Federal Court of Australia

Al-Huda Pty Limited v Secretary, Department of Education, Skills and Employment [2020] FCA 1613

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The decision of the Administrative Appeals Tribunal made on 29 June 2020 be set aside.

3.    The matter be remitted to the Administrative Appeals Tribunal to be heard and determined according to law.

4.    The Respondent pay the Applicant’s costs.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J

1    This is an appeal on questions of law under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) from the decision of the Administrative Appeals Tribunal made on 29 June 2020 to cancel the approval of Al-Huda Pty Ltd as a provider of childcare services pursuant to s 195H(1)(b) of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the new Act). The Act changed in significant respects on 2 July 2018 from its previous form (the old Act). Under the transitional provisions, some of the relevant provisions in force before 2 July 2018 applied to the Tribunal’s determination of the application for review before it. And, under both versions of the legislation, the Minister had powers to make legislative instruments including the Child Care Subsidy Minister’s Rules 2017 (Cth) (the Minister’s Rules) and the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Rules 2017 (Cth) (the Eligibility Rules). There is a myriad of complexity in the rules with which providers must comply under childcare subsidy arrangements.

2    There was no issue between the parties as to the version of each legislative provision that applied and I have had regard to each such agreed provision in these reasons.

The questions of law and grounds

3    There are four questions of law set out in the amended notice of appeal. Relevantly, question 1(a) and ground 1 raised the issue as to whether the Tribunal, in assessing whether Al-Huda was reckless, asked itself the right question, or correctly applied the law, in assessing two mandatory relevant considerations in s 52(3)(d) and (4)(b)(ii) of the Minister’s Rules in the staged decision-making process that it had to follow in arriving at the imposition of the sanction of cancellation (the recklessness issue).

4    The remainder of question 1 and questions 3 and 4 raised issues as to whether the Tribunal correctly applied the Eligibility Rules and s 52(3)(g) of the Minister’s Rules. Question 2 raised whether the Tribunal denied Al-Huda procedural fairness. The amended notice of appeal dealt with those issues in grounds 2 to 9.

5    Al-Huda contends that the Tribunal erred in nine respects, namely:

(1)    in finding that Al-Huda had, first, had a reckless disregard for its obligation to comply with conditions for continued approval within the meaning of s 52(4)(b)(ii) of the Minister’s Rules, and, secondly, engaged in conduct that involved the reckless giving of inaccurate, false or misleading information to the Secretary, within the meaning of s 52(3)(d) (ground 1, being the recklessness issue);

(2)    in finding that Al-Huda lacked a fundamental understanding of its compliance obligations and was not committed to complying with them for the purposes of s 7(2)(d) of the Eligibility Rules, where there was no logical and probative basis for that conclusion (ground 2);

(3)    in finding that Al-Huda did not have the ability to meet and provide the appropriate quality of childcare as required by s 7(2)(b) of the Eligibility Rules (ground 3);

(4)    in denying Al-Huda procedural fairness by drawing conclusions about matters on which the Tribunal either had not given it an opportunity to respond or by failing to consider all of its evidence (grounds 4 and 5);

(5)    in failing to:

(a)    take into account, or erring in the way it took into account, what a person in Al-Huda’s position could have done to prevent or detect the subject matter of its non-compliance (ground 6);

(b)    take into account the number of errors that Al-Huda had made in its record-keeping and administration as a proportion of the overall much larger total claims for which it received payments (ground 7);

(c)    take into account Al-Huda’s recent and continuing improvement in its policies, procedures and governance, for the purposes of considering aspects of the Minister’s and Eligibility Rules (ground 8); and

(6)    in finding there were “aggravating factors” because of its misconstruction of the meaning of that expression in s 52(3)(g) of the Minister’s Rules (ground 9).

The legislative context

6    Relevantly, the new Act provided in s 195H(1) and (2):

195H Consequences of breach of conditions for continued approval

Sanctions

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

  (a) suspend the provider’s approval;

  (b) cancel the provider’s approval;

(c) suspend the provider’s approval in respect of one or more child care services;

(d) vary the provider’s approval so that the provider is not approved in respect of one or more child care services;

(e) reduce the number of any child care places allocated to the service under section 198B;

(f) suspend, for a maximum of 3 weeks, payments under section 67EB of fee reduction amounts in respect of sessions of care provided by one or more approved child care services of the provider.

Note 1:    The Secretary may also decide the vary or impose additional conditions under subsection 195F(2).

Note 2:    Before doing a thing mentioned in paragraphs (a) to (f), the Secretary must follow the procedure in section 199A

(2) In exercising a power under subsection (1), the Secretary must have regard to any matters prescribed by the Minister’s rules as matters to be taken into account by the Secretary in applying the subsection to approved providers.

7    The Minister’s Rules, as in force at the date of the Tribunal’s decision, required, in s 52, that a decision-maker had to take account of the matters that it prescribed, but did not limit the decision-maker to those matters. Relevantly, s 52(3)(d) and 4(b)(ii) provided:

52 Matters the Secretary must take into account in exercising the power to impose a sanction on an approved provider

…

(3) In deciding whether to impose a sanction on the provider, the Secretary must take into account whether the provider’s non-compliance:

…

(d) involves the deliberate or reckless giving of inaccurate, false or misleading information to the Secretary, including in a report under subsection 204B(1) of the Family Assistance Administration Act…

(4) The Secretary must take into account the following matters in considering which sanctions to impose:

…

(b) whether it would be more appropriate to cancel the provider’s approval under paragraph 195H(1)(b) of that Act rather than to impose a different sanction, having regard to the following matters:

…

(ii) whether the non-compliance indicates a deliberate or reckless disregard for the obligation to comply with the condition, or a lack of ability to understand their obligation;

(emphasis added)

Background

8    The Tribunal heard evidence and argument, and later gave its reasons. The documentary material before the Tribunal was voluminous, amounting to almost 2,000 pages, but I was only taken to one page, being part of the transcript, of that material during the course of argument.

9    Al-Huda has conducted its business, as an approved provider, since 14 July 2014. In April 2015, the Secretary issued it with a notice of non-compliance. On 6 May 2015, it responded to the complaints in that notice promptly, and apparently satisfactorily.

10    The next circumstance in which Al-Huda appreciated that it had come to the Secretary’s attention was on 20 April 2018, when it received a notice of intention to impose sanction that set out a detailed list of alleged non-compliances.

11    On 21 September 2018, a delegate found that Al-Huda’s approval as a provider should be cancelled under s 195H(1)(b) of the new Act.

12    Al-Huda sought internal review of the delegate’s decision and on 1 November 2018, the authorised review officer affirmed the delegate’s decision.

13    On 2 November 2018, Al-Huda applied to the Tribunal for review of the internal review officer’s decision. Al-Huda obtained a stay of that decision that, in one form or another, has been in place while it has pursued its rights to seek review in the Tribunal and now on appeal to this Court.

The proceeding in the Tribunal

14    In its reasons, the Tribunal reviewed the evidence and found, overall, that Al-Huda’s principal, Ms Fatme Tlais, was not a reliable witness and that Al-Huda’s records were also unreliable. It explored those matters in detail in its reasons. It found that Al-Huda had received over $14.75 million for the provision of child care in the period from the time of its approval in 2014 to June 2019.

15    In the lead up to the hearing in the Tribunal, Ms Tlais made two affidavits: the first on 1 February 2019, before Al-Huda was served with the Secretary’s statement of facts, issues and contentions on 1 March 2019, and the second shortly before the hearing on 31 May 2019. The latter consisted of nine pages of testimony and 253 pages of annexures.

16    The Tribunal explained in its reasons why it considered that Al-Huda’s record-keeping was not reliable and compliance with numerous of its obligations was deficient, and why it did not accept a number of Ms Tlais’ explanations. Indeed, on some occasions, it accepted her explanations and made appropriate findings in Al-Huda’s favour. The Tribunal summarised its findings of non-compliance as follows at [155]:

I find that the Applicant’s non-compliance history discussed above demonstrates that it:

•    lacks expertise and experience in providing child care (subsection 7(2)(a) of the Eligibility Rules). I acknowledge that it has been running the business for several years, however the number and seriousness of non-compliances set out above demonstrate its lack of expertise, despite the years of running the business. The length of the Applicant’s “experience” has not resulted in a commensurate increase in expertise.

•    does not have the ability to meet and provide the appropriate quality of child care (subsection 7(2)(b) of the Eligibility Rules) because its oversight of educators and its knowledge of when, where, and what they are doing, is inadequate.

•    has inadequate governance arrangements (subsections 7(2)(c)(i) and (ii) of the Eligibility Rules). It has falsely and/or inaccurately reported hundreds of sessions of care where no care could have been provided because the educator or the child was overseas. It has falsely and/or inaccurately reported thousands of sessions of care where no CCB or CCR was payable because the care was provided in the child’s own home. The Applicant gave possible explanations for those non-compliances. Its records are unreliable. Ms Tlais’ evidence is unreliable. The Applicant has not provided persuasive evidence as to why the non-compliances occurred. I am not persuaded that the governance measures the Applicant has or proposes to introduce will be adequate, given its history of non-compliance, the unreliability of its records, and Ms Tlais’ resistance to accepting and acknowledging the obligations imposed upon the Applicant as a child care service provider.

•    lacks an understanding of its obligations under the family assistance law and is not committed to complying with them (subsection 7(2)(d) of the Eligibility Rules). The Applicant has admitted not understanding some of its obligations, including that it was not aware of the prescribed timeframes for submitting enrolments and attendance reports. It has sought to blame others. I also refer to my comments about its new and proposed governance measures in the previous paragraph.

•    has a poor record of financial management (subsection 7(2)(g) of the Eligibility Rules). The Applicant has a debt due to the Commonwealth, the amount of which is in dispute as discussed at [136] and [137].

17    The Tribunal made a number of further, largely adverse, findings, leading to its conclusions at [176] that Al-Huda was not a suitable person and that, given its history of non-compliances, it did not satisfy s 196(1) of the old Act.

18    The Tribunal then turned its attention to the questions under s 195H(1) and (2) of the new Act. If the Secretary was satisfied that Al-Huda had not complied with a “condition of continued approval”, she could impose a sanction under s 195H(1). As is clear from s 195H(2), the decision maker had to have regard to any matters prescribed in the Minister’s Rules as mandatory relevant considerations including s 52(3) and (4).

19    The Tribunal noted that Al-Huda had argued that no sanction should be imposed on it because of the small percentage of its errors and the small, but disputed, proportion of over-payments out of the total $14.75 million that it had received over its five years acting as a provider that was in issue in the review, and that there was no deceit involved on its part. The disputed quantum of the total overpayments ranged from about $112,000 (as claimed by the Secretary) of which Al-Huda had already repaid $43,500 and a lesser sum being about a further $29,000 that Al-Huda contended was the maximum for which it could be found still liable. The Tribunal said that it was “not the Tribunal’s role to determine the quantum of the monies received [by Al-Huda] which were not legally owing” and, thus made no finding about this matter ([137]).

20    The Tribunal concluded at [179]:

Addressing the relevant matters in subsection 52(3) of the Minister’s Rules, having considered the Applicant’s non-compliance, I conclude that its non-compliance:

•    is not an isolated incident; it has a history of proven contraventions, including after the reviewable decision was made (subsection 52(3)(a));

•    has resulted in overpayments of CCS, the amount of which is in dispute (discussed at [137]) and is likely to result in overpayments (subsection 52(3)(b));

•    involves the reckless giving of inaccurate, false or misleading information to the Respondent (including a report under subsection 204B(1) of the Current Administration Act (formerly section 219N of the Old Administration Act) (subsection 52(3)(d));

•    is associated with a debt to the Commonwealth (whether or not discharged) (subsection 52(3)(e));

•    is serious in nature (subsection 52(3)(f)); and

•    is associated with other relevant aggravating factors in relation to the non-compliance (subsection 52(3)(g)).

(emphasis added)

21    The Tribunal then found that, given the history of Al-Huda’s non-compliance, it was likely there would be non-compliance in the future, which would result in over-payments of subsidy and that its non-compliances had been consistent and persistent. It found that Al-Huda had resisted, and continued to resist, accepting responsibility for its non-compliances and had minimised their seriousness. It evaluated the material before it, finding that Al-Huda had been operating for several years, and had the opportunity to implement appropriate governance measures but had not done so. It gave little weight to Ms Tlais’ evidence of Al-Huda’s changed policies and procedures, noting that its new policy documents contained high level and general statements without detailed procedures. Furthermore, it found that Al-Huda’s non-compliances were “very serious” because Al-Huda had:

    reported thousands of sessions of care inaccurately;

    demonstrated a lack of knowledge of its obligations, under the “family assistance law” (being a compendious expression covering the myriad of regulations that applied);

    failed to supervise its staff and contractors effectively;

    provided inadequate supervision of children, contrary to s 124 of the Education and Care Services National Regulations (NSW); and

    minimised its responsibility for non-compliance.

22    The Tribunal noted that the Secretary had alleged that the aggravating factors in relation to Al-Huda’s non-compliance under s 52(3)(g) of the Minister’s Rules were its dishonest behaviour or inadequate governance arrangements and that the non-compliance continued after the reviewable decision was made.

23    The Tribunal found that Al-Huda’s non-compliance was systemic and ongoing and that non-compliance after the reviewable decision was also an aggravating factor. It concluded, on that basis, that it was appropriate to impose a sanction and then turned to consider what the sanction under s 195H(1) ought be.

24    The Tribunal, as the decision-maker exercising the Secretary’s powers under s 195H(1) and (2) had to have regard to, among other matters, the Minister’s Rules. It considered, as s 52(4)(a) of the Minister’s Rules required, whether it would be more appropriate to exercise the power to suspend rather impose a different sanction. It addressed three considerations under that rule, namely whether:

(1)    Al-Huda’s non-compliance was systemic and ongoing. The Tribunal found that it was and that there had been a fundamental failure of governance that had not improved since Al-Huda had adopted new policies, as Ms Tlais had attested in her affidavit of 1 February 2019. It found that this factor tended towards a cancellation decision rather than a suspension.

(2)    the non-compliance had resulted in the significant debt due to the Commonwealth by reason of overpayments. It noted that Al-Huda had emphasised the relatively small amount of the debt compared to the public funds that it had received. The Tribunal accepted that the total of the disputed debt was relatively small compared to the amount of $6 million that Al-Huda had received during the period of non-compliance between 2016 and 2018. But, the Tribunal asserted that the disputed debt was significant. Quite how the Tribunal did that without finding what the debt was is not clear, however, that finding was not challenged in this appeal.

(3)    there were any other relevant matters. It found that Al-Huda had demonstrated, and continued to demonstrate, that it did not understand its obligations under the family assistance law, which indicated that it should not be an approved provider of childcare.

25    The Tribunal then set out its reasoning in relation to the matters that s 52(4)(b) of the Minister’s Rules required it to consider as follows (at [194]):

Subsection 52(4)(b) of the Minister’s Rules requires the Respondent to consider whether it would be more appropriate to cancel the provider’s approval under subsection 195H(1)(b) of the Current Administration Act than to impose a different sanction, having regard to five matters:

(i)     Subsection 52(4)(b)(i) of the Minister’s Rules specifies whether the noncompliance has resulted in significant and multiple overpayments of CCS and ACCS, or is likely to result in such overpayments if the approval is not cancelled. The discussion of the Applicant’s non-compliance shows that it has resulted in significant and multiple overpayments of CCB and is likely to result in significant and multiple overpayments if the approval is not cancelled because of its demonstrated past and continuing fundamental failure of governance and its lack of understanding of its obligations.

(ii)     Subsection 52(4)(b)(ii) of the Minister’s Rules specifies whether the noncompliance indicates a deliberate or reckless disregard for the obligation to comply with the condition, or a lack of ability to understand that obligation. The Applicant has demonstrated a reckless disregard for the obligation to comply with conditions for continued approval. That is apparent from the detailed discussion of its non-compliance.

(iii)     Subsection 52(4)(b)(iii) of the Minister’s Rules specifies whether the noncompliance demonstrates that the provider is no longer a fit and proper person to provide a child care service for the purposes of section 194E of the Family Assistance Administration Act 1999 (Cth). Section 194E of the Current Administration Act specifies 12 matters to which regard must be had to determine whether a person is a “fit and proper person”. I consider each in turn:

•    the Applicant’s non-compliance with Commonwealth and State laws (the National Law) is serious, frequent and ongoing;

•    there is no evidence of any proceedings, other than this proceeding, currently before a court or Tribunal, that involve the Applicant;

•    there is no evidence of any decision, other than the reviewable decision, made under a law of the Commonwealth or a Sate or Territory relating to child care which adversely affects the Applicant;

•    subject to Part VIIC of the Crimes Act 1914 (Cth), there is no evidence of any conviction or finding of guilt against the Applicant for an offence against a law of the Commonwealth or a State or Territory including (without limitation) an offence against children, or relating to dishonesty or violence;

•    there is no evidence of any order for the Applicant to pay a pecuniary penalty for the contravention of a civil penalty provision of a law of the Commonwealth or a State or Territory;

•    the evidence does not establish and the Respondent did not contend that the Applicant's conduct involved fraud or dishonesty; the Tribunal is not dealing with possibilities and does not embrace the Respondent’s assertion that the Applicant’s conduct demonstrates such large scale neglect that this could not be discounted as a possibility; it has found that the Applicant’s records and Ms Tlais’ evidence is unreliable for the reasons set out earlier in this decision, including in relation to the 1581 sessions of care in the child’s own home;

•    the consideration of non-compliance set out above demonstrates that the Applicant had no, or inadequate, governance arrangements to ensure that the Applicant, its staff, educators, and parents/guardians complied with the family assistance law; for reasons given [35] –[147] the Applicant's new policies are not going to ensure future compliance with the family assistance law;

•    the consideration of non-compliance set out above demonstrates that the Applicant has a poor record of administering Commonwealth funds because the Applicant has a debt to the Commonwealth,93 and has on numerous occasions, failed to pass on a fee reduction and not immediately remitted the payment to the Respondent;

•    the Applicant owes a significant debt to the Commonwealth;

•    there is no evidence of insolvency or external administration involving the Applicant; this provision does not require repetition of matters addressed in subsections 194E(1)(h) and (i);

•    other matters prescribed by the Minister's Rules; the Applicant has some experience as a provider but as found above, its expertise is not commensurate with the length of its experience, as demonstrated by its past and on-going non-compliance with and lack of understanding of its obligations under the family assistance law; there is no evidence to suggest that the circumstances in subsections 46(4) and 46(5) of the Minister's Rules exist; and

•    any other matter Respondent considered relevant: for reasons set out earlier in this decision, I am not satisfied that the Applicant's recently adopted and proposed procedures and policies will ensure that it complies with its obligations under the family assistance law.

(iv)     Subsection 52(4)(b)(iv) of the Minister’s Rules specifies whether the noncompliance constitutes an unacceptable risk to the safety, health or wellbeing of children being cared for in one or more child care services for which the provider is approved. The Applicant’s non-compliance with the educator to child ratio set out at [156] to [157] and its lack of knowledge of when, where and whether care took place, as demonstrated for example, by its non-compliance in relation to educators and children overseas and care in the child’s own home, shows that the non-compliance constitutes an unacceptable risk to the safety, health or wellbeing of children being cared for in one or more child care services for which the provider is approved.

(v)    Subsection 52(4)(b)(v) of the Minister’s Rules specifies any other relevant matters. The Respondent referred to the Applicant’s proposed new policies and post-reviewable decision non-compliance. I agree that little weight should be given to the recently implemented and proposed policies and procedures because they do not address the fundamental governance problem of unreliable records and evidence from Ms Tlais, which continued to be exposed up to and during the hearing. The policies do not provide detailed procedures. The Applicant has not adopted an obvious measure that is likely to improve the accountability of educators and parents, that is, requiring payment of the gap fee to the provider and not to the educator.

(emphasis added)

26    The Tribunal concluded that Al-Huda was not a “fit and proper person” for the purpose of being a provider under the family assistance law. It determined that the appropriate sanction was that Al-Huda’s approval should be cancelled.

27    The Tribunal expressly found in [194], as I have emphasised above, that Al-Huda’s conduct did not involve fraud or dishonesty. It rejected the Secretary’s assertion that Al-Huda’s conduct demonstrated such large-scale neglect that fraud or dishonestly could not be discounted as a possibility and said that it was not dealing with possibilities. It explained that, rather, Al-Huda’s records and Ms Tlais’ evidence were unreliable because of poor administration and governance, not by reason of any dishonest or morally iniquitous behaviour.

The recklessness issue

28    The Tribunal made findings, in [179] and [194(ii)], that Al-Huda’s non-compliance, first, involved the reckless giving of inaccurate, false or misleading information to the Secretary (s 52(3)(d)); and, secondly, demonstrated a reckless disregard for its obligation to comply with the conditions for continued approval, which, the Tribunal said, was apparent from its detailed discussion of Al-Huda’s non-compliance. The Tribunal did not identify precisely, in [179] or [194(ii)] or anywhere else in its reasons, what it meant or understood when it used the expression “reckless” in considering either of ss 52(3)(d) or (4)(b)(ii). It is common ground that it did not give any reasoning that expressly addressed what it understood that legal standard to require.

29    The Secretary argued that, having regard to the Tribunal’s reasons as a whole, it was entitled to come to the conclusion, as a matter of fact, that Al-Huda was reckless within the meaning of s 52(3)(d) and (4)(b)(ii) of the Minister’s Rules. That was because, she asserted, in its natural and ordinary meaning, “reckless” included being careless or negligent. The Secretary contended that the use of the disjunctive “or” in both of s 52(3)(d) and (4)(b)(ii) supported the construction of “reckless” in its more lambent, or objective, meaning, in contrast or juxtaposition to its subjective meaning of being equivalent to intentional or deliberate in the sense of a person acting when not caring about a risk of which he or she was aware. She submitted that in Banditt v The Queen (2005) 224 CLR 262 at 275 [36], Gummow, Hayne and Heydon JJ acknowledged that “reckless” could be used in legislation in that objective sense. The Secretary argued that based on its overall findings, the Tribunal was entitled to come to its factual conclusion that Al-Huda was reckless, without identifying the precise legal rule on which it proceeded. She contended that Al-Huda had the onus of identifying why that factual finding was an error, and how it might be entitled to relief based on any such basis.

30    In the course of argument, the Secretary accepted that if I should come to the conclusion that there was an error of law in the way in which the Tribunal approached its fact-finding in arriving at its conclusions that Al-Huda was reckless, then it would be open to me, if the finding were material to the decision, to set it aside and remit the matter for re-hearing. However, the Secretary argued, in light of the Tribunal’s overwhelming adverse findings there would be no different result if its decision was set aside and the application for review remitted.

Consideration

31    In Banditt 224 CLR at 265–266 [2]–[3] and 275 [36], Gummow, Hayne and Heydon JJ stated that:

2    When “reckless” is used in applying the principles of the tort of negligence, the yardstick is objective rather than subjective. On the other hand, to sustain an action in deceit, fraud is proved when it is shown "that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false" (The formulation is that of Lord Herschell in Derry v Peek (1889) 14 App Cas 337 at 374). But (3) is but an instance of (2) because, as Lord Herschell put it in Derry v Peek ((1889) 14 App Cas 337 at 374): “[O]ne who makes a statement under such circumstances can have no real belief in the truth of what he states.” This reasoning is akin to that which supports the evidentiary inference explained by Lord Esher MR as being that one who wilfully shuts his eyes to what would result from further inquiry may be found to know of that result (English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700 at 707–708).

3     To these expositions of the civil law by Lord Herschell and Lord Esher there may be added the following statement by Lord Edmund-Davies in his dissenting speech in Commissioner of Metropolitan Police v Caldwell ([1982] AC 341 at 358. The majority decision in Caldwell was unanimously overruled in R v G [2004] 1 AC 1034):

“So if a defendant says of a particular risk, ‘It never crossed my mind,’ a jury could not on those words alone properly convict him of recklessness simply because they considered that the risk ought to have crossed his mind, though his words might well lead to a finding of negligence. But a defendant’s admission that he ‘closed his mind’ to a particular risk could prove fatal, for, ‘A person cannot, in any intelligible meaning of the words, close his mind to a risk unless he first realises that there is a risk; and if he realises that there is a risk, that is the end of the matter’. (See Glanville Williams, Textbook of Criminal Law (1978), p 79)”

…

36     It may well be said that “reckless” is an ordinary term and one the meaning of which is not necessarily controlled by particular legal doctrines. However, in its ordinary use, “reckless” may indicate conduct which is negligent or careless, as well as that which is rash or incautious as to consequences; the former has an “objective”, the latter a “subjective”, hue.

(The italic emphasis is original, I have added the bold)

32    Relevantly here, the rule in s 52(3)(d) required the Secretary to form a view as to whether a provider’s non-compliance involved either deliberate or reckless giving of information of a particular kind, namely, inaccurate, false or misleading information. The criteria of “deliberate or reckless” giving of information relevantly required the decision maker to have regard to the state of mind of the provider when giving information that had the characteristic that it was wrong.

33    The rule did not provide simply that the act of giving any kind of inaccurate, false or misleading information to the Secretary could be a relevant consideration in the exercise of the power to impose a sanction. Had that been the rule-maker’s intention, the rule would be differently expressed. The rule included the important qualification about the nature of a provider’s non-compliance in the giving of the wrong information, namely, that the non-compliance involved the provider giving it deliberately or recklessly.

34    “Deliberate” in s 52(3)(d) must mean that the provider intended to give the information, knowing that it was inaccurate, false or misleading – mere negligence would not suffice. In that context, I am of opinion that the alternate state of mind that s 52(3)(d) prescribed as “reckless” connoted that when that the provider gave the information it did so without belief in its truth or whether it be true or false, as explained in Banditt 224 CLR at 265 [2]. Martin CJ noted in Giudice v Legal Profession Complaints Committee [2014] WASCA 115, [44]–[46] (see Buss JA at [95]–[96] and Edelman J who agreed at [130] with Martin CJ, and see too at [147]), the subjective state of mind connoted by “reckless” means indifference to the truth of the statement or not caring whether it is true or false. The Chief Justice called in aid Bowen LJ’s reasons in Angus v Clifford [1891] 2 Ch 449 at 470–471 and succinctly made the point at [45] that “not caring did not mean not taking care”. Bowen LJ had said:

It always has been the law that a man must have a belief, because, as Lord Bramwell points out in the case of Smith v. Chadwick (9 App. Cas 203) and Lord Herschell in Peek v. Derry [14 App. Cas 337], a man who affirms that he knows a thing, affirms implicitly that he believes it, and if he does not believe it, that affirmation is false. It is not the less false because the affirmation he makes is an affirmation about the state of his own mind….

an action for deceit is a common law action — the old direction, time out of mind, was this, did he know that the statement was false, was he conscious when he made it that it was false, or if not, did he make it without knowing whether it was false, and without caring? Not caring, in that context, did not mean not taking care, it meant indifference to the truth, the moral obliquity which consists in a wilful disregard of the importance of truth, and unless you keep it clear that that is the true meaning of the term, you are constantly in danger of confusing the evidence from which the inference of dishonesty in the mind may be drawn — evidence which consists in a great many cases of gross want of caution — with the inference of fraud, or of dishonesty itself, which has to be drawn after you have weighed all the evidence.

(emphasis added)

35    I reject the Secretary’s argument that the criterion of “reckless” in s 52(3)(d) was used in an objective sense, namely, that it would be sufficient if the non-compliance involved the negligent or careless giving of information. That construction would conflate the subjective state of the provider’s mind, being “reckless”, in giving the information with the objective quality of error as a characteristic of the information, namely that it was inaccurate, false or misleading. The giving of erroneous information ordinarily will be careless or negligent because it is wrong or likely to be so. The rule uses the word “reckless” as the alternative state of mind to “deliberate” in the evaluation of the way in which the non-compliance occurred. It is unlikely that the rule maker intended that a provider who was “reckless” in giving wrong information would be treated as one who had merely been negligent or careless, when imposing a sanction in contrast to how a provider who had done so deliberately would be treated. If “reckless” were construed as the Secretary argued, then a provider who gave wrong information knowing of the risk that it was inaccurate but not caring whether it was true or false would be assessed in the same way as one who did so negligently, rather than deliberately. It would be open to the Secretary to have regard to other matters, such as negligence or carelessness in giving erroneous information, as s 52(2) provides.

36    However, I am of opinion that the ordinary and natural meaning of s 52(3)(d) requires a consideration of the subjective state of mind of the provider for the purposes of determining whether a sanction should be imposed, being a state of mind amounting, in law, to an intention to give the information either knowing it to be wrong or being subjectively reckless as to whether it was true or false. And, such a construction is reinforced by the similar choice of criteria in s 52(4)(b)(ii).

37    The position is even clearer when one comes to s 52(4)(b)(ii), because that prescribes three different alternate states of mind: (1) a deliberate or (2) reckless disregard for the obligation to comply with a condition, or (3) a lack of ability to understand that obligation. The third criteria, being lack of ability to understand an obligation, requires consideration of the provider’s state of mind and its capacities. Likewise, the circumstances of non-compliance in the first two elements in s 52(4)(b)(ii) involve consideration of the provider’s state of mind, being a deliberate or reckless disregard for an obligation that it owed. That criterion required not merely an objective failure of the provider to have regard to the obligation, but a state of mind that connotes some form of moral obliquity or intentional acting without caring whether or not it complied with the condition. Relevantly, the point is made in the quotation in Lord Edmund-Davies’ speech in Caldwell [1982] AC at 358 that Gummow, Hayne and Heydon JJ endorsed in Banditt 224 CLR at 266 [3] (see [31] above):

“A person cannot, in any intelligible meaning of the words, close his mind to a risk unless he first realises that there is a risk; and, if he realises that there is a risk, that is the end of the matter.”

(emphasis added)

38    The Tribunal never explained what it meant or understood by its duty to consider whether Al-Huda was “reckless” under either of ss 52(3)(d) or 4(b)(ii). Rather, in the only two findings it made about recklessness, it did so by simply echoing the words of the Minister’s Rules and referring back to its earlier findings, without explaining what it understood “reckless” to mean.

39    I reject the Secretary’s argument that it is possible to find that the Tribunal did not adopt an erroneous test of what was “reckless” in its considerations, having regard to its rejection of her allegation of dishonesty on the part of Al-Huda. It expressly found there was no dishonesty on the part of Al-Huda. The Tribunal rejected the Secretary’s assertion that Al-Huda’s conduct demonstrated such large-scale neglect that a dishonest state of mind could not be discounted as a possibility. Rather, it found only that Al-Huda’s business records and Ms Tlais’ evidence were unreliable. That finding was a far cry from a finding of subjective recklessness.

40    Each of s 52(3)(d) and (4)(b)(ii) was a mandatory relevant consideration in the exercise of the power to impose a sanction in s 195H(1). In Telstra Corporation Ltd v Australian Competiton and Consumer Commission (2008) 176 FCR 153 at 181–183 [103]–[112] (in a passage that Jacobson, Lander and Foster JJ approved in Telstra Corporation Ltd v Australian Competition Tribunal (2009) 175 FCR 201 at 242 [267]) I explained that a decision maker had to take mandatory relevant considerations into account by giving each of them weight, in Mason J’s words in Reg v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329, “as a fundamental element in making his determination”.

41    For these reasons I am of opinion that the Tribunal did not address the mandatory relevant considerations in s 52(3)(d) and (4)(b)(ii) of the Minister’s Rules with a correct understanding of the law in making its adverse findings that Al-Huda’s non-compliance was reckless. In doing so, the Tribunal made a material jurisdictional error: Hossain v Minister for Immigration (2018) 264 CLR 123 at 136 [34] per Kiefel CJ, Gageler and Keane JJ; 147–148 [70]–[72], per Edelman J (with whom Nettle J agreed at 136 [39]).

42    In my opinion, the Tribunal’s findings in respect of s 52(3)(d) and (4)(b)(ii), that each of Al-Huda’s non-compliances was reckless, were material for the purposes of ascertaining its entitlement for relief. The Tribunal was obliged to take into account each of those findings as a fundamental element in its decision-making when deciding, first, that a sanction was appropriate, and, secondly, the actual sanction to be imposed, namely, the cancellation. It is impossible to conclude that, had the Tribunal appreciated that a finding of recklessness was tantamount to a finding of dishonestly (which it had declined to make against Al-Huda), it would have made no difference to the ultimate outcome, having regard to its other findings. A finding that a person is subjectively reckless is a serious and significant finding. The Tribunal had to (and, I infer, did) take into account its findings that Al-Huda was “reckless" by giving each of them weight as a fundamental element in making its determination that Al-Huda’s status as a provider be cancelled.

Conclusion

43    In my opinion, for the reasons above, the Tribunal failed to exercise its statutory function in considering the matters under ss 52(3)(d) and (4)(b)(ii) in accordance with law and thereby committed jurisdictional error. I would uphold the appeal on ground 1(a).

44    I considered that the appropriate course was to give a decision promptly so that the parties would know their position and the matter could then be dealt with in the Tribunal. That was because of the significant amount of public money which Al-Huda is continuing to receive because of the stay of the cancellation of its provider status, and the fact that at the end of the hearing I formed a firm view that the Tribunal had committed a jurisdictional error as I have explained above so that the matter must be remitted.

The remaining grounds of appeal

45    I should briefly also state my conclusions on the other grounds. In my opinion, ground 3 involved a challenge to the Tribunal’s fact-finding about Al-Huda’s failure to provide the appropriate quality of childcare in accordance with s 7(2)(b) of the Eligibility Rules in a way that did not evince any jurisdictional error. The Tribunal gave reasons why it determined that Al-Huda had not provided the appropriate level of childcare because of its findings that Al-Huda’s oversight of educators and its knowledge of when, where and what they were doing was inadequate ([155]). Whether those findings would have been sufficient of themselves to sustain the ultimate decision need not be considered since the matter must be remitted.

46    Likewise, in my opinion, grounds 4 and 5 were, really, complaints about the Tribunal’s fact-finding in a way that did not reveal jurisdictional error. It was clear that, at all times, Ms Tlais’ credibility was in issue. Indeed, this was plain in the Secretary’s submissions, which the Tribunal rejected, that she was dishonest. It was not necessary for the Secretary or Tribunal to put to Ms Tlais every single criticism. The Tribunal described as “disingenuous” Ms Tlais’ claim in her affidavit of 31 May 2019 that she was partly addressing the Secretary’s amended statement of facts, issues and contentions of 17 May 2019. While that may have been an unfortunate description of Ms Tlais’ evidence in that respect, in the end, the Tribunal accepted as its reasons demonstrated, a considerable amount of her evidence in that affidavit. It also rejected other parts of that affidavit, as was open to it as a tribunal of fact.

47    However, the Tribunal was not obliged to disclose its thought process to the parties so long as Al-Huda, or the witness, was sufficiently on notice about the issue(s) concerning the witness’ credibility. For, as Gleeson CJ, Kirby, Hayne, Callinan and Heydon JJ explained in SZBEL v Minister for Multicultural and Indigenous Affairs (2006) 228 CLR 152 at 165–166 [47]–[48]:

That indication may be given in many ways. It is not necessary (and often would be inappropriate) for the Tribunal to put to an applicant, in so many words, that he or she is lying, that he or she may not be accepted as a witness of truth, or that he or she may be thought to be embellishing the account that is given of certain events. The proceedings are not adversarial and the Tribunal is not, and is not to adopt the position of, a contradictor. But where, as here, there are specific aspects of an applicant’s account, that the Tribunal considers may be important to the decision and may be open to doubt, the Tribunal must at least ask the applicant to expand upon those aspects of the account and ask the applicant to explain why the account should be accepted.

Secondly, as Lord Diplock said in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry ([1975] AC 295 at 369),

“the rules of natural justice do not require the decision maker to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental processes before he reaches a final decision. If this were a rule of natural justice only the most talkative of judges would satisfy it and trial by jury would have to be abolished.”

Procedural fairness does not require the Tribunal to give an applicant a running commentary upon what it thinks about the evidence that is given. On the contrary, to adopt such a course would be likely to run a serious risk of conveying an impression of prejudgment.

(bold emphasis added)

48    In addition, I am not satisfied that the Tribunal’s statement that it was not necessary for it to consider material annexed to Ms Tlais’ affidavit of 31 May 2019 that was not directly addressed constituted an error, much less a jurisdictional error. As Robertson J pointed out in Minister for Immigration and Citizenship v SZRKT (2013) 212 FCR 99 at 127 [97], merely ignoring relevant material does not establish jurisdictional error and “this is consistent with proper limits on judicial review so that fact-finding is a matter for the tribunal of fact”. His Honour went on to say (212 FCR at 130 [111]):

In my opinion there is no clear distinction in each case between claims and evidence: see SHKB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 545 at [24], set out at [69] above. The fundamental question must be the importance of the material to the exercise of the Tribunal’s function and thus the seriousness of any error. In my opinion the distinction between claims and evidence provides a tool of analysis but is not the discrimen itself. Further, it is important not to reason that because a failure to deal with some (insubstantial or inconsequential) evidence will, in some circumstances, not establish jurisdictional error, then a failure to deal with any (substantial and consequential) evidence will also not establish jurisdictional error.

(emphasis added)

49    I was not taken to any material in Ms Tlais’ affidavit of 31 May 2019 that indicated any substantial matter that the Tribunal ought to have considered but did not. Senior counsel for the Secretary took me to the page in the transcript of the Tribunal hearing where counsel for Al-Huda told the Tribunal that Ms Tlais’ affidavit of 31 May 2019 was:

“relatively short in terms of substantive paragraphs, being only nine pages… And most of the material that is annexed or exhibited is, in fact, not new. Some of this, in fact, the great bulk of it has been previously provided to the Tribunal and it was provided by way of reiteration. And so these are the supporting documents that I have already provided to the Department, as I understand the case.”

50    Accordingly, unless there was some information or matter in that material that was not otherwise before the Tribunal, there is no reason to think it did not have regard to any material or documents that were before it.

51    Grounds 2, 6, 7 and 8 essentially concerned the overall way in which the Tribunal weighed evidence or arrived at its conclusions. Those grounds raised complaints about the weight that the Tribunal gave to certain factors or matters. In my opinion, those grounds substantively amounted to challenges to the Tribunal’s fact-finding that are not jurisdictional in nature: SZRKT 212 FCR at 127 [97], 130 [111].

52    Ground 9 asserted that the Tribunal misconstrued the meaning of “aggravating factors” in s 52(3)(g) when it found that the extent and breadth of Al-Huda’s non-compliance led it to the conclusion that the non-compliance was systemic, had continued after the decision under review had been made and that its records and Ms Tlais’ evidence continued to be unreliable, as it found was demonstrated in her affidavit of 31 May 2019.

53    It is important to appreciate that s 52(3)(g) required consideration of whether the non-compliance is “associated with any other relevant aggravating or mitigating factors in relation to the non-compliance” (emphasis added). In my opinion, that rule is directed to factors distinguishable from those addressed earlier in s 52(3)(a)–(d), so as to give meaning to the word “other”: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 382 [71] per McHugh, Gummow, Kirby and Hayne JJ.

54    To the extent that the Tribunal took into account, for example, the systemic nature of Al-Huda’s non-compliance, it was entitled to do so in weighing how serious that non-compliance was when making the ultimate finding of non-compliance. Likewise, the continuation of the non-compliance was a matter that it could take into account in weighing how its seriousness affected the Tribunal’s assessment of the relevant conduct. However, it was not entitled to take those factors into account under the separate head of s 52(3)(g). If it did so, that may or may not have led it into double-counting those factors in its evaluative task. If it did so, that would have been an error. However, it is not apparent quite how that would affect the overall decision, and since the matter must go back, the Tribunal can re-determine it on a correct basis.

Conclusion

55    For these reasons, I am of opinion that the appeal must be allowed, the Tribunal’s decision must be set aside and the matter remitted to the Tribunal to be heard and determined in accordance with law. The Secretary must pay Al-Huda’s costs.

Associate:

Dated:    6 November 2020