FEDERAL COURT OF AUSTRALIA

Galaxy Day Care Pty Ltd v Secretary, Department of Education and Training [2018] FCA 1549

ORDERS

UPON THE APPLICANT THROUGH ITS COUNSEL PROVIDING THE USUAL UNDERTAKING AS TO DAMAGES, THE COURT ORDERS THAT:

1.    The decision of the delegate of the respondent taken on 2 October 2018 to cancel the applicant’s provider approval be stayed until 10:15 am on 22 November 2018.

2.    If the respondent makes a decision on internal review before 22 November 2018, the applicant, within 3 days of having received notification of any internal review decision, take steps to have the matter relisted before the docket judge or, if the matter has not been docketed, the General Duty Judge, for consideration as to whether the stay should be vacated or extended.

3.    Liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Revised from Transcript)

THAWLEY J:

1    On 11 October 2018, the applicant filed an originating application for judicial review. That application sought review of a decision of a delegate of the respondent, the Secretary of the Department of Education and Training, to cancel the applicant’s approval as an approved provider of child care services. That decision was made under s 195H of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth). The decision was dated 2 October 2018. It came to the attention of the applicant on 3 October 2018. The cancellation of the approval was expressed to take effect on 15 October 2018.

2    The originating application contained five grounds of review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) and a claim for interlocutory relief. The claim for interlocutory relief was for an order suspending the operation of the decision of the delegate of the Secretary to cancel the applicant’s provider approval until determination of the applicant’s ADJR Act claim. The source of power to order such a suspension derives from s 15(1)(a) of the ADJR Act.

3    Before turning to the factual background, it is relevant to say something about the legislative regime. The Act contains a number of provisions of an administrative, procedural and technical nature that apply in relation to the provision and administration of the family tax benefit and child care subsidy. The scheme contemplates, where it applies, that a person whose child is in care may make a claim for a benefit, but the payment of the benefit will be made to the child care service provider.

4    A child care service provider must be approved under the Act in order for the subsidy to be paid to it and for the person whose child is in care to make a claim in respect of that service. Part 8, Div 1 of the Act provides for provider approval and contains a series of rules governing eligibility. Part 8, Div 2, which contains s 195H, includes various conditions for continued approval. The decision in respect of which the originating application seeks review was made under s 195H(1)(b), which provides as follows:

(1)    If the Secretary is satisfied that an approved provider has not complied, or is not complying, with a condition for continued approval of the provider, the Secretary may do one or more of the following: …

(b)    cancel the provider’s approval; …

5    Section 109A(1B)(a) allows for a provider to apply to the Secretary for internal review of a decision made under Pt 8. The applicant made a request for internal review on 10 October 2018. Following internal review, an application may be made to the Administrative Appeals Tribunal (AAT) for “AAT single review” under s 138. The two-tier review system, which applies to certain decisions made under the Act, does not apply to a decision made under Pt 8 – see: s 111(2)(f).

Background

6    The applicant relied upon two affidavits: the first of Mr Alameddine, and the second of Ms Akrong. Ms Akrong has been a director of the applicant since February 2012 and is currently the sole director and shareholder of the company. The applicant’s business is the provision of family day care services, meaning that services are provided to children in a home environment. Typically, an educator provides care for the child in the educator’s home before school, then drops the child at school, picks them up from school and provides further after-school care.

7    The applicant received provider approval in relation to family day care services on 27 February 2014. That approval is a requirement for parents to receive child care subsidies; without approval, parents would not receive child care subsidies in relation to child care services provided by the applicant. The applicant operates in the south-western Sydney suburb of Prestons, and the majority of the families it caters for come from a “low socio-economic background” (to adopt the words used in the evidence).

8    Ms Akrong deposed to the applicant having 60 educators that it hires as contractors to provide care to children; that it has 561 registered children from 356 families; and that it employs 5 staff members. The applicant charges $9.75 per hour of care per child. Of the $9.75 charged, approximately $8.30 is subsidised by child care subsidies, with the balance of $1.45 being paid by a child’s parent. If the cancellation decision takes effect, which it is due to on 15 October 2018, the parents will no longer be entitled to receive or claim the child care subsidy, should they continue to receive child care services from the applicant.

9    In light of the difficult circumstances in which many of the parents find themselves, the applicant is concerned that, should the cancellation decision come into effect, a number, if not most, of the parents will make a decision not to continue receiving child care from the applicant.

10    On 26 April 2018, a delegate of the Secretary wrote to the applicant indicating that she was “considering imposing the sanction of cancellation of the approval of [the applicant]”. The letter included an identification of the reasons that the delegate was considering imposing the sanction of cancellation. The letter also identified the consequences of imposing the sanction and made an invitation to the applicant to make written submissions.

11    On 11 May 2018, an officer of the Department wrote to the applicant identifying “further contraventions of the family assistance law”. The letter identified a due date for any submissions of 25 May 2018.

12    On 25 May 2018, the applicant wrote to the Department and made various submissions. Annexed to that letter (which was signed by Ms Akrong) were a number of documents, largely of a business-record nature, intended to support the submissions contained in the letter.

13    On 9 June 2018, the applicant sent a further letter to the Department enclosing further submissions. That letter also attached material intended to support the submissions which had been made.

14    On 2 October 2018, the Department made a decision to cancel the approval, as indicated above. Attached to the letter was a document entitled “Reasons for Imposing Sanction of Cancellation”.

The present application

15    The applicant commenced these proceedings urgently on 11 October 2018, having served a draft originating application and draft affidavits on 10 October 2018.

16    As indicated, the applicant relied upon s 15(1)(a) of the ADJR Act in support of its claim for interlocutory relief. Section 15(1)(a) provides:

The making of an application to the Federal Court under section 5 in relation to a decision does not affect the operation of the decision or prevent the taking of action to implement the decision but:

(a)     the Court or a Judge may, by order, on such conditions (if any) as it or he or she thinks fit, suspend the operation of the decision; …

17    An alternative source of power would be s 23 of the Federal Court Act 1976 (Cth).

18    It has been recognised that there are two potential formulations of the test to apply under s 15(1)(a), these having been discussed by Besanko J in Nyangatjatjara Aboriginal Corporation v Registrar of Aboriginal Corporations (No 2) [2006] FCA 675 at [33]-[38]. His Honour there said:

34.    One formulation of the proper test is to apply the test applied on an application for an interlocutory injunction, namely, whether there is a serious question to be tried and, if so, where does the balance of convenience lie.

35.    The other formulation of the test is that an order may be made under s 15(1)[(a)] of the ADJR Act if the applicant satisfies the Court that it is just in all the circumstances to make such an order. …

19    There may be circumstances where, although the test for granting an interlocutory injunction is satisfied, that is insufficient to warrant an order under s 15(1)(a) for reasons particular to the operation of the ADJR Act and the particular legislative regime on which it is operating: Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 129 per French J.

20    The parties before me proceeded, however, on the basis that it was appropriate to approach consideration of whether interlocutory relief should be granted on the basis of the test applied on an application for an interlocutory injunction. On that formulation of the test there are two main enquiries:

(1)    The first is whether the applicant has a prima facie case in the sense of a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. This does not mean that the applicants must establish that they are more probable than not to succeed at trial – see: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65].

(2)    The second is whether the balance of convenience or injury to the applicant outweighs the injury to the respondent if the injunction were granted: See O’Neill at [65].

21    These two enquiries are related in the sense that a strong prima facie case may lead a court more readily to grant an injunction where the balance of convenience is even, but a more doubtful claim which, nevertheless, raises a serious question may still attract interlocutory relief if there is a marked balance of convenience in favour of the applicant for interlocutory relief: Bullock v The Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 at 467, 469 and 472.

Serious question to be tried

22    The Act, by s 199A, requires a certain procedure to be followed before cancellation of a provider’s approval under s 195H(1). Section 199A provides:

(1)    Before doing a thing mentioned in subsection 195H(1) or section 197D or 197E, the Secretary must give a notice to the provider concerned that:

(a)     states that the Secretary is considering doing the thing; and

(b)    sets out the grounds for doing the thing; and

(c)    summarises the evidence and other material on which those grounds are based; and

(d)    summarises the effect of doing of the thing on eligibility for CCS or ACCS in respect of a session of care provided by an approved child care service of the provider; and

(e)    summarises the provider’s rights under this Act to seek a review of the decision to do the thing; and

(f)    invites the provider to make written submissions to the Secretary, within 28 days, stating why the thing should not be done.

(2)    The Secretary must have regard to any submissions made by the provider in accordance with an invitation under paragraph (1)(f) in deciding whether to do the thing.

23    As can be seen, subs (2) requires the Secretary to have regard to any submissions made by the provider in accordance with an invitation under subs (1)(f) in deciding whether to cancel the provider’s approval. The argument which the applicant wishes to advance, in summary form, is that: (a) the reasons for the cancellation decision disclose that certain evidence was not taken into account; (b) that evidence was a “submission” (or part of it) within the meaning of subs (1)(f); (c) subs (2) has the effect that the applicant’s evidence was a mandatory consideration; and (d) the failure by the Secretary to have regard to it constituted error within the meaning of s 5(1)(e) of the ADJR Act, read with s 5(2)(b). Those provisions provide:

(1)      A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Circuit Court for an order of review in respect of the decision on any one or more of the following grounds: …

(e)      that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made; …

(2)      The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:

(b)      failing to take a relevant consideration into account in the exercise of a power; …

24    The first ground of review can be summarised in the following way. By the first notice sent to the applicant on 26 April 2018, the Department stated that certain educators engaged by the applicant cared for more than seven children at one time, in breach of the applicant’s obligations under the “family assistance law”. The Department invited the applicant to make submissions in that respect. The applicant made submissions to the effect that educators had not cared for more than seven children at one time and submitted timesheets, which the applicant contends established the submission.

25    At paragraph [19] of the cancellation decision, the delegate set out the applicant’s submissions, the first of which was: “that no educator physically cared for more than seven children at any one time and the over ratio is as a result of processing errors”. At paragraph [20], the delegate stated: “[T]he provider has failed to submit any specific evidence to support its submission”. As indicated earlier, the submission was supported by business records.

26    In my view, it is at least arguable in the sense required by the authorities for the purposes of interlocutory relief that the decision-maker failed to take into account a mandatory consideration. In the circumstances of this case where, as I will come to, the balance of convenience strongly favours the applicant, it is not necessary to embark upon a detailed consideration of the strength of the applicant’s case. It is sufficient for present purposes simply to say that the case is arguable.

27    The second ground of review relates to the view formed by the Department that two named educators provided services to more than seven children at the same address in breach of the relevant rules. At paragraph [25] of the reasons, the delegate stated that the applicant had submitted no evidence to support its claim that the two educators “did not provide care on the same day at the same venue or residence at any time”. It appears from paragraph [23] that the delegate did consider certain data and evidence, and it might be a matter for debate at a future occasion as to whether there was no evidence to support the claim or whether the reference to no evidence is to be understood in a different way. Whilst I do not form the view that the claim is a strong one (recognising that I have considered it only briefly), for the purposes of this application I do not conclude that it is unarguable.

28    It is not necessary to review each of the grounds of review for the purposes of this interlocutory application. It is enough to say that the first two grounds are sufficient, in my view, to satisfy the first limb of the test, namely that there is a prima facie case in the sense of a sufficient likelihood of success to justify the preservation of the status quo. In saying that, I do not intend to say that it is more probable than not that the applicant would succeed.

Balance of convenience

29    The applicant points to three matters in particular on the issue of balance of convenience. First, the applicant submits that it is likely to experience a loss of business and that the damage so caused might be unable to be easily repaired. Secondly, the applicant states that it would suffer significant financial hardship. And, thirdly, the applicant points to the significant effect the cancellation would have on third parties, including a disruption to existing child care arrangements for children, the loss of livelihood for educators, and significant or potential difficulties for parents in locating alternative care in a proximate location to where the care is currently provided. It is not known whether alternative care could conveniently be found at an equivalent price.

30    The respondent did not accept that the balance of convenience favoured the applicant. The respondent did not accept that the cancellation would adversely affect the applicant’s business. I reject that submission. In my view, a cancellation of the approval is most likely to have a serious effect on the applicant’s business.

31    The respondent also submitted that overpayments in the amount of roughly $13,000 were made to the applicant, which the applicant had failed to repay. The applicant disputed that the payments received were overpayments, and also pointed to the fact that the applicant has received approximately $2.5 million in child care subsidies over the period 1 July 2017 to 20 April 2018, and that the dispute over the amount of $13,000 amount should be seen in that context. The applicant also provided evidence that its practice was to repay amounts to the respondent where errors were identified.

32    The respondent also submitted that visits to educators’ homes were not provided on a sufficient basis. The evidence of the applicant on this application was that visits were conducted to educators’ homes on a monthly basis. The respondent was unable to identify why or if that practice was in breach of the required rules.

33    The balance of convenience favours the applicant who, by its counsel, gave the usual undertaking as to damages.

Conclusion

34    The seeking of internal review under s 109A of the Act does not operate as a stay of the cancellation decision made under s 195H(1)(b), nor does a subsequent application for review made to the AAT. Whilst the applicant seeks an order that the cancellation decision be stayed until determination of the applicant’s review under the ADJR Act, in my view, the appropriate order to make should recognise that internal review has been sought and that the questions of balance of convenience and prospect of success may shift.

35    In my view, the appropriate order to make is a stay of the cancellation decision for a period which recognises the fact that internal review is being sought.

36    It is worth observing that it is in the applicant’s interests to provide any further information sought by the Department in the context of internal review expeditiously. The length of time for which a stay is sought is obviously relevant to whether a further stay should be granted or the present stay extended.

37    I was informed that the Department has requested submissions from the applicant in respect of the internal review by 19 October 2018. I was told by the solicitor appearing for the respondent that the usual timeframe for internal review to be completed was four to six weeks, although it was possible that expedition could be sought in particular cases, and, as I understood it, expedition would be sought in this case. I was told that often a majority of that period of four to six weeks was taken up, effectively, in waiting for material to be provided by the person seeking internal review.

38    In light of that information, and on the basis of the undertaking as to damages given by the applicant through its counsel, it is appropriate that the decision of the delegate of the respondent taken on 2 October 2018 to cancel the applicant’s provider approval be stayed until 10.15 am on 22 November 2018.

Associate:

Dated:    17 October 2018