that price, necessarily includes all of PDI's property,[16] both real and personal, tangible and intangible which together conferred upon Barrick the right to continue operating PDI as a going concern and, in due course, to merge PDI's continuing business operations into its own business operations.  Those items of property include the land to which PDI was entitled.  The first substantive proposition advanced by the appellant in support of its appeal is that, for various reasons, the Tribunal failed to distinguish between the value of PDI's land, and the value of all of the rights which together conferred upon Barrick the right to continue PDI's business as a going concern.

   [16] Other than that excluded pursuant to s 76ATI(4).

3. There is a distinction in principle between an item of property, such as a piece of land, or a portfolio of pieces of land, and the bundle of rights associated with a business as a going concern.  That distinction in principle is made clear by the decision of the High Court in Murry's case.[17]  The impact of this distinction in principle upon such things as, for example, the difference between the value of the bundle of rights which comprise a business as a going concern, and the value of a specific item or items of property included within that bundle of rights will, of course, depend upon the particular circumstances of the case.  It is therefore apt to now turn to the particular circumstances of this case, for the purpose of distinguishing between the value of the portfolio of land held by PDI at the time of its acquisition, and the value of the bundle of rights which together comprised PDI's business, and which, following the acquisition, conferred upon Barrick the right to continue to conduct that business as a going concern.

All the property to which PDI was entitled - its business

[17] Which will be considered in greater detail below.

1. There is no doubt that the business conducted by PDI was a very substantial going concern.  PDI was a very large international goldmining company built over more than 100 years.  It was operating goldmines, undertaking development projects and exploration projects in various countries on various continents around the world.  The business which Barrick acquired by its acquisition of PDI was very substantial, employing more than 13,000 people and in the last accounting period prior to the acquisition generating a little under $300 million in profits.

2. Consistently with the principle enunciated in Spencer's case, the value of PDI's business, as a going concern, is to be assessed by reference to the price which a 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.[18]  In this case there is no reason to suppose that the shareholders of PDI did not have the characteristics attributed to the hypothetical vendor, or that Barrick did not have the characteristics attributed to the hypothetical purchaser in Spencer's case.  It follows that the evidence establishes the price, and therefore the value, which parties acting at arm's length attributed to PDI's business as a going concern.

   [18] This approach was adopted by the Tribunal - see Reasons [157].

3. However, it is much more difficult to identify the various attributes or components of PDI's business which caused the parties to assess its value as the price at which the transaction was concluded.  Indeed, with a business as substantial and complex as that conducted by PDI, it would be difficult, if not impossible, to exhaustively identify each and every component or attribute of PDI's business which contributed to the value of PDI's business as a whole.  It will be sufficient for the purposes of this appeal to refer to some of the attributes of that business to which reference was made in the evidence given to the Tribunal, and in the reasons of the Tribunal.

4. Clearly PDI's international portfolio of interests in land upon which it operated goldmines, or which had the potential to be developed into operating goldmines, or which was under exploration, was a substantial component of PDI's business.  The value properly attributed to those interests in land was, of course, the subject of much evidence before the Tribunal.  But the evidence also established that there was much more to PDI's business than its interests in land.

5. PDI employed more than 13,000 staff, no doubt with varying levels of skill and expertise.  Those personnel operated PDI's business, generating substantial profits available to the owner of that business immediately after acquisition.  Further, PDI's personnel had demonstrated the capacity to develop and expand the business through a programme of exploration, the application of the technical capability of its personnel, and its global operating structure.[19]  Evidence was also given of the development of innovative mining techniques by PDI, including through its research and development laboratory located in Vancouver.[20]  There was evidence to the effect that those innovations enabled PDI to viably extract lower grade ores from certain mine sites giving it a competitive advantage over other miners who could not avail themselves of that technology.[21]

   [19] Evidence of Mr Mark Fisher, summarised at [69] ‑ [71] of the Reasons.

   [20] Evidence of Mark Fisher - Reasons [71].

   [21] Evidence of Mark Fisher - Reasons [71].

6. There was also evidence to the effect that PDI employed a strong and experienced project group that was able to design and construct mines, and also employed mine managers who took a 'lean, focused approach' to operations performance.[22]

   [22] Evidence of Mark Fisher - Reasons [71].

7. As would be expected in a business of the size and complexity of PDI's, management structures and systems were utilised for the purpose of enhancing profitability and efficiency.  Those systems included the development of strategic business plans at each operating mine which were reviewed by head office management.  Further, in the year preceding the acquisition, PDI had commenced a redesign of its business processes through what became known as 'A Mine Standard' (AMS).  The aim of that system was to standardise production planning, purchasing, project management, strategic planning, information technology, geological reporting and business performance management in the context of a large global business with large capital intensive operating mines and development projects.[23]

   [23] Evidence of Mark Fisher - Reasons [74].

8. The evidence of Mr Mark Fisher was generally to the effect that PDI's size and global structure, management systems and structures and the skills and the expertise of its personnel enabled it to harvest efficiencies and economies of scale, and created the capacity to expand and develop the business by identifying and developing new mining projects as the resources of existing mines were depleted.  Further, the evidence established that the most likely acquirer of PDI's business[24] was another large international goldmining company, and that any such acquirer would anticipate deriving economic benefits from the merger of PDI's business with its own business.  Those economic benefits, described in the evidence as synergies, would be derived from savings made through the joint operation of mining projects in reasonable vicinity of each other, and as a result of management and other cost savings derived from the integration of the businesses.  There is no reason to suppose that those benefits were only available to Barrick, and the evidence of Mr Jamie Sokalsky was to the effect that those benefits would be equally available to any other large international goldmining company, or to a consortium of other large goldmining companies, acquiring PDI's business.[25]

   [24] The hypothetical purchaser in a Spencer analysis.

   [25] Reasons [52]; see also the evidence of Mr Mark Fisher at Reasons [76].

9. The Commissioner asserts that some or other of the attributes or components of PDI's business to which I have referred are either not property at all, or at least not PDI's property and are therefore not properly included in the assessment of comparative values undertaken for the purposes of s 76ATI of the Act.  So, for example, it is asserted that the prospective synergies or savings to be derived from the integration of PDI's business with the business of an acquirer are either not property at all, because they do not exist until after an acquisition has taken place, or at least are not property of PDI because they cannot be realised by PDI until its business has been acquired and integrated into another business.

10. Although it will be necessary to deal with these issues in greater detail below in the context of the propositions advanced with respect to goodwill, that submission mistakes both the property which is to be valued for the purposes of s 76ATI, and the manner in which it is to be valued.  Dealing firstly with the property to be valued, the bundle of rights which together confer the right to carry on a business are properly regarded as property for the purposes of s 76ATI.[26]  It was that bundle of rights which Barrick acquired through its acquisition of all the shares in PDI.  So, the value of PDI's property to which the value of PDI's land has to be compared in order to determine whether PDI was a listed land-holder corporation is the value of all the rights which together conferred the right to carry on PDI's business upon PDI, and, after the acquisition, upon Barrick.

    [26] Murry [23].

11. Turning now to the valuation of that property, consistently with long‑established principle, the value of the bundle of rights which together confer the right to carry on PDI's business is to be assessed by reference to the price at which the business would be sold in a hypothetical transaction having the characteristics hypothesised in Spencer's case.  All of the attributes or components of value which would be taken into account by the hypothetical parties to such a transaction are relevant to the ascertainment of value.  So, in light of the evidence that the most likely hypothetical acquirer of PDI's business would be another large international goldmining company, the benefits which such a purchaser would derive from the synergies likely to be obtained upon the integration of PDI's business with its own business would be taken into account by both the purchaser and the vendor in arriving at the price at which the business would be sold.

12. In summary, the property of PDI to which the value of PDI's land had to be compared in order to determine whether PDI was a listed land-holder corporation was the bundle of rights which together conferred the right to carry on PDI's business as a going concern.  The evidence established that PDI's business was a very substantial going concern, which had attributes and components to which the parties to a transaction for the sale of the business might well attribute value, above and beyond the value of PDI's interests in land.  The question raised by this aspect of the appeal is whether the Tribunal properly distinguished between the value of PDI's land and the value of PDI's business, and properly approached the valuation of PDI's land.  Obviously the answer to that question must lie in the reasons given by the Tribunal to which I now turn in greater detail.

The Tribunal's reasons with respect to the value of PDI's land

1. The Tribunal commenced the portion of its reasons concerned with the proper approach to the valuation of PDI's land with a consideration of the decision in Nischu.  After referring to the distinction drawn in that case between the value of a mining tenement per se, and the value of a mining tenement enhanced by a right of ownership of the documents and other things containing information with respect to the mineral resources on that tenement, the Tribunal observed that the decision was followed by the enactment of what became s 33(1)(c) of the Act, which I have set out above.  The Tribunal then referred to extrinsic materials relating to the enactment of that provision, including relevant Parliamentary Debates.  In that context, after referring to the need to value all PDI's property, and then determine a value for PDI's land alone, the Tribunal observed:[27]

   It is at this stage that Nischu presents something of a challenge.  While Nischu contemplated that the mining tenements should be valued on a stand­alone basis, that is the hypothetical purchaser of the tenements is not the hypothetical purchaser of the total property, it is also clear from Nischu that the land value can be arrived at by deducting the value of the non­land assets from the value of all of the property

   [27] Reasons [254].

2. With respect to the Tribunal, it is difficult to comprehend the point being made, and in particular to identify the 'challenge' presented by the decision in Nischu, or to identify any conflict or tension between the propositions that are said to give rise to that 'challenge'.

3. At all events, the Tribunal then proceeded to consider the difference in approach between what might be called a 'top down' valuation approach on the one hand, and a 'bottom up' valuation approach on the other.  Those terms provide a convenient shorthand description of alternative methodologies considered by the Tribunal.  The 'top down' approach involves starting 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 the land.  The 'bottom up' approach involves starting with a valuation of the land, and then identifying what may be described as 'balancing items' in order to reconcile the value attributed to the land with the value attributed to all property.

4. As the Tribunal noted, in EIE Ocean BV v Commissioner of Stamp Duties,[28] in a case concerning the land-rich company provisions of the Stamp Act 1984 (Qld), the Commissioner propounded the top down approach, whereas the taxpayer propounded the 'bottom up' approach.  As the Tribunal in this case noted, Macrossan CJ observed that there was nothing inherently wrong in the top down approach, provided one is satisfied that all non-land assets have been identified and correctly valued.  Macrossan CJ also observed that the bottom up approach 'has no greater claim to acceptance than the Commissioner's method'.[29]

   [28] [1996] QCA 524; (1998) 1 Qd R 36.

   [29] EIE (38).

1. After referring to EIE, the Tribunal observed:[30]

   In fact, in every case which has been brought to my attention, including Nischu, to establish whether a corporation is a land­holder, both the starting and end points are the value of the total property, including the land assets.  In particular, the sum of the value of the individual assets which make up the total is invariably reconciled with the total value of the property.

   To argue that there is no requirement to do so, and that the value of the land should be arrived at without regard to the price paid for all of the property, is, in my opinion, incorrect.

   [30] Reasons [261] - [262].

2. It is to be noted that the second paragraph above deals with two quite separate propositions.  The first proposition is that there is no requirement to reconcile the sum of the value of the individual assets which make up the total value of the property, including the land assets.  The second proposition is that the value of the land should be arrived at without regard to the price paid for all of the property.  It seems clear that the Tribunal considered both propositions to be incorrect.[31]

   [31] Especially when this portion of the Reasons is read in the context of other portions, notably [265].

3. The Tribunal's rejection of the second proposition cannot be challenged.  The price paid for all of the property of the relevant corporation should obviously be taken into account when valuing the corporation's land.  However, in rejecting the first proposition, and, in effect, concluding that in every case it was necessary to attribute values to each and every item comprising the individual assets making up the total of the corporation's property, the Tribunal fell into error.

4. While there may be cases in which it is quite feasible to identify each and every asset held by a corporation, and allocate values to each such asset, including its land assets, which, together, equal the price paid for all the corporation's assets, there will be other cases in which that task is not practicable or feasible.  This is such a case.  The total property of PDI consists of all the rights which together enabled it to conduct a very large business in different countries on different continents employing 13,000 people and generating almost $300 million in annual profit.  As I have observed, the value of that property assessed according to conventional Spencer principles will include value attributed to components or attributes of the business which do not correspond to specific assets or identifiable items of property, such as the benefits to be derived from integrating PDI's business with the business of an acquirer.  I respectfully agree with the observations of Macrossan CJ in EIE, to the effect that the top down approach can only be applied if the individual assets comprising the total assets of the relevant corporation, and the value properly applied to each of those individual assets can be ascertained with certainty.  This is not a case in which either of those conditions can be satisfied, essentially because all the property to which PDI was entitled was all the rights which together conferred the right to conduct a business as a going concern, and the attributes or components which add value to that business do not necessarily correspond to identifiable assets.

5. The error made by the Tribunal in this respect is manifest in the portion of the reasons immediately following the portion I have set out above:[32]

   In Nischu, while the approach was taken that the land should be valued as though there was a separate and different hypothetical purchaser, and for the land as opposed to the rest of the assets, I believe that this was done entirely to recognise a distinction between ownership of the mining tenements and ownership of the documents and things containing the mining information relating to the tenements.  I think that the significance of conducting a 'stand­alone' valuation of the land assets as though they were not sold with the rest of the property has been removed by the provisions of s 33(1)(c).  Section 33(1)(c) must be read as a whole and in its context, including s 76ATI and the extrinsic materials to which I have already referred.  It is my view that the requirement that 'no account' is to be taken of certain amounts which have to be expended means that those amounts are not to be either added to or subtracted from the value of the land, but are to be disregarded entirely.  I reject the applicant's argument that the inclusion of the words 'no account' in s 33(1)(c) means that those amounts are to be excluded from the value of the land.  To exclude them would be to take account of them.

   Further, the hypothetical purchaser by s 33(1)(c) knows everything that is known about the land.  Possibly the hypothetical purchaser is better informed than the actual purchaser.  It follows that there is unlikely to be any material delay while information about the property is being reproduced or acquired, and any loss of revenue during that time should also be disregarded.  To interpret the words of s 33(1)(c) in any other way would be to not give effect to the purpose of the provision.

   In my view, the correct approach, having valued the component assets making up the total property, is to then subtract from that the value of the 'non­land' assets.  That would leave a value which can be attributed to land assets and a simple arithmetical calculation will establish whether the balance is 60% or more of the total.

   [32] Reasons [263] ‑ [265].

6. The last paragraph above replicates the error which I have identified, and compounds that error by proposing, in effect, a methodological approach to the resolution of the issues posed by s 76ATI which does not involve any valuation of the land held by the relevant corporation.  To the contrary, the Tribunal has taken the view that the 'correct approach' is to start with the value of all of the corporation's property, calculated by reference to the price paid for that property, and then subtract the value of identified assets of the corporation which are not land, leaving a residual value which is then attributed to the assets which are land.  According to the Tribunal, if that residual is more than 60% of the total value, the question posed by the section is answered, and the corporation is a listed land-holder corporation.

7. With respect, that approach does not accord with the natural and ordinary meaning of the words used in the section.  Those words require the relevant decision maker to ascertain the value of all the land to which the relevant corporation is entitled.  While there may be cases in which that value can be derived through the process of deduction proposed by the Tribunal, there will be other cases in which it cannot.  This is one of the latter class of cases, for the reasons I have given.

8. There is another error apparent in the portion of the reasons I have set out above.  That error concerns the effect which the Tribunal has attributed to s 33(1)(c) of the Act.  It seems clear from this and other portions of the reasons to which I will refer below, that the Tribunal has relied upon the section to sustain its conclusion that the top down approach is the correct way of resolving the question posed by s 76ATI.  However, the section is much more limited in its scope and effect.  Its terms correspond precisely to the decision in Nischu, and require property to be valued on the assumption that a hypothetical purchaser negotiating the purchase of the property would have knowledge of all relevant information and would not have to expend money to secure a permanent right of access to that information.  With respect to the Tribunal, the section has no significant bearing upon the issues which had to be resolved in this case, other than to require that PDI's mining tenements be valued on the assumption that a purchaser of those tenements had, and would continue to have, a right to all information pertaining to those tenements.

9. In the next portion of its reasons, the Tribunal expanded upon its view of the correct approach in the following terms:[33]

   The principles for determining the value of the various assets are the ordinary principles of valuation, with full knowledge of all existing information relating to the property and with no account being 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.

   The sum of the values of the total property must be cross­checked with the acquisition price, which the valuers have all agreed is the best evidence of the value of the total property.

   While I agree with the applicant that care needs to be taken to ensure that all of the 'non­land' assets are identified to ensure that the land value is not inflated by the value of non­land assets, that does not mean that I go so far as to say that, in the case of mining tenements, I need to distinguish between the value of an operating mining business and the value of an operating mine.  Mining tenements are mechanisms for the conduct of mining activity.  While I note the applicant's challenge that the Tribunal must separately value the mining tenements as opposed to the business of mining, I also note that the applicant in its submissions does not advance any methodology as to how that might be achieved.

   [33] Reasons [266] - [268].

10. These paragraphs reflect the Tribunal's adoption of the top down approach to the valuation of PDI's land.  However, in the last paragraph above, the Tribunal refers to three different things - namely:

    •the value of an operating mining business;

    •the value of an operating mine; and

    •mining tenements.

11. With respect, it is not clear what distinction the Tribunal intends to draw between the value of an operating mine and the value of an operating mining business (if there is in fact any such distinction).  However, what does appear to be clear is that the Tribunal rejected the appellant's proposition that the value of PDI's land had to be distinguished from the value of PDI's business, as a going concern, utilising that land.

12. It will be clear from the reasons I have already given that the Tribunal's failure to distinguish between the value of PDI's land on the one hand, and the value of PDI's business on the other involved a fundamental misconception of the task required by s 76ATI of the Act, in the circumstances of the case before the Tribunal.  The value of all PDI's property, which had to be determined for the purposes of that section was, in effect, the value of PDI's business as a going concern.  The value of PDI's land had to be determined, and compared to the value of all PDI's property (in effect PDI's business) in order to determine whether PDI was a listed land-holder corporation.  By conflating those two different things and in effect treating them as one, it was inevitable that the Tribunal would conclude that the value of PDI's land was approximately equal to the value of all its property.

13. In the next portion of the Tribunal's reasons, it noted that although the applicant's submissions did not advance a method as to how the value of the land might be distinguished from the value of the business (a proposition which the appellant challenges), evidence was given to the Tribunal of what was described as 'restoration valuation methodology'.  This methodology distinguishes between the value of a mining tenement and the value of an operating mine by quantifying the costs, delays and risks that a hypothetical purchaser avoids by acquiring the operating mine instead of only the tenement.

14. After summarising that evidence, the Tribunal observed:[34]

    The difficulty which I have with the 'restoration approach' is that it seems to assume not only a hypothetical purchaser and a hypothetical seller, but also hypothetical land, in this case, hypothetical mines.

    I consider that under the ordinary principles of valuation, it is the actual land which is to be valued, in the actual market when and where the hypothetical transaction takes place.

    Accordingly, what are to be valued are the actual mines at the relevant date, under the actual market conditions prevailing at that time.  The mines at the relevant date were in a fully operational state. 

    [34] Reasons [276] - [278].

15. The paragraphs above are consistent with the Tribunal's earlier rejection of any distinction between the value of a mining tenement and the value of an operating mine.  The fact that PDI's mines were operational at the time PDI was acquired does not mean that the value of the land on which the mines were conducted is necessarily to be equated to the value of an operating mine.  To the contrary, consistently with accepted valuation principles, and the evidence which would distinguish between the value of a mining tenement and the value of an operating mine, it is entirely reasonable to infer that a hypothetical purchaser would pay more and a hypothetical vendor expect a purchaser to pay more for the right to continue to employ the personnel responsible for the operation of the mine and continue to use the equipment and business structures in place, rather than suffer the costs and delays necessarily involved in hiring personnel and setting up new operations.  It follows that these paragraphs are also indicative of error in the proper approach to the application of s 76ATI to the circumstances before the Tribunal.

16. The Tribunal's consideration of the evidence given by Mr Tutton relating to the costs which would be incurred putting some of PDI's mines into an operating state if only the land, and not the mining operation, were acquired, perpetuates the errors evident in the portions of the Tribunal's reasons to which I have already referred.  The Tribunal observed:[35]

    Simply deducting Mr Tutton's 'restoration costs' from those valuations and then somehow accounting for the 'restoration periods' is not supported by the language and purpose of s 33(1)(c) of the Stamp Act or the ordinary principles of valuation. 

    Particularly, this method would not in my view produce a valuation that a hypothetical seller would consider to be the price that the hypothetical purchaser must reasonably expect to pay.  Mr Sokalsky's evidence is that Barrick in the months leading up to the takeover of Placer Dome was aware that there were other parties interested in making the same acquisition.  A hypothetical seller would also be aware of this interest.  A hypothetical willing but not anxious purchaser would know that a price based on a discounted cash flow analysis, but factoring in a discount for the costs of delays of between two and six years and a further $600 million in 'restoration costs' would not be acceptable to a willing but not anxious seller.  The purchaser is deemed to know all existing information about the mines, including the fact that they are fully operational.  Further, a willing but not anxious seller of that operating mine would provide any reasonable assistance and cooperation to the hypothetical purchaser if it means avoiding a significant discount from the price.

    I do not consider that the 'restoration approach', for mining tenements as land, in the context of the Stamp Act, is appropriate and it should be rejected.

    [35] Reasons [280] - [282].

17. With respect, the Tribunal's conclusion that s 33(1)(c) of the Act requires land in the form of a mining tenement to be valued as a fully operational mine, by reference to a hypothetical transaction in which the purchaser acquires not only the land, but the rights to continue the employment of all personnel and to continue operating the mine as a going concern, cannot be sustained by any of the language contained in s 33(1)(c), which is concerned only with access to information.  There are no words in the section which would enable it to be construed as requiring land to be valued on the basis that its value includes the value of any business conducted on the land.

18. Further, the Tribunal's analysis of a hypothetical sale in the passage above reveals the Tribunal's misconception of the task it was required to perform in accordance with s 76ATI of the Act.  The transaction to which Mr Sokalsky referred in his evidence, and the transaction which in fact occurred was a takeover of PDI, and through that takeover, the acquisition of all of PDI's business as a going concern.  It was not a transaction for the purchase of PDI's interest in land only.  Of course, no purchaser in a hypothetical transaction for the purchase of PDI's business as a going concern would contemplate offering, nor would a hypothetical vendor contemplate accepting, a price assessed by reference to something else - that is, a transaction which involved only the acquisition of PDI's land, after which the purchaser would be required to bring the mines on the land into operation.

19. The Tribunal's failure to accept the significant distinction between the value of PDI's interest in land and the value of PDI's business as a going concern caused it to deviate from the task it was required to perform in a fundamental respect.

The Tribunal's assessment of the goodwill issue

1. The same fundamental error is evident in the Tribunal's analysis of the evidence and submissions relating to the value of the goodwill associated with PDI's business.

2. The Tribunal commenced that analysis with the correct observation that no provision of the Act requires the attribution of any value to the goodwill of a business for the purpose of determining whether a company is a listed land-holder corporation.  However, the Tribunal went on to observe that because it had adopted the top down approach to the valuation of PDI's land assets, it was necessary to identify and attribute a value to all of PDI's non-land assets, including the goodwill of its business.[36]  Put another way, the methodology adopted by the Tribunal gave a primary importance and significance to the valuation of PDI's goodwill which cannot be found in any provision of the Act.

   [36] Reasons [354].

3. The Tribunal summarised the evidence given by various witnesses on the topic of goodwill before turning to an analysis of the decision of the High Court in Murry.

4. After setting out a passage from the decision in Murry,[37] the Tribunal observed:[38]

   I do not take this statement as authority for the proposition that goodwill for legal purposes is the same as goodwill for accounting purposes.

   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.  A purchaser of the business will not pay twice for the same source of earning power.  The purchaser will not pay a sum that represents the earning power of, for example, a trademark and also a sum that represents the earning power of the business; Murry at [625].

   The difficulty which I have with the applicant's submission that Placer Dome's assets included a substantial amount of goodwill is that, apart from goodwill for accounting purposes, there is no evidence to support that submission.  No valuations of goodwill were provided by the applicant except the balancing amounts used by Mr Patel and Mr Lee.

   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.  The relevant issue is whether or not Placer Dome itself had any goodwill of any materially significant value at the date of the acquisition.  Professor Carlin does not provide any assistance in that regard, merely concluding that 'the devices upon which the authors of [Mr Lonergan's and Romar's reports] rely to sustain the proposition that material goodwill either did not or alternatively was very unlikely to have existed within Placer Dome do not withstand scrutiny through the lens of the theoretical or empirical literature on goodwill.'  While he says that '[b]y contrast, the empirical literature demonstrates that goodwill arising from acquisition transactions, including those involving firms operating in the extractive industries is widespread, material and value relevant', he also says that this 'general result does not lead directly to the derivation of the particular value ascribed to goodwill as a result of the acquisition accounting process applied to the acquisition of Placer Dome by Barrick'; Exhibit 27 pages 28­29.

   It follows that, in the absence of any evidence to the contrary, I find that Placer Dome's assets at the relevant date did not include any materially significant goodwill.

   It may be that, following the acquisition, Barrick could subsequently show as goodwill amongst its own assets the 'synergies' which arose from the acquisition of Placer Dome, but that could not be regarded as an asset of Placer Dome at the date of acquisition.

The decision in Murry

[37] Murry (624); see [88] of these reasons.

[38] Reasons [375] - [380].

1. Before reviewing the Tribunal's analysis of goodwill, it is appropriate to refer to the decision in Murry.

2. In Murry the question was whether the amount received on the disposal of a licence to operate a taxi, or some part of that amount, constituted a payment for goodwill for the purposes of the Income Tax Assessment Act 1936 (Cth). The question arose because a provision of that Act exempted receipts from realised capital gains assessable under the Act where 'a taxpayer disposes of, or of an interest in, a business … being a disposal that includes, or includes an interest in, the goodwill of the business'.[39]

   [39] Income Tax Assessment Act 1936 (Cth) s 160ZZR(1)(a) .

3. So, in Murry's case, the relevant statute expressly required a determination as to whether there had been a disposal of the goodwill of a business.  As the Tribunal noted, there is no equivalent provision in the Act.

4. In that context the majority noted that the legislation relevant to that case did not attempt to give any special meaning to the expression 'goodwill'.  They observed:[40]

   Goodwill is inseparable from the conduct of a business. It may derive from identifiable assets of a business, but it is an indivisible item of property, and it is an asset that is legally distinct from the sources - including other assets of the business - that have created the goodwill. Because that is so, goodwill does not inhere in the identifiable assets of a business, and the sale of an asset which is a source of goodwill, separate from the business itself, does not involve any disposition of the goodwill of the business.

   [40] Murry [4].

5. Given my view that the Tribunal erred by failing to distinguish between the identifiable land assets of PDI's business, and the bundle of rights which together comprised the business as a going concern, it is of note that the Tribunal made no reference to this observation in its reasons.

6. The majority expanded on the notion of goodwill later in their reasons after observing that goodwill is notoriously difficult to define.  They observed that the existence of goodwill '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'.[41]

   [41] Murry [12].

7. Referring to an earlier decision of the High Court in which it was observed that '[g]oodwill includes whatever adds value to a business, and different businesses derive their value from different considerations',[42] the majority also referred to earlier legal definitions of goodwill which emphasised the patronage of the business or, in essence, that goodwill was 'nothing more than the probability, that the old customers will resort to the old place'.[43]   However, they noted that a wider view of goodwill soon prevailed, referring with approval to a 19th century decision in which Wood V-C said that goodwill was:[44]

   Every advantage - 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 previously carried on, or with the name of the late firm, or with any other matter carrying with it the benefit of the business.

   [42] Box v Commissioner of Taxation [1952] HCA 61; (1952) 86 CLR 387, 397 (Dixon CJ, Williams, Fullagar & Kitto JJ).

   [43] Cruttwell v Lye (1810) 17 Ves Jun 335, 346; 34 ER 129, 134 (Lord Eldon LC).

   [44] Churton v Douglas (1859) Johns 174, 188; 70 ER 385, 391; Murry [15].

8. The majority noted that this definition had received approval in later cases,[45] and that in the United States, Story in his book on partnership had also defined goodwill in broad terms, namely as '[t]he advantage or benefit, which is acquired by an establishment, beyond the mere value of the capital, stock, funds, or property employed therein'.[46]

   [45] Trego v Hunt [1896] AC 7, 17 (Lord Herschell).

   [46] Story J, Commentaries on the Law of Partnership (5th ed, 1859) 158; Murry [15].

9. The majority were in no doubt that goodwill was property.  They observed:[47]

   Goodwill is correctly identified as property, therefore, 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.  It is a right or privilege that is inseparable from the conduct of the business.

   [47] Murry [23].

10. However, the majority went on to note that many of the sources of goodwill are not themselves property or assets, citing as examples manufacturing and distribution techniques, the efficient use of the assets of a business, superior management practices and good industrial relations with employees.  In that context they noted that '[c]are must be taken to distinguish the sources of the goodwill of a business from the goodwill itself.  Goodwill is an item of property and an asset in its own right'.[48]

    [48] Murry [30].

11. Conversely, the majority noted that the potential use of an asset which is transferred out of a business may give it a value, but that potential use is merely an attribute of an asset and is separate and distinct from goodwill, which is property and which is inseverable from a business.[49]

    [49] Murry [33].

12. The portion of the majority's reasons dealing with the value of goodwill contains the passage cited by the Tribunal immediately before the portion of its reasons which I have set out above.  That passage is:[50]

    When a business is profitable and expected to continue to be profitable, its value may be measured by adopting the conventional accounting approach of finding the difference between the present value of the predicted earnings of the business and the fair value of its identifiable net assets. Admittedly this approach can cause problems in valuing goodwill for legal purposes because the identifiable assets need to be valued with precision. Particular assets, as shown in the books of the business, may be under or over valued and may require valuations of a number of assets and liabilities which may be difficult to value.  However in a profitable business, the value of goodwill for legal and accounting purposes will often, perhaps usually, be identical.

    [50] Murry [49].

13. After citing this passage the Tribunal observed, correctly, that it does not stand for the proposition that goodwill for legal purposes is the same as goodwill for accounting purposes.  However, in the context of the approach taken by the Tribunal, the significance of the cited passage lies in its emphasis upon the vital need to value identifiable assets with precision if goodwill is to be valued by deducting the value of those assets from the value of the business as a whole.  Further, those observations were made in the context of a number of observations with respect to the difficulty of valuing goodwill in either its legal or accounting sense, because of its very nature.  Because of those difficulties, as the majority noted, goodwill is valued by accountants using the bottom up method of deducting the value of identifiable assets from the value of the business and, as the majority observed, this methodology will usually provide a reliable means of valuing legal goodwill.

14. That approach to the valuation of goodwill is fundamentally inconsistent with the top down approach to the valuation of PDI's land favoured by the Tribunal.  That approach required all of PDI's non-land assets, including goodwill, to be valued with precision, so that the value of land could be assessed as the residual value remaining after the value of all non-land assets had been deducted from the total value of all property.  However, in the passage from Murry above, the court observed that often goodwill will be valued as the residual remaining after the value of all tangible assets have been deducted from the value of the business, thereby necessitating an accurate valuation of all tangible assets, including of course land, before the value of goodwill can be assessed.

15. The difficulties which attend the valuation of goodwill in either a legal or accounting sense do not attend the valuation of land.  As the Tribunal noted, land can and should be valued using conventional Spencer principles.  But, despite acknowledging those principles, the Tribunal failed to apply them to the valuation of PDI's land, which was the critical issue it had to determine.  Rather, the Tribunal adopted the approach of valuing the land by deducting the value of the non-land assets, essentially goodwill, from the value of PDI's business.  That is the only reason why it was necessary to direct attention to the issue of the goodwill of PDI's business and its value.  It is also why, consistently with the views of Macrossan CJ in EIE, and of the majority in Murry, it was essential to value the goodwill of the business with accuracy if the top down approach is used.  But if that can only be done by accurately valuing all PDI's tangible assets, including its land, the valuation of PDI's goodwill is an unnecessary distraction from the statutory task.

16. Section 76ATI required only two things to be established.  One of those things was the total value of all PDI's property at the time of acquisition.[51]  There was general agreement that this value was $12.8 billion.  The other thing which had to be established was the value of PDI's land assets at the time of acquisition.  However, rather than endeavour to value those assets using the conventional approach enunciated in Spencer's case, the Tribunal instead adopted the top down approach which necessitated the precise identification and valuation of all PDI's non-land assets, including its goodwill.  That approach was a deviation from the requirements of the statute, and led the Tribunal into error.

    [51] Excluding the property specified in s 76ATI(4).

17. Returning to Murry's case, the source of the observations made by the Tribunal in the second paragraph of the portion of the reasons which I have set out above is the following passage from the reasons of the majority in Murry:[52]

    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. If the goodwill of a business largely depends on a trade mark, for example, and the trade mark is fully valued, the real value of goodwill can only reflect a value that is similar to the difference between the business as a going concern and the true value of the net assets of the business including the trade mark. A purchaser of the business will not pay twice for the same source of earning power. The purchaser will not pay a sum that represents the earning power of the trade mark and also a sum that represents the earning power of the business. Nevertheless, the earning power of the trade mark is unlikely to equal the earning power of the business.

    When a trade mark is sold it will continue to be a source of goodwill for the business if the business continues. That is because the trade mark will have built up favourable custom which will or may continue after the trade mark is transferred or expired. Similarly, where goodwill is largely the product of the personality of the owner or one or more employees of a business, much of the goodwill of the business will disappear upon the cessation of the connection between that person or persons and the business. Nevertheless, habit may continue to draw custom although the owner or employee has no further connection with the business. These illustrations also show that, although the goodwill of a business may be derived from one or more sources, it can continue to exist notwithstanding that the sources of the goodwill have gone.

    [52] Murry [51] - [52].

18. These paragraphs emphasise that although there may be an overlap between the value deriving from the potential use of an asset (such as a trademark) and the value of a business, they are unlikely to be the same.  However, in the portion of the reasons I have set out above, the Tribunal appears to have drawn the opposite conclusion by conflating the value of an asset with the value of a business, consistently with the erroneous approach to which I have previously referred.

19. That misconstruction of the decision in Murry is followed by the Tribunal's conclusion that there was no evidence to support the submission that PDI's business included a substantial amount of goodwill, apart from goodwill for accounting purposes.  That proposition is, with respect, clearly wrong.  There was ample evidence of the intangible aspects of PDI's very substantial business which contributed to its profitability.  That evidence was summarised earlier in the Tribunal's reasons, and has been summarised by me above.

20. Further, the proposition that Professor Carlin's evidence does not support the existence of goodwill in PDI's business is contradicted by the extracts from Professor Carlin's evidence cited in the Tribunal's reasons.  Further and in any event, Professor Carlin's evidence was addressed to general principles relating to goodwill from a theoretical perspective, and was not directed to the question of whether PDI's business contained goodwill or its value.  As I have noted, there was ample other evidence of the components of PDI's business which were likely to have contributed to its value, other than PDI's land.

21. Finally, it will be apparent from the reasons I have already given that the Tribunal's final observation in the passage I have set out above, to the effect that synergies arising from the acquisition of PDI's business could not be regarded as an asset of PDI, erroneously confuse the sources of goodwill, and its valuation, and the goodwill itself.  As the majority in Murry noted, goodwill may often have a source in things which are neither assets nor property.  As goodwill can be realised upon the sale of a business, anything which contributes to the value of the business, assessed in Spencer terms, is properly valued as part of its goodwill, including, in this case, the value which a hypothetical purchaser would attribute to the savings and efficiencies to be derived from the integration of PDI's business into its own, and the price which a hypothetical vendor would therefore expect to receive from such a purchaser.

First general ground - summary and conclusions

1. For these various reasons, the appellant's assertion that the Tribunal erred by failing to distinguish between the value of the land held by PDI and the value of the business conducted using that land should be upheld.  Although that error caused the Tribunal to deviate from the task it was required to perform under the Act in a fundamental respect, it is nevertheless necessary to resolve the second general ground of appeal in order to determine whether the Tribunal's decision must be set aside.  As will be seen, and as might be expected, the Tribunal's failure to distinguish between the value of PDI's land and the value of PDI's business affected its approach to the valuation evidence and contributed to its erroneous acceptance of Mr Lonergan's evidence of the value of PDI's land.

The second general ground of appeal

1. As I have already noted, the second general ground of appeal challenges the Tribunal's acceptance of the evidence given by Mr Lonergan with respect to the value of PDI's land assets at the time of acquisition, essentially for the reason that the valuations were derived using a discounted cash flow methodology utilising the price of gold futures at the date of acquisition where available, and where not available, escalating those prices indefinitely at an annual rate (real) of 2%.  The evidence is said to be flawed because gold futures are, in effect, financial instruments, and do not provide and are not seen by the market to provide any reasonable estimate of the price at which gold will be bought and sold in the future, and because the assumed escalation in (real) gold prices at 2% per annum is arbitrary and entirely unjustified by past movements in gold price.  The appellant asserts that the evidence overwhelmingly supports the conclusion that parties to transactions for the sale and purchase of gold producing assets - whether land or companies holding land - undertake their assessments of price by reference to the current price of gold and a range of estimates as to the likely price at which gold will be bought and sold in the future, and not by reference to the prices specified in gold futures contracts.

The Tribunal's assessment of the valuation evidence

1. In order to place these contentions in their context, it is necessary to review in greater detail the reasons given by the Tribunal with respect to its assessment of the valuation evidence. 

The Romar valuations

1. The Commissioner tendered expert evidence of the valuation of PDI's land from Mr Marvin Schneider and Mr Robert Allison, both of Romar Valuation Services (Romar).  The Tribunal excluded that evidence from detailed analysis on the basis that the conclusions of the two witnesses evolved as more information became available and as other opinions on valuation were presented.[53]  The Tribunal also observed that the results of the valuations of those two witnesses made it clear how widely different results of valuations could vary depending upon the assumptions made with respect to production and price.[54]

   [53] Reasons [283].

   [54] Reasons [283].

2. The Commissioner does not contend that the Tribunal was wrong to reject the evidence given by the Romar witnesses, and did not rely upon that evidence in its opposition to the appeal to this court.

Mr Lonergan

1. Mr Wayne Lonergan is a Chartered Accountant and managing director of a company specialising in the provision of valuation services and related advice.  He has decades of experience in the field of valuation and financial advice.  His evidence‑in‑chief included a witness statement to which three reports were attached.  The first report was a report he provided to the Commissioner in 2007 relating to the question of whether any legal goodwill attached to the mining operations of PDI.  The second report is, in effect, a series of reports dealing with the valuation of various mining projects held by PDI at the time of acquisition and the third report responds to expert evidence foreshadowed by the appellant in the course of the proceedings before the Tribunal.

2. By way of extremely generalised overview, in his first report Mr Lonergan expressed the opinion that the market value of PDI's goodwill was 'highly unlikely to be significant', and that it was 'intuitively improbable that a commodity producer of a homogeneous product would have any material goodwill value'.[55]  In his second series of reports, Mr Lonergan arrived at valuations of the various mining projects undertaken by PDI, having a combined value of between $11.8 billion and $12.2 billion.  As Mr Lonergan drew no distinction in principle between the value of a mining project and the value of the land on which it was conducted, the valuations which he performed in 2014 were consistent with the view he had expressed seven years earlier to the effect that it was unlikely that PDI's assets included any significant goodwill.

   [55] 3 GAB 1074.

3. In its assessment of Mr Lonergan's evidence, the Tribunal referred to Mr Lonergan's reliance upon cross-referencing values ascertained by the application of DCF methodology and the market value of the underlying assets.  The Tribunal noted Mr Lonergan's evidence to the effect that if there was a fundamental difference between the DCF values and the market traded price, it is an indication that the DCF values may be incorrect.[56]

   [56] Reasons [287].

4. I digress to observe that this approach depends upon the correctness of Mr Lonergan's assertion, first expressed in 2007, to the effect that it was highly unlikely that PDI had any significant goodwill, together with his assertion that there is no material difference between the value of a mining tenement and the value of a mining business conducted on that tenement.

1. Before turning to the cases dealing with the SAT Act, it is desirable to review the jurisprudence which has developed in relation to s 43 of the AAT Act.

Section 43 of the AAT Act

1. Cases dealing with the AAT generally, and with s 43 of the AAT Act in particular, are replete with the observation that the Tribunal 'stands in the shoes of the decision maker'.[131] 

   [131] See, as one of many examples, Commissioner of Taxation v Hornibrook [2006] FCAFC 170, [28] (Gyles J), [36] (Stone J).

2. It seems the phrase may have been purloined from a phrase used to describe the function of the Taxation Board of Review.[132]  The sense of the expression can be gathered from Liedig v Federal Commissioner of Taxation where Hill J described the function of the AAT by reference to language used by Kitto J speaking of the Taxation Board of Review in the Mobil Oil case[133] where his Honour described the Board's function as 'merely to do over again (within the limits of the taxpayer's objection) what the Commissioner did in making the assessment.'[134]

   [132] See Liedig v Federal Commissioner of Taxation [1994] FCA 1058; (1994) 121 ALR 561, 565 (Hill J).

   [133] Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475.

   [134] Mobil Oil [12].

3. There are many decisions of the Federal Court dealing with the question of the extent to which the jurisdiction conferred upon the AAT by s 43 of the AAT Act is constrained by provisions in the statute conferring jurisdiction upon the decision maker whose decision is subject to review by the AAT.[135]  The issue arose in a revenue context in Commissioner of Taxation v Hornibrook. In that context, Gyles J observed:[136]

   It may generally be correct to say that the Tribunal stands in the shoes of the decision maker, but that is subject to particular provisions which relate to the conduct of an appeal.  The Tribunal exercises the power granted by the Administration Act pursuant to the provisions of the AAT Act.  The two statutes must be read together so far as possible.  In that situation, the general power in the AAT Act cannot be used to circumvent the express limitations in the Administration Act.

   [135] Decisions most often cited include Secretary, Department of Social Security v Hodgson [1992] FCA 338; (1992) 37 FCR 32 [39] and Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Commissioner of Taxation [2005] FCAFC 244; (2005) 148 FCR 427 [28].

   [136] Hornibrook [28].

4. In the same case Stone J observed:[137]

   While I acknowledge the force of the argument that s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) gives the Tribunal broad powers to stand in the shoes of the original decision maker, I cannot accept that these general powers override the specific prohibition created by later statutory provisions namely [sections of the Taxation Administration Act].

   [137] Hornibrook [36].

5. Young J observed, in the same case:[138]

   The purpose of s 43(1) is to give the Tribunal the same powers and discretions as could have been exercised by the Commissioner when he made his decision on the objection.

   [138] Hornibrook [97].

6. Young J cited with approval a passage from the decision in Secretary, Department of Social Security v Hodgson, where Hill J described the Tribunal's jurisdiction in these terms:[139]

   Where its jurisdiction is enlivened by an application to review an administrative decision it exists to do again, within the limits of the review, that which the decision maker was entrusted to do.

   [139] Hodgson [40]. See also Isaacs v Commissioner of Taxation [2006] FCAFC 105; (2006) 151 FCR 427 [37].

7. It is clear from the cases to which I have referred[140] that the function of the AAT, in accordance with s 43 of the AAT Act, is to perform again the function of the original decision-maker, on the basis of the material before the Tribunal, with all the powers, and subject to all the constraints which applied to the original decision maker.

The SAT Act

[140] And there are many others.

1. Returning to the SAT Act, there is nothing in the language of that Act, and in particular in the statutory provisions to which I have referred, which would lead to any different construction to that which has been applied to the AAT Act. To the contrary, s 27 enunciates in statutory form the effect of decisions made by the AAT and by the Federal Court on appeal from the AAT with respect to the primary function of that Tribunal, and the ambit of the matters which may be taken into account by the Tribunal in performing that function. Section 29 is substantively similar to s 43 of the AAT Act and specifically provides that the function of the Tribunal in the exercise of its review jurisdiction corresponds with the function of the original decision-maker.

2. In this case, having regard to s 37(2) of the Taxation Administration Act, the function of the original decision maker (the Commissioner) was to determine whether the taxpayer had discharged the onus of establishing that the assessment of duty was invalid or incorrect. Section 29 of the SAT Act imposes the same function on the Tribunal, albeit on the basis of the material before the Tribunal, rather than on the basis of the material before the Commissioner.[141] My construction of s 37(2) of the Taxation Administration Act read with s 29 of the SAT Act is reinforced by s 18 of the SAT Act. The Taxation Administration Act is an 'enabling Act' as defined in s 3(1) of the SAT Act. By s 18(1) of the SAT Act, the Tribunal, in exercising its review jurisdiction, is to deal with a matter in accordance with the SAT Act and the enabling Act. By s 18(2) of the SAT Act, the enabling Act may modify the operation of the SAT Act in relation to a matter that comes within the Tribunal's review jurisdiction.

   [141] In accordance with s 27 of the SAT Act.

3. This court concluded that the Taxation Administration Act, read with the SAT Act had this effect in Commissioner of State Revenue v Serana Pty Ltd.[142]  In that case, Buss JA observed:[143]

   By s 37(2) of the Taxation Administration Act 2003 (WA), the onus of establishing that an assessment or decision of the Commissioner to which an objection relates is invalid or incorrect lies on the taxpayer.

   The proceedings before the Tribunal were within its review jurisdiction. See s 40(1) of the Taxation Administration Act and s 17(1) of the State Administrative Tribunal Act 2004 (WA) (the SAT Act). By s 27(1) of the SAT Act, the review of a reviewable decision is to be by way of a hearing de novo. Section 29(1) of the SAT Act provides:

   'The Tribunal has, when dealing with a matter in the exercise of its review jurisdiction, functions and discretions corresponding to those exercisable  by the decision-maker in making the reviewable decision.'

   …

   As I have mentioned, the onus of establishing that an assessment or decision of the Commissioner to which an objection relates is invalid or incorrect lies on the taxpayer.  Notwithstanding that onus, Serana adduced a paucity of evidence in relation to the conveyance or transfer and its commercial purpose. 

   …

   The onus which Serana bore required it to establish at the hearing de novo before the Tribunal, amongst other things, that the Tribunal should be satisfied …

   [142] [2008] WASCA 82; (2008) 36 WAR 251.

   [143] Serana [106] - [107], [166], [171].

4. Steytler P agreed with this portion of the reasons given by Buss JA.[144]  I did not express any contrary view in my reasons in that case.

The decision in Cheng

[144] Serana [77].

1. In Cheng, the Tribunal reviewed a decision of the Commissioner disallowing the applicant's objection to a decision made under the provisions of the First Home Owner Grant Act 2000 (WA). Section 29 of that Act is in substantially similar terms to s 37(2) of the Taxation Administration Act.  It provides that '[t]he onus of establishing that the decision on the application to which an objection relates is incorrect lies on the objector'.

2. In dealing with the Commissioner's submission that the objector had failed to discharge the onus of proving the incorrectness of the decision under review, Barker J observed:[145]

   It must be borne in mind that in creating this onus, s 29 of the FHOG Act appears in subdivision 2 of division 6 of the FHOG Act, dealing with objections before the Commissioner. Subdivision 3 deals with the review before the Tribunal and there is no separate onus provision in this subdivision. Rather, the Tribunal is obliged by s 27 of the SAT Act to produce the correct and preferable decision at the time the decision is being reviewed. No formal onus provision appears to exist in such circumstances.

   Counsel for the Commissioner submits that the onus created by s 29(2) of the FHOG Act not only applies in objection proceedings before the Commissioner but also in review proceedings before the Tribunal. Support for this proposition is said to be given by observations of Buss JA in Serana at [106], [166] and [171].  Martin CJ however did not make any express reference to this provision in his judgment, with which Steytler P agreed.  However, Steytler P also agreed with the reasons given by Buss JA for dismissing the appeal.

   Buss JA at [106] expressly noted the onus provision (in that case s 37(2) of the TA Act) that applies to an objection proceeding before the Commissioner, and at [107] expressly recognised that in review proceedings in the Tribunal, under s 27 of the SAT Act, those proceedings are de novo and that the correct and preferable decision must be made at the time of the decision.

   While at [166] and [171] Buss JA makes reference to the onus provision, as I understand what his Honour there said, he was making the point that a practical onus fell on the applicant when it sought review of the Commissioner's decision in the Tribunal disallowing an objection, to negative certain propositions. 

   [145] Cheng [56] - [59].

3. With respect to Barker J, while it is of course correct that Buss JA expressly noted that proceedings under s 27 of the SAT Act are de novo, the significant fact that Buss JA specifically referred to, and included, the text of s 29(1) of the SAT Act is not mentioned by Barker J. Further, with respect to Barker J, the proposition that Buss JA was referring only to a practical onus in the portions of his reasons which I have set out above cannot be sustained when regard is had to the unequivocal language used by Buss JA. With respect to Barker J, he was bound to follow the views expressed by this court in Serana.  Those views are clearly correct, and have the result that in this case the appellant carried the onus of proving to the Tribunal that the assessment of duty was incorrect or invalid.

4. The Commissioner also submitted that, irrespective of s 37(2) of the Taxation Administration Act, in the proceedings before the Tribunal the applicant bore the onus generally imposed on a moving party and, for that reason alone, bore the onus of proving to the Tribunal that the Commissioner's decision to disallow the appellant's objection was incorrect.[146] 

   [146] Relying upon Dickinson v Minister of Pensions [1953] 1 QB 228, 232 and Currie v Dempsey (1967) 69 SR(NSW) 116, 125.

5. While there is much to be said for that proposition, it need not be resolved in this case, having regard to the express provisions of s 37(2) of the Taxation Administration Act, which governed the Tribunal's review of the original decision, consistently with s 29 of the SAT Act.

6. The appellant submitted that an inference with respect to legislative intention should be drawn from the amendments made to the Taxation Administration Act when the Tribunal was established. Prior to the creation of the Tribunal, appeals from decisions of the Commissioner on objections lay to the Supreme Court pursuant to statutory provisions which included s 43(2) which provided, in respect of an appeal to the court, that '[t]he onus of establishing that an assessment or decision to which the appeal relates is invalid or incorrect lies on the taxpayers'.

7. The appellant submits that the legislature's omission of any provision expressly dealing with the onus of proof in review proceedings before the Tribunal, of the kind previously found in s 43(2), should be taken to indicate a legislative intention that there would be no relevant onus in proceedings before the Tribunal.

8. This submission should be rejected. Leaving to one side the implausibility of a legislative intention to create a scheme in which the taxpayer bears the onus of proving that an assessment is invalid or incorrect at the point of objection, but bears no equivalent onus in a hearing de novo before the Tribunal, the answer to the submission lies in s 29 of the SAT Act, which has the effect that the Tribunal stands in the shoes of the Commissioner when reviewing her decision. The effect of the corresponding provision in s 43 of the AAT Act was well known at the time the SAT Act was drafted and passed. In that context, a statutory provision specifying the onus of proof in proceedings before the Tribunal for review of a decision of the Commissioner would be entirely otiose. Consequently, no inference of legislative intention can be drawn from its omission.

9. For these reasons, the Tribunal was wrong in this case to conclude that there was, in effect, no onus of proof in the proceedings before it.  As it happens, it seems unlikely that this conclusion had any significant bearing upon the Tribunal's ultimate conclusion, given its acceptance of the evidence adduced by the Commissioner.  However, in light of my conclusion that the Tribunal was wrong to accept the most significant component of that evidence - namely, the evidence given by Mr Lonergan - the question of onus is relevant to the orders properly made in the disposition of this appeal.

The disposition of the appeal

1. I have concluded that the Tribunal failed to perform the function required under s 76ATI of the Act, and in particular failed to distinguish between the value of PDI's land, which it was required to determine, and the value of PDI's business, which was not in dispute.  I have also concluded that the Tribunal was wrong to accept the essential component of the evidence upon which the Commissioner relied, namely the evidence of Mr Lonergan, and the Commissioner does not now contend that the Tribunal should have accepted and relied upon the evidence given by the Romar witnesses.  In that context the question arises as to whether the court can and should determine the issues on the basis of the material before it, or whether the court should remit the matter to the Tribunal differently constituted for determination in accordance with these reasons.

2. The appellant contends that the court has all the information it needs to determine the application for review in its favour, and should take that course.  In particular, the appellant contends that if the evidence adduced on behalf of the Commissioner is excluded from consideration (as I have concluded it should), the only evidence remaining with respect to the value of PDI's land assets is the evidence given by Messrs Patel and Lee.  The appellant contends that as this evidence is not contradicted by any other credible evidence, it should be accepted by the court.  As the evidence of each of those witnesses was to the effect that the total value of PDI's land assets was less than $6 billion, it follows from the facts not in contention that the value of PDI's land assets was less than 60% of the value of all its assets.[147]  Accordingly, the appellant contends that the appeal should be allowed, the decision of the Tribunal set aside and substituted with the decision upholding its application for review and quashing the assessment of duty.

   [147] After excluding the property coming within s 76ATI(4).

3. In the particular circumstances of this case there is one step in this chain of reasoning which I do not accept.  Although I have concluded that the Tribunal was wrong to accept the evidence of Mr Lonergan, it does not follow that the Tribunal was bound to accept the evidence of Messrs Patel and Lee.  Put more bluntly, the fact that evidence, particularly expert evidence, is not contradicted does not mean that it must be accepted.  Because of the erroneous view which the Tribunal took of Mr Lonergan's evidence, it did not evaluate or scrutinise the evidence given by Messrs Patel and Lee, or express any view with respect to the reliability of that evidence, other than its general rejection of valuations undertaken using DCF methodology based upon consensus estimates of future gold prices.  This is not a case in which the Tribunal has expressed the view that it would have accepted the evidence of Messrs Patel and Lee but preferred the evidence of Mr Lonergan.  Rather, this is a case in which the Tribunal has not expressed a conclusion based upon a detailed evaluation of the evidence of Messrs Patel and Lee, because of its acceptance of the evidence of Mr Lonergan.

4. In these circumstances, it would be dangerous for the court to itself evaluate the evidence of Messrs Patel and Lee solely on the basis of the written record. This court lacks the advantage of having seen either witness, nor has the court been immersed in the many issues which were traversed in the oral evidence and reports of the various witnesses. Nor can it be said that the valuation evidence given by Messrs Patel and Lee is self-evidently plausible or credible. To the contrary, it appears to be plausible, as submitted by the Commissioner, that the proposition that the total value of all PDI's land assets, being its extensive mining operations across various continents, represents only a little over one‑third of the value of all its property,[148] and is approximately equal to, or even a little less than, the value of unidentifiable or intangible property such as goodwill is, on its face, a surprising proposition which should be subjected to detailed scrutiny. In my view, that scrutiny is best performed in another hearing before the Tribunal, differently constituted, rather than by this court on the papers.

   [148] Around $15.3 billion when allowance is made for liabilities assumed as part of the takeover.

The terms of the remitter to the Tribunal

1. The remission of the matter to the Tribunal should not provide the parties with the opportunity to resile from the fundamental basis upon which the Tribunal proceedings were conducted.  That fundamental basis included the parties' agreement that the price paid by Barrick for all the shares in PDI provided the best evidence of the value of all of PDI's property at the time of acquisition, which should be calculated by adding PDI's liabilities to the price paid by Barrick.  Nor should the parties be permitted to resile from their agreement with respect to the value of PDI's property properly excluded from consideration under s 76ATI(4).  It follows that the only matters which remain to be determined by the Tribunal are:

   (a)the total value of all PDI's land assets and whether that value results in the conclusion that PDI is a land-holder corporation;

   (b)the value of PDI's land assets in Western Australia.

2. Those values are to be determined by the application of the conventional principles enunciated in Spencer's case, and on the assumptions required by s 33 of the Act.

3. Further, in a circumstance in which the evidence adduced by the Commissioner with respect to the value of the land from the Romar witnesses was rejected by the Tribunal for reasons which the Commissioner does not challenge, and the evidence adduced by the Commissioner with respect to the value of the land from Mr Lonergan should have been rejected by the Tribunal for the reasons given above, it would be unjust to permit the Commissioner to advance a completely new case as a result of the errors made by the Tribunal. Section 105(9) of the SAT Act empowers the court to remit the matter to the Tribunal for reconsideration in accordance with any directions or recommendations that the court considers appropriate. In this case there are two considerations which support the exercise of that power, namely:

   (a)the need to hold the parties to the agreed basis upon which the proceedings were conducted before the Tribunal, with a view to minimising further delay and expense as a consequence of the need for a further hearing;

   (b)the need to prevent the Commissioner taking unjust advantage of the rehearing, in a circumstance in which the case which he advanced was rejected by the Tribunal in part, and should have been wholly rejected by the Tribunal.

1. In the circumstances of this case, the matter should be remitted to the Tribunal for reconsideration in accordance with the following directions:

   (a)the Tribunal is to be differently constituted;

   (b)the rehearing is to be conducted on the basis that:

   (i)the value of all the property to which PDI was entitled, at the time of its acquisition by Barrick, other than the property directed to be excluded by s 76ATI(4) of the Act, was $12.8 billion; and

   (ii)the value of all property to which PDI was entitled at the time of its acquisition by Barrick directed to be excluded from consideration under s 76ATI(4) of the Act was $2.5 billion;

   (c)the matters which are to be determined by the Tribunal are:

   (i)the value of all land to which PDI was entitled, whether situated in Western Australia or elsewhere, at the time of its acquisition by Barrick; and

   (ii)if the value of that land was equal to or more than $7.68 billion (being 60% of $12.8 billion), the value of the land situated in Western Australia to which PDI was entitled at the time of its acquisition by Barrick;

   (d)the Tribunal is to determine these values applying the conventional principles enunciated in Spencer's case on the assumptions required by s 33 of the Act;

   (e)in the circumstances of this case it is not appropriate to value all the land to which PDI was entitled using the 'top down' approach - that is, by deducting the value of PDI's assets other than land from a value assessed by reference to the price Barrick paid for the acquisition of PDI on the assumption that the remainder equals the value of all PDI's land;

   (f)the evidence to be received by the Tribunal at the further hearing is to be limited to:

   (i)the evidence already adduced before the Tribunal, but excluding the evidence given by the Romar witnesses and Mr Lonergan;

   (ii)evidence of the value PDI's land to be derived from the value of PDI's mining operations assessed by the discounted cash flow method;

   (iii)evidence of any adjustments in value required to allow for the fact that the discounted cash flow method of valuation assesses the value of mining operations as a going concern, rather than the value of the land;

   (iv)evidence concerning the reconciliation of or relationship between the value properly attributed to all of PDI's land assets at the time of its acquisition by Barrick and the price paid by Barrick;

(v)if it is not possible to value any particular piece or pieces of land owned by PDI at the time of its acquisition by Barrick by a process deriving from the discounted cash flow method (because, for example, the conduct of mining operations on the land is speculative), evidence of the value of that land based upon some other appropriate method of valuation.

1. The parties should be given liberty to apply for any amendment or variation to these directions.

Conclusion

1. For these reasons, the appeal should be allowed, the decision of the Tribunal set aside and the matter remitted to the Tribunal differently constituted for reconsideration in accordance with the reasons of the court and the directions specified above.

2. BUSS P:  I agree with the orders proposed by Martin CJ.  I agree with his Honour's reasons. 

3. Also, I agree with Murphy JA that the Tribunal made the errors identified in [244] ‑ [248] of his Honour's reasons.

4. MURPHY JA:  I am in general agreement with the reasons given by Martin CJ, although I would add the following observations on the topic of goodwill, which the Commissioner essentially regarded as the central issue in the appeal. 

5. Goodwill, as a legal concept, has three different aspects - property, sources and value, and is inseparable from a business:  Federal Commissioner of Taxation v Murry.[149]

   [149] Murry [22], [23].

6. Whilst goodwill is really a 'quality or attribute' that is derived, amongst other things, from the other assets of a business,[150] it is a 'quality or attribute' of a particular legal character.  It is recognised by the law as property[151] which may be bought and sold with a business,[152] and

protected by injunction,[153] or an action for damages for its wrongful impairment.[154]

[150] Murry [12].

[151] Murry [23], [30].

[152] Murry [29].

[153] Murry [20].

[154] Murry [30], [48].

1. Although goodwill is property in its own right, it is something which attaches to a business, and cannot be dealt with separately from a business with which it is associated.[155] 

   [155] Murry [22].

2. Goodwill includes whatever adds value to a business, and different businesses derive their value from different considerations.[156]  It includes 'every positive advantage' enjoyed by a business.[157]

   [156] Murry [12], [15], [20], [50].

   [157] Murry [50] citing Wood VC in Churton v Douglas (391).

3. The existence of goodwill 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' (emphasis added).[158]  The italicised words appear to refer to various potential sources of goodwill which are not, or not necessarily, identifiable assets of a business.

   [158] Murry [12].

4. Goodwill, as property, is the legal right or privilege in the proprietor of the business to conduct the business in substantially the same manner and by substantially the same means which, in the past, have attracted custom to the business or otherwise generated income for it.[159]  When the goodwill of a business is sold to a purchaser, the purchaser (as the new proprietor of the business) has that same right.[160]  The value of that right is another matter.

   [159] Murry [23], [45].

   [160] Murry [45].

5. Further, goodwill, as property, is also distinguishable from the potential use value of an identifiable asset which is transferred out of the business.  An asset may have its own particular value having regard to the potential use to which it can be put.  Such an asset may also provide a source of goodwill for the business, and it may be, as a matter of fact,[161] that the potential use value of that asset gives it a value approximating the value of the goodwill derived from the use of that asset in the business.  However, the potential use of an asset is merely an attribute of the asset, and is not to be equated for legal purposes with the concept of goodwill as property.[162]  Thus, if land is in a location which makes it an attractive place for a certain business to be conducted on it, that is an aspect of the potential use of the land which may give it special value.  When a business is in fact conducted on the land where the business has goodwill derived from the use of the land, the value of the goodwill may be some evidence of the potential use value of the land.[163]

   [161] For example, where the issue arises in a compensation case.

   [162] Murry [33], [36], [43].

   [163] Murry [38] - [43]; Minister for Home and Territories v Lazarus [1919] HCA 12; (1919) 26 CLR 156, 166 - 167; Commonwealth v Reeve [1949] HCA 22; (1949) 78 CLR 410, 418 ‑ 420, 428 ‑ 430.

6. Goodwill is to be distinguished from the sources of goodwill.[164]  Also, it is, at least generally, appropriate to refer to 'sources' of goodwill, rather than merely to refer to goodwill as being composed of 'elements'.[165]  Thus, goodwill may be derived from sources which no longer sustain elements of goodwill such as custom.  For example, a trademark, which has since expired or transferred, may have built up favourable custom, which the business continues to enjoy even after the expiry or transfer of the trademark.  Similarly, where goodwill has largely been the product of the personality of the owner or employees of a business in generating custom, habit may continue to draw custom even after the owner or employees have severed their connection with a business.[166]

   [164] Murry [24], [44].

   [165] Murry [24].

   [166] Murry [24], [52].

7. Sources of goodwill may include identifiable assets (such as trademarks),[167] but many sources of goodwill are not themselves property.[168]  Sources of goodwill may be internal or external to a business.[169]  External sources of goodwill include imperfect or inefficient competition, or extensive market penetration.[170] 

   [167] Murry [30], [51].

   [168] Murry [25] - [28]. Of course, if things such as know‑how, systems, processes, techniques and the like are treated as identifiable assets, they are not then merely sources of goodwill. They will then have their own value, and may contribute (depending on all the facts) very little to the value of the business as sources of goodwill. See Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492, (519) and Murry [24], [41].

   [169] Murry [28], [29].

   [170] Murry [28].

8. Goodwill is not limited to the attribute of 'patronage', ie, the mere probability 'that the old customers will resort to the old place'.[171]

   [171] Murry [15], citing Lord Eldon in Cruttwell v Lye (134).

9. As goodwill cannot be dealt with separately from a business with which it is associated,[172] it follows that 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 a business.[173]  Thus, where a vendor sells an identifiable asset of a business which also operates as a source of goodwill, the sale of the asset may reduce the value of the goodwill of the business, but the sale of the asset does not in itself involve a disposition of the goodwill, or any part of it, because goodwill is indivisible.[174]

   [172] Murry [22].

   [173] Murry [31].

   [174] Murry [32].

10. It is one thing to prove the existence of goodwill, and another to determine its value.[175]  Value is tied to the fortunes of a business, and varies with the earning capacity of the business and the value of the other identifiable assets and liabilities.[176]  In a business which is profitable and is expected to continue to be profitable, the value of goodwill may be measured by adopting the conventional accounting approach of finding the difference between the present value of the predicted earnings of the business and the fair value of its identifiable net assets.[177]

    [175] Murry [60] ‑ [61].

    [176] Murry [48].

    [177] Murry [21], [49].

11. In the case of a business selling goods or services which are virtually indistinguishable from the goods or services of others in the same market, the creation or maintenance of goodwill of any material value will generally depend upon any special advantages enjoyed by the business over its competitors which enable it to achieve above average industry custom or earnings.[178] 

    [178] Murry [61].

12. In the end, the value of goodwill for legal purposes, but not its existence, is governed by the extent to which the earnings of a business exceed the norm.[179]  In other words, as I would apprehend it, where the 'focus of the inquiry'[180] is the value of the goodwill of a business, value will ordinarily be assessed[181] in the context of the industry in which it operates and with regard to whether its earnings exceed those ordinarily enjoyed in the industry.  Where the purpose of the inquiry is to ascertain the value to be attributed to the goodwill of the business, evidence of average or below average earnings will militate against acceptance that it has goodwill of any material value.

    [179] Murry [61].

    [180] Murry [12].

    [181] Subject to any relevant statutory context.

13. In this appeal, the Commissioner contended, in effect, that goodwill, for legal purposes, is confined to the attraction of custom.  Reference was made to various passages in Murry in which goodwill was referred to as the attractive force which brings in custom.[182]  In my view, this involves too narrow a reading of the decision in Murry. 

    [182] Murry [16], [20], [23], [45], [68].

14. Gross earnings may be generated by increased custom.  However, the attraction of custom is not the only thing which adds value to a business.  Goodwill includes every positive advantage enjoyed by a business.[183]  A business also has goodwill if its value is derived from other considerations, which enable it to generate higher net earnings than its competitors.  That is so irrespective of whether their effect is also potentially to create a favourable perception of the business to customers in the market and, as a result, potentially attract additional custom.

    [183] Murry [50].

15. In this case, the focus of the relevant statutory inquiry was not the value of the goodwill of a business.  It was the value of the land assets of PDI.  The Tribunal, with respect, erred in setting its focus on the value of goodwill.

16. As to the Tribunal's focus on goodwill, it is important to note at the outset that the Tribunal did not find that PDI had no goodwill at the relevant date.  Nor did it accept Mr Lonergan's evidence that all mining companies have no material goodwill.  Rather, it found that there was no evidence that this company, ie, PDI, had 'goodwill of any materially significant value' (emphasis added).[184]  That finding was, with respect, in error.  There was evidence that PDI's business had goodwill of significant value.  It was the evidence of the appellant's expert witnesses, applying the accounting approach - which is permissible when valuing the goodwill of a business which is profitable and expected to continue to be profitable. 

    [184] Reasons [378] - [379].

17. Also, insofar as the Tribunal meant that there was no evidence of goodwill, in that there was no evidence that the locations, people, efficiencies, systems, processes and techniques of PDI's business attracted custom,[185] the Tribunal, with respect, proceeded upon an erroneous approach.  Goodwill is not confined to the attraction of custom.  It includes all those considerations which add to the value of the business, including those which tend to give it a competitive edge in the industry in which it operates.

    [185] Reasons [369] - [371].

18. Further, in concluding that there was no evidence of goodwill to a materially significant value, the Tribunal did not purport to find, or refer to any evidence to the effect that, PDI's earnings were at or below the industry norm.

19. Insofar as the Tribunal may have been confirmed in its view that there was no evidence of goodwill having regard to Mr Lonergan's DCF valuations, those valuations were unreliable by reason of the unreliable inputs for gold prices. 

20. Orders should be made in the terms referred to by the Chief Justice.