Charan v Nationwide News Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2015 06476

ATKINSON PRAKASH CHARAN	Plaintiff
v
NATIONWIDE NEWS PTY LTD (ACN 008 438 828)	Defendant

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JUDGE:	J FORREST J
WHERE HELD:	Melbourne
DATES OF HEARING:	20, 21, 23, 24, 27 and 28 February, 1, 2, 3, 6, 7, 8, 9, 10, 14, 15, 28, 29, 30 and 31 March, 3, 4, 5, 6, 7, 10, 11 and 12 April, 21, 22, 23, 24 and 31 August, 1 September 2017
DATE OF JUDGMENT:	25 January 2018
CASE MAY BE CITED AS:	Charan v Nationwide News Pty Ltd
MEDIUM NEUTRAL CITATION:	[2018] VSC 3

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DEFAMATION – Imputations – Defamatory words – Justification – Defamation Act 2005 (Vic) s 25 – Evidence Act 2008 (Vic) ss 69, 135 – Registered Training Organisation – Victorian Training Guarantee – Unscrupulous conduct – Failure to comply with quality standards – Business Records – Records kept by a statutory body – What constitutes a business record – Admission of evidence which may be unfairly prejudicial – Probative value outweighs unfair prejudice.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	G L Schoff QC with T J Mullen	Stephens Lawyers
For the Defendant	M J Collins QC with R L Enbom	M + K Lawyers Pty Ltd

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

The events leading up to the publication of the article.............................................................. 2

The article............................................................................................................................................ 5

The retraction and the apology........................................................................................................ 7

The alleged imputations arising out of the article and the defence........................................ 7

Mr Charan was head of ACN, which engaged in unscrupulous door-to-door marketing practices to vulnerable consumers..................................................................................................... 8
Mr Charan [as head of] ACN carried on a business which was significantly non-compliant with quality standards................................................................................................................. 9

Is the article defamatory of Mr Charan?...................................................................................... 10

Principles in relation to defamatory imputations.................................................................. 10
Application of the principles to this case................................................................................. 11
Mr Charan managed ACN which engaged in unscrupulous business practices that took advantage of vulnerable consumers – (a and b)............................................... 14
Mr Charan managed ACN which engaged in misleading and deceptive conduct to vulnerable consumers – (c) and (d)..................................................................... 16
Mr Charan managed ACN which engaged in unscrupulous door-to-door marketing practices to vulnerable consumers – (e) and (f)................................................. 17
Mr Charan managed ACN which was significantly non-compliant with quality standards – (g) and (h)............................................................................................................... 18

The justification defence................................................................................................................ 20

Mr Charan’s role at CTI and associated companies prior to December 2014....................... 23

Chronology.................................................................................................................................. 23
Evidence on this issue................................................................................................................ 26
Relevant persons not called as witnesses................................................................................ 27
Mr Charan’s version of his role at CTI and associated companies...................................... 27
The evidence and credibility of Mr Charan............................................................................ 29
Mr Charan’s memory – or lack of it................................................................................ 29
Telephone and text message communications between Mr Charan and Mr Brown before and around the time of the trial.................................................................................. 41
Deletion of text messages by Mr Charan....................................................................... 57
Mr Charan’s involvement in potentially unlawful conduct prior to the ASX float. 62
Communications and interaction of Mr Charan with potential witnesses............... 73
Documentary evidence entirely inconsistent with Mr Charan’s asserted minimal role in the CTI businesses........................................................................... 79
Conclusion as to quality of Mr Charan’s evidence.......................................... 79

Mr Charan’s role at CTI.............................................................................................................. 81
Conclusion............................................................................................................. 92

Mr Charan’s role at CTT............................................................................................................ 93
Conclusion............................................................................................................. 99

Mr Charan’s role at AMA (Thoan)........................................................................................... 99
Conclusion........................................................................................................... 108

Mr Charan’s role in the ACN float......................................................................................... 108
Conclusion........................................................................................................... 111

Conclusion as to Mr Charan’s role with the CTI companies prior to the float................ 111

Did Mr Charan, in his capacity as a director of an RTO, engage in unscrupulous conduct? 117

The allegations........................................................................................................................... 117
The evidence — generally........................................................................................................ 117
The Victorian Training Guarantee scheme............................................................................ 118
Relevant parts of the VET funding contracts........................................................................ 120
Audits and reviews under the VET funding contract......................................................... 123
The audits and reviews of CTT and AMA............................................................................ 124
Background to the audits of CTI and AMA.......................................................................... 125
The CTT Diabetes & Early Childhood courses EOE audit—Report of 4 May 2015.............................................................................................................. 129
The CTT Diabetes & Early Childhood courses EOP audit—Report of 15 May 2015.............................................................................................................. 134
The AMA Diabetes EOE audit—Report of 15 May 2015.............................. 136
CTT Diabetes student interviews—June 2015................................................ 137
CTT Early Childhood courses student interviews—June 2015................... 138
The Ernst & Young July AMA contract review audit—Report of 23 September 2015.............................................................................................................. 139

Are the audit reports and associated material admissible under s 69 of the Evidence Act? 142
Statutory provisions........................................................................................... 143
Are the documents business records?............................................................. 146
Were the documents obtained in contemplation of a legal proceeding? (s 69(3)) 150
Conclusion as to admissibility.......................................................................... 155

Does the evidence have a non-hearsay purpose under s 60?............................................. 156
Should the documents be excluded under s 135 of the Evidence Act?............................... 156
Conclusion as to admissibility and tender of the reports and allied documents 162

Why would Mr Charan engage in unscrupulous conduct which took advantage of vulnerable consumers?....................................................................................................................... 163
The first allegation: mass enrolments of students by CTI companies............................... 166
Evidence on this issue........................................................................................ 166
Conclusion........................................................................................................... 178

The second allegation: Falsification of enrolments and course material.......................... 178
Evidence on this issue........................................................................................ 179
Conclusion........................................................................................................... 205

Did Mr Charan’s unscrupulous conduct result in him making a large amount of money? 207

Did companies managed by Mr Charan comply with the quality standards required by the 2014 VET funding contract?............................................................................................................ 207

The allegations........................................................................................................................... 207
The first allegation: the offering of incentives...................................................................... 208
The relevant provision in the VET funding contract.................................................. 209
The evidence on this issue.............................................................................................. 209
Conclusion........................................................................................................................ 218

The second allegation: AMA’s failure to carry out Pre-Training Reviews....................... 218
The relevant provisions of the VET funding contract................................................ 219
The evidence on this issue.............................................................................................. 220
The Ernst & Young audit process.................................................................................. 220
The Ernst & Young contract review.............................................................................. 221
Conclusion........................................................................................................................ 228
Conclusion as to the allegations of significant non-compliance............................... 228

Summary of conclusions as to defamation and justification................................................ 228

HIS HONOUR:

Introduction

The plaintiff, Atkinson Prakash Charan, is a successful businessman who has been involved in vocational education since 2010. With his partner, Ivan Brown, he owned (through corporate vehicles) a number of vocational education and training (VET) organisations that flourished under their management. In December 2014, Mr Charan sold most of his interests in these companies as part of the float of the Australian Careers Network (ACN) on the Australian Stock Exchange (ASX). He received over $35 million for the sale of his stake.

On 20 November 2015, The Australian, a newspaper owned by the defendant, Nationwide News Pty Ltd (Nationwide), published an article in its print version and online website concerning the activities of ACN and a subsidiary, Phoenix Institute (Phoenix). The imputations that are said to flow from the article are set out below. It suffices to say that the nub of Mr Charan’s case is that the article conveys to the reader that, whilst under his management, VET organisations acted unscrupulously, in breach of regulatory standards, and that he made a large amount of money as a result of that conduct.

At the time of publication, Mr Charan’s only involvement with ACN was the holding, in escrow, of approximately four per cent of its issued capital. Phoenix had been acquired by ACN after he ceased any management role with ACN and its associated companies. On 21 November 2015 (the following day), a correction was published in the print edition and a correction and apology in the online edition. Mr Charan regarded both as unacceptable, and after a letter of concern to the author of the article, issued this proceeding against Nationwide.

The defence to these allegations is curious, but legitimate. Nationwide says that the imputations alleged by Mr Charan are not sustainable. Alternatively, if they are made out, then, after a relatively late amendment to the pleadings, those imputations going to unscrupulous conduct and non-compliance with quality standards on the part of companies under the management of Mr Charan, can be justified, and the defence of substantial truth under s 25 of the Defamation Act 2005 (Vic) (the Act) is made out.

The events leading up to the publication of the article

In order to understand the thrust of the article, its alleged imputations, and what transpired after its publication, it is necessary to set out, in short compass, the sequence of events between the time that Mr Charan became involved in the VET sector and the time of the publication of the article.

The system of private VET organisations offering vocational education programs (effectively in competition with the public TAFE system) commenced in this state in the early 1990s and developed over the next twenty years. Federal and other State governments have enacted similar schemes. In Victoria, a Registered Training Organisation (RTO) may be accredited with either the Commonwealth or the State government regulator.

In 2009, the Victorian Department of Education and Training (DET) implemented significant changes to the RTO system in this state which encouraged a large number of organisations to register as RTOs and enter the VET sector under a scheme called ‘Securing Jobs for the Future’. They competed with TAFE colleges and received direct payments from the State for student enrolments under the Victorian Training Guarantee (VTG). I will set out the way in which this system worked in more detail later.

Mr Charan entered the VET sector after engaging in a wide range of occupations. His primary interest and work history, however, was in sales and marketing. In 2010, he commenced work (as best I can tell, as a sub-contractor) in marketing for an RTO.[1] Through this business he met Mr Brown, who worked as a trainer and in sales and marketing.[2]
[1]T229–231, T232.
[2]T233.

In 2012, Mr Charan, Mrs Sally Charan, and Mr Brown established Community Training Initiatives (CTI), an incorporated company with Mr Charan and Mr Brown holding 50 per cent of the shares. The company was spectacularly successful, obtaining contracts with a number of TAFEs for the delivery of training courses.[3] Although CTI was not an RTO with either the Victorian or Federal Governments, it entered into partnerships or ‘auspicing’ arrangements with TAFE colleges, in particular Kangan and Chisholm Institute.
[3]T237–241, T244–245.

In 2013, Mr Brown and Mr Charan determined to expand the business by purchasing RTOs with existing government contracts. RTOs at a state level were directly funded by the relevant government department[4] and entered into comprehensive agreements for the provision of education services. Axiomatic to the development of a business of an RTO in the VET sector was increasing the number of student enrolments and thus the level of government funding.
[4]In Victoria, the DET.

In the case of Federal funding, RTOs entered into contracts under the VET FEE-HELP Scheme. The Federal Regulator is the Australian Skills and Quality Authority (ASQA).

At a State level, an RTO would operate in a similar manner, by way of a VET funding contract (VET funding contract) with DET. The Victorian Regulator was, at the relevant time, the Victorian Skills and Quality Authority (VSQA). A Victorian company, Consider This Training (CTT) had such a contract[5] when it was acquired by Mr Brown and Mr Charan in late 2013.
[5]CB.0745.001.

Once an RTO was party to such an agreement, it would be paid a fee for each student enrolment and participation in a course, which was usually paid incrementally during the course of a student’s training.

In February 2014, Mr Brown and Mr Charan discussed the listing of CTI (and the associated training companies owned by them) on the ASX. They engaged brokers, lawyers and accountants to assist them with this venture that was given the name ‘Project Standard’. It was determined that the companies (either already owned by the partners or purchased by them for the purpose of the float) would ultimately be placed within a group controlled by ACN, the holding company designated for the IPO.[6] As part of the expansion of the business and to assist in the float, several other RTOs were acquired after this date—including and of particular relevance to this case, Australian Management Academy (AMA)—the trading name of a company, Thoan Pty Ltd (Thoan). It also had a VET funding contract.
[6]T261–262.

On 30 September 2014, ACN became the holding company of each of the various companies within the Charan/Brown group – including CTI, CTT and AMA. Both Mr Charan and Mr Brown were allocated just short of 25 million shares each in ACN.[7]
[7]CB.0032: Second Replacement Prospectus for the initial public offering, Australian Careers Network Ltd (‘ACN Prospectus’), p 118.

Mr Charan resigned as a director of CTI on 30 September 2014.

On 26 November 2014, ACN published a prospectus (ACN prospectus)[8] offering on the IPO an issue price of $1.70 per share. The prospectus stated that Mr Charan would sell down 21.5 million shares for a consideration of approximately $36.55 million while the balance would be held in escrow.[9] Mr Charan was required to enter into a non-compete restraint deed with ACN.[10]
[8]The original prospectus for the float was lodged with ASIC on 20 October 2014 and subsequently replaced by the ACN prospectus.
[9]ACN Prospectus, p 30.
[10]Ibid, p 126.

On 10 December 2014, ACN listed on the ASX and Mr Charan received $35 million for the sale of his interest. He was left with slightly more than 4 per cent equity, held in escrow. He had no ongoing managerial role with the company. Mr Brown sold only a comparatively small portion of his shareholding and became Chief Executive Officer of ACN.

Shortly prior to the listing and continuing to the present time, there has been a large amount of adverse publicity concerning ‘rorts’ in the VET industry in its provision of vocational training, particularly concerning the abuse of contracts with both Federal and State governments.

During 2015, one of the authors of the subject article, Kylar Loussikian (an employee of Nationwide), published several articles about the industry and its troubles.[11] In addition, during this period a number of audits and reviews were carried out on VET organisations, including two organisations within the ACN group: AMA and CTT.
[11]E.g. CB.0022.

The ACN group failed within a year and a quarter of its listing. It was placed into voluntary administration on 22 March 2016.

The article

The article was published in the print version of The Australian on 20 November 2015 (under the heading ‘Watchdog takes peak training college to court’) and online (under the heading ‘ACCC to take top training college Phoenix Institute to court’). The online version is reproduced in Annexure A, which I précis here:[12]
[12]CB.0344 (print version); CB.0345 (online version). The text of both articles is identical. There are two minor variations in the online article from the print version: the heading and the addition of a photograph of Mr Brown in the online version.

(a) Phoenix (owned by ACN) is the subject of court action by the Australian Competition and Consumer Commission (ACCC);

(b) That action has been taken less than a month after the ACCC began court action against another RTO, Unique International College (Unique), for engaging in misleading or deceptive and unconscionable conduct;

(c) The CEO of ACN, Mr Brown, was comfortable with the company’s conduct and noted that the ACCC had not provided Phoenix with any specific allegations or names of complainants, which could be easily tested;

(d) The ACCC was cracking down on the sector and was concerned about unscrupulous door-to-door marketing practices;

(e) Previous media reports alleged that Phoenix sent sales staff into housing commission estates, pressuring potential students to join up;

(f) The ACCC said that the court action was part of a broader investigation into colleges;

(g) ACN was headed by Mr Brown and Mr Charan;

(h) ACN was under investigation by the Federal Department of Education and its ASQA shares were suspended from trade since last month;

(i) ASQA said it had uncovered significant non-compliance and was in the process of deregistering Phoenix;

(j) Mr Brown and Mr Charan had amassed fortunes of $68 and $35 million respectively;

(k) ACN acquired Phoenix for $2.25 million in January 2015 and the Federal Government fees received by it ($2.7 million and $1.9 million) were a fraction of the funding it received in 2015; and

(l) According to a Sydney University study, ACN converted more than half of the training funds from the Victorian Government into profit for its shareholders.

The retraction and the apology

Mr Charan learned of the article early on the morning of 20 November 2015 when he read the electronic version[13] on his telephone.[14] He contacted Mr Loussikian and asked for a retraction and an apology.[15] There followed an exchange of SMS messages between Mr Charan and Mr Loussikian regarding the article and any corrections to it.[16]
[13]CB.0345.
[14]T270–271.
[15]T274–277.
[16]CB.0352.

The next day, a Saturday, a correction (but no apology) was published on page two of the print version, which read as follows:

A report in The Australian yesterday (“Watchdog takes peak training college to court”, page 5) named Atkinson Prakash Charan as part of management at Australian Careers Network, which is under investigation by the Australian Skills Quality Authority. Mr Charan, in fact, left ACN late last year, and has no ongoing role in the company.[17]

[17]CB.0349.

The online version was amended in a different way. It contained an apology and removed any mention of Mr Charan, apart from the reference to the listing of ACN and his amassing a fortune of $35 million:

An earlier version of this article inadvertently named Atkinson Prakash Charan as part of ACN’s current management. Mr Charan, in fact, left ACN late last year and has no ongoing role in the company. The Australian apologises to Mr Charan for the error.[18]

[18]CB.0347.

The online article, and the apology, remain accessible in this form at the present time.

The alleged imputations arising out of the article and the defence

The eight pleaded imputations in the statement of claim (which I have grouped under four separate headings)[19] read as follows:
[19]Second further amended statement of claim of 19 October 2016.

Mr Charan was head of ACN, a company which engaged in unscrupulous business practices that took advantage of vulnerable consumers

(a) The plaintiff, as head of ACN, has amassed a fortune by engaging in unscrupulous business practices that take advantage of vulnerable consumers and government funding schemes in the education and training sector. (The first imputation)

(b) There are reasonable grounds to suspect that the plaintiff, as head of ACN, has amassed a fortune by engaging in unscrupulous business practices that take advantage of vulnerable consumers and government funding schemes in the education and training sector. (The second imputation)

Mr Charan was head of ACN, a company which engaged in misleading and deceptive conduct

(c) The plaintiff, as head of ACN, has been marketing education and training courses to vulnerable consumers in a manner that constitutes misleading and deceptive and unconscionable conduct in breach of the law. (The third imputation)

(d) There are reasonable grounds to suspect that the plaintiff, as head of ACN, has been marketing education and training courses to vulnerable consumers in a manner that constitutes misleading and deceptive and unconscionable conduct in breach of the law. (The fourth imputation)

Mr Charan was head of ACN, which engaged in unscrupulous door-to-door marketing practices to vulnerable consumers

(e) The plaintiff, as head of ACN, has been carrying on business in a manner that involves unscrupulous door-to-door marketing practices in relation to vulnerable consumers in the training and education sector. (The fifth imputation)

(f) There are reasonable grounds to suspect that the plaintiff, as head of ACN, has been carrying on business in a manner that involves unscrupulous door-to-door marketing practices in relation to vulnerable consumers in the training and education sector. (The sixth imputation)

Mr Charan [as head of] ACN carried on a business which was significantly non-compliant with quality standards

(g) The plaintiff, as head of ACN, has been carrying on business in a manner that involves significant non-compliance with the quality standards required from providers of vocational educational services. (The seventh imputation)

(h) There are reasonable grounds to suspect that the plaintiff, as head of ACN, has been carrying on business in a manner that involves significant non-compliance with the quality standards required from providers of vocational educational services. (The eighth imputation)

Nationwide’s original defence reads as follows:

As to paragraph 5, the Defendant: (a) denies the allegations because the Web Article and the article published in print on page 5 of The Australian titled “Watchdog takes peak training college to Court” (Print Article) in their natural and ordinary meanings, do not convey, were not understood to convey, and were incapable of conveying the imputations alleged (the Imputations); and (b) says further that the Imputations alleged to have been conveyed may only be derived by means of a strained, forced or unreasonable interpretation.

In its amended defence filed in October 2016 (pursuant to the order of an Associate Justice), Nationwide added a plea of justification which read as follows:

Further or alternatively, if (which is denied) the Print Article and the Web Article are defamatory of the Plaintiff in the meanings alleged in sub-paragraphs 5(a)-(b) and 5(g)-(h) of the SFSOC, or any permissible variant thereof, then in those meanings the Print Article and the Web Article are substantially true and accordingly the Defendant has a defence in respect of the publication of those meanings both at common law and pursuant to section 25 of the Defamation Act 2005 (Vic.), and the equivalent provision in the other States and Territories of Australia.

So, justification was asserted by Nationwide to the imputations relating to Mr Charan managing a company which engaged in unscrupulous business practices and significant non-compliance with quality standards.

Is the article defamatory of Mr Charan?
Principles in relation to defamatory imputations

It is necessary for Mr Charan to show that:

(a) The imputations (or meanings) he relies upon are, in fact, conveyed by the article; and then that

(b) Those imputations are defamatory of him.

In relation to the first point, the principles are well settled, as encapsulated in the following passage from the judgment of White J in Hockey v Fairfax Media Publications Pty Ltd:

The question is whether ordinary reasonable readers would have understood the matters complained of in the defamatory senses pleaded. The ordinary reasonable meaning of a matter may be either its literal meaning or that which is implied or inferred by the matter. It includes inferences and conclusions which the ordinary reasonable person draws from the words used, taking into account the observation of Lord Reid in Morgan v Odhams Press Ltd at 1245, that the reader may engage in a certain amount of ‘loose thinking’.
…
Ordinary reasonable readers are taken to be persons of ordinary intelligence, experience and education, who are neither perverse nor morbid nor suspicious of mind, nor avid for scandal. They do not live in ivory towers and can and do read between the lines in the light of their general knowledge and experience. They do not engage in over‑elaborate analysis in search for hidden meanings, nor do they adopt a strained or forced interpretation. They are not lawyers and their capacity for implication may be greater than that of lawyers.
The ordinary reasonable reader does not look at the matter complained of in isolation but rather in the whole context in which it is published.[20]

[20](2015) 237 FCR 33, 49–50 [63]–[65]. See also Reader’s Digest Services Pty Ltd v Lamb (1982) 150 CLR 500, 505; Farquhar v Bottom (1980) 2 NSWLR 380, 386; Radio 2UE Sydney Pty Ltd v Chesterton (2009) 238 CLR 460, 466–467 [1]–[5]; Hardie v Herald & Weekly Times [2016] VSCA 103 (13 May 2016) [46] (‘Hardie’).

Having identified which, if any, of the imputations are made out, the second question is to determine whether any of those imputations are defamatory. As it was not seriously contended by Nationwide that if the imputations were made out then they could not be defamatory, it is only necessary to set out the test without further elaboration: words are defamatory when the imputation lowers the person’s reputation in the eyes of reasonable members of the community, or causes the person to be ridiculed, shunned or avoided by members of the general public.[21]
[21]Radio 2UE Sydney Pty Ltd v Chesterton (2009) 238 CLR 460; applied in Hardie v Herald and Weekly Times Pty Ltd [2015] VSC 364 (22 July 2015) and considered in Hardie [2016] VSCA 103 (13 May 2016), with some discussion as to the ‘shun or avoid’ approach as being exceptional and related to certain special attributes of the plaintiff.

There is one other principle I need to refer to: there are two alternative meanings pleaded by Mr Charan in relation to the four categories of defamatory allegations. It was accepted by the parties that it is necessary for the Court to identify a single meaning in relation to these imputations.[22]
[22]T1283, T3058.

Application of the principles to this case

I have set out the thrust of the article at paragraph [22]. I think it important, bearing in mind the principles I have adverted to, that in examining an article such as this, one avoids the trap of parsing and analysing each sentence or paragraph to see whether the article as a whole conveyed the alleged imputations. What is important is the sting of the article in the eye of the reasonable reader of The Australian (print and online editions).

Equally, it is important to remember that a judge must disregard his or her legal training (if that be possible) and endeavour to take from the article what a reasonable reader would. There is much to be said for a jury rather than a judge making this determination; that said, I cannot avoid the task given the parties’ choice of forum. I should also add the following: given the task that I have described, it is not always possible to spell out satisfactorily the reason for preferring one or more (or perhaps none) of the meanings alleged. This is often exemplified by the principle that a court (be it judge or jury) is not bound by a pleaded imputation but must ensure, as a matter of ‘practical justice’, that the parties know generally the nature of the asserted imputation and fight the case on that basis.[23]
[23]See Hardie [2016] VSCA 103 (13 May 2016) [32]–[41].

In my opinion, the reasonable reader would have noted that the article was both general and specific: it refers to problematic issues in the VET sector as a whole and also singles out two companies: Phoenix and Unique – who have been the subject of investigation or prosecution by the ACCC. Of significance, the only persons mentioned are Mr Brown and Mr Charan.

With this in mind, I think the reader would have taken the following matters out of the article (including the headline) relevant to Mr Charan:

(a) That the relevant regulatory authorities (including the ACCC) were cracking down on VET organisations, and Phoenix was one of these organisations;

(b) That there were numerous allegations made about the conduct of a number of organisations in the VET sector;

(c) That ACN was one of those companies under investigation by the ACCC in relation to the conduct of its subsidiary, Phoenix;

(d) That ACN’s director, Mr Brown, was comfortable with Phoenix’s conduct;

(e) That Mr Charan with Mr Brown ‘headed’ the management of ACN at the time of the publication of the article;

(f) That, under Mr Charan and Mr Brown’s watch, ACN had acquired Phoenix, which had during 2014 received over $100 million worth of government-backed loans;

(g) That Phoenix, whilst under the control of ACN, had grown enrolments significantly;

(h) That Phoenix, an ACN company, had pressured students into enrolling; had not complied with quality standards; and was in the process of being deregistered by ASQA;

(i) That the ACCC was investigating training colleges which engaged in behaviour that affected vulnerable consumers;

(j) That Mr Brown and Mr Charan made ‘fortunes’ as a result of the listing of ACN, which received significant government subsidies; and

(k) ACN, controlled by Mr Charan and Mr Brown, was under investigation.

There are three matters I should mention before I go to the individual imputations.

First, counsel for Mr Charan submitted that common to each imputation was the proposition that Mr Charan engaged in these practices in his capacity as a director of ACN.[24] It was then said that any broader imputation raised a false issue — namely that given the limited nature of the suggested imputation then the defence of justification could only be tenable if Mr Charan had engaged in such conduct as a director of ACN — which he never was. I do not accept this. In my view, when the article is viewed as a whole, the imputation is that Mr Charan personally, as a director of an RTO, was involved in the impugned conduct. A reasonable reader (even a sophisticated reader of the business section of The Australian) would attach little or no importance to the reference to ACN. Rather he or she would focus on the role of Mr Charan as the manager of an RTO which was said to be implicated in unscrupulous practices involving vulnerable consumers.[25]
[24]Mr Charan’s closing submissions [150]–[151].
[25]Although irrelevant to this consideration –namely the perception of the reasonable reader of the article, it is of some interest that Mr Charan’s concern was that he was linked to a company being investigated by the ACCC: T273.

Second, as I mentioned earlier, notwithstanding the headline of both versions, the substance of the article is concerned not only with the activities of Phoenix and Unique but also their conduct in the VET sector generally.

Third, I do not think a reasonable reader would take any account of the expression ‘previous media reports allege’ contained in the ninth paragraph of the article which asserts that Phoenix pressured students. This is particularly so in the context of a reference to the ASQA statement, which identifies, without qualification, Phoenix’s non-compliance with quality standards. In any event, the use of the expression ‘previous media reports allege’ is consistent with what, in defamation law, is known as the repetition rule, summarised in Gatley on Libel and Slander, as follows:

As a general rule, the law does not allow a person to evade liability by attributing a statement to some other person.[26]

The parties agreed that this principle applied to this part of the article.

[26]Gatley on Libel & Slander, 1^st edition, 11–18.

I now consider the alleged imputations.

Mr Charan managed ACN which engaged in unscrupulous business practices that took advantage of vulnerable consumers – (a and b)

Nationwide contends that these imputations are strained as an ordinary, reasonable reader:

(a)will not have understood any allegations made by the ACCC against ACN to be proven facts, a matter which is fatal to imputation (a);
(b)will not have understood the article to be imputing that the ACCC’s allegations against ACN were of misleading, deceptive or unconscionable conduct—the article expressly states that they were the allegations made in the previous month by the ACCC against Unique;
(c)will have observed that the ACCC’s allegations against ACN are nowhere specified in the article—while, therefore, they might have wondered about whether there was any connection between the ACCC’s announcement ‘last month’ and its separate announcement concerning ACN, it would involve an excessive degree of loose thinking or avidity for scandal to conflate the allegations against Unique with the allegations against ACN;
(d)will also have observed that the only reference to ‘vulnerable’ people in the article appears in paragraph 8, in connection with Unique, not ACN;
(e)will not have understood the article to be imputing that Mr Charan amassed a fortune as a result of unscrupulous business practices—the article expressly states that the amassing of fortunes was the result of the listing of ACN (and identifies, in paragraph 2, that the government funding apparently of concern to the ACCC had occurred ‘this year’); and
(f)will not have understood the article to be imputing that Mr Charan had personally engaged in, or was personally suspected of engaging in, unscrupulous business practices—at highest, the article imputes that Mr Charan was the head of a very big company that was the subject of allegations by the ACCC.

For the following reasons, I do not accept any of these arguments.

As to (a), when the article is read as a whole and not dissected minutely, it is evident the article means more than the making of allegations, and conveys, indeed not too subtly, the following meaning: Phoenix, managed by a company controlled by Mr Charan, has in fact engaged in disreputable conduct and failed to comply with the regulator’s quality standards. This has led to Mr Charan making a lot of money. I reject the proposition that the reader would conclude that these were allegations rather than assertions of fact.

As to (b), for reasons I set out subsequently, I accept that the article does not convey that ACN engaged in specific ‘misleading and deceptive conduct’. However that does not resolve the matter. The article as a whole implies that a company under Mr Charan’s control engaged in unscrupulous business practices that took advantage of vulnerable consumers. I also reject the proposition that the reader would confine that assumption to the conduct of Unique.

As to (c), whilst it is correct that there is no detail as to the ACCC allegations against ACN, there are specific allegations concerning Phoenix, which I have set out. The imputation does not result from loose thinking (which is permissible in any event provided it can be properly inferred from the article)—in the context of the reasonable reader trying to make sense of the article as a whole. Indeed I suspect that ‘loose thinking’ for a vigilant defamation lawyer may be exactly what the reasonable reader may legitimately take out of an article as the true meaning.

As to (d), it is correct that there is no specific reference to the conduct of Phoenix in dealing with vulnerable consumers. But the context of the reference to Phoenix sending sales staff into housing commission estates to pressure potential students is directly followed by a reference to a ‘broader investigation’ into colleges that ‘affects consumers, particularly the vulnerable’. This means, I think, that a reader would conclude that Phoenix (and therefore Mr Charan) had engaged in such conduct.

As to (e), if this proposition is to be accepted, one might well question why there was any reference in the article to the listing of the company (ACN) and the fortunes realised by Mr Charan and Mr Brown. To any sensible reader the link is obvious—these men made a lot of money out of the listing that was facilitated by the use of unscrupulous business practices.

As to (f), whilst it is correct that Mr Charan was the head of the company, taken as a whole and particularly in light of the reference to the money made by Mr Charan out of the listing, it is patent that the imputation is that Mr Charan was knowingly involved in the unscrupulous practices of the companies.

I repeat what I said previously: the imputation is not confined to Mr Charan’s management of ACN. I do not think that a reader would take any real notice of the company name ACN; rather, he or she would identify Mr Charan as the manager of a VET organisation from which he made a lot of money when it floated in December 2014, and that he had been involved in its management prior to that date and, further, that he was still managing that company at the time Phoenix’s conduct was detailed in the article.

As I see it, the relevant meaning is a permissible variant[27] of imputation (a): Mr Charan managed a VET organisation which engaged in unscrupulous business practices that took advantage of vulnerable consumers and, as a result of which, he made a large amount of money.
[27]Hore-Lacy v Cleary (2007) 18 VR 562 [27].

This imputation is defamatory.

It is not necessary to deal with the alternative imputation (b).

Mr Charan managed ACN which engaged in misleading and deceptive conduct to vulnerable consumers – (c) and (d)

The third and fourth imputations – (c) and (d) – are not made out. The disputed meaning requires the reader to attribute a specific form of conduct to Mr Charan—namely that which was misleading and deceptive.

The only reference to ‘misleading and deceptive’ conduct in the article is in the first paragraph; it relates solely to Unique and is consistent with the reference in the seventh paragraph to Unique ‘coaxing’ vulnerable people to enrol in diplomas they were unlikely to complete.

The ‘pressuring of students’ to sign up (contained in the third paragraph) does not of itself convey misleading or deceptive conduct as such on the part of Mr Charan or ACN. Indeed, the content of this paragraph underpins part of imputation (a) as I have discussed, as it implies that there was unscrupulous conduct generally directed towards vulnerable consumers.

So, in summary, a reasonable reader would not link (or conflate) assertions about Unique’s conduct with Mr Charan. The reference to Unique is in the context of a crackdown on the sector. Nowhere in the article is there mention of ACN or its directors being associated with Unique or with the allegations of misleading or deceptive conduct. Nor for these reasons, does it give rise to an imputation (d) – that there were reasonable grounds to suspect that ACN engaged in misleading and deceptive conduct. The real sting of the article is the broader implication in (a) which I have, with modification, accepted.

The article does not convey either meaning alleged by Mr Charan.

Mr Charan managed ACN which engaged in unscrupulous door-to-door marketing practices to vulnerable consumers – (e) and (f)

The fifth and sixth imputations – (e) and (f) – based on the seventh paragraph in the article – are not made out.

There is no specific reference to ‘unscrupulous door-to-door sales’ in the account of Phoenix’s conduct or that of ACN. Rather, the reference to door-to-door sales refers to ‘10 organisations’ in the context of an industry-wide crackdown by the regulator. Notwithstanding the wording of the headline, a reasonable person would, I think, focus on the words of the article which, in relation to door-to-door marketing practices, contains a general assertion relevant to the industry as a whole—which is one theme of the article.

Mr Charan argued given the close proximity within the article of these words (i.e. unscrupulous door-to-door sales) to the allegations that Phoenix had gone on to housing estates and pressured students to enrol, then the meaning was conveyed as against Phoenix, and therefore Mr Charan.

Whilst I accept that the reader might link the general reference to ‘door-to-door selling practices’ with Phoenix’s marketing on ‘estates’, I think in the context of the general criticism of the industry, this is too long a bow to draw and would result in a strained construction of this part of the article.

So, in summary, whilst I regard alleged imputation (e) as possibly available, I am not persuaded it has been established. I repeat that I think that the more general imputation I have identified at [53] is more likely. Nor, despite my view that a reader might link the two references do I think that there are reasonable grounds to suspect that Mr Charan was involved in such practices. I repeat that I consider that the allegation is directed to industry-wide practices. If I am wrong about this, then I think that the sting of the imputation is covered by the variant of imputation (a) - that Mr Charan was the head of an organisation that engaged in unscrupulous conduct towards vulnerable consumers.

Mr Charan managed ACN which was significantly non-compliant with quality standards – (g) and (h)

Nationwide disputes that this meaning is conveyed and says that:[28]

(a)Ordinary, reasonable readers of the article will not have understood the article to convey that Mr Charan was responsible for carrying on business in a manner that involves, or is reasonably suspected of involving, significant non-compliance with the quality standards required from providers of vocational educational services; and
(b)At highest, the article imputes that Mr Charan was the head of a very big company that had carried on, or was reasonably suspected of having carried on, business in that manner.

[28]Nationwide’s closing submissions [5.55].

I do not accept either proposition.

The article refers to action being taken against Phoenix, and when combined with the reference to ASQA’s findings in relation to significant non-compliance with quality standards and deregistration of that company, the imputation is unequivocal. Phoenix is an ACN company and the article nominates Mr Charan as a director of ACN.

The reference to deregistration combined with non-compliance means far more than an investigation into practices. It readily implies that a company managed by Mr Charan was, in fact, non-compliant with the quality standards. The article conveys far more than ‘reasonable suspicion’. It says positively that, as a fact, it is being deregistered because of significant non-compliance with quality standards.

I repeat what I said at [40] in relation to the nature of the imputations. I think a reader would not focus on ACN but rather that Mr Charan was in a managerial/ownership role of a VET organisation.

Accordingly, I think the relevant meaning conveyed by the article, which is a slight variant of the pleaded imputation, is as follows: Mr Charan managed a VET organisation that was significantly non‑compliant with quality standards.

The imputation is defamatory.

It is not necessary to deal with the alternative imputation (h).

Variants of the first and seventh imputations have been established by Mr Charan. Each of these imputations is defamatory.

The justification defence

The established imputations of unscrupulous business practices and significant non‑compliance with quality standards are the subject of the justification defence—which means that Nationwide must, under s 25 of the Act, prove that the imputations are substantially true. The sting of the imputations are as set out above:

(a) Mr Charan managed a VET organisation, which engaged in unscrupulous business practices that took advantage of vulnerable consumers which resulted in him making a large amount of money; and

(b) Mr Charan managed a VET organisation that was significantly non-compliant with quality standards.

In broad compass, the allegations made by Nationwide justifying these imputations relate to the conduct of CTI, CTT and AMA. It was alleged in relation to specific courses offered in 2014:

(a) CTI employees arranged mass enrolments of students for AMA courses which did not comply with the ASQA protocols;

(b) CTT received payments under the VET funding contract in respect of multiple students who had not enrolled or participated in courses, contrary to data uploaded to DET which resulted in payments by DET to CTT and AMA. Student documentation (both enrolment and course work) in CTT and AMA courses was not completed by the student; it was completed by “scribes”; and

(c) CTI was significantly non-compliant with the quality standards set down in the VET funding contract in two ways. First by offering incentives to students to enrol in and complete courses. Second by AMA not adhering to its pre training review obligations.

This defence was built on differing threads of evidence:

(a) the oral testimony of a number of witnesses who had worked in the CTI group;

(b) the oral testimony of three “students” allegedly enrolled in CTI courses conducted by CTI companies;

(c) the contents of a series of audit reports, student interviews and file reviews (with associated documentation) of CTT and AMA, carried out in 2015 under the instructions of DET; and

(d) a large number of emails and associated documents flowing to and from Mr Charan and other officers or employees of the CTI companies.

Nationwide contends that Mr Charan’s role was far more expansive than he maintained: it argued that Mr Charan was intimately involved in the management of CTI and its associated companies, and this included the recruitment of students and their training. It produced a large amount of contemporaneous documentary evidence (primarily in the form of emails) to support this proposition. It contended that the only inference to be drawn from this material was that Mr Charan was intimately involved in the day-to-day management of the companies and knew exactly what was going on in terms of unscrupulous business practices and non‑compliance with stipulated quality standards.

In response, Mr Charan, on numerous occasions, said that his role was confined to high level marketing, sales and corporate relations on behalf of companies in the CTI group, and that he had little, if anything, to do with the day-to-day management of those companies which made up the ACN group. In essence, he contended that Mr Brown and other persons employed by CTI and its associated companies undertook the hands-on management. In other words, Mr Charan could not be associated with inappropriate conduct in relation to enrolments, training or non‑compliance with quality standards.

Before I go to the significant factual issues, I should mention several matters.

First, the allegations made by Nationwide in relation to unscrupulous conduct must be established to the Briginshaw[29] standard, which requires clear and cogent proof, where serious allegations of misconduct are made. But that is not to overstate the test by which an allegation must be proved. The Briginshaw principle, as encapsulated in s 140 of the Evidence Act 2008 (Vic), does no more than require that a court carefully consider the seriousness of the allegation and the gravity of the consequences flowing from a particular finding, as effecting the level of satisfaction that must be reached, before it can conclude that an allegation has been proved on the balance of probabilities.[30] The standard of proof of a particular assertion remains that of more probable than not, but with the proviso I have set out. Importantly it must be remembered, that neither s 140 nor the statement of principle in Briginshaw establishes a different standard of proof in a civil proceeding.[31]
[29]Briginshaw v Briginshaw (1938) 60 CLR 336 (‘Briginshaw’).
[30]Briginshaw v Briginshaw (1938) 60 CLR 336, 362. See also Giles v Jeffrey [2016] VSCA 314 [121].
[31]Karakatsanis & Anor v Racing Victoria Limited [2013] VSCA 305 [29]–[32].

Second, there is no merit in the submission by counsel for Mr Charan that some weight should be given to the fact that Mr Charan has not been investigated either by the police or regulatory authorities in the VET sector. This is patently irrelevant to a consideration of whether the factual material adduced by Nationwide establishes, to the requisite standard, that the sting of the imputations is true. Indeed, to give the submission any weight would invite unwarranted speculation. I put it to one side.

Third, each party made submissions about the drawing of Jones v Dunkel inferences. In my opinion it is appropriate to draw inferences against Mr Charan on certain issues by reason of his failure to call several witnesses whom he could have been expected to call. In particular, the failure to call his partner Mr Brown in relation to specific issues and, particularly, the management of the CTI companies in 2014 is stark. I will return to this point in more detail later.[32]
[32]See [340]–[344] below. I will, in the course of these reasons, identify any other witness whom I consider Mr Charan should have called and the use to which that failure to call those witnesses can be put.

Fourth, it seems clear that when the articles were published, Nationwide was mistaken as to Mr Charan’s involvement with ACN after the float in December 2014. However, it is also clear that (perhaps providentially) that it became aware and was ultimately able to adduce evidence relevant to justifying the sting of the two imputations. It is entitled to do so.

Fifth, contrary to the submissions of Mr Charan, it is incorrect to analyse the evidence both as to his role at the CTI group and his knowledge and participation in unscrupulous conduct in a piecemeal or ‘nuanced’ fashion. Nationwide’s case, in large part is circumstantial and depends on an examination of all the evidence on a particular issue and then determining what inferences can satisfactorily be drawn as to a particular allegation.

Sixth, Mr Charan submitted that “this case is not concerned with what Mr Charan’s role at CTI, AMA or CTT was”.[33] This was consistent with the false issue contention raised by Mr Charan: namely that the imputation was confined to Mr Charan’s role as a director of the ACN group (of which Phoenix was a part) – which could never be justified. I repeat that I reject this narrow construction of the true imputation. Once it is appreciated that the defamatory sting of the article is directed to Mr Charan’s involvement as the head of an RTO involved in unscrupulous practices, as well as its failure to adhere to quality standards, then the question of his role at the relevant RTO and his knowledge of its activities is a fundamental part of the justification defence.
[33]Mr Charan’s closing submissions [299].

Mr Charan’s role at CTI and associated companies prior to December 2014
Chronology

I now recount some uncontroversial matters preceding the float of ACN in December 2014, relating to CTI and its associated companies. These supplement my brief outline at [9]–[20].

In 2012, Mr Charan and Mr Brown, founded CTI. Each owned 50 per cent of the shares in CTI through respective corporate vehicles.

CTI’s head office was at 7 Raleigh Street, Spotswood.

Mr Charan was a director of CTI from 7 September 2013 until 30 September 2014.

Mr Charan described himself in email correspondence as the ‘Managing Director of CTI’ until the end of November 2014 – the last document tendered in evidence in which he utilised that title is dated 26 November 2014.[34]
[34]CB.0756.

Mr Brown was CEO of CTI throughout 2014.

CTI was part of a group of entities, which by mid-2014 operated under the CTI banner which included CTT and AMA (both RTOs); in addition, Community Employment Initiatives Pty Ltd (CEI) operated a call centre at the Spotswood premises for the CTI companies. Mr Charan was a director and Mr Peter Cage operated the call centre which closed in mid-2014.

CTT was purchased by Mr Charan and Mr Brown in July 2013. Each held 50 per cent of CTT shares through corporate vehicles which purchased the entire interest of Ms Elena Celona, who had established the company.[35]
[35]It is possible that Ms Celona retained a 15 per cent interest — see the ACN Prospectus, p 541.

From the date of purchase of CTT, Mr Brown was a director. Ms Celona remained the managing director of CTT until December 2013 and left the company in February 2014.

On 10 September 2013, Mr Brown and Mr Charan entered into an agreement with Mr Ian McAllister under which they were entitled to 20 per cent commission on sales of the Certificate II in Understanding and Management of Diabetes (the Diabetes course) which was subsequently utilised by CTT and AMA.[36]
[36]CB.0849.

AMA (Thoan)[37] was purchased by Mr Charan and Mr Brown in June 2014. Each held 50 per cent of AMA through corporate vehicles.
[37]AMA was the registered business name of Thoan Pty Ltd.

Mr Charan was a director and company secretary after its acquisition. He remained a director until 30 September 2014 and company secretary until 21 October 2014.

ACN was incorporated on 17 March 2014. At the time of its incorporation, Mr Charan and Mr Brown were both directors and in effect the only shareholders.[38] Ms Anastasia Mantzis (CTI employee and manager of the business development group)[39] was also a director until 30 September 2014.[40]
[38]Mr Peter Cage held a minuscule number of shares (.2 or .15 per cent).
[39]T260.
[40]CB.0819 (ASIC extract for CTI).

In addition to CTI, CTT, and AMA, the float prospectus of ACN in November 2014 identified the following six entities as part of the group: Cove, Smart, Haley College, Heron Access, Loka, and ITC.[41] Of these companies, the following had State Government funding contracts: CTT, Cove, Heron Assess (Victoria); AMA (NSW, Queensland and Victoria); and Smart (Queensland and Victoria).[42]
[41]ACN Prospectus, p 8.
[42]ACN Prospectus, p 38.

In preparation for listing on the ASX on 30 September 2014, ACN acquired all of the shares in CTI, CTT and AMA/Thoan. The ACN group effectively replaced the CTI group. On that day, Mr Charan resigned as a director of ACN, CTI and AMA/Thoan.

Mr Charan held 33.31 per cent of the shares in ACN until it was listed on the ASX on about 10 December 2014. The bulk of his equity (29.20 per cent) was sold for about $36.5 million. Subsequently, he held 4.11 per cent in escrow.

On 21 March 2016, the ACN group went into administration.

Evidence on this issue

The following witnesses gave evidence relevant to the management of CTI, and its associated companies, and as to the role of Mr Charan up to December 2014:

(a) Prakash Charan;

(b) Sally Charan – Mr Charan’s wife and a director of CTI until September 2013;

(c) Michael Moffat – managing director of CTT from February 2014;

(d) David Green – Chief Financial Officer of CTI (from April 2014) and then CFO of ACN (from October 2014);

(e) Teresa Ebejer – a CTI employee from August 2014;

(f) Elena Celona – owner of CTT (prior to its sale to CTI) and then the managing director until December 2014;

(g) Ian McAllister – the developer of the Diabetes course acquired by Mr Brown and Mr Charan in 2014 and marketed by AMA and CTT;

(h) Ron Ottery – a teacher of AMA courses in 2014;

(i) Peter Cage – employed by CTI and CEI (a CTI company) in 2013; and

(j) Curtis Cage – the son of Peter Cage.

In addition, there were numerous contemporaneous internal and external emails of Mr Charan and other CTI employees or associates, with attachments and associated documentation.

Relevant persons not called as witnesses

It is convenient here to identify a number of persons who were involved in the management or operations of CTI and its associated companies who featured, some prominently, in the evidence led at the trial but were not called as witnesses:[43]
[43]I will return to the question of any Jones v Dunkel inferences which may arise during the course of these reasons for judgment.

(a) Ivan Brown – the co-founder of the CTI group and the driving force behind its listing on the ASX;

(b) Harry Kochhar – who had a number of titles at CTI including that of Director of Education and, from September 2014, the Chief Operating Officer of the embryonic ACN group;

(c) Anastasia Mantzis – a manager, and described at times as the director of operations of CTI;

(d) Helen Lechte – a CTI project manager;

(e) Louisa Inguanti – a scribe employed by CTI;

(f) Harris Faiz – a trainer employed by CTI; and

(g) ‘Mehdi’ or ‘Mehti’ – a business developer who also recruited students.

Mr Charan’s version of his role at CTI and associated companies

The following extracts from Mr Charan’s evidence in examination-in-chief, in February 2017, underpin his case on this issue:

So we had a large client and this is, I suppose, my strength, in identifying and I suppose recruiting a proper marketing sales strategy and through that methodology we extracted a large client…[44]
[44]T236.
I was just a marketing and sales guy.[45]
[45]T617.
My domain is sales and marketing at CTI, that’s correct.[46]
[46]T472.
I have got to sort of paint a picture here about how decisions were made at CTI. So Ivan would make a lot of these decisions and he would go off-the-cuff and just basically do it and tell me once he’s done it.[47]
[47]T260.
The sales and marketing, as I was explaining yesterday, there is a clear separation between sales and marketing and the compliance and the operation of the business. So he – Harry Kochhar and Ivan was involved with the operation and the compliance and they were in charge of all those departments under that umbrella…[48]
[48]T265–266.

Then the following exchange occurred:

COUNSEL: So you are quite clear in your mind that you have never held any roles in CTT?
MR CHARAN: To the best of my knowledge, Your Honour, I did not hold any roles in CTT.[49] ….
COUNSEL: Mr Charan, have you ever told anyone that you were a director of CTT?
MR CHARAN: Not to the best of my knowledge. I don’t remember.[50]

[49]T316.

[50]T317.

Mr Charan also said the following about his role at CTI in the months leading up to the float in December 2014:

MR CHARAN: … my involvement diluted and it started – I started diluting – “diluting” is probably not the word. I started phasing out from CTI or any of its subsidiaries from, I would say, probably middle to late 2013, to all the way through to when I exited and there were two reasons for it. I was going through a very personal issue in 2013 so my attention and my drive, I suppose, wasn’t there in 2013.[51]
MR CHARAN: Ivan Brown was spearheading the IPO process, that’s correct, and by himself.[52]
…
COUNSEL: In the months leading up to 15 December what was your role within Community Training Initiatives as it prepared to float?
MR CHARAN: Nothing, I would say. I wasn’t going to the office. […] I would get calls every day at home, you know, from – I would be at home, I would be anywhere and they would either say, “It’s going ahead” or, “No, it’s got going ahead” so I was always in that really unknown predicament. My role in CTI really diminished from probably mid-2014. I became passive. I was only focusing on big clients…[53]

[51]T256.

[52]T262.

[53]T269.

These assertions are consistent with the contents of the prospectus[54] which asserts that ‘… Prakash Charan was primarily involved in sales and his role was reduced in 2013’.
[54]ACN Prospectus, pp 9, 52.

The evidence and credibility of Mr Charan

Central to Mr Charan’s denial of involvement in the day-to-day management of CTI and associated companies in 2014 (and as to whether he played any part in the conduct alleged by Nationwide) was whether his evidence was truthful.

I have concluded, comfortably, that Mr Charan was an entirely unreliable witness, not only on this issue but as to all matters relevant to his claim against Nationwide. For reasons I will now set out, I am satisfied that on issues central to the case he gave many untruthful answers and, in the main, dissembled, prevaricated or lied in an effort to advance his response to the justification defence. In particular, his evidence as to his lack of involvement in the management of CTI and associated companies was discredited by contemporaneous documentation and internal inconsistencies in his own evidence.

Mr Charan’s memory – or lack of it

Mr Charan’s lack of recollection of recent events, some of real significance in his commercial ventures (particularly given their success) was extraordinary and far‑fetched. In evidence-in-chief, he gave confident accounts of his business acumen and his association with a number of successful entrepreneurs. However, when cross-examined on the role he played in the Brown/Charan ventures throughout 2013 and 2014, he became vague and unhelpful to the point of patent prevarication.

The most conspicuous were Mr Charan’s answers in cross-examination about hundreds of emails (none of which on their face demonstrated any contemporaneous problems with his memory) of which he was either an author, or a recipient, many of which he professed no recollection. In the main, these emails demonstrated that Mr Charan’s role was not confined to that of a marketing guru (as he would portray himself), but that he was intimately involved in the day-to-day operations of the Brown/Charan ventures. Here is an example from 22 August 2014 (less than four months before the float) of email correspondence between Mr Brown and Mr Charan about an employee:[55]
[55]CB.0664.

Mr Brown (to Mr Charan):
Hi mate
Ash is coming in Monday,
This week coming has gotta be his last week on salary
It’s 5 months now this has been dragging on, and I guarantee he hasn’t been working all that time for us
He was meant to come to this mornings sales meeting and didn’t bother
He disrespects everyone including Neil who he blatantly disrespects
Then the smart cunt answering me back too,
Plus we will go hard on the call centre too, zero leads for the fortnight, only one
staff member and that one was doing fake leads
They been too busy trying to get other clients and then demanding more money as well while we fucking pay all their costs !
I’m of the mind to terminate the cunts immediately, or at absolute bare minimum
dock them half next months pay
We need the Philippines one ASAP so we can fuck these lazy amateur idiots off
mate
Another fucking example of parasites that we have encountered on this journey

Mr Charan (in reply to Mr Brown) on the following day:
Ok. This is your call.
Make sure you don’t piss him off too much cause he knows a lot about what goes on with us. And BAWM will be their client soon. You know what I mean...?
If you are going hard on Monday then someone needs to change docklands office locks asap!! Cause I’m sure you wouldn’t like them to take 40k off us to set up and make money through clients like BAWM etc...

Before I canvass some of the particular failings of Mr Charan’s evidence, I should identify one issue concerning these emails. Late in the course of his lengthy cross‑examination (necessarily so, given Mr Charan’s evasive responses) and subsequently when recalled to give evidence-in-reply, Mr Charan, on a number of occasions, questioned the authenticity of emails which appeared to have been either authored by him or received by him directly or copied to him.[56]For instance close to the conclusion of the trial:

COUNSEL: You are inviting His Honour to accept that this e-mail is a fabrication, Mr Charan?
MR CHARAN: I am not sure. I have seen a lot of edited amended e-mails or bunch of e-mails that's received from your side and I am not sure where you got that from and how it's edited and again, I would question the validity of most of the e-mails that you have put towards me.

[56]T993, T998, T1003, T1007, T1011.

This suggestion of fabrication of emails was patent nonsense. All of the emails appeared to come from him (and in many cases bore his standard email signature or came from his private email address) or had been addressed to his work email address. There was no objection by Mr Charan’s counsel to their tender (the emails had been discovered by Nationwide) and more importantly, the content and style of the emails were consistent with other emails not queried by Mr Charan. An example is this email exchange of 9 September 2014 (at which time Mr Charan says he had no involvement in the management of CTT):[57]
[57]CB.0695.

From Ms Maria Lim, a CTT bookkeeper, to Mr Charan:
Hi Kash
CTT has 3 urgent payables:
1. JLL Leasing – for stall rent at Pakenham             $770.00
2. Australian Pacific Training Solutions – training    225.00
3. Andrews Corporate Clothing – polos                  192.50
$1,187.50

I would appreciate if you could pay these 3 today.
Please don’t pay the other pending payments. I’m still waiting for fund transfer. Thanks

Kind regards,
Maria Lim
Financial Controller

From Mr Charan: (to Ms Lim, with copy sent to Mr Moffat)
Mike,
We need more sales through CTT. Much more than 60 Per Month
Maria, I will organise payment now

Mr Charan, when asked about this email, queried its authenticity.[58] No evidence apart from Mr Charan’s assertions in cross-examination and re-examination was led to suggest that this email or the other impugned emails were not the real deal. This is but one of many examples of Mr Charan resorting to bluster and prevarication in an effort to avoid the consequences of findings based upon the contents of these emails.

[58]T1011–1012.

Next, I put no stock whatsoever in Mr Charan’s asserted catastrophically poor memory, which he relied upon over the six days of his cross-examination when confronted with the contents of emails contradictory to his position. He constantly said he could not remember the contents of an email and therefore could not answer the question concerning the substance of the email or any inference which could be drawn from its contents.[59] I now set out some examples of the position he took in cross-examination.
[59]T336–337.

Mr Charan was asked about his involvement in CTT, which he and Mr Brown purchased in 2013 from Ms Celona to form part of the CTI group. Mr Charan said he held no roles at CTT, including that of director:[60]
[60]See [78]–[79] above.

COUNSEL: Could the witness be shown court book 0618. Mr Charan, about a third of the way down the page can you see Mr Moffat of CTT has e-mailed you and Mr Brown: “Hi Ivan and Kash. A few points that came up at our management meeting.” Do you have a recollection of attending a management meeting for CTT?
MR CHARAN: I do not recall.
COUNSEL: Did you attend management meetings for CTT?
MR CHARAN: I do not recall.
COUNSEL: You have responded to Mr Moffat with the subject line, “CTT report”: “Hi Mike, I will be there tomorrow morning to discuss further.” Do you remember that?
MR CHARAN: I do not recall.
COUNSEL: What you said there was you were going to attend a discussion with Mr Moffat the following day to talk about matters concerning CTT. Do you agree?
MR CHARAN: Again, on the face of it, that’s what it says but I do not recall this e-mail.
COUNSEL:Can you explain to His Honour why, if you had nothing to do with the management of CTT, you could have sent such an e-mail?
MR CHARAN: Again, I do not recall.[61]
[61]T687, CB.0618.

And in relation to sales reports:
COUNSEL: Mr Charan, in late 2013 did you receive weekly sales reports for CTT?
MR CHARAN: I do not recall.
COUNSEL: Could the witness be shown court book 0430. Do you see, Mr Charan, that this is an e-mail from Ms Celona to Mr Brown and you on 11 November 2013: “Hi. Here are the weekly sales reports FYI.” Does that refresh your memory?
MR CHARAN: No, it doesn’t. I don’t recall this document.
COUNSEL: You didn’t review this document before coming to give evidence?
MR CHARAN: I have not reviewed this document during the trial process - preparation, sorry.
COUNSEL: Are you able to explain to His Honour why, if you had nothing to do with the day-to-day management of CTT beyond the payment of accounts, you were being sent a weekly sales report for CTT?
MR CHARAN: Again, I don’t recall this document so I am not sure how to answer that.
COUNSEL: I want to ask you about the last paragraph in that e-mail. You see Ms Celona said to you and Mr Brown: “I would love to have a meeting with you both where we can sit down and review the circumstances at present and make decisions as to how you would like to proceed without the double handling and me sitting in the middle when it is really not necessary!! It is time for the talk and strategically making those necessary decisions that are best for the business.” Do you recollect receiving that?
MR CHARAN: I don’t recall this document.
COUNSEL: Mr Charan, are you able to explain why, if you had nothing to do with the day-to-day operations of CTT beyond the payment of accounts you were being asked by the CEO to have a talk and to make strategically necessary decisions that were best for CTT?
MR CHARAN: I don’t recall this communication so I probably wouldn’t be.
COUNSEL: Did you attend meetings with Mr Brown and Ms Celona at which strategic decisions for CTT were discussed and made?
MR CHARAN: I do not recall.[62]

[62]T441–442, CB.0430.

And in relation to staff and sub-contractor payments:

COUNSEL: Mr Charan, were you involved in matters such as determining the salaries, bonuses, retainers and benefits for staff at CTT?
MR CHARAN: I do not recall.
COUNSEL: Can the witness be shown court book 0451 and could we go to the last two pages of that document. Do you see at the very foot of the left-hand page, Mr Charan, is the start of the e-mail to which I want to draw your attention. You see you have sent an e-mail on 3 December 2013 in which you have said: “Hi guys. Can we offer Elise a retainer based structure? Let’s give her $850 per week retainer as a subcontractor. We will deduct this amount off her commissions payable when due, hence we are calling this a retainer based model. The commission rate is as follows: $150 on commencement of training.” Do you see that?
MR CHARAN:I do see that, yes.
COUNSEL: Does that refresh your memory about being involved in late December 2013 with determining payments and retainers for subcontractors?
MR CHARAN: I don’t recall this e-mail, no.
COUNSEL: Were you involved in approving retainer amounts and commission rates for subcontractors of CTT?
MR CHARAN: I do not recall.
COUNSEL: Do you see a little further up the left-hand page Ms Celona responding to you: “Hi. I do not have an issue. Will check with Maria how to set this up. What happens if she does not get signups. Also is she getting this 850 monthly or fortnightly.” That’s Ms Celona, the chief executive officer of CTT, seeking advice from you about the payment structure for a new CTT employee. Do you agree?
MR CHARAN: That’s what it says on this e-mail, the face of it, yes.
COUNSEL: Are you able to explain to His Honour why, if you had nothing to do with the day-to-day operations of CTT beyond the accounting matters you have referred to, you were involved in determining the retainer and commission rates for new subcontractors at CTT?
MR CHARAN: Again, I don’t recall this e-mail, hence I am not wanting to get drawn into it.
COUNSEL: Do you see at the top of the page, Mr Charan, you have written a further e-mail on 3 December, again to Ms Celona: “Hey salary can get paid when everyone else gets paid. If she doesn’t bring in enrolments after 4 weeks, we will replace her with someone more active in this space. I will be sourcing more sales staff for CTT.” What’s your explanation for that, Mr Charan?
MR CHARAN: Again, I don’t recall this e-mail so again, I am not going to be drawn into a guessing game.[63]

[63]T461–462, CB.0451.

And as to his role at CTI, the core company of the embryonic ACN group:

COUNSEL: Mr Charan, in your role at CTI did you get involved in staffing matters, matters such as whether staff had properly recorded sick leave and annual leave and so on?
MR CHARAN: Not to the best of my knowledge. I don’t recall.
COUNSEL: Could the witness be shown court book 0508 and could we go to the last page or the penultimate page of that chain. Do you see at the foot of the page, Mr Charan, you have sent an e-mail on 18 April to Mr Brown and it looks like the accounts Department at CTI, copied to Ms Mantzis: “Subject: sick leave”. Just read that to yourself. Have you seen that before?
MR CHARAN: I do read it on the screen, correct.
COUNSEL: Was that part of your role at CTI, to give directions about deducting hours from staff members’ annual leave and so on?
MR CHARAN: Again, I don’t recall this e-mail so I would be just guessing.
COUNSEL: In the previous e-mail further in the chain Ms Mantzis responds: “Hi Kash” and then she explains her absence. I just want to ask you about the sentence towards the end: “If you would like I can also start recording extra hours I work or late night and weekend calls I take for both CTT and CTI.” Do you see that?
MR CHARAN: Yes, I see that.[64]

[64]T510, CB.0508.

And in relation to direct marketing for the recruitment of students:

COUNSEL: Were you involved, Mr Charan, in late 2013, with approving scripts to be used by telemarketers in call centres who were cold calling potential students for CTI and CTT?
MR CHARAN: I do not recall.[65]
[65]T471.
…
COUNSEL: Were you involved in settling the script that was to be used by the people who made cold calls from the call centres?
MR CHARAN: Again, I do not recall. It’s something I possibly would have been involved in but I do not recall. I mean, that’s my domain.
COUNSEL: That is your domain?
MR CHARAN: My domain is sales and marketing at CTI, that’s correct.
COUNSEL: One of the views that you formed later in 2014 was that the script being used by the call centre operators needed to be rejigged to make it more effective. Do you recollect that?
MR CHARAN: That’s your comments, not mine.
COUNSEL: You have no recollection of doing that?
MR CHARAN: I do not recall.
COUNSEL: Can the witness be shown court book 0457.
…
COUNSEL: In that e-mail on the right-hand page from Peter at Community Employment Initiatives … It’s also gone to Mr Brown and Ms Celona and Ms Mantzis: “Subject: call centre script. Hi guys. Can we sit down on Thursday at 11 am and come up with the features and benefits for the script for our telemarketers?” Does that refresh your memory as to what you were doing in relation to the descriptor telemarketers?

I reject the submission that this was not an incentive, but was in some way connected with sponsorship—as suggested by Mr Thompson and Mr Charan. As Mr Maarten’s put it:

everything would be for free [meaning the Diabetes course] and once we had completed the course we would receive the $200 discount on our registration fees.[611]

[611]T1429.

Finally, there is the evidence of representations made by students to the auditors. I have previously described the manner in which audit interviews of students were carried out. As part of this process, one of the questions that the auditors were instructed to ask students was whether they were ‘offered any incentives to undertake the training’.[612]
[612]CB.0810.

Of the 38 Group A (Diabetes course) students who were interviewed by the auditors as part of the CTT Diabetes and Early Childhood courses EOE audit (Report 4 May 2015), eight said that they had been offered an incentive to enrol in the Diabetes course in the form of a reduction in basketball membership fees.[613] Each commenced the course in 2014.
[613]See [409] above.

Of the 35 students interviewed as part of the AMA Diabetes EOE audit, five told the auditors that they been given a Samsung tablet by their trainer upon completion of the course. One other student reported receiving $50 cash from their trainer upon completion of the course.[614] Each of those five students who reported receiving incentives commenced the Diabetes course on 30 January 2015.
[614]CB.1016; CB.0774. See [424] above.

Mr Charan argued that the provision of incentives by AMA, based on the student representations, occurred after December 2015 and should therefore be ignored.

In addition, as with the alleged falsification of student enrolments and course material, it is necessary to consider what weight should be given to these representations. Mr Charan submitted that:

· with the exception of Mr Maartens, he has not had an opportunity to test the evidence of any of these persons who said they were offered incentives;

· the audit witnesses had little recollection of the detail of the interviews or the interview process.

Notwithstanding these submissions, for the following reasons, I think that there is force in this body of evidence.

I have set out my reasons for accepting and attaching weight to the contents of the representations made to the auditors in relation to student participation in CTT courses. That reasoning applies here. First, the students are, in effect, a random sample. Although their names were nominated by DET, it is clear that it was not known what these interviews were likely to reveal. As with course enrolment and participation, if the student interviews had demonstrated that no students had been offered an incentive, then that would be powerful evidence for Mr Charan to rely upon in contradicting the allegations of the offering of incentives. Second, and as with the course enrolment and participation questions, there could be no ambiguity about the integrity of questions requiring a binary answer—and this also, to a large extent, answers the criticism that there has been no opportunity to test the evidence of the student. The question was simple—did you receive an incentive to enrol in the course—and a binary answer—yes/no. There is little room for error. Third, the weight of numbers here is also persuasive. I readily accept that if only one or two students had said that they received an incentive, then that would be of relatively low probative value. However, the greater the number who have said that they were provided with incentives (in this case thirteen in total), then the more likely it must be that this occurred. Fourth, as I indicated earlier, the auditors had no motive to record anything other than the answers that they were given. Whether they could recall the individual interviews is of no real significance; indeed, this concession speaks more of their probity than against it. What is important is that, as far as I could tell, each seemed confident that the transposition of the responses from the test sheet to the spreadsheet—which became the attachment to the report—was accurate. As I mentioned earlier, Mr Charan has not pointed to any significant inconsistency.

I put little store on the fact that the students in the AMA Diabetes course did not commence the course until January 2015. The invitation of incentives, it could readily be inferred, occurred prior to enrolment and in 2014 – as in Mr Maartens’ case. Even if I am wrong about that the CTT Diabetes and Early Childhood students were all enrolled in 2014. Mr Maartens was part of this group. I think it clear that this arrangement to sanction the provision of such an incentive must have occurred in 2014, and I infer that it must have come from a senior management position with instructions to BDs such as Mr Stringer. Moreover, the persons with the motive to maximise enrolments and participation were the owners of the CTI business and, this was particularly so in the year of the float.

Accordingly, I am satisfied that the representations are accurate and were made by the students, and that incentives were offered to students to enrol, participate in, and complete courses offered by both AMA and CTT. This tallies with the evidence of Mr Maartens.

Conclusion

I am comfortably satisfied that under Mr Charan’s watch, and with his knowledge, CTI companies authorised the offering of incentives to students in 2014 for enrolments in courses conducted under the VET funding contract.

I am fortified in this conclusion by Mr Charan’s participation in and sanctioning of mass enrolments and his knowledge of the falsification of student files. This behaviour overall is consistent with his attempts to maximise enrolments and ensure that students completed their courses by the provision of incentives.

The second allegation: AMA’s failure to carry out Pre-Training Reviews

The substance of Nationwide’s allegation is that AMA, in its conduct of the Certificate IV Building and Construction Course (Building course), failed to conduct an appropriate Pre-Training Review (PTR) of prospective students in contravention of clause 4 of Schedule 1 to the VET funding contract.

It is important to note that this allegation is confined to the Building course which was the subject of the Ernst & Young audit supervised by Ms Licciardo. It did not extend to the other courses audited by Protiviti, which I have described.

Nationwide contends that AMA’s PTR documentation was inadequate and failed to meet the requirements for PTRs set out in Schedule 1 to the VET funding contract, as it did not include:

[s]pace for documenting the information that would have been necessary to conduct a competent PTR, such as the existing skills of the student or their aspirations in terms of skill development or job outcomes.[615]

[615]Nationwide’s submissions, sch 8 [34].

It is said by Nationwide that Ernst & Young:

[c]ould not find any evidence that AMA had undertaken, let alone documented, an individualised assessment of each potential student prior to enrolment in accordance with the plain requirements of clauses 4.6 and 4.10 of Schedule 1 to AMA’s VET Funding Contract. The students had simply ticked boxes. The trainers had also simply ticked boxes which purported to confirm that they had discussed various matters with students, however, those matters did not conform with the requirements in clause 4.6, did not culminate in the documentation of any outcomes or conclusions reached by the trainers, and were not countersigned by students in any case..[616]

[616]Nationwide’s submissions, sch 8 [39].

In particular, it says that AMA’s PTR documentation did not identify the ‘requisite components of a PTR within the meaning of Schedule 1 to the VET funding contract’,[617] and that the ‘VTG Declaration’ (which required a trainer to confirm that he/she had discussed with a potential student matters relevant to the PTR assessment – with a potential student) was inadequate as it covered matters about how the course was run, rather than the prescribed elements of a PTR, such as:

a discussion about … ‘current competencies’, ‘competencies previously acquired’, whether the course is the most appropriate for the student and the likely job outcomes.[618]

[617]Nationwide’s submissions, sch 8 [35].

[618]Nationwide’s submissions, sch 8 [36].

The issue to be determined is, as I see it, whether the evidence collected by Ernst & Young and contained in the contract review demonstrates a significant breach of clauses 4.6 and 4.10 of Schedule 1 of the VET funding contract by AMA. I repeat that this allegation relates solely to the AMA Building course in 2014, and that I confine my analysis to the evidence and findings which relate to this course.

The relevant provisions of the VET funding contract

I again set out here the two relevant parts of the VET funding contract:

Pre-Training Review

4.6For each Eligible Individual, the RTO must conduct a Pre-Training Review of current competencies including literacy and numeracy skills prior to commencement in training. The Pre-Training Review must:
(a)identify any competencies previously acquired (Recognition of Prior Learning (RPL), Recognition of Current Competency (RCC) of Credit Transfer);
(b)ascertain the most appropriate qualification for that student to enrol in, including consideration of the likely job outcomes from the development of new competencies and skills; and
(c)ascertain that the proposed learning strategies and materials are appropriate for that individual.

…
4.10The Pre-Training Review must be completed, and the outcomes known and documented, prior to the student’s commencing training.[619]
[619]CB.0030, sch 1.

The evidence on this issue

The evidence on this issue came from:

(a)the Ernst & Young contract review;
(b)several internal CTI emails;
(c)Ms Licciardo;
(d)Ms Vassallo; and
(e)Mr O’Hare.

The Ernst & Young audit process

As a starting point, it is necessary to return briefly to the audit process undertaken by Ernst & Young. It is conveniently summarised by Nationwide in its submissions:

The process included [Ms Licciardo] and her team initially interviewing relevant people over two days to understand processes and to understand the documents contained on student files. The team reviewed 390 student files, 72 trainer files, business development contracts and other documents. They also interviewed 115 students, trainers and workplace representatives. The information acquired was recorded in master spreadsheets.[620]

[620]Nationwide’s submissions, sch 8 [27].

The audit is described in greater detail at [439]-[451] above.

The Ernst & Young contract review

The contract review dated 23 September 2015 and signed off by Ms Licciardo was delivered to DET on that date.

Paragraph 2.2,[621] which sets out the Ernst & Young finding, reads as follows:

Finding: AMA has not complied with Schedule 1, Clauses 4.6 a) and b) or 4.10 of the Contract as the evidence provided does not support that the student has been enrolled in the most suitable and appropriate training.

[621]CB.0779, 12.

The data collected by Ernst & Young, which is said to form the basis of the finding is then set out in a series of bullet points, under the heading, ‘Evidence’. There are eight bullet points in total; however, of these, only the first relates specifically to the Building course. The remaining points relate to other courses which were reviewed as part of the audit and are not relevant to this allegation. The key part relevant to the Building course reads:[622]
[622]CB.0779, 12 (emphasis added).

Evidence
AMA trainers perform PTRs, including the Language, Literacy and Numeracy (LLN) assessments and determine the suitability and appropriateness of the course to the student.
Through examination of student and trainer files and interviews with students and trainers, we have identified instances where evidence is not available which supports that enrolled courses were suitable and appropriate for the student:
·All PTR assessments used for students enrolling in Certificate IV in Building and Construction (Building) did not detail the students’ reasons for enrolling, future aspirations or assess students’ current level of education and learning needs. The PTR assessments included multiple choice and tick box questions and were approximately two pages in length. Further, the LLN assessments used by the RTO prior to March 2015 were not benchmarked against reliable sources, such as the Australian Core Skills Framework, so the validity of assessments performed prior to this date could not be determined.

The contents of this bullet point allegation, can be divided into two components:

(a) PTR assessments used for students enrolling in the Building course did not detail the students’ reasons for enrolling, future aspirations, or assess students’ current level of education and learning needs (‘Part 1’); and

(b) the LLN assessments used by AMA prior to March 2015 were not benchmarked against reliable sources such as the Australian Core Skills Framework, so the validity of assessments performed prior to this date could not be determined (‘Part 2’).

The contract review then sets out the ‘Overall Impact’ of the evidence/findings:

Overall impact
Students have been enrolled in training which does not meet their educational level or address their learning needs and affecting the students’ future entitlements to enrol in other government subsidised training that better suits their needs.
Students have participated in training from which they have limited capacity to benefit.
Unsuitable and inappropriate training maybe [sic] provided.
The Department maybe [sic] subsidising training and assessment that is not the ‘most’ suitable and appropriate for the eligible individual.[623]

[623]CB.0779, 12.

Ms Licciardo said in evidence that the ‘Overall Impact’ points/conclusions were drawn from all the eight bullet points of evidence, which, as I have said, did not relate (in the main) to the Building course.

Ms Licciardo said that she and her team reviewed approximately 109 PTR assessments for the Building course. As part of this process, the auditors also conducted interviews with approximately 20 students enrolled in the course. However, as Ms Licciardo believed that the template used by AMA in the PTR assessments was deficient, the review of the files ceased as she concluded that there was insufficient evidence to determine whether students were ‘suitable and appropriate’ for the course.[624]
[624]T1759, T1783–1785.

So the substance of the criticism directed to the PTR assessments was not that they were not undertaken, but that the files examined contained insufficient evidence to demonstrate that the students’ reasons for enrolling, future aspirations, and learning needs were discussed.[625]
[625]T1800–1801.

In cross-examination, Ms Licciardo appeared to accept that the following elements formed part of the student PTRs carried out by AMA and were present on the student files:[626]
[626]T1794-1796; T1806-1811.

· an enrolment form;

· a student training plan;

· a checklist of matters discussed with a prospective student and signed by a trainer;

· an LLN; and

· a pro-forma student declaration.

The AMA enrolment form is four pages long.[627] The first page requires a student to set out his or her personal information, including the student’s highest completed level of schooling. The next one and a half pages consist of a series of questions (the majority in a multiple choice/tick-box format) concerning:
[627]CB.0568.01.

· previous qualifications;

· current employment status;

· reasons for undertaking the course (e.g. finding employment, changing careers, or developing an existing business);

· learning disabilities; and

· recognition of prior learning.

The remainder of the document is dedicated to pro-forma student declarations regarding consent to use personal information and an acknowledgment that they have been provided with access to key parts of the ‘Student Handbook’.

It may be observed here that, although the enrolment form is hardly comprehensive, in the sense that it does not contemplate fulsome responses by a student, it is plainly directed to the matters outlined in clause 4.6 of the Schedule.

Ms Licciardo identified the real criticism as being that the documents sighted by the auditors did not set out the detail of the matters discussed during the PTR, which were required to be discussed in conformity with clause 4.6. Clause 4.10 requires particularly that the outcomes be ‘known and documented’.[628]
[628]CB.0030, sch 1.

So Ms Licciardo’s evidence boils down to this: the PTRs carried out by AMA in 2014 consisted of no more than the tick box/multiple choice document and this was insufficient to comply with clauses 4.6 and 4.10.

Marie Vassallo, a VET consultant who provided consulting services to small/medium-sized private RTOs, including the CTI companies, and assisted them to become registered and maintain compliance with State Government contracts—also gave evidence on this issue.[629]
[629]T2655.

Ms Vassallo first provided consulting services to the CTI companies in 2013, shortly after the acquisition of AMA, to assist with ‘standardising processes’—making CTI and AMA processes and documentation uniform and compliant.[630] Ms Vassallo also said that part of her role at the CTI companies was to conduct training sessions with trainers relating to the specific requirements under the contract and completion of forms in a particular way.[631]
[630]T2660.
[631]T2699.

Ms Vassallo described the PTR process used by AMA in 2014 in relation to enrolments and PTRs as “clear and documented.”[632] She said the following of the requirement under clause 4.10 of Schedule 1 that the PTR process be documented:
[632]T2671.

COUNSEL: There was an obligation to document what had been discussed with the students?
MS VASSALLO: It was an obligation to document that a discussion had occurred. Later iterations of the contract required the discussion content to be documented but not in 2014. [633]
[633]T2688.

And later:

COUNSEL: [in relation to a tick-box form] You agree there is nowhere indicated on that form where that sort of narrative content is – there is no space for that to be filled out?
MS VASSALLO: And in 2014 it was standard practice for people to have just done a tick-box. As the contract changes, that standard practice has changed.

…

COUNSEL: I want to suggest to you that they did have to write what happened in the discussion [with students] because unless they recorded it somewhere, it hadn’t been documented as required by the contract.
MS VASSALLO: I understand exactly what you’re saying but the standard practice was, at that time that if you ticked that box and said “I have had the discussion and they are suitable”, that you were meeting that obligation.[634]

[634]T2697.

Ms Vassallo’s reference to the 2014 and 2015 requirements relates to an October 2014 amendment to the VET funding contract via a “Contract Notification” including amendments to reporting clauses (and, relevantly, clauses 4.6 and 4.10 of the Schedule).

These amendments took effect from 1 January 2015 and required RTOs to ‘retain and make available’ to DET or its auditors, ‘all records relating to training services, including … evidence of [PTR] undertaken in accordance with clauses 4.6 - 4.10 of the Schedule and evidence that the training as assessment provided was appropriate as defined…”

It is plain that from 1 January 2015, there was a more onerous obligation upon the RTO to retain more detailed records of PTRs than during 2014.

I regard both Ms Vassallo and Ms Licciardo as credible witnesses.

But, I should pause here to note that it is not the opinion of either witness (Ms Licciardo or Ms Vassallo) that is determinative. Each expressed an opinion about the practical construction of the two clauses and compliance by an RTO with those terms. Ultimately, I have to determine whether the AMA’s documentation satisfied the requirements of the two clauses. I will return to this point in a moment.

Terry O’Hare is a bricklayer and TAFE teacher. For the last five years he has been a trainer and assessor in bricklaying.

He commenced employment with CTI in January 2013 as a trainer and assessor for the Certificate III in Bricklaying, and subsequently, after obtaining a further qualification, the Building course. Part of Mr O’Hare’s role was to conduct PTRs of prospective students and complete enrolment documentation.

Mr O’Hare said that during his time at CTI, he was provided with training (in the form of seminars and workshops) in relation to the correct completion of enrolment documentation, including PTRs.[635] He said that he had never experienced any issues with the suitability of students enrolled in his courses and the completion of PTRs.[636]
[635]T2768.
[636]T2788-2799.

Mr O’Hare was cross-examined on his understanding of the components of a PTR as required under clauses 4.6 and 4.10.[637] He clearly did not know much about these provisions. Nationwide made a point about this in its closing submissions.[638] However, his evidence was not surprising and it matters not: Mr O’Hare is a trainer and assessor, not a contract lawyer. It is not necessary for him to have understood the finer points of the contractual obligations of AMA under the VET funding contract – Mr O’Hare’s role was to conduct the PTRs in accordance with his training and complete the appropriate documentation as required by his employer.
[637]T2792-2795.
[638]Nationwide’s closing submissions, page 171, [47].

I accept Mr O’Hare’s evidence to the effect that in relation to his Building course, PTRs were carried out and recorded in the AMA documentation. I also accept that the students he taught were suitable for the course which they undertook. But, of course, that is not the whole story of how the CTI companies operated – (or for that matter, other AMA trainers) as has been seen, the enrolments of students, particularly those from non-English speaking backgrounds, was problematic, as was the completion of enrolment forms and class materials.

It does well to remember Mr Charan’s email of 30 May 2014 to Ms Mantzis and Ms Celona about enrolments for the Building course, which sets out, in the clearest terms, Mr Charan’s attitude towards compliance with the PTR requirements of VET funding contract:

Anastasia, Can we ensure that we book classes in for week starting 9^th June 2014? Don’t worry about the enrolment forms right now, just get them into the classes and let’s deliver the first cluster. We are hoping during this process we should have the enrolment forms in our hands by then…[639]

[639]CB.0554.

That said, there is no evidence of actual non-compliance by AMA despite Mr Charan’s exhortation to Ms Mantzis.

It is not clear from the text of clauses 4.6 and 4.10 that it required the RTO to detail the specific matters listed in clause 4.6, as opposed to simply documenting that the matters were discussed – i.e. the outcomes of the PTR.

Ultimately, I am satisfied that the requirements of the two clauses did not mandate the level of documentation identified by Ms Licciardo. Whilst the template is certainly not expansive and requires simple binary answers concerning the student’s ability to undertake the course, the reality is that the audit of this course demonstrated that the RTO completed and retained the relevant documentation which, admittedly brief, addressed the issues it was required to consider under the VET funding contract. As Mr Charan submitted, this, I think, is a non-issue. Even if I concluded that the AMA documentation did not comply with the terms of clauses 4.6 and 4.10, on any view, the breach as described by Ms Licciardo and as borne out by the evidence was not significant.

Conclusion

Nationwide has not established that, in relation to the Building course, there was a significant non-compliance with the terms of the VET funding contract.

Conclusion as to the allegations of significant non-compliance

I am satisfied that the provision of incentives by the CTI companies to students was a significant breach of an important part of the VET funding contract. It was inimical to the ethical management of the VTG which, as we have seen, was wide open to abuse and dependant on probity and compliance by an RTO with the terms of the VET funding contract. However I am not satisfied that there was significant non-compliance with clauses 4.6 and 4.10 of the Schedule to the VET funding contract in relation to the AMA pre-training reviews.

Summary of conclusions as to defamation and justification

I summarise my conclusions:

(a) Mr Charan was defamed in both the written and online versions of the article;

(b) the article defamed him by conveying imputations that:

(1) Mr Charan managed a VET organisation which engaged in unscrupulous business practices which took advantage of vulnerable consumers which resulted in him making a large amount of money; and

(2) Mr Charan managed a VET organisation which was significantly non-compliant with quality standards

I am satisfied that Nationwide has established the substantial truth of both imputations.

If, contrary to my conclusion, Nationwide had failed in its defence of justification, the assessment of damages (both compensatory and aggravated) would have been particularly difficult.

It is likely that if I had to deal with the question of the assessment of damages (compensatory and aggravated), I would have followed the approach of Neil LJ in Pamplin v Express Newspapers,[640] in which it was held that a ‘defendant is also entitled to rely in mitigation of damages on any other evidence which is properly before a Court’. So a defendant ‘may be able to rely upon such facts as he has proved to reduce the damages, perhaps to vanishing point’.[641]
[640][1988] 1 WLR 116. Cited with approval by the New South Wales Court of Appeal in John Fairfax Publications Pty Ltd v Zunter [2008] NSWCA 227 [48]-[50].
[641]Cited with approval by McCallum J in Dank v Nationwide News Pty Ltd [2016] NSWSC 295 [74].

I do not accept, as submitted by Mr Charan’s counsel that, if the justification defence failed, Mr Charan was entitled to awards of damages of $389,500 for compensatory and $800,000 for aggravated damages.

Notwithstanding the character witnesses called on Mr Charan’s behalf, having regard to all the evidence in the case and having observed him give evidence over seven days, I cannot accept that he would be entitled to a significant award of damages.

On the evidence before me I think that it is not possible to find that Mr Charan had an entitlement to an award of damages for vindication of his reputation or to provide reparation for injury. I cannot be satisfied that he has suffered any lasting anguish other than hostility towards Nationwide and its legal advisors. Whilst I accept that he may have suffered some injured feelings at the time of the publication, the apology proffered by Nationwide the next day was, I think, sufficient to salve any hurt he might have suffered.

ANNEXURE A

[2018] VSC 3

25 January 2018