VETiS Consulting Services Pty Ltd and Australian Skills Quality Authority

[2019] AATA 341

VETiS Consulting Services Pty Ltd and Australian Skills Quality Authority [2019] AATA 341 (7 March 2019)

Division:GENERAL DIVISION

File Number(s):      2019/0548

Re:VETiS Consulting Services Pty Ltd

APPLICANT

AndAustralian Skills Quality Authority

RESPONDENT

DECISION

Tribunal:Senior Member A Poljak

Date:7 March 2019

Place:Sydney

The application for a stay of the decision of the Respondent to cancel the registration of the Applicant as a Registered Training Organisation pursuant to sections 36(2)(f) and 39 of the National Vocational Education and Training Regulator Act 2011 (Cth), is refused.

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Senior Member A Poljak

CATCHWORDS

PRACTICE AND PROCEDURE – application to stay decision of Australian Skills Quality Authority – registered training organisation – decision to cancel registration – factors relevant to the granting of a stay – compliance history – prospects of success – consequences for applicant if stay not granted – applicant financially dependent on registration – reputational damage – public interest – impact on school students if substantive application affirmed – protection of Australia’s reputation in the VET sector – need to maintain confidence in the regulatory framework – public interest considerations outweigh consequences for applicant – stay application refused

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) s 41

National Vocational Education and Training Regulator Act 2011 (Cth) ss 2A, 3, 22, 29, 35A, 36, 27, 39, 185

CASES

Secretary, Department of Employment and Workplace Relations v Anastasiadis [2007] AATA 1065

SECONDARY MATERIALS

Standards for Registered Training Organisations (RTOs) 2015

REASONS FOR DECISION

Senior Member A Poljak

7 March 2019

1. VETiS Consulting Services Pty Ltd (“the applicant”) was granted registration as a Registered Training Organisation (“RTO”) by the Western Australian Training Accreditation Council (“TAC”) on 10 May 2012. On or around 15 July 2015, the applicant transferred its registration to the Australian Skills Quality Authority (“the respondent” or “ASQA”).

2. The applicant is a “for profit” corporate organisation and derives its income from private enterprise organisations. Its main focus is to specifically service vocational education and training (“VET”) programs in Government, Catholic and Independent schools across Australia. The applicant offers third-party usage in multiple schools in Western Australia, the Northern Territory and Tasmania. The provision of courses is governed by Memorandums of Agreement (“MOA”) between the applicant and the individual schools. Currently, the applicant has 73 qualifications, seven units of competency and four accredited courses on it scope of registration.

3. On 31 October 2018 ASQA issued the applicant with an Intention to Cancel Registration Notice (“the Notice”) under sections 36(2)(f) and 37 of the National Vocational Education and Training Regulator Act 2011 (Cth) (“the NVR Act”). Following the provision of further rectification evidence and a response to the Notice by the applicant, ASQA advised the applicant on 1 February 2019, that it affirmed the decision to cancel the applicant’s registration as an RTO effective from 8 March 2019 (“the cancellation decision”).The cancellation decision was made because ASQA identified that the applicant remained non-compliant with clauses 4.1, 5.1, 5.2, 1.7, 1.1, 1.2, 1.3, 1.8, 1.13, 1.16, 2.2, 2.4, 3.1, 3.3, 8.1 and 8.5 of the Standards for Registered Training Organisations (RTOs) 2015 (“RTO Standards”). The applicant has applied to the Tribunal for review of the cancellation decision (“the substantive application”).

4. These proceedings concern an application for a stay of the operation and effect of the cancellation decision until final determination of the substantive application (“stay application”).

   Relevant Legislative Provisions

5. The objects of the NVR Act are contained in section 2A and are as follows:

   “The objects of this Act are:

   (a)  to provide for national consistency in the regulation of vocational education and training (VET); and

   (b)  to regulate VET using:

   (i)  a standards‑based quality framework; and

   (ii)  risk assessments, where appropriate; and

   (c)  to protect and enhance:

   (i)  quality, flexibility and innovation in VET; and

   (ii)  Australia’s reputation for VET nationally and internationally; and

   (d)  to provide a regulatory framework that encourages and promotes a VET system that is appropriate to meet Australia’s social and economic needs for a highly educated and skilled population; and

   (e)  to protect students undertaking, or proposing to undertake, Australian VET by ensuring the provision of quality VET; and

   (f)  to facilitate access to accurate information relating to the quality of VET”. [Emphasis added]

6. ASQA is the national VET regulator. The NVR Act empowers ASQA to regulate “VET courses” and RTOs under the “VET Quality Framework”, as those terms are defined in section 3, to ensure nationally approved quality standards are met. For an RTO to be registered (and to maintain its registration) it must at all times demonstrate compliance with the conditions described in sections 21-28 of the NVR Act. Section 22(1) of the NVR Act provides:

   “An NVR registered training organisation must comply with the Standards for NVR Registered Training Organisations”. [Emphasis added]

7. Pursuant to section 185 of the NVR Act, the Minister may, by legislative instrument, make standards for NVR registered training organisations, as agreed by the Ministerial Council. The standards are currently contained in the legislative instrument, the RTO Standards.

8. Section 35A of the NVR Act provides that ASQA may give a written direction to an RTO requiring the organisation to rectify a breach of a condition of the organisation’s registration if it is satisfied that it is appropriate to do so. In making such a direction, ASQA may consider prior conduct and/or circumstances existing; section 35A(2). Section 36 of the NVR Act provides for the imposition of a range of administrative sanctions. Relevantly, in determining what action is to be taken in relation to an NVR registered training organisation, ASQA may have regard to the organisation’s conduct, or circumstances existing, before ASQA had cause to consider imposing a sanction. ASQA may, after natural justice requirements have been satisfied and by notice in writing, cancel an NVR registered training organisation’s registration in any circumstances that the Regulator considers it appropriate to do so pursuant to sections 36(2)(f) and 39 of the NVR Act.

   Compliance History

9. Having reviewed copies of reports from audits undertaken by TAC in relation to the applicant’s operations during the period of its TAC registration from 2012 - 2015, it appears that the applicant was initially determined to have one or more non-compliances at all of the TAC audits, but these were rectified in each instance and the applicant achieved compliance.

10. Between 28 November and 1 December 2016, approximately 18 months after the applicant transferred its registration from TAC; ASQA conducted a Compliance Monitoring Audit of the applicant’s operations, visiting eight delivery sites (“first audit”). On 4 May 2017, ASQA advised the applicant that it was determined to be non-compliant against the requirements of the RTO Standards and was therefore in breach of section 22 of the NVR Act; being a mandatory condition of its registration. As a result of the non-compliances, ASQA directed the applicant, under section 35A(1) of the NVR Act, to rectify the breaches identified in the audit by addressing each non-compliance within 20 working days; and directed the applicant to retain evidence of compliance with the written direction for examination at a future regulatory activity by retaining evidence that it addressed each of the non-compliances identified. On 4 May 2017, ASQA also imposed on the applicant conditions on its registration under section 29 of the NVR Act in relation to students in Western Australia. These conditions related to the retention and storage of completed student assessment material. The reasons for the decision contained in the letter dated 4 May 2017, was that the applicant was “found to have minor non-compliance with clauses 1.1, 1.3, 1.4, 1.8, 2.1, 2.4, 4.1 and 8.2”.

11. Between 9 to 11 October 2018, ASQA conducted a second Compliance Monitoring Audit which covered a sample of nine qualifications on the applicant’s scope of registration for seven delivery sites. As a result of the audit, ASQA determined that the applicant did not meet the requirements of clauses 4.1, 5.1, 5.2, 1.7, 1.1, 1.2, 1.3, 1.8, 2.2, 1.13, 1.14, 1.16, 2.4, 3.1, 3.3, 8.1 and 8.5 of the RTO Standards. On 31 October 2018 ASQA issued the applicant with the Notice. Following the provision of further rectification evidence and a response to the Notice by the applicant, ASQA advised the applicant on 1 February 2019, that it affirmed the decision to cancel the applicant’s registration as an RTO effective from 8 March 2019 i.e. the cancellation decision.

    Evidence and Consideration

12. A decision that is subject to review has full effect and operation unless and until the Tribunal makes an order under section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”) to stay the operation and effect of the decision. Such an order may be made if the Tribunal is “of the opinion that it is desirable to do so after taking into account the interests of any person who may be affected by the review”. It is not intended to simply protect an applicant from the consequences of a decision.

13. There are numerous authorities which set out a non-exhaustive set of factors to be taken into account when determining an application for a stay order. In Secretary, Department of Employment and Workplace Relations v Anastasiadis [2007] AATA 1065 at [6]-[7], the Tribunal summarised the well-established relevant factors and principles which may be considered when determining a stay application:

    [6] The decision whether to grant a Stay is entirely discretionary. It follows that an applicant does not have an automatic right to a Stay. Given the effect of s 41(1) of the AAT Act, it must necessarily be inferred that the reviewable decision, the decision of the SSAT in this case, is correct until proven otherwise. Further, the general principle applied by the courts that, prima facie, the successful party has the right to the fruits of a judgement should also apply in the case of Tribunal decisions. In the courts, an applicant for a Stay is required to show that there are special circumstances which would justify the stay of execution of the judgement. (emphasis added)

    [7] The matters which are considered by the courts to constitute special circumstances are similar to those enunciated by the Tribunal when dealing with Stay applications. Deputy President G.D. Walker in Re Secretary, Department of Workplace Relations and Nicholas [2006] AATA 497 at [21] and Senior Member B.J. McCabe in Re Labrador Liquor Wholesale Pty Ltd and CEO of Customs [2006] AATA 485 at [5] set out the following factors which may need to be considered in determining whether a Stay should be granted.

    (a) The prospects of success or the merits of the applicant’s case on review.

    (b) Whether there will be prejudice to the parties or anyone else if a Stay were not granted.

    (c) Whether it is in the public interest to grant a Stay.

    (d) That the review application, if successful, would be rendered nugatory or pointless if the Stay was not granted.

14. These factors are generally the touchstone against which consideration of stay applications are to be approached.

    Prospects of Success

15. While it is neither necessary nor appropriate for me to determine the substantive matter on an interlocutory application, I must be satisfied that the applicant has some prospects of success. This can be a difficult task given that all of the evidence intended to be relied upon at hearing of the substantive matter may not be before me. As is the case here.

16. The applicant predominantly relies on the evidence of Mr Anthony Feagan who provided a statement in these proceedings dated 26 February 2019. Mr Feagan is an experienced RTO auditor and there was no challenge to his qualifications to give an opinion in this matter. In summary, Mr Feagan formed the view that the audit report contained numerous errors, and where there were compliance issues with the applicant, they were of a minor administrative nature rather than of impact to students. Mr Feagan was not required for cross-examination.

17. Mr Alexander Black, a Lead Regulatory Officer of ASQA has provided two affidavits in these proceedings which are both dated 1 March 2019. He gave evidence orally at hearing and was cross-examined extensively by the applicant. Mr Black confirmed that he was the fourth regulatory officer of the respondent to review and assess the applicant’s site audit evidence and response evidence. He found that there were substantive non-compliances with regard to the applicant’s deficient assessment practices, lack of third-party oversight, and lack of access to sufficient learning and assessment resources. At hearing he confirmed that he reached his own conclusions and conducted his own review of the material and reiterated that he did not agree with the findings of Mr Feagan that the non-compliances were mainly of an administrative nature.

18. I prefer the evidence of Mr Black over that of Mr Feagan because Mr Black conducted an evidence review of the site audit evidence and the response evidence whereas Mr Feagan only reviewed the audit report. At the outset of Mr Feagan’s statement he advises that the applicant asked him to “review the audit report prepared by ASQA dated 16 January 2019 (the Audit Report) and comment on it as to the conclusions reached therein”. There is no other specific mention in the statement of any other documents that Mr Feagan had available to him for review when reaching his conclusions. As such I can only be satisfied that he reviewed the Audit Report when preparing his evidence in these proceedings.

19. While I am not convinced on the available evidence in these proceedings that the applicant has reasonable prospects of success; I am troubled by the extent of the non-compliances identified by Mr Black in his evidence and the fact that multiple regulatory officers of ASQA have reviewed and assessed the applicant’s site audit evidence and response evidence; all of which have found numerous non-compliances as detailed in the audit report and in Mr Black’s evidence. In saying that, I cannot say at this point that the applicant’s case is without merit. It is common and expected that further evidence will be provided for the substantive hearing in this matter when an assessment of the merits will be thoroughly undertaken. It will also be at that point that any inadequacies in the applicant’s evidence to date, such as I have mentioned above, may be rectified. I also note that Mr Feagan is currently attending the applicant’s business premises to assist with rectifying the non-compliances identified by ASQA in the audit report.

    Consequences for the Applicant if the stay was not granted

20. The applicant contends that the consequences if the stay application is refused are that it will be unable to continue to operate. In a letter from the Government of Western Australia Department of Education (“Department of Education”) dated 12 February 2019, it is made plain that if the applicant is unable to fulfil its fundamental obligations it will be in breach of its MOAs signed with various schools (as delegates of the Department of Education). The Department advised that it will expect to be compensated for the costs arising from the applicant’s breach of its agreement. The MOAs provide that the cancellation of registration is a force majeure event that entitles the Department of Education to cancel the MOAs without liability.

21. The applicant’s evidence is that it is financially dependent on the MOAs signed with schools/the Department of Education. The applicant further advises that there is currently $505,875.95 owing to the applicant from schools who have signed MOAs for the 2019 school year but have not paid these invoices as they are awaiting the outcome of the stay proceedings. A letter from the applicant’s accountant, BC Accountants, dated 11 February 2019, confirms that the applicant has made substantial investment in IP and R&D development in the educational sector and for those purposes has relied on continuing funding from its RTO activities. The letter states, “…we believe that the loss of RTO registration will have a dramatic impact on the financial health of the company, and likely lead to insolvency and other severe consequences”.

22. Ms Bronwyn Blencowe, the applicant’s Managing Director, Company Secretary and Chairperson, addresses the applicant’s financial situation in a sworn statement dated 26 February 2019. She advises that if the audit had not occurred, the applicant would have received fees of approximately $1.6 million in October 2018 in coursework fees and qualification fees, being the applicant’s entire income for the calendar year. However she advises that after the audit, the applicant has approximately 50 MOAs signed and $505,875.95 in fees payable under the agreements. Evidence also shows that the applicant has significant monthly expenses which are ongoing. Ms Blencowe advises that the applicant does not have a cash reserve, however operates on a $400,000 overdraft which is used for cash flow purposes throughout the year. She states that currently the applicant has approximately $7000 available in the overdraft. As a result of the applicant’s current financial position, Ms Blencowe submits that the balance sheet indicates that without the ability to recover its accounts receivables, it is likely that the applicant will be unable to operate profitably.

23. The applicant further submits that if the stay application is refused then its reputation and that of Ms Bronwyn Blencowe, in the Western Australian VET in schools industry will be damaged beyond recovery and it is likely that the applicant will cease to operate.

    Public Interest

24. The public interest consideration is a significant factor in these proceedings.

25. Ms Blencowe advises in her statement dated 26 February 2019 that:

    “In 2018, the applicant had approximately 130 MOAs in place with secondary schools and colleges in Western Australia with approximately 11,373 students enrolled in its courses.

    As of October 2018, approximately 63 schools have signed MOAs for the 2019 year and approximately 67 schools have not signed MOAs for the 2019 year. Following the notification of ASQA’s audit of the applicant in or around October 2018 the 67 schools who have not signed MOAs have refused to sign MOAs.

    I am aware of at least 14 schools have decided to enter agreements with alternate RTOs for the 2019 school year which amounts to approximately 2000 students. Other than these 2000 students I am not aware of what action the department of education has taken to provide alternative arrangements for the remaining 9000 students. Our view is that we can provide compliant education to these students and that is the best option available to these students.

    There are currently 4500 students who have completed induction with the applicant but are not enrolled as representatives of the schools have advised me that they are awaiting the outcome of the stay hearing. If the decision is not stayed, these students will be negatively affected as the students have completed induction, think that they are undertaking these courses, want to undertake these courses to better themselves but ultimately would be left without an ability to undertake the courses”.

26. In written submissions the applicant confirms that in summary there are approximately 63 schools who have signed MOAs with the applicant for the 2019 year and around 4500 students who have completed induction with the applicant but are not yet enrolled pending the outcome of this stay application. Though students will certainly need to find an alternative provider if the stay application is refused; the applicant contends that maintenance of the applicant’s registration is the most certain way of ensuring thousands of students are not delayed in completing qualifications that will count towards those students’ completion of high school.

1. I accept that a very large number of students will be immediately impacted if the stay application is refused. I also accept that this may pose some inconvenience and delay for the students affected while they transition to alternative providers. However, this immediate impact is ameliorated by the fact that it is still early on in the 2019 school year and the fact that a large portion of the students namely, 4500 students, at this stage have only completed induction and have not yet embarked on the core aspects of completing the courses. I am satisfied that the impact suffered by the students now as a result of the cancellation decision is a much more desirable position than the alternative possibility. The alternative being that if the stay is granted and the cancellation decision is affirmed following review of the substantive application, the students would be in a dire situation. The substantive application could likely take a few months to conclude and at that time the students would be well into their courses. For the RTO to lose its registration at that point could have very significant consequences for the students and could impact on their completion of high school. The protection of the students in this instance is paramount.

2. The applicant submits that there is nowhere for the students to be transferred to should the applicant lose its registration however, the respondent tendered at hearing two emails to ASQA, from Ms Genevie Baker from Catholic Education Western Australia and from Mr Martin Clery from the Department of Education. Ms Baker states in her email that “…it looks like all our schools have moved providers and will be alright if 4 March VETiS is unable to keep trading. A lot of work but we have got there!”. Mr Clery advises in his email that to minimise any impacts on students this will “primarily involve TAFEs taking over delivery of quals that schools currently auspice through VETiS”. He notes that there is no guarantee that this will cover all students. The applicant objected to the content of the emails at hearing on the basis that the evidence was unable to be tested or verified. I agree that there is a limitation on the weight that can be attributed to the emails for those reasons however; I do note that both emails were addressed to Ms Stephanie Trestrail. Ms Trestrail has provided an affidavit in these proceedings dated 28 February 2019. She gave evidence orally at hearing and was available for cross examination. At no time was the validity of the email correspondence challenged. I have no reason to suspect that the emails are false. The level of detail is lacking in regards to the number of students and schools referred to in the emails however I do accept that they indicate a possibility that students can be successfully transferred to alternative providers if the cancellation decision comes into effect.

3. The applicant contends that correspondence from the Department of Education indicates its willingness to work with the applicant. I accept this submission to a degree. In a letter dated 12 February 2019, the Department of Education puts the applicant on notice that “unless appropriate and agreed processes are put in place as a matter of urgency to respond to the situation created by the Provider, the Department will seek to recover from the Provider all costs the Department and schools incur from Monday, 18 February 2019 to deal with the consequences of the Provider’s pending disqualification”. In a letter dated 21 February 2019, the Department of Education advises that the primary purpose of the correspondence dated 12 February 2019 was to “…ensure that the Department is able to fulfil its duty to students for the completion of their training and subsequent receipt of a qualification. The intent is to work with the Provider to the extent possible to achieve this purpose”. In regards to Future Plan Actions, the Department states “Clearly, the Provider’s conduct and the decision of ASQA require arrangements to be put in place to minimise disruptions to schools and students, and that prepares for the real possibility the Provider will not be able to fulfil its obligations”. The Department of Education plainly understands the significance of the current situation and the importance of making alternative arrangements should the cancellation decision come into effect.

4. The public interest also goes to protection of Australia’s reputation as a domestic and international provider of quality vocational education and training. Allowing non-compliant operators to continue to operate undermines confidence in the efficacy of the vocational education sector that affects Australia’s reputation both at home and abroad. Further, there is a public interest in the maintenance of confidence in the regulatory framework that operates in the vocational education and training sector.

5. I note that there are a number of staff members of the applicant that will be adversely affected if the stay application is refused and as already stated above, there will likely be a significant financial impact on the applicant. I’m not convinced that concern for either business profitability or staff should outweigh the public interest considerations raised in these proceedings.

   Would the review application be rendered nugatory if a stay was not granted?

6. I accept that there is a real chance that the applicant may not return to business if the stay application is refused. It is plain on the financial records that the applicant is running at a loss and is reliant on its ability to recover its accounts receivable. Based on the MOAs between the applicant and various schools (as delegates of the Department of Education), the applicant will be in breach of these agreements as soon as the cancellation decision comes into effect. As such, the Department of Education will have no liability under the agreements. I also accept that if the applicant ceases to operate, it may not survive until hearing. As already stated above, I am very troubled by the public interest considerations in this matter and this is only emphasised by the sheer number of students which will be adversely affected should the cancellation decision be affirmed. Additionally, given the number of students affected by this decision, the risk of undermining confidence in the regulatory system and the integrity of the Australian vocational education and training sector should the cancellation decision be affirmed could be profound.

   Decision

7. Having taken into account the submissions and evidence advanced by both the applicant and respondent, I have reached the view that on balance, it is not desirable to order a stay under section 41(2) of the AAT Act. I accept that the consequences of the cancellation decision coming into effect on 8 March 2019 are significant and possibly catastrophic for the applicant; however, these do not outweigh the public interest considerations in this matter. I am satisfied that there is a real risk that a number of the objectives of the legislative regime would not be met if the applicant was permitted to continue operating. Specifically, I am concerned with the protection of the students and the risk of damage to the reputation of the Australian vocational education and training sector.

8. The application for a stay is refused.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak

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Associate

Dated: 7 March 2019

Date of hearing:	4 March 2019
Solicitors for the Applicant:	Mr M Lynch, Gorval Lynch
Solicitors for the Respondent:	Mr T Lloyd, Australian Skills Quality Authority