Kontea Pty Ltd and Tertiary Education Quality and Standards Agency
[2025] ARTA 785
•13 May 2025
Kontea Pty Ltd and Tertiary Education Quality and Standards Agency [2025] ARTA 785 (13 May 2025)
Applicant/s: Kontea Pty Ltd
Respondent: Tertiary Education Quality and Standards Agency
Tribunal Number: 2024/6679
Tribunal:General Member R M Smith
Place:Adelaide
Date: 13 May 2025
Decision:The Tribunal sets aside the decision under review and in substitution decides to cancel the registration of the Kontea Pty Ltd as a registered provider under the Education Services for Overseas Students Act 2000 (Cth)
..
Statement made on 13 May 2025 at 3:49pm
General Member R M Smith
Catchwords
VOCATIONAL EDUCATION AND TRAINING – suspension of registration – cancelation of registration – non-compliance with the ESOS Act – the protected account – the protected amount – decision set aside
Legislation
Corporations Act 2002 (Cth) ss 459C, 482
Education Services for Overseas Students Act 2000 (Cth) ss 10E, 28, 29, 83 and 92
Tertiary Education Quality and Standards Agency Act 2011ss 35, 57, 158,Cases
Australian Tertiary Academy Pty Ltd and Australian Skills Quality Authority [2018] AATA 4875
Austwide Institute of Training Pty Ltd and Secretary, Department of Education and Training [2016] AATA 266
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Success Fast-Track Pty Ltd and Australian Skills Quality Authority [2018] AATAUnited Business College Pty Ltd and Australian Skills Quality Authority AATA 2778
Statement of Reasons
PRELIMINARY MATTERS
This application for review, together with 2024/ 6823, 2024/ 8119 and 2024/ 8120 Kontea Pty Ltd and Australian Skills Quality Authority (ASQA), was heard by the Tribunal on 25 and 26 February 2025. At the time of the hearing, the Tribunal was aware Kontea Pty Ltd (Kontea or the Applicant) was defending an application filed by the Tertiary Education Quality Standards Agency (TEQSA or the Respondent) seeking an order the company be wound up in insolvency.
On 14 April 2025, the Federal Court made an order winding up the Applicant in insolvency under the relevant provisions of the Corporations Act 2001 (Cth) and appointing Mr Andrew Yeo (the Liquidator) as the liquidator of the company. The Tribunal became aware of this development prior to the delivery of its decision. Given the significance of the development, a further hearing was held on 6 May 2025 and was directed to the impact of the Applicant’s liquidation on the decision under review.
In accordance with section 92 of the of the Education Services for Overseas Students Act 2000 (Cth) (the ESOS Act), the registration of a provider is automatically cancelled for all courses and all locations if a winding up order is made in respect of a provider that is a body corporate. On 14 April 2025, upon the making of the winding up order, the Respondent’s decision the subject of this review was superseded by the operation of that section and the Applicant’s registration was cancelled.
The Tribunal was advised by Ms Tsiolas she intends to file an application under section 482 of the Corporations Act 2001 (Cth) seeking an order terminating the winding up. No application had been filed as at the date of this decision, nor had the Applicant sought to appeal the winding up order. The Liquidator informed the Tribunal that in his discussions with Ms Tsiolas in respect of the application to terminate the winding up order, the company intends to meet its liabilities from a third-party investment. The investment requires a favourable decision in this review.
Termination of the liquidation does not set aside the winding up order or otherwise dismiss the originating process. It simply terminates the liquidation at a later point in time determined by the Court. Even if the Applicant were to be successful in this review and noting the company was wound up after the time the Tribunal decision is taken to have effect, s 92 would operate to cancel the registration of the Applicant under the ESOS Act.
Notwithstanding this, it is still appropriate for the application for review to be determined. For the reasons outlined below, the Tribunal has decided to set aside the Respondent’s decision and in substitution cancel the Applicant’s registration under the ESOS Act.
The Tribunal acknowledges the cross over in the facts and issues between this and ASQA review. Noting there are some critical differences in the facts and issues, and they involve decisions from different agencies I have decided to issue a statement of reasons for each application. There is, however, repetition between each statement of reasons where the facts and issues intersect.
INTRODUCTION
Prior to the decision the subject of this review, the Applicant:
(a)was registered under the Tertiary Education Quality and Standards Agency Act 2011 (Cth) (the TEQSA Act) as a registered higher education provider;
(b)held an accreditation under the TEQSA Act in respect of its Bachelor of Construction Management (Honours) course;
(c)was registered under the ESOS Act as a registered provider in respect of its Bachelor of Construction Management (Honours) course.
On 29 August 2024, TEQSA made a decision in relation to the Applicant under s 83(3)(b) of the ESOS Act to suspend the Applicant’s registration as a registered provider.
On 29 August 2024, the Applicant applied to the former Administrative Appeals Tribunal for a review of TESQA’s decision and for a stay of that decision.
On 25 September 2024, the AAT ordered an interim stay of the decisions under review subject to conditions.
On 25 October 2024, the Administrative Review Tribunal refused Kontea’s application for a stay of TEQSA’s decision under review. The operation of the decision to suspend the Applicant’s registration as a registered provider took effect that day.
PROCEDURAL BACKGROUND
The facts are taken predominantly from the Tribunal documents.
On 8 April 2024, Kontea applied for renewal of the accreditation of its Bachelor of
Construction Management (Honours) course. Under s 55(2) of the TEQSA Act,
that application must be accompanied by a fee determined under s 158, which in this case was $6,930. The Applicant did not pay the fee.On 19 April 2024, Kontea applied for renewal of its registration as a registered higher
education provider. Under s 35(2) of the TEQSA Act, that application must be accompanied by a fee determined under section 158, which in this case was
$106,700. The Applicant did not pay the fee.On 14 June 2024, TEQSA wrote to the Applicant expressing concern in respect of a number of matters, including but not limited to a failure to comply with conditions of registration, maintain student and provider defaults in Provider Registration and International Student Management System (PRISMS) and failure to apply for Commonwealth Register of Institutions and Course for Overseas Students (CRICOS) registration within the required time frame. Kontea provided a response to the concerns raised on 1 July 2024.
On 23 July 2024, ASQA advised TESQA that it had decided to suspend the Applicant’s registration effective 25 July 2024. The next day, ASQA provided TEQSA with information and their analysis to support the suspension decision. This included bank statements of the Applicant.
On 29 July 2024, TEQSA advised the Applicant that it had commenced a compliance assessment under s 59 of the TEQSA Act. The specific areas of consideration in the compliance assessment were outlined in the communication and relevantly included compliance with s 29 of the ESOS Act.
On 15 August 2024, the Applicant provided a response to the Notice of Compliance Assessment.
On 20 August 2024, TEQSA notified Kontea that it was considering suspending the Applicant’s registration under the ESOS Act on the basis that TEQSA believed on reasonable grounds that Kontea had breached s 29 of the ESOS Act. In particular, that based on analysis of the bank statements that Kontea consistently did not hold the required monies in its protected account, and based on the non-payment of the Registered Higher Education Provider (RHEP) charge imposed by the TEQSA Act, it may not meet the registration requirements.
TEQSA also advised the Applicant that as it had not paid the fees under ss 55(2) and 35(2) of the TEQSA Act, the applications for renewal of accreditation and registration were invalid and, further the accreditation and registration would expire on 3 and 4 September 2024 respectively. The fees were not paid in response to this communication.
On 21 August 2024, Kontea provided a response to the concerns raised by the Respondent. The Applicant did not dispute that it had failed to maintain the protected amount as required by the ESOS Act. The Applicant, however, did advise the Respondent that an investor had agreed to acquire 70% of the shares in Kontea for $2million (the First Investment). This in turn would guarantee that the protected account would meet the requirements of s 29 together with any ongoing expenses. The Applicant advised that in order for the agreement to be finalised, the investor needed to be satisfied the registration would not be suspended or cancelled.
On 29 August 2024, TEQSA decided to suspend Kontea’s registration under the ESOS Act on the basis that TEQSA believed on reasonable grounds that Kontea had breached s 29 of the ESOS Act. This was primarily because the Applicant had failed to maintain the protected amount in the protected account. The suspension was effective immediately.
TEQSA made two other decisions on 29 August 2024 which have not been reviewed by the Applicant. The first was a decision under s 37A of the TEQSA Act to extend the Applicant’s registration as a registered higher education provider until 31 December 2024. The second was a decision under s 57 of the TEQSA Act to extend the Applicant’s accreditation for its Bachelor of Construction Management (Honours) course until 31 December 2024.
On 2 September 2024, ASQA made a decision to cancel Kontea’s registration under the National Vocational Education and Training Regulator Act2011 (Cth) (NVR ACT) and the ESOS Act and to not renew Kontea’s registration under the ESOS Act. On 9 September 2024, Kontea applied for a review of ASQA’s decisions to the former Administrative Appeals Tribunal.
In September 2024, the Commonwealth Ombudsman wrote to the Respondent to disclose information in respect of an investigation as a matter of public interest. The Ombudsman, in that correspondence advised that it had received 56 complaints from students in relation to unpaid refunds.
On 31 December 2024, the Applicant’s registration as a registered higher education provider and its accreditation for its Bachelor of Construction Management (Honours) course expired as the requisite fees were not paid by the due date.
REGULATORY FRAMEWORK
The ESOS Act
The objects of the ESOS Act are found in s 4A as follows:
(a)to provide tuition assurance, and refunds, for overseas students for courses for which they have paid; and
(b)to protect and enhance Australia's reputation for quality education and training services; and
(c)to complement Australia's migration laws by ensuring providers collect and report information relevant to the administration of the law relating to student visas.
The “ESOS agency” for registered higher education providers is TEQSA.[1] TEQSA is therefore responsible for granting and renewing registration for higher education courses under the ESOS Act.
[1] Section 6C of the Education Services for Overseas Students Act 2000
A provider may apply to be registered to provide a course or courses at a location or locations to the ESOS agency.[2] TEQSA may renew the providers registration if the provider meets the registration requirements.[3]
[2] Section 9
[3] Section 10
Section 11 sets out the registration requirements. Subparagraph (b) includes a requirement that the ESOS agency is satisfied that the provider is complying, or will comply with the ESOS Act and the National Code of Practice for Providers of Education and Training to Overseas Students (the National Code). The National Code, which is a legislative instrument made under the ESOS Act, supports these objects by establishing nationally consistent standards that govern the protection of international students and the delivery of courses by CRICOS providers.
For registered providers who receive fees from overseas students, s 27 restricts the prepayment to 50% of the total tuition fees. Sections 28 and 29 impose very strict requirements in respect of those fees as follows:
·a registered provider must maintain a bank account with an Australian ADI (the Protected Account). [4]
·any pre-paid tuition fees must be paid into the Protected Account within five (5) business days of receipt of those fees.[5]
·the provider must ensure that at all times there is a sufficient amount (the Protected Amount) standing to the credit of the Protected Account to repay all tuition fees to every overseas student (or intending overseas student) in respect of whom tuition fees have been paid to the relevant provider and who has not yet begun the course in respect of which the tuition fees were paid.[6]
·Funds may only be withdrawn so as to reduce the balance below the Protected Amount to pay a refund as required by ESOS Act, an alternative provider in respect of an alternative course or the Tuition Protection Service (TPS) director.[7] The amount must not be more than the amount received by the provider in respect of the relevant student before the student begins the course.[8]
·The Protected Amount is not available to pay debts of the provider (other than for the purposes of s 29) and is protected from recovery action.[9]
[4] Section 28
[5] Section 29(1) and (2)
[6] Section 29(3)
[7] Section 29(4)
[8] Section 29(5)
[9] Section 29(6)
Once the tuition has been provided, the fees may also be used by the provider.
Part C of the ESOS Act sets out what happens when a registered provider or an overseas student or intending overseas student, fails to start or finish a course with a provider, including the obligations on providers to provide refunds to students.
Section 50B deals with when refunds are made by the Director of the TPS. Section 50C sets out the consequences of payment under 50B. For students, once a refund is made by the TPS, they cease to have a claim against the provider in respect of their fees.[10] Providers are required to pay the TPS Director an amount equal to the amount the TPS Director paid.[11] The amounts paid by the TPS Director are a debt due to the Commonwealth and can be recovered in a court of competent jurisdiction.[12]
[10] Section 50C(1)
[11] Section 50C(2)
[12] Section 50C(3)
Section 83(1) of the ESOS Act provides as follows:
Circumstances in which ESOS agency may take action
(1) The ESOS agency for a registered provider may take one of more actions mentioned in subsection (3) against the provider if the agency believes on reasonable grounds that the provider, or an associate or high managerial agent of the provider, is breaching or has breached:
(a)this Act; or
(b)the national code; or
(c)if the ELICOS Standards or Foundation Program Standards apply in relation to the provider – those Standards; or
(d)a condition of the provider’s registration
Subsection (3) sets out the available actions as:
a.The imposition one of more conditions on the registered providers registration either generally or in respect of any one or more specified courses for any one or more specified locations;
b.Suspension of the registered providers registration either generally or in respect of any one or more specified locations;
c.Cancellation of the registered providers registration for any one or more specified courses for any one or more specified locations
Once TEQSA believes on reasonable grounds that a registered provider is breaching or has breached the ESOS Act, the power to take action against that provider is enlivened. Although TEQSA has a broad discretion as to the action it can take, the discretion is not unfettered. The power must be exercised for the purposes of the Act and in the context of the regulatory regime.
THE ISSUES
In this review, it is the role of the Tribunal to determine whether the decision under review, namely TEQSA’s decision under s 83(3)(b) of the ESOS Act to suspend Kontea’s registration as a registered provider was the correct or preferable decision on the material before the Tribunal.[13]
[13] Shi v Migrations Agents Registration Authority [2008] HCA 31
The Tribunal, in the course of the review, exercises all the same powers and is subject to the same constraints as the original decision maker and must address the same question and direct attention to the same statutory regime under which the decision was made.
The Respondent argued at the hearing that the Tribunal should set aside the decision under review and in substitution cancel the Applicant’s registration as a registered provider under the ESOS Act. Alternatively, the Tribunal should affirm the decision under review. In their view, a lesser sanction would not be appropriate having regard to the extent of the non-compliance, the likelihood of rectification and future compliance. The protection of students and Australia’s reputation for providing quality education and training should be paramount.
The Applicant argued that the decision should be set aside. The Applicant submitted that by imposing the following conditions in respect of the registration:
(i)to provide a biannual or quarterly report as to the financial and operational status of the Applicant, including information specifically in respect of the protected account;
(ii)that no funds be received from students until a visa has been granted; and
(iii)if the Applicant does not receive the investment funds within 7 days the registration can then be cancelled.
That the students and Australia’s reputation will be sufficiently protected.
THE EVIDENCE
The Tribunal at the hearing had the benefit of the following material:
·Affidavit of Argyro Tsiolas sworn on 19 December 2024;[14]
[14] Exhibit A
·Affidavit of Argyro Tsiolas sworn on 24 February 2025;[15]
[15] Exhibit A2
·Witness Statement of Graem Kelly dated 14 February 2025;[16]
[16] Exhibit R6
·Witness statement of Tanya Benton-Hall dated 13 February 2025;[17]
[17] Exhibit R5
·Witness statement of Kylie Stafford dated 14 February 2025;
·Letter from Plumber Board[18]
·ASIC extract Dimension Capital Pty Ltd;[19]
·ASIC extract DK Obvious Pty Ltd[20];
·Dimension Capital bank records;[21]
·Oral evidence of Ms Tsiolas;
·Oral evidence of Ms Benton-Hall;
·Oral evidence of Ms Stafford;
·The Tribunal documents
Discussion of Evidence
[18] Exhibit R7
[19] Exhibit R8
[20] Exhibit R9
[21] Exhibit A3
The Tribunal documents
The Tribunal has been provided with bank account statements of the Applicant for the period commencing 31 December 2021 to 31 May 2024.[22] The bank statements relate to both the operational and Protected Accounts.
[22] With the exception of the period 28 February 2023 to 28 March 2023 for the Protected Account only.
PRISMS provides a report function to show how much money should be held in the Protected Account by a provider at any given date. The money held in the Protected Account compared with the amount required to be held as indicated by PRISMS data was as follows:
Month
Protected Account closing balance
Protected Amount required from PRISMS data
Shortfall
January 2022
$5000
$227,202
$222,202
February 2022
$5875
$164,680
$158,805
March 2022
$1000
$163,751
$162,751
April 2022
$1000
$194,147
$193,147
May 2022
$61,228
$280,097
$218,869
June 2022
$50,006
$372,108
$322,102
July 2022
$57,037
$516,287
$459,250
August 2022
$30,610
$583,946
$553,336
September 2022
$18,857
$660,870
$642,013
October 2022
$1005
$563,382
$562,377
November 2022
$40,589
$556,617
$516,028
December 2022
$102,475
$583,810
$481,335
January 2023
$471,671
$353,897
- $117,774
February 2023
$268,979
$291,700
$22,721
March 2023
No bank statement provided
$343,052
unknown
April 2023
$150,782
$352,964
$202,182
May 2023
$37,499
$347,954
$310,455
June 2023
$18,939
$369,114
$350,175
July 2023
$20,626
$497,176
$476,550
August 2023
$2985
$650,781
$647,796
September 2023
$49,488
$649,925
$649,925
October 2023
$30,892
$642,704
$611,812
November 2023
$28,745
$665,294
$636,549
December 2023
$42,371
$719,971
$677,600
January 2024
$35,028
$848,856
$813,828
February 2024
$15,014
$900,423
$885,409
March 2024
$8096
$916,253
$908,157
April 2024
$1338
$864,648
$863,310
May 2024
$2010
$869,650
$867,640
With the exception of January 2023, the Protected Amount was not maintained by the Applicant in the Protected Account. For March 2023, a bank statement for the Protected Account has not been provided by the Applicant and so the balance of the Protected Account during this period is unknown. Having regard to the balance of the Protected Account in the months prior to and after March 2023 and the admissions of the Applicant, it can be inferred the Protected Amount was not in the Protected Account for this period as well.
A review of the Protected Account bank statement reveals that for those periods where the account was less than the Protected Amount, that funds were being withdrawn by the Applicant for an unauthorised purpose. Significant funds were transferred into the operational account of Kontea and used by the Applicant.
A review of the operational account reveals that although the funds were used for operational expenses of the Applicant, a portion was also used on expenses that have no clear nexus to the business operation as well as to items that are plainly personal expenses of the Directors. The Tribunal, in reviewing those statements, identified expenses relating to pet insurance and pet supplies, private health insurance, medical expenses, pool maintenance, personal care and grooming, wine, restaurants, cafes and uber eats and general retail. There were also cash withdrawals where the purpose was unable to be identified. Funds were also used to repay loans. The operational account also includes transactions that are described as student refunds.
The bank statements together with the financial statements also show an injection of funds into the business. Ms Tsiolas clarified in her evidence that Kontea borrowed funds guaranteed by the Director’s equity in personal property to provide extra financial support to the company. The injection of those funds did not replenish the Protected Account. The loan proceeds were generally paid into the operational account of the Applicant and frequently exhausted almost immediately.
There is no evidence before the Tribunal as to the status of the Protected Account before January 2022 and after May 2024.
Evidence of Ms Tsiolas
Although the Applicant had legal representation in the earlier stages of the review, by the date of the hearing the Applicant was not legally represented. Ms Tsiolas advocated on behalf of the Applicant in addition to being the only witness for Kontea in her capacity as the Chief Executive Officer (CEO). In my view she was prepared, articulate and assisted the Tribunal to the best of her ability.
Ms Tsiolas agreed that the Applicant had failed to maintain the Protected Account. She clarified, however that this arose as a result of extenuating circumstances which she described as a “perfect storm” of events which were outside of the control of the Applicant.
The first of these events was the Covid pandemic. As a result of border and other restrictions, international students were unable to travel to Australia to take up educational placements and educational facilities were unable to deliver face to face learning. The impacts were particularly harsh in Victoria.
The second of these events was the loss of four family members, the most significant of which was her husband and co-founder, who suffered a heart attack in the workplace in November 2023. Not only did this loss take a personal toll on Ms Tsiolas, but her husband also held a key position within the management of the Applicant. It was necessary to redistribute his duties across the leadership group.
Post Covid, and in preparation for a large number of students who had applied for courses but had been unable to commence due to the pandemic, the Applicant made an investment in infrastructure, staffing and other resources. The Applicant was then faced with the final event being an increase in visa refusals. In addition to the education and training not actually being delivered at the scale anticipated, unspent tuition fees were required to be refunded more frequently than prior to the pandemic. In her affidavit, Ms Tsiolas stated the Applicant has paid over $200,000 in refunds to students who were refused visas. There were also some students that were refused visas but were not entitled to a refund.
Ms Tsiolas agreed that the funds were transferred from the Protected Account to fund the operational costs of the Applicant. She stated the Applicant did so in order to keep Kontea’s educational services operating for the benefit of students and staff. It was her evidence that protection of the students was the focus of the Applicant at the time. Students would have been displaced should Kontea have ceased to operate as some courses were not offered by other providers[23] and some students may not have been able to complete their qualifications prior to the expiration of their visa.
[23] For example, Certificate IV in Plumbing Services, Advanced Diploma in Building and Construction and Bachelor of Construction management
Ms Tsiolas conceded in cross-examination that the injection of funds from loans guaranteed by the Directors did not bring the Protected Account to the Protected Amount. When the Applicant was unable to generate sufficient funds from available resources, it sought out investment opportunities.
Ms Tsiolas also stated that the Applicant’s financial problems were compounded by ASQA’s decision to revoke a stay of their suspension decision while it completed an internal review. As a result of this conduct, the First Investment opportunity was unable to proceed. Had the investment moved forward the outstanding fees would have been paid, the Protected Account would have been restored and the Applicant would have been able to continue to provide educational services.
In cross examination, Ms Tsiolas was taken to the financial statements which record significant liabilities on the part of Kontea. Ms Tsiolas conceded the financial position of the company has deteriorated since the preparation of those reports. Kontea currently has no income and there are challenges in recovering unpaid tuition fees. Ms Tsiolas told the Tribunal that the Applicant remained financially viable notwithstanding the difficult circumstances. She stated the Applicant had approximately $2.5 million in outstanding tuition fees to be collected and they had been able to secure a new investment. The Applicant is also defending the winding up proceeding brought against them by the Respondent.
Exhibited to her affidavit dated 24 February 2025 was a copy of the Investment Agreement with the proposed investor Dimension Capital Pty Ltd. Essentially the investor has agreed to obtain a 49% stake in Kontea for $800,000. The proposal is conditional upon the Tribunal setting aside the decision and provides that funds will be paid in two tranches. The first $450,000 within seven days of the Tribunal’s decision to reinstate the registration, with those monies to be applied to the TPS and TEQSA debts, and the second of $350,000 upon “confirmation of the favourable decision” for the purpose of clearing any remaining liabilities of Kontea. The investor also has the right to obtain an additional 30% equity in Kontea for a further $800,000 within the next 12 months.
It is unclear whether Ms Tsiolas would remain as the CEO after the second tranche of funds. Ms Tsiolas confirmed in her evidence that not all the details have been finalised, but they would do so after the conclusion of the Tribunal proceedings.
Ms Tsiolas contends that the Applicant has moved through the unprecedented set of circumstances and that this should be taken into account when determining whether to exercise the power to cancel or suspend the registration. There are still a number of agents who wish to enrol students in the courses offered by Kontea and there are a number of students who have been displaced who will be able to continue with their study and career paths should the decision be set aside.
Evidence of Ms Benton-Hall
Ms Benton-Hall is a Director in the Case Management Team of the TPS. The role of the TPS is to support international students whose education providers are unable to fully deliver their course of study. Where an education provider does not meet their obligations under the ESOS Act to provide a refund to a student of unspent tuition fees, the TPS may provide a refund.
Ms Benton Hall in her evidence confirmed the TPS had processed 137 refunds for 79 international students who were enrolled with Kontea. The total amount refunded to those 79 students was $451,344.45 from 16 September 2024 until the date of the hearing. The majority of the refunds were for visa refusals. There were some students who also required a refund following the suspensions and cancellation of the Applicant’s registration.
In cross-examination and in response to a question from the Applicant in respect of the impact of Covid and the increase in visa refusals, Ms Benton-Hall confirmed that there was no increase in non-compliance with s 29 and the maintenance of the Protected Accounts of providers generally. There has been only one other closure of a provider requiring TPS assistance.
Ms Benton- Hall also provided evidence that a provider obligation letter was sent to the Applicant in August and again in November 2024. The letter reminds the provider of their obligations under the ESOS Act in relation to the Protected Account and their obligation to either refund the tuition or place the student with an alternate provider. There was no substantive response to the correspondence or compliance with the Protected Account obligations.
Evidence of Mr Kelly
Mr Kelly is a Director of Sector Risk and Compliance within TEQSA. He was not called to give evidence nor was he cross examined. His evidence was limited to the material contained in his affidavit which covered two issues. The first related to the winding up proceedings commenced by TEQSA against the Applicant on 14 January 2025. Those proceedings concern the failure of Kontea to comply with a statutory demand in respect of a $50,321 debt owed to the Respondent in respect of the REPC imposed by s 6 of the TEQSA Act. As at the date of the hearing that application had not been determined.
The second was to confirm the Applicant has not paid the fees associated with its registration and accreditation under the TEQSA Act. As a result of this, from 1 January 2025, Kontea has not been registered as a higher education provider.
Evidence of Ms Stafford
Ms Stafford is an Assistant Director in Compliance Management with ASQA. She was cross-examined by the Applicant at the hearing, although many of the questions were outside the knowledge of the witness.[24] In her affidavit, Ms Stafford states that based on her analysis of reports retrieved from PRISMS that:
·There could be as many as 257 students who had a visa refused and 301 students who have an active confirmation of enrolment at the time of the cancellation of Kontea’s registration. Although there may be some cross over from both lists, there is a body of students that would be entitled to a refund for prepaid fees; and
·Between 7 February 2023 to 3 February 2025, Kontea has not varied any enrolments to record it has refunded students. Although all refunds are required to be recorded in PRISMS, it is possible that some students have been refunded but the details not recorded.
70.This evidence was not the subject of cross examination by the Applicant.
CONSIDERATION OF ISSUES
[24] For example, there were several questions directed to the decision of ASQA to withdraw the stay of the suspension decision on 19 August 2025. This decision was made by a delegate within the Internal Review Team of ASQA and not Ms Stafford.
Was the power to impose a sanction enlivened?
The Tribunal may impose a sanction under the ESOS Act if it believes the Applicant is breaching or has breached the Act, and it has reasonable grounds for that belief. There does not appear to be any dispute between the parties that Kontea has breached the ESOS Act in failing to maintain the Protected Amount in the Protected Account and the power is therefore enlivened. For the avoidance of doubt, I find the Applicant was in breach of s 29 of the ESOS Act and the grounds for that belief are reasonable based on the bank account statements as compared against the PRISMs data in evidence before the Tribunal. The power to impose a sanction under s 83 of the ESOS Act is therefore enlivened and exercisable.
What action is appropriate in the circumstances?
The Respondent argued the most appropriate sanction having regard to the circumstances surrounding the breach of the ESOS Act is the cancellation (or alternatively the suspension) of the Applicant’s registration.
Kontea argued that cancellation or suspension should not be imposed where the breach was as a result of unprecedented events outside the Applicant’s control. They say that the imposition of conditions is appropriate in the circumstances.
As to the question of whether the cancellation power is exercisable, the cases indicate the Tribunal should have regard to the following factors in exercising the discretion:[25]
·The probability of the provider complying with its obligations within a reasonable timeframe and remaining compliant with those obligations;
·The purposes of the ESOS Act, which is directed to the protection of students and Australia’s reputation for quality education and training; and
·Deterrence to the sector generally and the need to promote voluntary compliance.
[25] United Business College Pty Ltd and Australian Skills Quality Authority [2019] AATA 2778 per Senior Member Furnell at [26] to [29]
In marginal cases the inconvenience to current students may be of some relevance. [26] For the reasons expanded upon below, I do not consider this to be a marginal case.
[26] Austwide Institute of Training Pty Ltd and Secretary, Department of Education and Training [2016] AATA 266 at 126
The power to cancel the provider’s registration is clearly available where the decision-maker has reason to believe the provider is unlikely to substantially comply with the regulatory regime within a reasonable time frame, and to thereafter remain in substantial compliance. If one of the other sanctions referred to in s 83(3) of the ESOS Act or 36 of the NVR Act would be sufficient to bring about ongoing compliance, then the decision-maker should look to impose one of the lesser sanctions first. The cancellation power should be exercised for the benefit of the public rather than a punishment and therefore should only be exercised where it represents the minimum sanction necessary for the protection of the public interest.[27]
[27] Success Fast-Track Pty Ltd and Australian Skills Quality Authority [2018] AATA at [37]
Compliance with obligations
In United Business College Pty Ltd and Australian Skills Quality Authority[28], Senior Member Furnell helpfully outlined an approach to assess the likelihood of timely and sustained future compliance as follows:
The first concerns the significance and extent of any College non-compliance before being put on notice of ASQA’s concerns. This is relevant to an assessment of the recidivism risk because it is an indicator of the attitude or approach the College would adopt to regulatory compliance were it to be left substantially to its own devices (as it would be, were it to no longer be facing the immediate threat of loss of registration in an industry context that “is partly self-regulating, with limited resources available to the Regulator to conduct audits”). Attitudes displayed by the College in the past may well be displayed in the future, especially as there has been no change in its directors or shareholders since the College’s initial registration under the NVR Act.
The second consideration concerns the significance and extent of any past non−compliance and the extent to which, and manner in which, such non-compliance has been rectified. This is relevant to an assessment of the risk of recidivism as it is an indication of the College’s capacity and willingness to implement remedial action which is both timely and effective to restore the College to a position of regulatory compliance.
The third consideration concerns the significance and extent of any current non−compliance. Current non-compliance is relevant to an assessment of the risk of recidivism as:
(a)non-compliance in the face of an immediate threat to its survival as an educational institution does not bode well for the capacity or willingness of the College to achieve and maintain regulatory compliance in the future, absent that threat; and
(b)it is suggestive of the extent to which changes made by the College since being alerted to its compliance issues are likely to be successful in its achieving and sustaining substantial compliance. (footnotes omitted)
[28] Ibid at [31] to [35]
The significance of any non-compliance
It is not in dispute that the Applicant has not complied with s 29 of ESOS Act from at least January 2022 to May 2024 (with the exception of January 2023) by failing to maintain the Protected Amount in the Protected Account. In my view, and having regard to the evidence of Ms Tsiolas that the Applicant’s financial problems began in 2020 as a result of Covid, that the Protected Account was in deficit in both January 2022 and May 2024 and the deterioration in the financial position of the company during this period, it can be inferred the Applicant was in breach of its obligations both prior to January 2022 and after May 2024 until the implementation of the Respondent’s decision.
The deficit in the Protected Account for January 2022 was $222,000 by May 2024 that had escalated to $867,640. With the exception of January 2023, the deficit was often substantial.
The bank statements reveal funds in the Protected Account were withdrawn for an unauthorised purpose, namely, to top up the Applicant’s operational account. The money was then used by the Applicant to pay for the company’s business expenses including the repayment of loans but also to fund personal or non- business expenses.
Although Kontea was able to obtain loans secured against the assets of the Directors, those funds were not used to replenish the Protected Account. They were used to fund purchases out of the operational account which included both business and non-business expenses.
The Applicant argued that the issues with the Protected Account began during Covid as a result of financial pressures arising from border closures and other restrictions. Those pressures were compounded by an increase in visa refusals post Covid and some tragic personal circumstances. It was therefore necessary for Kontea to use the funds in the Protected Account to keep the business operating.
The Tribunal generally accepts that the various restrictions imposed during Covid and an increase in student refusals would have a detrimental impact on education providers and in particular on those who provide courses for overseas students. The evidence of Ms Benton-Hall, however, indicates that although there were a number of unforeseen challenges facing the sector during this time this did not translate into wide-spread breaches in maintaining the Protected Account by registered providers. In other words, organisations were able to comply with their legal obligations and maintain the Protected Amount in the Protected Account in similar circumstances.
The Applicant also argued that funds from the operational account were used to provide refunds to students. The Tribunal acknowledges that there are transactions in the operational account bank statements which are described as refunds. Critically, however, the PRISM records do not reflect any refunds being provided by Kontea between February 2023 and February 2024. The failure to record the provision of a refund is of itself a breach of Kontea’s obligations under the ESOS Act.
Notwithstanding this, there is a very significant disparity between the funds withdrawn from the Protected Account (which is in the millions of dollars during the period covered by the bank statements) and the amount the Applicant says it refunded to students, being circa $200,000. The payment of some refunds does not alter the fact the Applicant failed to maintain the Protected Amount in the Protected Account and that significant funds were consistently withdrawn for an unauthorised purpose over a period of more than two and a half years.
Although some students did receive refunds, there were also students who did not as evidenced by the activation of the TPS and the complaints to the Ombudsman. The Applicant says that not all the students were entitled to a refund, although no evidence was provided in support of this proposition. The Tribunal prefers the evidence of the Respondent which would indicate that the Applicant has not always provided refunds to students as required by the ESOS Act.
Ms Tsiolas stated the Applicant only used funds from the Protected Account in order to continue operations for the benefit of the current students and that the use of those funds was necessary and reasonable in the circumstances. Section 29(6) of the ESOS Act is very clear on this point and specifically confirms that the Protected Amount is not available for the payment of any debts owing by the provider regardless of the situation. The Applicant was, or should have been, aware of this clear requirement and decided to use the funds for that purpose anyway.
In any event, the statement of Ms Tsiolas is not entirely accurate. The bank statements for the operational account show funds were also being used to pay for expenses with no obvious connection to the business or which were plainly personal expenses of the Directors. Although the Applicant did use funds to meet operational expenses, Kontea was also prioritising the private interests of the Directors over the very clear legal obligation to students in maintaining the Protected Account and providing refunds as required.
Even accepting the financial pressures following Covid and as a result of visa refusals, there is no evidence before the Tribunal that the Applicant used the funds reluctantly, or as a last resort. The Applicant accessed the funds frequently over a number of years such that the shortfall in the account in May 2024 was more than $850,000. The regular reliance on the Protected Account would suggest the Applicant viewed and treated the funds as their own.
There is no evidence the Applicant explored other options such as laying off staff, downsizing operations, or a restructuring arrangement in order to manage the financial pressures. The evidence suggests the opposite. Despite the financial pressures following on from Covid, the Applicant invested into the business on the assumption student numbers would increase. This did not occur as a result of the increase in student visa refusals.
Instead of making a difficult decision in respect of the company operations, the Applicant used the funds in the Protected Account, despite being aware of the very clear legal requirement to protect those funds and to only use them for an authorised purpose.
Kontea was in breach of s 29 of the ESOS Act for a prolonged period of time resulting in a substantial shortfall in the Protected Account. It regularly withdrew funds from the Protected Account for a purpose that it knew was unauthorised and specifically prohibited by the ESOS Act. As a direct result of this conduct, students were not refunded their unspent tuition fees and it has been necessary for the TPS to be activated.
The brazen regularity of the unauthorised withdrawals over such an extended period of time indicates a complete disregard by the Applicant of the purpose of the Protected Account, namely to hold on trust the prepaid tuition fees of the students until they can be withdrawn for an authorised purpose. The breach can only be characterised as severe.
The Applicant provided minutes of the Higher Education Corporate Governance Board meetings for July 2023, September 2023 and March 2024. By this time the issues in maintaining the Protected Account were persistent and the shortfall significant. Despite the importance of these matters, they are not mentioned in the minutes and do not appear to have been discussed at these meetings.
This was also the case with the minutes from a Special Meeting regarding the TEQSA compliance assessment of the Applicant. Again, those minutes contain no reference to the issues in maintaining the Protected Amount. It is concerning that the Board either did not know or was not proactively dealing with this long-standing breach of its legal obligations under s 29, or the financial issues more generally, which the Applicant says underpinned the conduct.
Ms Tsiolas in her evidence sought to cast some of the blame in respect of the financial difficulties faced by the Applicant, including maintenance of the Protected Account, on ASQA. In doing so, the Applicant conveniently ignores the long standing and serious non-compliance of Kontea in failing to comply with s 29 of the ESOS Act or the chronic financial issues faced by the Applicant for approximately two years before ASQAs involvement. Steps to remedy the situation were only taken by Kontea after they were advised that cancellation or suspension of their registration was likely by the regulators
The apparent lack of awareness or action of the Board, the minimisation of the behaviour by seeking to blame external circumstances, the length of time the Applicant was in breach and that decisive action was only taken after intervention of the regulator, reflects poorly on the attitude of the Applicant to compliance with its statutory obligations and its willingness to accept responsibility for its own actions. At best, the Applicant was indifferent to compliance with those obligations. At worst the conduct is also consistent with an intentional disregard of their legal requirements.
Rectification efforts
No evidence has been provided to the Tribunal to show that the non-compliance in respect of the Protected Account has been rectified. Bank statements post May 2024 have not been provided notwithstanding they would have been in the possession and control of the Applicant at the time of the hearing. Further, there is no evidence the Applicant has implemented any changes to its policies or procedures in order to prevent any further breaches moving forward in respect of the Protected Account.
At the hearing, the Applicant argued that rectification in respect of all the financial issues, which incorporates the Protected Account, would be achieved via a third- party investment. Since the hearing, the Applicant has gone into liquidation rendering this option improbable. The Liquidator has now assumed control of the company and he advised the Tribunal the liquidation is progressing in the usual way.
Putting that to one side, in my view the Investment Agreement relied on during the course of the hearing would not have satisfied the Tribunal the non-compliance would be rectified in any event.
Under the Investment Agreement the first tranche of $450,000 was to be applied to the debts owing to TEQSA and the TPS. The second tranche of $350,000 would then be applied to any outstanding debts of the Applicant.
Kontea did not provide any evidence at the hearing as to its current financial position such as updated bank statements, financial statements, tax records or evidence from an accountant. The Tribunal did not have a full and complete picture of the Applicants assets, liabilities and equity in order to accurately assess the financial position.
The Tribunal was advised the Applicant has had no income since the decision on the stay application. The financial statements as at March 2024 record $3,111,209.36 in current liabilities and non-current liabilities of $731,782.90. Ms Tsiolas gave evidence that the Shift loan (which is recorded as $250,000 in the financial statements) had not been repaid and there is a remainder on the FIFO loan. Those liabilities do not include the debts to the TPS. The Liquidator advised the Tribunal the non-current liabilities are actually several million dollars.
It does not appear that the debts of the company as described at the hearing would have been extinguished under the Investment Agreement. There was also no clear provision in the agreement to replenish the Protected Account. It could not be concluded (even on the scant material before the Tribunal) the Investment Agreement would have rectified the financial issues of Kontea.
Significance and extent of any current non-compliance
As the Tribunal has previously observed, more recent bank statements or other evidence as to the financial position of the Applicant was not provided as part of the review. There is no evidence the Protected Account has been replenished or the deficiency is less than what it was in May 2024. Given the Applicant has not been in receipt of any income since the stay application was refused and the evidence of Ms Tsiolas is that the financial position has deteriorated since May 2024, I infer that the Protected Account does not currently hold the Protected Amount and the Applicant is still in a position of non-compliance.
No evidence has been provided to establish that the Protected Account has been replenished or the deficiency is less than what it was in May 2024. Given the Applicant has not been in receipt of any income since the stay application was refused and the evidence of Ms Tsiolas is that the financial position has deteriorated since May 2024, it can be inferred that the Protected Account does not currently hold the Protected Amount and the Applicant is still in a position of non-compliance. Given the Applicant is now in liquidation, there are no prospects the Applicant will be able to comply and remain in compliance moving forward.
To summarise, the Tribunal finds in respect of the Applicant’s non-compliance as follows:
(a)The non-compliance conceded by the Applicant in respect of the failure to maintain the Protected Account in breach of s 29 of the ESOS Act is both significant and extensive. The Applicant regularly accessed large sums of money in the Protected Account for an unauthorised purpose for a period of at least two and a half years. Further, Kontea has not provided refunds to students as required and it has been necessary for the TPS to be activated;
(b)That notwithstanding the severity and degree of the non-compliance, the Applicant has not taken any remedial action the rectification strategy proposed was wholly inadequate; and
(c)There are no prospects of Kontea substantially complying with the regulatory regime within a reasonable timeframe and thereafter remaining in substantial compliance.
These matters weigh heavily in favour of cancellation.
Purposes of the Act
The second consideration underlying a determination as to whether a registration cancellation power should be exercised concerns the effect on the students and on Australia’s reputation, both nationally and internationally, as a provider of high-quality education and training. That is to say, would the objects of the ESOS Act be served by the continuing registration of Kontea.
Sections 28 and 29 of the ESOS Act function to ensure that the provider has sufficient funds available to provide refunds to overseas students, where it is required to do so. If a registered provider fails to maintain the Protected Amount and therefore cannot provide refunds, it is the prospective overseas students who suffer a detriment. This in turn has consequences for Australia’s reputation for providing quality education and training.
Given the balance of the Protected Account which was almost always significantly less than what was actually required, it should have been clear to the Applicant, that having spent the money in the Protected Account, there would be insufficient funds available when it was required to provide refunds. The Protected Account was not maintained for more than two and a half years as a result of persistent financial problems.
The TPS has been activated to provide support to students enrolled with Kontea. As at the date of the hearing, the total value of the refunds provided from September 2023 to the date of the hearing was $451,000 to 79 students. It is anticipated that further refunds will be required moving forward. Those refunds are likely to be substantial based on the evidence of Ms Stafford.
The Applicant has also been the subject of complaints made by students to the Commonwealth Ombudsman after they were unable to obtain a refund directly from the Applicant. At least 20 of those student complaints were transferred to the TPS.
In not maintaining the Protected Amount in the Protected Account (which is a reflection of the broader poor financial position of the Applicant) Kontea has failed to protect students such that it has been necessary for refunds to be provided by the TPS. Complaints to the Ombudsman also negatively impact Australia’s reputation for quality education and training.
In this case, the outcome that the relevant provisions are designed to prevent have been realised as a direct consequence of the Applicant’s non-compliance with those provisions. The protection provided by the maintenance of the Protected Amount in the Protected Account has been compromised by the Applicant’s conduct such that it has been necessary for refunds to be provided by the TPS. Complaints to the Ombudsman also negatively impact Australia’s reputation for quality education and training.
Given my conclusion Kontea will not substantially comply with section 29 within a reasonable time frame and thereafter remain in substantial compliance, the interests of students and our reputation in the education sector would be put at risk were Kontea to remain registered. This weighs in favour of cancellation.
Deterrence
The primacy given to the Protected Account is evident from the statutory construction of section 29 of the ESOS Act. It is clear the prepaid tuition funds of the student are not to be spent for any purpose (apart from the authorised purpose). There is no exclusion for exceptional circumstances. No excuse is permissible.
In this case prepaid tuition fees were transferred from the Protected Account to the operational account where they were then used by the Applicant to fund a range of expenses, including those unrelated to the business and to the personal benefit of the Directors. The Applicant operated in this way for more than two and a half years and there is no evidence of any intention to change without the intervention of the regulators. When the Applicant was either unable or unwilling to provide student refunds it was necessary for the Australian Government to step in. Those funds in turn may never be recovered from the Applicant now it is in liquidation
Allowing an organisation to remain registered despite intentional, long standing and serious non-compliance would undermine the regulatory regime and voluntary compliance within the sector. This weighs heavily in favour of cancellation.
CONCLUSION
Having regard to the Applicants conduct before and after being put on notice by the Respondent of the compliance concerns, the extent and seriousness of that non-compliance, the lack of remedial or rectification that has occurred, the objects of the ESOS Acts and the public interest associated with those mattes included deterrence, I have concluded that the only appropriate sanction in this case is cancellation of the Applicant’s registration under the ESOS Acts.
Cancellation of a registration is a sanction at the higher end of the spectrum and ought be reserved for the more serious cases. This is such a case. The Applicant’s failure to comply with s29 of the ESOS Act for more than two and half years is a serious and sustained non-compliance which has in turn impacted on both students and taxpayers by the activation of the TPS. The non-compliance has never been addressed nor has the Applicant accepted full responsibility for their conduct, laying the blame on external factors which were felt across the sector. The apparent indifference to compliance with regulatory requirements and clear statutory obligations must be discouraged in an environment of voluntary compliance.
DECISION
Having regard to the facts and evidence, the correct and preferable decision in this case is to set aside the decision under review and in substitution decide to cancel the registration of the Kontea as a registered provider under the ESOS Act.
Date(s) of hearing: 25, 26 February and 6 May 2025 Date final submissions received: 6 May 2025 Applicant: In person Counsel for the Respondent: Mr M Hosking Solicitors for the Respondent: Australian Government Solicitor
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