Commissioner of State Revenue v Placer Dome Inc., [2018] HCA 59

Whether the acquisition by Barrick Gold Corporation ("Barrick") of another Canadian public company, namely, Placer Dome Inc. ("Placer") triggered Western Australia land transfer tax (“stamp duty”) of A$55 million on the unencumbered value of "the land and chattels situated in Western Australia” of an Australian subsidiary of Placer Dome turned on whether Placer was a "listed land-holder corporation" for Stamp Act purposes. This turned on whether, on a global consolidated basis, the value of all of Placer's land (defined to include mining tenements and improvements) equalled or exceeded 60% of the value of all its property.

The price Barrick paid to acquire Placer (grossed up for liabilities) was $15.346 billion. The post-acquisition balance sheet of Placer valued its identifiable assets at $8.84 billion including $5.694 billion for its land assets, and recognized goodwill of $6.506 billion, being the excess of the cost over the fair value of the specifically identified tangible and intangible assets.

In rejecting the proposition that sufficient value could thus be assigned to the goodwill to avoid a conclusion that Placer was a listed land-holder corporation, the plurality stated (at paras. 78, 87, 141 and 143):

The accounting approach in Murry [(1998) 193 CLR 605] was described as "the difference between the present value of the predicted earnings of the business and the fair value of its identifiable net assets". That methodology is not the same as comparing the fair value of Placer's identifiable net assets to the purchase price of the business, the accounting approach adopted by Barrick. ...

Murry did not broaden the legal concept of goodwill to include sources which did not generate or add value (or earnings) to the business by attracting custom. The "typical sources" of goodwill acknowledged in Murry were "typical sources" because "they motivate service or provide competitive prices that attract customers" (emphasis added). And Murry and the decision which preceded it, Box [(1952) 86 CLR 387], recognised that in the modern world, patronage – in the sense of customers through the door – was no longer the sole means of generating or adding value (or earnings) to a business by attracting custom. But, in both decisions, the recognition that there were other sources of goodwill was itself considered in terms of the ability of those other sources to attract custom. ...

[A]t the acquisition date, there were no sources of goodwill that could explain the $6 billion gap which was attributed by Barrick to goodwill. That unexplained gap suggests that the DCF calculations used by Barrick's valuers to value Placer's land, its principal asset, were wrong. … [T]he danger identified by the majority in Murry of attributing a value to goodwill which actually inheres in an asset was readily apparent. …

At the acquisition date, Placer was a land rich company which had no material property comprising legal goodwill. … [italics in original]

Whether the acquisition by Barrick Gold of Placer Dome (“Placer”) triggered Western Australia stamp duty of A$55 million on the lands of in Western Australia of an Australian subsidiary of Placer Dome turned on whether, on a global consolidated basis, the value of all of Placer Dome's land (defined to include mining tenements and improvements) equalled or exceeded 60% of the value of all its property.

The post-acquisition balance sheet of Placer valued its land assets at $5.694 billion, and recognized goodwill of $6.506 billion, being the excess of the acquisition cost (grossed-up for liabilities) over the fair value of the specifically identified tangible and intangible assets.

In rejecting the proposition that sufficient value could thus be assigned to the goodwill to avoid a conclusion that Placer did not exceed the 60% threshold, the plurality stated (at paras. 78, 87, 141 and 143):

The accounting approach in Murry [(1998) 193 CLR 605] was described as "the difference between the present value of the predicted earnings of the business and the fair value of its identifiable net assets". That methodology is not the same as comparing the fair value of Placer's identifiable net assets to the purchase price of the business, the accounting approach adopted by Barrick.

Murry did not broaden the legal concept of goodwill to include sources which did not generate or add value (or earnings) to the business by attracting custom. …

… [A]t the acquisition date, there were no sources of goodwill that could explain the $6 billion gap which was attributed by Barrick to goodwill. That unexplained gap suggests that the DCF calculations used by Barrick's valuers to value Placer's land, its principal asset, were wrong. … [T]he danger identified by the majority in Murry of attributing a value to goodwill which actually inheres in an asset was readily apparent. …

At the acquisition date, Placer was a land rich company which had no material property comprising legal goodwill. … [italics in original]

In the context of discussion the extent to which a gold mining company should have significant separate value assigned to goodwill, Gageler J stated (at paras. 163-166, footnotes omitted):

"Property" is not "a monolithic notion of standard content and invariable intensity". "Accordingly, to characterise something as a proprietary right ... is not to say that it has all the indicia of other things called proprietary rights. Nor is it to say 'how far or against what sort of invasions the [right] shall be protected, because the protection given to property rights varies with the nature of the right'. Statutory use of the term "property" correspondingly invokes a protean concept, the content of which is informed by the statutory context.

That "property" has a broad meaning in this statutory context is indicated by the scope of the "property" statutorily excluded. For most legal purposes, information alone is not treated as proprietary in character unless it is confidential. Yet amongst the categories of "property" directed to be excluded in this statutory context is "intellectual property (including knowledge or information that has a commercial value) relating to any process, technique, method, design or apparatus to ... locate, extract, process, transport or market minerals". Knowledge or information that has a commercial value is thereby treated for this statutory purpose as "property" whether or not it is confidential.

More important for present purposes is that the content of the term "property" is informed in this statutory context by the amplified reference to "all property" to which the corporation is entitled, a reference which encompasses all property of a corporation which has an entitlement to conduct a business as a going concern.

An entitlement to conduct a business as a going concern has never been doubted to be capable of being conveyed by a seller to a purchaser. When conveyed to the purchaser, an entitlement of that nature has long been protected by injunction from derogation by the seller by reference to the principle that "[a] vendor of any form of property incurs an implied obligation not to destroy, defeat or impede the enjoyment by the purchaser of the subject of the sale".

Thus, Federal Commissioner of Taxation v Murry explained that "the legal right or privilege to conduct a business in substantially the same manner and by substantially the same means which in the past have attracted custom to the business" is recognised as "property" – traditionally described as "goodwill" – which can be conveyed by a seller to a purchaser, so as to remain the property of the purchaser within the protection of the law for so long as the purchaser in fact conducts substantially the same business in substantially the same manner.