The licensing authority may approve the transfer of a licence from one person to another provided that the transferee is a fit and proper person to hold a licence. There is a prohibition upon a licensee selling or assigning his or her rights to carry on business in pursuance of a licence, unless the transfer has been approved by the licensing authority: s71. That prohibition, however, does not prevent a licensee from entering into a contract for the sale or assignment of his rights to carry on business subject to a condition precedent under which the sale is not to take effect until the transfer or assignment of the licence has been approved by the licensing authority.
The only restriction placed upon the removal of licences is that if the new premises are the subject of a lease the lessor (and if there is a sub-lease the ultimate owner) must consent to the application.
Thus, in South Australia, licences to sell alcohol are limited both to the person licensed and the premises licensed. However, subject to the discretion of the licensing authority and the matters referred to above, there is now no impediment in transferring a licence from one set of premises to another, just as there is no impediment in transferring a licence to another person who is a fit and proper person to hold a licence.
Given the legislative difference between the situation existing in South Australia and that existing in 19th century England, it may well be there is a need to rethink the prima facie rule that the whole goodwill of a public house attaches to the premises. Socially the public house in an Australian city may well play a different role from that played by the local "pub" in 19th century England. But more significantly, the ability in South Australia to secure a transfer of the licence from one set of premises to another (albeit with the approval of the licensing authority) may lead to the conclusion that more weight should now be given to the relationship between goodwill on the one hand and the limited statutory monopoly granted in the form of the licence on the other. The owner of premises the subject of a licence may sell those premises without the licence. A purchaser in the result obtains unlicensed premises which can not, unless a new licence is acquired, be used for the purpose of the sale of alcohol. The purchaser does not obtain the goodwill of the business theretofore carried on on the premises merely because those premises have been sold. The same is, of course, true where instead of a sale there is a grant of a lease, although the lessee may, by virtue of the terms of that lease, be obliged to carry on at all times the business of the sale of alcohol and, if permitted at all to assign the lease, may be required to transfer the lease only in conjunction with the licence.
The true position is that the goodwill of the business carried on at licensed premises can only be transferred if the licence is also transferred with the premises. But with the ability to remove a licence from one premises to another the holder of the licence may well hold in the licence significant value. Put simply, at least some part of the goodwill of the business must attach to the licence rather than the premises.
In summary I think it may be said that there are various kinds of goodwill, all of which, with the exception of personal goodwill, attach to property. Site goodwill clearly attaches to the site, although in the case of a public house the conclusion that all aspects of goodwill attach to the site ignores the significance in South Australia of the licence. Name goodwill clearly attaches to the trade name and at least where this involves a trade mark (registered or unregistered,) this name will be property. A mere business name may not be property. Monopoly goodwill attaches to the statutory monopoly right. Having regard to the disparate nature of these rights which together make up the goodwill of a particular business and which to some extent can be dealt with separately, I do not think it can be correct today to say that although comprised of separate elements goodwill is to be treated as inseverable. It is, however, correct to say that to the extent that the goodwill attaches to a species of property it may only be dealt with together with that property. But this is not to say that it is not capable of being dealt with as a separate species of property or as being the subject of a bargain and sale at a price.
In the present case, the contract provided for the monopoly goodwill to be transferred by clauses dealing with the transfer of the liquor licence to the purchaser. It dealt with the personal goodwill by requiring the vendor to provide assistance during the thirty days after possession was given and in the covenant of the vendors not to compete; it dealt with the name goodwill by the requirement that the vendor assign its right title and interest to it and the contract ensured that site goodwill would pass by providing for the execution of the lease. The parties bargained that the purchase price for the business was to be $840,000, the rights to be sold being plant and equipment and "goodwill". I see no reason why this Court should rewrite the bargain between the parties so that the sale of the business is for $420,000, no part of the purchase price is to be allocated to the aspects of goodwill which I have referred to as personal goodwill, name goodwill and monopoly goodwill, but $420,000 is to be treated as the consideration for the site goodwill, even if it were then to follow that that $420,000 should be treated as a premium for the grant of the lease.
I have discussed the cases dealing with goodwill and particularly the relationship of site goodwill to the land on which the business is conducted in deference to the submissions of counsel who, in a careful argument, took the Court to the most significant of the cases in support of his argument that, because the premises were licensed premises the goodwill of the hotel necessarily attached to the premises and so passed with the grant of the lease to the purchasers with the result that the consideration for goodwill was properly to be seen as consideration for the grant of the lease rather than consideration for the sale of goodwill. I think, however, that a consideration of these cases may well distract from the real issue in the case, namely, whether the payment expressed in the agreement to be the consideration for the goodwill of the business was a "premium" for the grant of a lease. For the purposes of considering this issue, I am happy to accept that goodwill adheres to the premises on which the business is carried on.
The parties were in agreement as to the proper test to be applied in determining whether a payment was to be characterised as a premium for the grant of a lease. A sum will be a premium where it is paid as consideration for the grant of the lease. The expression is used in contradistinction to rent which is the consideration payable under the lease for the right of use and occupation of the leased premises during the term of the lease: King v Earl Cadogan [1915] 3 KB 485, Strick (Inspector of Taxes) v Regent Oil Co Ltd [1966] AC 295, Frazier v Commissioner of Stamp Duties (NSW) (1985) 17 ATR 64, Nixon v Doney [1961] SR (NSW) 311 at 316.
It may, in passing, be noted, as McHugh JA pointed out in Commissioner of Stamp Duties (NSW) v JV (Crows Nest) Pty Ltd (1986) 86 ATC 4740 at 4747, in a judgment with which Samuels JA concurred, that the distinction between a payment which is made for the use of property for a term and a payment made by a lessee to the lessor not relating to the use of the property, is a difficult one. While that comment was made in the context of payments for services to be performed by the lessor, additional rates and the like, the same can be said of the distinction between rent and premium. As his Honour observed, in the decided cases the distinction seems often to turn on matters of form rather than matters of substance. That gives additional significance to the form which the parties in their bargain adopted, namely, that the payment made was consideration for goodwill, rather than for the grant of the lease.
There have been a number of cases in the context of income tax where the courts have been required to consider whether a particular payment was to be treated as a premium for particular statutory purposes. We were taken to many of them by senior counsel for the Commissioner. I gain little assistance from most of these cases. Such assistance as can
be derived from these cases supports Krakos rather than the Commissioner.
Thus, in In re Income Tax Acts [1934] VLR 250 where the parties had apportioned the purchase price between lease, licence and furniture and there was evidence that the apportionment was agreed to as representing real values, it was held that the Commissioner was not bound to regard the sum of the amounts paid for the lease and licence as being consideration for the grant of the lease. Two propositions emerge from the decision. First, the allocation adopted by the parties was given effect to. Second, there was no principle of law that the licence could not be sold separately from the premises. This, the Court said, in what is clearly only dicta, was also the case with goodwill. Thus Mann ACJ said (at 254):
"The authorities show that the licence as well as the goodwill attached to licensed premises may be the subject of a separate sale or lease, even although the premises themselves are demised or transferred by the same document, and that it is none the less true to say that there are two sales or two transfers because in practice and by reason of the circumstances attaching to the licence the transferee must in each case, from the nature of the business, be the same person." (emphasis added).