Australian Skills Quality Authority v Western Institute of Technology Pty Ltd

BACKGROUND FACTS 5 The circumstances in which these orders have been sought are not, for the most part, contentious. They are recounted in affidavits filed by the solicitors on each side. 6 As already noted the appeal to this Court was filed on 16 March 2017. 7 The decision of the Tribunal which gave rise to the appeal related to a dispute between the Western Institute and ASQA about whether the Western Institute had complied with some of its obligations under the National Vocational Education and Training Regulator Act 2011 (Cth) ("the NVE Act") and the Education Services for Overseas Students Act 2000 (Cth). ASQA had decided to impose suspensions of registration by way of sanctions against the Western Institute for alleged non-compliance with requirements of those Acts. By the time of the Tribunal hearing the parties had agreed that the Western Institute had, in fact, met all of its obligations. As a result they had agreed that the Tribunal should set aside ASQA's decision to impose the sanctions against the Western Institute. There remained, however, a dispute as to whether the Western Institute's ongoing registration should be subject to a condition that the Western Institute retain records of student assessment for a period of two years rather than the six months which applied to other similar providers. 8 The Tribunal recorded its decisions in two paragraphs. The first set aside, by consent, the decisions to impose sanctions. The second paragraph recorded a decision that the Tribunal had declined to make Western Institute's registration subject to the condition that it retain assessment records for two years. 9 ASQA's appeal to this Court relied on four grounds. The first three complained that, in deciding not to impose a condition on the Western Institute's registration, the Tribunal had misconstrued the nature, purpose and effect of the power under s 56 of the NVE Act and, further, that its decision was not open on the material before it. Each of these grounds specifically referred to the operation of s 56 of the NVE Act. The fourth ground was that the Tribunal had denied ASQA procedural fairness by failing to give it an opportunity to comment on the operation of s 56 and of the consequences of the imposition of the condition on the Western Institute's students and on Australia's reputation and social and economic needs. It is not necessary fully to develop the arguments raised in support of these grounds. Suffice it to say s 56 empowered ASQA, in certain circumstances, to cancel a qualification or statement of attainment issued to a student by institutions such as the Western Institute following an audit of retained assessment records. The link between the powers conferred by s 56 and the Tribunal's decision to reject the two year retention condition were explained in the Tribunal's reasons at [47] as follows: If [the Western Institute's] registration were subject to the condition that ASQA seeks, the practical effect is that no student could be assured of the [Vocational Education and Training ("VET")] qualification or VET statement of attainment conferred by [the Western Institute] until two years had passed from the final assessment decision for that particular unit of competency or module. That would seem to us to be contrary to a system that is directed, in part, to a VET system designed to deliver valued skills, knowledge and competences to members of the Australian community as well as to the international education market. Australia's social and economic needs will not be met unless there is some measure of confidence that the system will deliver those educated and skilled persons. Its reputation as a provider of quality education and training services to overseas students will be damaged. ASQA complained that the Tribunal had not raised, in the course of the hearing, the operation of s 56 and the potential for damage to Australia's reputation and social and economic needs flowing from an exercise of its powers under that provision. Neither party had made submissions which referred to or relied on s 56. 10 ASQA sought orders that the appeal be allowed, the Tribunal's decision be set aside and that the matter be remitted to the Tribunal for reconsideration according to law. It also sought an order than the Western Institute pay its costs of the appeal. 11 On 31 March 2017 ASQA's solicitor sent an offer of compromise to the Western Institute's solicitor. The offer was that the appeal be resolved on the basis of orders that it be allowed, the decision of the Tribunal being set aside and the matter being remitted to the Tribunal for reconsideration according to law. It was proposed that there be no order as to the costs of the appeal. 12 The offer of compromise was made under cover of a letter from ASQA's solicitor. The letter advised that the offer of compromise had been made under r 25.01 of the Federal Court Rules 2011 (Cth) ("the Rules"). The four grounds of appeal were summarised. The letter continued: We consider that each of these grounds is likely to succeed, and that the inevitable result of the appeal is that the decision of the Tribunal will be set aside. Accordingly, in order to avoid any further expenditure of time and costs on this proceeding, the Applicant offers to resolve the proceeding on a walk away basis, with the decision to be set aside and the matter remitted to the Tribunal for reconsideration according to law, so that the parties have a proper opportunity to address the Tribunal on the operation of s 56 of the NVR Act in the circumstances. 13 The letter concluded by advising the Western Institute that the offer was open for a period 14 days (until 5.00 pm on 14 April 2017) and inviting Western Institute's solicitor to contact the author if the Western Institute wished to discuss any aspect of the offer. 14 The Western Institute did not respond to the offer. It, therefore, expired without being accepted. 15 As a result the parties proceeded to prepare the appeal for hearing. ASQA filed and served its submissions on 5 July 2017. 16 On 28 July 2017 the Western Institute filed its submissions in response. It accepted that the appeal should be allowed and that the question of whether conditions ought to be imposed on its registration should be remitted to the Tribunal for reconsideration according to law. It did so because it agreed that ASQA had been denied procedural fairness by the Tribunal for the reasons advanced by ASQA. 17 On the same day the Western Institute's solicitor wrote to ASQA's solicitor. The Western Institute said that it had considered in detail ASQA's written submissions and made an open offer to compromise the appeal. It proposed that the appeal be allowed on the procedural fairness ground and that the second paragraph of the Tribunal's decision be set aside. It said that "because ground 4 should be upheld, in our view grounds 1-3 must fail." 18 By letter, dated 31 July 2017, ASQA's solicitor responded by noting Western Institute's concession in relation to the procedural fairness ground but asserting that grounds 1 and 3 would also be upheld if the matter proceeded to hearing. ASQA said that it was entitled to its costs on an indemnity basis because the Western Institute had not accepted its earlier offer of compromise. Nonetheless, it advised that, in order to resolve the matter as quickly as possible, ASQA would be agreeable to "accepting costs of and incidental to the entirety of the proceeding on a party-party basis." It further advised that it was "willing to accept a form of order which deal[t] only with paragraph 2 of the decision of the Tribunal, on the basis that the question to be remitted to the Tribunal is confined to the question of whether conditions should be imposed on the applicant's registration." The offer was to be open for acceptance until 4.00 pm on 1 August 2017. 19 On 1 August 2017 Western Institute's solicitors wrote to ASQA's solicitor rejecting the offer. It countered that the appropriate costs order would be for each party to bear its own costs until 28 July 2017 and that ASQA should pay its costs thereafter. This was "because ASQA is persisting with its untenable position in respect of paragraph 1 of the Tribunal's decision." 20 On 7 August 2017 the Court made orders by consent in the following terms: 1. The appeal be allowed. 2. Paragraph 2 of the decision of the Tribunal be set aside. 3. The question whether conditions should be imposed on the First Respondent's registration be remitted to the Tribunal for reconsideration according to law. 4. The hearing listed before the Full Court on 9 August 2017 be vacated. 5. The question of costs be determined on the papers: … Notation 1. The parties agree that: 1.1 the Tribunal failed to afford procedural fairness to the parties by failing to give the parties an opportunity to comment on the operation of s 56 of the National Vocational Education and Training Regulator Act 2011 (Cth) in the circumstances, or its consequences for the proposed conditions sought to be imposed on the registration of the First Respondent; and 1.2 it is unnecessary to determine whether the Tribunal otherwise erred in the manner set out in grounds 1 to 3 of the Notice of Appeal dated 16 March 2017. 2. The parties do not consider that it is necessary for the matter to be remitted to the Tribunal differently constituted.

RULE 25.14 - ASQA'S OFFER 21 Rule 25.14 deals with offers of compromise made by respondents and applicants in proceedings in the Court. Rule 25.14(3) provides that: 25.14 Costs where offer not accepted … (3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs; (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mention in paragraph (a) - on an indemnity basis. 22 In dealing with the former O 23 r 11 of the Federal Court Rules 1979 (Cth), which was the forerunner of the present r 25.14, the Full Court (Stone, Edmonds and Jagot JJ) in IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1; [2010] FCAFC 31 considered O 23 r 11(6) which provided for offers made by a respondent and not accepted by an applicant. This rule was in substantially the same terms as r 25.14(3) save that the latter deals with offers by an applicant. Their Honour's summarised the relevant case law at 4-5 [9]: It may be accepted that the prima facie position established by O 23 r 11(6) can be departed from. So much is clear from the statement of exception in the rule which the appellants seek to invoke (unless the court otherwise orders). The cases say more than this, however. The cases establish that: (1) If O 23 r 11(6) is engaged it is for the applicant to satisfy the Court that the prima facie position established by that rule should be departed from: Futuretronics at [12]. (2) Unlike a case in which a Calderbank offer (named after the decision in Calderbank v Calderbank [1975] 3 All ER 333; [1976] Fam 93) is made, the fact that an unsuccessful litigant acted reasonably in rejecting an offer of compromise "is not of itself a sufficient reason to displace the operation of the rule": Futuretronics at [11]. (3) It is true that doubts have been expressed about a need to show "compelling and exceptional circumstances" to justify otherwise ordering: see Port Kembla Coal Terminal at [17]. Nevertheless, properly understood, the rule creates a presumption in favour of indemnity costs which the unsuccessful party must rebut. A court may depart from the presumptive position but only "for proper reasons which, in general, only arise in an exceptional case": Port Kembla Coal Terminal at [17] cited with approval in Futuretronics at [10]. (4) The requirement for "proper reasons" for any departure from the prima facie position of indemnity costs reflects the purpose of the rule. As explained by Mason P in Morgan v Johnson (1998) 44 NSWLR 578 at 581F-582E (Morgan) the rule is intended to encourage the compromise of litigation (such compromise being in both the private and the public interest) and to oblige parties "to give serious thought to the risk involved in non-acceptance" on the basis that "litigation is inescapably chancy": Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725. For these reasons "the ordinary provision is expected to apply in the ordinary case" (referring to New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 at 102-3. 23 The operation of r 25.14 is not qualified by a phrase such as "unless the Court otherwise orders". Although the Court retains power to make such costs orders as it considers appropriate, the absence of such a qualification tends to emphasise the presumptive nature of r 25.14: see Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [23] and [27] (Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ); Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [22] (Rares, Flick and Bromwich JJ). There is nothing in r 25.14 to suggest that it does not, according to its terms, apply to appeals from the Tribunal: cf Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 at [8]-[9] (Tamberlin, Finn and Sundberg JJ); IFTC Broking Services Limited at [6] (Stone, Edmonds and Jagot JJ). 24 ASQA contended that r 25.14(3) applied such that it was entitled to the indemnity costs order which it sought. 25 A comparison of the terms of the offer of compromise, made on 31 March 2017, with the orders made disposing of the appeal supports ASQA's contention that it obtained a judgment which was more favourable than the terms of the offer. That is so because, although the orders relating to the disposition of the appeal were the same in the offer and the final orders, ASQA would not have received any costs had the offer been accepted. The consent orders, made by the Court, left open the prospect that some costs order, favourable to ASQA, would be made by the Court. 26 The Western Institute disputed this analysis, arguing that the ASQA's offer, had it been accepted, would have seen the whole of the Tribunal's decision set aside on the basis that the proposed orders in the offer were not, in terms, confined to the second paragraph. The Court's order only set aside the second paragraph of the Tribunal's decision. It had not interfered with the consent decision recorded in the first paragraph. 27 This argument lacks force. ASQA's notice of appeal did not, either expressly or impliedly, seek to interfere with the consent decision. On the contrary, as the grounds made clear, its attack was directed at paragraph 2 of the Tribunal's decision. So much was reinforced by what was conveyed by the solicitor's letter dated 31 March 2017 which accompanied the offer of compromise. 28 The Western Institute also sought to resist an order for indemnity costs on some additional grounds. It relied on the following matters: Neither party was responsible for the Tribunal's legal error. The appeal had been commenced by ASQA "peremptorily" without first contacting Western Institute about the error. At no point had the Western Institute taken any steps to resist the making of an order allowing the appeal. No order could be made by the Court until such time as ASQA had prepared detailed submissions in support of its appeal as it "was always necessary for ASQA to satisfy this Court that the decision should be set aside". ASQA and the Tribunal were both funded by the Commonwealth "and it would be inequitable to require [the Western Institute] to compensate the Commonwealth in its capacity as ASQA for the error of the Commonwealth in its capacity as the AAT." 29 None of these considerations, in our view, warrant a departure from the costs consequences of r 25.14(3). 30 It is true that neither party was responsible for the Tribunal's error. There was, however, an error and it was of such a character as to justify the setting aside of the second paragraph of the decision. So much should have been apparent to the Western Institute at the time the offer of compromise was made by ASQA. 31 The appeal to this Court was commenced without prior discussions between the parties. Having regard to the subsequent conduct of the pre-trial process, it may be doubted that any such discussions would have been fruitful. More importantly, however, ASQA's offer of compromise was made shortly after the appeal had been lodged and before any costs (or significant costs) had been incurred by the Western Institute. It may be true to say that the Western Institute had not taken any steps to resist ASQA's application over the period between the commencement of the proceeding and its consent determination but that is beside the point. Its failure to respond to the offer of compromise is not explained. 32 It should, at the very least, have considered the offer and advised ASQA, within the following fortnight that it either accepted or did not accept it. It did not do so. One of the matters which the Court is required to take into account when exercising its discretion to award costs is any failure on the part of a party to comply with the over-arching purposes of the civil procedure provisions, which is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see ss 37M(1) and 37N(4) of the Federal Court of Australia Act 1976 (Cth). Had the Western Institute acceded to the offer in the early part of April 2017 substantial costs would have been avoided. 33 The other two matters raised by the Western Institute lack merit. The making of orders by this Court was not dependent upon the preparation of detailed submissions by ASQA and the source of funding for ASQA and the Tribunal was not a relevant consideration. 34 Orders to give effect to the terms of r 25.14(3) will be made.

THE WESTERN INSTITUTE'S COSTS CLAIM 35 The Western Institute's costs claim was founded on the open offer which it made on 28 July 2017. It contended that it had invited ASQA to abandon its appeal against paragraph one of the Tribunal's order and agreed to orders that the appeal, insofar as it related to the second paragraph, be allowed for the reasons advanced by ASQA. ASQA's failure to accept this offer had caused unnecessary costs to be incurred on both sides between then and 7 August 2017 when the Court's orders were made. 36 We do not accept these submissions. They proceed on the false premise that ASQA was seeking to challenge paragraph one of the Tribunal's orders. This premise is misconceived for the reasons we have already outlined. 37 The Western Institute's open offer of 28 July 2017 did not deal with costs. In its response to that offer, dated 31 July 2017, ASQA fairly drew attention to the existence of its asserted and extant entitlement to costs on an indemnity basis as a reason for not agreeing to the Western Institute's open offer. It was entitled to do so. In the event the parties agreed that the other orders proposed should be made and the parties should have their costs dispute resolved by the Court. This agreement was reached within a matter of days of the open offer having been made and the Court promptly gave effect to them. 38 Western Institute has not made out any basis for the costs claim which it proposes.

A CERTIFICATE UNDER S 6(1) OF THE COSTS ACT? 39 The Western Institute seeks a certificate under s 6(1) of the Costs Act. 40 That sub-section provides that "where a Federal appeal succeeds on a question of law, the court that heard the appeal may, on the application of a respondent to the appeal, grant to the respondent a costs certificate in respect of the appeal." 41 The Western Institute submitted that it satisfied the requirements for the issue of a certificate because the appeal had succeeded on a question of law, it was a respondent to the appeal and, implicitly, because it had engaged solicitors and counsel, it had incurred costs in the conduct of the appeal. 42 The power to grant such certificates is discretionary. There is no presumption in favour of a respondent being granted such a certificate. It is incumbent on a respondent to establish some proper ground for the granting of the certificate: see Bullock v The Federated Furnishing Trades Society of Australasia (No 2) (1985) 5 FCR 476 at 477-478; [1985] FCA 48 at pp 1-5 (Smithers, Sweeney and Woodward JJ); cf Main v Main (1949) 78 CLR 636 at 643 (Latham CJ, Rich and Dixon JJ). See also: Anti-Doping Rule Violation Panel v XZTT (No 2) [2013] FCAFC 135 at [32]-[37] (North, Cowdroy and McKerracher JJ); Secretary, Department of Primary Industries, Parks, Water and Environment v Tasmanian Aboriginal Centre Incorporated (No 2) [2016] FCAFC 137 at [25] (Allsop CJ, Griffiths and Moshinsky JJ). This is because, if a certificate is granted, it opens the doorway to the respondent's costs (or part of them) being paid by the taxpayer. 43 The Western Institute has not advanced any reason for it to be granted a certificate beyond establishing that the literal requirements of s 6(1) had been met: cf Anti-Doping Rule Violation Panel at [36]. 44 Having regard to the matters to which we have already adverted we do not consider that this is an appropriate case in which to grant a certificate. The application will be refused. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Tracey, Griffiths and Charlesworth.