In the matter of Australian Institute of Professional Education Pty Limited... [2018] NSWSC 1028 | Case summary

Affidavit evidence and agreed facts

At the hearing on 25 May 2018, the Liquidators read, without objection, the affidavit of Mr George Georges sworn 22 December 2017 and tendered Exhibit GG-1 to that affidavit. Mr Georges there referred to the nature of the Company's business, and registrations and approvals which it held with Australian Skills and Quality Authority ("ASQA") and the Tertiary Education and Quality Skills Authority ("TEQSA") and on the Commonwealth Register of Institutions and Courses for Overseas Students as a provider of vocational education and training, higher education and English language intensive courses for overseas students. Mr Georges noted that, from 31 October 2016, the Company had ceased to provide education courses to domestic and overseas students. Mr Georges also referred to the nature of the courses provided to overseas students, the enrolment processes for such courses, the manner in which tuition fees were paid, and the circumstances in which the Company's registration with ASQA had been cancelled, an appeal against that cancellation was brought in the Administrative Appeals Tribunal ("AAT"), and liquidators were appointed to the Company. He refers to the steps which were taken by the TPS to transition overseas students to alternate courses or refund amounts paid by them, after the Company ceased providing courses of study. Mr Georges' affidavit also dealt with the steps which had been taken by the Liquidators, the claims by the TPS Director in respect of a "protected amount" under s 29 of the ESOS Act, the steps which have been taken by the Liquidators to calculate that amount, and the current financial position of the Company.
The Liquidators also read the affidavit of Mr Georges sworn 23 February 2018, which referred to evidence which had been led in relation to dealings with overseas students in liquidators' examinations, to notification of the hearing of this application to creditors, and to recent correspondence between the solicitors acting for parties. The Liquidators also read the affidavit of Mr Georges sworn 11 May 2018, which updated his evidence as to those matters, and tendered Exhibit GG-2 to that affidavit. The Liquidators also read the affidavit of Mr Georges sworn 24 May 2018 which identified the amounts that were received by the Company from overseas students and how they were treated, and referred to other proceedings which had been brought by the Liquidators in connection with the liquidation.
The TPS Director read, also without objection, the affidavits of Mr Vipan Mahajan affirmed 17 May 2018 and 25 May 2018. Mr Mahajan there referred to a determination under s 50A of the ESOS Act that the Company had defaulted within the meaning of s 46A of the Act, and to a call made on the Overseas Students Tuition Fund ("OTSF") in respect of the Company under s 50A of the ESOS Act. Mr Mahajan's evidence was that he caused an amount to be paid out of the OSTF sufficient to meet refund requirements under Pt 5 Div 2 of the ESOS Act and had paid an amount of $1,717,318.60 out of the OSTF. His evidence was that that amount included an amount of $420,688.40 allocated to refunds to students who were yet to commence their studies, and a further amount to students who had commenced but not completed their studies.
The parties agreed a complex factual narrative for the purposes of this proceeding, which I largely set out below. In doing so, I adopt the array of acronyms adopted by the parties, in deference to their use of them. It is not apparent that all of the agreed facts affect the narrow issues raised by the proceedings. I am satisfied that the relevant agreed facts were established by the affidavit evidence and provide a proper basis for the declaratory relief sought. Those agreed facts identify the fact of disagreement between the parties as to some matters, and the proceedings were largely not conducted in a manner that would establish that the view of either party was correct as to the matters as to which they disagreed. The parties agreed as follows: Registrations and approvals 6.1 Prior to the appointment of the Liquidators, and relevantly during the period 2013 to 2016, the Company: (a) carried on a business of providing educational courses to domestic and overseas students; (b) was approved by [ASQA] as a registered training organisation ("RTO") under the National Vocational Education and Training Regulator Act 2001 (Cth) ("NVETR Act"); and as a registered provider under the ESOS Act in relation to vocational education and training ("VET") courses (ESOS Act, s 6E(b); and English Language Intensive Courses for Overseas Students ("ELICOS") programs (ESOS Act, s 6E(d)), offered by the Company to overseas students; (c) was registered with [TEQSA] as a higher education provider under the Tertiary Education Quality and Standards Agency Act 2011 (Cth) ("TEQSA Act"); and a registered provider under the ESOS Act in relation to higher education ("HE") courses offered by AIPE to overseas students (ESOS Act, s 6E(a)); (d) was registered on the Commonwealth Register of Institutions and Courses for Overseas Students ("CRICOS") as a provider of VET, HE and ELICOS programs; and (e) was approved as a VET Provider and a Higher Education Provider by the Department of Education ("Department") for the purposes of the Higher Education Support Act 2003 (Cth) ("HESA"). 6.2 Since at least 2013, the Company provided and sought to provide VET, HE or ELICOS courses to domestic and overseas students. With effect from 31 October 2016, the Company ceased to provide all courses of study to domestic and overseas students. Enrolment process for intending overseas students 6.3 Prior to commencing a course with the Company, an intending overseas student had to apply for admission into the relevant course by completing and submitting an application form. If the intending overseas student's application was successful, the Company issued a Letter of Offer to the intending overseas student which set out the course or courses offered to the intending overseas student and the total tuition fees for each course, any enrolment conditions to be satisfied prior to commencing the course and the initial course fees to be paid to the Company upon accepting the offer. 6.4 In the period 2013 to October 2016, the Company received applications for enrolment in various courses from intending overseas students. Successful enrolment in a course required the intending overseas student to pay a certain amount of the tuition fees payable for that course prior to the intending overseas student commencing the course of study with the Company. The amount of tuition fees required to be paid in advance of the course depended on the course in which the student was enrolling. 6.5 The Company's 'International Student Enrolment Agreement' dated 21 May 2014 and examples of the Company's Letter of Offer to international students dated 19 March 2014, 6 February 2015 and 16 July 2015 specify that fees, including tuition fees, were to be paid into a Commonwealth Bank of Australia Business Transaction Account in the name of the Company with account number [redacted] ("CBA Transaction Account"). Payments and tuition fees received from intending overseas students and overseas students 6.6 In the period 2013 to October 2016, the Company received tuition fees from overseas students or intending overseas students, including from those whom, as at the date of appointment of the Liquidators, had not commenced their course of study with the Company for which the tuition fees had been paid. 6.7 During FY2015, on the basis of investigations conducted by the Liquidators, the Company received from overseas students, and intending overseas students, payments (including tuition fees) in the amount of $12,559,550.45 with: (a) $12,543,160.85, being approximately 99.9% of the amounts received from overseas students and intending overseas students, paid into the CBA Transaction Account; and (b) $16,389.60, being approximately 0.1% received from overseas and intending overseas students, paid into a Westpac Banking Corporation account in the name of the Company with account number [redacted] ("WBC Account"). 6.8 In relation to transactions on the CBA Transaction Account: (a) the opening balance of the CBA Transaction Account on 1 June 2015 was the amount of $117,422.03; (b) during the course of 10 June 2015, the balance of the CBA Transaction Account was reduced to the amount of $2,670.33; (c) on 16 June 2015, the amount of $10,416,666.08 was deposited into the account from the Department of Education, which amount related to VET FEE-HELP payments for tuition fees for domestic students; and the amount of $10,000,000 was transferred out of the CBA Transaction account into a Commonwealth Bank of Australia Direct Investment Account with account number [redacted] in the name of the Company ("CDI Account"); (d) on 22 June 2015, the amount of $5,000,000 was transferred from the CDI Account and deposited back into the CBA Transaction Account; (e) on 24 June 2015, $5,000,000 was withdrawn from the CBA Transaction Account and deposited into a Bank of Queensland account in the name of the Company with account number [redacted] ("BOQ Account"); (f) on 30 June 2015, the closing balance of the CBA Transaction Account was the amount of $366,229.48 in credit. 6.9 From these transactions, the $5,000,000 paid into the BOQ Account was from funds received from the Department of Education by way of VET FEE-HELP payments in relation to domestic students. 6.11 On 4 November 2015, ASQA provided the Company with notice of its intention to cancel the Company's registration as an RTO under the NVETR Act and as an approved provider under the ESOS Act (for VET and ELICOS courses). 6.12 On 16 December 2015, in response to a request made by the TPS Director for details of the designated account and its current balance: (a) Mr Amjad Khanche, the Chief Executive Officer of the Company, sent the TPS Director an email which attached a copy of a bank account statement for the BOQ Account which held, at 30 June 2015, the amount of $5,000,000. The email from Mr Khanche said "We currently hold $5,000,000 in the account". (b) the Company provided a schedule that identified tuition fees paid in advance for future students in the amount of $667,597.00. 6.13 On 21 December 2015, ASQA gave notice to the Company that on 17 December 2015 it had decided to cancel the Company's registration as an RTO under the NVETR Act and as an approved provider under the ESOS Act (for VET and ELICOS courses) with effect from 1 February 2016 (the ASQA Decisions). 6.14 On 23 December 2015, by email to the TPS Director, Mr Khanche of the Company said: "Nominated Tuition Fee Account I can confirm that the BOQ specialist account is the designated account for prepaid fees. AIPE also operates an everyday bank account, to receive all the tuition fees and make the payments." 6.15 On 23 December 2015, the Company applied to the Administrative Appeals Tribunal ("AAT") for a review of the ASQA Decisions and for orders staying the operation of the ASQA Decisions pending resolution of the application for review ("AAT Proceedings"). 6.16 On 22 January 2016, the AAT made an order staying the ASQA Decisions pending the resolution of the AAT Proceedings, the effect of which meant that the Company remained registered as an RTO under the NVETR Act and an approved provider under the ESOS Act. 6.17 During FY2016, on the basis of investigations conducted by the Liquidators, the Company received from overseas students, and intending overseas students, payments (including tuition fees) in the amount of $12,260,355.92 with: (a) $12,217,474.97, being approximately 99.7% of the amounts received from overseas students and intending overseas students, paid into the CBA Transaction Account; and (b) $42,880.95, being approximately 0.3% of the amounts received from overseas students and intending overseas students paid into the WBC Account. 6.18 By a series of transactions between April 2016 and 23 May 2016, the $5,000,000 held in the BOQ Account was transferred to a National Australia Bank (NAB) term deposit account with account number [redacted] ("NAB Term Deposit"). The TPS Director was not informed of the movement of $5,000,000 in funds from the BOQ Account to the NAB Term Deposit. The parties agreed that this series of transactions was accurately set out in a flow of funds diagram to which they referred. 6.19 From 1 July 2016, all payments (including tuition fees) received from overseas students and intending overseas students were paid into the CBA Business Transaction Account. 6.20 By a series of transactions in August 2016, the amount of just in excess of $5,000,000 was transferred from the NAB Term Deposit to an account with National Australia Bank Limited ("NAB") with account number [redacted]. On 19 September 2016, that account was transferred into the name of International Education Management Pty Ltd, the sole shareholder of the Company. 6.21 In relation to transactions on the CBA Transaction Account in FY2017: (a) during the course of 23 September 2016, the balance of the CBA Transaction account was reduced to the amount of $1,397.31 in credit; (b) payments made into the CBA Transaction Account in the amount of $146,925.10 received in the period 24 September 2016 to 6 October 2016, appear to relate to payments received from overseas students or intending overseas students; (c) after 23 September 2016 and by 30 September 2016, in addition to payments in relation to overseas students and intending overseas students, deposits were made into the CBA Transaction Account in the total amount of $1,050,000 from the CDI Account; (d) in October 2016, and up to and including 6 October 2016, in addition to payments in relation to overseas students and intending overseas students, deposits were made into the CBA Transaction Account in the total amount of $7,000,000 from the CDI Account; and in the amount of $2,000,000 with the description "money transfer"; (e) the closing balance of the CBA Transaction Account on 6 October 2016 was $603,676.18. Overseas Students Tuition Fund and TPS Levies 6.22 During FY2015 and FY2016, the Company paid the TPS Levy to the TPS Director. Appointment of Liquidators 6.23 At 6pm on 5 October 2016, a meeting of the directors of the Company took place, at which the directors of the Company passed a resolution that: (a) the directors could not sign a solvency declaration declaring that the Company would be able to pay its debts in full within the coming 12 months; and (b) the directors recommend to the shareholders of the Company that the Company be wound up voluntarily. 6.24 On 6 October 2016, International Education Management Pty Ltd transferred the amount of $1,000,000 (of the $5,000,000 held in the BOQ Account) to a NAB account in the name of the Company with account number [redacted] ("NAB Account"). 6.25 At 4pm on 6 October 2016, a meeting of the members of the Company took place and it was resolved that the Liquidators be appointed to act as liquidators of the Company. Immediately after this meeting the Liquidators took control of the Company's assets and operations. 6.26 On 18 October 2016, the Liquidators activated the tuition assurance arrangements for domestic students and notified the relevant bodies and entities that the Company would cease providing courses of study with effect from 31 October 2016. 6.27 Shortly after their appointment, and in October 2016, the Liquidators activated tuition assurance for overseas students and commenced discussions with the TPS in relation to the cessation of courses of study. Financial position of the Company on appointment of the Liquidators 6.28 The combined pre-appointment bank balance, immediately before the appointment of the Liquidators at 4pm on 6 October 2016 was $2,672,834.68, comprised of funds held in specified accounts and petty cash. 6.29 On appointment of the Liquidators, the Company did not hold the BOQ Account or any active account with the Bank of Queensland and did not hold any account described as a designated account, protected amount account, pre-paid tuition fees account or tuition fees account. 6.30 The report as to affairs signed by Mr Khanche, the chief executive officer of the Company, did not provide any information to the Liquidators in relation to the protected amount or amounts of pre-paid tuition fees received from students who had not commenced their course of study with the Company. 6.31 On 12 October 2016, the Liquidators transferred the amount of $603,676.18 from the CBA Transaction Account; $808,461.89 from the CDI Account; and $1,067,259.70 from the NAB Account, to account number [redacted] ("Liquidation Account"). 6.32 On 20 October 2016, the Liquidators transferred the amount of $192,904.89 from the WBC Account to the Liquidation Account. Liquidators' calculation of potential pre-paid fees amount and consolidation of Company accounts 6.33 On 12 October 2016, Mr Vipan Mahajan, the TPS Director, sent an email attaching a letter to the Liquidators in relation to the Company's obligations as a registered education provider under the ESOS Act. The letter said, inter alia: "As discussed, the Tuition Protection Service (TPS) is aware that the Australian Institute of Professional Education entered voluntary liquidation on 6 October 2016. I am writing to you regarding AIPE's obligations as a Commonwealth Register of Institutions and Overseas Students (CRICOS) registered education provider. As a CRICOS registered education provider, AIPE has obligations that it must meet as specified under the ESOS Act. Section 29 of the ESOS Act requires AIPE to maintain a 'designated' account to keep sufficient funds (the protected amount) to repay all tuition fees to every overseas student who has paid fees but not yet commenced their course. The TPS is aware that AIPE maintained such an account. I would appreciate it if you could advise the status of the designated account, including its balance as at 6 October 2016, to the TPS, by no later than Wednesday 19 October 2016. Please note under section 29(6) of the ESOS Act, the protected amount is not available for payment of a debt of any creditor of the provider, other than as referred to in section 29 subsection (4); and is not liable to be attached or taken in execution under the order or process of a court at the instance of any creditor of the provider. If a provider ceases to deliver courses to overseas students, this may result in 'provider default' (as described under section 46A of the ESOS Act). In this case the provider is required to meet its obligations under section 46D of the ESOS Act within 14 days of the date of default. These obligations relate to assistance to overseas students and intending overseas students. The provider can discharge its obligations by either arranging placements in suitable alternative courses for the affected overseas students or by providing a refund of unspent tuition fees." 6.34 Shortly after the appointment of the Liquidators, in October 2016, a report was extracted from the Company's student relationship management system which contained information in relation to intending overseas students and overseas students who had pre-paid tuition fees to the Company and whom were due to commence their course of study on or after 3 October 2016. This report was generated by the former Chief Financial Officer of the Company in order for the Liquidators to determine a preliminary estimate of the amount of tuition fees the Company may have received in relation to intending overseas students and overseas students who had not commenced the course of study with the Company by 3 October 2016, being the commencement of the week in which the Liquidators were appointed. 6.35 The preliminary estimate of the amount of pre-paid tuition fees received from intending overseas students was the amount of $1,078,911.23. 6.36 As at 7 December 2016, there was $1,897,278.51 in the Liquidation Account which included funds that had been transferred into the Liquidation Account from the CBA Transaction Account, the WBC Account and the NAB Account. 6.37 On 8 December 2016, the amount of $1,100,000 from the combined funds held in the Liquidation Account was deposited into the Liquidators' Term Deposit Account pending directions from the Court. Communications with overseas students and intending overseas students 6.38 After the appointment of the Liquidators, the Liquidators, the TPS Director and the TPS Administrator contacted overseas students and intending overseas students to inform them of the Company being placed into Liquidation, the cessation of courses of study and informed the students to contact the TPS in relation to the transition to a new RTO to commence or complete their course of study, or in order to receive a refund of unspent tuition fees. Emails were sent: (a) on 19 October 2016, to all email addresses recorded in the Company's records for overseas students and intending overseas students enrolled in ELICOS courses with the Company; (b) on 28 October 2016, to all email addresses recorded in the Company's records for overseas students and intending overseas students enrolled in VET courses with the Company; and (c) on 31 October 2016, to all email addresses recorded in the Company's records for overseas students and intending overseas students enrolled in HE courses with the Company. Cancellation of registrations and cessation of courses 6.39 On 27 October 2016, TEQSA gave notice to the Liquidators that it had decided to cancel the Company's registration as a Higher Education Provider under the TEQSA Act, with effect from 31 December 2016 (TEQSA Notice). Registration as a Higher Education Provider under the TEQSA Act is a prerequisite for TEQSA granting approval pursuant to the ESOS Act to education providers offering HE courses to overseas students. As the decision to cease all courses of study had been made, the Liquidators took no steps to challenge or set aside the TEQSA Notice. 6.40 As at 31 October 2016, AIPE had ceased to provide all courses of study to students, specifically: (a) on 16 October 2016, HE students concluded their trimester and were subsequently notified on 2 November 2016 that the next trimester for HE due to start on 7 November 2016 would not commence; (b) on 19 October 2016, ELICOS students were notified that their courses would no longer be offered as at the close of business on 21 October 2016; and (c) on 28 October 2016, VET students were notified that their courses would no longer be offered as at the close of business on 31 October 2016. 6.41 On 3 November 2016, the Liquidators agreed to consent orders dismissing the AAT Proceedings seeking a review of the ASQA Decisions. On 4 November 2016, the AAT Proceedings were dismissed with the effect that the Company's registration as an RTO under the NVETR Act and its approval as a provider of VET and ELICOS courses under the ESOS Act were cancelled from 4 November 2016. Effective 4 November 2016, the Company was no longer a registered provider within the meaning of ss 6E(b) and 6E(d) of the ESOS Act. Further calculation of pre-paid amount for intending overseas students (potential protected amount) 6.42 Between 20 October 2016 and 4 November 2016, the Liquidators, with the assistance of the former Chief Financial Officer of the Company, prepared and provided to the TPS Administrator spreadsheets extracted from the student management system which contained information in relation to all overseas and intending overseas students enrolled with the Company in HE, VET and ELICOS courses ("Student Spreadsheets"). 6.43 The Student Spreadsheets identified amounts that had been received by the Company from the overseas students and intending overseas students. From the Student Spreadsheets the Liquidators calculated that that the amount which had been received from intending overseas students and overseas students who had not yet commenced the course of study to which the amount paid relates was in the total amount of $1,065,421.44 ([p]otential [p]rotected [a]mount). The difference in the [p]otential [p]rotected [a]mount and the preliminary estimate of this potential amount referred to above is due to a later course cut-off date being used in the Student Spreadsheets and because earlier data was not checked for errors at the time the data was extracted from the student database. 6.44 In early October 2016, the TPS Director determined: (a) that the Company had defaulted in relation to an overseas student or intending overseas student within the meaning of s 46A of the ESOS Act; (b) the default day in relation to the Company was 6 October 2016; (c) the Company was unlikely to be able to discharge its obligations under s46D of the ESOS Act within the relevant period. 6.55 Following the determinations by the TPS Director, the TPS Director commenced the student placement service pursuant to s 49 of the ESOS Act and determined to make a call on the Overseas Students Tuition Fund ("OSTF") in relation to overseas students and intending overseas students for the purposes of s50A of the ESOS Act. 6.56 As a call was made on the OSTF and the student placement service had been commenced, the TPS Director instructed PricewaterhouseCoopers, who at the time performed the function of the TPS Administrator to commence the claims and assistance process for affected students. 6.57 In October and November 2016, the Liquidators (including by employees of the Liquidators), the TPS Director and the TPS Administrator carried out the tuition assurance process (including the student placement service and the student refund process) which involved the following steps: (a) communications being sent by the TPS Administrator to all overseas students and intending overseas students enrolled in a course provided by the Company by email and/or text message requiring the student to register with the TPS Administrator and provide proof of identity; (b) on campus meetings being held for overseas students to discuss the tuition assurance process were held by the Liquidators and TPS; (c) where possible TPS arranged the transfer of enrolment of intending overseas students and overseas students to courses with a different provider that would result in a similar qualification being attained. Where a student transferred to an alternate course, the TPS Director pays an amount equal to the unspent tuition fees paid by the student to the defaulting provider, calculated in accordance with section 49D(6) of the ESOS Act to the alternate provider; and (d) where a transfer of enrolment was not possible or not wanted by the relevant intending overseas student or overseas student, documents in relation to the amount of tuition fees paid to the Company were requested by TPS from each student and, on occasion, from the Liquidators and reconciled against the Student Spreadsheets and the data in the Provider Registration and International Student Management System (PRISMS) to which the TPS Administrator and the TPS Director had access. 6.58 PRISMS is an electronic system established by the Secretary of the Department of Education pursuant to s 109 of the ESOS Act for the purpose of receiving and storing information about overseas students and intending overseas students. Section 19 of the ESOS Act requires providers to enter certain prescribed information in relation to a person that becomes an accepted student of the provider into PRISMS. 6.59 The Liquidators do not have access to the records in PRISMS. The Liquidators were not responsible for completing the reconciliation of amounts paid by overseas students and any refund payable to each student by TPS, but did provide to the TPS Administrator any information and student records from the Company's records to assist with this process. 6.60 A number of intending overseas students and overseas students were transferred to alternate providers including students who had not commenced their course of study as at the date of the Liquidators' appointment and whom had been included in the calculation of the [p]otential [p]rotected [a]mount. The Liquidators do not have details of which intending overseas students or overseas students were transferred to alternate providers. The Liquidators do not know the details of any amounts paid to alternate providers in relation to students who have transferred to an alternate provider. 6.61 The TPS Administrator was responsible for determining the refunds to be paid to students enrolled with the Company that had not commenced their course of study. 6.62 The refund amount for students: (a) who have had their visa refused due to the provider default is the sum of prepaid tuition fees and non-tuition fees minus an administrative fee of 5% of the course fee or $500, whichever is the lesser; (b) who have not had their visa refused is the quantum of the tuition fees paid to the provider. TPS Director's claim for repayment 6.63 On 31 August 2017, the TPS Director sent, by email, a letter to the Liquidators which the cover email described as "regarding the possible reimbursement of prepaid tuition fees for affected students of AIPE". The letter said, inter alia: "The Tuition Protection Service (TPS) is seeking reimbursement of pre-paid tuition fees (as per section 27 of Education Services for Overseas Students Act 2000 (ESOS Act) for affected students of Australian Institute of Professional Education (AIPE). Section 29 of the Education Services for Overseas Students Act 2000 (ESOS Act) stipulates the obligation on a provider relating to protected monies. A registered provider who receives, in respect of an overseas student or intending overseas student, tuition fees for a course before the student has begun the course, must pay the fees to the credit of an account maintained in accordance with section 28 of the Act. The provider must pay these fees into the account within five business days of receiving the fees. These fees under the ESOS Act are considered as the 'protected amount'. It is also worth noting that the protected amount is not available for the payment of a debt of any creditor of the provider. The TPS is aware that AIPE maintained such an account for the protection of tuition fees. The table below provides information on the pre-paid tuition fees for students, who were yet to commence their course on the date of your appointment as voluntary liquidator. Table 1: Australian Institute of Professional Education as at 6 October 2017 [it is accepted this should be 2016] Default Date Round Total 6/10/2017 ELICOS $ 194,681.34 6/10/2017 VET $ 67,936.40 6/10/2017 Higher Education $ 199,095.00 Total $ 461,715.74 Please note the amount in the table above only relates to pre-paid tuition fees. The total amount of fee refunds paid out by the TPS for former AIPE students as at 31 August 2017 is $1,674,183." 6.64 The letter from the TPS Director set out that the amount of pre-paid tuition fees for students in VET, HE and ELICOS courses that had not commenced their course of study on the date of the Liquidators' appointment was the amount of $461,715.74 ("TPS Protected Amount Claim"). This claim includes amounts paid by students who have accepted a place with an alternate provider. 6.65 On 12 September 2016, the TPS Director provided revised spreadsheets which set out the overseas students and intending overseas students enrolled in VET, HE and ELICOS courses of study with the Company who had not commenced their course of study with the Company as at the date of appointment of the Liquidators ("TPS Spreadsheets"). The TPS Spreadsheets identified the amount refunded by the TPS Director in relation to each student. The total amount of refunds referred to in the TPS Spreadsheets is the amount of $461,715.74 (being the TPS Protected Amount Claim). 6.67 The Liquidators attempted to reconcile the Student Spreadsheets (and the [p]otential [p]rotected [a]mount) with the TPS Spreadsheet (and the TPS Protected Amount Claim) to determine the reason for the difference in the [p]otential [p]rotected [a]mount identified in the Student Spreadsheets, being $1,065,421.44 and the amount of $461,715.74 identified in the TPS Spreadsheets. 6.68 The difference in the [p]otential [p]rotected [a]mount and the TPS Protected Amount Claim is $603,705.70. 6.69 From the reconciliation attempted by the Liquidators, the differences identified include the following, all of which relate to persons who had not commenced the relevant course of study with the Company at the date of the appointment of the Liquidators: (a) there are students named in the Student Spreadsheets who are not named in the TPS Spreadsheet; (b) students named in the Student Spreadsheets whom have been refunded by TPS an amount different to that recorded as the pre-paid amount in the Student Spreadsheets. In approximately 5% of the students there was an inconsistency with the tuition fees recorded in PRISMS and the Student Spreadsheets and in this instance, the TPS Administrator sought additional documents from students to support the amounts paid to the Company; (c) students listed in the Student Spreadsheets with pre-paid amounts recorded whom have not had any amount refunded by TPS; (d) students recorded in the TPS Spreadsheet with a "-" as the amount refunded by TPS for whom the Student Spreadsheets record a potential pre-paid amount. Students marked with a "-" in the TPS Spreadsheet have a total amount of $641,352.70 recorded as the pre-paid amount in the Student Spreadsheets. 6.70 In addition, an administrative fee is applied prior to the refund in some instances. 6.71 The difference in the [p]otential [p]rotected [a]mount and the TPS Protected Amount Claim is predominantly due to students in the Student Spreadsheets, also identified in the TPS Spreadsheets, but in respect of whom no amount has been claimed in the TPS Protected Amount Claim. These students are identified in the Student Spreadsheets as having paid the amount of $641,352.70 (referred to above). 6.72 A complete reconciliation of the differences between the Student Spreadsheets and the TPS Spreadsheet would result in significant costs being incurred in the Liquidation and would result in a duplication of work already completed by the TPS Administrator. 6.73 The Liquidators, by matching student identification numbers against deposits in the WBC Account have determined that none of the students referred to in the Student Spreadsheets paid amounts into the WBC Account. From the Liquidators' investigations it appears that amounts received from overseas students referred to in the Student Spreadsheets were paid into the CBA Transaction Account. 6.74 As at 23 September 2016, the CBA Transaction Account had a balance of $1,397.31 in credit. 6.75 From 24 September 2016 until the appointment of the Liquidators, as set out above, the amount of $8,050,000 was deposited into the CBA Transaction Account from the CDI Account and the amount of $2,000,000 was transferred into the CBA Transaction Account with the description "money transfer". Significant withdrawals were made from the CBA Transaction Account and the balance of the CBA Transaction Account on appointment of the Liquidators was $603,676.18. 6.76 The Liquidators have identified payments made into the CBA Transaction Account in the period 24 September 2016 to 6 October 2016, which appear to relate to payments received from overseas students or intending overseas students. The Liquidators have identified the amount of $146,925.10 as being the amount received after 23 September 2016 from overseas or intending overseas students. Approximately 75% of these payments included a student identification number. Using these student identification numbers, the Liquidators were able to match certain students with the students on the TPS Spreadsheet. Other deposits appear to relate to students who had already commenced their course of study and whom are not the subject of the TPS Protected Amount Claim. 6.77 The results of this matching exercise are in a table to which the parties refer. 6.78 From this matching exercise, the Liquidators have identified that: (a) after 23 September 2016, the amount of $40,633 was received from overseas students who had not commenced their course of study with AIPE on 6 October 2016; and (b) the TPS seeks repayment of the amount of $23,640 (as part of the TPS Protected Amount Claim) in relation to these students. 6.79 There may be additional deposits from overseas students received after 23 September 2016 who had not commenced their course of study and in respect of whom TPS has sought repayment as part of the TPS Protected Amount Claim. However, the Liquidators have no easily accessible records as to the payment date for each student deposit, from which to identify these amounts and the identification of these additional amounts would require a detailed and manual reconciliation of amounts received on or after 24 September 2016. Financial position of the Company 6.80 As at October 2017, the current cash on hand (including the $1,100,000 held in the Liquidators Term Deposit Account) was $1,693,886.31 and the Liquidators had received notice of potential claims against the Company in an amount just in excess of $80,000,000. 6.81 As at 24 May 2018, the current cash on hand in the Liquidation was $1,460,014.89. 6.82 The Liquidators have not yet called for formal proofs of debts in relation to the claims against the Company. Potential further claims by overseas students or intending overseas students 6.83 The Liquidators, on 22 January 2018, 30 January 2018, 13 February 2018 and 22 February 2018 caused circulars to be issued to creditors of the Company in relation to these proceedings. No request for information concerning this proceeding has been received by the Liquidators. 6.84 Other than the TPS Protected Amount Claim, the Liquidators have not received notification of any potential claim or any actual claim by any overseas student or intending overseas student for a refund of amounts paid to the Company by way of prepaid tuition fees or any other claim in relation to the [p]otential [p]rotected [a]mount. 6.85 In relation to the TPS Protected Amount Claim ($461,719.74) as at 8 May 2018, $420,688.40 has been paid by the TPS Director from the OSTF to overseas students or intending overseas students; and $41,027.34 had been identified as part of the TPS Protected Amount Claim but have not yet been paid from the OSTF by the TPS Director. 6.86 Other than the TPS Protected Amount Claim ($461,715.74) by the TPS Director, the Liquidators have not received any claim for payment from the [p]otential [p]rotected [a]mount in relation to the students identified in the Student Spreadsheets.

Whether the Deposit Amount is available for distribution in the liquidation in accordance with s 556 of the Corporations Act

First, the Liquidators seek a declaration that the Deposit Amount is not a "protected amount" for the purposes of s 29 of the ESOS Act and it is available to the Liquidators as an asset of the Company, to be dealt with in accordance with s 556 of the Corporations Act 2001 (Cth). The Liquidators next identify a question whether the ESOS Act, as a matter of construction, creates priority in favour of the TPS Director in relation to amounts that he asserts form part of the protected amount contemplated by s 29 of the ESOS Act. The Liquidators point out that the question of priority is of considerable significance, where they have been notified of preliminary claims that substantially exceed the assets presently available to the Company, and may well exceed its assets even if recoveries are made by other proceedings commenced by the Liquidators.
In a report to creditors dated 15 June 2017, the Liquidators stated that: "… $1,078,911 of the funds held in the Company's bank accounts are 'protected monies' and may be required to be remitted to the Tuition Protection Services (TPS). The 'protected monies' have been quarantined while we seek directions from the Court regarding distribution." (Ex GG-1, Tab 22, 199) I do not understand that statement to constitute an admission binding on the Liquidators as to that matter, which is a question which now arises for determination in this application. This question raises issues as to the interaction between ss 501, 555 and 556 of the Corporations Act, which provides for the priority of distribution of assets in a liquidation, and the ESOS Act, particularly ss 28 and 29 of the ESOS Act. It appears that the present form of these sections has not previously been considered by a Court.
I should first note the legislative history of the ESOS Act, which the parties addressed in submissions. The former Education Services for Overseas Students (Registration of Providers and Financial Regulation) Act 1991 (Cth) required certain monies paid by students to education providers to be retained in designated trust accounts. That requirement was then repealed, and the Explanatory Memorandum for the Education Services for Overseas Students Bill 2000 (Cth) noted (at p15) that the intent was to remove that requirement in order to reduce compliance costs for education providers and "increase flexibility in handling cash, eliminate the administrative expenses associated with NTA auditing and reporting and … increase levels of earnings on cash held in trust accounts through use of other investment vehicles". That Explanatory Memorandum also noted that, when notified trust accounts were removed, non-exempt providers would be required to contribute to an assurance fund. A further report subsequently published by the Australian Government in February 2010, in respect of a review of the then ESOS Act considered, but rejected, the option of requiring providers to maintain trust accounts, and preferred the option of a single tuition protection service applicable to all providers (the TPS) which would be fully funded by industry and administered by a Commonwealth body or outsourced and independently operated (p 51).
Following these amendments, and prior to further amendments from 1 July 2014, the ESOS Act did not require education providers to maintain trust accounts for prepayments by students, but s 28 required a registered provider to maintain a "designated account" and s 29 required a registered provider to pay pre-paid tuition fees, received before a course commenced, into that "designated account". Section 29 of the ESOS Act, in that form, was noted in a decision of the AAT in Williams Business College Ltd v Tertiary Education Quality and Standards Agency [2014] AATA 371, to which the Liquidators refer, but the AAT did not there seek to analyse the substantive operation of that section. Section 28 of the ESOS Act was then further amended by the Education Services for Overseas Students Amendment Act 2014 (Cth) from 1 July 2014 to remove the requirement for a "designated account" and require only that relevant accounts be maintained with an Australian ADI. There has since been no requirement to maintain a designated account for pre-paid student fees, and there is no suggestion that the fees in issue in these proceedings were paid prior to 1 July 2014.
Section 4A of the ESOS Act, as it now stands, identifies the principal objects of the Act, namely to provide tuition assurance and refunds for overseas students for courses for which they have paid; to protect and enhance Australia's reputation for quality education and training services; and to compliment Australia's migration laws by ensuring providers collect and report information relevant to the administration of the law relating to student visas. Part 2 of the ESOS Act provides for the registration of providers and, as I noted above, the Company was (but is not now) a registered provider within the meaning of the ESOS Act. Under s 24 of the ESOS Act and s 5 of the Education Services for Overseas Students (TPS Levies) Act 2012 (Cth), a registered provider must pay the TPS Director a TPS Levy on an annual basis. Section 27 of the ESOS Act limits the percentage of an overseas student's tuition fees that a registered provider may receive, before the student has begun a course.
Section 28 of the ESOS Act now requires a registered provider to maintain an account with an Australian deposit-taking institution, if the registered provider receives tuition fees from an overseas student for a course before that course has begun. That section reads as follows: 28 Obligation for registered provider to maintain account Requirement to maintain account (1) A registered provider who receives, in respect of an overseas student or intending overseas student, tuition fees for a course before the student has begun the course must maintain an account in accordance with this section. Note: Providers covered by section 31 are not required to comply with this section. Account to be maintained with an Australian ADI (2) The account must be maintained with an Australian ADI (within the meaning of section 9 of the Corporations Act 2001).
It appears that the Company complied with its obligations under that section, so far as the CBA Transaction Account and the WBC Account were maintained with Australian ADIs. Although Mr Georges' first affidavit refers to investigations undertaken by the Liquidators as to whether the Company continued to maintain the BOQ Account or any other account as a "designated account" (Georges 22.12.2017 [50]), and it is understandable that the Liquidators conducted those investigations where the correspondence between the Company and the TPS Director in December 2015 referred to a "designated account", little turns upon their outcome where the requirement for a "designated account" had been repealed from 1 July 2014, and student payments were in fact made into the CBA Transaction Account and the WBC Account, as I noted above, rather than into the BOQ Account.
Section 29 of the ESOS Act in turn requires a registered provider to pay tuition fees received before a student has commenced the course into that account. That section provides that: 29 Obligations in relation to account money Tuition fees received before course begins to be paid to credit of account (1) A registered provider who receives, in respect of an overseas student or intending overseas student, tuition fees for a course before the student has begun the course must pay the fees to the credit of an account maintained in accordance with section 28. Note: Providers covered by section 31 are not required to comply with this section. (2) The provider must pay the fees into the account within 5 business days of receiving the fees. Note: For the definition of business day, see section 2B of the Acts Interpretation Act 1901. Requirement in relation to withdrawing money from account (3) The provider must ensure that, at all times, there is a sufficient amount (the protected amount) standing to the credit of the account to repay all tuition fees to every overseas student or intending overseas student (a relevant student): (a) in respect of whom tuition fees have been paid to the provider; and (b) who has not yet begun the course that the provider is to provide to the student. (4) An amount may be withdrawn from the account, so as to reduce the balance of the account below the protected amount, only if: (a) the amount is withdrawn to pay a refund under section 46D, 47D or 47E to, or in relation to, a relevant student; or (b) both of the following apply: (i) the provider arranges, under section 46D, for a relevant student to be offered a place in an alternative course at the provider's expense; (ii) the amount is withdrawn to pay the alternative provider in relation to the relevant student; or (c) the amount is withdrawn to pay the TPS Director under section 50C in relation to the relevant student. Note 1: Tuition fees of a relevant student cease to be part of the protected amount (and may therefore be withdrawn from the account) once the student begins the course that the provider is to provide to the student: see subsection (3). Note 2: There are no limits on withdrawals from the account as long as the balance of the account remains above the protected amount. (5) An amount withdrawn in accordance with subsection (4) must not be more than the amount of the tuition fees received by the provider in respect of the relevant student before the student begins the course. Account money not available for payment of debts etc. (6) To avoid doubt, the protected amount: (a) is not available for the payment of a debt of any creditor of the provider, other than as referred to in subsection (4); and (b) is not liable to be attached or taken in execution under the order or process of a court at the instance of any creditor of the provider, other than as referred to in subsection (4).
That section permits monies to be withdrawn from the account maintained in accordance with s 28 of the ESOS Act, so long as there is a sufficient amount standing to the credit of the account to repay all tuition fees paid by overseas students in respect of whom tuition fees have been paid to the provider who have not yet begun the relevant course. Plainly, the Company breached that obligation at least by 23 September 2016, when the CBA Transaction Account reduced to a balance of $1,397.31.
Sections 50B(1) and 50C of the ESOS Act in turn provide as follows: 50B What the TPS Director must do when a call is made TPS Director must pay amount (1) If a call is made on the OSTF, then, as soon as practicable, the TPS Director must pay out of the OSTF an amount equal to the amount that the provider must still pay in order to satisfy the refund requirements under Division 2. Note: The TPS Director pays the amount to the person specified in subsection (3). 50C Consequences of a payment under section 50B Cessation of claim (1) If: (a) either: (i) a registered provider defaults in relation to an overseas student or intending overseas student and a course at a location; or (ii) an overseas student or intending overseas student defaults in relation to a course provided by a registered provider at a location; and (b) the TPS Director pays an amount in accordance with section 50B in relation to the student; the student, and any person specified in paragraph 50B(3)(b), cease to have any claim against the provider in respect of the student's fees to which the refund requirements under Division 2 relate. Provider must pay back TPS Director (2) Instead, the provider must pay the TPS Director an amount equal to the amount that the TPS Director paid under section 50B. Note: For providers who are required to maintain an account in accordance with section 28, the amount might be paid out of the account: see section 29. (3) The TPS Director may recover that amount from the provider as a debt due to the Commonwealth by action in a court of competent jurisdiction. TPS Director may enforce security (4) If the provider had granted the TPS Director a charge or other security over any of its assets, the TPS Director may enforce the charge or security in satisfaction, or partial satisfaction, of the debt. Former registered providers (5) This section continues to apply to a provider if the provider ceases to be a registered provider. This section creates a debt owed by the Company to the Commonwealth, of the kind that would ordinarily be proved in a winding up.
Section 52A of the ESOS Act establishes the OSTF. Under s 52B of the ESOS Act, the TPS Levy, and any amount recovered under s 50C of the ESOS Act, is credited to the OSTF. Under s 52C of the ESOS Act, the OSTF is used to make payments as a result of calls on that fund by the TPS Director. It is common ground that the Company paid the TPS Levy. Sections 54A-54B identify the functions of the TPS Director, which include determining whether a call was made on the OSTF and paying amounts out of the OSTF under s 50B of the ESOS Act.
As I noted above, it is common ground that tuition fees paid by students were largely paid into the CBA Transaction Account, although a small proportion of those payments was made into the WBC Account. The amount held in the CBA Transaction Account was reduced to $1,397.31 by 23 September 2016 but, for reasons that are unexplained, was then increased to $603,676.18 by a payment made into the account by the Company prior to the commencement of the liquidation. An amount of $1,100,000 is presently held by the liquidators in the Liquidators' Term Deposit Account, which exceeds the Liquidators' estimate of fees that had been paid by students who did not begin courses with the Company, in the amount of $1,064,421.44. Of that amount, the TPS Director initially claimed a priority payment of $461,715.74, of which $438,075.74 appears to reflect fees paid by the Company prior to 23 September 2016, when the transaction account fell to $1,397.31, and $23,640 relates to fees received after that date. In oral submissions, the TPS Director reduced the amount he claimed to $420,668.40 (T4). That matter was clarified in further submissions on the basis that a call was made for $461,715.74 but only the lesser amount was paid out, and the balance is pending against the contingency that other students can be located (T15).
Turning now to the parties' submissions, Mr Pritchard, who appears with Ms Hamilton-Jewell for the Liquidators, points to s 555 of the Corporations Act which provides that all debts and claims rank equally and must be paid proportionally in a winding up, except as provided by the Corporations Act, and to s 556 of the Corporations Act which sets out certain payments that are made in priority to general unsecured claims. Mr Pritchard points out that the ESOS Act does not specifically provide how its provisions apply in a liquidation, by contrast with other statutory regimes which refer to the priority of payments in the event of insolvency: contrast s 50 of the Child Support (Registration and Collection) Act 1998 (Cth) and s 28 of the Insurance (Agents and Brokers) Act 1994 (Cth) (repealed). Mr Pritchard submits that the Court should be reluctant to find that the effect of s 29(6) of the ESOS Act is to elevate the TPS Director's claim to a refund above the priorities contemplated by s 556 of the Corporations Act, where there is no express provision in s 29 of the ESOS Act or otherwise in the ESOS Act for refunds paid from the protected amount to be given priority in insolvency.
The Liquidators also submit that the "protected amount" under the ESOS Act (as defined in s 29(3) of the ESOS Act) is calculated by reference to students who had pre-paid tuition fees and not commenced the relevant course of study, and point out that the Company ceased providing courses of study by 31 October 2016 and students have now been transferred to alternate providers. They submit that s 29(4) of the ESOS Act is a preservation provision and that there is no obligation to maintain a minimum balance in relation to a student once the student has commenced the course or is no longer enrolled with the registered provider. It is not necessary to address those submissions given the conclusions that I have reached on other grounds.
In supplementary submissions, the Liquidators submit that the ESOS Act and the Corporations Act must have been intended to operate harmoniously, and that s 50C of the ESOS Act entitles the TPS Director to recover the protected amount as a debt due to the Commonwealth, which is to be addressed in accordance with Div 6 of Chapter 5 of the Corporations Act. The Liquidators also submit that: "The obligations in ss 28 and 29 [of the ESOS Act] apply expressly to a registered provider and the obligations do not continue of the Company is no longer a registered provider. That conclusion is logical. While this result may seem unpalatable in the context of an insolvent company unable to teach out [sic] or refund all overseas students, the circumstance was clearly contemplated by Parliament and addressed by Part 5 of the ESOS Act which provides, inter alia, for the TPS director to arrange for overseas students to be refunded from the [OSTF] or transferred to an alternate provider."
That submission finds support, as a matter of construction, in the fact that other provisions of the ESOS Act to which the Liquidators refer, including ss 46D(8), 47D(6), 47E(5) and 50C(5) of the ESOS Act, expressly provide that the section continue to apply notwithstanding the provider ceasing to be a registered provider. That submission leaves room for s 29 of the ESOS Act to function, at least while an education provider is a registered provider conducting an ongoing business, and prior to liquidation, to maximise the prospect that sufficient monies are held by that provider to meet its obligations in respect of relevant students, and minimise the risk of default. The Liquidators point out that the Company ceased to be a registered provider with effect from 4 November 2016, and accept that the TPS Director may now recover refunds paid to overseas students from the Company as a debt due to the Commonwealth, under s 50C of the ESOS Act which (as I noted above) expressly continues to apply after the Company ceases to be a registered provider. The Liquidators also accept that the operation of that section would allow the TPS Director to claim the lesser amount claimed, $420,668.40, from the Company in respect of students who had not commenced their course of study.
Mr Assaf, who appears for the TPS Director, submits that s 29(4) of the ESOS Act operates to prevent any amount held in an account established under s 29(4) of the ESOS Act being used to pay creditors of the provider, if the effect of such a withdrawal would be to reduce the balance of the account below the protected amount. Mr Assaf submits that, if the specified amount constitutes a protected amount for the purposes of s 29 of the ESOS Act, then that amount is "effectively quarantined" from distribution for "the payment of a debt of any creditor of the provider", other than as referred to in s 29(4) by operation of s 29(6) and that: "This conclusion holds true even if the provider enters into external administration. In that regard, the ESOS Act does not draw a distinction between solvent and insolvent providers."
Mr Assaf fairly accepts that there is a tension between s 29(6) of the ESOS Act, as the TPS Director construes it, and ss 501, 555 and 556 of the Corporations Act. That tension does not arise on the findings that I reach below. Mr Assaf also submits that, in enacting s 501 of the Corporations Act, Parliament could not have intended for a liquidator to act in a way that would contravene an express statutory prohibition, presumably s 29(6) of the ESOS Act, designed to give effect to protective legislation such as the ESOS Act. No such contravention arises on the findings that I reach below. In supplementary submissions, Mr Assaf submits that ss 555 and 556 of the Corporations Act do not require a liquidator to cause the Company which he or she controls to contravene express statutory provisions, including ss 29(4) and (6) of the ESOS Act. While that proposition may be correct, it does not assist the TPS Director unless s 29 of the ESOS Act applies to the Company when it is no longer a registered provider for the purposes of the ESOS Act or a provider of educational services. I will address that question below.
Mr Assaf also submits that the Liquidators' contentions would undermine the policy and purpose of the ESOS Act and: "It would be a surprising result if a Court were to find that there were no protected amount because of a provider's non-compliance with the ESOS Act. Parliament could not have intended for providers to circumvent the protections of the ESOS Act by failing to comply with ss 28 and 29 and then going into external administration." This submission depends on an assumption as to the purposes of the relevant provisions that is not drawn from their text and, in my view, does not recognise the range of competing interests at stake. It is, of course, a question for the legislature to determine the protections for monies paid out by the TPS Director which it seeks to achieve under the ESOS Act. It could have established a trust arrangement, which would have provided protection to students and to the Commonwealth's interests to the extent that it funded alternative courses for students or refunds to them. It previously had established such arrangements, and then repealed them. It has now established an alternative scheme, including the OSTF, and imposed penalties upon registered providers which do not comply with the requirements of the ESOS Act. There seems to me to be nothing surprising, however, in the fact that the ESOS Act is given effect in accordance with its terms, or does not give rise to a trust arrangement which was repealed, or a priority which was not specified in it.
Mr Assaf also submits that, if the Court finds the CBA Transaction Account was maintained by the Company in accordance with s 28 of the ESOS Act, the prohibition on withdrawal of an amount as prescribed by s 29(4) must be given effect although the Company is now in liquidation. As I have noted above, s 28 of the ESOS Act required no more than the relevant account be an account with an Australian ADI, and the CBA Transaction Account and the WBC Account satisfied that requirement. The further proposition that s 29(4) of the ESOS Act must apply, if s 28 applied, does not follow, since s 28 was directed to the maintenance of the relevant account while the Company was a registered provider for the purposes of the ESOS Act, and the question of any application of s 29(4) of the ESOS Act now arises where the Company is no longer a registered provider for the purposes of the ESOS Act, nor a provider of educational services.
In supplementary submissions, Mr Assaf accepts that compliance with s 29 of the ESOS Act (if it applied) could be achieved if the Liquidators left the protected money in the Liquidation Account, although he submits that that outcome could not have been intended by Parliament. I accept that that outcome was likely not Parliament's intention, but that outcome does not arise where s 29 of the ESOS Act does not apply in the relevant circumstances, for the reasons noted below. Mr Assaf also fairly accepts that the provisions of the ESOS Act do not provide a mechanism for the TPS Director to compel the Company or the Liquidators to deal with the "protected amount" in a particular manner. It seems to me that, for the reasons noted below, the ESOS Act also does not authorise the liquidators to deal with that amount in a manner that would be inconsistent with ss 555 and 556 of the Corporations Act. In supplementary submissions, Mr Assaf also submits that ss 555 and 556 do not apply, and that "property of the company" in s 555 is to be read as property that is not subject to any statutory prohibition. It is not necessary to address that submission, where I find for the reasons noted below that s 29 of the ESOS Act does not apply in the particular circumstances.
I now turn to a determination of the question whether the Deposit Amount is available for distribution in the liquidation in accordance with s 556 of the Corporations Act. As I noted above, s 29(3) of the ESOS Act imposes the obligation to retain the "protected amount" in an account established under s 28 of the ESOS Act. Section 29(4) permits withdrawals from the account only for the specified purposes. I should have regard to the applicable principles of statutory construction in construing these sections, although the parties did not make detailed submissions about them. I have drawn on my summary of those principles in Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [219] for that purpose. The legislative intent is, of course, to be determined primarily from the words of the statute. The relevant provisions must be construed having regard to the context in which they appear: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69]; Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83; (2009) 78 NSWLR 43 per Spigelman CJ at [86] (with whom Allsop P and Tobias JA agreed); Wilson v State Rail Authority of New South Wales [2010] NSWCA 198; (2010) 78 NSWLR 704 per Allsop P at [12] (with whom Tobias and Macfarlan JJA agreed). The plurality of the High Court observed in Alcan (NT) Alumina v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47] that: "This court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy" (footnotes omitted). The Court should prefer an interpretation of the provisions that would best achieve the purpose or object of the Corporations Act: Acts Interpretation Act 1901 (Cth) s 15AA; Project Blue Sky Inc v Australian Broadcasting Authority above at [69].
I note that s 28 of the ESOS Act requires a "registered provider" to pay money into the relevant account; s 29(1) is addressed to obligations of a "registered provider" in respect of monies held in that account; and the other references to "provider" in those sections should also be read as abbreviated references to a registered provider. That reading of the sections is reinforced by the fact that s 50C of the ESOS Act, by contrast, expressly extends beyond a "registered provider" to an entity that was but is no longer such a registered provider. It seems to me that, having regard to the statutory purpose of s 29 of the ESOS Act as it emerges from its text, the restrictions under s 29 of the ESOS Act cannot be read as extending to a company in liquidation that is no longer either a registered provider for the purposes of the ESOS Act nor, as a matter of fact, an ongoing provider of educational services, and where its liquidators' role is now to bring in and distribute its assets on a winding up. As I have noted above, the Company is no longer either a registered provider or, indeed, a provider of educational services.
I should not assume that these sections have a statutory purpose, not supported by their terms, of giving an unqualified priority to the TPS Director in a winding up. First, the section does not itself confer any priority on the TPS Director, but merely imposes restrictions on how amounts held in an account established in accordance with s 28 of the ESOS Act may be applied in certain circumstances. Second, as will emerge below, the construction of the sections for which the TPS Director contends would lead to the absurd result that a liquidator was neither obliged nor authorised by the ESOS Act or ss 501, 555 or 556 of the Corporations Act to pay the monies held in the account to the TPS Director, but was constrained by s 29 of the ESOS Act from applying them in accordance with the priorities specified in s 556 of the Corporations Act. The legislature could scarcely have intended that unfortunate result. Third, that assumption would not have regard to other interests that the legislature would likely take into account, including the need for an orderly winding up of insolvent educational providers and the interests of their other creditors.
If I am incorrect in the view that s 29 of the ESOS Act does not apply to a company in liquidation that is no longer either a registered provider for the purposes of the ESOS Act or a provider of educational services, then neither of the purposes specified in s 29(4)(a)-(b) would be satisfied by a payment in the relevant circumstances. The Company, by its Liquidators, would not breach the ESOS Act by withdrawing an amount (under s 29(4)(c) of the ESOS Act) to pay that amount to the TPS Director under s 50C of the ESOS Act in relation to the relevant students. However, s 29(4)(c) of the ESOS Act does not itself impose any obligation upon the Company or its Liquidators to make such a withdrawal. It also seems to me that s 29 of the ESOS Act does not, in its terms, alter the priority of claims by the TPS Director in an insolvency, which are to be determined under ss 555 and 556 of the Corporations Act, and does not authorise the Liquidators to make a payment in a manner that would be inconsistent with the priorities specified in those sections in an insolvency. If I were incorrect in the view I have reached above, s 29 of the ESOS Act would therefore lead to the unfortunate result that, as I noted above, the Liquidators were not authorised to treat the TPS Director's claims in a winding up other than in accordance with the priorities provided by ss 555 and 556 of the Corporations Act, but could not pay an amount out in the winding up other than for the purposes specified in s 29 of the ESOS Act. That result does not arise on the view that I have taken, since s 29 of the ESOS Act does not apply where, as would generally or always be the case, a company ceases to be a registered provider within the scope of s 29 of the ESOS Act before or on its winding up.
Section 29(6) of the ESOS Act in turn prohibits the withdrawal of a protected amount "for the payment of a debt of any creditor of the provider", other than as referred to in s 29(4) of the ESOS Act. Mr Assaf submitted that that subsection prevents the Liquidators from using the protected amount for any purpose other than that stipulated in s 29(4) of the ESOS Act, and that one of the permissible purposes would be to make payment to the TPS Director under s 50C of the ESOS Act. That subsection would protect the interests of students, and the TPS Director, where a company remains solvent, by seeking to ensure that funds constituting the protected amount were not applied to claims of other creditors. On the view that I have reached above, that subsection also has no application to an entity that is no longer a registered provider or a provider of educational services, at least by reason of its liquidation.
If I were wrong in that view, it seems to me that there may be a question whether that subsection would have no application in a liquidation in any event, depending on whether a liquidator can properly be said to "pay" debts of creditors in adjudicating their claims and distributing the company's assets in a winding up in the order specified in ss 555 and 556 of the Corporations Act. In supplementary submissions, Mr Assaf accepts that the remedies available to a creditor, in respect of a debt, are converted into a right to prove in the winding up in a liquidation, but submits that that does not necessarily lead to the conclusion that the debt ceases to exist, and only the right to enforce a payment ceases to exist in that situation: Duke Group Ltd (in liq) v Arthur Young (Reg) and Peat Marwick Hungerfords & Ors (1991) 4 ACSR 355 at 394-397; Commissioner of Taxation v Macquarie Health Corporation Ltd (1998) 88 FCR 451 at 472. It is not necessary to express a final view as to this question since if (contrary to my view) s 29 of the ESOS Act applies, then s 29(4) of the ESOS Act would not authorise a payment other for the specified purposes, irrespective of whether s 29(6) of the ESOS Act prohibits that payment.
I recognise that it might appear unfortunate, from the perspective of taxpayers although not from that of the Company's other creditors, that the TPS Director does not have priority for payments made in these circumstances. However, there are competing interests at stake and there is nothing unreasonable in ss 555 and 556 of the Corporations Act applying to the benefit of the Company's creditors generally. If the legislature preferred to give priority to the TPS Director over other creditors, it could readily have done so or do so by retaining or reinstating the trust account regime that it previously repealed, or amending the ESOS Act or s 556 of the Corporations Act to establish such priority.
I note, for completeness, that Mr Assaf submitted that the Court would, in its discretion, refuse to grant the declaratory relief sought in paragraph 1 of the Amended Originating Process, on the basis that there would be no practical utility in the declaration sought. Mr Assaf also submitted that the Liquidators had failed to discharge the evidentiary onus necessary to establish a negative proposition, in the form in which that declaration was originally sought. It seems to me that a declaration can and should be made to determine the legal issues that have been in dispute in this application. That declaration should be made in the alternative form identified by the Liquidators, in the course of oral submissions, namely that the Deposit Amount is an asset of the Company to be dealt with in accordance with s 556 of the Corporations Act, on the basis that s 29 of the ESOS Act is not applicable to the Company in its present circumstances.

In the matter of Australian Institute of Professional Education Pty Limited (In Liquidation) [2018] NSWSC 1028

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