In September 2013, it appeared that the Hydra had finally been slain: the long-running, complex and expensive Bell Group litigation had settled just before the hearing of an appeal to the High Court. However, just like the Hydra of myth, it appears that where one head of litigation is cut off, at least one other will grow. The High Court has just ruled in Bell Group N.V. (in liquidation) v Western Australia  HCA 21 that the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (‘Bell Act’), under which the $1.7B settlement sum was sought to be distributed, is constitutionally invalid. The legislation was rushed through the Western Australian parliament last year, but last-minute amendments made in April this year were insufficient to save it. It seems likely that the Bell litigation will continue, as litigation had previously been both threatened and commenced after settlement and prior to the enactment of the Bell Act.
As I have noted previously, the Bell litigation was funded by the WA State Government-owned Insurance Commission of Western Australia (ICWA). Western Australian motorists paid an annual levy of $50 on third party insurance from 1993 to 1996, known as the WA Inc levy. The Western Australian government created a statutory authority to disburse funds pursuant to the Bell Act. Among the major creditors were ICWA and the Australian Tax Office. The presence of the latter as a creditor was pivotal in the resolution of the recent High Court case. Section 4 of the Bell Act seemed to contemplate 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, as Stephen Bartholomeusz reports in The Australian, this distribution was not in accordance with the way in which such funds are typically distributed, as ICWA was an unsecured creditor who would typically rank below the other creditors in a normal administration:
Its [the Bell Act] administrator had proposed giving ICWA $930m of the $1.8bn at stake, despite the fact that ICWA was an unsecured subordinated creditor of the Bell Group, ranking behind the ATO and holders of Bell’s unsecured but unsubordinated bonds. The biggest of those higher-ranking creditors is a Dutch billionaire, Louis Reijtenbagh, who bought bonds at a discount in the 1990s, along with another group led by litigation financier Hugh McLernon.
As it was the major funder of the litigation against Bell’s banks that resulted in the pot of gold for the creditors, ICWA might have a moral case for a meaningful share of the $1.8bn. Its legal entitlement, however, could be as little as $3m of unpaid rent from Bell’s occupancy of an ICWA building in the 1980s.
Now that it [sic] attempt to have its own administrator decide how the $1.8bn would be distributed, with ICWA already designated as the major beneficiary, the government and ICWA are at the wrong end of the creditors’ queue. Conventionally, after the ATO and other higher-ranking creditors have been paid their entitlements, ICWA might get what’s left.
As Martin Clark has described in his excellent short note on the decision here, the entire Bell Act was struck down as invalid because it was inconsistent with Federal law (see s 109 of the Constitution). Specifically, the Bell Act was inconsistent with provisions of the Income Tax Assessment Act 1936 (Cth) and the Taxation Administration Act 1953 (Cth) (collectively, the Tax Acts). The essence of the decision can be gleaned from  of the plurality’s judgment:
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.
Gageler J also invalidated the Bell Act on a ‘narrower basis’, namely, that ss 22 and 29 of the Bell Act were essential to the scheme. These provisions respectively outlined the transfer of property to the Authority for distribution and the powers in regard to that property, and granted the Authority the power to administer the company. These provisions would alter, impair or detract from the operation of s 215 (which deals the pre-tax liabilities of a company in liquidation) and s 254 (which deals with the post-tax liability of a company in liquidation) of the 1936 Act, and consequently were inconsistent.
In any event, as a result, the Bell litigation lives again for another day.