How or why WA forgot the existence of the Tax Acts or decided to proceed blithely in disregard of their existence

The concluding comment from the decision of the High Court in Bell Group N.V. (in liquidation) v Western Australia; W.A. Glendinning & Associates Pty Ltd v Western Australia; Maranoa Transport Pty Ltd (in liq) v Western Australia [2016] HCA 21 was to note that …

“The Commissioner concludes his written submissions with the observation that the basic problem here is 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”.

That problem arose in November 2015, when the Parliament of Western Australia enacted the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (“the Bell Act”) in order to provide a legislative framework for the dissolution, and administration of the property, of The Bell Group Ltd, in liquidation.  The liquidation of those companies had not been finalized.

The High Court found that the Bell Act was invalid in its entirety under s 109 of the Constitution because of inconsistency between the provisions of the Bell Act and provisions of the Commonwealth tax laws – the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953.

“The Bell Act purports to create 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. The rights and obligations which arose and had accrued to the Commonwealth as a creditor of the WA Bell Companies in liquidation, and to the Commissioner, under a law of the Commonwealth prior to the commencement of the Bell Act are altered, impaired or detracted from by the Bell Act”.

Senate inquiry

How that all happened and what may have been behind it is now the subject of a Senate inquiry entitled “Nature and scope of any agreement reached by the Commonwealth and Western Australian governments in relation to the distribution of proceeds of the liquidation of, and litigation concerning, the Bell Group of companies (the proceeds)”.

On 30 November 2016, the Senate referred these matters to the Legal and Constitutional Affairs References Committee for its inquiry and report by 21 March 2017:

The nature and scope of any agreement reached by the Commonwealth and Western Australian governments in relation to the distribution of proceeds of the liquidation of, and litigation concerning, the Bell Group of companies (the proceeds), with particular reference to:

1. the priority order for distribution of the proceeds;
2. the Commonwealth’s position in relation to the distribution of, and litigation concerning, the proceeds;
3. any connection between the above and the settlement of other disputes between the Commonwealth and Western Australian governments, including regarding the distribution of GST revenue between the states;
4. any direction or instruction given by the Attorney-General to the Solicitor-General, either directly or through his office or department, in relation to the conduct of litigation concerning the proceeds;
5. any connection between the above and the issuing of the Legal Services Amendment (Solicitor-General Opinions) Direction; and
6. any other related matter.

In referring this, the Senate directed the Attorney-General (Senator Brandis) and the Minister for Finance (Senator Cormann) to appear before the committee to answer questions.

An initial hearing was conducted on 7 December 2016, with representatives of the ATO, Treasury, and the Attorney-General’s Department attending.

The closing date for submissions is 17 January 2017.