News: Bell Group – the litigation that just won’t die

In September 2013, I reported that long-running and complex Bell Group litigation had settled immediately before an appeal to the High Court was to be heard. The litigation began in 1995, and related to loans given to Alan Bond’s Bell Group of companies. However, it seems that the litigation just won’t die.

As I noted just before settlement, the question of how the settlement sum was to be distributed was potentially controversial. The litigation had been funded by the WA State Government-owned Insurance Commission of Western Australia (ICWA). Western Australian motorists had to pay an annual levy of $50 on third party insurance from 1993 to 1996 to assist ICWA, known as the WA Inc levy. That promise of controversy has now been realised.

After settlement, futher litigation had been both threatened and brought regarding the question of how the $1.7B settlement sum was to be disbursed. In the wake of this, the Western Australian government decided to pass legislation creating a statutory authority to disburse funds, as the ABC reported in May last year:

WA Treasurer Mike Nahan said legislation would ensure there was certainty about the process of distributing funds to creditors.

“It was hoped that after that settlement, the creditors of Bell Group would work together to bring about a swift and equitable distribution of those funds. That hope has not been realised,” Dr Nahan told Parliament.

He said litigation over the distribution of money from the pool has been threatened and run since settlement, in both the WA Supreme Court and the British High Court.

“After two decades of incredibly expensive litigation, the State Government is not inclined to let a third decade of litigation pass,” he said.

“The government is also not inclined to have the funds of taxpayers, or motorists insurance funds utilised to pay for the legal system to further delve into, at great expense, the affairs of the Bell Companies in the 1980s.”

Dr Nahan introduced a bill to Parliament to dissolve the companies and place the assets under the control of a statutory authority that would administer and then distribute them.

Nahan said the bill would “ensure an expeditious end to the Bell litigation and the equitable distribution of the pool of funds”.

Dr Nahan said the four major creditors of owed money were ICWA, the Australian Tax Office, and two other legal parties.

Accordingly, the Western Australian government passed the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA). Section 4 of the Act states that the objects are as follows:

(a)         to provide a mechanism, that avoids litigation, for the distribution of funds (the Bell litigation funds) received by the liquidator of TBGL and certain of its subsidiaries (the Bell group of companies) as a consequence of the Bell litigation and the settlement of it in 2013;

(b)         to provide a form of external administration of WA Bell Companies and require that it be carried out only in accordance with the provisions of this Act;

(c)         to provide appropriate compensation to the creditors who funded the Bell litigation taking into account the funding provided and the associated risks assumed by them;

(d)         to reflect the circumstance that without the funding mentioned in paragraph (c), the Bell litigation funds would not exist and the creditors of the Bell group of companies would have received no (or only nominal) dividends in the liquidation of those companies;

(e)         to make reasonable provision for the distribution of the property of the WA Bell Companies having regard to the uncertainties existing as to the nature and extent of that property;

(f)         to make reasonable provision for the satisfaction of liabilities owed to creditors having regard to the uncertainties existing as to the nature and extent of those liabilities;

(g)         to distribute the Bell litigation funds generally in accordance with the commercial substance of the agreements between the liquidator and the creditors who funded the Bell litigation, as made before the enactment of this Act;

(h)         to avoid further litigation that will waste the resources of the State and other persons and consume the Bell litigation funds. [emphasis added]

The issue (taking into account aims (c) and (d) above) seems to be that the government believes that the party which funded and took the risk of litigation (ICWA) should get a greater share of the settlement funds because without its actions, there would be no funds available for other creditors at all.

However, the hope that no further litigation would arise as a result has been dashed. A High Court transcript reveals that applicants in at least three different matters are seeking to challenge the Constitutional validity of the Bell Group Act. The parties are arguing that either the entire Act is invalid, or, in the alternative, that Parts 3 and 4 of the Act and certain other specific provisions are invalid, either because they are inconsistent with certain Commonwealth Acts (the Tax Act and the Corporations Act) in contravention of s 109 of the Constitution or that the Act contravenes Chapter III of the Constitution.

Bell J ordered that the matters would all be set down for hearing before the Full High Court on 5 and 6 April 2016. The Bell Group litigation is far from over.

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About Katy Barnett

Katy Barnett is an Associate Professor at Melbourne Law School. She was awarded her PhD in 2010, and it was published in 2012 by Hart Publishing as a monograph entitled Accounting for Profit for Breach of Contract: Theory and Practice. In 2013 she was a visiting scholar with Brasenose College, Oxford as part of the Melbourne-Oxford Faculty Exchange.

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