Bell Group NV (in liquidation) v Western Australia [2016] HCA 21

The Bell Group companies had been business vehicles of the late Robert Holmes à Court in the 1980s before they were acquired by Alan Bond. The companies collapsed in the early 1990s.

A complex mass of litigation followed, including claims against 20 Australian and foreign banks. That litigation was funded by parties including the Insurance Commission of Western Australia.

In 2013, a $1.7 billion settlement was reached, but further litigation about how the proceeds of the litigation ensued. In 2015, with no end to the litigation in sight, the Western Australian Government proposed that the further litigation be finalised by means of what became the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (Bell Group Act).

It established a state-based regime under which a statutory authority would finalise the winding up and distribution of the Bell litigation funds received by the liquidators of the Bell Group of companies.

Some creditors, associated companies and liquidators of various Bell Group companies challenged the validity of the Bell Group Act. The main basis of the challenge was an alleged inconsistency, for the purposes of s 109 of the Constitution, between the Bell Group Act and:

• part 1.1A of the Corporations Act 2001 (Cth)
• the Income Tax Assessment Act 1936 (Cth) and the Taxation Administration Act 1953 (Cth) (the Tax Acts)
• s 39(2) of the Judiciary Act 1903 (Cth).

The Attorneys-General for Queensland, the Commonwealth, New South Wales, South Australia, Victoria and Tasmania intervened.

The significant issue from Queensland’s perspective was the alleged inconsistency with the Corporations Act's ‘roll-back’ provisions, which allow a state to exclude the operation of the Corporations Act in certain circumstances. In this case, the Bell Group Act purported to apply the roll-back provisions to exclude the winding-up provisions of the Corporations Act from the Bell Group companies.

At the hearing on 5--7 April 2016, Queensland was represented by Solicitor-General Peter Dunning QC and Senior Deputy Crown Solicitor Tony Keyes, instructed by Crown Law. The main object of Queensland’s submissions was that the court should decide the case on the basis of inconsistency with the Tax Acts, making it unnecessary to rule on the roll-back provisions.

On 16 May 2016, the High Court handed down its judgment. The majority (French CJ, Kiefel, Bell, Keane, Nettle and Gordon JJ) held that the Bell Group Act was invalid in its entirety because of an inconsistency between provisions of the Bell Group Act and the Tax Acts.

The Bell Group Act allowed the WA statutory authority to determine the existence and quantum of a tax liability of a Bell Group Company. The discretion overrode the Commonwealth’s rights as a creditor in relation to the enforcement and recovery of those tax debts.

As a result, the Bell Group Act purported to create a scheme under which Commonwealth tax debts were stripped of the characteristics given to them by the Tax Acts. Section 109 of the Constitution therefore rendered the Bell Group Act invalid. Justice Gageler agreed with the conclusions of the majority, but on a narrower basis.

As a result, the court did not have to consider the other bases on which the validity of the Bell Group Act was challenged, including the Corporations Act roll-back provisions.

Significance for Queensland

The plaintiffs had argued for a narrow interpretation of the roll-back provisions, which essentially would only allow the States to roll back certain specified provisions of the Corporations Act or provisions that operated in a ‘territorially defined or ascertainable’ way. This interpretation would have prevented the States from relying on the roll-back provisions in a wide variety of circumstances.

For example, Queensland has relied on the roll-back provisions to exclude all or parts of the Corporations Act in relation to its application to certain types of bodies corporate in Queensland, and also, for example, incorporated associations and cooperatives, as well as specific entities such as the Crime and Corruption Commission, the Public Trustee and the Queensland Treasury Corporation.

The plaintiffs’ interpretation of the roll-back provisions could have raised doubts about the scope of the State’s ability to exclude the Corporations Act in this manner.

Ultimately, Queensland and the other States were successful in dissuading the court from entertaining the narrow interpretation proposed by the plaintiffs.