FEDERAL COURT OF AUSTRALIA

Malek Fahd Islamic School Limited v Minister for Education and Training [2017] FCA 757

ORDERS

THE COURT ORDERS THAT:

1.    Time be extended for the applicant to file and serve by 5:00 pm on 7 July 2017 the originating application dated 29 June 2017.

2.    Noting the undertaking to the Court set out below, and on the condition that the applicant prosecute the proceedings with all deliberate speed, pending further order of the Court the respondent:

(a)    restore financial assistance to the applicant pursuant to the Australian Education Act 2013 (Cth) (the Act) dating back to April 2017; and

(b)    refrain from delaying future payments of financial assistance to the applicant pursuant to the Act,

by reference to the table which is set out in [70] of the reasons for judgment in this matter.

3.    The parties have liberty to apply on the giving of 48 hours’ notice.

4.    The matter be listed for a case management hearing before Griffiths J on Tuesday, 1 August 2017 at 9:30 am.

5.    The costs of the interlocutory application be costs in the cause.

applicant’s undertaking to the court

1.    Payments of financial assistance made by the respondent in respect of the applicant are to be deposited into a separate bank account with the words “funds from Commonwealth Minister for Education and Training” included in the name of the account.

2.    Any monies expended from that account must be clearly identified and the purpose of the expenditure noted in a separate set of accounts.

3.    Supporting documents for each of the transactions from that account must be maintained.

4.    No funds from that account are to be expended on:

(a)    legal fees, for whatever purpose;

(b)    attributed or paid in respect of any lease or loan arrangements; or

(c)    matters otherwise contrary to the requirements of the Australian Education Act 2013.

5.    At all times the balance of the account is to be held on trust for the Minister for Education and Training.

6.    Reports on expenditure from the bank account are to be provided to the respondent by the end of the first full week of each month.

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

REASONS FOR JUDGMENT

GRIFFITHS J:

1    This is an important case. It affects the schooling of approximately 2,400 students, who currently attend a school which is operated by Malek Fahd Islamic School Limited (MFISL), and approximately 250 teaching and other staff employed at that school, which is spread over three campuses in Sydney (the school). The case also raises important issues concerning the payment of financial assistance under the Australian Education Act 2013 (Cth) (the Act).

2    At the heart of the matter is a decision made by the Minister’s delegate on 6 April 2017, purportedly made under s 110(1)(c) of the Act, to delay payments to the State of NSW in respect of the school on the basis that the school “does not comply, is not complying or has not complied with sections 75 and 78 of the Act (basic and ongoing funding requirements for approval)”.

3    The applicant challenges the validity of that decision by way of an originating application dated 29 June 2017. It will be necessary to say something more about that application shortly. I am not asked to determine that application on a final basis now. Rather, at this stage, I am asked to determine whether time should be extended to enable the applicant to file the originating application and to determine the applicant’s claim for interlocutory relief that the respondent refrain from delaying payment of financial assistance to it pursuant to the Act.

4    The matter has considerable urgency about it. For reasons which will be developed, unless Commonwealth funding which is provided to the State and then passed through to the school is restored, the applicant will shortly go into administration. The school will also close, with obvious serious practical ramifications for inter alia the students and staff at the school not the least because term 3 starts on 18 July 2017.

5    The matter came before me on Friday, 30 June 2017. The respondent had just been provided with a copy of the unfiled originating application and affidavit in support affirmed by Dr John Bennett on 29 June 2017. Dr Bennett is the current Chair of the Board of the applicant. I made directions at that time for the interlocutory hearing to proceed at 10:15 am on 4 July 2017.

6    When the matter resumed on 4 July 2017, the respondent was represented by Ms Davidson of counsel. The Minister relied on an affidavit by his instructing solicitor, Mr Alexander Holcombe, sworn 3 July 2017. Ms Davidson provided an outline of written submissions before the interlocutory hearing commenced. Mr Coleman SC also provided written submissions in support of the applicant’s case.

7    For the reasons which follow, the applicant should be granted an extension of time to file and rely upon the originating application. I also consider that the applicant is entitled to the interlocutory relief it seeks.

8    These reasons for judgment reflect the urgency surrounding the matter and the need for both parties (not to mention other interested parties) to know as soon as possible the outcome of the interlocutory application. The reasons are not as comprehensive as they might otherwise have been if more time was available.

9    It is convenient first to summarise the relevant statutory provisions and then provide a broad outline of the background facts before turning to the two interlocutory matters.

Summary of relevant provisions in the Act

10    The long title of the Act gives some indication of its contents:

An Act in relation to school education and reforms relating to school education, and for related purposes.

11    The objectives of the legislation are amplified in the lengthy Preamble, which should be read in full:

Preamble

The Parliament of Australia acknowledges the following matters.

All students in all schools are entitled to an excellent education, allowing each student to reach his or her full potential so that he or she can succeed, achieve his or her aspirations, and contribute fully to his or her community, now and in the future.

The quality of a student’s education should not be limited by where the student lives, the income of his or her family, the school he or she attends, or his or her personal circumstances.

The quality of education should not be limited by a school’s location, particularly those schools in regional Australia.

It is essential that the Australian schooling system be of a high quality and be highly equitable in order for young Australians to become successful learners, confident and creative individuals, and active and informed citizens. A high quality and highly equitable Australian schooling system will also create a highly skilled, successful and inclusive workforce, strengthen the economy, and increase productivity, leading to greater prosperity for all.

If Australia is to be a prosperous nation with a high standard of living in the 21st century, the performance of Australia’s schools, and school students, must continuously improve, particularly as school performance in countries around the world and in Australia’s region is also improving.

It is also essential that Australian schooling provide school students with opportunities to engage with Australia’s region. Through this engagement, Australia can maximise economic, cultural and social opportunities during the Asian century.

To address these matters, future arrangements will be based on the needs of Australian schools and school students, and on evidence of how to provide an excellent education for school students. These arrangements will build on the Melbourne Declaration on Educational Goals for Young Australians (2008), which reaffirmed the importance of national collaboration and promoting high quality schooling for all Australian students, and successful reforms to date.

Schools will also need to adopt the opportunities offered by digital education and new evidence-based methods of teaching and learning.

Strong partnerships across the broader community are necessary to support all school students, including partnerships between teachers, parents, carers and families, not-for-profit and community organisations, and employers.

As Australia’s schools are diverse, the Australian Government will recognise the role of the Governments of the States and Territories, non-government education authorities, parents, carers and families, not-for-profit and community organisations, other partners and schools in delivering school education, and work with them to support and lift the performance of schools and school students.

12    The express objects of the Act are also important. They are set out in s 3, which relevantly provides (emphasis added):

3    Objects of this Act

(1)    The objects of this Act are the following:

(a)    to ensure that the Australian schooling system provides a high quality and highly equitable education for all students by having regard to the following national targets:

(i)    for Australia to be placed, by 2025, in the top 5 highest performing countries based on the performance of school students in reading, mathematics and science;

(ii)    for the Australian schooling system to be considered a high quality and highly equitable schooling system by international standards by 2025;

(iii)    lift the Year 12 (or equivalent) or Certificate II attainment rate to 90% by 2015;

(iv)    lift the Year 12 (or equivalent) or Certificate III attainment rate to 90% by 2020;

(v)    at least halve the gap between Aboriginal and Torres Strait Islander students, and other students, in Year 12 or equivalent attainment rates by 2020 from the baseline in 2006;

(vi)    halve the gap between Aboriginal and Torres Strait Islander students, and other students, in reading, writing and numeracy by 2018 from the baseline in 2008;

(b)    to acknowledge the matters referred to in the Preamble;

(c)    to provide a needs‑based funding model for schools applied consistently across all schools which includes:

(i)    a base amount of funding for every student; and

(ii)    additional loadings for students and schools who need extra support;

(d)    to implement the National Plan for School Improvement.

(2)    The Commonwealth will work with the governments of the States and Territories, and non‑government education authorities, to implement the National Plan for School Improvement set out in the National Education Reform Agreement to meet the objects of this Act by addressing the reform directions set out in subsections (3) to (8).

Note:    The governments of the States and Territories, and non‑government education authorities, that agree to implement the National Plan for School Improvement set out in the National Education Reform Agreement will be provided with financial assistance in accordance with Part 3.

…

Quality learning

(4)    Australian schooling will provide a high quality educational experience with an environment and curriculum that supports all school students to reach their full potential.

…

Meeting student need

(8)    Australian schooling will place the highest priority on:

(a)    identifying and addressing the needs of school students, including barriers to learning and wellbeing; and

(b)    providing additional support to school students who require it.

Note:    These reform directions are given effect to by this Act and relevant arrangements.

13    Section 4 contains a helpful guide to the Act. It is stated there that the Act provides Commonwealth financial assistance for schools by way of financial assistance to the States under s 96 of the Constitution and to Territories under s 122 of the Constitution. The financial assistance which the Commonwealth provides is then passed on to the approved authority for the relevant school. An approved authority for a school is a person approved under s 73.

14    The amount of recurrent funding that a school attracts for a year depends on whether the school is a participating or a non-participating school. Financial assistance for participating schools is worked out using a formula in Div 2 of Pt 3 and consists of a base amount for all schools, plus loadings for schools with students with greater needs.

15    The Minister has a discretion to determine in writing an amount or amounts of payments of financial assistance to a State or Territory that appear to the Minister are, or will, become payable under Div 5 of Pt 3 of the Act and may also determine when such payments are payable.

16    The basic requirements for the Minister to approve a person as an approved authority for one or more schools are set out in s 75. They include a requirement that the person is financially viable (s 75(4)).

17    Ongoing funding requirements for an approved authority for a school are set out in s 78, which provides:

78    Ongoing funding requirements for approved authorities

(1)    This section sets out the ongoing funding requirements for an approved authority for a school for the purposes of subparagraph 73(1)(b)(ii) and paragraph 81(1)(a).

(2)    The ongoing funding requirements for all approved authorities are the following:

(a)    the approved authority deals, in accordance with the regulations, with financial assistance that is payable under Division 2 or 5 of Part 3 (recurrent funding for participating schools), Part 4 (recurrent funding for non‑participating schools), or Division 2 or 3 of Part 5 (capital and special circumstances funding) to the authority;

(b)    the approved authority complies with requirements prescribed by the regulations in relation to monitoring the authority’s compliance with this Act, and with any implementation plan required by Part 7.

(3)    The ongoing funding requirements for an approved authority for more than one participating school are also:

(a)    to distribute all financial assistance received in accordance with Division 2 or 5 of Part 3, or from a State or Territory, in accordance with a needs‑based funding arrangement that complies with any requirements prescribed by the regulations; and

(b)    to comply with Part 7 (implementation plans).

18    The Minister is empowered under s 81(1)(a) to vary or revoke an approved authority’s approval on the Minister’s own initiative if the Minister is satisfied that the approved authority does not comply, is not complying, or has not complied, with ss 75, 77 or 78.

19    Part 8 of the Act confers additional powers on the Minister where there is non-compliance with the Act. Relevantly, ss 108(b) and 110(1), which are important provisions in this proceeding, provide (emphasis added in text):

108    Application of Division for non compliance

This Division applies to a State or Territory if any of the following applies:

…

(b)    an approved authority for one or more schools located in the State or Territory does not comply, is not complying or has not complied with section 75, 77 or 78 (basic and ongoing requirements for approval);

…

110    Actions the Minister may take

(1)    The Minister may take any one or more of the following actions in relation to a State or Territory to which this Division applies:…

(c)    delay making any further payment (or a part of a further payment) to the State or Territory under this Act for a year until:

(i)    if this Division applies because of section 108 - the non-compliance, breach or failure is rectified;

…

Summary of background facts

20    The school has a current enrolment of 2,342 students, 153 of whom are enrolled in years 11 and 12. There are 231 teachers and other staff at the school.

21    In recent years, the school has had a troubled history. It is unnecessary at this interlocutory stage to go into great detail, but that history is set out in a decision of the Administrative Appeals Tribunal dated 23 December 2016 (Malek Fahd Islamic School Limited v Minister for Education and Training [2016] AATA 1087 (AAT decision)) and in a judgment by Rares J in Malek Fahd Islamic School Limited v Minister for Education and Training [2016] FCA 807 (Rares J’s decision).

22    The AAT decision involved a review of a decision dated 8 February 2016, made by the Minister’s delegate, to revoke the approval of MFISL under s 81(1) of the Act on the basis that MFISL did not satisfy the requirements in ss 75 and 78 of the Act. In brief, those requirements relate to ensuring that an approved authority conducts the school on a not-for-profit basis, deals with financial assistance it receives in accordance with the law, and is a “fit and proper person”. The AAT noted that MFISL acknowledged that there were problems with its governance and accountability arrangements in the past but that it claimed that those issues had been addressed. The AAT noted at [5] that the Minister acknowledged that “substantial improvements have been made at MFISL”, but that they had not gone far enough or were not as effective as claimed. The AAT found at [6]:

The evidence suggests MFISL is a good school which provides quality education. It appears to enjoy support in the community. It has the loyalty of its students and staff. But the reviewable decision is not directly concerned with the quality of the education provided by the school. The requirements in ss 75 and 78 of the Act are concerned with accountability. The Act implicitly assumes that even a good school will not remain good for very long if the financial assistance provided by the Commonwealth is not managed by the approved authority as intended. MFISL is accepting public monies, and those monies must be managed and applied in accordance with the Act.

23    The school receives tuition income from parents. However, the Commonwealth is the largest source of funding to the school. The AAT noted at [10] of its reasons for decision that the school had received more than $76m in financial assistance from the Commonwealth in the period 2012 to 2015 and that it was estimated that it would receive around $19m in funding in 2016 if the relevant payments were made.

24    The AAT was not satisfied that MFISL was able to satisfy the relevant requirements of the Act, or that it would be able to do so within the foreseeable future. Accordingly, the delegate’s decision was affirmed.

25    It is important to note that the delegate’s decision under review in the AAT was stayed. Thus the school remains an “approved authority” which is able to receive (indirectly) Commonwealth funding. That stay remains in force, notwithstanding that MFISL subsequently appealed to the Full Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). The Full Court heard that appeal on 17 May 2017. The Court’s decision is reserved and there is no indication as to when the judgment will be published.

26    It is convenient to now say something more about Rares J’s decision, which predates the AAT’s decision. One of the issues before Rares J was whether the stay of revocation of the school’s approval under s 81(1), which was made shortly after the AAT proceedings were commenced, prohibited the Minister from making further decisions under s 110(1) of the Act to delay payments. In his Honour’s reasons for judgment, Rares J noted at [18] that the evidence before him indicated that “the school’s circumstances have changed significantly since the delegate’s original decision of 8 February 2016”. Those changes involved the installation of a new board and that the school “was undertaking steps to regularise its governance and financial position, but that not all that the current board wished to do in that regard had been, or could yet be, accomplished” (at [19]). His Honour found that, on a proper construction of the Act, the Minister could only act to delay a payment under s 110(1)(c)(i) where the state of affairs that that provision specifies exists as a matter of fact. Because no formal decision had been made by the Minister to delay making any further payment in respect of the school, his Honour found that the Minister was bound to make a payment to New South Wales (and indirectly to the school) under s 25(1)(b). A declaratory order was made to that effect. The school also gave an undertaking through its senior counsel, which is noted in order 4 of Rares J’s decision:

4.    Upon the applicant, by its senior counsel, undertaking to the Court that:

(a)    it will not pay any money received pursuant to order 4, below, or any other money it receives, to the Australian Federation of Islamic Council or the entity known as AFIC (collectively AFIC) unless the Court so orders;

(b)    unless the Court orders otherwise, it will commence proceedings expeditiously to recover from AFIC the sum of $4.7 million or such other sum as and if it is advised there are reasonable grounds for believing would be recoverable in such an action;

on or before 24 June 2016, unless the Court otherwise orders, the first respondent do all things necessary for the Commonwealth to pay the State of New South Wales as soon as possible thereafter, the amount of the second payment due to the applicant under the determination.

27    That undertaking remains in force.

28    By way of further background, some mention should also be made of proceedings which are currently pending in the Supreme Court of NSW which have been brought by MFISL against the Australian Federation of Islamic Councils (AFIC). In those proceedings, MFISL seeks to recover monies from AFIC, the payment of which, it says, has given rise to its past failures to comply with relevant provisions of the Act. I was told from the Bar table that those proceedings had been expedited and might be heard in September 2017.

29    Against that broad background, it is desirable to now focus upon recent events which give rise to these proceedings.

30    It is not surprising that, given the problems confronting the school, there has been frequent contact with the Minister’s department by the new board of the school with a view to overcoming the concerns which have given rise to adverse decisions being made under the Act. As will shortly emerge, one of those adverse decisions is at the forefront of these proceedings, namely the decision dated 6 April 2017 by the Minister’s delegate to delay payment to NSW in respect of the school. Before analysing that decision in more detail, it is appropriate to note that, notwithstanding the ongoing difficulties encountered by the school, on 4 April 2017, the school was advised by the Minister’s delegate that she had decided to approve a payment of approximately $3.28m to be made to NSW in respect of the school for the months of February and March 2017. The 4 April 2017 letter also stated that the payment “should not be understood as involving any concession or acceptance of MFISL’s compliance with the Act, or that further payments to NSW for MFISL will necessarily be made” and that a decision to delay funding under s 110 remained open for future funding decisions. That letter was sent only two days before the delegate decided on 6 April 2017 to delay future payments.

The 6 April 2017 decision

31    As noted above, the school was informed by the letter dated 6 April 2017 that payments affecting it had been delayed because the delegate decided that the school “does not comply, is not complying or has not complied with” ss 75 and 78 of the Act. The school was informed that the decision took effect immediately and that all payments of financial assistance, effective from April, in respect of MFISL, were delayed until the school rectified the non-compliance issues which were said to be identified in the letter.

32    The delegate noted that the school had been put on notice on 11 January 2017 that she proposed to make a decision under s 110 on the basis of the non-compliance outlined in that letter and that the school was provided with an opportunity to comment on that proposed decision.

33    The delegate explained in her letter, which should be regarded as a statement of reasons, that she had taken into account a range of material in making her decision. This included information provided in response to what she described as the 11 January 2017 “show cause notice”. That information included, relevantly, a letter dated 3 February 2017 from the Chair of MFISL. I will return below to discuss the significance of that letter.

34    The delegate’s statement of reasons set out why the delegate had reached the views that she had concerning the school’s non-compliance with ss 75 and 78. In [16] of her statement of reasons, the delegate referred to her review of information provided in response to the “show cause notice” (which presumably included the 3 February 2017 letter). The delegate considered that MFISL “has been, and is, non-compliant with the Act, particularly with regard to subsection 75(3) (not-for-profit) and section 78 (dealing with financial assistance appropriately and keeping adequate records)”. The delegate elaborated upon this finding by reference to the information upon which it was said to be based.

35    The delegate then summarised in [17] of her statement of reasons why she had decided to delay the payments. Those reasons were:

(a)    The Tribunal’s decision affirmed the decision of the Minister that MFISL has not and is not complying with the requirements of the Act.

(b)    The conduct of MFISL identified by the Tribunal as contrary to its statutory obligations under the Act is continuing.

(c)    Financial assistance payable to MFISL has been and will be applied to ‘for profit’ arrangements and not expended on school education.

(d)    If MFISL is not successful in its appeal of the Tribunal’s decision to the Federal Court, MFISL would not be eligible for any financial assistance for the 2017 year under the terms of the Tribunal’s decision.

(d)    If financial assistance is paid in the 2017 year in respect of MFISL and an appeal is unsuccessful, the Commonwealth is likely to have difficulty recovering those payments of financial assistance as those funds will have been expended in the course of running MFISL (including applying funds for existing lease arrangements with AFIC) and MFISL does not have the asset base to satisfy any subsequent debt.

36    It is necessary to now say something briefly about the events which occurred after the school was informed of the delegate’s decision. Copies of extensive correspondence which then passed between the parties or their respective solicitors are in evidence. Having regard to the interlocutory nature of the current application and the urgency of the matter, I will focus on what seem to be the most relevant matters.

37    By letter dated 13 April 2017, MFISL’s solicitors wrote to the delegate and asked her to revoke her decision dated 6 April 2017. The letter stated that, unless she did, there was no alternative but to approach the Court for judicial review on grounds which were briefly set out in that letter. The delegate was also informed that MFISL had filed an amended statement of claim in the Supreme Court of New South Wales challenging the validity of the rental term of MFISL’s lease over the property at one of its three campuses.

38    There was an exchange of correspondence between solicitors concerning the alleged strength or weakness of the proposed grounds of review. In a letter dated 24 April 2017, MFISL’s solicitors said that their client was “not anxious” to make an application to the Federal Court and that it would not do so if the Department was prepared to continue monthly funding of the school, on the same terms as had applied since 21 June 2016, until the determination of the appeal to the Full Court, which was scheduled to be heard on 17 May 2017. This proposal was rejected.

39    By letter dated 12 May 2017, MFISL’s solicitors wrote to the Minister’s solicitors and said that, in view of the Full Court hearing the following week “and to avoid the cost of proceedings which may prove to be unnecessary”, MFISL would refrain from commencing proceedings challenging the 6 April 2017 decision until after the Full Court hearing.

40    Meanwhile, the Chair of the new board, Dr John Bennett, wrote directly to the delegate in respect of her decision. One such letter is dated 14 June 2017. In it Dr Bennett said that unless funding was soon released the school would be unable to reopen for term 3 (i.e. commencing 18 July 2017). He explained that, by the end of June, the school will have exhausted its cash reserve, except for the residual necessary to meet employee leave entitlements. He then described at some length the effects which closure of the school would have, not only on the students enrolled at the school, but for teachers and other staff who will be forced to seek new positions at a time when school hiring decisions have long been made. He drew attention to the concern of parents at the prospect of the school closing. He said that the board recognised that the school’s future depends on restoring an amicable relationship with the Commonwealth and that the board was prepared “to do whatever is necessary towards that objective”. Dr Bennett attached to his letter detailed material which described the steps which he said had been taken with a view to addressing the Department’s concerns of non-compliance.

41    The delegate responded by a letter dated 20 June 2017 and stated that she considered that “there has been minimal progress towards compliance” since the 6 April 2017 decision and that there was no basis for the delayed decision to be revoked.

42    Arrangements were made for representatives of the school to meet with Departmental representatives to discuss the matters but apparently the meeting did not proceed. Further information was provided by Dr Bennett and Mr Ben Marsh, business manager of MFISL, under cover of emails dated 23 and 27 June 2017 in support of MFISL’s claim that it had rectified the non-compliance issues.

43    By a letter dated 28 June 2017, the delegate wrote to Dr Bennett and said that she needed more time to give such information due and proper consideration and that she would not be in a position to finalise the matter before 4 pm on that day. That is the time stipulated in a letter dated 23 June 2017 from MFISL’s solicitors for the Commonwealth to continue funding or proceedings would be commenced challenging the 6 April 2017 decision.

The Federal Court judicial review proceeding

44    The following grounds of judicial review in respect of the 6 April 2017 decision are set out in the originating application (which relies upon the jurisdiction conferred on the Court by the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act)):

(a)    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, in that a relevant consideration was not taken into account in the exercise of the power;

(b)    the discretionary power was exercised in accordance with a rule or policy without regard to the merits of the particular case;

(c)    the exercise of the power was so unreasonable that no ordinary person could so have exercised the power; or

(d)    the exercise of power otherwise constituted an abuse of the power.

45    The applicant needs an extension of time to file the originating application because more than 28 days have lapsed since it was notified of the delegate’s decision. It requires time to be extended for the Court to hear and determine its claim for interlocutory relief.

(a) Should time be extended?

46    The principles guiding the Court’s discretion to extend time are relatively well settled. As the Minister pointed out, the leading case in respect of the Court’s discretion to extend time under s 11 of ADJR Act is Wilcox J’s decision in Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 186; 3 FCR 344 at 348-349. Relevant matters include whether the applicant has provided an acceptable explanation for the delay; steps taken by the applicant other than pursuing judicial review proceedings; any prejudice to the respondent or others affected by the decision and the merits of the substantive application.

47    The Minister contended that no adequate explanation had been provided for the delay. I do not agree. Dr Bennett adequately explained that there were two reasons why the delay occurred:

(a)    it was hoped that the Full Court may have delivered its reasons for judgment in the appeal from the AAT decision by 30 June 2017; and

(b)    MFISL was able, having received approximately $3.28m of Commonwealth financial assistance for February and March 2017, to continue operating until 30 June 2017, which was the last day of term 2 of the school year.

48    Given the school’s dire financial status after Commonwealth funding was withheld, it is understandable that the board was reluctant to bring judicial review proceedings which might prove to be futile. This would be the case if the Full Court rejected its appeal concerning its status as an “approved authority”. Moreover, MFISL was involved not only in those proceedings, but also in proceedings in the Supreme Court against AFIC, as outlined above.

49    I also consider that it was reasonable and responsible for MFISL to defer commencing judicial review proceedings while it focused on providing the delegate with additional information which it hoped would persuade her to revoke her 6 April 2017 decision. I am satisfied with Dr Bennett’s explanation, which is to the effect that MFISL refrained from commencing proceedings until it had no practical alternative than to do so having regard to its failure by 28 June 2017 to have the delegate revoke her decision and the financial crisis which confronted the school at that point.

50    I do not accept the Minister’s submission that the delay has caused relevant prejudice. It was submitted that public funds were at risk of being passed to AFIC as a result of a “for-profit” arrangement with that entity and not for the purposes of the school. The Minister submitted that MFISL had a current contractual obligation to pay non-commercial rent to AFIC. I reject that submission. It is inconsistent with the undertaking which MFISL gave to the Court in the proceedings before Rares J, an undertaking which continues (the terms of the undertaking are set out in [26] above). Moreover, as Mr Coleman SC pointed out, the balance sheet for the school as at May 2017 showed that the school had total assets in excess of $42m and total liabilities of almost $12m, which nevertheless left it with net assets of approximately $30m. As he explained, the school was “asset rich but cash poor”. I acknowledge the point made by the Minister that many of the assets are buildings and other physical structures on land owned by AFIC and that this may affect their realisable value. Nevertheless, on the available evidence, it would appear that there are extensive assets to address amounts which the Commonwealth might seek to recover in the future. I also take into account the terms of the undertakings which MFISL proffers in the context of this proceeding (see [68] below), which would operate alongside the undertakings given to the Court in Rares J decision.

51    That brings me then to the issue of the merits of the substantive judicial review application, an issue which also needs to be addressed in respect of the claim for interlocutory relief. To avoid duplication, I will now address that matter. As will emerge, I consider that the proposed judicial review application is not lacking in merit and that at least one of the proposed grounds of judicial review is reasonably arguable.

(b) Should interlocutory relief be granted?

52    Again, perhaps not unsurprisingly, the parties were in substantial agreement concerning the relevant principles to be applied in considering whether or not interlocutory relief should be granted. It was in the application of those principles to the facts and circumstances here that the parties disagreed.

53    In broad terms, the relevant issues are whether the originating application raises a serious issue to be tried and where lies the balance of convenience. Discretionary considerations may also arise.

54    Section 15(1) of the ADJR Act is relied upon by the applicant in support of its claim for interlocutory relief (it should be noted that an alternative source of power is to be found in s 23 of the Federal Court of Australia Act 1976 (Cth)). There has been some discussion in the cases as to the appropriate test to apply under s 15(1) of the ADJR Act. The different formulations are discussed by Besanko J in Nyangatjatjara Aboriginal Corporation v Registrar of Aboriginal Corporations (No 2) [2006] FCA 675 at [33]-[38]. As his Honour noted at [38], in many cases the application of the test for an interlocutory injunction is the proper test to be applied on an application under s 15(1). I did not understand the parties to contend otherwise in this proceeding. Accordingly, in common with Besanko J, I will proceed to deal with the matter on that basis.

55    Turning to the question of whether there is a serious question to be tried, the proposed grounds of review as set out in the originating application are described in [44] above. They are unparticularised. In his written and oral submissions, Mr Coleman SC focused primarily on two of those grounds, namely those relating to a failure to take into account mandatory relevant considerations and unreasonableness.

56    On the first of those grounds, Mr Coleman SC identified eight matters which, he said, the applicant would contend were mandatory relevant considerations which were not taken into account by the delegate. They included that the facts and circumstances as known to the delegate on 4 April 2017 (when she advised MFISL that it would receive payments of funding for February and March 2017), did not change between that date and 6 April 2017, when she decided to stop further payments.

57    Mr Coleman identified the following additional matters which, he contended, were mandatory relevant considerations not taken into account by the delegate:

    the delegate’s knowledge on 6 April 2017 that the Full Court would hear MFISL’s appeal on 17 May 2017;

    the delegate knew then that the applicant would not be able to re-open its doors to students on 18 July 2017 if it did not receive public funding;

    the delegate also knew of the implications for students, parents, teachers and support staff of the applicant being unable to open its doors on 18 July 2017;

    in the circumstances, the delegate knew that the delay of public funding was likely to render nugatory the fruits of a successful appeal; and

    the delegate knew, or ought to have known, that without public funding the applicant would be placed into administration, thereby jeopardising the recovery of monies from AFIC in the proceedings in the Supreme Court of New South Wales and, thereby, jeopardising the Commonwealth’s prospects of recovering millions of dollars of public funds wrongly paid to AFIC.

58    The Court was told that all eight matters would also be relied upon by the applicant in support of its unreasonableness challenge.

59    It is well established by authorities such as Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24 at 40-41 that, in the absence of an express statement in legislation that a particular consideration must be taken into account by a decision-maker in exercising a discretionary power, the question whether or not a particular consideration is a mandatory relevant consideration falls to be determined by an analysis of the subject matter, scope and purpose of the statute. The relevant terms of s 110(1) are set out in [19] above. In Rares J’s decision, his Honour held that s 110(1)(c)(i) operates on “an existing state of affairs”, namely a non-compliance, breach or failure to comply with a requirement in ss 75, 77 or 78. His Honour concluded that the Minister was empowered to make a decision under s 110(1)(c)(i) only if the jurisdictional fact of non-compliance, breach or failure actually exists.

60    The applicant’s judicial review application here appears to be directed in part to the issue whether the relevant “state of affairs” as referred to by Rares J exists as a matter of law. It appears to be contended that the jurisdictional fact does not exist because of one or more of the grounds of review set out in the originating application. But there is another matter which is raised in these proceedings which did not arise in the proceedings before Rares J. It is directed to the proposition that, independently of the need for the jurisdictional fact validly to exist, on a proper construction of s 110(1), even if that jurisdictional fact does legally exist, the decision-maker has a residual discretion whether or not to exercise the power under that provision to delay making any further payment. It is contended that such a discretion is implicit in the use of the word “may” in the chapeau to s 110(1). That contention is plainly arguable and I did not understand Ms Davidson to contend to the contrary.

61    The next issue is whether there is a serious question to be tried as to whether one or more of the considerations described by Mr Coleman SC (see [56]-[57] above) are mandatory relevant considerations which were not taken into account by the delegate.

62    In my respectful view, that question should be answered affirmatively. It is sufficient at this interlocutory stage to identify a serious question in respect of only one of the list of considerations described by Mr Coleman SC. Thus it is appropriate to concentrate on the claim that, as at 6 April 2017, the delegate knew of the implications for students, parents, teachers and support staff of the school not being able to reopen (which would be the consequence of deferring further payments in respect of the school), but did not take that matter into account. The Minister contended that there was no serious question to be tried because “matters of disruption, or the continuity of provision of education, that is not – those are not matters with which the Act is concerned” (Transcript 51, lines 7-9). The Minister further contended that the scope of the Act is concerned with the provision of funding and that, notwithstanding the references in the Preamble and objects of the Act, the Act sought to address those matters by “a needs-based funding model”. Thus, while it was acknowledged that it was open to a decision-maker to take into account the kinds of matters described by Mr Coleman SC, there was no legal duty to do so because they are not mandatory relevant considerations, so submitted the Minister.

63    For the following reasons I consider that there is serious question to be tried in relation to this aspect of the originating application. First, having regard to the Preamble and express objects in s 3 of the Act, the applicant has at least a respectable argument that, in exercising the residual discretion whether to proceed under s 110(1) of the Act, the decision-maker is obliged to take into account the likely effects of such a decision on affected students and the quality of their education. The provision of Commonwealth funding under the Act is not provided in a vacuum. Rather, such funding is plainly directed to achieving the relevant objects of the legislation, including the matters identified in the Preamble which are acknowledged in the objects (s 3(1)(b)).

64    Secondly, material was placed before the delegate prior to her decision which highlighted the likely practical and serious adverse consequences for students at the school if payments were further delayed. Such material was included in the letter dated 3 February 2017 which was sent by the then Chair of MFISL to the delegate:

While the school has some cash reserves, if the regular payments are not maintained it is difficult to see how the school could continue to operate for very long. The board would be forced to take the very painful step of closing down a highly successful school that has now addressed all compliance and governance matters and as indicated above is in the process of resolving either through settlement or litigation the excessive rent being paid to AFIC. The school not only achieves excellent academic results, but importantly, it is a place where appropriate values and attitudes are successfully passed on.

The question of reducing the payments is a difficult one. At the present time the Commonwealth Government provides approximately $19 000 000 per annum to the school. That money is virtually all used to pay salaries and associated staff entitlements. If that money is reduced in the short term, again it is hard to see how the school could continue to survive and cater for the learning needs of the students. We once again confirm that none of the School’s own funds from fees are being paid to AFIC for any rent or services and that all rental payments have been suspended.

65    As previously noted, in her statement of reasons, the delegate made reference to this letter as forming part of the material which she had taken into account in making her decision. It appears, however, from the balance of those reasons that the letter was taken into account by the delegate in concluding that MFISL does not comply, is not complying or has not complied with ss 75 and 78. In other words, the information appears to have been taken into account in reaching the “state of affairs” which must exist as a jurisdictional fact for the purposes of s 110(1). There appears to be nothing in the delegate’s statement of reasons to indicate that the delegate appreciated that she had a residual discretion not to make a decision to delay further payments even if she was satisfied that the relevant state of affairs existed. It is also arguable that the delegate did not appreciate that she may have been under a legal obligation, in the exercise of her discretion, to consider the likely practical consequences of her decision for the nature and quality of the education of the students affected by her decision. Accordingly, notwithstanding the delegate’s statement that she had had regard to the 3 February 2017 letter, it is arguable that there is nothing in her statement of reasons to indicate that she had regard to this particular aspect of the letter, which highlighted the probable consequences of an adverse decision for the quality of the future education of the affected students. Arguably, the delegate focused exclusively on the compliance issues and did not have regard to a matter which she was required to take into account in considering the exercise of her discretion.

66    I must emphasise that it is unnecessary at this stage to express any final views on these matters. Upon a detailed examination of these matters, as would occur at the final hearing, the Minister’s submissions on this issue may well prevail. Based on the evidence and material before me at this interlocutory stage, however, I am satisfied that there is a serious question to be tried on this particular issue. It is unnecessary at this stage to analyse the other proposed grounds of review other than to say that what I have said above may have some relevance to other grounds, including unreasonableness in the legal sense and abuse of power (in the relevant legal sense of both those grounds of review).

67    Turning now to the issue of the balance of convenience, Ms Davidson frankly conceded that the balance of convenience weighs in favour of the applicant. That concession was properly made in circumstances where closure of the school, which is imminent if funding is not restored, is bound to have significant affect on the students (in particular the students at the school who will sit their important Higher School Certificate examinations in October), as well as their parents and guardians and the teaching and other staff at the school who will have to search elsewhere for employment.

68    As noted above, the board of MFISL has proffered undertakings to the Court in support of the interlocutory application, which undertakings would complement and not replace the undertakings which remain in force following Rares J’s decision. The proffered undertakings are in the following terms:

Scope of undertaking

1.    Payments of financial assistance made by the Respondent in respect of MFISL are to be deposited into a separate bank account with the words “funds from Commonwealth Minister for Education and Training” included in the name of the account.

2.    Any monies expended from that account must be clearly identified and the purpose of the expenditure noted in a separate set of accounts.

3.    Supporting documents for each of the transactions from that account must be maintained.

4.    No funds from that account are to be expended on:

(a)    legal fees, for whatever purpose;

(b)    attributed or paid in respect of any lease or loan arrangements; or

(c)    matters otherwise contrary to the requirements of the Australian Education Act 2013.

5.    At all times the balance of the account is to be held on trust for the Minister for Education and Training.

6.    Reports on expenditure from the bank account are to be provided to the Respondent by the end of the first full week of each month.

69    I consider that those undertakings are appropriate and should be accepted as a condition of the grant of interlocutory relief. Another condition of the grant should be that the applicant must prosecute its judicial review challenge with all deliberate speed.

70    In the event that the Court determined to grant interlocutory relief, the Minister also requested that the Court take into account that recurrent grant funding under the Act is made on a monthly basis. It is appropriate that that course be taken. The recurrent grant funding payments in respect of the school are set out in a table which is an annexure to the affidavit of Mr Holcombe. The table is based on a statement of enrolments dated February 2017. It is convenient to set out the table in its entirety.

71    I consider that it is appropriate that funding be restored, dating back to April 2017 and continue until further order of the Court, by reference to the table. I will grant the parties liberty to apply on the giving of 48 hours’ notice. Thus, for example, should the Full Court deliver judgment, the parties can have the matter brought back before the Court if necessary. The Court will also monitor the progress of the judicial review proceeding, the outcome of which may also affect the interlocutory relief.

Conclusion

72    For these reasons, time should be extended and the applicant granted leave to file and serve its originating application dated 29 June 2017. The application for interlocutory relief should be granted, on condition that the applicant progresses the proceeding with all deliberate speed and also noting the proffered undertakings. Orders will be made accordingly, together with incidental orders relating to the future conduct of the matter. Costs of the interlocutory application should be costs in the cause.

Associate:

Dated:    6 July 2017