The High Court has this morning struck down the Bell Act (WA)1 in Bell Group NV (in Liquidation) v Western Australia [2016] HCA 21.

In a 7:0 decision (albeit as often seems to occur, Gageler J wrote alone concurring2 with the joint judgment of the rest of the bench) the Court found:

…the Bell Act creates 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, with the result that the Bell Act purports to override the Commonwealth’s accrued rights as a creditor of each of the WA Bell Companies and the rights of the Commissioner [of Taxation]. The Bell Act thereby significantly alters, impairs or detracts from the rights and obligations created by a law of the Commonwealth and existing prior to the commencement of the Bell Act. That alteration or impairment of, or detraction from, the Tax Acts engages s 109 of the Constitution, which operates to render the offending provisions of the Bell Act invalid.3

As is the usual practice, having determined that parts of the Bell Act were invalid, the Court considered whether those parts could be severed. They concluded this was not open as “severance … would result in a set of provisions which, to the extent they might be capable of any rational application, could not possibly have been regarded as something which the Parliament of Western Australia intended.” 4

The nub of the joint reasons was encapsulated in these terms:

Part 4 of the Bell Act is also essential to the scheme created by the Bell Act. It is headed “Completion of winding up of WA Bell Companies”, but the heading is misleading. The Part does not provide for completion of the winding up of WA Bell Companies. Rather, it provides for the termination of the winding up of the WA Bell Companies that is provided for under the Corporations Act, and, among other effects on creditors, the purported annihilation of the rights of the Commonwealth as a creditor of certain WA Bell Companies to a pro-rata distribution of any surplus in a winding up under subdiv D of Div 6 of Pt 5.6 of the Corporations Act.5

The State of Western Australia had also initially challenged the standing of the plaintiffs to bring the invalidity challenge. Although the standing complaint “fell away” when the Commissioner of Taxation and the Attorney-General (Cth) intervened in support of the challenge6, the Court nevertheless dealt with it:

…the plaintiffs have standing in their own right to challenge the validity of the Bell Act.  That is because, like the Commissioner, they have an interest in the due administration of the liquidation of debtor companies – an interest which is sufficient to seek the assistance of the Court to ensure that the company’s assets are dealt with in accordance with the law governing the winding up[6].  Once the plaintiffs’ interest is correctly identified it will be understood that the central theme of Western Australia’s argument, that the enactment of the Bell Act might not mean that the plaintiffs (and the Commissioner) will receive less than they would in a winding up, and that they will therefore not be adversely affected by it, misses the point.7

It was unnecessary for the Court to consider other challenges, specifically whether:

  • any provisions of the Bell Act were inconsistent with the Corporations Act 2001 (Cth) or the Judiciary Act 1903 (Cth) and thus invalid under s 109 of the Constitution; or
  • the Bell Act infringed the separation of powers in Ch III of the Constitution.
  1. Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA). []
  2. At [79] his Honour said “I reach the conclusion that the Bell Act is invalid on a narrower basis than the other members of the Court.” []
  3. At [74] []
  4. At [72] []
  5. At [37] []
  6. At [7] []
  7. At [8] []