On Monday 16.5.16, the High Court unanimously held 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 s109 of the Constitution because of inconsistency between its provisions and provisions of the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953 (collectively, the “Tax Acts“).
In November 2015, the WA Parliament enacted the Bell Act “to provide a legislative framework for the dissolution, and administration of the property, of The Bell Group Ltd ACN 008 666 993 (In Liq) and certain of its subsidiaries and for related purposes”. The Bell Act was enacted to deal with a list of companies, each defined in the Bell Act as a “WA Bell Company”, each either in liquidation or deregistered. The Commonwealth is a substantial creditor of a number of WA Bell Companies in respect of taxation liabilities. The Court said 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 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). To the extent that the State chooses not to distribute the pooled property of the WA Bell Companies, the surplus vests in the State.
In each proceeding, the parties stated a special case and questions of law arising for the opinion of the Full Court. The questions of law include whether the Bell Act (or certain provisions of the Bell Act) is invalid by the operation of s109 of the Constitution because of inconsistency with one or more provisions of the Tax Acts.
By majority, the High Court held that 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 of Taxation, 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 Court said. The High Court held that that alteration or impairment of, or detraction from, the Tax Acts engages s109 of the Constitution which operates to render the offending provisions of the Bell Act invalid. It was not possible to read down offending aspects of the Bell Act nor were the offending provisions able to be severed from the rest of the Bell Act, the Court said. The Court held, therefore, that the Bell Act is invalid in its entirety.
(Bell Group N.V. (in liquidation) v Western Australia; W.A. Glendinning & Associates Pty Ltd v Western Australia; Maranoa Transport Pty Ltd (in liq) v Western Australia [2016] HCA 21, High Court, French CJ, Kiefel, Bell, Gageler, Keane, Nettle and Gordon JJ, 16 May 2016.)
[[2016] HCASum 17] [LTN 92, 16/5/16]
Extract from High Courts reasons
- FRENCH CJ, KIEFEL, BELL, KEANE, NETTLE AND GORDON JJ. In November 2015, the Parliament of Western Australia enacted the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (“the Bell Act”)[1] – an “Act to provide a legislative framework for the dissolution, and administration of the property, of The Bell Group Ltd ACN 008 666 993 (In Liquidation) and certain of its subsidiaries and for related purposes”[2] – to deal with a list of companies, each defined in the Bell Act as a “WA Bell Company”[3]. When the Bell Act was enacted, each WA Bell Company was in liquidation or deregistered. None of the windings up of the companies in liquidation had concluded prior to 27 November 2015, which was the “transfer day” under the Bell Act[4].
- There are three proceedings before the Court – S248 of 2015 (“the BGNV Proceeding”), P63 of 2015 (“the WA Glendinning Proceeding”) and P4 of 2016 (“the Maranoa Transport Proceeding”). The State of Western Australia is a defendant in each proceeding.
- In each proceeding, the parties stated a special case and questions of law arising for the opinion of the Full Court under r 27.08.1 of the High Court Rules 2004 (Cth). The questions of law include whether the Bell Act or certain provisions of the Bell Act are invalid by the operation of s 109 of the Constitution because of inconsistency with one or more provisions of the Income Tax Assessment Act 1936 (Cth) (“the 1936 Act”) and the Taxation Administration Act 1953 (Cth) (“the TAA”) (collectively, “the Tax Acts”), the Corporations Act 2001 (Cth) (“the Corporations Act”), and s 39(2) of the Judiciary Act 1903 (Cth) (“the Judiciary Act”). The plaintiffs in the BGNV Proceeding and the WA Glendinning Proceeding also contended that provisions of the Bell Act are invalid because they infringe Ch III of the Constitution.
….
[1] The Bell Act received the Royal Assent on 26 November 2015. The Bell Act was amended by the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Amendment Act 2016 (WA) (“the Amending Act”). The Amending Act received the Royal Assent on the evening of 5 April 2016 – the first day of the hearings before this Court.
[2] Long title.
[3] s 3(1), Sched 1 to the Bell Act.
[4] Section 3(1) of the Bell Act defines “transfer day” to mean “the day on which Part 3 [of the Bell Act] comes into operation”, which was on the day after the Bell Act received the Royal Assent: s 2(1)(d) of the Bell Act.