FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) (No 2) [2018] FCA 1459

ORDERS

THE COURT ORDERS THAT:

1.    In relation to the affidavit of Ruth Cecilia Walker, affirmed on 24 October 2017:

(a)    compliance with r 29.02 of the Federal Court Rules 2011 (Cth) be dispensed with pursuant to r 1.34;

(b)    Ms Walker’s affidavit be read in this proceeding; and

(c)    the portions of Exhibit RCW-1 to Ms Walker’s affidavit that are contained at tabs 27 and 28 of the Court Book be admitted into evidence.

2.    In relation to the affidavit of Michael Dunnett, sworn on 12 September 2018 and filed on 13 September 2018:

(a)    compliance with r 29.08 of the Federal Court Rules 2011 (Cth) be dispensed with pursuant to r 1.34;

(b)    any necessary leave be granted to the applicants to rely upon Mr Dunnett’s affidavit;

(c)    Mr Dunnett’s affidavit be read as evidence in this proceeding; and

(d)    the McGrathNicol report at tab 622 of the Court Book be admitted into evidence.

3.    In relation to the affidavit of Adam Allanson, affirmed and filed on 13 September 2018:

(a)    compliance with r 29.08 of the Federal Court Rules 2011 (Cth) be dispensed with pursuant to r 1.34;

(b)    any necessary leave be granted to the applicants to rely upon Mr Allanson’s affidavit; and

(c)    Mr Allanson’s affidavit be read as evidence in this proceeding, including the annexures to that affidavit, such that the ORIMA Research Findings Report in its final form (annexure AA-3) be admitted into evidence.

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

REASONS FOR JUDGMENT

BROMWICH J:

Introduction and background to proceeding

1    These are reasons for evidential rulings that I made on 21 September 2018 in the course of the trial in this proceeding.

2    The applicants in this proceeding are the Australian Competition and Consumer Commission (ACCC) and the Commonwealth of Australia. The respondent is the Australian Institute of Professional Education Pty Ltd (in liq) (ACN 126 628 215) (AIPE).

3    The applicants commenced this proceeding against AIPE on 1 April 2016, before it went into liquidation. Later that year, on 6 October 2016, directors of the respondent resolved to wind up the company and liquidators were appointed on the same date. On 16 May 2017, over the opposition of the liquidators, I granted leave under s 500 of the Corporations Act 2001 (Cth) to the applicants to bring this proceeding against AIPE as a company in liquidation: Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521.

4    AIPE was a former provider of vocational education courses which were eligible for Commonwealth funding by way of a scheme of student loans under the Higher Education Support Act 2003 (Cth) known as VET FEE-HELP. Upon confirmation of a student’s enrolment in an eligible course, the Commonwealth paid the course fee directly to the provider. The student incurred a corresponding debt of 120% of that course fee, which was payable through the taxation system once the student’s taxable income reached a certain threshold (just above $50,000 per annum).

5    The applicants allege that AIPE engaged in conduct in connection with the supply of those courses to consumers that was unconscionable and misleading or deceptive, or likely to mislead or deceive, in contravention of ss 18, 21 and 29(1) of the Australian Consumer Law (ACL), which is in Schedule 2 to the Competition and Consumer Act 2010 (Cth). The applicants contend that a significant proportion of the enrolments should not have taken place, corresponding payments should not have been made by the Commonwealth to AIPE, and related debts should not have been incurred by the students concerned. In total, VET FEE-HELP payments were made by the Commonwealth to AIPE in excess of $210 million, although the sums potentially affected by this proceeding are a subset of that amount.

Background to evidence rulings

6    On 18 September 2018, on the second day of the trial, I heard legal argument on the question of whether certain evidence should not be admitted, as sought by AIPE. The impugned evidence concerned proof of the results of:

(1)    an audit of AIPE by the Australian Skills Quality Authority (ASQA) in relation to AIPE’s compliance with legal obligations under the National Vocational Education and Training Regulator Act 2011 (Cth) – the evidence was the auditor’s report, related material, and a covering affidavit, all of which were relied upon by ASQA in a prior proceeding in the Administrative Appeals Tribunal (AAT) brought against it by AIPE;

(2)    a forensic audit of AIPE by McGrathNicol on behalf of the Commonwealth Department of Education and Training to address concerns about the validity of student enrolments and the entitlement to VET FEE-HELP payments, by way of an auditor’s report and a very late affidavit of the kind ordinarily used to adduce expert evidence (sworn by Mr Michael Dunnett); and

(3)    a survey of AIPE students conducted by ORIMA Research (ORIMA) on behalf of the Department to obtain responses relevant to compliance with VET FEE-HELP requirements and enrolments, by way of a market survey report and, again, a very late affidavit of the kind ordinarily used to adduce expert evidence (affirmed by Mr Adam Allanson).

7    As is apparent from the description above, the ASQA compliance audit (including a survey conducted on a sample of students as part of that audit), the McGrathNicol forensic audit and the ORIMA market survey were not conducted for the purposes of this proceeding. The evidence was therefore sought to be adduced by the applicants as a business record of the federal government agency for which each audit or survey was conducted, being ASQA or the Department. The principal additional hurdles raised by AIPE in rendering that evidence admissible were:

(1)    the requirements for the admissibility of survey evidence in the case of the ASQA audit report (this was sought to be overcome in part by the report itself and in part by an affidavit from the auditor provided in a prior proceeding in the AAT); and,

(2)    the requirements of expert evidence in s 79 of the Evidence Act 1995 (Cth) in order to overcome the inadmissibility of opinions under s 76 in relation to the McGrathNicol audit report and the ORIMA Research Findings Report (this was sought to be overcome by associated affidavit evidence, provided on the eve of the trial).

8    On 19 September 2018, I ruled that the evidence be admitted, and for that purpose dispensed with the requirement that any affidavit evidence to be relied upon be furnished at least three days prior to its intended use. I granted leave, if required, to permit the applicants to rely upon the late affidavits in support of the McGrathNicol audit report and the ORIMA Research Findings Report. I gave a brief explanation for each decision, with reasons to follow. Formal orders were not made at that time.

9    On 20 September 2018, AIPE applied to reopen its case for the exclusion of the McGrathNicol and ORIMA evidence, advancing additional reasons for exclusion upon the ground of unfair prejudice substantially outweighing its probative effect pursuant to s 135(a) of the Evidence Act 1995 (Cth), relying upon an affidavit and further oral submissions. The respondents opposed leave being granted to reopen, and made oral submissions in the event that leave was granted. I decided to grant AIPE leave to reopen its case, but to adhere to the conclusion previously reached that the McGrathNicol and ORIMA evidence should be admitted. These are my reasons for admitting that evidence and making formal orders to that effect on 21 September 2018.

10    By way of completeness, I should add that on 20 September 2018, I rejected other expert evidence adduced by the applicants of a quantitative demographic and arguably statistical nature, subject only to the admission by consent of five tables produced by the expert. The basis for the rejection of that evidence was that the expert’s report did not meet the requirements of expert evidence, aside from expertise, by reason of serious flaws in the application of the expertise to produce the results sought to be relied upon. After the cross-examination of the expert and submissions for AIPE, the applicants did not make any submissions in opposition to rejection of the report.

ASQA audit report and supporting AAT affidavit

11    Ms Ruth Cecilia Walker was employed by ASQA as the lead compliance auditor in the compliance team based in Sydney in the period between 4 February 2013 and 14 August 2015. On 14 April 2015, she conducted a site audit of the Sydney premises of AIPE. As part of the audit, a telephone survey was subsequently conducted with a sample of 24 AIPE students.

12    AIPE later brought a merits review proceeding against ASQA in the AAT in relation to the conclusions it reached about compliance. Ms Walker affirmed an affidavit which was relied upon by ASQA in the AAT proceeding. That AAT affidavit annexed 47 documents related to the audit. It also referred to a further 61 of the documents that the decision-maker provided to the AAT as required by s 37 of the Administrative Appeals Tribunal Act 1975 (Cth), commonly referred to as “T documents”. Those 61 “T documents” were tendered in the AAT proceeding, including, in particular, the ASQA audit report titled “T12”, which was prepared by Ms Walker apparently with the assistance of another auditor.

13    For the purposes of this proceeding, Ms Walker affirmed a further affidavit, briefly providing the above summary of events and exhibiting a bundle of documents as a single exhibit comprising:

(1)    a copy of her AAT affidavit and its 47 annexures; and

(2)    a copy of the 61 “T documents” referred to in her AAT affidavit.

14    The applicants sought to rely upon Ms Walker’s affidavit in this proceeding and parts of the exhibit to that affidavit comprising the AAT affidavit, some of the 47 annexures to the AAT affidavit, an index to the “T documents”, and the ASQA audit report, T12.

15    AIPE objected to Ms Walker’s affidavit and to the parts of the exhibit to that affidavit that the applicants wished to rely upon, being the AAT affidavit, the selection of annexures to the AAT affidavit and the ASQA audit report. The index to the “T documents” was neither here nor there. AIPE’s objections to admissibility concerned relevance and form. If those objections were overcome by the applicants, AIPE sought discretionary exclusion under s 135(a) of the Evidence Act upon the basis that the probative value of that evidence was substantially outweighed by the danger that it might be unfairly prejudicial.

16    The form objection to Ms Walker’s affidavit, namely that it did not comply with the formal requirements of r 29.02 of the Federal Court Rules 2011 (Cth), was not renewed in oral submissions, although it was not abandoned. The substance of that complaint arises from the adoption of prior evidence rather than meeting the requirements of the Rules for affidavit evidence. The Court may, in an appropriate case when this arises, allow a departure from the Rules and, in particular, do so by allowing evidence in chief to be by way of adoption of a prior statement or report, and a fortiori, by adoption of such a statement made in a prior affidavit by which documents are also produced, adopted, or otherwise rendered admissible.

17    The relevant Evidence Act provision and related authority are as follows:

(1)    s 37(3) of the Evidence Act;

(2)    Platcher v Joseph [2004] FCAFC 68 at [101], [163], a case in which the adoption of the transcript of an examination conducted under s 19 of the Australian Securities and Investments Act 2001 (Cth) was permitted to be evidence in a bankruptcy proceeding;

(3)    Alfred v Lanscar [2007] FCA 833; 162 FCR 169, applying Platcher v Joseph to permit the adoption by affidavit of prior investigators’ statements in civil penalty proceedings under the former Workplace Relations Act 1996 (Cth); and

(4)    Temple v Powell (No 1) [2007] FCA 987; 164 IR 409 at [17]-[22], referring to and applying s 37(3), Platcher v Joseph and Alfred v Lanscar to permit the adoption by affidavit of prior investigators’ statements in civil penalty proceedings under the Workplace Relations Act.

18    When adoption by affidavit of prior evidence in written form takes place, the adopted evidence is no more hearsay than it would be if the text of the adopted material was instead simply copied into the adoption affidavit, but with the loss of the greater contemporaneity of the prior written account. It follows that there is nothing remarkable in a departure from formal requirements being permitted in such circumstances, such that substance can triumph over form. Indeed, the case for allowing a prior affidavit to be adopted is somewhat stronger than it is for the adoption of an examination transcript or an investigator’s statement because of the solemn nature of affidavit evidence and its status as a written form of evidence under oath or affirmation. However, the content of such adopted evidence is subject to any ordinary objections as to admissibility, including any that may arise from the original evidentiary account being prepared for a different forum or purpose: see Temple v Powell (No 1) at [23].

19    AIPE’s form objection did not suggest any reason to depart from the long-standing authority cited above, nor provide any compelling reason to refuse the applicants leave to rely upon the form of Ms Walker adopting her prior affidavit for the purposes of this proceeding. Leave was therefore given under r 1.34 to depart from the formal requirements of r 29.02.

20    AIPE’s objection as to the relevance of Ms Walker’s evidence turned on a number of assertions. The first was that the AAT affidavit was prepared for the purposes of the AAT proceeding between AIPE and ASQA, setting out information in relation to the audit by ASQA and the results of that audit. That objection went nowhere on its own. Relevance is generally determined by content rather than purpose, unless the purpose, or some other latent feature, in some way overwhelms or relevantly distorts the content in a way that deprives it of any true relevance. Even then, however, it is more likely to ground an objection upon the basis of unfair prejudice or one of the other grounds in s 135, or to limit the use of the evidence in some way under s 136. It is worth noting that the general discretion in s 90 of the Evidence Act to exclude evidence upon the basis of unfairness is confined to criminal proceedings. It may also be observed that many objections to evidence amount to little more than an emphatic assertion of minimal weight.

21    It needs to be remembered that the statutory test in s 55(1) of the Evidence Act, while important and fundamental, is not especially onerous. It provides that evidence must be nothing more than being capable of directly or indirectly rationally affecting the assessment of a fact in issue in the proceeding. The point of a relevance objection should be to exclude things that are truly irrelevant in the sense that the evidence cannot, in any direct or indirect rational way, affect the assessment of a fact in issue in the proceeding. An objection of relevance is best directed to evidence of a character that, if left in place, will in some way distort, divert, or delay the litigation or fact-finding process. It should not generally be used as a means of picking out items of merely extraneous material amongst otherwise admissible evidence. Moreover, when a judicial officer is the tribunal of fact, it may be too granular an approach to insist that every skerrick of evidence pass even that relatively low threshold, especially as the use of the word “indirectly” in s 55(1) is able to encompass contextual evidence which helps to make directly relevant evidence comprehensible. In any event, relevance may sometimes only be fully appreciated in the context of evidence that is yet to come, which may support provisional admission of evidence subject to relevance later being established: s 57, Evidence Act. Courts routinely admit evidence subject to relevance, although it is an approach to be adopted with restraint to avoid too much uncertainty as to what is, in fact, finally in evidence for one party and possibly calls for a response, evidentiary or otherwise, from an opposing party. With the foregoing general principles and reasoning in mind, I rejected the original purpose objection to relevance.

22    AIPE’s second objection to relevance was that the ASQA audit concerned a number of aspects of the AIPE operations in 2015 which were said not to be relevant to the issues to be determined in this proceeding, and, further, that the evidence referred to allegations of students being enrolled without their permission or knowledge, being matters that do not form a part of the applicants’ allegations in this proceeding and are therefore irrelevant. Orally, AIPE also submitted that the precise way in which the audit report applies to the applicants’ case was not clear or readily apparent. However, that argument set the bar too high for admissibility on the grounds of relevance. The requirement is the capacity of the evidence to affect the assessment of a fact in issue, rather than to conclusively or directly establish it. As adverted to above, for evidence to be relevant, not every fine detail must be relevant. Regard must also be had to context and comprehension. Thus, for example, in a file of documents, the ostensibly irrelevant documents before and after a clearly relevant document may be indirectly relevant to establish a more precise time of creation, dispatch or receipt than is revealed by the face of the relevant document.

23    The applicants submitted that Ms Walker’s AAT affidavit was relevant because it set the context for the audit of AIPE by ASQA, identified how the audit was carried out and identified which documents were inspected by the auditors in order to determine whether AIPE complied with its legal obligations under the National Vocational Education and Training Regulator Act 2011 (Cth). Twenty-four students who had been enrolled in AIPE courses, including for the Diploma of Management, the Diploma of Travel and the Diploma of Events, were selected to be the subject of a telephone interview for audit purposes. The part of the audit in relation to those 24 students identifies aspects of the operation of AIPE’s enrolment conduct. The applicants allege in these proceedings that the enrolment process was unconscionable in particular respects. I considered that it was legitimate for the applicants, at least to some degree, to prove how the enrolment system operated overall, potentially including aspects that were perhaps not to AIPE’s general credit but are not specifically relied upon, in order to better understand the parts that are relied upon.

24    A perusal of the ASQA audit report revealed that it was, at least in part, capable of directly or indirectly rationally affecting the assessment of a fact in issue in the proceeding, being the question of whether the pattern of behaviour for marketing and enrolling students in AIPE courses was, in the manner alleged, unconscionable. An aspect of that allegation is that false or misleading representations were made to students as to courses being free when in fact a debt was incurred, and that the costs of a course would never have to be repaid when this was not so. Relevant to those particular facts in issue is that an aspect of the ASQA audit concerned telephone interviews with the selected students. Those interviews produced the following statistics, set out at page 2 of the audit report and repeated in the AAT affidavit:

Subsequent to the site visit component of the audit, a number of current students were interviewed with regard to their experience in enrolling with AIPE. Of those interviewed:

•    12% did not know the name of the RTO [Registered Training Organisation] they had enrolled in

•    12% did not know the name of the course they had enrolled in

•    100% did not know the cost of the course they had enrolled in

•    14% believed the course was free

•    31% were not aware they had incurred a debt by enrolling in the course

•    43% did not complete the enrolment form themselves

•    86% were offered financial or other inducements to enrol in a course

•    48% have not commenced any training since enrolling.

25    Those statistics were capable of directly or indirectly rationally affecting the assessment of whether or not the alleged false or misleading representations took place, especially having regard to parts of [8] of the Concise Statement which allege unconscionable conduct that is said to make up a pattern of behavior for marketing and enrolling students in AIPE courses, including representations as to a course being free or no payment of course fees being required. It was quite a different matter as to whether this evidence would ultimately support any such conclusion.

26    For present purposes, it was neither necessary nor desirable to go further. At least a part of the ASQA audit report evidence met the s 55(1) test of relevance, and that sufficed for the purposes of determining relevance when regard was had to contextual considerations. It was likely that other parts of Ms Walker’s AAT affidavit and the audit report she produced would be relevant in a similar way, or relevant in an indirect way to assist in understanding those impugned parts. Not every aspect of relevance had to be identified for the ruling as to admissibility.

27    AIPE also submitted that Ms Walker’s AAT affidavit was not necessary and that the applicants, if they overcame the remaining objections, should be confined to the audit report. That submission was rejected. Necessity is not a measure of relevance. Ms Walker’s AAT affidavit went beyond the strictures of the form of the audit report itself and explained, in a useful narrative, how the audit took place and aspects of the conclusions reached. There was nothing inherently remarkable or objectionable to that evidence. Experts can often be called to give oral evidence in chief to explain or otherwise make clearer or more accessible a formal report. There is nothing wrong with that within proper bounds. Ms Walker’s AAT affidavit was not objectionable in form or content so as to warrant limitations on the use of parts of it received in evidence upon that basis.

28    As to the assertion that the probative value of Ms Walker’s evidence was substantially outweighed by its unfair prejudice, AIPE accepted the observations of McHugh J in Papakosmas v The Queen [1999] HCA 37; 196 CLR 297 at [90]-[97] as to the material differences between the common law and the Evidence Act on this discretion, and submitted that the relevant prejudice was of the kind identified by Sackville J in Seven Network Limited v News Limited (No 8) [2005] FCA 1348 (C7) and Perram J in Australian Competition and Consumer Commission v Air New Zealand (No 7) [2013] FCA 83; 209 FCR 361 (Air Cargo case). There were a number of problems with this submission.

29    The first problem was that each of those cases involved evidence of a very different kind to the present. In each of C7 and the Air Cargo case, the evidence that was sought to be relied upon was potentially critical to a fundamental aspect of the case.

30    In C7, a contentious statement of opinion was sought to be relied upon that went to the heart of the dispute, but without making it clear how the opinion was arrived at, or how any relevant expertise had been relied upon to form that opinion. Cross-examination would have been a substantial burden. Even then, the evidence was not excluded but, rather, its use restricted under s 136(a) of the Evidence Act by reason of a particular use of the evidence being unfairly prejudicial. A typical way in which use may be restricted is to confine a representation to being evidence of it having been made, rather than being evidence as to the truth of an assertion contained within the representation. That is particularly apposite for second-hand hearsay within a business record, where a request pursuant to s 167 of the Evidence Act to call the maker of the record will not enable the truth to be ascertained or tested. In C7, the use of the disputed evidence was confined to being an expression of a belief, rather than as to the truth of the facts asserted. Importantly, the unfair prejudice arose from an inherent characteristic of the impugned evidence that was able to be cured by a restriction rather than by exclusion: see C7 at [5]-[6], [20]-[21], [26].

31    In the Air Cargo case, a business record of an overseas regulator was sought to be relied upon without any corresponding witness being able to be the subject of cross-examination. That business record was potentially fatal to the applicant’s case in a way that was practically impossible to challenge. It also had certain troubling features that would likely have resulted in domestic evidence of that kind being excluded by reason of being brought into existence in contemplation of litigation, a restriction in s 69(3) of the Evidence Act that did not apply to foreign evidence of that kind. The prejudice thus again flowed from an inherent characteristic of the impugned evidence, accompanied by a relevant procedural prejudice standing in the way of addressing that particular characteristic. The unfair prejudice was serious enough to pass the high hurdle of substantially outweighing its undoubted significant probative effect: see Air Cargo case at [21]-[25].

32    This situation was very different to either C7 or the Air Cargo case. Ms Walker’s evidence undoubtedly assisted the applicants’ case to a degree and to that extent was and is important. It is evidence in a relatively narrow compass and not of great complexity. But there was nothing inherently unfair about that evidence in the s 135(a) sense, as discussed further below. The alternative to such evidence would be to have each of the individual student witnesses who were called and who spoke to be made a witness, which would run counter to the reasoning of the Full Court in Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313 at 358-364, and especially the observation at 364 that, if the interviewees have to be called, there is little point in tendering such evidence. While AIPE made submissions about the problems with survey evidence by reference to the features of concern identified in this Court’s Survey Evidence Practice Note (GPN-SURV), that practice note is directed to the design of surveys conducted specifically for the litigation in which it is proposed to be used to address a particular issue of concern, most commonly involving intellectual property disputes. Moreover, Ms Walker was able to be made available to be cross-examined, but her attendance was not sought.

33    Overall, I was not satisfied that there was any real degree of unfair prejudice in the evidence of Ms Walker sought to be relied upon by the applicants, let alone a degree of such prejudice as to substantially outweigh its probative value. Ms Walker’s evidence was therefore admitted.

34    While Ms Walker’s audit report also addressed some matters that might have been seen not to be either directly or indirectly relevant to the issues in dispute in this proceeding, the applicants made it clear that they were willing to co-operate with the respondent to ensure that only those parts of the audit report that were so relevant were ultimately relied upon. Redaction to achieve that objective may or may not be necessary. To the extent that this is not agreed upon, it may be the subject of competing submissions.

McGrathNicol audit report and the late affidavit of Mr Michael Dunnett

35    In April 2016, the Department commissioned the well-known advisory firm McGrathNicol to conduct a forensic audit of AIPE to address concerns about the validity of student enrolments and their entitlement to VET FEE-HELP payments. An emphasis was required to be placed on reviewing internal processes for cancelling the enrolment of students who had not logged in or engaged with AIPE. The audit was duly carried out and a final report, dated 7 October 2016, was furnished.

36    The McGrathNicol audit report was included in the bundle of documents apparently obtained by the ACCC in the course of its investigation that the applicants sought to rely upon in this proceeding. It was not accompanied by any affidavit made by the author of the report that produced a curriculum vitae and the report itself so as to meet the expert qualification requirements in s 79. It is necessary to meet those requirements so as to exclude the opinion rule in s 76 of the Evidence Act and also to comply with key rules in Division 23.2 of the Rules, namely rr 23.11, 23.12 and 23.13. Those rules deal with calling expert evidence at trial, the provision of the Court’s practice note guidelines for expert witnesses and the contents of expert reports, and are considered further below. Such evidence is not required as a matter of course in order to rely upon opinion evidence contained within business records: see C7 at [25]. However, such evidence may be necessary in some cases in order to establish the expert evidence exception to the opinion rule, if that is unable to be ascertained from the content of the report itself, or from other evidence before the Court.

37    It is also important to note that rr 23.11, 23.12 and 23.13 are directed to the adducing of expert evidence brought into existence for the purposes of a proceeding in this Court, rather than the adducing of business records which contain pre-existing opinion evidence.

38    AIPE objected to the McGrathNicol audit report being admitted upon the grounds of hearsay and opinion and, in the alternative, sought discretionary exclusion under s 135(a) of the Evidence Act. Specifically, AIPE contended, as articulated in written objections that were required to be exchanged a short time prior to the trial, that:

(1)    the report was prepared in relation to the veracity of student enrolments, student participation rates and student completion rates, yet no allegation is made in the proceedings in relation to those matters, thus essentially raising a question of relevance;

(2)    the report was also opinion and hearsay and was therefore inadmissible by reference to ss 59 and 76 of the Evidence Act; and

(3)    the applicants did not seek to call the author of the report and the Court should therefore reject the evidence on the basis of s 135 of the Evidence Act.

39    The applicants’ response to the written objections that were based on opinion, hearsay and the absence of an author was to obtain and seek to rely upon an affidavit of the lead author of the McGrathNicol audit report, Mr Michael Dunnett. Mr Dunnett is a chartered accountant, partner and was, at the relevant time, a director at McGrathNicol. It was not suggested that Mr Dunnett did not qualify as an expert for the purposes of the opinions expressed by him being admissible as an exception to the opinion rule. The Dunnett affidavit was furnished to the applicants only on Thursday, 13 September 2018, prior to the trial commencing on Monday, 17 September 2018. It was therefore furnished too late to be relied upon without compliance with r 29.08 of the Rules being dispensed with under r 1.34. The first question that I had to determine, before turning to AIPE’s objections to the McGrathNicol audit report, was whether that dispensation should be granted.

40    The Dunnett affidavit contains evidence of a kind that is ordinarily indispensable for expert evidence prepared for the proceedings in which it is sought to be relied, but remains formal in nature inasmuch that it does not affect the content of the expert evidence itself. AIPE objected to that affidavit being relied upon, noting also that the procedural timetable required affidavits to be filed by the end of 2017, which ended up being over eight months before the start of the trial. However, AIPE took no issue with the contents of the affidavit beyond its value in rendering the expert opinions in the report admissible. The applicants accepted that the Court’s dispensation was required to depart from the requirements of r 29.08. The applicants also did not take issue with the assertion by AIPE that the arguments in support of that dispensation being granted could not fairly be bolstered by bootstrap reasoning associated with the evidentiary value of the McGrathNicol audit report itself, or any similar ends-justifies-means reasoning. In large measure, that shared position should be accepted in the particular circumstances of this case. However, the question of dispensation is not a determination that can be made entirely in a vacuum, artificially divorced from the general nature of the report.

41    The first point to note of significance to the question of dispensation, by reference to the general nature of the McGrathNicol audit report, was that, as already observed, the report was not being led as expert evidence that was prepared for this proceeding. Rather, it was sought to be led as a business record of the Commonwealth as manifested by the Department of Education and Training. While evidence by way of contested business records is conventionally adduced through a person from the business who produces them, that is not the only way this can be done, which may be seen to be part of the reason for the protection afforded by the request regime in ss 166-169 of the Evidence Act. A Court is entitled to inform itself as to any issue going to admissibility of a document by reference to inferences to be drawn from its face: s 183 of the Evidence Act. The McGrathNicol audit report has the conventional appearance of an expert report prepared by any of the major forensic accounting firms and provides more than enough information to readily draw the inference that it is a business record of the Department who commissioned it.

42    The real issue to which the Dunnett affidavit went was not the business record status of the McGrathNicol audit report, but, rather, the second requirement attaching to expert opinions within a business record, being that they need to be proven to have that expert quality: see Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2011] NSWSC 395 at [4]; Eddie Michael Awad v Twin Creek Properties Pty Ltd [2011] NSWSC 922 at [3]; but cf C7 at [25]. That is not so readily done by way of inference, but nor is it conceptually impossible to do. Read holistically, the McGrathNicol audit report goes a substantial way towards indicating that it has been prepared by a person or persons appropriately qualified to furnish the conclusions reached. However, a conclusive view in that regard ultimately entailed an assumption based on the way in which the report was written, rather than only inferential reasoning. It might have been different if the report, or annexures to the report, had contained the information identifying and qualifying the author or lead author, but the McGrathNicol audit report did not contain this information. In those circumstances, such inferential reasoning, on the face of this particular report, did not go far enough to meet the requirements of s 79 of the Evidence Act. It followed that the Dunnett affidavit was indispensable in establishing the necessary expert quality that was required for the McGrathNicol audit report to be admissible.

43    The weighing exercise for the grant of leave to rely upon an affidavit served late and filed well out of time was said by AIPE to require that regard be had to the considerations mandated by s 192(2) of the Evidence Act. That provision, without limiting the matters that this Court may take into account, requires the following to be taken into account:

(a)    the extent to which to do so would be likely to add unduly to, or to shorten, the length of the hearing; and

(b)    the extent to which to do so would be unfair to a party or to a witness; and

(c)    the importance of the evidence in relation to which the leave, permission or direction is sought; and

(d)    the nature of the proceeding; and

(e)    the power (if any) of the court to adjourn the hearing or to make another order or to give a direction in relation to the evidence.

44    However, AIPE’s submission was misconceived as to the application of s 192(2) to this situation. Section 192 is directed to leave required to be given because of the Evidence Act. The grant of leave in question here did not arise because of the Evidence Act, but, rather, because of the Rules. The need for relief under the Rules potentially arises in three ways:

(1)    failure to comply with the procedural timetable for the filing of affidavit evidence – in this instance, there was no guillotine order, so that, strictly speaking, the most that was needed was a nunc pro tunc extension of time to Thursday, 13 September 2018 in which to furnish the Dunnett affidavit, pursuant to r 1.39, rather than leave because of service outside the Court-ordered timetable;

(2)    failure to serve the affidavit at least three days before it was to be relied upon in accordance with r 29.08 (excluding Saturday, 15 September 2018 and Sunday, 16 September 2018, by reason of r 1.61), for which a dispensation is required under r 1.34; and

(3)    failure to comply with the expert evidence rules, which, as noted above, apply to the adducing of expert evidence prepared for the purpose of a proceeding in this Court, for which, if those rules had to be complied with, a dispensation would again be required under r 1.34. The relevant expert evidence rules adverted to above are as follows:

23.11    Calling expert evidence at trial

A party may call an expert to give expert evidence at a trial only if the party has:

(a)    delivered an expert report that complies with rule 23.13 to all other parties; and

(b)    otherwise complied with this Division.

Note:    Expert and expert report are defined in the Dictionary.

23.12    Provision of guidelines to an expert

If a party intends to retain an expert to give an expert report or to give expert evidence, the party must first give the expert any practice note dealing with guidelines for expert witnesses in proceedings in the Court (the Practice Note).

Note:    A copy of any practice notes may be obtained from the District Registry or downloaded from the Court’s website at http://www.fedcourt.gov.au.

23.13    Contents of an expert report

(1)    An expert report must:

(a)    be signed by the expert who prepared the report; and

(b)    contain an acknowledgement at the beginning of the report that the expert has read, understood and complied with the Practice Note; and

(c)    contain particulars of the training, study or experience by which the expert has acquired specialised knowledge; and

(d)    identify the questions that the expert was asked to address; and

(e)    set out separately each of the factual findings or assumptions on which the expert’s opinion is based; and

(f)    set out separately from the factual findings or assumptions each of the expert’s opinions; and

(g)    set out the reasons for each of the expert’s opinions; and

(ga)    contain an acknowledgement that the expert’s opinions are based wholly or substantially on the specialised knowledge mentioned in paragraph (c); and

(h)      comply with the Practice Note.

(2)    Any subsequent expert report of the same expert on the same question need not contain the information in paragraphs (1)(b) and (c).

45    The general powers of the Court are set out in Division 1.3 of the Rules: see rr 1.31 to 1.42. The key rules allow the Court to make any order considered appropriate in the interests of justice, including dispensing with compliance with any of the Rules upon any condition considered appropriate, and extending any time for compliance fixed by the Rules or by an order of the Court. It is an essentially unfettered discretion, albeit to be exercised judicially. The Court is not precluded from independently having regard to the considerations of the kind that are listed in s 192(2) of the Evidence Act. While the Court is not required to have regard to those considerations, that section provides a useful guide to the exercise of the discretion in this case.

46    In relation to dispensing with r 29.08 requirements for the Dunnett affidavit, and any leave that may have been required to rely upon it (no such additional requirement was readily apparent, except perhaps in the sense of excusing non-compliance with the Court-ordered evidence timetable), I considered that:

(1)    the affidavit would not of itself add unduly to the length of the hearing, but may have the collateral effect of adding hearing time if AIPE wished to cross-examine Mr Dunnett on the report thereby produced;

(2)    reliance on the affidavit would be unfair to AIPE to the extent that additional costs would be incurred if the course of cross-examination were to be adopted, but would also give AIPE an opportunity to challenge the McGrathNicol audit report – the report being rendered admissible was not of itself relevantly unfair, given that it was served well before the trial in about April 2018, with AIPE having the option of making a request that the author be made available for cross-examination: see s 167, read with s 166(c) of the Evidence Act, and more generally the request regime overall in ss 166-169;

(3)    the affidavit was not directly of great moment in the sense of changing the evidentiary landscape of the McGrathNicol audit report by its contents, but its capacity to render the report admissible, subject to other objections, made it of importance proportionate to the evidentiary value of the report itself (that report being of some importance to the applicants’ case, subject to a determination of AIPE’s relevance objections);

(4)    the proceedings include the seeking of civil penalties, and to that extent are of a kind dictating caution in granting leave, but AIPE is a company in liquidation and any penalty ordered cannot be enforced without leave of the Court by reason of orders made to that effect, as recorded in the 17 May 2017 judgment noted at [3] above, [2017] FCA 521;

(5)    the Court has the power to adjourn the hearing or make any other necessary order, including as to costs thrown away.

47    AIPE also submitted that it was improper of the applicants to seek to repair their position in relation to proof of the expert evidence exception to the opinion rule by the furnishing of a late affidavit. I rejected that submission. The applicants certainly should have appreciated at a much earlier time that they were seeking not just to tender a business record, but to rely also upon the expert opinions expressed within that record, and would thus need to render those opinions admissible. However, the late realisation of that shortcoming (which was prompted by AIPE’s objection) and the steps taken to remedy it could not fairly be characterised as improper.

48    I considered the competing considerations in deciding whether the applicants should be permitted to rely upon Mr Dunnett’s late affidavit, divorced from any substantive consideration of the evidentiary value of the McGrathNicol audit report as urged by AIPE. It was not an easy decision. However, I placed significant weight on the fact that the substance of the evidence in the McGrathNicol audit report would not change by way of the affidavit, with that report being served months before the trial. AIPE appeared to have adopted a strategy of confidently assuming that its objections to the admission of the McGrathNicol audit report into evidence would be successful. If that was indeed the case, it was at all times a potentially high-risk strategy, given how little had to be done, essentially formally, to overcome that deficiency. Moreover, the Dunnett affidavit could well have been served three weeks, rather than less than three days, before the trial, or indeed only a full week before the trial. In that event, the primary basis for requiring dispensation, being non-compliance with r 29.08, would have been wholly absent.

49    I further noted that even when leave is required to rely upon late evidence, the ordinary reasons for refusal concern an absence of explanation for lateness and the substance of the additional evidence itself, although any collateral effect of the evidence is doubtless also relevant. In Tatow on behalf of the Iman People #2 v State of Queensland [2011] FCA 802, consideration was given to Order 14 rule 7(1) of the rules of the Court that were in force prior to the commencement of the Rules, which required an affidavit to be served a “reasonable time” before the occasion for using it arose. In that case, no explanation was provided for the late provision of two affidavits, in circumstances in which each affidavit contained extensive allegations of fact, unsubstantiated hearsay and scandalous material. While that was a more extreme circumstance for refusing to allow a late affidavit to be relied upon than must always be present, it does indicate that the primary focus should be on the substance of the late evidence and the reasons for its lateness.

50    The Dunnett affidavit was facilitative in nature in relation to the expert opinion exception to the opinion rule, insofar as it applied to such an opinion within a business record. This proceeding is doubtless important for AIPE, but it is also of considerable importance to the applicants and the community, in that it involves the payment of very large sums of public money that may or may not ultimately be shown to be unconscionable. On balance, I considered that the interests of justice fell in favour of allowing the applicants to rely upon the Dunnett affidavit. It was not a situation that should have been permitted to occur in the first place, but to give that determinative primacy would have been to ignore the overarching interests of justice in this case. I therefore dispensed with the requirement in r 29.08 and granted any other leave that may have been required to enable the applicants to rely on the Dunnett affidavit.

51    I turn now to my consideration of AIPE’s relevance challenge to the admission of the McGrathNicol audit report and the alternative of excluding that report in the exercise of the discretion in s 135(a) of the Evidence Act. As noted above, AIPE submitted that the report was prepared in relation to the veracity of student enrolments, student participation rates and student completion rates, but that no allegation is made in the proceedings in relation to those matters.

52    On the question of relevance, AIPE relied upon the ambit of the work order form by which the audit work was formally commissioned and which identified the parameters of that audit, and contrasted that with the applicants’ case as revealed by the Concise Statement.

53    The applicants instead focussed on the contents of the McGrathNicol audit report, highlighting a number of sample entries that addressed such topics as student completion rates, prior education attainment levels, rates of interaction between students and AIPE (with comparisons between rates for students directly enrolled with AIPE as against those enrolled via agents or brokers) and more generally the nature of enrolments.

54    The McGrathNicol audit report reveals that the features identified by the applicants are capable of directly or indirectly rationally affecting the assessment of a fact in issue in the proceeding, being the question of whether the pattern of behaviour for marketing and enrolling students in AIPE courses was, in the manner alleged, unconscionable. Direct alignment with the applicants’ case was not necessary to meet the relevance threshold. The applicants identified enough to meet the test of relevance under s 55(1) of the Evidence Act. The argument against relevance was therefore rejected.

55    On the question of exclusion under s 135(a) by reason of probative value being substantially outweighed by unfair prejudice, AIPE relied upon the financial constraints the liquidator faced in being able to cross-examine Mr Dunnett. This situation was sought to be compared again with C7 and the Air Cargo case. However, as with Ms Walker’s evidence, those cases were very different to the McGrathNicol audit report, which has few of the inherent difficulties with the impugned evidence of the kind identified in those cases. That argument was sought to be bolstered by AIPE in reopening with affidavit evidence and submissions about the costs of preparing and conducting a cross-examination of Mr Dunnett and the process by which judicial advice was sought and obtained from Gleeson J about defending this proceeding: see Kelly (liquidator), in the matter of Australian Institute of Professional Education Pty Limited (in liq) [2018] FCA 780.

56    The difficulty with this approach was that, even more than for Ms Walker’s evidence, the argument in favour of unfair prejudice turned not upon any inherent problem with the nature of the evidence (apart from the complexity of expert evidence of this kind), but, rather, upon the need for an adjournment to prepare such a cross-examination, as well as the financial impediments faced by the liquidator in funding both that preparation and the conduct of the cross-examination.

57    In relation to the loss of the opportunity to cross-examine Mr Dunnett, while that again could be seen to constitute a measure of prejudice, it was not prejudice of the kind that is addressed by s 135(a) of the Evidence Act, which is concerned with issues arising out of an inherent quality of the impugned evidence, for the reasons discussed in more detail below. Rather, it was the product, at least in part, of forensic decisions that AIPE chose to make. The McGrathNicol audit report was part of the evidence that was served on AIPE at the time that it sought judicial advice from Gleeson J in relation to defending this proceeding. No safe assumption could be made that the McGrathNicol audit report evidence, if found to be inadmissible by reason of s 79 expertise not having been established in a formal rather than substantive way, could not be rendered admissible prior to the trial: see Hart v Commissioner of Taxation (No 2) [2016] FCA 897 at [15] to [18] on the relative importance of meeting formal requirements when well-established fields of expertise are involved.

58    In any event, those circumstances cannot be seen to constitute unfair prejudice in the sense contemplated by s 135(a). That subsection relates to the unfairly prejudicial effect of the evidence itself: Papakosmas at [91]-[93]. McHugh J in Papakosmas at [92] quoted from the Australian Law Reform Commission report titled “Evidence” (Report No 26 (Interim) (1985), vol 1, par 644), as follows:

By risk of unfair prejudice is meant the danger that the fact-finder may use the evidence to make a decision on an improper, perhaps emotional, basis, ie on a basis logically unconnected with the issues in the case. Thus evidence that appeals to the fact-finder’s sympathies, arouses a sense of horror, provokes an instinct to punish, or triggers other mainsprings of human action may cause the fact-finder to base his decision on something other than the established propositions in the case. Similarly, on hearing the evidence the fact-finder may be satisfied with a lower degree of probability than would otherwise be required.

59    McHugh J considered at [93], with express reservation, a number of intermediate appeal court cases dealing with procedural disadvantages as a potential aspect of unfair prejudice. However, each such procedural disadvantage was directed to the substance of the evidence, and potentially insurmountable obstacles to challenging the evidence due to its inherent characteristics in the particular circumstances in which it was to be adduced. Subsequent cases have addressed procedural disadvantages, but that has again been confined to features of the evidence itself, or the context in which it was to be adduced, making meaningful challenge impossible: see, for example, La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; 190 FCR 299 at [62] to [73]; see also Director of Public Prosecutions (Vic) v Wearn [2018] VSCA 39 at [32]-[33]. To entertain purely financial considerations concerning capacity to afford to mount a cross-examination would have been a step too far in departing from the necessary consideration of the inherent features of the impugned evidence itself, even as possibly exacerbated by its form or by the way in which it was presented. The application of s 135(a) urged by AIPE exceeded the proper scope of that provision insofar as it concerned the issue of unfair prejudice arising from the evidence itself.

60    In seeking leave to reopen its case and in advancing further arguments for discretionary rejection of the McGrathNicol audit report (and the ORIMA Research Findings Report addressed below), AIPE relied upon its solicitor’s affidavit, which explained the process by which judicial advice was obtained from Gleeson J to enable the liquidator to defend this proceeding. The affidavit also deposed to the legal costs incurred by the liquidator to date (not confined to this proceeding), and an estimate that, if an adjournment were granted to permit cross-examination of Mr Dunnett and Mr Allanson (the latter being relevant to the ORIMA Research Findings Report addressed below), costs of almost $80,000 could be incurred. Senior counsel for AIPE, before furnishing this affidavit, advised the Court that no such adjournment was sought, a position that was confirmed after the ruling was finally made. It was not made explicit that the adjournment was not sought solely or principally because of the costs involved. Had that been intended to be conveyed, it needed to be conveyed explicitly. The Court could not proceed on such an issue on the basis of assumption or inference alone, as there may well have been other reasons, forensic or otherwise, why an adjournment was not sought, even if cost was going to be an important consideration.

61    AIPE plainly enough decided that the best approach to the McGrathNicol audit report and the ORIMA Research Findings Report was to object to its admission and hope that this objection would prevail. As already observed, that was a strategy that did not, perhaps because it could not, address the event that the evidence was not excluded. For example, had the Dunnett and Allanson affidavits been filed three weeks before trial, or even one week before trial, rather than less than three days before, there is little prospect that they would not have been permitted to be read, especially as no question of dispensation would then have arisen. I did not consider that the submissions by AIPE on reopening this issue advanced any substantial addition to the argument on unfair prejudice already considered above.

62    Overall, I was not satisfied that there was any unfair prejudice in the relevant sense arising from the evidence in the McGrathNicol audit report sought to be relied upon by the applicants, let alone such a degree of prejudice as to substantially outweigh its probative value. While it was doubtless that there was prejudice in the evidence being available (rather than not being available), there was nothing relevantly unfair about that. In one sense, evidence is ordinarily adduced because of its (properly) prejudicial effect. Rhetorically, why else adduce it?

63    Even if s 135(a) were to be found to have the reach that AIPE contended, I would not find that this constituted unfair prejudice. There is nothing relevantly unfairly prejudicial in quite modest steps being taken to render inadmissible evidence formally admissible, so as to meet pre-trial objections reflective of forensic choices being made.

64    It follows that AIPE did not make out a case for the application of s 135(a) to exclude the McGrathNicol audit report.

65    For the preceding reasons, I admitted the McGrathNicol audit report into evidence.

ORIMA Research Findings Report and the late affidavit of Mr Adam Allanson

66    Substantially the same objections were taken by AIPE to the late affidavit of Mr Adam Allanson, which was also furnished on 13 September 2018 in response to the opinion and hearsay objections to a market survey research report prepared for the Department. Mr Allanson is a professional market researcher and was an Associate Partner of ORIMA research at the time that the ORIMA Research Findings Report was produced. There were material distinctions in the nature of that evidence in comparison to the McGrathNicol audit report and the related Dunnett affidavit, but the same issues arose in relation to the extension of time required for the applicants to be able to rely upon the Allanson affidavit. The same reasoning and conclusions applied as for the Dunnett affidavit.

67    On balance, the interests of justice fell in favour of allowing the applicants to rely upon the Allanson affidavit. Again, it was not a situation that the applicants should have permitted to occur, but to give that determinative primacy would have been to ignore the overarching interests of justice in this case. I therefore dispensed with the requirements of r 29.08 in relation to the Allanson affidavit and granted any other leave that was required to permit the applicants to rely upon it.

68    I turn now to my consideration of AIPE’s relevance challenge to the admission of the ORIMA Research Findings Report and the alternative of excluding that report in the exercise of the discretion in s 135(a) of the Evidence Act. As noted above, AIPE submitted that the ORIMA Research Findings Report was prepared in relation to the veracity of student enrolments, student participation rates and student completion rates, but that no allegation is made in the proceedings in relation to those matters. AIPE also relied upon C7 and upon the Air Cargo case to point to the prejudice it faced, it again being common ground that no cross-examination was possible in the remainder of the single week allocated for this trial, with AIPE not seeking any adjournment as described above.

69    On the question of relevance, AIPE relied upon the ambit of the work order form by which the survey work was formally commissioned and which identified the parameters of that survey. Reference was also placed on comments in Arnotts (at 360) about the survey in that case not being evidence that went to the heart of the dispute between the parties. It was suggested, in a general way, that the survey lacked the necessary rigour for it to be admitted into evidence. Framed in that way, this was more of an objection to weight than admissibility.

70    The applicants again focussed on the content of the impugned evidence, this time being the ORIMA Research Findings Report. In particular, the information obtained from the 333 survey participants dealt with the numbers of those participants who were not aware that they had received a VET FEE-HELP loan, were not told about course fees and charges, did not receive or request a loan form, or were offered inducements to enrol. The applicants submitted that this was an example of how this evidence gave some degree of support to the element of the system relied upon by them in support of their unconscionability case.

71    Further consideration of the ORIMA Research Findings Report revealed that it is capable of directly or indirectly rationally affecting the assessment of a fact in issue in the proceeding, again being the question of whether the pattern of behaviour for marketing and enrolling students in AIPE courses was, in the manner alleged, unconscionable. It therefore met the test of relevance under s 55(1) of the Evidence Act. The argument against relevance was therefore rejected.

72    The arguments for the application of s 135(a) of the Evidence Act to discretionarily exclude the ORIMA Research Findings Report were the same as for the McGrathNicol report. The same conclusion applied to reject those submissions. For those reasons, I admitted the ORIMA Research Findings Report into evidence.

Associate:

Dated:    10 October 2018