Dictators, Discretion and Systems of Public Law: Bell Group NV (in liq) v Western Australia

By Martin Clark

Bell Group Case Page

The High Court’s judgment in Bell Group was a nice rendition of the well-told story about s 109 of the Constitution. Section 109 provides that ‘[w]hen a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.’ Western Australian passed a law to create a body that was empowered to finally determine the liabilities owed to various creditors of the Bell Group companies in the fallout of their liquidation, the long saga of which is detailed by Katy Barnett here and here. The High Court held that this law was invalid because it conflicted with the federal tax laws, which created the rights of and liabilities owed to another government and another office holder in relation to these companies: the Commonwealth and the federal Commissioner of Taxation. As I wrote shortly after the decision came down, the plurality judges (French CJ, Kiefel, Bell, Keane, Nettle and Gordon JJ) held that:

The Authority’s purportedly absolute discretion to determine the existence of a liability of a WA Bell Company and to quantify that liability and the Governor’s powers to extinguish liabilities that would otherwise be owed to the Commonwealth meant that the Bell Act effectively created a scheme that stripped the Commonwealth’s tax debts of their existence, quantification, enforceability and recovery under the Tax Acts (at [57]–[60]). Because it overrides the Commonwealth’s rights under the Tax Acts as a creditor of the WA Bell Companies, the Bell Act alters, impairs or detracts from the rights accrued to the Commonwealth under the Tax Acts (at [61]).

The day after the High Court handed down Bell Group I heard the eminent British historian Gareth Stedman-Jones speak on the meaning of ‘dictatorship’. What followed was a great rendition (which I’ll recollect poorly shortly) of a well-told story in the history of political thought — the origins and development of the office of ‘dictator’ in Rome and beyond.

In this post, I attempt to make the otherwise fairly routine decision in Bell Group a little more interesting by framing it around the content of Stedman-Jones’s paper. This might seem a bit esoteric: what could the two have to do with each other? But I think that bringing Bell Group and the idea of ‘dictator’ together suggest one way in which the case is interesting: as a modern Australian episode in the long global history of the relation between discretion and systems of law. That relation is of fundamental importance to public law in general, and reflects some foundational aspects of the Australian constitutional system that were at play in Bell Group.

The ‘Dictatorship’ in History

Stedman-Jones’s short paper on the meaning of ‘dictatorship’ throughout history was prompted by his soon to be released intellectual biography of Karl Marx, specifically the tricky idea of the ‘dictatorship of the proletariat’ that Marx first used in a series of articles in 1848–50. The twentieth century meaning of ‘dictator’ has well-known and invariably bad connotations. But what — in 1848 and before — did dictatorship mean in the political discussions of everyday people, and what did it mean specifically to Marx when he used it?

The ‘dictatorship’ was a Roman office built on the twin ideas of necessity and emergency that are encapsulated in the maxims ‘salus populi suprema lex esto’ and ‘necessitas non habet legem’: the safety of the people is the highest law, and necessity knows no law. These maxims form one side of the ‘dicta’ part of the word: the dictator, guided by these words, is the person who speaks for the people directly and without mediation through a legislature, acting not in accordance with ordinary laws on the books, but instead holding the legal power to do whatever is necessary to ensure their safety. ‘Dicta’ is seen often in legal language, though not with these connotations of almost unbridled decision-making power. Prominent among the many examples is ‘jurisdiction’, speaking law, or judging in accordance with law. The best-known republican legend of dictatorship is the story (or really, myth or fable) of Cincinnatus (see Livy [3.26] here), the humble retired consul turned farmer appointed Dictator by the panicked Roman senate to defeat Rome’s enemies. Achieving that purpose in sixteen days, he gave up the emergency powers that had been granted to him for six months, declined any military honours, and returned to his farm.

Skipping forward ten centuries and over a few other well-known Roman dictators not so ready to dispense with their powers voluntarily, Stedman-Jones turned to the princes of Italy. From the thirteenth to fifteenth centuries, various princes around Florence began to reappropriate the title of ‘dictator’ during constitutional emergencies, with these invocations contributing to the term being discredited in modern usage. From the sixteenth century the office was firmly detached from its republican ideals, with the links to ‘necessity’ and ‘safety’ made much more tenuous as the term was stretched to cover executive action in the context of trade and colonial wars with other European powers. With its invocation during the French Revolution the echoes of ‘salus populi’ reappear in the Committee of Public Safety, and some then came to see a ‘virtuous dictatorship’ as the only solution to France’s problems. When Marx comes to use the phrase with all this history in mind, he emphasised the energetic side of dictatorship: that in any ‘unconstituted state of affairs’, where law runs out and fails to provide any guide to action, the general public welfare is what remains as the guide for decisive and energetic action. After witnessing the excesses of Louis-Napoleon’s reign, Marx moved away from this terminology, though Lenin later took up the authoritarian view of ‘dictatorship’ in his attempts to put the dictatorship of the proletariat into practice.

Bell Group through Emergency, Discretion and Law

Throughout Stedman-Jones’s impressive sketch of this long and complex history, I kept thinking about the Bell Group decision. This is probably a bit strange on my part. The decision was, ultimately, a fairly routine s 109 case, albeit with the long and novel saga behind it that was drawn out over decades, involving monumental sums of money and monumental judgments from a range of Australian courts.

But the link that recurred in my mind was that despite the unsurprising result, the dispute could be read as a recent episode in an old story about discretionary power and systems of law linked to the story told by Stedman-Jones. What probably appeared as an at best tenuous link between the history of the idea of dictator and the Bell Group saga might, I hope, start to become clear now: that problems of discretion and law recur in a range of contexts relevant to public law, but that these conflicts in Australia have come to be channelled through constitutional text and doctrine and be resolved in relatively simple ways. In Australia’s legalist, textualist system of constitutional law, the conflict here was not — and never could have been — between power and law as general forces in tension or conflict. Far from a clash of arbitrary power and law, constitutional law entrenches routine ways of weighing these powers. This is might seem a fairly mundane side to Australian constitutional adjudication. But constitutional matters in Australia are rarely decided by the clash of big principles, even if those principles seem to spark questions of justice and equality that many people think surely must have some relevance in constitutional law.

I’ll briefly recount the story behind Bell Group through the lens raised above of emergency, discretion, and law.

There were two emergencies; one passed and the other impending. First was the 1990s collapse of the Bell Group companies, leading to almost two decades of litigation as creditors tried to recover money from 20 Australian and international banks, leading finally to a settlement in 2014 of $1.7 billion. This led to a second emergency in the prospect of further litigation beyond this by the remaining creditors. The Bell Group Act was, according to the Western Australian Government’s media release, aimed ‘to avoid further protracted litigation … to carve up the $1.7 billion’, and to ‘stop the decades-long consumption of public resources through associated court actions, and to conclude these matters for the benefit of creditors’.

The government’s response was to create a dictator with the Bell Group Act, labelled the ‘Authority’. To be sure, I do not use the term ‘dictator’ with its usual rhetorical connotations of a person with authoritarian power, oppressive, silencing of opposition and so forth. Rather, in light of the history recounted above, it is a body which, in response to an emergency, was granted supreme powers to decide a range of things to fix that emergency.

So here is the dictator angle. In response to a crisis about which creditors of the Bell Group would receive what amount of money, Parliament directed that the property of the remaining companies would be transferred to a fund, to then be administered by the Authority in making final determinations of those liabilities. Those determinations would be given to the Minister in a final report and the Authority ‘must recommend, in writing, to the Minister’ the amounts of money to be paid to particular creditors or property to be transferred to or vested in them. The Minister must then submit the report to the Governor, and the Governor may then issue instruments in writing to make those payments and transfers. To guide the Authority’s decisions, whatever the safety of creditors (or perhaps the State of Western Australia?) required was the supreme law. Certainly one difference from the classical image of the dictator is that the Authority was a creature of statute and bound by that statute. But the substantive link is that because of the breadth of its discretion it was able to make its final decisions about this specific public problem effectively as it saw fit.

The High Court did not declare the Bell Group Act invalid because it conflicted with some general principle prohibiting such wide discretionary power in a public body, or due to some risk of arbitrariness or injustice that the State Parliament created. Rather, as noted above, the Authority’s powers would interfere with and detract from the rights held by the Commonwealth and given to it by federal laws.

To my mind, what is interesting is how nicely this illustrates fundamental problems and principles of public law. Here, it is the tension or conflict between the need for discretionary power to seek to redress specific social problems and the legal principles that govern and constrain the ways in which that power can be exercised. This tension is present in the old idea of ‘dictator’ and the new emergency of the Bell Group.

We can read it as a conflict between wide discretion and the web of law that is the Tax Acts. The office of Commissioner of Taxation is at the opposite end of the ‘dictatorial’ spectrum. Far from the two general (and probably completely indeterminate) principles of ‘the safety of the people’ or ‘necessity knows no law’, the system of taxation is arranged in a complex mass of provisions that guide the Commissioner’s powers and duties and structure the system of taxation in Australia: it is a considerable power, but heavily constrained by the Tax Acts.

But it was not the breadth of the Authority’s discretion that was of any direct concern; rather that laws creating and quantifying tax debts at the federal level meant that federal law curtailed and made that discretion impermissible because its exercise would detract from the rights of the Commonwealth enshrined in a federal law. Western Australia certainly has the legislative power to create a dictatorial body; it was where those powers detracted from the federal government’s pre-existing creditor rights to taxation that the scheme fell apart.

One response here might be that the federal dimension to Bell Group is the more prominent story than the one about discretion and law. That is a fair frame, but really just a more specific one. Australian federalism is also about dividing discretion and law-making power: to the federal government a set of enumerated heads of power under which the federal parliament can make laws, and to the States the remainder. That States only turn to these broader powers in times of emergency is because of the political ramifications of acting arbitrarily which often tends to appear unjust, not because they lack the constitutional powers to decide to do so.

Other Dictators in Australian Public Law?

Bell Group is by no means a new take on the operation of s 109. I have attempted to make it more interesting by looking at it through the frame of dictators. Indeed, this frame might be illuminating for other constitutional contexts in Australia because it focuses our attention on the tension between political discretion and legal constraint.

A range of other offices and bodies might begin to appear in Australian public law as interesting from the perspective of discretion and legal constraints, and elements of the dictator become clear. In particular, other recent decisions touching on s 109 could be read through the lens: Dickson v The Queen [2010] HCA 30 and Momcilovic v The Queen [2011] HCA 34 (hat tip on both of these to Jeremy Gans); as well as Maloney v The Queen [2013] HCA 28. Illustrating this suggestion with the last example of Maloney, the emergency was (in the words of the Fitzgerald Report) that ‘[a]lcohol abuse and associated violence are so prevalent and damaging that they threaten the communities’ existence and obstruct their development’, leading to a Ministerial power to recommend the Governor of Queensland declare an area a restricted area in which alcohol could not be possessed, later exercised over Palm Island Shire Council, and then held by the High Court to not conflict with s 10 of the Racial Discrimination Act 1975 (Cth). Moving beyond s 109, dictatorship might illuminate aspects of the powers of Commonwealth offices. Over the past few decades of High Court challenges and so many legislative amendments, the powers of the Minister for Border Protection under the Migration Act 1958 (Cth) have become — maybe paradoxically — both more labyrinthine and more discretionary. And then there is the link to schemes like that on Nauru, which clearly raises the themes of discretion, the relations of systems of law inside and outside Australia, and eventually resolved by the Court to be constitutional through a focus on text and the contracting out of immense power.

The safety of the people, necessity knows no law; which people, whose necessity, which emergency, whose safety? Who decides, who will interpret; with what authority and what law? Other cases won’t so easily allow for using the language of ‘dictator’ in the more politically neutral way that is appropriate for thinking about the Bell Group Authority and the power it was to have of doling out what remained of a liquidated corporate group. But more politically controversial constitutional questions are asked and answered in similar, neutralised ways.

AGLC3 Citation: Martin Clark, ‘Dictators, Discretion and Systems of Law: Bell Group NV (in liq) v Western Australia‘ (3 June 2016) <http://blogs.unimelb.edu.au/opinionsonhigh/2016/06/03/clark-bell-group>.

Martin Clark is an MPhil/PhD Candidate at the London School of Economics and Political Science and a Research Fellow at Melbourne Law School

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About Martin Clark

Martin Clark is a PhD Candidate and Judge Dame Rosalyn Higgins Scholar at the London School of Economics and Political Science and Research Fellow at Melbourne Law School. He holds honours degrees in law, history and philosophy from the University of Melbourne, and an MPhil in Law from MLS. While at MLS, he worked as a researcher for several senior faculty members, was a 2012 Editor of the Melbourne Journal of International Law, tutor at MLS and various colleges, a Jessie Legatt Scholar, and attended the Center for Transnational Legal Studies Program.