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Page 8 Senate Friday, 17 February 2017 Senator BACK: I am. I will in fact just make that observation and thank you for your earlier comments. As we all know, it is longstanding practice of governments of both persuasions to decline to disclose legal advice, and I appreciate your efforts, Senator Watt, in that. Gentlemen, by way of background, my recollection, supported by my good colleague, was that the Bell Group was a heavy transport trucking company. Do any of you have any idea why the Western Australian government, representing the taxpayers of Western Australia, would be involved in any litigation relating to a trucking company? Mr Faulkner: Speaking for myself, I certainly do not feel competent to answer. Perhaps the only answer I could give in that regard is that the litigation that we have been dealing with in the High Court, of course, is all about arrangements for liquidation of certain companies whatever the area in which they trade might have been. Senator BACK: Perhaps I can assist for those who might be listening. Bell was a very long established and very successful heavy transport trucking company in Western Australia and was purchased by the then corporate raider Mr Robert Holmes a Court simply because it was a business that had a very high cash flow, which of course was attractive to Mr Holmes a Court. In 1987, Holmes a Court got himself in the stock market crash into very severe financial difficulty and turned to his friend, the then Premier Burke, to bail him out. The end result of that was that the Bond group—Mr Alan Bond and his group—purchased 19.9 per cent of Bell and, lo and behold, the other party to purchase 19.9 per cent was none other than the state government Insurance Commission of Western Australia. So Mr Burke has used the finances of the Western Australian taxpayer to bail out his mate Holmes a Court and, of course, then Bond goes to the wall, Bell goes into liquidation and we find ourselves in the very sad circumstance of today. So it is important, if I may, to put into context the background to all this because under no circumstances at any time in a well-run or honest government would we ever have had the people of Western Australia being co-owners of a heavy transport trucking company. Can I take you to the correspondence of Dr Nahan? Are you familiar with that letter? I understand it was received on 15 April 2015. It is a letter from state Treasurer Nahan to federal Treasurer Hockey. Is that a letter with which you are familiar? Mr Faulkner: We have seen that letter. Senator BACK: My first question is—and perhaps you might be able to take it on notice for me—Nahan spells out to Hockey the circumstances relating to the interests between the Western Australian government and possibly the federal government. He makes the point: The Bell Group litigation is infamous for its length and cost. Of course, this led to the WA Inc. royal commission. The scene was so rotten that by the time the Hon. Carmen Lawrence became Premier, acting particularly with the heavy pressure of her brother Bevan Lawrence, she was minded to call for a royal commission into what became known as WA Inc. Right at the centre of WA Inc. was the Bell situation. Nahan makes the comment that: The Insurance Commission of Western Australia ('ICWA') —here it is again— has spent about $200 million funding the liquidator of the Bell Group in his successful action against the 20 Australian and foreign banks… You may not know, but I wonder if you could take on notice, and if you could advise the committee, how much of anything did the Commonwealth of Australia contribute to those costs of litigation? I know how much Western Australians did because the government of Mr Richard Court imposed a $50 levy on every vehicle licence for many years to pay for the Western Australian taxpayers' contribution. But I am keen to know, did the Commonwealth contribute anything and, if so, how much did the Commonwealth contribute? If you could take that on notice, I would be appreciative. Mr Anderson: If I could just note: it is highly unlikely that information would be information held by the department, including by AGS. Senator BACK: Is it? Perhaps I can find others. Mr Anderson: If we can take it on notice we are committing to give you an answer. I am just saying I do not think we will be able to answer that question ourselves. Senator BACK: All right, thank you. Nahan goes on to say that the liquidator, as result of that successful litigation for which the Western Australian taxpayers paid, has approximately $1.7 billion available to it. Incidentally, Nahan makes the point, not in this correspondence but in other correspondence, that the actions LEGAL AND CONSTITUTIONAL AFFAIRS REFERENCES COMMITTEE
Friday, 17 February 2017 Senate Page 9 proposed to be taken by the Western Australian parliament had the unanimous support of both the Labor opposition and the Greens political parties, so this was totally bipartisan. Nahan says to Hockey Accordingly, the Western Australian government is planning to introduce legislation that will…deliver a more rapid financial return to the Commonwealth, the State Government and the other creditors… He goes on to say that 'We'll ensure there is no "misdistribution" and that it will eliminate further speculation by professional litigation funders'—because we know what they are all about. He, then, obviously seeks to advise Hockey as to what actions to be taken. Then, Hockey, in his response on 29 April 2015, makes statements: I acknowledge the desire of the Western Australian Government to see an efficient and timely conclusion to the Bell Group insolvency process. It is important that the ensuing process result in … fair outcomes for creditors consistence with their legal positions… I that understand the proposed legislation will require any future determination in reaction to creditor distribution to have due disregard to the agreements… He said: I trust the Western Australian government will therefore continue to engage in good faith in the forthcoming mediation process. In his final paragraph, he says: Given the significant nature of the proposed course of action, I urge the Western Australia Government to ensure that the utmost probity is evidenced throughout the process so as to ensure that Australia remains and continues to be seen as an attractive destination … Based on your roles in the whole process, is there any indication at all that any action or statement by then Treasurer Hockey is inconsistent with what would be normal practice of a senior cabinet member communicating back to a state colleague in the context of what I have just read out to you? Mr Faulkner: This may somewhat unhelpful, and I apologise for that, but I would have to say that, speaking for the department, our interest is solely with the Constitution or the technical constitutional propositions which emerged in relation to this proceeding. We have no knowledge of and no interest in, in a sense, the surrounding matters—although they are, no doubt, in some senses interesting—that you are referring to, so I do not think we have anything to offer at all on that front, I am afraid. We were concerned with the technical constitutional arguments in relation to this legislation, and that is it really. Senator BACK: Good. So I will now move, if I may, to the 78B notice. Am I to understand clearly, in response to the answers given to my good colleague Senator Watt, that the department's instructions to AGS were motivated around the issue of the 78B notice? Is that correct? Mr Faulkner: That is right. The point of the exercise is that the possibility of an Attorney-General's involvement in a particular proceeding rests solely on the fact that a constitutional issue arises. We then consider is that issue important in constitutional terms. It may be fantastically important in all kinds of other policy terms and utterly trivial in constitutional terms, in which case we would not intervene. It is a funny kind of highly technical proposition, which is not well understood, I must confess, but our interest is only, 'Does this case raise an interesting or an important constitutional point?' There may be associated questions about how Commonwealth legislation operates where a court might find it useful to hear from the Commonwealth, so I would not want to suggest that there can be no other issue than the constitutional issue in play, but they are legal questions of a fairly high order in technical terms. Our job in looking at 78B notices is to develop a device for the Attorney-General that allows the Attorney-General to decide whether this is a sufficiently significant matter in which to intervene— to take the step of intervening not being a party, as it were, before that step. Senator BACK: I understand from my reading and from what I have learnt that the Australian tax office, for whom you cannot speak, raised its challenge in the High Court based on, as I understand it—excuse the simplicity; I am not a lawyer—revenue related matters. Is that an accurate portrayal? Mr Faulkner: Broadly; I would not quibble with that myself. Perhaps to put that another way, the constitutional issues raised by the 78B—there are in fact three proceedings that formed the Bell proceedings, and they began consecutively. The three constitutional issues that were raised across those three proceedings, which were the proceedings in relation to which the Attorney ultimately intervened—there were three constitutional issues raised. The first constitutional issue was: was the WA liquidation law inconsistent with Commonwealth tax law? The constitutional question was: if it was, it would be invalid by operation of section 109 of the Constitution. That was the first constitutional issue. The second constitutional issue was: was there a problem in terms of the WA liquidation law created under the Commonwealth Corporations Law, because that law was also relevant to the capacity of the states to make new laws in relation to things broadly connected with corporations. That was the second constitutional issue. The third constitutional issue was: was there something about the state LEGAL AND CONSTITUTIONAL AFFAIRS REFERENCES COMMITTEE
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