TOURISM HOLDINGS AUSTRALIA PTY LTD v COMMISSIONER OF TAXES (NT)

Judges: Martin CJ
Mildren J

Riley J

Court:
Court of Appeal of the Northern Territory

MEDIA NEUTRAL CITATION: [2007] NTCA 8

Judgment date: 14 November 2007

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Riley J

46. I have read the judgment of Mildren J and agree this appeal should be dismissed. I add some observations of my own on one aspect of the matter.

47. The appeal focuses upon the application of s 9BA of the Taxation (Administration) Act (NT). At the relevant time the section was in the following terms:

" Where in the opinion of the Commissioner, dutiable property is wholly or partly situated in the Territory or is wholly or partly related to a business undertaking carried on in the Territory, stamp duty shall be assessed in respect of that portion of the dutiable property situated in the Territory or related to the business undertaking carried on in the Territory. "

48. The dutiable property of concern is the relevant goodwill of the Britz International Motor Vehicle Rental Business which was carried on in Australia and overseas. The Australian business (which was a part only of the international Britz business) was sold to Tourism Holdings Australia Pty Ltd. The issue was the extent to which the goodwill covered by the sale should be subject to duty in the Northern Territory. There is no dispute that goodwill is dutiable property for the purposes of the Act.

49. The trial Judge found that the vendors carried on business in Australia and in Europe and that the Australian business had goodwill in Europe. That finding has not been challenged. The contention of the appellant is that the goodwill of the Australian business has a local situs and as a consequence the obligation on the part of the Commissioner was to determine what part of the goodwill was " situated in " the Northern Territory for the assessment of duty.

50. When the matter was referred to the Supreme Court the learned trial Judge did not proceed by reference to the location of the goodwill but, rather, looked at the issue of what goodwill was " related to " the business undertaking carried on in the Territory. He noted that whilst the Australian business had goodwill which was situated in Europe that did not mean that the goodwill was not related to the business carried on in the Territory. He went on to conclude that it was appropriate to assess the value of the dutiable property " by applying to the total value of the Australian goodwill the proportion of Territory revenues of the motor vehicle rental business to the total Australian revenues of the business for the three financial years " immediately preceding sale.

51. The appellant submitted that his Honour was in error in so doing. He was required to assess the portion of dutiable property " situated in the Territory " . It was submitted that where dutiable property forming part of the assets of a business has situs then duty should be assessed by reference to the situation of the property.

52. 

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ATC 5199

The appellant contended that s 9BA apportions dutiable property depending on the type of dutiable property the subject of apportionment. The section envisages two classes of property and creates two separate limbs to deal with those classes. It was submitted that s 9BA should not be construed so as to create two alternative bases of taxation with the Commissioner being empowered to select one to the exclusion of the other.

53. The provision does not have that effect. Section 4 of the Stamp Duty Act imposes stamp duty upon conveyances of dutiable property. The term " dutiable property " is defined in s 4 of the Taxation (Administration) Act (NT) and, for present purposes, includes the goodwill of a business undertaking carried on or to be carried on in the Territory or in the Territory and elsewhere. Section 9BA of the Act is then a relieving provision in that it serves to relieve the taxpayer of the obligation to pay duty where the Commissioner forms the opinion that the dutiable property is wholly or partly situated in the Territory or is wholly or partly related to a business undertaking carried on in the Territory. If either of those circumstances applies, the duty is to be assessed by reference to that portion of the dutiable property situated in the Territory or related to the business undertaking carried on in the Territory rather than the whole of the dutiable property.

54. In the present case, as the learned trial Judge found, it was appropriate to assess duty by reference to the portion of the dutiable property which is " related to " the business undertaking carried on in the Territory rather than by reference to the supposed location of the goodwill. The goodwill of the Australian business was spread over a substantial geographic area. It related to a single business and was not spread amongst a number of businesses gathered under the one umbrella. Whilst it may be accepted that goodwill has " the attribute of locality " :
Inland Revenue Commissioners v Muller & Co ' s Margarine Ltd [ 1901 ] AC 217 (at 224), this does not mean that it may be apportioned to different localities. As was observed in that case by Lord Macnaghten:

" No doubt, where the reputation of a business is very widely spread or where it is the article produced rather than the producer of the article that has won popular favour, it may be difficult to localise goodwill. "

55. The present case is not one such as was considered by the High Court in
Geraghty v Minter (1979) 142 CLR 177 where Stephen J said (at 193):

" Goodwill of a partnership business is an inseverable whole unless, of course, it consists in fact of a series of separate goodwills, each applicable to distinct areas in which the one business operates or to distinct business activities which the one business entity carries on. When sold, proceeds of goodwill may be divided up readily enough, but, because goodwill is ' the benefit and advantage of the good name, reputation and connection of a business ' ( Inland Revenue Commissioner v Muller & Co ' s Margarine Ltd (22) per Lord Macnaghten) it is inherently inseverable from the business to which it relates. "

56. Given that goodwill is something which attaches to a business and cannot be dealt with separately from the business:
Federal Commissioner of Taxation v Murry 98 ATC 4585 ; (1998) 193 CLR 605 (at 611), is " inherently inseparable from the business to which it relates " and cannot be separated from the business which created it, it will be situated where the business is carried on:
IRC v Muller & Co (at 235). The goodwill in this case is not susceptible to being apportioned among different locations. As the respondent submitted, the subject goodwill is peculiarly appropriate for apportionment by the second method provided for in s 9BA of the Act. In the circumstances of this case the appropriate approach was to look at the goodwill as a single entity and determine the portion of that single entity which is related to the business undertaking carried on in the Territory. This is what the trial Judge did. In my view he was not in error.