Jainzii Pty Ltd v Chief Executive of Create NSW, an agency of the Department of Creative Industries, Tourism, Hospitality and Sport

What led to the parties' dispute?

1. Create NSW made various changes to the scheme's terms and conditions over time. These eventually led to the parties' dispute.
2. Create NSW refused payment for the disputed vouchers in January 2023, despite Jainzii earlier receiving email confirmations from Service NSW that the vouchers had been received and that payment would be made within 10 days. Create NSW ultimately cancelled those vouchers.
3. It was in November 2021 that changes were announced which required that approved programs change from prerecorded written instructional material to real time live presentations. Provision of art materials could form part of such instruction, the cost of those materials recoverable by providers pursuant to the scheme.
4. Changes in February 2022 precluded the use of vouchers to cover the cost of art materials offered by providers and required providers to resubmit their programs for approval. Under these new rules, art materials could still be sold separately from a provider's Creative Kids program but could not be paid for using a voucher.
5. These changes left Jainzii with a substantial inventory of materials, which it then had to deal with separately from the program it offered. How it dealt with those materials lies at the heart of the dispute, Jainzii ultimately offering the materials as a free gift for customers who signed up for its 12-month online program.
6. In June 2022, Jainzii sought and was granted approval for a new program which complied with the new rules, involving only the provision of online workshops.
7. In November 2022, Create NSW changed its FAQs to prohibit the advertisement of free art supplies in connection with a provider's Creative Kids program.
8. The approved workshops for which the disputed vouchers could be used were offered as part of the 12-month online access which Jainzii gave to its online program through its website. What was approved under the scheme was two workshops, limited to 20 participants, provided live by qualified instructors, not the entire program of which they were part. Still the cost of the entire program was $100, whether or not paid for using a voucher, with no extra charge being made for the approved workshops.
9. In late 2022 Create NSW received information that suggested Jainzii was in breach of the guidelines because it was offering free art materials to those who signed up to its 12-month program, which could be paid for with a Creative Kids voucher. Create NSW investigated and in early December threatened to suspend Jainzii's account, unless it ceased offering gifts and free products in conjunction with the use of the vouchers. By email to Create NSW on 11 December 2022, Jainzii agreed to do so.
10. In December 2022 and January 2023 Jainzii accepted, in total, some 1,943 vouchers, which it submitted through Service NSW for payment. It may be inferred that this was the result of parents or guardians using vouchers which were soon to expire, Jainzii having been promoting its program to them online.
11. Despite Jainzii having been advised by emails from Service NSW that all the submitted vouchers would be paid, Create NSW suspended Jainzii's account on 12 January 2023 and continued the suspension and ultimately refused payment for 1,587 of those vouchers on 9 March 2023. It considering that despite Jainzii's 11 December 2022 agreement, Jainzii had continued, impermissibly, to bundle or offer free art supplies when parents used their vouchers to pay for its program. In the result it was in breach of its obligations and not entitled to have the vouchers redeemed. Create NSW later revoked Jainzii's registration.
12. Create NSW's 12 January decision to suspend Jainzii's account is the first decision that it challenges. The second is the 9 March decision to continue the suspension and refuse payment for the disputed vouchers.
13. Jainzii claims that it was denied the procedural fairness it was entitled to receive, before the challenged decisions were made, that resulting in a loss for which Create NSW is liable. It also pursues an estoppel claim against the State, to which s 5 of the Crown Proceedings Act 1988 (NSW) applies.

Issues

1. There is no issue about the content of the applicable terms and conditions of the program, the guidelines and the answers to the FAQs; that Jainzii was bound to comply with them; that in December 2022 Jainzii was advised that Create NSW considered that it was not complying with the then applicable guidelines because it was offering those who subscribed to its program a free gift; or that it then agreed to stop offering prizes and free product in connection with vouchers.
2. What was in issue was identified by Jainzii in its written submissions to be: (a) What is the legal basis of the Application for the purposes of UCPR 59.4(c)? (Issue 1) (b) Is each decision amenable to Judicial Review by way of certiorari, on the ground of the procedural unfairness alleged or some other ground? (Issue 2) (c) Was procedural fairness given? (Issue 3) (d) Should relief be refused on discretionary grounds, in any event? (Issue 4)
3. There was also a dispute about the orders which could be made, in the event that Jainzii established that it had been denied procedural fairness and whether Jainzii had established its estoppel case.

Were the applicable Rules complied with?

1. The Uniform Civil Procedure Rules 2005 (NSW) require a summons to state, "with specificity, the grounds on which the relief is sought": r 59.4(c).
2. Jainzii's March 2024 further amended summons sought orders under s 69 of the Supreme Court Act 1970 (NSW) quashing the two challenged decisions, or alternatively a declaration setting them aside or declaring them invalid, relying on the claimed lack of procedural fairness which Jainzii contended that it was entitled to receive.
3. In its response to this pleading Create NSW contended that it did not identify, with the required specificity, the legal basis for the relief sought; the power it was claimed it had exercised; why Jainzii was entitled to the relief sought; and how the exercise of the challenged power was amenable to judicial review.
4. I am satisfied that the further amended summons, sparely pleaded as it was, was sufficient to put Create NSW on notice, in the required way, of the two decisions which were challenged and on what basis. Namely, because it had failed to give Jainzii the procedural fairness it was entitled to receive, in the making of those decisions. It was also put on sufficient notice of the estoppel claim.
5. The parties' submissions reflected that there were no real issues about the facts or the applicable law or principles. It was whether they had been complied with and if not, whether the evidence established that the Court should exercise its discretion to make the orders sought, which was really in issue between the parties.
6. What was not pleaded, but only raised in Jainzii's submissions, was that Create NSW had wrongly suspended its account because it lacked the power to do so, it only having a right, under the applicable terms and conditions, to remove a provider's approval, not to suspend it.
7. As I explained, leave to pursue this new claim could not be granted. But I am satisfied that what is in issue between the parties does not turn on this. It was not pleaded by Jainzii in circumstances where its account had been suspended on a number of earlier occasions, including as early as in August 2020 and December 2020, without any dispute about Create NSW's right to suspend. Jainzii is bound by the forensic decisions it made in relation to how it chose to plead its case, which did not raise the absence of a power to suspend providing any basis for the orders which it sought.
8. But the real issues lying between the parties concern Create NSW's decisions to suspend and not to reimburse the disputed vouchers, despite Jainzii having received email confirmation that they had been successfully redeemed and payment would be made within 10 business days. Particularly, whether it was entitled to receive, but was not given procedural fairness before the decisions were made. As well as whether it has established the reliance on the payment advice, on which its estoppel claim depends.

Was Jainzii entitled to the claimed procedural fairness?

1. It is settled that "a statute conferring a power the exercise of which is apt to affect an interest of an individual is presumed to confer that power on condition that the power is exercised in a manner that affords procedural fairness to that individual": Minister for Immigration and Border Protection v SZSSJ (2016) 259 CLR 180; [2016] HCA 29 at [75].
2. But the decisions here in issue were not made pursuant to any statutory regulation of the Creative Kids program.
3. Non-statutory decisions made by the executive government can, however, also be subject to judicial review on procedural fairness grounds, as the defendants accepted: Donaghy t/as GJ Donaghy & Company Solicitors v Legal Aid Commission of NSW [2022] NSWSC 626 at [98] and Karimbla Properties (No 50) Pty Ltd v State of New South Wales [2015] NSWSC 778 at [72].
4. In Karimbla Beech-Jones J observed at [72] that: [T]he absence of a statutory basis for executive or quasi-government action does not exhaust the possibility that it is amenable to judicial review or that procedural fairness does not condition its exercise. In relation to the former, there is some authority that, if the relevant action can be characterised as "the performance of a public duty and not the mere exercise of a capacity to make arrangements for the government's internal purposes", then it is amenable to judicial review (State of Victoria v Masters Builders' Association of Victoria [1995] 2 VR 121 at 138 per Tadgell J, at 160 per Eames J; cf Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; 78 NSWLR 393 at [75] per Basten JA).
5. In Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190, Basten JA discussed decisions of the "Building Industry Taskforce" which had been considered in State of Victoria v The Master Builders' Association of Victoria [1995] 2 VR 121: at [75]. Noting that the Taskforce, which had been established under the auspices of the Victorian Department of Justice "was, in effect, an arm of government, although not established pursuant to statute" and thus an "emanation of government, exercising governmental power".
6. In Amos v Western New South Wales Local Health District [2016] NSWSC 1162 Beech-Jones J noted at [93] the doubt which existed about the availability of such review in the area of contracting, referring to State of Victoria v Masters Builders' Association of Victoria. At [92] his Honour referred to the discussion in M Aronson and M Groves, Judicial Review of Administrative Action (5th ed, 2013) at [3.180]. The authors there noting that there is a general aversion to judicial review of government contracting decisions, but that such "aversion has not become judicial abstention".
7. In this case what arises for consideration is a non-statutory scheme under which Create NSW suspended Jainzii's account and then refused to reimburse the vouchers parents had used to pay for the program it offered, which gave children access to its approved online workshops, that enabling them to attend them over the following year, despite the advice which Service NSW had earlier given about their payment. That following the view it reached that Jainzii had breached the program's terms and conditions, by offering those who had used the voucher a free gift. The decision did not turn on such gifts having in fact been provided, or that Jainzii was not capable of providing the workshops for all those who had used the vouchers.
8. Jainzii's case was that it was entitled to receive procedural fairness before Create NSW made either decision. Further, that the decisions were amenable to judicial review, given the terms and conditions of the scheme, its funding and that decisions made about the scheme and its operation involved the exercise of "non-statutory executive power by an emanation of government".
9. Jainzii pointed to the fact that Create NSW was at the time of the decisions part of the Department and that the scheme was funded from the State Education budget, as supporting a finding that Create NSW's decisions in respect of the Creative Kids scheme were exercises of a non-statutory executive power.
10. In their oral submissions the defendants accepted that the authorities supported Jainzii's submissions on this issue.
11. I am satisfied that the evidence establishes that decisions made by Create NSW in relation to the Creative Kids scheme did not involve "the mere exercise of a capacity to make arrangements for the government's internal purposes": State of Victoria v The Master Builders' Association of Victoria at [138].
12. Further, that like the Building Industry Taskforce, Create NSW was also, in effect, an arm of government which had also not been established pursuant to statute, but was an emanation of government. And that what here arises for consideration is the operation of the scheme and decisions Create NSW made in respect of it and a provider it had registered to participate in the scheme, not the parties' contractual rights.
13. That scheme included the process by which registered providers were paid for the vouchers they successfully redeemed online. They were not only notified that their redemption applications had been successful, but that payment would then be made. The terms and conditions specifying the circumstances in which that would not occur. Unless they were engaged, registered providers were entitled to receive the notified payments.
14. Those conclusions must result in the acceptance that Jainzii was entitled to the procedural fairness it claimed in respect of the challenged decisions. At the very least, in relation to Create NSW's consideration of whether it had complied with the applicable terms and conditions and its resulting right to payment under the scheme.
15. There was no issue about what procedural fairness required. In short, the applicable principles include providing the person affected by a decision with a reasonable opportunity to deal with matters adverse to the person's interest, that the decision maker proposes to take into account.
16. In issue was whether these requirements had been complied with.

Did Jainzii receive procedural fairness?

1. I am satisfied that Jainzii did not receive the procedural fairness it was entitled to receive before both decisions were made.
2. This turning on a consideration of what Jainzii was entitled to accept vouchers for; how the rebate system operated; and how Create NSW came to make the two challenged decisions.

What was Jainzii entitled to accept the vouchers for?

1. Ms Worthing gave affidavit evidence and Jainzii also relied on the affidavit evidence of its solicitor, Mr Morris. The defendants relied on the affidavit evidence of Mr Gordon, the Acting Director then Director of the section of the Department which oversaw the Creative Kids program.
2. The approval which Jainzii sought and obtained in June 2022 was for an online program called "Art Story online workshop". The workshops were to be hosted by qualified instructors and conducted weekly during NSW school terms via Zoom, to a maximum of 20 students. The value Jainzii identified in the use of a voucher for this program was "2 x 1-hour sessions of the Art story online workshop". These sessions could be accessed as part of a 12-month annual subscription to its "Artzee Kids Program".
3. In its application Jainzii advised that it would not be selling creative or packaged materials it had previously offered as art packs; that no creative material formed part of its new program; that it was not dependent on the sale of materials; and that no materials would be offered at a subsidised price.
4. The parties' difficulties began in December 2022. A member of the public then raised an advertisement on Jainzii's website with Create NSW, which said "FREE GIFT when you become an Artzee kid". Create NSW investigated the advertisement and notified Ms Worthing that the advertisement of free items or value-adds in connection with Creative Kids offers was not allowed, given the FAQs on its website. Create NSW advised Jainzii that, to avoid being placed in suspension, it had to remove the promotion of free kits/materials from its website.
5. It was not any issue with the approved workshops which Jainzii had to offer, which Create NSW raised and so it was the free gifts offered on its website, which it then addressed.

How did the rebate system operate?

1. The February 2022 version of the terms and conditions specified the circumstances in which vouchers could be accepted: cl 6. As to claims for payment of vouchers, what was provided was: 6.8 When you accept a Voucher, you may claim a payment from the Agency of: a. $100, where the fee charged by you for the named Child participating in an Approved Program is $100 or more b. the actual amount of the fee, where the fee charged by you for the named Child participating in an Approved Program is less than $100. 6.9 You may only claim a payment in connection with a Voucher if you make the claim using the process on the Agency's website before the expiry date stated on the Voucher. 6.10 The date of birth of the Child is required for validation of the Voucher. This information does not appear on the Voucher, and it is the responsibility of the Provider to obtain date of birth from the Eligible Applicant or the Child. 6.11 The Agency is not obliged to and may decline to pay an amount claimed by you if you do not properly complete the process for claiming Vouchers on the Agency's website or if any of the information provided by you is incorrect.
2. As to the making of payment, the terms provided: 6.14 After you submit a valid and complete claim for payment, the Agency will make the payment into the nominated bank account. 6.15 The payment made by the Agency should be received by you between 3 and 7 business days from the day of successfully completing the Voucher redemption process, depending on the Registered Provider's financial institution and providing the correct information has been supplied by the Provider. The Agency is not responsible or liable to the Registered Provider where funds are not received into the nominated bank account within 7 business days. This time frame is subject to the Agency's right to take steps under clause 8 (Verification).
3. Reimbursement within 7 days of the provider redeeming the voucher online was also referred to in the FAQ document.
4. Clause 7 of the terms and conditions specified the obligations of registered providers. They included "that you will comply with these Terms and Conditions". Clause 8 dealt with verification. It provided: 8.1 Notwithstanding any other provision of these Terms and Conditions, the Agency may require you to provide additional information or documents to the Agency before making a decision about registering you as a Registered Provider or making a payment to you. 8.2 The Agency may at any time take steps to verify any information provided as part of your application to be registered as a Registered Provider or as part of a claim for payment for a Voucher. These steps may include, without limitation, any or all of the following: a. requesting that you provide specified information or documents to the Agency; and b. making enquiries with the parent, guardian or carer of a Child. 8.3 You agree to comply with any verification request made by the Agency. 8.4 You must retain copies of all documents associated with accepting and redeeming a Voucher for 12 months after receiving the Voucher, to allow for post-redemption verification if required. 8.5 You must provide any copies of any documents associated with the Creative Kids program to the Agency when requested to do so. 8.6 If you fail to comply with any requirement or request made by the Agency under these Terms and Conditions, the Agency may, at its complete discretion: a. refuse to register you as a Registered Provider; b. remove your registration as a Registered Provider; or c. refuse to make a payment to you.
5. It is pertinent that payment for vouchers did not depend on a child actually undertaking an approved program for which the voucher was used to pay. Attending an online program was obviously not within the control of a registered provider. Payment for the voucher also did not depend on the approved program having already been provided under the terms and conditions, payment being expected to be made within 3 to 7 days of advice being given about redemption of the voucher.
6. Clause 9 thus provided for repayment of amounts paid by Create NSW to a registered provider in the event that a provider did not comply with the obligations contained in cl 7. The terms and conditions did provide for removal of registration "with immediate effect" on satisfaction of specified matters and notification in writing of the removal: cl 4.3. They relevantly included that Create NSW be reasonably satisfied that the provider no longer satisfies the eligibility criteria (which are defined in cl 3 and relevantly include that the provider delivers an approved program), that the provider contravenes any of the terms and conditions, or an allegation of serious misconduct is made against the provider or its staff.
7. The terms and conditions did not provide for the suspension of a provider's account or registration, or the circumstances in which that might occur. But reference was made to suspension in the FAQ document as updated in March 2022 at page 12. It stating that if a provider continues to redeem vouchers for ineligible programs (following the 2022 changes to the rules) their account will be subject to suspension or cancellation and they may be required to pay back any funds for vouchers accepted and redeemed illegitimately.
8. The guidelines identified at page 7 define ineligible activities to include "all programs that include the supply of any creative materials or art/craft kits (including those accompanied by written instructions or live lessons)" and online lessons that host more than twenty participants. Costs excluded were creative material and art/creative kits.
9. This was also referred to in the FAQ document. It also provided that providers could continue selling creative materials and art/craft kits, but vouchers could not be redeemed for them.
10. The FAQs also advised that "[i]f you are selling creative materials as part of your business separate to your Creative Kids program, these creative materials cannot in any way be promoted as included or bundled with your Creative Kids program".
11. The FAQs were again updated in November 2022 to include an additional question "Can I bundle or add free items or value-adds to my Creative Kids offer?" The answer provided was "No. Any discounts/free offers on materials and any other products related to or not related to the lesson, should be promoted without any mention, link to or connection with the Creative Kids program, whether it be vague, direct, or indirect": p 12.
12. Providers were also provided with an electronic boarding pack which included digital marketing tools with images and copy block which could be used for promotion on a website: p 10.
13. In their written submissions the defendants contended that the essential difficulty with Jainzii's case was that its evidence did not support a finding that for each of the 1,587 unpaid vouchers it had redeemed, it had delivered an approved program to the participant. That cannot be accepted.
14. Under the scheme vouchers were paid before programs were to be delivered and payment did not depend on a child actually undertaking the approved program the voucher had paid for.

The first challenged decision

1. The first decision came to be made in circumstances where: 1. In March 2022 Create NSW had again suspended Jainzii's account for non-compliance with the guidelines, it then requiring the purchase of kits and materials by those who enrolled in its approved program at a time when the guidelines no longer permitted voucher redemption for art kits or materials or supplies. Separate sales of such materials were, however, permitted. Its voucher redemptions were then reviewed by a third party, with results it is unnecessary to explain. 2. Later communications between Ms Worthing and Create NSW resulted in Jainzii seeking and, in July 2022, obtaining approval for vouchers being used to pay for the two workshops it proposed to offer as part of its online program. That approval followed assurances it gave about the program and its sale of art materials. 3. In November 2022 the FAQs were further altered to prohibit the bundling or adding of free art supplies to a provider's Creative Kids offer. 4. In December 2022 Jainzii began offering its workshops through its website as part of a new course, the Art Story Online, which it offered by way of an annual subscription of $100. It also offered free gifts to subscribers. Over 1,900 children signed up for its new course, paying with their vouchers. 5. It was on 4 December 2022 that Create NSW became aware that Jainzii's website was advertising the provision of a free gift with a voucher, which it considered to be contrary to its guidelines. 6. On 6 and 8 December 2022 Create NSW notified Jainzii by email that the offer of free art supplies should be removed from its website to avoid its account being put into suspension, but it received no reply until 11 December, when Ms Worthing returned from leave. 7. On 11 December 2022 Ms Worthing's email advice was that she "will adjust and remove this offer for members using a voucher" and that it would not be "offered to members subscribing using a creative kids voucher". She also noted that the "offer is still available for full paying members who do not use a voucher." 8. On 13 December 2022 Jainzii was thanked for updating the website and advised that a voucher could not be used to offset the cost of materials and that materials had to be available to members of the public at the same price as that offered to those who used vouchers. 9. What was offered on Jainzii's website still included free products. But there is no evidence that those who used the disputed vouchers received them.
2. That the changes Jainzii had made to its website satisfied the requirements of the terms and conditions, was not accepted by Create NSW. It also submitted that "signing up participants in circumstances where the plaintiff's website advertised the program to include a "FREE GIFT" supports "a conclusion that the plaintiff did not provide the approved program". That does not follow. The evidence not establishing any connection between the offer of a free gift and Jainzii's conduct of approved workshops.
3. Service NSW advised Jainzii by a number of emails sent between 30 December 2022 and 12 January 2023 that vouchers it had submitted had all been successfully redeemed and payment would be made within 10 business days. Jainzii relies on this notification, which it contends Create NSW could not unjustly depart from, to advance its case. The defendants contend that this was merely an automated response on which nothing turned.
4. That cannot be accepted. Under this scheme, it was advice on which registered providers were entitled to rely, unless Create NSW pursued steps it was entitled to take to refuse payment, in accordance with the applicable terms and conditions.
5. Mr Gordon's evidence included that such advices were part of the process that Service NSW had automated. It resulted in an automatic response whenever vouchers were submitted. Payment of the vouchers still depending on adherence to the applicable terms and conditions, with payments being automatically suspended, if an account went into suspension after "a red risk threshold suspension".
6. This aspect of the automated system does not appear to be one that Create NSW disclosed to providers. Such an alert placing a provider's account into immediate suspension and triggering a compliance review, if a provider with up to five employees redeemed more than 250 vouchers in a 56-day period. There was no automated email which alerted providers to this. Providers only became aware of such a suspension if they checked online to see their account status, which they presumably did when the expected payment was not received within the notified time.
7. There was no suggestion that this automated process formed part of the terms and conditions, guidelines or FAQs.
8. On 12 January 2023, Creative Kids' manager of strategic projects checked Jainzii's website and took screenshots of the webpage. It was still offering "a free thankyou gift, as part of joining us at Artzee Kids HQ". A decision to suspend Jainzii's account that day for breach of the terms and conditions, guidelines and FAQs, was then made.
9. This first challenged decision, to suspend Jainzii's account, was conveyed to Jainzii by email, by the coordinator of the Creative Kids program later on 12 January. It made no reference to any red alert suspension, the emails of 11 December from Jainzii or 13 December from Create NSW, which had noted that the website had been updated. At that time no issue was taken with the changes Jainzii had made to its website.
10. What was notified on 12 January was that Jainzii's account had again been placed into suspension and that: As per our email dated 6 December 2022 and your acknowledgment of that email (attached) free products/gifts/kits cannot be bundled against Creative Kids vouchers. Any discounts/free offers on materials and any other products related to or not related to the lesson, should be promoted without any mention, link to or connection with the Creative Kids program, whether it be vague, direct, or indirect. Contrary to the advice provided on 6 December 2022, it has come to our attention that free products have been bundled against the Creative Kids Australia (Artzee Kids) program. Your account will remain in suspension while we investigate this matter and conduct a review into the vouchers redeemed between 11 December 2022 and 12 January 2023, of which there are 1941 vouchers. Please note, while your account is in suspension, you cannot accept any Creative Kids vouchers. If you are holding any vouchers not yet uploaded to the system, please ensure you return those vouchers to parents/carers so they have the option to use their vouchers with other eligible providers. The Creative Kids team will be in touch with you in the coming days to request further information.
11. In Jainzii's 22 January reply, Ms Worthing did not deny the continuing offer of free gifts on its website. But Jainzii disputed that it had impermissibly "bundled" free products with vouchers, explaining that vouchers had merely been "presented as a payment method" on the website.

Procedural fairness was denied

1. Create NSW plainly considered not only that it had the power to suspend an account, but that Jainzii's website evidenced its continuing breach of the applicable terms and conditions and FAQs in relation to the use to which vouchers could be put and the limitations imposed on offering free gifts, that warranting account suspension. The merits of the resulting decision to suspend the account do not arise to be considered on this review application.
2. Before making this decision, the applicable principles required Create NSW to give Jainzii the opportunity to deal with the proposed suspension of its account, by providing it with a reasonable opportunity to deal with matters adverse to its interests, which Create NSW took into account, in making its decision.
3. I am satisfied that Create NSW did not take any of the necessary steps.
4. Create NSW had raised the problem it perceived with the website on 6 and 8 December and as a result, Jainzii's website had been updated, as Create NSW's 13 December email acknowledged. Jainzii was then advised by the automated emails that the vouchers it had submitted for redemption would be paid. As Ms Worthing accepted, it was aware that payment was still subject to the provisions of cl 8.3 of the terms and conditions, which entitled Create NSW to verify any information it had provided, before payment was made.
5. In January, Create NSW formed the view that Jainzii had not adhered to what it had agreed to do about its website in December 2022. As a result it suspended the account, without giving Jainzii any prior warning of what it was verifying, or the view it had reached that it was still in breach of the terms and conditions, despite the changes to the website which it had earlier acknowledged had been made, or giving Jainzii any opportunity to explain why it considered that it had complied with the applicable terms or conditions, or to resist the suspension of its account. That was simply imposed without any prior warning.
6. The result was that Jainzii was not given the procedural fairness it was entitled to receive, before the 12 January decision was made.
7. This was established by Mr Gordon's evidence. He described the written advices Jainzii had been given, which said that the vouchers it had uploaded for redemption had been "successfully redeemed", to involve an "automatic response" when vouchers were submitted, that resulting in the voucher being picked up for payment in accordance with cl 6.15 of the terms and conditions. That expressly providing for payment being subject to the right to take steps under clause 8.
8. Those steps were relevantly there identified to be to verify any information provided as part of a claim for payment for a voucher: cl 8.2. But it was not verification of information Jainzii had provided as part of its claim for payment of the disputed vouchers which resulted in them not being paid in accordance with cl 6.15 and its account being suspended. It was rather Create NSW's consideration of its compliance with the conditions which precluded it from offering free gifts, which resulted in suspension, without Jainzii being given the procedural fairness it was entitled to receive.
9. The terms and conditions did not relieve Create NSW of the obligation to give Jainzii such procedural fairness, before it made a decision to suspend its account. Nor did the "red risk threshold" system which Mr Gordon described. On Mr Gordon's description of that system, it simply did not provide for procedural fairness to be given, before an automatic suspension took effect.
10. The system implemented paid no attention to the need to give a registered provider procedural fairness. It no doubt had an important purpose. Presumably so that Create NSW could consider a provider's capacity to deliver the approved programs it had accepted payment by voucher for. But that was not disclosed to Jainzii, nor the basis on which Create NSW proceeded.
11. Had it done so, Jainzii would have had the opportunity to advance matters about which Mrs Worthing gave evidence. Such as how it proposed to ensure that it could offer sufficient numbers of online workshops for all the children whose access had been paid for using vouchers. On her evidence it did have the ability to provide the required workshops.
12. But that does not arise to be resolved in these proceedings.

The second challenged decision

1. Create NSW advised Jainzii by its 9 March 2023 letter of its conclusion that despite Jainzii's 11 December acknowledgment that it would remove its offer of free art kits for members using a voucher, it had continued to promote and provide free kits with the purchase of a membership to its program using a Creative Kids voucher.
2. That letter conveyed the second challenged decision, not to reimburse the disputed vouchers and to suspend Jainzii's registration. It made no reference to Jainzii's 22 January email or any automatic suspension as the result of the red alert system. It relevantly advised: … Our records show that you redeemed 1943 vouchers between 11 December 2022 and 12 January 2032. 1,587 of those vouchers have not been reimbursed by you. The unreimbursed vouchers were redeemed against a membership program to Artzee Kids that included promotion of free products/art kits/toys with the purchase of a membership. The Creative Kids Creative Kids Provider FAQs (the Provider FAQs) directly state that the bundling of free items or value-adds is not permitted in the Creative Kids Program. On 6 December 2022, Create NSW informed you via email that "[a]ny discounts/free offers on materials and any other products related to or not related to the lesson, should be promoted without any mention, link or connection with the Creative Kids program, whether it be vague, direct, or indirect". On 11 December 2022 you acknowledged Create NSW's email and stated that you would "…adjust and remove this offer for members using a voucher". Despite your acknowledgment on 11 December 2022 to Create NSW's advice that free items were not to be given in conjunction with a Creative Kids offer, you continued to promote and provide free kits, toys and products with the purchase of a membership with a Creative Kids voucher. The Creative Kids Provider Terms and Conditions (the Provider Terms and Conditions) provide that: by submitting an application to become a Registered Provider, you agree to be bound by the Provider Terms and Conditions, Creative Kids Provider Program Guidelines (the Guidelines) and the Provider FAQs (clause 2); and as a Registered Provider, you warrant and agree to comply with the Provider Terms and Condition (clause 7.1(c)). It is Create NSW's view that in continuing to promote and provide free kits, toys and products to Creative Kids voucher holders despite being notified by Create NSW that it was not allowed, you have breached the Provider Terms and Conditions by not complying with the Provider FAQs. As such, Create NSW will not reimburse you for the 1587 unreimbursed vouchers. Please note that Service NSW will issue new vouchers to those people who redeemed vouchers for which you have not been reimbursed. If you have additional vouchers that you have accepted by not yet redeemed in the Service NSW system, please return those vouchers to the parent/carer. You are advised that your registration will remain suspended until Service NSW has completed the process of cancelling and issuing new vouchers.

Procedural fairness was again denied

1. Again, the merits of the second decision do not arise to be considered. But it is relevant to observe that the 9 March letter does not disclose the basis of the conclusion that Jainzii had continued to "promote and provide free kits, toys and products with the purchase of a membership with a Creative Kids voucher". That must have rested on what the website offered after 11 December, but that was not quoted or described.
2. Nor did the letter respond to what Jainzii had advanced by its 22 January or later emails; explain why what they had raised had not been accepted; or give Jainzii any opportunity to make representations before the decision was made.
3. That Jainzii's emails had been considered is not apparent from the letter. But Mr Gordon's affidavit explained that a briefing had been prepared for the CEO of Create NSW, who made the decision communicated to Jainzii. The briefing does not refer to Jainzii, but rather to Creative Kids Australia trading as Artzee Kids. Nothing appears to turn on this.
4. The briefing timeline discloses that on 11 January, Create NSW had identified that a high number of vouchers had been redeemed by Jainzii, in response to which Create NSW had identified that the terms and conditions had been breached "against former direction and advice provided on 6 December 2022". Further, that this "soon placed the Provider into suspension on 12 January 2023". It quoted the 12 January email and also referred to the parties' subsequent communications about the progress of the case, which showed Jainzii's "initiative and awareness of what has occurred thus far".
5. The issue identified in the brief was that an ineligible promotion had been run "as part of its Creative Kids voucher program contrary to advice and direction" which had been provided by Create NSW on 6 December. It also noted that legal advice had been obtained. The recommendation was that the outstanding vouchers not be paid and that steps to deregister Jainzii be taken. That was considered to be a just and proportionate action in the circumstances, the replacement of the rejected vouchers resulting in no net cost to the Creative Kids budget.
6. Other options which had been considered were also explained, as was why they were not preferred, or had been discounted.
7. The 9 March letter communicated the view Create NSW had arrived at, that Jainzii had breached the terms and conditions, but it did not disclose which clause that conclusion rested on. Nor did it give Jainzii any opportunity to address the decisions it had made as a result, not to reimburse the vouchers now in issue and to suspend its registration, before they were made.
8. That in those circumstances Jainzii was again denied procedural fairness must be accepted. Possible suspension of its registration had not been raised in the 12 January email and it had no opportunity to deal with matters adverse to its interest or seek that some other course than refusal of payment and suspension of its registration be pursued.
9. That Jainzii would be unable to provide over 1,900 children with the two workshops for which they had used vouchers to sign up for during the course of their annual subscription was not referred to in the briefing note which resulted in the second decision. On its case the large number of vouchers Jainzii received reflected that the time available to use the vouchers was running out, not the attraction of a free gift which parents might wrongly have thought was available to them if they used the vouchers.
10. If Jainzii had been given procedural fairness, the concern that plainly lay at the heart of the seemingly undisclosed red alert system, that a provider would accept more vouchers than it had the capacity to provide the services they were used to pay for, could have been dealt with. Undoubtedly a provider could not become entitled to payment of vouchers it had accepted for services it was incapable of providing. As Ms Worthing accepted, if the approved services were not delivered, Create NSW would also have been entitled, under the terms and conditions, to recover payments made for them.
11. The evidence did not establish how many approved workshops Jainzii actually conducted in 2023, or how many of those who participated in them, had used the disputed vouchers to pay for them, with resulting loss for Jainzii, before their access ended.
12. It was Ms Worthing's oral evidence that paying to enrol in the program did not necessarily result in a child undertaking a workshop, even though being entitled to do so, whether or not vouchers were used to pay for access. Her evidence was that it had the capacity to provide the required programs, for reasons which she explained.
13. This was in a context where the result of accepting over 1,900 voucher payments meant that Jainzii might have had to offer over 190 workshops over the course of 2023, if each of those children entitled to attend 2 workshops with each capped at 20 attendees, had wanted to attend. Given that the workshops were to be offered weekly, the result was that more than one workshop per week might have been required. But the evidence disclosed only 68 actual registrations to attend any workshops.
14. Ms Worthing accepted that the vouchers could only be used to access the approved workshops, given the applicable terms and conditions. The practical result was that the workshops which were actually conducted were available to all subscribers, those who had not paid using vouchers, those whose vouchers had been reimbursed and those whose vouchers had not been, but who were still given access.
15. Ms Worthing also agreed that if the required workshops were not provided for those whose vouchers had been paid, Jainzii would not have been entitled to retain any payment it received for such vouchers. But there was no evidence that any such chid had sought, but been unable to attend, a workshop.
16. Such matters need not be further explored, given that the decisions in issue did not rest on any conclusions arrived at about Jainzii's inability to provide the required workshops and that payment for the vouchers did not depend on approved programs first being delivered.
17. Given the conclusions I have reached about the denial of procedural fairness to which Jainzii was entitled to receive, I am satisfied that it is entitled to orders setting aside both decisions.

Exercise of the Court's discretion

1. The orders finally pressed were: 4. An order pursuant to s69 of the Supreme Court Act [1970] (NSW), in the nature of certiorari or, alternatively, a declaration setting aside or declaring invalid the decision of the Defendant, made on or about 12 January 2023 to suspend the Plaintiff's account as part of its participation as a registered 'provider' of a NSW government funded program known as "Creative Kids" (the Program) administered by 'Create New South Wales', a body administered by the Department of Enterprise, Investment and Trade. (The First decision) 5. Further and alternatively, an order pursuant to s69 of the Supreme Court Act (1970 (NSW), in the nature of certiorari or, alternatively, a declaration setting aside or declaring invalid the decision of the Defendant, made on or about 9 March 2023 to: a. Refusal to reimburse, the Plaintiff for 1587 vouchers redeemed in respect of the Program; and b. Suspend the Plaintiff's registration as a 'provider' for the Program. (the Second Decision)
2. Whether such orders could be made, or relief granted had to be confined to a declaration, as the defendants contended, was also in issue. What was not in issue was that appropriate declaratory relief could be ordered.
3. The defendants urged that there being no statutory basis for the scheme under which the challenged decisions were made and thus no statutory duties imposed in relation to their making, the Court could not make orders compelling the performance of any non-statutory duty. Further that it would, in any event, refrain from exercising any discretion to make orders in favour of Jainzii, no useful result being able to ensue from them, the scheme having ceased in early 2024.
4. I am unable to accept this, despite the reliance placed on Re Minister for Immigration and Multicultural and Indigenous Affairs (2003) 211 CLR 441; [2003] HCA 1, in support of a submission that a remedy of mandamus to compel performance of a statutory duty is unavailable and that "the unavailability of mandamus entails that there is no utility in granting certiorari".
5. In that case it was observed in relation to the exercise of a statutory power by a Minister, which did not impose a duty on the Minister to consider whether to exercise that power, "mandamus would not issue without an order that the earlier decision of the Minister be set aside. Further, that there would be no utility in granting relief to set aside that earlier decision, where mandamus could not then issue": at [48].
6. In this case under this non-statutory scheme, parents were provided with vouchers which they could use to subscribe to approved arts programs and providers who accepted such vouchers were to be paid for vouchers they successfully redeemed, in accordance with the terms and conditions of the scheme, which did not provide for the suspension of their accounts. The scheme's decision maker was obliged to give registered providers procedural fairness, before decisions were made about the suspension of their accounts or registration or the refusal of payment for vouchers which the providers had already been given written advice would be paid.
7. It follows that if the challenged decisions are set aside, Jainzii will be entitled to the payment it was advised by emails that it would receive in 10 business days, unless the challenged decision not to make the notified payments is remade, after Jainzii has been given the procedural fairness to which it is entitled.
8. It is for the defendants to determine what path they wish to pursue, once orders setting aside the decisions are made. They are, of course, entitled to decide that the notified payments should be made. Or that the question of whether Jainzii is entitled to those payments, given the terms and conditions of the scheme, should be revisited, that requiring Jainzii being given the procedural fairness to which it is entitled.
9. If the decisions are not revisited, Jainzii will be entitled to the notified payment. If the decision is revisited, Jainzii may be paid. If it is not and Jainzii still disagrees with the decision made after it has been given the required procedural fairness, it will be for it to determine what further steps, if any, it will then pursue.
10. In the result I am satisfied that justice requires that the Court's discretion to set aside the decisions should be exercised, given the procedural fairness which Jainzii was entitled to receive before the decisions were made, but which it was denied.

Estoppel

1. I am satisfied that estoppel is also an available remedy in this case, given the nature of this scheme and the contractual relationship which it must have resulted, although that does not arise to be considered, given the cases which the parties advanced: Minster for Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 215.
2. The essence of the doctrine of estoppel is reliance. The Court "may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs (including a legal state of affairs), which assumption the other party has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness.": Commonwealth v Verwayen (1990) 170 CLR 394 at 394-395; [1990] HCA 39 at [36].
3. Thus Jainzii must show that Service NSW's email advices that payment would be made for the disputed vouchers were an unambiguous representation, which induced an assumption in it and that it then acted reasonably, in relying on that assumption, Create NSW knowing or intending that Jainzii would do so and that it later departed the representation about payment and failed to act to avoid the detriment to Jainzii which resulted.
4. I am not satisfied that Jainzii has met the onus which falls on it to establish all these matters, given Ms Worthing's evidence.
5. Payment for an online subscription which gave children access to the two approved workshops Jainzii offered had to be made through its website. Jainzii offered the options of payment using a NSW Creative Kids voucher, or by other means. The cost of access to its entire program was $100, whether or not vouchers were used. That payment entitling the children to undertake the two approved workshops which it had to offer those who used the vouchers, that being what they could be used for.
6. Those vouchers were numbered and Jainzii had to use that number when seeking reimbursement for each voucher used. If the voucher was invalid, the system which Create NSW operated would not accept it for payment.
7. If it was valid, Jainzii was given advice of the child's legal name and date of birth and it then set up an account for the child, in the expectation that the voucher would be paid. Payment notification would usually follow within 10 days. Jainzii then provided the child's parent or guardian with the link which permitted the child to access its program, by email. That payment entitling the child to a 12-month subscription to its program, which included access to the two interactive workshops, "Art Story".
8. It follows that usually, Jainzii did not give a child access until after a voucher was paid. In the case of the disputed vouchers, however, access was given despite Jainzii having been notified by Create NSW that the earlier advised payment of the disputed vouchers would not be made and its account would be suspended, while the notified investigation was pursued.
9. That Jainzii was not advised until 9 March 2023 that its registration was suspended and the vouchers would be cancelled, does not establish that it acted reasonably in departing from its practice of only giving access to its program after a voucher had been paid and instead, giving access to those whose vouchers had not been paid.
10. I do not accept that Jainzii made the decision to give access without payment on the basis of the earlier Service NSW advice that the disputed vouchers would be paid, or that it was reasonable for Jainzii to have acted on that advice, despite having been notified of the suspension of its account and investigation, the terms and conditions permitting Create NSW to pursue the latter. If it had then assumed that the vouchers would still be paid, that was not shown to have been a reasonable assumption, or one that Create NSW induced.
11. In her second affidavit Ms Worthing described the steps Jainzii took after Create NSW's refusal to reimburse the vouchers to include: a. Each subscriber was forwarded an email to advise them that even though their Voucher had not been honoured by the Agency, that the Company was still going to provide them with access to, and in line with their subscription to the 'Online Program'. As the Company was unable to confirm which Vouchers (specifically) had been paid by the Agency, and which had not, due to the Company's account with the Agency being suspended and all access and communication ceasing, the Company provided each subscriber that had presented a valid Voucher with a full 12 month subscription to the 'Online program'. This increased operational costs as costs are based on a cost per subscription and the unpaid subscriptions were still being covered despite no payment. b. The lack of access to information raised accounting and administration costs in both investigating, extracting and collating data and determining outcomes as well as seeking and initiating legal advice on the validity of the actions of Create NSW. c. The company revised all budgets to reflect the change in income and redirected funding into minimising damages to the company's reputation as a result of the implied fraudulent behaviour of our company in terms of the accepting and processing of vouchers. This included initiatives to increase the profile of the company and increased allocation of funding toward increasing the company profile, through community events and marketing. d. The company's growth and marketing plan was revised to reflect sustainability rather than growth due to the impact of the Create NSW delays and actions.
12. Ms Worthing also explained that Jainzii sent weekly emails to all subscribers providing details of the upcoming week's creative guide; monthly emails giving details of new activities, including interactive workshops which could be booked; and advice to subscribers whose vouchers had not been honoured, that the subscription would be honoured until 30 June.
13. Nevertheless, when it advised subscribers that despite their vouchers not having been honoured, they would be given access to Jainzii's program, it was already aware that their vouchers might not be paid, even if the children undertook two of its approved workshops.
14. That Jainzii incurred expenses as a result of the course it pursued must be accepted. As must that it may not have incurred such expenses, had the vouchers been paid.
15. But the actual detriment Jainzii suffered as the result of giving those who had used the disputed vouchers the opportunity still to undertake approved workshops it conducted, that being what the vouchers were provided to be used for, was not established. Nor that this was the result of assumptions about the state of a present, past or future state of affairs which Create NSW induced.
16. In the result, I am satisfied that Jainzii has not established the estoppel it pursues.

Costs

1. The usual order is that costs follow the event. In this case that is an order that the defendants bear Jainzii's costs. If the parties wish to be heard about costs, they should approach the Court with short written submissions within 14 days.

Orders

1. The parties should also bring in orders which reflect the conclusions I have otherwise reached.

Amendments 19 November 2024 - Coversheet, case name changed, defendant changed from State of NSW to read Chief Executive of Create NSW, an agency of the Department of Creative Industries, Tourism, Hospitality and Sport DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 November 2024