Referral

1.1        On 29 November 2016, the Senate referred the following matter to the Legal and Constitutional Affairs References Committee (the committee) for inquiry and report by 21 March 2017:

1. 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.
2. That the Senate directs the Attorney-General (Senator Brandis) and the Minister for Finance (Senator Cormann) to appear before the committee to answer questions. [1]

1.2        On 22 March 2017 the committee tabled an interim report[2] and on the same day, the Senate granted an extension of time until 21 June 2017 to report on this inquiry.[3]

Background

1.3        As the committee stated in its interim report, the Bell Group of Companies (Bell Group) was a large diversified conglomerate of companies, which had several member companies go into liquidation between 1991 and 1993.

1.4        In 1995, the Insurance Commission of Western Australia (ICWA) commenced legal proceedings against a number of Australian and international banks to recover money following the collapse of Bell Group.

1.5        In 2008, judgment was delivered for the banks to pay $1.7 billion to creditors, including the Australian Taxation Office (ATO) and the ICWA.[4] The matter was appealed to the Court of Appeal and subsequently to the High Court of Australia. Prior to the High Court hearing, settlement was reached in 2013 for $1.7 billion to be distributed between the remaining creditors.[5]

1.6        On 26 November 2015, 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 determine the distribution of the $1.7 billion.[6] The legislation prioritises the Western Australian government's claims for Bell Group liquidation funds before the claims of other creditors, including the tax debts to the ATO.[7]

1.7        Immediately following its enactment non-government creditors commenced proceedings challenging the constitutional basis of the Bell Act. On 8 March 2016, the ATO intervened in the case. While the ATO was the relevant Commonwealth agency in the context of the Bell Act litigation, the Commonwealth also had an option to intervene in the proceedings in addition to the ATO.[8] On 30 March 2016, the Attorney-General, Senator the Hon George Brandis, intervened in the case on behalf of the Commonwealth.

1.8        On 16 May 2016, the High Court upheld the constitutional challenge to the validity of the Bell Act on the basis that there was an inconsistency between the Bell Act and the Income Tax Assessment Act 1997 (Cth) and the Taxation Administration Act 1953 (Cth).[9] This decision struck down the Bell Act under section 109 of the Constitution which provides that where there is an inconsistency between state and federal legislation, federal laws will prevail over inconsistent state laws. Litigation concerning the distribution of proceeds of the liquidation of Bell Group continues.

1.9        During the course of this inquiry the committee obtained information which indicates that the Attorney-General was considering issuing a direction to the ATO that would have prevented the Commissioner of Taxation from intervening the in High Court proceedings. The committee has sought to clarify whether such a direction was contemplated or issued by the Attorney-General, his office or department, however, the government has not provided this information.

Conduct of the inquiry

1.10      Details of the inquiry were advertised on the committee's website, including a call for submissions by 17 January 2016.^[10] The committee did not receive any submissions but did receive evidence at public hearings and through tabled documents. The committee held public hearings in Canberra on 7 December 2016, 17 February 2017, 8 March 2017 and 27 March 2017. A list of witnesses who attended these hearings to give evidence is available at appendix 2 of this report. Hansard transcripts of the hearings are available on the committee's website.

1.11      The committee tabled a substantial interim report on 22 March 2017. A summary of the key findings of the interim report will be provided in chapter 2.

1.12      The Attorney-General was ordered by the Senate to provide a number of documents, through orders for the production of documents on 30 November 2016[11] and 27 March 2017.[12] Additionally, on 28 March 2017, on motion of the Senate (no. 274), the Attorney-General was required to provide answers to the committee's questions on notice as listed in appendix 1 of the committee's interim report. The motion also required the Attorney-General to attend the Senate at 9:30 am on 30 March 2017 to provide a statement and answer questions about his actions in relation to the Bell proceedings.

1.13      Throughout this process, this committee has been frustrated by the failure of the government and the Attorney-General to provide timely answers to questions. Additionally, the Attorney-General has refused to answer certain questions and made public interest immunity claims to avoid giving the committee critical information it needs to satisfactorily undertake this inquiry. The committee views the evidence provided by the Attorney-General as evasive. This will be discussed in more detail in chapter 2.

Structure of this report

1.14      There are two chapters in the report. This chapter sets out the administrative details of the inquiry, as well as a brief outline of the Bell Group liquidation process.

1.15      Chapter 2 discusses the key issues raised during the inquiry and sets out the committee's views and recommendations.

Acknowledgements

1.1        The committee thanks all witnesses who gave evidence at public hearings. 

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