Malek Fahd Islamic School Limited and Minister for Education and Training
[2016] AATA 300
•28 April 2016
Malek Fahd Islamic School Limited and Minister for Education and Training [2016] AATA 300 (28 April 2016)
Division
GENERAL DIVISION
File Number
2016/1753
Re
Malek Fahd Islamic School Limited
APPLICANT
And
Minister for Education and Training
RESPONDENT
DECISION
Tribunal Deputy President J W Constance
Date 28 April 2016 Date of written reasons 11 May 2016 Place Sydney In accordance with section 41(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act), IT IS ORDERED that:
(1) upon the Applicant giving to the Tribunal and to the Respondent the undertakings set out in direction 2, the decision of the delegate of the Minister for Education and Training made 8 February 2016 and affirmed on 4 April 2016, is stayed until further order of the Tribunal;
(2) the undertakings referred to in the preceding direction are:
(a)that the Applicant will use its best endeavour to implement as soon as possible the recommendations contained in the Grant Thornton report (Exhibit SA2) dated 4 March 2016;
(b)that during the first week of each calendar month, commencing May 2016, the Applicant shall advise the Respondent in writing of action taken by it or on its behalf, during the immediately preceding month, to implement the recommendations of the Grant Thornton report;
(c)that during the first week of each calendar month, commencing May 2016, the Applicant will provide to the Respondent a statement of the income and expenditure for the immediately preceding month;
(3) the document providing the undertakings referred to in the preceding direction shall be signed by two directors of the Applicant.
.................[sgd].......................................................
J W Constance
Deputy PresidentCATCHWORDS
EDUCATION - independent school - funding provided by Commonwealth – where Minister revoked approval of Applicant as an approved authority under the Australian Education Act 2013 – where Applicant sought stay of decision - whether Tribunal has jurisdiction to grant a stay - whether the Tribunal should use its discretion to grant a stay - stay granted
LEGISLATION
Australian Education Act 2013 (Cth) ss 73(1), 75, 81, 122
Administrative Appeals Tribunal Act 1975 (Cth) s 41(2)
CASES
Shi v Migration Institute of Australia Ltd and Anor [2003] FCA 1304
Seymour v Migration Agents Registration Authority and Another [2006] FCA 64
Labrador Liquor Wholesale Pty Ltd and Chief Executive Officer of Customs [2006] AATA 485Scott and Australian Securities and Investment Commission [2009] AATA 798
WRITTEN REASONS FOR DECISION GIVEN ORALLY ON 28 APRIL 2016
Deputy President J W Constance
11 May 2016
INTRODUCTION
The Applicant Company has operated the independent Malek Fahd Islamic School in Sydney since 1989. Its operations have been funded in part by grants from the Commonwealth.
Since 2013 Commonwealth funding has been provided under the Australian Education Act 2013 (Cth), (“the Education Act”). Part 6 of the Education Act provides that the Minister for Education and Training may approve a body corporate to be an “approved authority” for a school. Only an approved authority is entitled to receive recurrent funding from the Commonwealth for the school in respect of which it is approved.
Prior to 8 April 2016 the Applicant was the approved authority to receive Commonwealth funding for the Malek Fahd Islamic School.
On 8 February 2016 a delegate of the Minister revoked the approval of the Applicant as an approved authority under the Act (“the initial decision”).[1] The decision was affirmed by an Internal Reviewer, as delegate of the Minister, on 4 April 2016, with effect from 8 April 2016 (“the reviewable decision”)[2].
[1] Exhibit SA1. The Minister has power to revoke an approval on the Minister's own initiative in certain circumstances; see section 81 of the Act.
[2] Exhibit SA2.
On 6 April 2016 the Applicant applied to the Tribunal to review the reviewable decision. This right of review is provided by section 122 of the Education Act. In addition the Applicant applied for an order staying the reviewable decision until the application for review is determined.
On 28 April 2016 I made orders staying the reviewable decision upon the Applicant giving specified undertakings. The stay is to continue until further order of the Tribunal. At the time I gave oral reasons for making the orders. I now provided my reasons in writing.
LEGISLATION
Subsection 73(1) of the Education Act provides:
(1) The Minister may, in writing, approve a person as an approved authority for one or more schools if:
(a)the person has made an application under section 72; and
(b)the Minister is satisfied that:
(i) the person satisfies, and will continue to satisfy, the requirements in section 75; and
(ii) the ongoing policy requirements in section 77 will be satisfied in relation to the schools; and
(iii) the ongoing funding requirements in section 78 will be satisfied in relation to the schools.
Section 75 provides in part:
(1) This section sets out requirements for a person for the purposes of subparagraph 73(1)(b)(i) and paragraph 81(1)(a).
Note: Approved authorities for government schools may be taken to satisfy the requirements in this section (see section 76).
Body corporate or body politic
(2) The person is a body corporate or a body politic.
Not-for-profit
(3) The person does not conduct for profit any school in relation to which the application is made.
Financial viability
(4) The person is financially viable.
Fit and proper person
(5) The person is fit and proper to be an approved authority for one or more schools.
Subsection 81(1) provides:
(1) The Minister may, in writing, vary or revoke an approved authority’s approval for one or more schools on the Minister’s own initiative if:
(a)the Minister is satisfied that the approved authority does not comply, is not complying, or has not complied, with section 75, 77 or 78; or
(b)the Minister is satisfied that the approved authority is not complying or has not complied with a condition to which the approval is subject; or
(c)the Minister is satisfied that varying or revoking the approval is in the public interest; or
(d)for an approved authority for government schools located in a State or Territory—the Minister is satisfied that the State or Territory has not complied with a condition under section 22 or 24, any of paragraphs 23(2)(a) to (d), or subsection 23(3).
Note 1: Decisions under paragraphs (1)(a), (b) and (d) are reviewable decisions (see Division 3 of Part 9).
Note 2: A report must be laid before each House of the Parliament if the Minister makes a decision under paragraph (1)(c) (see section 127).
(2) Without limiting subsection (1), the Minister may vary an approved authority’s approval by making the approval subject to one or more conditions, and the approved authority must comply with those conditions.
(3) The Minister may do either of the following if the Minister is satisfied that a school has ceased to provide primary education or secondary education:
(a)if the approved authority for the school is approved only for that school—revoke the authority’s approval;
(b)if the approved authority for the school is approved for other schools as well—vary the authority’s approval by removing the school from the approval.
(4) The Minister may vary an approved authority’s approval for one or more schools only if the Minister is satisfied that the requirements referred to in paragraph 73(1)(b) are, and will continue to be, satisfied in relation to the varied approval.
Note: This subsection is subject to paragraph 74(4)(b) (approval or refusal on public interest grounds).
(5) A variation or revocation must specify the day on which the variation or revocation takes effect, which may be earlier than the day the Minister varies or revokes the approval.
(6) In varying or revoking an approval of an approved authority under subsection (1) (including by imposing conditions as referred to in subsection (2)), the Minister must have regard to any relevant arrangement of the approved authority.
BACKGROUND
On 13 November 2015 the delegate who later made the initial decision, issued a Notice of Proposed Decision to the Applicant advising that consideration was being given to revoking its status as an approved authority under the Act. The Applicant was invited to comment. Documents presently available to me do not indicate that a response, if any, was made to this invitation.
In the initial decision made 8 February 2016, the delegate set out a Summary of Decision as follows:
Section 75
With regard to compliance with section 75 of the Act, following an assessment of the MFISL submission and on the basis of the reasoning outlined in the attachments to this decision, I am satisfied that MFISL:
· in contravention of subsection 75(3), is conducting Malek Fahd Islamic School for profit; and
· in contravention of subsection 75(5), is not a fit and proper person
….
Section 78
With regard to compliance with section 78 of the Act, following an assessment of the MFISL submission and on the basis of the reasoning outlined in the attachments to this decision, I am satisfied that MFISL:
· in contravention of paragraph 78(2)(a), is not dealing with the financial assistance payable to MFISL under the Act in accordance with the prescribed requirements as the financial assistance payable to MFISL is not being spent for the purpose of providing school education (as required by subsection 29(1) of the Regulation); and
· in contravention of paragraph 78(2)(b), is not complying with the prescribed requirements in relation to monitoring MFISL’s compliance with the Act, as MFISL’s records are not kept in accordance with section 37 of the Regulation.
The delegate provided more detailed reasons for his decision in annexures to the decision document.
On 15 February 2016 the Applicant and the Australian Federation of Islamic Councils Inc. jointly engaged Grant Thornton Australia Ltd to provide them with corporate advisory services and in particular to assist in preparing a response to the initial decision.
By letter of 7 March 2016[3] the Applicant applied for an internal review of the initial decision. The following documents were enclosed with the letter:
[3] Exhibit SA3.
a) Recommendations in response to DET Notice of Decision by Grant Thornton, 7 March 2016.
b) Board resolution of Australian Federation of Islamic councils Inc. (AFIC) Board of Directors Resolution of 5 March 2016, accepting the repeal by Malek Fahd Islamic School (MFISL) of its constitution and adoption of a new one, and providing it with full financial control.
c) Resolution of MFIS dated 5 March 2016, revoking its constitution, adopting the new constitution dated 5 March 2016, and appointing and [sic] interim board.
d) Resolution and MFIS dated 5 March 2016 consenting to the submission of a fraud report by a chairman in relation to Amjad Mehboob and Casifarm PTY LTD, and possibly other members/contractors.
e) Resolution of MFIS Board of Directors dated 5 March 2016 4:30 pm, by which all members of the board resign, effective immediately.
f) Constitution of MFISL adopted on 5 March 2016.
g) Resume of interim board members
1.Martyn Bawden;
2.Miriam Silva; and
3.Geoffrey Bruce Dornan
h) The first and last page of a Fraud Report form filed by the chairman Mr Hafez Kassem on Friday 4 March 2016 in relation to Amjad Mehboob and Agim Garana. [original emphasis]
In its application for review, the former Board of the Applicant made a number of concessions, including that:
·the Board had been mistaken in not complying with the requirement that an approved authority operate on a not-for-profit basis;
·the policies and practices in place for the Applicant were inconsistent with the above requirement;
·funds intended for the School’s operations were distributed to other entities and not applied for the purposes of the School;
·the leasing arrangements entered into by the Applicant were inadequate;
·a company in which a board member had a significant interest was engaged to provide services to the school without an appropriate contract and without maintaining proper records of services rendered;
·the engagement of service providers to the School was not properly recorded or approved.
The Internal Reviewer affirmed the initial decision as he was satisfied that the Applicant “does not comply, is not complying, and has not complied with section 75 and 78 the Act.” He adopted the reasons set out in the initial decision and provided additional reasons for his decision.
ISSUES
In considering the application for a stay of the reviewable decision, two issues arise for determination.
(1) Does the Tribunal have the power to make the order sought by the Applicant?
(2) If it does have the power, should the discretion given by subsection 41(2) be exercised in favour of the Applicant?
CONSIDERATION OF THE ISSUES
Issue 1: Does the Tribunal have the power to make the order sought by the Applicant?
Section 41(2) of the Administrative Appeals Tribunal Act
Subsection 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act” ) provides:
(2) The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
Note: This section does not apply in relation to proceedings in the Social Services and Child Support Division, as a result of provisions in the enactments that authorise applications for reviews that will be heard in that Division.
The Minister’s argument
Counsel for the Minister argued that the Tribunal’s jurisdiction was not enlivened until 4 April 2016, being the date when the reviewable decision was made. The reviewable decision was to affirm the initial decision made 8 February 2016. In the initial decision and in the reviewable decision, the delegates each determined that the decision was to take effect on 8 April 2016. The Applicant applied to the Tribunal for review and for the stay order on 6 April 2016.
It was argued further that subsection 81(5) of the Education Act permits the decision-maker to specify a date of effect of the decision which is earlier than the date of the decision itself. At the time the Tribunal’s jurisdiction was enlivened there was no authorisation of the Applicant in force in respect of which the Tribunal could exercise its power. It was put that ”to make an order that somehow afforded [the Applicant] the status of an approved authority, the Tribunal would have to vary the original decision or the decision under review to extend the date of effect of the decision under review”. Subsection 41(2) of the AAT Act does not give the Tribunal this power.
Consideration
I was referred to several authorities which considered the question of the Tribunal’s jurisdiction in this regard.
Shi v Migration Institute of Australia Ltd and Another[4]
[4] [2003] FCA 1304.
Mr Shi applied for the renewal of his registration as a migration agent. Under the Migration Act 1958 (Cth) he was deemed to be registered until his application for renewal was determined. In due course the Authority decided to refuse the application for renewal. Mr Shi applied to this Tribunal for a stay of the decision.
The Tribunal decided that it did not have jurisdiction to grant a stay. It reasoned that what was being sought was a stay of a negative decision, being a refusal to register, rather than of a positive decision to de-register, and that only the latter was the type of decision which the Tribunal could stay. The Tribunal was of the view that to stay a refusal to register was the equivalent of directing the Authority to positively register the applicant.
Before the Federal Court the Authority argued that when the decision was made to refuse the application nothing had been done to enliven the Tribunal’s jurisdiction. There had been no decision to take away statutory status; rather there had been a decision not to grant that status.
Tamberlin J. held that the Tribunal did have the power to grant a stay in these circumstances. He said:
Accordingly, in substance, and as a direct consequence of the MARA decision, there has been a termination of the rights of the agent enlivened by the deemed registration. This is quite different from ceasing to have effect [by reason of] a statutory expiry as a consequence of the lapse of time. Accordingly, the decision not to renew has an operation which is capable of being stayed pursuant to s41(2) of the AAT Act. It is the cessation of the deemed right to be treated as if he were registered as a consequence of the decision not to renew that is the subject of the stay.[5]
[5] At para. [26].
Seymour v Migration Agents Registration Authority and Another[6]
[6] [2006] FCA 649.
The relevant facts in this matter were the same as in Shi. However by the time the appeal came before the Federal Court the Migration Act had been amended by the addition of subsection 300(7). The new subsection provided that for the purposes of section 300 (being a section which provided for the continuation of registration until the determination of an application for renewal), the Authority is taken to have made a decision, even if the decision is later stayed.
The Court held that an agent had no right to be re-registered as an application for re-registration had to be made each year and certain conditions had to be met. The Act was clear that the statutory extension of an existing registration came to an end when the decision as to re-registration was made. The Court concluded:
Upon a decision to refuse registration, s 300(4)(a) is enlivened and the deeming provision in s 300(1) ceases to have the effect of continuing an agents registration: s 300(7) evinces a clear legislative intention that even a stay cannot operate to defeat the effect of the decision.
Re Labrador Liquor Wholesale Pty Ltd and Chief Executive Officer of Customs[7]
[7] [2006] AATA 485.
In this matter the applicant’s warehouse licence was due to expire on 30 June 2006. Prior to that date the Chief Executive Officer of Customs decided that the applicant was not a fit and proper body to hold such a licence. The applicant sought a stay of this decision. The Tribunal refused the stay sought. In its reasons for decision it stated:
On the face of it, the tribunal cannot grant effective relief in this case when the matter is heard some time in the future because the statute provides that the licence expires at the end of June. The tribunal cannot reinstate a licence that has already expired by force of statute. Granting a stay so the applicant can continue trading at the end of June would leave it in a position to contest a non-renewal decision, but that is not the point of the power in s 41(2). The state power is intended to facilitate a proper review of the decision challenged in these proceedings, not to facilitate a decision that will be challenged in proceedings that have not yet been commenced. [8]
These principles do not apply to the facts of this application
[8] At para.[28].
The legislative provisions in this application are different to those considered in the cases referred to above. Unlike Shi and Seymour, the Applicant was neither operating as an approved authority under a statutory extension of a previous authorisation nor had its authorisation expired by force of statute, such as in the situation envisaged in Labrador Liquor Wholesale Pty Ltd.
The Applicant was approved under section 73 of the Education Act. There is no indication that a time limit on the period of the approval was in place. Section 73 does provide that an approval may be conditional. However there is nothing before me that indicates that a condition as to the duration of the approval was imposed in relation to the Applicant. Thus, the Applicant is in the position of having had its status as an approved authority brought to an end by the reviewable decision made on 4 April 2016. This is a decision which the Tribunal has the power to stay.
I do not accept the argument that the Applicant was not an approved authority at the time the Tribunal’s power to stay was enlivened.
The initial decision was not to take effect until 8 April 2016. The reviewable decision, which affirmed the initial decision, was made on 4 April 2016. The Tribunal’s power under section 41 was then enlivened and (subject to time limits not relevant here) from that time onwards the Applicant was entitled to apply to the Tribunal for a review of the reviewable decision. The Applicant applied for a review of this decision on 6 April 2016. The reviewable decision took effect on 8 April 2016 which meant that the Applicant’s approval was revoked on that day. As at 8 April 2016 the Tribunal had jurisdiction to review the decision of the Internal Reviewer.
Issue 2: Should the discretion given by subsection 41(2) be exercised in favour of the Applicant?
The power to order a stay given to the Tribunal by subsection 41(2) is discretionary. The subsection requires that the Tribunal take into account “the interests of any person who may be affected by the review” and sets out the purpose for which a stay may be granted. The stated purpose is for “securing the effectiveness of the hearing and determination of the application for review.”
In considering whether a stay was appropriate in Scott and Australian Securities and Investment Commission,[9] President Downes, constituting this Tribunal, stated:
In considering the application, it is appropriate for me to consider a range of matters, including:
1. The prospects of success.
2. The consequence for the applicant of the refusal of a stay.
3. The public interest.
4. The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not.
5. Whether the application for review would be rendered nugatory if a stay were not granted.
6. Other matters that are relevant, amongst which I would include the length of time that the ban has already been in place and the gap between today and the hearing of the application.[10]
In a matter such as the one before me involving a regulatory regime established by statute, I consider the above principles to be applicable.
[9] [2009] AATA 798
[10] At para [4].
The prospects of success
When considering a stay application the Tribunal does not embark on a detailed assessment of the merits of the substantive application. However, if it is apparent on the basis of the material before the Tribunal that an application for review has poor prospects of success should the matter proceed to determination, the Tribunal may take this into account as a factor suggesting that a stay is not appropriate.
In this matter I do not asses the Applicant’s prospects of success as being so low as to mitigate against ordering a stay. In reaching this conclusion I have taken into account the recommendations of the Grant Thornton report and that the Applicant has indicated that it is implementing the recommendations. As the Tribunal is to decide the substantive application on the basis of the evidence available to it at the time of its decision, I am satisfied that the Applicant has reasonable prospects of success in having the reviewable decision set aside or varied. This is a factor in favour of making the order sought by the Applicant.
The consequences for the Applicant and others of the refusal of a stay
Counsel for the Applicant painted a bleak picture of what the future would hold for the Applicant and the School should the stay not be granted. Although the Tribunal is not bound by the rules of evidence, in my view the Applicant should have made available a member of the Board or the Management of the School to give evidence as to the likely effect of a refusal to grant a stay, particularly in respect of the School’s financial situation and the effect on students and staff. I appreciate that stay applications are usually listed on short notice to the parties, but an applicant seeking such a stay should expect this and be prepared to present evidence in support of the application.
Notwithstanding the lack of sworn evidence I am satisfied on the basis of the Grant Thornton report and the information provided by Counsel which was not in dispute, that the revocation of the Applicant’s authority to receive Commonwealth recurrent funding would cause considerable difficulty for the Applicant within the next three to four months.
I accept that without further recurrent funding the Applicant may not be able to continue to operate the School after the end of the current school term. I accept also that if this eventuates the education of the School’s 2,400 students and the employment of approximately 250 staff will be severely disrupted. If this number of students were to seek enrolment in other schools within the area it would impose a significant burden on the resources of those schools.
I proceed also on the basis that it is a matter of common knowledge that considerable expense could be incurred by the parents or carers of a student who had to change schools.
Further I am satisfied that the closure of the School, even if only temporary, would have a detrimental effect on those businesses providing goods and services to the School.
The public interest
The Grant Thornton report discloses serious failures by the Applicant to comply with the requirements of the Education Act, some of which are ongoing. Importantly the failures relate to the management of Commonwealth funds provided to it for the education of its students. Clearly there is a public interest in ensuring the proper management and use of such funds. The Applicant concedes that this has not occurred in the past. On the other hand I have to consider the public interest in ensuring that the education of children and young people proceeds with as little disruption as possible. There is also a public interest in assisting parents and carers who provide for the education of those for whom they have responsibility and in protecting the livelihoods and careers of the staff of the School and those providing goods and services to the School.
The consequences to the Minister in carrying out his functions depending upon whether a stay is granted or not
A decision to order the stay requested by the Applicant will enable it to remain approved to receive funding from the Commonwealth should it become payable. Counsel for the Minister argued that the decision to fund is separate from the decision to approve an entity to receive the funds.
It is not necessary that I decide this issue and I do not propose to reach a conclusion as it has not been fully argued before me. However, there does appear to be considerable merit in the argument put on behalf of the Minister. Section 110 of the Education Act sets out several actions the Minister may take in relation to funding. They include the power to reduce and/or delay funding for an approved authority for a school for a year.
If the argument is correct it would indicate that a stay order will have no significant consequences for the Minister in carrying out his functions as the critical decision as to the amount of funding (if any) to be paid to the Applicant will not be affected by the continued existence of the Applicant as an authority approved to receive such funds. In fact a stay will facilitate the provision of funds to the School should the Minister decide that circumstances have changed and that funding should be made available prior to the Tribunal making its final decision.
Will the application for review be rendered nugatory if a stay is not granted?
Should the School be unable to continue to operate after the end of the current term there is a reasonable risk that the School will close and that the final decision of the Tribunal as to the approval of the Applicant will be rendered nugatory.
Other matters that are relevant, including the length of time that the reviewable decision has already been in effect and the time which is likely to elapse before the hearing of the substantive application
The Applicant acted promptly to apply for a review of the decision of the Minister’s delegate and it is less than a month since the application for review by this Tribunal was made. Since the stay was granted a Directions Hearing has been held and a timetable has been set for the parties to file further statements and documents. It is expected that the matter will be heard within the next three months. Provided the parties adhere to the timetable set the stay order should only be in effect for approximately four months. This is a consideration in favour of the grant of the stay.
CONCLUSION
Taking into account the factors I have referred to I came to the conclusion that the stay should be granted. In my view the factors supporting the granting of a stay outweigh those factors which mitigate against it. I have taken into account that the orders I have made (which are set out below) will not necessarily restore the School’s funding – whether further funding in fact is to be provided is a matter for the Minister to decide.
ORDERS AND UNDERTAKINGS
On 28 April 2016 I made the Orders set out below. The Applicant gave the undertakings required on 3 May 2016.
In accordance with section 41(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act), IT IS ORDERED that:
(1) upon the Applicant giving to the Tribunal and to the Respondent the undertakings set out in direction 2, the decision of the delegate of the Minister for Education and Training made 8 February 2016 and affirmed on 4 April 2016, is stayed until further order of the Tribunal;
(2) the undertakings referred to in the preceding direction are:
(a)that the Applicant will use its best endeavour to implement as soon as possible the recommendations contained in the Grant Thornton report (Exhibit SA2) dated 4 March 2016;
(b)that during the first week of each calendar month, commencing May 2016, the Applicant shall advise the Respondent in writing of action taken by it or on its behalf, during the immediately preceding month, to implement the recommendations of the Grant Thornton report;
(c)that during the first week of each calendar month, commencing May 2016, the Applicant will provide to the Respondent a statement of the income and expenditure for the immediately preceding month;
(3) the document providing the undertakings referred to in the preceding direction shall be signed by two directors of the Applicant.
I certify that the preceding 49 (forty-nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President J W Constance .........[sgd]...............................................................
Associate
Dated 11 May 2016
Dates of hearing 14 & 28 April 2016 Date final submissions received 14 April 2016 Counsel for the Applicant T R Coleman Solicitors for the Applicant Mitry Lawyers Solicitors for the Respondent L Holcombe; HWL Ebsworth
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