The High Court has decided a constitutional matter on the validity of a state law, the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA), which aimed at providing a legislative framework for the dissolution and administration of the property of the Bell Group Ltd (the Bell Act). Following the collapse of the Bell Group and a number of its subsidiaries (the WA Bell Companies), the Western Australian parliament enacted a law to collect the remaining property of each of these companies to be then transferred to and vested in a fund that was to be administered by a statutory authority (see [20]ff). The Commonwealth was a substantial creditor of several WA Bell Companies, including for pre-liquidation tax debts and post-liquidation liabilities. The Bell Act required the Authority to determine the property and liabilities of each WA Bell Company, and granted it absolute discretion in determining those liabilities (at [39]ff, and see the considerations noted at [42]). The Governor of Western Australia is also empowered (on the recommendation of the Authority) to determine an amount to be paid to a person, or for property to be transferred or vested in a person, or alternatively to make ‘no determination’ of payments or property transfers in relation to liabilities, which has the effect of extinguishing those liabilities (see at [44]–[47]).
The Court unanimously held that the Bell Act was invalid because, contrary to s 109 of the Constitution, it was inconsistent with provisions of the Income Tax Assessment Act 1936 (Cth) and the Taxation Administration Act 1953 (Cth) (collectively, the Tax Acts). The plurality (French CJ, Kiefel, Bell, Keane, Nettle and Gordon JJ) recalled that an inconsistency arises where a state law alters, impairs or detracts from the operation of a law of the Commonwealth parliament through a conflict with that Commonwealth act (direct inconsistency), and is assessed by construing and comparing the operation of the two statutes (see [50]–[52]).
The Tax Acts provide the federal legislative framework under which tax liabilities are assessed as a debt due to the Commonwealth which may be recovered by the Commissioner (see at [54]). Here, the rights of the Commonwealth and the Commissioner to rely on an assessment to ultimately recover a tax liability accrued prior to the commencement of the Bell Act, specifically as a creditor of each of the relevant WA Bell Companies (at [55]). 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]). Similarly, the Bell Act’s transfer of all WA Bell Company property to the fund meant that no funds were retained by the liquidator to meet the accrued tax liabilities of those companies in liquidation, which conflicted with the provisions of the Tax Acts relating to pre- and post-liquidation debts (see [62]–[66]).
While s 109 inconsistencies may be ‘read down’ by severing only those provisions of the state law that are inconsistent with the federal law, here the Bell Act presented a ‘package of interrelated provisions …operat[ing] fully and completely according to its terms’ and severing the inconsistent provisions would result in a ‘radically different and essentially ineffective residue’ (at [69], [70]). Consequently, the Bell Act is invalid in its entirety.
Gageler J also held the Bell Act to be invalid, but on a ‘narrower basis’ than the plurality, namely, that ss 22 and 29 of the Bell Act are essential to the scheme and that those provisions would alter, impair or detract from the operation of s 215 and 254 of the 1936 Act (see [79]ff).
| High Court Judgment | [2016] HCA 21 | |
| Result | Bell Act invalid | |
| High Court Documents | Bell Group |
|
| Full Court Hearings | [2016] HCATrans 80 | 7 April 2016 |
| [2016] HCATrans 79 | 6 April 2016 | |
| [2016] HCATrans 78 | 5 April 2016 | |
| Directions Hearings | [2016] HCATrans 74 | 24 March 2016 |
| [2016] HCATrans 11 | 8 February 2016 | |
| [2015] HCATrans 344 | 16 December 2015 |
Below is the Court’s full order:
Matter No S248 of 2015 – The BGNV Proceeding
Question 1: Do the plaintiffs have standing to seek relief in respect of the alleged invalidity of Parts 3 and 4 of the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) on the grounds alleged in paragraph 56 of the statement of claim?
Answer: Yes.
Question 1A: Does any justiciable controversy arise in respect of the alleged invalidity of Parts 3 and 4 of the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) on the grounds alleged in paragraphs 56.1 and 56.2 of the statement of claim insofar as the grounds rely on former s 215 of the [Income Tax Assessment Act 1936 (Cth)] (and alternatively, s 260–45 of Schedule 1 to the [Taxation Administration Act 1953 (Cth))]?
Answer: Yes.
Question 2: Is the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) invalid in its entirety?
Answer: Yes.
Question 3: If the answer to question 2 is “no”, are any of the provisions of Parts 3 and 4 and any of ss 48, 54, 55, 56, 58 and 69 to 74 of the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) invalid (and, if so, to what extent)?
Answer: Unnecessary to answer.
Question 4: If the answer to question 3 is yes is the invalid provision severable from the rest of the Act (and, if so, to what extent)?
Answer: Unnecessary to answer.
Question 5: Who should pay the costs of the special case?
Answer: The defendant.
Matter No P63 of 2015 – The WA Glendinning Proceeding
Question 1: Do the plaintiffs have standing to seek relief in respect of the alleged invalidity of Parts 3 and 4 [of] the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (Bell Act) on the grounds alleged in paragraphs 56 to 58 of the statement of claim?
Answer: Yes.
Question 2: Does any justiciable controversy arise in respect of the alleged invalidity of Parts 3 and 4 of the Bell Act on the grounds alleged in paragraphs 56.1 and 56.2 of the statement of claim insofar as the grounds rely upon s 215 of the [Income Tax Assessment Act 1936 (Cth)] (alternatively, s 260–45 of Schedule 1 to the [Taxation Administration Act 1953 (Cth)])?
Answer: Yes.
Question 3: Are any of the provisions of Parts 3 and 4 and any of ss 51, 52 and 73 of the Bell Act invalid (and, if so, which and to what extent):
(a) by the operation of s 109 of the Commonwealth Constitution by reason of:
(i) inconsistency between that provision (as a law of the State of Western Australia) and:
(1) the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) or the Taxation Administration Act 1953 (Cth), on the grounds alleged in paragraph 56 to 58 of the statement of claim; further or alternatively
(2) the Corporations Act 2001 (Cth), on the grounds alleged in paragraphs 72 to 88 of the statement of claim; further or alternatively
(3) s 39(2) of the Judiciary Act 1903 (Cth), on the grounds alleged in paragraphs 59 to 68 of the statement of claim?; further or alternatively
(b) because it infringes Chapter III of the Constitution, on the grounds alleged in paragraphs 59 to 68 of the statement of claim?
Answer: (a)(i)(1) Yes. The Bell Act is invalid in its entirety.
(a)(i)(2) Unnecessary to answer.
(a)(i)(3) Unnecessary to answer.
(b) Unnecessary to answer.
Question 4: If any provisions of the Bell Act are invalid, are they severable from the rest of the Act (and, if so, to what extent); or is the Bell Act invalid in its entirety?
Answer: The Bell Act is invalid in its entirety.
Question 5: Is the Bell Act invalid in its entirety because it infringes Chapter III of the Constitution on the grounds alleged in paragraphs 69 and 71 of the Statement of Claim?
Answer: Unnecessary to answer.
Question 6: Who should pay the costs of the special case?
Answer: The defendant.
Matter No P4 of 2016 – The Maranoa Transport Proceeding
Question 1: Do the Plaintiffs have standing to seek relief in respect of the alleged invalidity of Parts 3 and 4 of the [Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (“the Bell Act”)] on the grounds alleged in:
(a) paragraph 56.1 of the [statement of claim], insofar as the grounds rely upon ss 215 of the [Income Tax Assessment Act 1936 (Cth)] (alternatively, s 260–45 of Schedule 1 to the [Taxation Administration Act 1953 (Cth)]) and 254(1)(h) of the [Income Tax Assessment Act 1936 (Cth)]; and
(b) paragraphs 56.2, 56.3 and 56.4 of the [statement of claim]?
Answer: (a) Yes.
(b) Yes.
Question 2: Does any justiciable controversy arise in respect of the alleged invalidity of Parts 3 and 4 of the Bell Act on the grounds alleged in paragraphs 56.1 and 56.2 of the [statement of claim] insofar as the grounds rely upon s 215 of the [Income Tax Assessment Act 1936 (Cth)] (alternatively, s 260–45 of Schedule 1 to the [Taxation Administration Act 1953 (Cth)]) and s 254(1)(h) of the [Income Tax Assessment Act 1936 (Cth)]?
Answer: Yes.
Question 3: Are any of ss 9, 10, 22, 25, 27, 28, 29, 30, 33, 35, 37, 38, 39, 40, 41, 42, 43, 44, 45, 47, 54, 55, 56, 68, 69, 71, 72 or 73 of the Bell Act invalid, and, if so, which and to what extent, by the operation of s 109 of the Commonwealth Constitution by reason of inconsistency between that provision (as a law of the State of Western Australia) and:
(a) the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) or the Taxation Administration Act 1953 (Cth), on the grounds alleged in paragraphs 40 to 56 and 91A of the statement of claim; further or alternatively:
(b) the Corporations Act 2001 (Cth), on the grounds alleged in paragraphs 59 to 91 and 91B of the statement of claim?
Answer: (a) Yes. The Bell Act is invalid in its entirety.
(b) Unnecessary to answer.
Question 4: If any provisions of the Bell Act are invalid, are they severable from the rest of the Act (and, if so, to what extent); or is the Bell Act invalid in its entirety?
Answer: The Bell Act is invalid in its entirety.
Question 5: Who should pay the costs of the special case?
Answer: The first defendant.