GAGELER J. This appeal is concerned with the application of the "land rich" corporation regime in Pt IIIBA of the Stamp Act 1921 (WA) to the acquisition by Barrick Gold Corporation ("Barrick") in an on-market takeover in 2006 of a controlling interest in Placer Dome Inc ("Placer"), a publicly listed corporation which owned gold mining and exploration tenements in Western Australia and elsewhere throughout the world.
The statutory question at the heart of the appeal is whether, as at the time of the acquisition, "the value of all land to which [Placer 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 certain excluded property. If that question is answered in the affirmative, Barrick was liable to pay stamp duty calculated by reference to the unencumbered value of "the land and chattels situated in Western Australia to which the corporation [was] entitled".
Although I reject central tenets of the argument of the Commissioner of State Revenue as to the identification of the property to which Placer was entitled and as to the appropriateness of adopting a "subtractive" or "top down" approach to determining the value of the land to which Placer was entitled, I conclude that the appeal from the judgment of the Court of Appeal of the Supreme Court of Western Australia should be allowed and that the decision of the State Administrative Tribunal, affirming the decision of the Commissioner to disallow an objection to an assessment of stamp duty, should be reinstated.
The basis for that conclusion is my opinion that Barrick failed to discharge the onus placed on it as taxpayer of showing on the material before the Tribunal that the statutory question should be answered in the negative.
The "land rich" ratio
Application of the "land rich" ratio involves determining, as at the time of the acquisition of a controlling interest in a corporation, the ratio of "the value of all land to which the corporation is entitled" to "the value of all property to which it is entitled". Two uncontroversial aspects of the requisite determination set the context for considering aspects of the statutory numerator and of the statutory denominator that are in contest.
First, the reference to "value" invokes the well-settled and well-understood principle of valuation that value is to be determined as the price that would be negotiated in an arm's length transaction between a hypothetical willing but not anxious seller and a hypothetical willing but not anxious purchaser, each having knowledge of all existing information bearing on the value of the subject matter of the transaction.
Invocation of that principle is confirmed by the statutory instruction that, "when applying the ordinary principles of valuation", "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", to which it is added that "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". The latter part of the instruction makes clear that all of the existing information which the hypothetical purchaser of the land or other property is assumed to have when negotiating a price for that land or other property pre-acquisition is also to be assumed to remain available to the purchaser at no cost so as to enable that purchaser to put the land or other property to its highest and best use post-acquisition. But the latter part of the instruction does not go beyond requiring the information assumed to be available to the purchaser post-acquisition to be information which actually existed at the time of the hypothesised sale.
Second, though the seller and the purchaser are hypothetical, the subject matter of the hypothesised transaction is the actual subject matter to be valued and the context of the hypothesised transaction is the actual market for that subject matter. The land and other property relevant to the application of the statutory ratio being statutorily identified as that "to which the corporation is entitled", the identification and valuation of that land and other property must in each case be on the basis of the hypothetical seller selling and the hypothetical purchaser purchasing an entitlement to land or other property of the same nature and in the same condition as the land or other property which the corporation has at the time of the acquisition of a controlling interest in it. That is important to determining both the statutory numerator and the statutory denominator in ways which will need to be explained.
The denominator
The statutory denominator is set as "the value of all property to which [the corporation] is entitled" other than "property" within a category that is directed to be excluded.
Identification and valuation of property that is the subject matter of the transaction hypothesised by the statutory denominator must proceed on the assumption that, where the corporation has an entitlement to conduct a business as a going concern, the hypothetical seller and the hypothetical purchaser of all of the property of the corporation transact for an entitlement to conduct the same business as a going concern.
"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. "Goodwill" was explained to be "an indivisible item of property", "inseparable from the conduct of a business" yet "legally distinct from the sources - including other assets of the business - that have created the goodwill".
Not raised on the facts in Murry and left open by the reasoning in that case is whether "goodwill" is confined to what has traditionally been described as "the attractive force which brings in custom" or extends more generally to "whatever adds value to a business". Historically, and as reiterated in Murry, "attractive force" has been seen to be "central" to the legal concept of goodwill, and Australian cases before Murry in which the more general meaning was alluded to were all cases in which the value that was added to a business was the value of the favourable disposition of customers. But it does not follow that attractive force is essential to goodwill or, if it is, that goodwill is exhaustive of the value that inheres in an entitlement to conduct a business as a going concern.
To treat attractive force as essential to goodwill and then to go on to treat goodwill as exhaustive of the value that inheres in an entitlement to conduct a business as a going concern would, as Southwood J pointed out subsequent to Murry, fail to give legal recognition to the obvious fact that "[a] business may be successful and create excess value without substantial customer preference". Amongst the "positive advantages which may arise from the continuity of organisation of the business", and which may therefore add value to an entitlement to conduct the business as a going concern, his Honour usefully instanced "good relations with suppliers of the business, good industrial relations, the quality of management, the configuration of plant and equipment, the technical skills of management and senior staff, technological skills, credit management and capital raising ability, all of which may add value to the business by reducing costs and increasing profits without necessarily maintaining or increasing custom".
Whilst "[t]he books abound in definitions of good will", Cardozo J observed in the Court of Appeals of New York nearly a century ago, "[m]en will pay for any privilege that gives a reasonable expectancy of preference in the race of competition". In the same vein and at around the same time, delivering the unanimous decision of the United States Court of Appeals for the Second Circuit, of which Learned Hand J was a member, Swan J said:
"A going business has a value over and above the aggregate value of the tangible property employed in it. Such excess of value is nothing more than the recognition that, used in an established business that has won the favor of its customers, the tangibles may be expected to earn in the future as they have in the past. The owner's privilege of so using them, and his privilege of continuing to deal with customers attracted by the established business, are property of value."
The latter privilege, Swan J noted, "is known as good will". The former privilege, which he had also referred to as "property of value", he had no occasion to name.
The two elements of the privilege of a business-owner to which Swan J referred are reflected in the distinction then recognised and still recognised in taxation and regulatory contexts in the United States between: the "goodwill" of a business, comprising "that element of value which inheres in the fixed and favorable consideration of customers, arising from an established and well‑known and well-conducted business"; and the "going concern value" of a business, comprising that element of value which inheres in "the ability of a business to generate income without interruption, even though there has been a change in ownership" and encompassing the value of an assembled workforce as well as the value of an assembled plant. "The difference between a dead plant and a live one is a real value", the Supreme Court of the United States has said, "and is independent of ... any mere good will as between such a plant and its customers". "That there is an element of value in an assembled and established plant, doing business and earning money, over one not thus advanced", the Supreme Court has opined, is "self-evident". Going concern value, no less than goodwill, the Supreme Court has recognised as "property".
Australian courts have not "thrown the protection of an injunction around all the intangible elements of value, that is, value in exchange, which may flow from the exercise by an individual of his powers or resources whether in the organization of a business or undertaking or the use of ingenuity, knowledge, skill or labour". We have not treated as property all that can be monetised.
However, I see no reason why an Australian court should not recognise the entitlement of a business-owner to continue to use the organisation of an existing business without interruption as a proprietary aspect of what was referred to in Murry as "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". In that respect, I see no reason why an Australian court might not in an appropriate case protect that entitlement by injunction against derogation by the former owner, for example by enjoining the former owner from soliciting suppliers in the same way and on the same basis as it might enjoin the former owner from soliciting customers. And in the event of a business-owner suffering an interference to the conduct of an existing business as a consequence of the tortious conduct of a third party, I see no reason why an award of damages by an Australian court might not in an appropriate case compensate for injury to the organisation of the business in the same way and on the same basis as it might compensate for injury to customer relations.
Whether or not such protection or compensation for injury would be available to a business-owner under the general law in Australia, however, I see no reason why the ability of a corporation, at the time of acquisition of a controlling interest in it, to continue to use the organisation of its own existing business should not be included within the statutory reference to "all property" to which the corporation is entitled at that time, given the self-evident contribution of that entitlement to the price which a willing but not anxious purchaser could be expected to pay to a willing but not anxious seller.
With reference to Murry, the Canadian Federal Court of Appeal has taken the view in the context of examining the taxation consequences of the acquisition of a business as a going concern that "efficient management" and "the potential for new business opportunities" flowing from business can be viewed as goodwill.
The view which I prefer, and which I consider to be consonant with the reasoning in Murry so far as that reasoning went, is that an entitlement to conduct a business as a going concern is a single item of property the value of which (if any) in a given case might be found to lie in either or both of two sources that might be found to be more or less distinct. One is the continuity of relationships with customers. The second is the continuity of organisation of the business. The traditional label "goodwill" is appropriately applied to the first of those sources of value. The label "going concern value" is appropriately applied to the second.
There is no question that Placer lacked goodwill in that sense at the time of the acquisition of a controlling interest in it by Barrick. Materially, its only product was gold - an undifferentiated product which it sold into a world market at a world price. Whether Placer could be inferred to have had at that time any material going concern value is a topic on which the Tribunal and the Court of Appeal took different views. Consideration of that topic is best deferred until after consideration of the statutory numerator.
The numerator
The statutory numerator is set as "the value of all land to which the corporation is entitled" at the time of acquisition of a controlling interest in it. The meaning of the term "land", not unlike the meaning of the term "property", is context dependent.
The meaning here is informed by specific statutory instructions that extend the definition of "land" to include both a "mining tenement" and "anything fixed to the land" and that define "mining tenement" to include "the specified piece of land in respect of which the mining tenement is ... granted or acquired".
Two aspects of the inquiry into value required to determine the statutory numerator are significant.
First, it follows from the extended definition of "land" that, in its application to mining tenements on which mining operations are occurring at the time of acquisition of a controlling interest in the corporation, the land to be valued includes all structures located on the land which is the subject of those mining tenements in the working condition in which the structures exist at that time. The fact that a mining plant is assembled and "live" on the tenement at that time is a fact which contributes to the value of the tenement itself. The notion that an individual mining tenement could be valued using a "restoration valuation methodology" so as to reflect what was described in the valuation evidence as the value of "an idle mine with plant and equipment in 'care and maintenance' mode" was rightly rejected by the Tribunal.
Second, it follows from the requirement for "the value of all land" to be compared with "the value of all property" that all of the land to which the corporation is entitled is to be treated as a bundle. Just as the denominator is determined by inquiring into the price that would be negotiated in an arm's length transaction between a hypothetical willing but not anxious seller and a hypothetical willing but not anxious purchaser for the totality of the property to which the corporation is entitled, so the numerator must be determined by inquiring into the price that would be negotiated in an arm's length transaction between a hypothetical willing but not anxious seller and a hypothetical willing but not anxious purchaser for the totality of the land to which the corporation is entitled. If "the value of all property" is determined on the basis that the totality of the property would be sold together, but "the value of all land" is determined on the basis that the land would be sold piecemeal, the resultant ratio would be distorted to the extent that the assembling of the property or land might result in a price greater than the sum of the prices of the component items of property or parcels of land.
For reasons I will explain, in my opinion, that second aspect of the inquiry into value required to determine the statutory numerator is ultimately determinative of the appeal.
Determining the integers in this case
Despite the fact that Barrick appears to have paid a premium of 25 per cent above the prevailing market price of Placer's shares, Barrick and the Commissioner agreed before the Tribunal that the amount Barrick paid to acquire those shares represented the best evidence of the price that would be negotiated in an arm's length transaction between a hypothetical seller and a hypothetical purchaser for the totality of the property to which Placer was then entitled. Adjusted to account for the liabilities which Placer then had, the purchase price indicated that the value of all property to which Placer was then entitled was $15.3 billion.
For the purpose of determining the denominator of the statutory ratio, Barrick and the Commissioner also agreed before the Tribunal the value of the excluded property to which Placer was then entitled. Although it emerged on the hearing of the appeal that there was a difference between them as to the scope of what was encompassed within the excluded category of knowledge or information that has commercial value relating to any process, technique, method, design or apparatus to locate, extract, process, transport or market minerals, the amount of all excluded property was agreed to be $2.5 billion.
The result was that Barrick and the Commissioner were agreed before the Tribunal that the value of all property other than excluded property to which Placer was entitled at the time of the acquisition of the controlling interest in it by Barrick was $12.8 billion. Ostensibly, at least, the value of the statutory denominator was uncontentious.
The contest before the Tribunal and on appeal to the Court of Appeal was focused on the determination of the statutory numerator. The contest was as to whether the value of all of the land in Western Australia and elsewhere throughout the world to which Placer was entitled at the time of the acquisition of the controlling interest in it by Barrick was at least 60 per cent of $12.8 billion, being $7.68 billion. Other than gold mining and exploration tenements, the value of the land to which Placer was then entitled was implicitly accepted by both parties to be immaterial.
As issue was joined before the Tribunal, Barrick, as taxpayer, accordingly assumed the evidentiary and persuasive onus of establishing on the material before the Tribunal that the value of the gold mining and exploration tenements in Western Australia and elsewhere throughout the world to which Placer was entitled was less than $7.68 billion.
To discharge that onus, Barrick relied on expert valuations of Placer's gold mining and exploration tenements. The two principal valuations on which Barrick relied (ignoring a valuation based on restoration valuation methodology) were those of Mr Lee and Mr Patel, who valued the tenements at $5.3 billion and $5.7 billion respectively. Those valuations were met with competing expert valuations on which the Commissioner relied. The principal valuation on which the Commissioner relied was that of Mr Lonergan, who valued the tenements at between $11.8 billion and $12.3 billion.
Understanding the methodology employed in those valuations is important. On the common understanding that the highest and best use of Placer's gold mining and exploration tenements lay in the continued exploitation of mineral resources and that a hypothetical willing but not anxious seller and a hypothetical willing but not anxious purchaser of a mining or exploration tenement would each adopt the same methodology to ascribe a value to that use, the valuers agreed that the gold mining and exploration tenements were to be valued by reference to the discounted cash flow forecast to be generated from mining operations on those tenements. Treating each existing mining project as a separate "enterprise", the valuers each determined the present value of the projected cash flow from sales of gold mined from proven and probable reserves over the projected life of the project. Each calculated the total value of the gold mining and exploration tenements simply as the sum of the present values of the individual mining projects.
Discounted cash flow methodology is, of course, reliant on predictions. The principal difference between the valuations of Mr Lee and Mr Patel, on the one hand, and that of Mr Lonergan, on the other hand, lay in their predictions of the long-term prices of gold. Mr Lee and Mr Patel based their predictions on management and industry consensus forecasts at the time of acquisition of future spot prices. Mr Lonergan based his prediction on prices assessed by reference to gold futures contracts at the time of acquisition.
The Tribunal preferred the approach of Mr Lonergan. In an aspect of the Court of Appeal's reasoning that is unchallenged in this appeal, the Court found Mr Lonergan's reliance on prices assessed by reference to gold futures contracts to have been erroneous. The valuation at which Mr Lonergan arrived must therefore be treated for the purpose of this appeal as an unreliable guide to the value of the statutory numerator.
The obvious difficulty with the remaining valuations, those of Mr Lee and Mr Patel, is that they left a very large difference between the value of the gold mining and exploration tenements as indicated by their valuations and the value of all of Placer's property which it was agreed was indicated by the price Barrick paid to acquire Placer. How could it be said of a gold mining company, whose only material source of revenue was from the mining of gold, that barely a third of the value of the total property to which it was entitled lay in its gold mining and exploration tenements?
Mention was made before the Tribunal of an industry practice or rule of thumb according to which a multiplier, referred to as the "net asset value multiple" or the "gold premium", is applied to reconcile that value with the market value of a gold mining company. The multiplier was in the range of 1.2 to 2.5 times the value of mining tenements derived through the application of discounted cash flow methodology. The basis for the application of such a multiplier was unexplored before the Tribunal beyond brief reference in the cross-examination of Mr Patel to him considering three reasons why its application would be appropriate: the possibility of finding more gold in the existing tenements or in new tenements; the possibility of the gold price exceeding consensus forecasts; and the option available to the operator of the mine of varying production levels in response to changes in the gold price. Neither Barrick nor the Commissioner relied on the multiplier before the Tribunal and experts on both sides specifically rejected its application on the basis that it lacked intellectual rigour. The Tribunal in those circumstances put the multiplier to one side. The practice of applying a multiplier can nevertheless be taken as recognition within the gold mining industry that the business of a gold mining company ordinarily has value beyond that revealed by the application of a standard discounted cash flow analysis to its existing mining operations.
To the extent to which it was incumbent on Barrick to explain the difference between the value of the gold mining and exploration tenements to which Placer was entitled (a task which Barrick steadfastly refused to embrace as part of its persuasive burden), Barrick attributed that difference to "goodwill", corresponding to what I have referred to as going concern value. The Commissioner disputed that any such going concern value, even if it could be treated as property of Placer, was shown on the material before the Tribunal to be substantial.
Quite properly, Barrick did not seek to gain direct support for the existence of substantial going concern value from accounting practice. Barrick did, however, place reliance on the reasons it had advanced to justify recording as "goodwill", in financial statements required by the United States Securities and Exchange Commission to be prepared in accordance with United States generally accepted accounting principles, an amount of $6.5 billion, being the difference between the price it paid for the shares in Placer and the fair value which it attributed to Placer's net assets. The reasons there advanced, Barrick argued, similarly supported recognition of Placer having had substantial going concern value at the time of acquisition.
Barrick explained in its financial statements:
"In a gold mining context, the current and future product is gold, and the depletion of the existing portfolio of reserves and mineralized materials does not usually define the economic end of the mining company. The going concern value of a mining business will be indefinite to the extent that there is an expectation that management will be able to locate attractive investment opportunities in the future at either its existing mineral properties or by locating other prospective mineral properties, ie, find additional mineral reserves. The existence of this component of goodwill in the acquisition of Placer Dome can be inferred because the historic market capitalization of Placer Dome reflected a premium to the underlying [net asset value]."
Barrick further explained in its financial statements that the amount of $6.5 billion recorded as "goodwill" in the acquisition of Placer was contributed to by "synergies" from the combination of Barrick's mining operations with those of Placer in the form of cost savings and economies of scale which, at the time of purchase of Placer, Barrick expected to realise. The capitalised value of those synergies was uncontroversially in the range of $1.6 billion to $2 billion.
Evidence given before the Tribunal by Barrick's Chief Financial Officer at the time of the acquisition was to similar effect. He explained that the amount recorded as "goodwill" in Barrick's financial statements represented, in addition to "the fair value of the expected synergies and other benefits which could be realised upon the integration of Placer Dome's business into Barrick's", "the fair value of the going concern element of Placer Dome's business - including the value attributable to the ability of management to integrate the business and ensure that existing revenue streams and the value of the assets working together were maintained, sustained and grown by locating attractive investment opportunities in the future at either its existing mineral properties or by locating additional mineral reserves".
Mr Lee in his evidence advanced a more general justification for that approach. Having posed the question, "Why should goodwill arise on a mining transaction?", Mr Lee answered it as follows:
"In a mining context such as the acquisition of Placer Dome, goodwill represents the avoided cost of having to assemble a portfolio of operating mines, mines that are generating cash flow, with the management teams in place, the anticipation of synergies expected to arise from the combination of the Placer Dome business with the Barrick business and at least in part, the expectation, that the management team will be able to keep the company in operation, long after the existing mines are depleted."
Mr Lee elsewhere in his evidence explained that savings in production costs, economies of scale and reductions in risk were available to a mining company which had what he again referred to as a "portfolio" of mines and development projects, and that those advantages would not be available to a company which had only a single mine.
Barrick emphasised in other evidence and submissions before the Tribunal that, at the time of acquisition, Placer had an ongoing profitable business which had been operating for more than 100 years, was the fifth largest publicly listed gold producing company in the world, employed a workforce of some 13,000 employees worldwide, held proven and probable gold reserves which had increased by 60 per cent over the previous five years, operated 16 existing mining projects in seven countries and had an additional seven exploration areas which it had identified as of interest, and had a demonstrated capacity to develop and expand its gold mining operations by identifying and developing new mining projects as the resources of existing mines were depleted.
Barrick drew attention to the overview of Placer's business strategy contained in Placer's 2004 annual report, its last annual report before its acquisition by Barrick. The annual report explained that Placer had a strategy of "continuing to build upon its high-quality portfolio of gold producing assets". Amongst the ways in which Placer went about implementing that strategy were: investing in personnel and systems, "[b]uilding land positions near current infrastructure and in geological systems where gold discoveries have been repetitive" and "[e]xploring aggressively on these land packages". The result was that Placer had a "longer-term expectation" of having a "high-quality, geographically balanced portfolio of operations".
Barrick also drew attention to its own strategic goal in acquiring Placer. The acquisition was justified in a proposal adopted by its Board as providing a "stronger development pipeline for growth".
Without expressing a view on whether going concern value is proprietary in nature, the Tribunal went so far as to deny that there was evidence before it sufficient to establish that Placer had going concern value of any significance. The Tribunal found that there was none.
The Tribunal's finding that Placer had no going concern value at the time of acquisition by Barrick appears to have fed into another strand of reasoning on which the Tribunal relied to reject the value of the statutory numerator indicated by the valuations of Mr Lee and Mr Patel. That strand of reasoning began with the Tribunal adopting the view that the value of the statutory numerator could be derived by the "simple arithmetical calculation" of taking the agreed value of the statutory denominator and deducting from it the value of all property that could be shown not to be land. Finding, in the absence of any significant going concern value, that Barrick had failed to prove that Placer held significant property which was not land, the Tribunal concluded that the statutory numerator was not substantially less than the statutory denominator.
Taking the view that going concern value where it exists is proprietary in character - a view which for reasons already given I consider to be correct - the Court of Appeal found the Tribunal to have been wrong in fact to conclude that the evidence before it was insufficient to establish that Placer had significant going concern value and wrong as a matter of valuation principle to apply a subtractive or top down approach in the circumstances of the case. In both respects, I consider the reasoning of the Court of Appeal to be sound.
As to the facts, the Court of Appeal in my opinion was correct to conclude from the evidence that the synergies available to and expected to be realised by Barrick would be available to and expected to be realised by a hypothetical purchaser of Placer's business and, on that basis, to treat the capitalised value of those synergies as a component of going concern value. I reject the submission of the Commissioner that such synergies could not have added to the value of the entitlement to conduct Placer's business as a going concern because they represented inefficiencies in the conduct of that business in respect of which a hypothetical purchaser would benefit from changing the business rather than from continuing to conduct the business in substantially the same way as it had been conducted before. Accepting that synergies can in one sense be characterised as having been inefficiencies in the conduct of Placer's business, it is sufficient that the availability of the synergies from which the hypothetical purchaser could be expected to benefit added to the price which the hypothetical purchaser could have been expected to pay for the entitlement to continue to conduct that business.
The Court of Appeal, in my opinion, was also correct to infer from the scale and scope of Placer's gold mining operations that substantial value inhered in its continuing business operations beyond the value of its existing portfolio of mining and exploration tenements. I reject the submission of the Commissioner that all of the value of those continuing business operations necessarily inhered in its existing portfolio of mining and exploration tenements because gold production from those tenements was Placer's only material source of revenue, or that any significant additional value is necessarily attributable to the statutorily excluded category of property constituted by knowledge or information that has commercial value relating to processes, techniques and methods, and designs to locate, extract, process, transport or market gold. The submission in both respects conflates the value of presently existing property (Placer's portfolio of mining and exploration tenements, or its relevant knowledge or information of commercial value) with the value of the capacity to develop that property and to use it in such a way as to generate additional property in the future.
As to the valuation methodology, there can be nothing inherently wrong with a subtractive approach to the determination of the statutory numerator in a case where it is possible to identify and to value property other than land with reasonable precision. The approach, however, is problematic where the property other than land that can be identified cannot readily be valued with reasonable precision. More fundamentally, the approach is mathematically nonsensical where the property other than land that can be identified includes an entitlement to carry on a business having going concern value and where a part of that going concern value might lie in the existence of a portfolio of land. To subtract the total going concern value from the total value of "all property" to which the business-owner is entitled would not in such a case yield a result equivalent to the value of "all land". Tellingly, although the Commissioner argued for application of the subtractive methodology in closing submissions before the Tribunal, the Commissioner did not suggest that anything contained in the extensive valuation evidence before the Tribunal supported its application in the circumstances of the case.
To accept the soundness of the Court of Appeal's criticism of the Tribunal, however, is not to accept that Barrick is to be taken by reason of the evidence of Mr Lee and Mr Patel to have discharged its evidentiary onus before the Tribunal, or that (if not) the order of the Court of Appeal remitting the matter to the Tribunal for reconsideration was appropriate.
As the evidence of Mr Lee spelled out, at least a substantial part of the going concern value of Placer, including some part of the $1.6 billion to $2 billion in synergies available to and expected to be realised by a hypothetical purchaser of Placer's business, was attributable to the fact of Placer's gold mining and exploration tenements forming an assembled portfolio rather than being sold separately. Indeed, Placer's annual report described the goal of its business strategy in terms of having a high-quality, geographically balanced portfolio of mining operations.
On Barrick's own case, therefore, a substantial part of the going concern value of Placer's business was attributable to the assembled whole of Placer's portfolio of mining assets being more valuable to a hypothetical purchaser than the sum of the values of the individual mining operations were those mining operations to be acquired separately.
Yet the evidence of Mr Lee and Mr Patel on which Barrick relied to value Placer's gold mining and exploration tenements in the range of $5.3 billion to $5.7 billion valued those tenements only as the sum of the values of the individual mining operations each treated as a separate enterprise. Left entirely out of account was such additional amount as might be expected to have been paid by a hypothetical purchaser in order to purchase the assembled whole. Whether the hypothetical purchaser would have been inclined to adopt the industry practice of applying a "gold premium" in the form of a multiple in the range of 1.2 to 2.5 to Mr Lee's and Mr Patel's discounted cash flow calculations, it is inappropriate to speculate.
The extent to which a hypothetical purchaser would have attributed value to the assembled whole of Placer's portfolio of gold mining and exploration tenements was not explored in the evidence on which Barrick relied. That gap in the evidence is enough for the appeal to be decided in favour of the Commissioner.
That the going concern value of the entitlement to carry on a business as a going concern must be included in the denominator of the "land rich" ratio does not mean that the whole of the going concern value must be excluded from the numerator. The numerator, as has been explained, must be determined by inquiring into the price that would be negotiated in an arm's length transaction between a hypothetical seller and a hypothetical purchaser for the totality of the land to which the corporation in question was entitled at the time of acquisition.
The question required to be addressed in determining the statutory numerator was as to the value of the entire portfolio of Placer's gold mining and exploration tenements treated as a portfolio. The flaw in Barrick's case before the Tribunal was that Barrick failed to address that question.
Conclusion
The State Administrative Tribunal Act 2004 (WA) read with the Taxation Administration Act 2003 (WA), as the Court of Appeal held in an important aspect of its reasoning unchallenged in the appeal, placed on Barrick as taxpayer the onus of establishing that the assessment to which its objection related was "invalid or incorrect".
Having contended that the assessment was incorrect in its entirety on the basis that Placer did not meet the "land rich" ratio, and having failed on the material placed before the Tribunal to establish that ground of objection, Barrick has not demonstrated any basis for an order of remitter which would provide another opportunity for it to attempt to make out that ground. It is also too late for Barrick now to complain that the assessment was incorrect for the reason that it proceeded on an incorrect determination of the unencumbered value of the land and chattels situated in Western Australia to which Placer was entitled.
For these reasons, I agree with the orders proposed by the plurality.