Bond’s Bell group litigation never dies: High Court strikes down WA laws as constitutionally invalid


Bell Group N. V (in liquidation) v Western Australia [2016] HCA 21

Alan Bond passed away last year, but the legal battles over the 1990 collapse of his Bell Group companies may yet continue. The High Court has declared state legislation, which was designed to end the long-running litigation by short-circuiting certain aspects of the Corporations Act 2001 (C’th), constitutionally invalid.


For 20 years, the state-owned Insurance Council of Western Australia (ICWA) had been funding litigation against 20 banks to claw back funds which were allegedly improperly recovered by the banks at the time of the Bell Group’s collapse.  In 2013, the Bell Group liquidator and banks agreed to settle the dispute, subsequently creating a pool of $1.7 billion for distribution to creditors (including the ICWA and the Commonwealth).

After that settlement, however, litigation continued to consume the available pool of funds as creditors fought over the manner of its distribution.  Fearing a third decade of litigation, the WA government passed legislation  – the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (the Bell Act) – to:

  1. transfer and vest in a statutory authority all remaining Bell Group property;
  2. give that authority absolute discretion to determine the distribution of property amongst creditors; and
  3. ensure that any surplus property vested in the state of WA.

The stated objects of this legislation were to avoid further litigation and to provide “appropriate compensation” to the creditors who funded the litigation (i.e. the ICWA).

The Bell Act had the effect of circumventing the winding-up provisions of the Corporations Act, leveraging the ICWA’s claim for a greater share of the settlement pool and reaping the benefits of any surplus for the State. Unsurprisingly, the liquidators sought orders in the High Court declaring the Bell Act unconstitutional.

Submissions made by the parties

The Commonwealth was a significant creditor of the Bell Group, with its tax liabilities approximating $480 million.  Accordingly, the Commissioner of Taxation and the Commonwealth Solicitor-General intervened in the proceeding and supported the plaintiffs’ submissions that the Bell Act was invalid by operation of s109 of the Constitution because it was inconsistent with provisions of the Income Tax Assessment Act 1936 (C’th) and the Taxation Administration Act 1953 (C’th) (collectively, the Tax Acts).

The parties also challenged the validity of the Bell Act on other grounds, including inconsistency with provisions of the Corporations Act, the Judiciary Act 1903 (C’th) and infringement of Chapter III of the Constitution (grounds that were ultimately unnecessary to determine).

The High Court’s decision

The court unanimously held that the Bell Act was invalid in its entirety by operation of s109 of the Constitution because it was inconsistent with provisions of the Tax Acts.

The majority (French CJ, Keifel, Bell, Keane, Nettle and Gordon JJ) noted that the determination of s109 questions required comparison of the two laws to determine whether the legal operation or practical effect of the state law altered, impaired, or detracted from the legal operation or practical effect of the Commonwealth law.

Under the Tax Acts (prior to the Bell Act), the Commonwealth and Commissioner could rely on an assessment to recover a tax liability as a creditor of the Bell Group, including in a pro rata distribution in a winding up.

The majority held that the legal and practical effect of the Bell Act was to vest the property of each Bell Group company in a State fund administered by a State authority, which had absolute discretion to determine the existence and sum of any liability of such a company to the Commissioner.  Further, the Bell Act empowered the Governor to extinguish taxation liabilities and prohibit the Commissioner from suing to recover them.

The majority held the Bell Act effectively “created a scheme under which Commonwealth tax debts are stripped of the characteristics ascribed to them by the Tax Acts as to their existence, their qualification, their enforceability and their recovery.” By reducing the Commonwealth to the position of a “mere supplicant for the exercise of a favourable discretion” the Bell Act altered, impaired or detracted from the Commonwealth’s rights to recover its tax debts.

Similarly, the transfer of the Bell Group companies’ assets to the authority prevented the liquidator from complying with his obligations to retain funds and pay debts pursuant to the Tax Acts (and, although not mentioned by the High Court, with the liquidator’s obligations under the Corporations Act to control all the property).

Although s109 would operate to invalidate the Bell Act only insofar as it was inconsistent with a Commonwealth law, the majority held that it presented as a “package of interrelated provisions … intended to operate fully and completely according to its terms”.  If the inconsistent provisions alone were severed from the Bell Act, it would result in a “radically different and essentially ineffective residue” which the State Parliament never intended to enact.  Accordingly, the Bell Act was held to be invalid in its entirety.

Gageler J agreed with that conclusion, but in narrower terms: namely, on the basis of the provisions vesting property in the state authority and preventing a liquidator from performing any function or exercising any power except with the consent of that authority.  Gageler J took aim at the WA government, endorsing the Commissioner’s submissions that “the drafter of the Bell Act either has forgotten the existence of the Tax Acts or has decided to proceed blithely in disregard of their existence.  That, indeed, is the basic problem.”


While the High Court did not determine the other challenges to the validity of the Bell Act, it is clear that the legislation was inconsistent with the provisions in the Tax Acts as well as the liquidation procedures prescribed by the Corporations Act. The WA government will now have to get back in line behind the ATO and holders of Bell’s unsecured bonds and either negotiate or continue to litigate for a share of the remaining settlement sum in accordance with Commonwealth law.

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