Jessica Education Centre Pty Ltd (KA Family Day Care) v Secretary,... [2020] NSWCATAD 99 | Case summary

NCAT Administrative and Equal Opportunity|2020-02-11

The applicant's case

The applicant through one of its directors, Ms Choi, agreed that there were flaws in its processes but submitted that these were by error and not deliberate. It submitted that conditions should be imposed upon its approval rather than the approval being cancelled. It relied on a position statement responding to the claimed breaches.
Ms Choi explained that since the AAT decision it could not afford to operate and had lost staff and clients. There were a number of educators hoping that it would be able to operate again. (The evidence was that the applicant could employ 12 educators).
The points made by the applicant were: 1. It did not intend to flout the law by failing to provide accurate information to the Department regarding its educators. The software system which it was using failed to provide instructions on how to update change of educator information. The applicant said that due to the lack of information provided by the software manufacturer, it did not update the changes on the system used by the Department and the Department relied on old information, leading to its officers conducting inspection visits to premises where educators no longer resided. This in turn resulted in the Department making some findings of non-compliance. The applicant said it was not aware that the Department's information had not been updated as its own portal reflected the correct information. 2. It submitted that the majority of inaccurate reports were due to administrative error and staff misinterpreting what was required. It believed that there was no lack of compliance in educator - child ratios in fact. 3. The proportion of Commonwealth child care subsidies that were received in breach of the Administration Act was very small, approximately 0.13% of the total subsidies received. It was acknowledged that the service lacked appropriate governance mechanisms to oversee non-compliance, but it had implemented strategies to deal with this. 4. It disagreed that the service had contravened its reporting obligations with respect to reporting attendance. 5. Some of the matters in the notice had been withdrawn by the Department regarding child ratios and absences. 6. In 2013 when rated and assessed by the Department, the service met two of the seven quality areas and exceeded one of the quality areas. It disputed that it was not able to appropriately supervise or care for children. 7. The service had taken extensive steps to rectify the identified issues. It was unable to do so immediately because of the "enormity of the data that was identified". The steps taken included: 1. An internal audit; 2. Requesting advice from the Department on how to refund the incorrectly paid subsidies; 3. Developing a compliance strategy to mitigate the risk of non- compliance in submitting attendance records which it submitted "drastically reduced" the instances of error. Furthermore the approval of subsidies for three weeks after the service's cancellation proved that the strategies were effective; 1. As a service working with Culturally and Linguistically Diverse (CALD) communities and staff, the service claimed that there were increased risks of misinterpreting the legislation and regulations and breakdowns in communication. The issues arose from unforeseen circumstances arising from miscommunication; and 2. CALD communities obtained benefits from the service which could understand their unique cultural and linguistic needs. The service had provided bilingual education and care to the Korean Australian community for over ten years and had brought many benefits for children and parents.

Whether the applicant has failed to operate an education and care service for more than 12 months

It is not disputed that the applicant has not operated an education and care service for more than 12 months. Moreover the applicant states that it cannot afford to operate unless it is eligible to receive subsidies under the Commonwealth legislation, which currently it is not.

Whether the applicant breached a condition of its provider approval by repeatedly failing to comply with the National Law

The breaches relied upon by the respondent are those listed in the notice of 4 June 2018. The applicant did not respond to the 4 June notice at the time. There were several thousands of instances.
The applicant does not dispute that it failed to comply with the National Law in some respects but it disputes a few matters, and claims there were explanations or mitigating circumstances for others. The applicant blames the software manufacturer for not providing information on how to update the information on the Department's system. I am not satisfied, however, that this failure was responsible for more than a small proportion of the breaches which related to actual operations at the centres.
The AAT was satisfied that the applicant had breached multiple conditions for the continued approval of a child care service under the Administration Act and that the breaches were not an isolated event. Those breaches related to failure to provide accurate reports of child care under s 219N of the Administration Act; and contravening s 196(3) of the Administration Act by: 1. Instances where the required educator to child ratio was not met; 2. Not registering information regarding relief educators; 3. Not accurately keeping attendance records.
I note that the applicant does not accept the findings regarding ratios and attendance records. In the AAT decision it is recorded that the applicant blamed clerical errors by the educators. However there is no evidence to support these claims, and in any event it is the provider's responsibility to meet the conditions. As noted in Moonlight Family Day Care Pty Ltd and Secretary, Department of Education and Training [2018] AATA 2706 the obligation was on the applicant, not its educators. I do not agree that any language issues which might cause delays or difficulties in ensuring that CALD educators understood instructions given to them by the applicant was unforeseen, as the applicant claims.
The applicant submitted that it had implemented measures to address the breaches and showed improvement over three months, but there was no clear evidence of this.
Some breaches concerned whether educators responsible for caring for children had proper oversight and instruction, and whether children's whereabouts were known and recorded. These are very significant issues.
I am satisfied that the applicant breached a condition of its approval by repeatedly breaching the National Law.

Whether the applicant is a fit and proper person

On the issue of "fit and proper" the Tribunal said in Two Cubed at [54]-[58]: "The context in which the person is or will be engaged in the underlying principles and objects of the legislation give the phrase meaning in particular circumstances: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 380. A definition of fitness and propriety at least includes "honesty, knowledge and ability": Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127 at 156. An assessment of fitness and propriety "also includes public confidence that the person is able to maintain high standards of rectitude and that they likely future conduct will keep to that standard": CYD v Secretary of the Department of Education NSW [2017] NSWCATAD 190 at [89]. In the regulatory regime surrounding provider approvals, the term "fit and proper" in context refers to the provision of education and care services to children under 13 years of age. An applicant's fitness and propriety may well be dependent then on an adequate knowledge and understanding of the responsibilities of an approved provider, whether the applicant acts in accordance with those responsibilities and whether the applicant has sufficient moral integrity and character to be entrusted with the provision of education and care services: Tanyous v Secretary, Department of Education [2018] NSWCATAD 197 at [31]; Brandusoiu v Commissioner of Police [2015] NSWCATAD 204 at [91]-[92]. Compliance with the National Law is a mandatory consideration in the assessment of the applicant's fitness and propriety because of the conditions attached to provider approvals. A person's management capability to operate an efficient education and care service in accordance with the National Law is a relevant consideration in assessing whether a person is a fit and proper person to be engaged in education and care services. The objectives of the National Law are promoted where persons with management or control of an education and care service have knowledge and understanding of the National Law and Regulations: CYU V Secretary Department of Education [2017] NSWCATAD 290 at [53]-[54]; DPW v Secretary Department of Education [2018] NSWCATAD 257 at [40], [42]-[43]."
Section 13(1) of the National Law also provides that in determining whether a person is a fit and proper person I must have regard to the applicant's history of compliance with the National Law. I would normally interpret this to mean proven non-compliance prior to the incidents relied on in these proceedings. There is no evidence of a history of prior non-compliance.
In addition I may have regard to: 1. whether the financial circumstances of the applicant may significantly limit the person's capacity to meet their obligations in providing an education and care service in accordance with the National Law; 2. whether the applicant has the management capability to operate an education and care service in accordance with the Law; and 3. any sanction imposed under s 200 of the Administration Act (s 13(2)).
The applicant's decision not to operate for the past 22 months and the applicant's statement that it needed child care benefit subsidies to operate indicate that its current financial circumstances would not allow it to meet its obligations in providing an education and care service in accordance with the National Law.
As to the applicant's management capability, there are factors which indicate that this capability is weak, such as: 1. The quantity and repeated nature of the matters identified in the 4 June notice, acknowledged by the applicant; 2. The fact that many go beyond administrative errors and relate to matters of safety; 3. The steps taken to remediate the identified issues included an audit and governance measures. However most of these governance measures involved checking for errors in attendance record keeping and did not address the other substantive identified risks. There was no evidence available as to whether the measures are effective. Given the large numbers of breaches, such evidence is necessary if the Tribunal is to have confidence that the applicant is a fit and proper person to operate the service.
I have also had regard to the sanction of cancellation imposed under the Administration Act and which was upheld by the AAT. This sanction was imposed because of the large scale of the breaches and failure to properly educate and supervise staff, in the context of a service involved in caring for children.
Ms Choi, a director of the applicant, clearly desires to assist the Korean community and there was evidence of her good character and diligence. The evidence, however, supports a finding that the applicant's knowledge and understanding of the responsibilities of an approved provider is inadequate and the applicant has not acted in accordance with those responsibilities.
While there is no evidence to suggest that Ms Choi individually is not of good character, the available evidence indicates that she and the applicant lack the knowledge and ability to operate the service in compliance with the National Law and therefore are not fit and proper within the meaning of the National Law.

Whether cancellation is the correct and preferable decision

The applicant suggested that conditions would be a more appropriate sanction than cancellation. Given the history of the matter, I am not satisfied that conditions would be effective. In addition, in my view any conditions would require extensive oversight and would be unduly onerous for the respondent to monitor.
I am also mindful of the objective of the national education and care services quality framework under the National Law to ensure the safety, health and wellbeing of children attending education and care services and the guiding principle that the rights and interests of children are paramount.
Given my findings, I am satisfied that the correct and preferable decision is to confirm the Regulatory Authority's decision to cancel the approval.

Order 1. The decision of the Regulatory Authority cancelling the applicant's provider approval is confirmed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 08 April 2020

Background

This is an application for review of the decision by the respondent to cancel the applicant's provider approval. The decision was made pursuant to s 31(a) of the Children (Education and Care Services) National Law (NSW) ("the National Law") on 3 October 2019.
The applicant held a service approval to operate a family day care service from 10 February 2014 following approval by the respondent to transfer the service approval from "Korean Australian Family Day Care" to the applicant. The service was known as "KA Family Day Care".
The following facts are not in dispute. On 8 November 2017 the Australian Department of Education and Training issued a Notice of Intention to cancel the applicant's approval under the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) ("the Administration Act") (known as a child care benefit or CCB approval). This followed findings made by the delegate of the Secretary of the Department that the service had not complied and continued not to comply with conditions for its continued approval under the following provisions of the Administration Act: 1. Section 196(1) making it a condition that the service satisfies any eligibility rules applying to it under paragraph 205(1)(b); 2. Section 196(2) making it a condition that the service not contravene an obligation imposed on it by the Administration Act; and 3. Section 196(3) making it a condition that the operation of and provision of care by the service comply with all applicable requirements imposed by a law of the Commonwealth or the State or Territory in which it operates.
The Department again wrote to the applicant on 7 March 2018 advising that it had received additional information from the NSW Department of Education relating to visits made in December 2017, which had allegedly identified a number of discrepancies in the applicant's attendance reports. In particular since the notice of intention to cancel was issued, the applicant had continued to fail to comply with a number of its obligations including reporting attendances for children who were in fact overseas, failing to report attendances within the required timeframe, reporting absences after care for the child had ceased, and reporting educators providing care for more than 7 children at one time.
The applicant was invited to make further written submissions on these matters no later than 16 March 2018.
On 3 April 2018 the Department cancelled the approval of the applicant under the Administration Act with effect from 13 April 2018. The effect of this decision was that families would no longer be able to receive Australian Government child care fee assistance for care provided by the applicant.
The applicant sought a review of this decision in the Administrative Appeals Tribunal (AAT) but it was affirmed (Jessica Education Centre Pty Ltd and Secretary, Department of Education and Training [2019] AATA 3739).
On 4 June 2018 the respondent sent a Compliance Notice to the applicant under s 177 of the National Law requiring it to take steps outlined in the notice to comply with various provisions of the National Law or the Education and Care Services National Regulations (NSW) ("the National Regulations") at a number of its family day care locations and provide written evidence of its compliance by 22 June 2018.
The non-compliance issues identified in the Notice included the following: 1. numbers of children, 2. coordinator to educator ratios, 3. proper supervision of children, 4. safe storage of cleaning chemicals and safe premises, 5. working with children checks for persons residing at educators' residences, 6. display of approvals and supervisors on the premises, 7. keeping of prescribed documents available for inspection, 8. health and hygiene practices, 9. first aid kits, 10. emergency and evacuation procedures, 11. risk assessments and written authorisations for excursions, 12. assessments including risk assessments of each residence and/or venue for day care, 13. safety of glass accessible to children or 0.75 m or less above floor level, 14. approval of family day care assistants, 15. attendance records, and 16. systems for ensuring that supervisors, staff members and educators follow the policies and procedures required under Regulation 168 and 169.
I note that the applicant disputes that there was non-compliance with some of these matters.
On 22 June, 27 July, 31 August, 21 September, and 26 October 2018 the applicant applied to the respondent to grant voluntary suspension of its service approval. On each occasion the application was refused.
On 27 July 2019 the respondent issued a Show Cause Notice to the applicant giving notice that it intended to cancel its provider approval on the following grounds: 1. It was satisfied that the applicant was not a fit and proper person to be involved in the provision of an education and care service; 2. The approved provider had breached a condition of the provider approval, namely regulations 124 and 177(2).
On 16 August 2019 the applicant provided a written response.
On 3 October 2019 the approval was cancelled.

The issues to be determined

The Tribunal must determine what is the correct and preferable decision having regard to the material before it, as held in DBU v Secretary, Department of Education [2017] NSWCATAD 257 at [24]-[26]. It is not confined to the material before the original decision maker or the reasons identified in the decision under review (Two Cubed Pty Ltd v Secretary of the Department of Education NSW [2019] NSWCATAD 122 at [28], [41], [87]).
The Tribunal may confirm or amend the decision under review, or substitute another decision for the decision under review (s 193 National Law).
There is no onus of proof upon either party - Kendrick v Secretary of the Department of Education NSW [2019] NSWCATAD 45 at [32]-[38].

The respondent's case

The respondent submits that the applicant's approval should remain cancelled based on the following grounds: 1. The applicant has failed to operate an education and care service for more than 12 months (s 31(f)); 2. The applicant breached a condition of its provider approval by repeatedly failing to comply with the National Law (s 31(e) read with s 19(2)). 3. The applicant is not a fit and proper person to operate an education and care service (s 31(a)).
In relation to (1), the respondent submitted that the applicant had stated on a number of occasions to the respondent, the AAT and in these proceedings that it has not operated since April 2018. Therefore it had not been in operation, at the time of the hearing, for just under 22 months.
The reason stated for this was that its child care benefits approval had been cancelled, but the respondent submitted that this did not prevent the applicant from operating. The applicant still does not, however, possess that approval and seems unlikely to operate without it based on its statements to the respondent.
With regard to (2), it was submitted that the compliance notice of 4 June 2018 identified a series of wide ranging breaches of the National Law to which the applicant did not reply at the time. In addition, the AAT found that the applicant repeatedly breached the Administration Act and the National Law on 5,790 occasions with regard to educator ratios and 1,637 instances of failing to maintain accurate documentation.
With regard to (3) the respondent submitted that the Tribunal could take into account the person's history of compliance with the National Law, the person's management capability and any sanction under the previous s 200 of the Administration Act, as well as whether its financial circumstances significantly limited its capacity to meet its obligations in providing a service under the National Law (s 13). Where, as here, the applicant is a body corporate, it must satisfy the Regulatory Authority that each person who will have management and control of the service is a fit and proper person to be involved in the provision of an education and care service (s12(2)) (Two Cubed at [48]).
The respondent submitted that the volume and systemic nature of the breaches by the respondent identified before the AAT, and the sanction imposed under the Administration Act, indicates a lack of knowledge of the National Law and ability to implement measures to meet its obligations.
It also relied on Jump Start Family Day Care Pty Ltd v Department of Education and Training (Review and Regulation) [2019] VCAT 1631 in which it was held that cancellation of a provider's CCB approval pointed against the provider being a fit and proper person (at [60]). It submitted that the applicant had shown failure to take responsibility for its deficiencies, had inadequate knowledge, oversight and support and inadequate management capability.

Jessica Education Centre Pty Ltd (KA Family Day Care) v Secretary, Department of Education

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