Commissioner of the NDIS Quality and Safeguards Commission v Aurora Community Care Pty Ltd

ABRAHAM J: 1 The Commissioner of the NDIS Quality and Safeguards Commission (Commissioner), by interlocutory application dated 26 April 2024 (application), seeks orders pursuant to s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act) for leave to proceed against Aurora Community Care Pty Ltd (respondent) in liquidation. 2 The context of this application is that on 21 December 2023 the Commissioner commenced proceedings in this Court seeking declarations that the respondent, as a registered provider under the National Disability Insurance Scheme Act 2013 (Cth) (NDIS Act), contravened ss 73J and 73V of that Act; pecuniary penalties; and ancillary orders. The originating documents were formally served on the respondent on 29 December 2023. On 16 January 2024, the respondent was referred, by its lawyer, to Mr Baxendale (liquidator), for the appointment of a liquidator. The respondent ceased trading on 4 February 2024 and went into voluntary liquidation on 16 February 2024, seemingly because these proceedings were commenced. 3 On 10 April 2024, the Commissioner sought the liquidator's consent for the grant of leave to proceed against the respondent. On 23 April 2024, the liquidator informed the Commissioner that he is neutral and does not object to the Commissioner's application. 4 In support of the application, the Commissioner relied on the affidavit of Gareth Andrew James Kerr affirmed 26 April 2024, including accompanying annexure GK-1 (Kerr Affidavit). The Commissioner also filed written submissions on 1 May 2024. I have considered the material relied on by the applicant. The liquidator was aware of the application and that it was going to be considered on the papers. No material was provided by the liquidator. 5 For the reasons below, I grant the Commissioner leave to proceed against the respondent in liquidation.

Background 6 The following allegations are contained in the concise statement filed by the applicant on 21 December 2023. 7 The applicant alleges that the respondent failed to provide services to Mr Gupta in accordance with the conditions of its registration as a National Disability Insurance Scheme (NDIS) provider. Mr Gupta died on 17 March 2023, when he was 38 years-old, having been hit by a motor vehicle after leaving his supported independent living residence alone, without the knowledge of his support workers. 8 Mr Gupta had an intellectual disability, tuberous sclerosis, epilepsy, adenoma sebaceum and obstructive sleep apnoea. Pursuant to a supported independent living service agreement, from 16 February 2022 to the time of his death, Mr Gupta was required to receive two on one care from the respondent 24 hours a day, seven days a week, at a supported independent living residence operated by the respondent. The care provided under the agreement included active overnight shifts, where both support workers were required to be awake during normal sleeping hours. It was known to the respondent that Mr Gupta would leave (or attempt to leave) his residence and that he was not subject to any environmental restraint that permitted the respondent to lock doors or gates. This meant that the support workers were required to watch Mr Gupta to ensure he did not leave the residence alone. Mr Gupta left the residence alone, without the knowledge of his support workers, sometime after 1:00am on 17 March 2023. It is alleged that one support worker had fallen asleep; the other heard Mr Gupta open the back door but did not investigate this further. Mr Gupta was hit by a motor vehicle while on foot. He sustained multiple injuries and died. 9 It was also known to the respondent that restricting Mr Gupta's access to Pepsi and television were triggers which increased the likelihood that he would engage in harmful behaviours including physical harm to himself and others, property damage/destruction, verbal aggression and harmful sexual behaviours to others. The applicant alleges that, notwithstanding this knowledge, the respondent restricted Mr Gupta's access to Pepsi and television without the appropriate approvals and documentation, including without reporting it to the Commissioner.

Legal principles 10 Section 500(2) of the Corporations Act provides: (2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 11 The legislation is silent as to the principles to be applied in determining an application for leave. 12 In refusing leave in Rushleigh Services Pty Ltd v Forge Group Ltd (In Liq) [2016] FCA 1471 (Rushleigh), Foster J conveniently summarised the principles emerging from several of the leading authorities: 15 In Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314 at 315-317, McPherson J, when sitting as a judge of the Full Court of the Supreme Court of Queensland, summarised the relevant principles. I extract the following relevant propositions from his Honour's summary: (a) A decision granting or refusing leave to proceed against a corporation in liquidation involves the exercise of a judicial discretion; (b) The prohibition against commencing or proceeding with an action or other proceeding against a company once a winding up order is made or the company is placed into liquidation is a feature of companies legislation of long standing; (c) Without the relevant restriction, a corporation in liquidation would be subjected to a multiplicity of actions which would be both expensive and time-consuming, as well as in some cases completely unnecessary. This explanation has been accepted in a number of Canadian cases and was also accepted by Street J in Re AJ Benjamin Ltd (In Liq) [1969] 2 NSWR 374 at 376, (1969) WN (Pt 1) (NSW) 107 at 109-110; (d) Generally, what is substituted for litigation in the ordinary form is a procedure by which a claimant lodges a verified proof of debt with the liquidator, who admits or rejects it wholly or in part, and from whom an appeal lies to a judge who determines that appeal de novo; (e) A claimant should proceed by way of lodgment of a proof of debt unless he or she can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claim in dispute; and (f) It is impossible to state in an exhaustive manner all of the circumstances in which leave to proceed may be appropriate. However, in the past, those circumstances have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved and the stage to which the proceedings, if already commenced, may be progressed. 16 These remarks of his Honour were approved by the Full Court of this Court (Wilcox, Burchett and Beazley JJ) in Vagrand Pty Ltd (In Liq) v Fielding (1993) 41 FCR 550 at 554-555. 13 These observations have subsequently been adopted and applied: see for example, Fair Work Ombudsman v Sushi Bay Pty Ltd [2023] FCA 548 at [10]; Fair Work Ombudsman v DTF World Square Pty Ltd [2022] FCA 724 at [19]; Fair Work Ombudsman v Blue Sky Kids Land Pty Ltd (in liquidation) [2020] FCA 718 at [9]; Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 2) [2020] FCA 284 at [8]; Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) [2019] FCA 1601 at [14]; Australian Competition and Consumer Commission v Birubi Art Pty Ltd (No 2) [2018] FCA 1785 at [8]; Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 (ACCC v AIPE) at [22]. 14 In ACCC v AIPE, Bromwich J gave particular weight to the public interest factors relied on by the ACCC, as the relevant regulator, in support of the grant of leave to proceed. The factors identified by his Honour at [26] are as follows: (1) The purpose of a civil penalty, and thus of such proceedings, is primarily, if not wholly, protective in promoting the public interest in compliance, by putting a price on contravention that is sufficiently high to deter repetition by the contravener and by others tempted to contravene. (2) Even if a company is in liquidation, it may still be appropriate to order that it pay penalties as a measure of the Court's disapproval of the contraventions and as a measure of the seriousness in which they are regarded, including for the purpose of general deterrence. (3) In seeking declaratory and other relief, the regulator's real interest is to vindicate a public right that has been breached. (4) There is a significant public interest in declarations of contravening conduct and imposition of penalties being on the public record in aid of deterrence, which is not defeated by the fact that the company is in liquidation and unable to pay the penalties. 15 I note also that the capacity to pay any penalties imposed is not a proper or relevant consideration: ACCC v AIPE at [26], and that while the protection of the interests of creditors is important, it is not determinative: ACCC v AIPE at [23].

Consideration 16 I have weighed the principles, facts and circumstances relevant to this application and am of the view that leave to proceed against the respondent in liquidation ought to be granted. 17 The Commissioner brings these proceedings in its capacity as regulator of the NDIS Act. Its core functions include upholding the rights of, and promoting the health, safety and wellbeing of, people with disability receiving supports or services under the NDIS: s 181E(a) of the NDIS Act. The Commissioner seeks leave to continue these proceedings for the purposes of: (a) furthering the public interest in compliance with the NDIS Act by enforcing contraventions and putting a price on contraventions of the NDIS Act that is sufficiently high to deter repetition by the contravener and others tempted to contravene; (b) protecting and promoting the interests of NDIS participants generally; (c) promoting the deterrence of conduct which contravenes the NDIS Act; (d) vindicating a public right that has been breached; and (e) addressing particular conduct that may have contravened the NDIS Act. 18 The Commissioner also seeks declarations and penalties to ensure that the objects in ss 181E(a), 181E(d) and 181F(c) of the NDIS Act are fulfilled. 19 I agree with the Commissioner's submission that these proceedings will promote the public interest in compliance with the NDIS Act, as well as the protection of people with disability receiving supports by other registered NDIS providers. It is self-evident that the allegations against the respondent described in the concise statement are serious. The respondent's alleged failure to provide services to Mr Gupta in accordance with the conditions of its registration as a NDIS provider caused harm of the utmost seriousness to a person of disability who, by virtue of his disabilities, required protection from harm. The respondent's alleged conduct resulted in Mr Gupta's death. I am of the view that the gravity of the subject matter weighs very heavily in favour of leave being granted. I note also that the respondent's alleged use of restrictive practices during Mr Gupta's life gave rise to an increased risk of harm in respect of his behaviours of concern and restricted his individual rights to freedom of expression, self-determination and decision making in accordance with applicable laws and conventions. 20 Though it is accepted that a claimant should ordinarily proceed by way of lodgement of a proof of debt in the liquidation, departure from that procedure is justified in this case: Rushleigh at [15]. The declarations and pecuniary penalties sought by the Commissioner cannot be the subject of lodgement of a proof of debt. The relief sought is therefore unavailable to the Commissioner absent the grant of leave to proceed, a factor weighing in favour of leave being granted in the circumstances: ACCC v AIPE at [21]; ss 553 and 553B of the Corporations Act. 21 As to the prejudice to creditors, I note the grant of final relief will not impact creditors because the Commissioner undertakes not to enforce any penalty awarded, or any costs order made in its favour, without further leave of the Court: Kerr Affidavit at [16(c)]; see also ACCC v AIPE at [32].

Conclusion 22 For the reasons given, I am satisfied that leave ought to be granted to the Commissioner to continue these proceedings against the respondent in liquidation. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.