George Brandis

Embattled Attorney-General George Brandis is in trouble again, this time over a complex legal case stretching over two decades involving the West Australian government, the late Alan Bond and former solicitor-general Justin Gleeson. Here’s what you need to know about the scandal.

Why are there calls for Brandis to resign?

There seem to be new reasons every week, but this time it relates to allegations Brandis did a deal with the WA government not to run a particular argument in a High Court case over money owed to both state and federal governments by the collapsed Bell Group.

What is Bell Group?

Bell Group was a group of resources companies owned by the late Alan Bond until they collapsed in the early-1990s. When the group was in major financial strife and loans to the banks were due, Bell Group entered into refinancing arrangements with 20 banks, and agreements were made that a sale of the assets owned by Bell Group would be used to pay down the loans.

The decades-long litigation that followed the collapse of Bell has largely been around the banks entering into an agreement with Bell at the time it was insolvent. It is said to be Australia’s longest-running and most expensive case.

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To get a sense of the scale of the case, a 2008 judgment on the case in the WA Supreme Court is 2643 pages long. The WA Supreme Court in 2013 approved a settlement of $1.8 billion paid by the banks to the liquidator and the banks released their claims on Bell Group as part of the agreement.

What did WA try to do?

The Western Australian government attempted to bring the case to a close by passing the Bell Act in November 2015. The law effectively would have given the state government the power to allocate the $1.8 billion to the company’s remaining creditors, including the Insurance Commission of WA and the Australian Taxation Office.

There had been legal fights between the creditors over who should get what, and WA was attempting to put a stop to the litigation by giving the state government the final say.

Why did this end up in the High Court?

The creditors saw it somewhat differently, and argued the legislation — which would effectively put the WA government at the top of the list of creditors, even above the Commonwealth government — was unconstitutional, on the grounds that giving the state the entire control over the $1.8 billion in assets was inconsistent with the Commonwealth Tax Acts, among other pieces of legislation.

What is Brandis alleged to have done?

Enter the federal Attorney-General. The West Australian alleges that Brandis had reached an agreement with Western Australian A-G Michael Mischin over the case, and instructed solicitor-general Justin Gleeson earlier this year not to pursue a legal argument in the case on behalf of the ATO. Bell Group owed the ATO nearly $300 million.

Gleeson, representing the Commissioner of Taxation, ultimately ended up mounting an argument against the legislation in the High Court. The Commissioner of Taxation’s submission to the High Court, written by Gleeson, said:

“The basic problem is that the drafter of the Bell Act has either forgotten the existence of the Tax Legislation, or decided to proceed blithely in disregard of its existence. No mechanism has been provided for in the Bell Act to allow for the continued operation or paramountcy of the Tax Legislation. “

The WA government was left looking like it didn’t understand the constitution, although The West Australian says the WA government in fact worked with the Commonwealth in development of the legislation. It is unclear whether Gleeson agreed to the request from the ATO to mount its submission in the High Court with or without Brandis’ approval, but Brandis will give an explanation to the Senate at noon today.

WA Treasurer Mike Nahan confirmed in WA Parliament in May that a deal had been made over the legislation but the Commonwealth had gone back on it:

“We had a deal with the Commonwealth that it would not oppose the Bell Act. Despite the deal we thought we had, the Australian Taxation Office thought that it had to have its say in the High Court.”

What was the outcome of the case?

In May, the High Court found the Bell Act to be invalid, and struck down the law:

“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.”

What does Brandis claim?
In a statement to the Senate on Monday, Brandis threw former treasurer Joe Hockey under the bus, saying it was Hockey who had been in negotiations with the WA government, which might have been interpreted by WA as an agreement. Brandis said he hadn’t been aware of any deal with the WA government, and neither was the current minister responsible, Kelly O’Dwyer.

Brandis claims he considered whether or not the ATO should intervene in the case, but ultimately came to the view that it should. This was, he said, separate to whether or not the Commonwealth — separate from the ATO — should intervene.

The Commonwealth did end up intervening and although Brandis claimed the primary issue in the case was section 109 of the constitution (around taxation laws), the submission curiously devotes very little time to 109, instead focusing on other matters of the case.

What does this have to do with the dispute between Solicitor-General Justin Gleeson and Brandis?

It is alleged this might be the reason Brandis issued a directive just before the election to require requests made to the solicitor-general go through him first. The ongoing dispute led to Gleeson’s resignation as solicitor-general. Brandis ultimately withdrew the direction as he was facing being humiliated by having the Senate disallow the directive.