CYRIL HENSCHKE PTY LTD & ORS v COMMISSIONER OF STATE TAXATION (SA)

Judges:
Gray J

Court:
Supreme Court of South Australia

MEDIA NEUTRAL CITATION: [2008] SASC 360

Judgment date: 18 December 2008

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Gray J

1. This is an appeal against an assessment of stamp duty.

2. On 23 December 2007, the Treasurer of South Australia made a determination upholding the assessment of stamp duty made by the Commissioner of State Taxation on 16 March 2006. That assessment related to a deed of retirement of a partner from a partnership, CA Henschke & Co. The appellants, three of the four partners, have appealed. It is their case that the deed of retirement did not effect any transfer of property and that no ad valorum was payable.

3. The appeal is brought pursuant to section 92 of the Taxation Administration Act 1996 (SA).^[1] Section 92 of the Taxation Administration Act 1966 (SA) relevantly provides: “A person who has made an objection may appeal to the Supreme Court if— (a) the person is dissatisfied with the Minister’s determination of the objection” On the hearing of the appeal, the parties submitted an agreed statement of facts which in turn identified and attached relevant documents. The agreed statement and the documents were received as evidence on the appeal. There was no dispute of fact. The parties, however, invited the Court to draw different inferences from those facts.

4. The position of the Commissioner and the Treasurer was that the deed of retirement conveyed the retiring partner's interest in the partnership property to the three other partners and as such was a conveyance within the meaning of section 60 of the Stamp Duties Act 1923 (SA). It was said in the alternative that if the deed of retirement did not operate in this

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way, that the transactions of the partners resulted in a change in the ownership of the retiring partner's interest in the partnership business or an interest in the partnership for the purposes of section 71E of the Stamp Duties Act.

5. It was the appellants' submission that the analysis and approach of the Commissioner and the Treasurer were flawed. It was submitted that there was neither a conveyance nor transfer of any property, or a sale by the retiring partner.

6. Before coming to discuss the parties' contentions it is necessary to set out the history of the matter and to record in these reasons a number of the salient agreed facts.

The facts

7. The partnership, CA Henschke & Co, as constituted from time to time has conducted the Henschke wine business for the last 50 years. The partnership at all relevant times has been the producer of high quality wines under the brand name "Henschke" and various other brand names and trade marks associated with the Henschke name, including "Hill of Grace" and "Mount Edelstone".

8. The third appellant, Stephen Carl Henschke, is a fifth generation winemaker from the Henschke family. The founder, Johann Christian Henschke, purchased land and planted grapes near Keyneton in the 1860s.

9. The partnership produced the wine from grapes either purchased from independent growers or grown by the partnership on vineyards owned by entities and persons associated with the Henschke family and operated by the partnership under unwritten licences or similar arrangements. Those vineyards include the Nuriootpa vineyard, the Eden Valley vineyard and the Hill of Grace vineyard planted over 140 years ago. The partnership itself, at no relevant time, owned any real property.

10. Prior to and as at 23 December 2004, the partnership was governed by a partnership agreement dated 17 January 1986. The interests in the partnership were held as follows:

• - The first appellant, Cyril Henschke Pty Ltd, held one third of the partnership;
• - The second appellant, Henschke Cellars Pty Ltd, held one third of the partnership;
• - The third appellant, Stephen Carl Henschke, held one sixth of the partnership;
• - Doris Henschke held one sixth of the partnership.

11. Doris and her three children - Stephen and his siblings, Paul Henschke and Christine Stevens - held all of the shares in the first and second appellants. Doris, Paul and Christine are hereafter referred to as the minority owners. The minority owners owned between them, directly and indirectly - via the first and second appellants - approximately 41.3 per cent of the interests in the partnership.

12. On 8 December 2004, the appellants and the minority owners executed a sale and purchase agreement relating to various transactions, including the sale of the minority owners' interests in the first and second appellants to a company owned by Stephen, and the retirement of Doris from the partnership. These transactions settled on 23 December 2004.

13. On 23 December 2004, pursuant to clause 4 of the sale and purchase agreement, the appellants and Doris entered into the Deed of Retirement to effect Doris's retirement from the partnership, pursuant to which Doris retired from the partnership with effect from the end of June 2003. The appellants continued to operate the Henschke wine business in partnership with one another. According to the Deed, Doris's share of the partners' funds of the partnership, capital and income, amounting to $5,885,298.00, was distributed to her in full satisfaction of all claims she had against the partnership.

14. The Deed of Retirement is in the following terms:

"Date 23 December 2004

Parties

• 1. Cyril Henschke Pty Ltd ABN 71 007 691 018 of Keyneton, South Australia, 5353 (Cyril Henschke)
• 2. Henschke Cellars Pty Ltd ABN 30 007 602 986 of Keyneton, South Australia, 5353 (Henschke Cellars)
• 3. Stephen Carl Henschke of Henschke Road, Keyneton, South Australia, 5353 (Stephen)

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  ATC 9272

  4. Doris Elvira Henschke of Unit 6, Vailima Gardens, 63 Hackney Road, Hackney, South Australia, 5069 (Doris)

Recitals

• A The parties are partners in a partnership (the Partnership), constituted by a partnership agreement dated 17 January 1986 (the Partnership Agreement), which trades under the name C.A. Henschke & Co.
• B The interests of the partners in the Partnership (capital and income) are as follows:
  • (a) Cyril Henschke - one third;
  • (b) Henschke Cellars - one third;
  • (c) Stephen - one sixth; and
  • (d) Doris - one sixth.
• C Doris wishes to retire from the Partnership.
• D This Deed sets out the terms upon which Doris shall retire from the Partnership.

It is agreed as follows.

• 1. Notwithstanding anything contained in the Partnership Agreement (including, without limitation, clauses 22 and 23):
  • (a) Doris hereby retires from the Partnership, with effect at the end of 30 June 2003, (without giving 6 calendar months' notice and despite the date of this Deed not being 30 June); and
  • (b) Cyril Henschke, Henschke Cellars and Stephen (the Continuing Partners) shall continue the Partnership under the Partnership Agreement (without purchasing Doris' interest in the Partnership and without the Partnership being dissolved).
• 2. The Partnership shall distribute to Doris her share of the partners' funds of the Partnership (capital and income), amounting to $5,885,298, in full satisfaction of all claims she has against the Partnership.
• 3. The Continuing Partners:
  • (a) release Doris from all obligations under the Partnership Agreement; and
  • (b) shall indemnify and keep indemnified Doris against all or any claims against the Partnership after the date of this deed.
• 4. Subject to clauses 2 and 3(b), Doris releases the Partnership from all or any claims she may have against the Partnership at any time.
• 5. The Continuing Partners acknowledge that their interests in the Partnership (capital and income) are now as follows:
  • (a) Cyril Henschke - two fifths;
  • (b) Henschke Cellars - two fifths; and
  • (c) Stephen - one fifth.

Executed unconditionally as a deed."

15. After the Deed of Retirement was executed, the interests of the appellants in the partnership (capital and income) were as follows:

• - The first appellant held two fifths of the partnership;
• - The second appellant held two fifths of the partnership; and
• - Stephen held one fifth of the partnership.

16. Following correspondence between the appellants' solicitors and the Commissioner, a notice of assessment was issued by the Commissioner to the appellants on 16 March 2006 for an amount of ad valorem stamp duty payable of $316,669.00. The appellants lodged a notice of objection to the Treasurer of South Australia, and paid the duty to the Commissioner. The appellants' objection to the Treasurer was disallowed.

17. The sale and purchase agreement signed by the parties in December 2004 was the result of extensive negotiations that formally commenced in December 1997. While Stephen and the minority owners were members of the same family, they at all times dealt with each other on arm's length terms and were represented by separate firms of lawyers. For most of the period of negotiations, the parties were unable to come to an agreement regarding the value of and hence the amount to be paid for the minority interests.

18. In April 2003 a formal mediation was conducted to assist the parties to reach an agreement. At the mediation and on 15 April 2003, an agreement was reached and documented between Stephen and the minority owners. They agreed that the minority owners would receive $15.3 million for their interests

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in the partnership, including settling of loan accounts, on the basis that the transactions would complete on 30 June 2003.

19. The transactions did not complete by 30 June 2003. Following further negotiations, the parties signed a formal agreement on 8 December 2004. To compensate for the delay of almost 18 months that had elapsed since July 2003, the parties had agreed to an upwards adjustment of the $15.3 million figure at which the parties had agreed the minority interests, including loan accounts, applying a notional percentage of interest for that period.

20. The amount paid for the minority interests followed protracted, arm's length negotiations between the parties and represented a negotiated and agreed valuation of the minority owners' direct and indirect interests in the partnership. Based on the valuations of those direct and indirect interests, it was calculated and agreed that the total value of the partnership, including goodwill, was approximately $35.5 million.

21. The value of the partnership's goodwill was calculated on a "net basis", that is, as an amount represented by the difference in the value of the net assets of the partnership as they appeared in the accounts - goodwill not previously having been recognised in the accounts - and the agreed value of the business. The goodwill was valued at approximately $35.2 million.

22. The value of the partnership's goodwill had not, until that point, been shown on the partnership's balance sheet. The goodwill included goodwill in the "Henschke" brand name and other brand names and trade marks associated with Henschke wines, including "Hill of Grace" and "Mount Edelstone". Goodwill of the partnership was included as an asset in the balance sheet of the partnership prepared as at 22 December 2004, with a corresponding "goodwill revaluation reserve".

23. All of the assets of the partnership, including goodwill, were taken into account by Doris in the negotiation of the value of Doris' share of the partners' funds paid to her upon her retirement from the partnership. An amount of $5,885,298.00 represented the value of Doris' one sixth share of the partnership's net assets, including the goodwill calculated and recognised on the partnership's balance sheet.

24. So far as the balance of the minority interests was concerned, Doris, Christine and Paul sold and transferred their shareholdings in the first and second appellants, as provided for in the Sale and Purchase Agreement signed by the parties on 8 December 2004. Ad valorem stamp duty was paid on those transactions.

Preliminary matters

Stamp Duties Legislation

25. In
Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd,^[2] Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd 2002 ATC 4876 ; (2002) 209 CLR 651 at [34]-[35] (footnotes omitted). Gleeson CJ and Gummow, Kirby and Hayne JJ restated certain fundamental principles concerning stamp duties legislation:

"In considering the true construction of [Stamp Duties Legislation] two principles must be kept in mind. First, the statutory provisions in question in this case impose a duty on instruments, not on transactions. Secondly, liability to duty arises because the dutiable instrument transfers an estate or interest in real property, and it is by reference to the value of that which is transferred that duty is imposed."

26. The Court in Pioneer Concrete relied on the following observations from
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW), where Mason J observed:^[3] DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) 82 ATC 4125 ; (1981-1982) 149 CLR 431 at 449. This statement was recently approved in Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd 2002 ATC 4876 ; (2002) 209 CLR 651 .

"It is a fundamental principle of the law relating to stamp duties that duty is levied on instruments, not on the underlying transactions to which they give effect … [I]n the case of a conveyance the statutory command is that it attracts duty on the property conveyed; in the case of the declaration it attracts duty on 'the property comprised therein'. Consequently the issues are: (1) What was the property conveyed by the transfer?; and (2) What was the property comprised in the declaration? The decision on these issues hinges on the interpretation of the two instruments, that is, on the description given by them of the relevant estate or interest as applied to the facts of the case. It is a matter of ascertaining what is the property with which each instrument deals, according to its terms.

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We cannot substitute for the issues preserved by the statute a different issue having no foundation in the statutory provisions. Nor can we substitute for the property which the parties have chosen by their instruments to convey and make the subject of a declaration of trust the interest in property which in a practical sense represents the alteration in [the transferor's] position brought about by the combined operation of the two instruments."

27. The approach to the interpretation to taxing or fiscal statutory provisions has been the subject of extensive judicial comment. In
Cooper Brooks (Wollongong) Pty Ltd v Federal Commissioner of Taxation,^[4] Cooper Brooks (Wollongong) Pty Ltd v Federal Commissioner of Taxation 81 ATC 4292 ; (1981) 147 CLR 297 . Mason and Wilson JJ confirmed the approach to be taken to the interpretation of a taxing statute:^[5] Cooper Brooks (Wollongong) Pty Ltd v Federal Commissioner of Taxation 81 ATC 4292 ; (1981) 147 CLR 297 at 320-321, 323. See also Pearce & Geddes, Statutory Interpretation (6 ^th ed, 2004) at [9.40].

"The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.

The rules, as D C Pearce says in Statutory Interpretation, p 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature.

On the other hand, when the judge labels the operation of the statute as 'absurd', 'extraordinary', 'capricious', 'irrational' or 'obscure' he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.

…

The fact that the Act is a taxing statute does not make it immune to the general principles governing the interpretation of statutes. The courts are as much concerned in the interpretation of revenue statutes as in the case of other statutes to ascertain the legislative intention from the terms of the instrument viewed as a whole."

Goodwill of a partnership

28. As earlier observed, the value of the goodwill of the Henschke partnership business was taken into account in calculating the amount that was paid to Doris on its dissolution.

29. The concept of goodwill was examined in the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ in
Federal Commissioner of Taxation v Murray^[6] Federal Commissioner of Taxation v Murray 98 ATC 4585 ; (1998) 193 CLR 605 at 611-629. :

"As pointed out earlier in these reasons, s 160A defines 'asset' to include 'goodwill', but neither Pt IIIA nor the Act generally attempts to define goodwill. That is not surprising because, as Dawson J pointed out in this Court in
Hepples v Federal Commissioner of Taxation^[7] 92 ATC 4013 ; (1992) 173 CLR 492 at 519. , '"[g]oodwill" is notoriously difficult to define'. One reason for this difficulty is that goodwill is really a quality or attribute derived from other assets of the business^[8] cf Slater, ‘The Nature of Goodwill’, (1995) 24 Australian Tax Review 31. . Its existence 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. As Dixon CJ, Williams, Fullagar and Kitto JJ pointed out in
Box v Commissioner of Taxation^[9] (1952) 86 CLR 387 at 397. , '[g]oodwill includes whatever adds value to a business, and different businesses derive their value from different considerations.' Another reason is that courts have been called on to define and identify goodwill in greatly differing contexts. In some cases, the nature of goodwill as property may be the

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focus of the legal inquiry. In other cases, the value of the goodwill of a business may be the focus of the inquiry. And in still other cases, identifying the sources or elements of goodwill may be the focus of the inquiry. It is unsurprising that in these varied situations courts have defined goodwill in ways that, although appropriate enough in one situation, are inadequate in other situations.

Goodwill is also an accounting and business term as well as a legal term. The understanding of accountants and business persons as to the meaning of the term differs from that of lawyers. That has added to the difficulty of achieving a uniform legal definition of the term, particularly since accounting and business notions of goodwill have proved influential in the valuation of goodwill for legal purposes.

Originally, the legal definition of goodwill emphasised the patronage of the business. In
Cruttwell v Lye^[10] (1810) 17 Ves Jun 335 at 346 [34 ER 129 at 134]. , Lord Chancellor Eldon said that goodwill was 'nothing more than the probability, that the old customers will resort to the old place.' However, 'a wider view soon prevailed'^[11] Box (1952) 86 CLR 387 at 396. . In
Churton v Douglas^[12] (1859) Johns 174 at 188 [70 ER 385 at 391]. , Wood V-C said that goodwill was:

'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.'

This definition received the approval of Lord Herschell in
Trego v Hunt^[13] [1896] AC 7 at 17. . In the United States, Story in his book on partnership^[14] Story, Commentaries on the Law of Partnership , 5th ed (1859) at 158. defined goodwill as: 'the advantage or benefit, which is acquired by an establishment, beyond the mere value of the capital, stock, funds, or property employed therein'.

One of the most cited definitions of goodwill for legal purposes in the Anglo-Australian legal world is found in the speech of Lord Lindley in
Inland Revenue Commissioners v Muller & Co's Margarine Limited^[15] [1901] AC 217 at 235 cited by Dixon CJ, Williams, Fullagar and Kitto JJ in Box (1952) 86 CLR 387 at 396-397. where his Lordship said:

'Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable from the business to which it adds value, and, in my opinion, exists where the business is carried on. Such business may be carried on in one place or country or in several, and if in several there may be several businesses, each having a goodwill of its own.'

Lord Macnaghten gave another much cited definition of goodwill in the same case. His Lordship said^[16] [1901] AC 217 at 223-224. :

'What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade.'

Earlier Lord Macnaghten had said^[17] [1901] AC 217 at 223. :

'It is very difficult, as it seems to me, to say that goodwill is not property. Goodwill is bought and sold every day. It may be acquired, I think, in any of the different ways in which property is usually acquired. When a man has got it he may keep it as his own. He may vindicate his exclusive right to it if necessary by process of law. He may dispose of it if he will - of course under

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the conditions attaching to property of that nature.'

An equally useful judicial definition of goodwill is to be found in
Haberle Crystal Springs Brewing Co v Clarke^[18] 30 F 2d 219 at 221-222 (2nd Cir) (1929) cited in Note, ‘An Inquiry into the Nature of Goodwill’, (1953) 53 Columbia Law Review 660 at 661. , a United States case, where Judge Swan pointed out that:

'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. This latter privilege is known as good will.'

The definitions of Lord Lindley, Lord Macnaghten and Judge Swan bring out the point that goodwill has three different aspects - property, sources and value^[19] cf Note, ‘An Inquiry into the Nature of Goodwill’, (1953) 53 Columbia Law Review 660 at 661; see Taylor, Capital Gains Tax: Business Assets and Entities , (1994) at 206. which combine to give definition to the legal concept of goodwill. What unites these aspects is the conduct of a business. As Barwick CJ pointed out in
Geraghty v Minter^[20] (1979) 142 CLR 177 at 181. In the same case at 193, Stephen J said that goodwill was ‘inherently inseverable from the business to which it relates.’ , 'goodwill is not something which can be conveyed or held in gross: it is something which attaches to a business. It cannot be dealt with separately from the business with which it is associated'.

From the viewpoint of the proprietors of a business and subsequent purchasers, goodwill is an asset of the business^[21] Bacchus Marsh Concentrated Milk Co Ltd (in Liquidation) v Joseph Nathan & Co Ltd (1919) 26 CLR 410 at 438. because it is the valuable right or privilege to use the other assets of the business as a business to produce income. It is the right or privilege to make use of all that constitutes 'the attractive force which brings in custom.' Goodwill is correctly identified as property^[22] Potter v The Commissioners of Inland Revenue (1854) 10 Ex 147 at 159 [156 ER 392 at 396]; Muller [1901] AC 217 at 223; Bacchus Marsh Concentrated Milk (1919) 26 CLR 410 at 438; Bollinger v Costa Brava Wine Co Ltd [1960] Ch 262 at 275. , 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^[23] Smale v Graves (1850) 3 De G & Sm 706 [64 ER 670] ; Wedderburn v Wedderburn (1856) 22 Beav 84 at 104 [52 ER 1039 at 1047]; Smith v Everett (1859) 27 Beav 446 [54 ER 175 ]; Robertson v Quiddington (1860) 28 Beav 529 [54 ER 469] ; Hall v Barrows (1863) 4 De G J & S 150 [46 ER 873] ; Muller [1901] AC 217 at 224; Commissioner of Taxation v Just Jeans Pty Ltd 87 ATC 4373 ; (1987) 16 FCR 110 . ."

30. The goodwill of the winemaking business was not recognised in the partnership accounts until the dissolution of the partnership. Although those accounts state that no regard was paid to the application of accounting standards, the practice adopted accorded with ordinary accounting practices. At the time, Australian Accounting Standard AASB 1013 provided that "goodwill which is internally generated by an entity is not permitted by this Standard to be recognised as an asset by that entity".^[24] Australian Accounting Standard AASB 1013 at 4.1. AASB 1013 further provided that goodwill was only to be recognised as an asset if it was "probable that the future benefits embodied in the unidentifiable assets will eventuate" and "it possesses a cost or other value that can be measured reliably".^[25] Australian Accounting Standard AASB 1013 at 5.1.3. Hence, it was appropriate for the value of the goodwill to be identified in the 2005 partnership accounts for the purposes of Doris' retirement, after the protracted arm's length negotiations between the parties resulted in the reliable establishment of value.

The legislative scheme

31. Section 4(1) of the Stamp Duties Act provides that:

"Subject to the exemptions contained in Schedule 2 and the other provisions of this Act, the stamp duties specified in that Schedule are charged in respect of the instruments specified in that Schedule."

Schedule 2, Part 1, item 3 provides for duty to be paid in relation to the conveyance or transfer on sale of any property. Item 4 provides for duty to be paid in relation to a conveyance operating as a voluntary disposition inter vivos. In both cases, where the value of the property exceeds $500,000 the duty payable is charged at $21,330 plus $5.50 for every $100 in addition to $500,000.

32. Section 60 of the Stamp Duties Act provides, inter alia, that:

"In this Act-

conveyance includes

…

• (d) every other assurance or instrument of any kind,

by which or by virtue of which or by the operation of which, whether upon

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registration or otherwise, or by the issue of a certificate of title in pursuance of which, any real or personal property or any estate or interest in any such property is assured to, or vested in, any person, and to convey has a meaning coextensive with the meaning of conveyance, as extended by this section".

33. "Property" is defined by section 2(1) to mean "real or personal property and includes an interest in property". "Interest in property" is defined by section 2(1) to mean "a legal or equitable interest and includes a potential, contingent, expectant or inchoate interest".

34. Section 71E of the Stamp Duties Act provides, inter alia, that:

• "(1) Subject to subsection (2), this section applies to a transaction in the following circumstances-
  • (a) the transaction results in a change in the ownership of a legal or equitable interest in-
    • (i) land; or
    • (ii) -
      • (A) a business situated in the State; or
      • (B) a part of a business (being a business situated in the State), excluding goods that are stock-in-trade of a business where the transaction occurs in the ordinary course of business, where the transaction is associated with, or is for the purposes of, a change in the ownership of a legal or equitable interest in the business (including a case where a business is being divided up into separate parts and then those parts are being transferred to one or more persons as part of one transaction or one series of transactions); or
    • (iii) an interest in a partnership; and
  • (b) -
    • (i) the transaction is not effected, or not wholly effected, by an instrument on which ad valorem duty is chargeable; but
    • (ii) if the transaction had been effected, or wholly effected, by an instrument, the instrument would be chargeable with duty as a conveyance or as if it were a conveyance.
• (1a) For the purposes of this section (and for the calculation of the value of any property), a change in the ownership of a legal or equitable interest in a business will be taken to include a transfer of the goodwill of the business."

The appeal

The nature of the appeal

35. Section 3 of the Stamp Duties Act provides that it should be read in conjunction with the Taxation Administration Act. Section 2 of the Stamp Duties Act defines an assessment to be as defined in the Taxation Administration Act. The notice of objection was lodged. The Treasurer made a determination. An appeal to this Court from the Treasurer's determination lies as of right pursuant to section 92 of the Taxation Administration Act. This Court is empowered to confirm or revoke the assessment, make a new assessment, make an order for payment of tax or any further order as to costs or otherwise as this Court thinks fit.

36. This appeal is not an appeal strictly so-called. It is an appeal de novo, to be conducted against the background that there has been no prior hearing. The Stamp Duties Act contemplates a full hearing inter partes, with each party having the opportunity to tender evidence, to test opposing evidence, and to present submissions. An analogous situation arises in regard to appeals under the Valuation of Land Act 1971 (SA), and guidance can be obtained from authorities dealing with appeals under that Act. In
Fenton Nominees v Valuer-General,^[26] Fenton Nominees v Valuer-General (1982) 29 SASR 348 at 355. See also Myer v SA Stores Pty Ltd (1986) 40 SASR 102 . Jacobs J observed:

"At the threshold, a question has been raised as to the nature of an appeal to this Court against the assessment of the Valuer-General and in particular, whether it is an appeal stricto sensu, or an appeal by way of re-hearing, or whether the issue is to be treated as being completely at large, with this Court approaching the matter de novo and making its own determination, based upon the evidence of the relevant value. This question was raised but apparently not argued before the learned Judge, although he expressed a reasoned conclusion upon it; but it has been fully argued before us. The

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learned Judge, upon a full consideration of the relevant statutory provisions, attributed to the appeal something of a hybrid nature. He held that it was, in a sense, a hearing de novo, upon the footing that there never had been a prior hearing, but that the issue went beyond lis inter partes. Having regard to the statutory role and function of the Valuer-General, his Honour came to the conclusion that an appellate Court ought not to disturb his valuation, unless it was shown to be tainted by significant error either of law or fact."

The submissions

37. The question in this appeal is whether the Deed of Retirement entered into on 23 December 2004 addressing the retirement of Doris from partnership with the appellants was charged by section 4 of the Stamp Duties Act with stamp duty as a "conveyance or transfer on sale of any property" within the meaning of item 3(1) in Schedule 2 to that Act. As earlier observed, "conveyance" is defined by section 60 of the Act to include, amongst other things, every instrument by which any real or personal property or any interest in such property is vested in any person. "Transfer", in relation to property, is defined by section 2(1) to mean "transfer, assure or vest at law or in equity".

38. The appellants submitted that there was neither a conveyance or transfer of any property, nor a sale by Doris. It was emphasised that Doris retired from the partnership by the Deed of Retirement. The partners were entitled to enter into the Deed notwithstanding that it did not follow any process provided for by clauses 22 and 23 of the Partnership Agreement.^[27] Section 19 of the Partnership Act 1981 (SA) provides: “The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing.”

39. The appellant submitted that by changing the membership of the partnership, the legal effect of the Deed of Retirement was to dissolve the partnership and constitute a new partnership between the continuing partners. That was so, notwithstanding the statement to the contrary in clause 1(b) of the Deed.

40. The appellant referred to
S. J. Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd,^[28] S. J. Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87 at 90. where McPherson J observed:

"[T]he conception of partnership as understood by English law … regards any change in membership as destroying the identity of the firm. … Hence it is that under our law the transfer of a share to a non-partner inevitably breaks the continuity of the firm, thus constituting a new firm or partnership of those members of the former partnership who remain, together with the newcomer. This approach is sometimes contrasted with that of continental legal systems and of Scotland, where a partnership is seen as possessing at least some features or attributes of distinct legal personality. …

Once this principle is grasped, or rather called to mind, it is impossible to give literal effect to a provision [which says] that the partnership is a continuing partnership not dissolved by transfer of a unit or other interest in the partnership. At least that is so if what is meant by that clause is that the introduction, whether by addition or substitution, of a new partner effects no dissolution of the existing partnership."

41. The Commissioner accepted that the observations of McPherson J were a correct statement of the law, and that notwithstanding what may have been the terms of the Deed of Retirement, as a matter of law, on Doris' retirement the partnership came to an end and a new partnership was formed by the remaining partners.

42. The appellants also relied on section 39 of the Partnership Act 1891 (SA), which provides:

"On the dissolution of a partnership every partner is entitled, as against the other partners in the firm, and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm; and for that purpose any partner or his or her representatives may on the termination of the partnership apply to the Court to wind up the business and affairs of the firm."

It was submitted that what had taken place in the present case was a dissolution of the partnership, as prescribed in section 39 of the

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Partnership Act. It was said that the Deed of Retirement did not result in a "conveyance or transfer on the sale of property" within the meaning of Item 3(1) in Schedule 2, and there was no sale of any of the partnership property. It was contended that the mutual releases in clauses 2 to 4 of the Deed of Retirement did not operate as a "conveyance or transfer on the sale of property" for the purposes of Item 3(1) in Schedule 2.

43. The Commissioner submitted that the appellant had misunderstood the operation and effect of section 39 of the Partnership Act. It was contended that section 39 was simply the statutory conferral of what had been a common law entitlement to a partner's share in the surplus assets of the partnership.

44. The appellants relied on
McCaughey v Commissioner for Stamp Duties (NSW)^[29] McCaughey v Commissioner for Stamp Duties (NSW) (1914) 18 CLR 475 . as authority for the proposition that a release of debts or claims cannot constitute a transfer or conveyance for these purposes. McCaughey was a partner in two grazing partnerships which owned land that was registered in his name as trustee for the partners. He agreed to buy out his partners and shortly thereafter agreed to sell the whole of the former partnership assets to third parties. In between these two events, a deed was executed by all of the partners, providing that the partnerships were dissolved, the sale to the third party was ratified, McCaughey covenanted to pay all partnership debts and costs of sale, and that all parties released the others from all claims in respect of partnership dealings up until its dissolution. Griffith CJ observed:^[30] McCaughey v Commissioner for Stamp Duties (NSW) (1914) 18 CLR 475 at 484-486.

"The question is whether the deed … was a conveyance or transfer on sale of property within the meaning of the Stamp Duties Act 1898. The term 'conveyance' is defined as meaning "any instrument or deed whereby property is vested in any person or transferred or conveyed from one person to another." The test to be applied is, therefore, whether after the execution of the instrument any property became vested in the alleged transferee which was not vested in him before that execution.

…

My difficulty has been to discover what part of this deed can be suggested to be a transfer of property. So far as I could apprehend the argument for the respondent, principal reliance is placed upon the release. But, in my opinion, it is impossible to construe a release of debts or claims as a conveyance within the meaning of the Statute."

45. The Commissioner distinguished the decision in McCaughey. Reliance was placed on the difference between the Deed of Retirement in the present case and the deed in McCaughey. Attention was also drawn to the differing terms of the legislation in question.

46. It was submitted by the appellants that goodwill was not transferred from Doris to the continuing partners pursuant to the deed or retirement. Goodwill is itself indivisible, though its value, when realized, may be shared in proportions.^[31] Geraghty v Minter (1979) 142 CLR 177 at 181 (Barwick CJ); cited in Federal Commissioner of Taxation v Murray 98 ATC 4585 ; (1998) 193 CLR 605 at 618 (Gaudron, McHugh, Gummow and Hayne JJ). In
Geraghty v Minter,^[32] Geraghty v Minter (1979) 142 CLR 177 at 193 (Stephen J). Stephen J observed:

"[The goodwill of a partnership business] is inherently inseverable from the business to which it relates. …

Thus where, after dissolution, the business previously conducted by a partnership continues to be carried on under the same name by one of the former partners … the old goodwill will tend, at least initially, to adhere to that business. As time passes the business, under its new management, will acquire for itself its own distinctive goodwill which will gradually take the place of the old goodwill."

47. It follows, it was submitted, that the continuation of the winemaking business after the retirement of Doris did not involve any conveyance or transfer of goodwill. Rather, the appellants submitted that Doris received from the partnership funds money representing her share of the value of the partnership upon her retirement and the goodwill adhered to the business conducted by the continuing partners. What she received was a payment, it was claimed, from the net assets of the partnership.

48. The Commissioner submitted that it was a misconception to equate Doris' entitlement upon retirement to her share of the goodwill of the partnership. It was said that she had no such entitlement. Her entitlement was to an equitable chose in action against the continuing partners with respect to, and a beneficial interest in, all of the partnership property, including the goodwill. The continuing partners, once they

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ATC 9280

had paid Doris the consideration for her equitable interest in the partnership property, were free to continue operating the business with the goodwill in tact.

49. The appellants submitted that
MSP Nominees Pty Ltd v Commissioner of Stamps (SA)^[33] MSP Nominees Pty Ltd v Commissioner of Stamps (SA) 99 ATC 4937 ; (1999) 198 CLR 494 . was analogous to the present case. In MSP Nominees, in accordance with a unit trust deed, the trustee of a trust redeemed a unit holder's units, appropriated to them the value of the units calculated as a proportion of the trust fund and cancelled the units. The High Court held that there was no transfer of property or, within an extended statutory definition of transfer, no surrender or renunciation of a beneficial interest, or potential beneficial interest, in the trust assets. Rather, there was the enlargement of one interest by absorption or "drowning" of the other. In the present case, the goodwill of the business adhered to the continuing business. Doris's interest was "drowned". As she did not carry on the business, she could hold no goodwill. But she did not convey or transfer goodwill to the continuing partners.

50. The Commissioner submitted that the decision of the High Court in MSP Nominees was readily distinguishable. The decision proceeded on the basis that the interest of a unit holder under a trust did not involve any beneficial interest or potential beneficial interest in or in relation to the assets represented by the trust fund.^[34] MSP Nominees Pty Ltd v Commissioner of Stamps 99 ATC 4937 ; (1999) 198 CLR 494 at [34]. The Commissioner relied on the decisions in
Christie v Commissioners of Inland Revenue^[35] Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 . and
Garnett v Commissioners of Inland Revenue^[36] Garnett v Commissioners of Inland Revenue (1899) 81 LT 633 . as involving reasoning of application to the present appeal.

51. The appellants submitted that the position in the present case can be contrasted with that in
Christie v Commissioners of Inland Revenue.^[37] Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 . In that case it had been contended that a conveyance of land to a former partner on the dissolution of a partnership did not attract stamp duty because the conveyance represented:^[38] Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 at 51 (Kelly CB).

"[T]he well-known case in which partnership property, although it may consist in part, or even wholly of real estate, is as between the partners upon a dissolution, or any other settlement that may take place between them, dealt with, not as land, but as money."

This contention was rejected by the Court on the ground that a conveyance occurred and it was the instrument of conveyance, not the preceding deed of dissolution of partnership, to which attached duty.^[39] Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 at 51 (Kelly CB), 53 (Channell B), 53 (Pigott B). Channell B observed that the Court was not called upon to say what would have been the state of things in the case of one partner paying another out.^[40] Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 at 53 (Channell B).

52. The appellants also submitted that
Garnett v Commissioners of Inland Revenue^[41] Garnett v Commissioners of Inland Revenue (1899) 81 LT 633 . could be distinguished from the present case. In Garnett, a partner who wished to retire from a partnership followed a notice procedure similar to that found in clause 22(1) and (3) of the Henschke Partnership Agreement. It was common ground that upon the exercise of the option by the continuing partner there had been "a sale of the partner's share in the partnership assets".^[42] Garnett v Commissioners of Inland Revenue (1899) 81 LT 633 at 637. The critical question was whether a subsequent deed passed the personal property. It was held that it did.

Consideration of the appeal

53. A partner has a beneficial interest in all of the property of the partnership. The beneficial interest entitles the partner to an account of the profits earned by the use of the property. A partner's beneficial interest in the property also ranks above a mere charge over the property given by another partner to an outsider.

54. As earlier observed, on the retirement of a partner, the partnership is dissolved. The non-retiring partners may well agree to continue in partnership, and in that event, a new partnership is formed. It is convenient for a partnership deed to speak of the retirement of a partner, and of continuing partners, but this does not affect the legal position. As McPherson J pointed out in
S. J. Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd,^[43] S. J. Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87 . changing membership destroys the identity of the partnership. The retirement of a partner inevitably breaks the continuity of the partnership, thus constituting a new partnership of those members of the former partnership who remain together. On the retirement from a partnership, in circumstances where the former partners remain together, the equitable interest of the retiring partner may be conveyed to the continuing partners.

55. 

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I reject the appellants' submission that the conveyance takes place by operation of section 39 of the Partnership Act. As earlier observed, section 39 is the statutory recognition of what had been a common law entitlement to the partner's share in the surplus assets of the partnership. It is the entitlement to a share that gives rise to an equitable interest in the property which may be transferred by an act or acts of the partner.

56. For the purposes of the Stamp Duties Act the relevant question, on the retirement from or dissolution of a partnership, is not whether the beneficial interest has been conveyed, but rather was there a conveyance of the interest by a document on which stamp duty is to be levied. Alternatively, was there a transaction within the terms of section 71E of the Act that resulted in a change in the ownership of a beneficial interest in the business or the partnership.

Did the Deed of Retirement convey Doris' interest in the partnership property to the continuing partners?

57. Prior to 23 December 2004, Doris held a one sixth interest in the partnership. This interest was an equitable interest in the nature of a chose in action.^[44] Commissioner of Taxation (Cth) v Everett 80 ATC 4076 ; (1980) 143 CLR 440 at 446-447 (Barwick CJ, Stephen, Mason and Wilson JJ); Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327-328 (McTiernan, Menzies and Mason JJ); United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 687 (Mason J); Manley v Sartori [1927] 1 Ch 157 at 164-165. The partnership was either dissolved by the retirement of Doris from the partnership upon the execution of the Deed of Retirement on 23 December 2004 or alternatively the mutual rights and duties of the partners as to the retirement of any one of them were varied by consent to effect her retirement on 23 December 2004. Upon dissolution of the partnership, or on her retirement, Doris was entitled to her one sixth interest in the Partnership assets, if necessary by initiating legal proceedings.^[45] See Commissioner of Taxation (Cth) v Everett 80 ATC 4076 ; (1980) 143 CLR 440 at 446-447 (Barwick CJ, Stephen, Mason and Wilson JJ).

58. Whether the Deed of Retirement purported to effect a retirement or a dissolution is not to the point. The deed evidenced the end of the partnership, with a new partnership being formed by those members of the former partnership who remained. Doris, by executing the Deed, conveyed her interest in the partnership property to the continuing partners for the sum of $5,885,298 which was paid in full satisfaction of all claims she had against the Partnership.

59. Recital B of the Deed of Retirement records that Doris held a beneficial interest in the property of the partnership reflecting her entitlement to one sixth of the capital and income of the partnership immediately before the execution of the Deed. Clause 5 records that on the execution of the Deed Doris was no longer entitled to that interest and that her interest was taken up proportionately by the other partners.

60. The value of Doris' equitable interest was the subject of negotiation and agreement, and then payment. The equitable interest related to the assets of the partnership, predominantly but not exclusively goodwill. Doris conveyed her one sixth interest in the partnership assets in exchange for the agreed consideration. This was the substantive effect of the deed.

61. It follows that the Deed of Retirement is an "instrument … by the operation of which … [an] … interest in [personal] property is … vested in, [Doris]" for the purposes of section 60 and hence is a conveyance within the meaning of the Stamp Duties Act.

62. The appellants rely on the decision in
McCaughey v Commissioner of Stamp Duties (NSW)^[46] McCaughey v Commissioner of Stamp Duties (NSW) (1914) 18 CLR 475 at 486 (Griffith CJ). to support the proposition that "it is impossible to construe a release of debts or claims as a conveyance within the meaning of the Statute". McCaughey may be distinguished on several grounds.

63. The Deed of Retirement in this case, unlike the deed in question in McCaughey, if not expressly then by necessary implication, conveyed Doris' one sixth interest in the partnership to the continuing partners. In McCaughey, Griffith CJ held that nothing in the deed itself operated as a conveyance. Rather, the conveyance in question had been effected by an earlier agreement between the parties thereby leaving the deed in that case little work to do.

64. The terms of the Stamp Duties Act 1898 (NSW) were relevantly different. The New South Wales Act defined "conveyance" to mean simply: "any instrument or deed whereby property is vested in any person or transferred or conveyed from one person to another." The Stamp Duties Act (SA) has extended the meaning of conveyance inter alia by extending the proprietary interests that may be conveyed. The meaning of "conveyance" in the South Australian statute includes an instrument which

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ATC 9282

vests "any real or personal property or any estate or interest in any such property".^[47] Section 60 of the Stamp Duties Act 1923 (SA). As earlier observed, "property" and "interest in property" are broadly defined. Extended definitions of these kind suggest that Parliament intended to overcome distinctions of the kind drawn in McCaughey.

65. The retiring partners in McCaughey had personal debts (and an amount due under the subsequent contract for sale) to the remaining partner that exceeded the value of their interests in the partnership.^[48] McCaughey v Commissioner of Stamp Duties (NSW) (1914) 18 CLR 475 at 491 (Isaacs J). Therefore, the effect of the deed in McCaughey was to release the retiring partners from their obligations to the remaining partner and to set off part of their debts to the remaining partner. The Deed of Retirement, in the present case, had a different effect. It released Doris from her obligations to the remaining partners and included payment to her of $5,885,298.

66. Similarly,
MSP Nominees Pty Ltd v Commissioner of Stamps^[49] MSP Nominees Pty Ltd v Commissioner of Stamps 99 ATC 4937 ; (1999) 198 CLR 494 . may be distinguished. The relevant question in MSP Nominees was whether the transaction recorded on the register of unit holders was a transfer of property, surrender or renunciation within the meaning of section 71(15)(b) of the Stamp Duties Act. In this case there is no doubt that Doris' interest in the partnership property has been transferred to the continuing partners. The question is whether that interest was conveyed by the Deed of Retirement. In reaching its conclusion the High Court drew an analogy between the cancellation of the units and the surrender of shares in a company.^[50] MSP Nominees Pty Ltd v Commissioner of Stamps 99 ATC 4937 ; (1999) 198 CLR 494 at [10]. The common law regards any attempt to equate a partnership with a company as a "foreign heresy".^[51] SJ Mackie v Dalziell Medical Practice Pty Ltd (1989) 2 Qd R 87 at 90 (McPherson J).

67. The decision of the Court in MSP Nominees proceeded on the basis that the interest of a unit holder under a trust must be considered quite differently to a beneficial interest of the sort held by partners. The Court said that:^[52] MSP Nominees Pty Ltd v Commissioner of Stamps 99 ATC 4937 ; (1999) 198 CLR 494 at [34] (footnotes omitted).

"The use of terms such as "beneficial interest" is apt to mislead when applied to beneficiaries' interests in a discretionary trust. As effected by cl 4 of the Trust Deed, the Unit Holders were denied any specific interest in any item of property held in the Trust Fund. Rather, the rights enjoyed by Budget and Galaxy as Unit Holders were, upon favourable exercise by the Trustee of its discretion conferred by cl 34, transmuted by the redemption process into the entitlement to the price arrived at by the valuation for which cl 36 provided. This, as indicated earlier in these reasons, was in fulfilment of the rights of Budget and Galaxy, not the "surrender", in the sense of that term in the definition of "transfer" in s 71(15) of the Act, of a beneficial interest or potential beneficial interest in or in relation to the assets represented by the Trust Fund."

68. The Commissioner submitted that if the appellants' contention was correct, then although a deed of retirement that openly acknowledged a payment to a retiring partner for the equitable interest held by that partner would be caught by the Act,^[53] McCaughey v Commissioner for Stamp Duties (NSW) (1914) 18 CLR 475 ; Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 ; Garnett v Commissioners of Inland Revenue (1899) 81 LT 633 . a deed that was expressed in different terms, such as those contained in the Deed of Retirement, would avoid duty. It was contended that the broad language of section 60 of the Act ought not be interpreted restrictively such that the mere terminology adopted in the drafting of a deed of retirement could be used as a device to avoid the operation of the Act. The Act should not be interpreted as permitting form to prevail over substance.^[54] The importance of looking to form over substance in this context has been reiterated in many of the authorities. In Wale v Commissioner of Inland Revenue (1879) 4 Ex D 270 , Kelly CB said at 276-277 that, “I asked who possessed that mortgage the day before the instrument in question was executed, and who possessed it just after the execution? … The particular mode and form in which the change or transfer was carried out, do not affect the question”. In Christie v Commissioners of Inland Revenue (1866) 2 LR Ex 46 , Kelly CB said at 50 that, “[i]n all these cases, it appears to me, that the substance of the transaction is alone to be considered upon the question whether the instrument is liable to the stamp duty under the statute”, Channell B said at 52 that, “I agree with the Lord Chief Baron that we have to look to the substance of the transaction”, and Pigott B said at 53 that, “I quite agree that we must look to the substance of the transaction”. See also, Garnett v Commissioners of Inland Revenue (1899) 81 LT 633 . In my view these submissions should be accepted.

69. The appellants' reasoning equates Doris' entitlement upon retirement to her share of the goodwill of the partnership. Doris was not so entitled. Doris was not entitled to any particular piece of partnership property. Rather, Doris was entitled to an equitable chose in action against the continuing partners with respect to, and to a beneficial interest in, all of the partnership property, including the goodwill. Understood in this way, the supposed difficulties of severing goodwill from the business by which it was generated, to which the appellants referred, are not relevant. Having paid Doris consideration for her equitable interest in the partnership property, the continuing partners were free to continue operating the Henschke business, with the goodwill remaining intact.

70. It is for these reasons that I have concluded that the Deed of Retirement conveyed Doris' interest in the partnership

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ATC 9283

property to the continuing partners, and as such the appeal should be dismissed.

Did the transactions of the partners result in a change in the ownership of Doris' interest in the partnership business or an interest in the partnership?

71. As I have found that the appeal should be dismissed because the Deed of Retirement conveyed Doris' interest in the partnership property to the continuing partners, there is no need to rely on section 71E of the Act in this case. The respondents submitted in the alternative that the elements of section 71E had been satisfied, and as it was fully argued, I will express my views on this issue.^[55] See also the following observation of the High Court in Kuru v State of New South Wales (2008) 246 ALR 260 at [12], where Gleeson CJ, Gummow, Kirby and Hayne JJ observed: “This Court has said on a number of occasions that, although there can be no universal rule, it is important for intermediate courts of appeal to consider whether to deal with all grounds of appeal, not just with what is identified as the decisive ground. If the intermediate court has dealt with all grounds argued and an appeal to this Court succeeds, this Court will be able to consider all the issues between the parties and will not have to remit the matter to the intermediate court for consideration of grounds of appeal not dealt with below.” Their Honours cited Cornwell v R (2007) 81 ALJR 840 at 865 [105]; 234 ALR 51 at 85; [2007] HCA 12; Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274 at 312 [105]; [2004] HCA 58; Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (2001) 207 CLR 1 at 19-20 [34]-[35]; [2001] HCA 8.

72. The appellants submitted that section 71E of the Stamp Duties Act did not apply. First, there was no transaction which resulted in a change in the ownership of a legal or equitable interest in the partnership for the purposes of section 71E(1)(a)(iii). Secondly, there was no transaction which, if it had been effected, or wholly effected, by an instrument, the instrument would have been chargeable with duty as a conveyance or as if it were a conveyance. The transaction was wholly effected by the Deed of Retirement, which was an instrument. It was not a conveyance and was not chargeable with duty as a conveyance, as if it were a conveyance, as required by section 71E(1)(b)(ii).

73. It is agreed by the parties that Doris held a one sixth interest in the partnership prior to 23 December 2004. It is agreed by the parties that upon signing the Deed of Retirement on 23 December 2004 the continuing partners had taken Doris' interest in the Partnership and Doris was to be paid $5,885,298 from the partnership funds. These facts evidence "a transaction … [that] results in a change in the ownership of [an] … equitable interest in … a partnership [or] … a part of a business" for the purposes of section 71E of the Act. The form over substance approach that applies with respect to section 60 of the Act applies with even greater force to section 71E of the Act. The manifest purpose of section 71E is to extend the imposition of duty to transactions which achieve, in substance, a conveyance that might ordinarily be expected to have been achieved by means of a dutiable instrument.

74. Applying the approach of Kelly CB in
Wale v Commissioner of Inland Revenue,^[56] Wale v Commissioner of Inland Revenue (1879) 4 Ex D 270 at 276-277 (Kelly CB). the present appeal may at its simplest be answered by asking who possessed Doris' one sixth interest of the partnership property on 22 December 2004 and who possessed that same property on 24 December 2004. When the Stamp Duties Act is applied according to its plain intent the fact that there has been a conveyance or a transfer cannot be in doubt. The instrument effecting the conveyance or transfer was the Deed of Retirement. There were no antecedent transactions as in McCaughey.

Conclusion

75. The appeal is dismissed.