High Court Finds WA Bell Group Act Invalid: [2016] HCA 21
Monday 16 May 2016 @ 12.41 p.m. | Taxation
The High Court has unanimously declared that the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (“the Bell Act”) is invalid in its entirety by the operation of s 109 of the Constitution because it is inconsistent with one or more provisions of the Income Tax Assessment Act 1936 (Cth) and the Taxation Administration Act 1953 (Cth) (together, “the Tax Acts”).
Introduction of the Act
The Bell Act was designed to end Western Australia’s “longest running and most expensive legal battle”, that was the result of the collapse of Alan Bond’s Bell Group in the late 1990s. When the Act was originally introduced into parliament, WA Treasurer Dr Nahan said:
“In June 2013, the banks agreed to settle the Bell litigation, resulting in a pool of funds of $1.7 billion being made available to the liquidators for distribution to creditors. It was hoped that after the settlement, the creditors of the Bell companies would cooperate to bring about a swift and equitable distribution of those funds. That hope has not been realised…
After two decades of incredibly expensive litigation, the government is not inclined to let a third decade of litigation pass. The government is also not inclined to have the funds of taxpayers, or motorists’ insurance funds, utilized to pay for the legal system to further delve into, at great expense, the affairs the Bell companies in the 1980s.”
The Commonwealth Government was a "substantial" creditor of the Bell Group companies, having lodged a number of proofs of debts for unpaid tax liabilities.
The Act’s Operation
At [56], the High Court’s majority judgement explained that:
“the purported legal operation and practical effect of the Bell Act is that the State of Western Australia collects, pools, and vests in a State authority, the property of each WA Bell Company. The State of Western Australia then determines in its "absolute discretion" who is paid an amount or has property transferred to or vested in them out of the pooled property (if anyone). And then, to the extent that the State of Western Australia chooses not to distribute the pooled property of the WA Bell Companies, the surplus vests in the State of Western Australia.”
The WA Government was forced to rush through a number of amendments to the original Act, with ABC News reporting “the Government revealed it had been given legal advice that amendments would make the legislation more likely to survive a High Court challenge.” The Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Amendment Act 2016 (WA) received royal assent on the day hearings began in the High Court. However, the amendments made by the Act did not have an impact upon the decision.
Decision
The majority judgment summed up their reasoning for finding the Bell Act invalid at [9]:
“The Bell Act purports to create a scheme under which Commonwealth tax debts are stripped of the characteristics ascribed to them by the Tax Acts as to their existence, their quantification, their enforceability and their recovery. The rights and obligations which arose and had accrued to the Commonwealth as a creditor of the WA Bell Companies in liquidation, and to the Commissioner, under a law of the Commonwealth prior to the commencement of the Bell Act are altered, impaired or detracted from by the Bell Act.”
The majority decision found it was impossible to sever or read down the inconsistent provisions, and thus concluded that the Bell Act was entirely invalid.
Gageler J wrote a separate decision, but concurred with the majority conclusion. However, he found the Bell Act to be:
“invalid on a narrower basis than the other members of the Court. In my opinion, it is sufficient to conclude that the Bell Act is invalid in its entirety that ss 22 and 29 of the Bell Act are essential to the scheme of the Bell Act and that those sections, if valid, would alter, impair or detract from the operation of ss 215 of the 1936 [Income Tax] Act (and the relevant equivalent provision of the TAA [Taxation Administration Act]) and 254 of the 1936 Act.” [at 79]
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Sources:
Bell Group N.V. (in liquidation) v Western Australia [2016] HCA 21
Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015, Second Reading Speech - available from TimeBase's LawOne service
