News: Bell Group FINALLY over

In the 1984 science fiction movie The Terminator, the Terminator, a cybernetic android assassin from the future, pursues the two heroes of the movie, Sarah Connor and Kyle Reese relentlessly. Connor and Reese shelter in a police station, and the Terminator seeks entry, but is denied entry by a policeman at the door. He says to the policeman “I’ll be back” and returns in a car, which he crashes through the door of the police station, over the top of the officer who denied him entry. In later movies spawned by the first (the sequelae that never end?) “I’ll be back” comes to be the Terminator’s mantra: he never gives up, as will be evident from my description of the final scenes of the original movie (in my opinion, still the best of the series).

Over and over, in The Terminator, the two heroes think they’ve escaped him or killed him, but he just keeps going, despite an explosion which destroys the external layer of human flesh which makes him look human and reduces him to a metal skeleton. Eventually, Reese puts explosives in the Terminator’s metal torso (killing himself in the process) and it seems the Terminator is finally dead. His legs have been blown off, and the light in his eyes has faded. Then his red eyes light up again, and he starts dragging himself along with his arms, still intent upon killing Connor. This scene always horrified me—it’s something from our primal nightmares—the thing which just won’t stop.

You might wonder why I’m mentioning this on the High Court blog. I’m glad you asked! Famously, there is an Australian litigation equivalent to the Terminator: the litigation which just won’t die. However, it seems that after almost thirty years, the Bell Group litigation is finally over, and I could not let that momentous moment pass (akin to Sarah Connor releasing the hydraulic press upon the cybernetic android).

To recap, leave to appeal to the High Court in the Bell Group litigation was granted way back in 2013, as I reported on the blog here, but even then there were rumours of settlement talks. The long-running litigation arose out of the collapse of the Bell Group of companies, formerly owned by Australian entrepreneur Robert Holmes à Court. However, the Bell Group was severely affected by the international share market crash of October 1987 (Black Monday) and hence it was acquired in a joint takeover by Bond Corporation (run by another famous Australian entrepreneur Alan Bond) and the State Government Insurance Commission (SGIC), in which both parties took a 19.9% stake in Bell Group. Holmes à Court retained 6% of Bell Group and received $340 million from the sale. Bond Corp ended up with a majority shareholding of 68% in Bell Group. Bond Corp then stripped $500 million from Bell Resources for its own use in an effort to prevent its own insolvency. At this time, various banks who had loaned money to Bell Group demanded (and were given) security for previously unsecured loans. Ultimately, this led Alan Bond as chairman of Bond Corp to be jailed for fraud in 1997. This period of Western Australian history was known as “WA Inc” because the Western Australian government had made large investments in private companies run by prominent entrepreneurs (note the investment of SGIC in this case) and a huge amount of public money was lost when those companies failed.

The subsequently chain of events is usefully summarized in a diagram contained in the ultimately unsuccessful Bell Group of Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015 (WA):

In essence, the various other creditors (including the WA SGIC, which had now been renamed WA State Government-owned Insurance Commission of Western Australia (ICWA), sought to argue that the banks had known Bell Group was in trouble, and to claw back proceeds from the bank. Western Australian motorists had to pay an annual levy of $50 on third party insurance from 1993 to 1996 to assist ICWA in undertaking this litigation, known as the WA Inc levy. As can be seen from this time line, the litigation was immensely complex and began in 1991: it has now been going for 29 years. As outlined in Martin Clark’s summary of proceedings here, the trial judge and the Western Australia Court of Appeal said that the banks had to repay the value of the assets they’d taken in security plus interest (about $1.9B), and that these funds were available for other creditors, and the banks appealed to the High Court of Australia.

In September 2013, we thought that it was all over. As I noted here on the blog, the parties settled the day before the case was to be heard before the High Court (much to my chagrin, because I continue to consider that the Western Australian Court of Appeal confused loss and gain). About $1.7B was available for creditors, one of whom (crucially) was the Australian Tax Office.

However, this was not the end of the matter. In the event the question of how the funds were to be divided between the various creditors became controversial, as I outlined here in this post. The Western Australian government passed the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (‘Bell Act’), which created a statutory authority to distribute the funds. Section 4 of the Bell Act seemed to contemplate that ICWA, which had funded and taken the risk of litigation 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 I outlined in this post here, 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. Accordingly, the Australian Tax Office brought proceedings challenging the constitutional validity of the Bell Act, and in 2016, the matter again went up to the High Court of Australia. As Martin Clark has described in his short note on the decision here, the entire Bell Act was rendered inoperative because it was inconsistent with Federal taxation law (see s 109 of the Constitution, which allows for the striking down of inconsistent State laws).

The litigation bubbled along for a further four years. However, it was reported yesterday afternoon by ABC News that the Western Australian Supreme Court had approved a final distribution of funds to creditors, and it is hoped that this will be the end of the matter. I do wonder, however, if Western Australian Treasurer Ben Wyatt is also a fan of The Terminator movie. The ABC reports as follows:

Outside court he said he was reluctant to “assume this is over” before the Government actually received the money it was owed “because as we know, this has been an ongoing saga”.

“Anything can happen and what the litigation has shown over the years is that this is something (where) you can never assume a conclusion, so until that money is paid I’ll certainly remain anxious about that outcome,” Mr Wyatt said.

“I’m just pleased that we’re hopefully very, very close to seeing this thing finally complete and the taxpayers of WA no longer funding what has been a ridiculously long piece of litigation.”

The final disbursement is due on September 11.

Hopefully, for the sake of everyone involved, the hydraulic press has now been lowered on this case.

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About Katy Barnett

Katy Barnett is a Professor at Melbourne Law School. She has published extensively in the areas of private law and remedies, and is a co-author of ‘Remedies in Australian Private Law’ with Dr Sirko Harder. In 2016 she received the Barbara Falk Award for excellence in teaching.