Malek Fahd Islamic School Limited v Minister for Education and Early Learning

Court of Appeal (NSW)|2023-06-02|Before: Ward P, Meagher JA, Rothman J

Solicitors: Mitry Lawyers (Appellant) Crown Solicitor's Office (Respondent) File Number(s): 2022/280829 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Common Law Citation: [2022] NSWSC 1176 Date of Decision: 1 September 2022 Before: Rothman J File Number(s): 2021/161161

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The appellant, Malek Fahd Islamic School Limited, operates a non-government school which receives government funding from the respondent Minister for Education and Early Learning (NSW). To be eligible for government funding a non-government school must not operate for profit. In 2017 the Minister was made aware that the appellant had been operating for profit in 2014 and 2015, during which time the appellant had received $11,065,584.69 in financial assistance. On 5 March 2021 the respondent wrote to the appellant to inform it that, pursuant to s 83J(3)(b) of the Education Act 1990 (NSW), she would reduce the provision of future financial assistance by $2,213,116 per annum for five years to recover the government funding paid during the period in which the school was ineligible. On 4 June 2021 the appellant sought judicial review of the respondent's decision of 5 March 2021 by commencing proceedings in the Supreme Court. The appellant argued that the six year limitation period under the Limitation Act 1969 (NSW) had expired and any debt was thereby extinguished. The Minister was thus barred from recovering money provided more than six years prior to the time at which recovery action was commenced. The primary judge found that no recovery could be undertaken if the underlying debt had been extinguished. However, as the limitation period only ran from when the Minister's Advisory Committee recommended that a non-compliance declaration be made in relation to the appellant, the debt had not been extinguished. The main issues on appeal were whether: (i) the Limitation Act limited the recovery of payments of financial assistance to ineligible non-government schools; and (ii) if it did, the date at which the "cause of action" arose. The Court (Basten AJA, Ward P and Meagher JA agreeing) held, dismissing the appeal: As to issue (i) (application of Limitation Act) (1) Section 83J(3) of the Education Act created two separate methods of recovering financial assistance paid to an ineligible school. The first created a cause of action in debt which might be pursued in a court of competent jurisdiction and therefore fell within s 14(1)(d) of the Limitation Act. The second was by way of reduction of future financial assistance and was not an "action" on a cause of action within s 14(1) of the Limitation Act: [27]. (2) While the Limitation Act defines the term "action" to include "any proceeding", thus including proceedings which would not normally be identified as "actions", the purpose of the definition is to expand the category of proceedings in a court. Relevantly to the public law nature of the present dispute, proceedings in the supervisory jurisdiction do not fall within the conventional understanding of an "action" but would be covered by the extended definition using the phrase "any proceedings". Non-curial processes are not: [33]. (3) As a matter of statutory construction, the presumption is that Parliament, in creating the novel right, attaches to it the particular mode of enforcement as part of its statutory scheme. To that extent the enactment is a code: [52]. Josephson v Walker (1914) 18 CLR 691; [1914] HCA 68; Federal Commissioner of Taxation v Official Receiver (1956) 95 CLR 300; [1956] HCA 24; Health Insurance Commission v Peverill (1994) 179 CLR 226; [1994] HCA 8 applied (4) Recovery by reducing future amounts of financial assistance is distinct from the recovery of an amount as a debt. Although one mechanism for recovery of the amount is by court process, the amount is not stated to be a debt but merely an amount recoverable "as" a debt. Further, s 83J(3)(a) and (b) are expressed in the alternative. The structure of the provision thus isolates recovery by reduction of future assistance and uses language which is distinct from recovery of a debt in a court: [50], [56] - [57]. Walker v Secretary, Department of Social Security (1995) 56 FCR 354; Taylor v Secretary, Department of Social Security (1988) 18 FCR 322; [1998] FCA 70 discussed. As to issue (ii) (when "cause of action" arose) (5) Issue (ii) did not arise except in relation to proceedings in a court pursuant to s 83J(3)(a): [61]. (6) There is no right of recovery under Pt 7, Div 3 of the Education Act until two statutory preconditions have been satisfied, namely (i) a recommendation by the Advisory Committee and (ii) the giving of notice of the recommendation to the affected school. Once those conditions have been met, it is open to the Minister to be satisfied that the basis for recovery has been established: [61]. (7) The primary judge's view that the cause of action arose at the date of the recommendation of the Advisory Committee should not be accepted. The better view is that a right of recovery arises upon the satisfaction of the Minister that a school has been the recipient of an unlawful payment, or that the school is otherwise a non-compliant school: [62], [64].

JUDGMENT

WARD P: I agree with Basten AJA.
MEAGHER JA: I agree with Basten AJA.
BASTEN AJA: The appellant, Malek Fahd Islamic School Limited, operates a non-government school which receives funding from the Minister for Education and Early Learning (NSW). There was no dispute that in 2014 and 2015 the appellant operated for profit and was thus ineligible for State Government funding. On 5 March 2021, the Minister wrote to the appellant communicating her decision to recover the amount of financial assistance provided to the School in 2014-2015 when the School operated for profit, by reducing future amounts of financial assistance payable to the appellant by $2,213,116 per annum for five years.
The appellant contended that the steps taken by the Minister to recover financial assistance paid under a statutory scheme by reduction of future benefits constituted "action on a cause of action" subject to the six-year limitation period provided by the Limitation Act 1969 (NSW), s 14(1). Secondly, the appellant submitted that the cause of action arose when the payments were made, with the result that, by the time the Minister made her decision to recover the payments, the six-year limitation period had expired.
In response, the Minister contended that s 14(1) of the Limitation Act had no operation and hence the appellant's proceeding failed on that basis. In the alternative, the Minister contended that no "cause of action" arose until 5 March 2021 when the Minister made the decision to recover the overpayments by way of deductions from future financial assistance. Alternatively, the cause of action arose when the Minister determined that the appellant was a non-compliant school, a determination made on 28 May 2020. Thus, assuming the Limitation Act was engaged, steps taken to recover the money by reduction of future assistance were commenced within time.
These proceedings were commenced by a summons filed on 4 June 2021 in the Common Law Division seeking an order quashing or setting aside the decision of the Minister communicated on 5 March 2021 or, in the alternative, a declaration that the Minister was precluded under the Limitation Act from recovering payments made in excess of six years prior to the recovery action being taken. On 1 September 2022, Rothman J made orders dismissing the proceedings and requiring the plaintiff to pay the defendant's costs. The present appeal was commenced on 30 November 2022.
Contrary to the Minister's position, the primary judge found that the Limitation Act was engaged, but that it did not arise when the payments were made but rather when the Advisory Committee established under the Education Act 1990 (NSW) recommended that a non-compliance declaration be made with respect to the appellant. [1]
The Minister submitted that the Limitation Act, s 14(1) was not engaged, but rather the Education Act, Pt 3, Div 7, contained its own self-contained provisions for payments of financial assistance to non-government schools and for the recovery of such payments in circumstances where it was later determined that a school had not been eligible at the time a payment was made. For the reasons explained below, that submission should be accepted.
Although the issue did not arise in the light of that finding, it is convenient in the circumstances to address the appellant's further argument as to when the "cause of action" arose, the Education Act providing an alternative means of recovery by way of proceedings as for a debt in a court of competent jurisdiction.

Legislative scheme

It is convenient to start with the provisions of the Limitation Act, which provide the basis of the appellant's case. Section 14(1) provides for a limitation period with respect to causes of action founded on contract (par (a)), on tort (par (b)), and to enforce a recognizance (par (c)), none of which are presently relevant. Rather, reliance was placed on s 14(1)(d) which provides: 14 General (1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims - … (d) a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.
Further, the appellant relied upon the fact that the expiration of a limitation period resulted in the extinguishment of the cause of action: 63 Debt, damages etc (1) Subject to subsection (2), on the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, the right and title of the person formerly having the cause of action to the debt damages or other money is, as against the person against whom the cause of action formerly lay and as against the person's successors, extinguished. (The qualification in subcl (2) is irrelevant for present purposes.)
Section 63 has no operation unless the appellant is correct in identifying a limitation period fixed by s 14(1)(d). With respect to s 14(1), two matters should be noted. First, the term "action" is defined in s 11(1) to include "any proceeding in a court." As will be noted shortly, the Minister contended that recovery of an amount unlawfully paid by reduction of future benefits did not constitute a proceeding in a court and should not be understood to constitute an "action" for the purposes of s 14(1).
Secondly, if s 14(1) were engaged, it was because, in terms of par (d), there was a cause of action "to recover money recoverable by virtue of an enactment", the relevant "enactment" being provisions of the Education Act. (It is convenient to assume for immediate purposes that that characterisation is appropriate.)
To the extent that the appellant contended that the cause of action arose in part in 2014, it is necessary to identify the legislation as at the date of the payment. It appears that there was no statutory right of recovery at the time when payment was made in 2014. Until November, virtually the end of the 2014 school year, the Minister had a power to provide financial or other assistance to non-government school children, pursuant to s 21(1) of the Education Act. While s 21A(1) imposed a prohibition on payment to a non-government school that operated for profit, it made no provision for recovery of payments made to such a school. However, s 21(7) provided that "any financial assistance under this section is to be paid out of money to be provided by parliament". Arguably, the combined effect of these provisions was that, in accordance with the general law principle of parliamentary control of public expenditure, a payment out of consolidated revenue in contravention of the prohibition in s 21A(1) would not have been provided for by parliament and accordingly was "simply illegal and ultra vires, and may be recovered by the government", [2] as a claim for money had and received. [3]
However, as the appellant's argument fails for other reasons, this difficulty, and the possibility that a claim by the government for recovery of unlawful expenditure may be by way of a cause of action in restitution and thus fall within s 14(1)(a), need not be pursued. It is sufficient for present purposes to address the legislation, as the parties did, by reference to the current terms of the Education Act. Thus, as from 28 October 2014, [4] Pt 7, Div 3 provided, in similar terms to the former s 21, as follows: 83B Financial and other assistance in respect of non-government school children (1) The Minister may provide financial assistance or other assistance, or both, in respect of non-government school children. (2) The determination of the amount of financial assistance provided under this section is subject to the obligations of the State, under any agreement made between the State and the Commonwealth, that relate to financial assistance in respect of non-government school children. The amount may exceed any amount that the State is so obliged to contribute in respect of non-government school children. (3) If there ceases to be any relevant agreement in operation in respect of non-government school children, the following provisions have effect subject to this section - (a) the Minister is to maintain financial assistance in respect of non-government school children at the level that the State was obliged to contribute under the most recent relevant agreement before it ceased, (b) the Minister may increase the amount of that financial assistance from time to time to take account of the costs of schooling (as assessed by the Minister). (4) Financial assistance under this section may be allocated having regard to the needs of different non-government schools. (5) Financial assistance under this section includes the cost to the State of the administration of the provision of that financial assistance. (6) Any financial assistance in respect of non-government school children may be paid - (a) directly to the school that the children attend, or (b) to any of the following for the benefit of that school - (i) a system of non-government schools, (ii) an approved system authority within the meaning of the Australian Education Act 2013 of the Commonwealth, (iii) a person or body approved by the Minister for the purposes of this section. (7) Any payment of financial assistance under this section is to be paid out of money to be provided by Parliament and is subject to Parliament appropriating money for the payment. (8) (Repealed) (9) In this section, relevant agreement means - (a) the National Education Reform Agreement, or (b) any subsequent replacement agreement.
As appears from s 83B(2), the provision of financial assistance is the subject of an agreement between the State and Commonwealth governments. Section 83BA demonstrates that in some circumstances, the Commonwealth may have an interest in recovering money from a school which is in breach of conditions of receiving such monies.
The prohibition on providing financial assistance to a school that operates for profit, formerly contained in s 21A, now appears in s 83C, the relevant aspects of which provide: 83C Financial assistance not to be provided to schools that operate for profit (1) The Minister must not provide financial assistance (whether under this Division or otherwise) to or for the benefit of a school that operates for profit. … (4) The Minister is not obliged to terminate the provision of financial assistance because of this section if, following an investigation under this Division, the Minister is satisfied that - (a) termination of financial assistance is not justified because of the minor nature of the relevant conduct, or (b) more appropriate action can be taken under section 83E.
Section 83D provides that the Minister may make a "for profit declaration" where a school "operates for profit or has operated for profit during a specified previous period, or both": s 83D(1). However, the Minister may only make such a declaration if the Advisory Committee recommends that the declaration be made: s 83D(2).
That provision was not directly relevant for present purposes, because the Minister did not make such a declaration. Rather, she made a "non-compliance declaration" pursuant to s 83F. The power to make that declaration was also conditional upon the Advisory Committee recommending that it be made.
A "Non-Government Schools Not-for-profit Advisory Committee" is provided for in s 83K. The functions of the Advisory Committee are to provide advice to the Minister on compliance with Div 3, and to make recommendations for the making of the declarations referred to above: s 83K(2)(a), (b). Neither form of declaration can be made unless the Minister has given written notice of the recommendation of the Advisory Committee and 30 days have elapsed within which time the school might seek administrative review before NCAT: s 83G. There are, therefore, two mandatory preconditions to the making of either form of declaration, namely obtaining a relevant recommendation and giving notice thereof.
The appellant was a non-compliant school because it had operated for profit, and therefore fell within the definition in s 83A. (It may be that the condition is properly stated as dependent on the satisfaction of the Minister as to such a matter.) [5] The significance for present purposes of the Minister making a non-compliance declaration under s 83E, rather than more directly making a "for profit declaration", is the flexibility of response permitted under s 83E(3) in relation to a non-compliance declaration.
The critical provision for present purposes was s 83J providing for recovery of overpayments: 83J Recovery of amounts from schools (1) The Minister may recover the amount of any financial assistance provided by the Minister to or for the benefit of a school (whether under this Division or otherwise) if the financial assistance was provided in respect of a period when the school operated for profit or was a non-compliant school. (2) Any amount of costs under section 83I (3) that is not paid by a school or the proprietor of a school may be recovered by the Minister as if it were financial assistance provided under this Division to the school when the school was a non-compliant school. (3) The Minister may recover an amount under this section - (a) as a debt in a court of competent jurisdiction, or (b) by reducing future amounts of financial assistance payable by the Minister to or for the benefit of the school concerned, or both. (4) A school, the proprietor of a school and any system, authority, person or body referred to in section 83B(6)(b) to which an amount recoverable under this section (or part of the amount) was paid are jointly and severally liable for repayment of the amount.

Application of Limitation Act

Although the primary judge found that the Limitation Act applied, the Minister challenged the finding pursuant to a notice of contention. It is logical to deal first with the question thus raised as to whether the Limitation Act applied at all, before considering how it operated.

Reasoning of primary judge

The reasoning of the primary judge involved the following steps. First he held that s 83J(1) of the Education Act resulted in there being "money recoverable by virtue of an enactment", as described in s 14(1)(d) of the Limitation Act. [6] That conclusion was not disputed.
Secondly, the judge accepted the appellant's submission "that the Limitation Act applies to proceedings in a court of competent jurisdiction and recovery of the debt by other means". [7] While the primary judge accepted that the Minister "in reducing future financial assistance, is not instituting an action", he held that the Minister was nevertheless recovering money, which would constitute a cause of action for debt within s 83J(3)(a). [8] He reasoned that if the limitation period for the cause of action in debt had expired, the debt was extinguished under s 63(1) of the Limitation Act, and there was therefore no amount to be recovered by reduction of future financial assistance under s 83J(3)(b). [9]
This reasoning required the judge to determine when the limitation period applicable to recovery under s 83J(3)(b) commenced. He rejected the Minister's submission that "the cause of action does not accrue until the Minister exercises her discretion and decides to recover the amount in question". [10] Rather, he concluded that it "cannot accrue until the Advisory Committee determines the necessary questions and advises as to, and/or recommends to, the Minister the action to be taken". [11] As the Advisory Committee determination was made on 1 June 2017, and, the appellant having been accorded procedural fairness, notice that moneys would be recovered by reductions under s 83J(3)(b) was given on 5 March 2021, the judge concluded that the limitation period had not expired. [12]

Contentions on appeal

On appeal, the Minister submitted that s 83J(3) created two separate and independent methods of recovering the amount of any financial assistance paid to a school while it was operating for profit. Although the first alternative created a cause of action in debt which might be pursued in a court of competent jurisdiction (and therefore fell within the terms of s 14(1)(d) of the Limitation Act), the alternative means of recovery by way of reduction of future financial assistance was not an "action" on a cause of action. The Minister submitted that "an action on … a cause of action" to recover money, in s 14(1) of the Limitation Act, contemplated "pursuit of a right to sue or bring proceedings to recover some curial relief, remedy or enforcement". [13] The term "action", defined only as including a proceeding in a court, when used in combination with the concept of "a cause of action", envisages some form of curial proceeding. The Minister relied on the reasoning of Lord Goddard CJ in relation to similar provisions in the UK limitation act in China v Harrow Urban District Council: [14] "In my opinion the very wide terms of the definition [of 'action'] show that section 2(1) of the Act was intended to apply to all money claims made in a court. This view I think is to some extent strengthened by the inclusion of ecclesiastical courts in the definition section … [W]hen I find reference both to ecclesiastical courts and to all classes of arbitration in the present Act it leads me to think that the legislature meant to bring every class of litigation, before whatever tribunal it might come, within the ambit of the statute."
While the Limitation Act does not contain references to other courts, it does contain reference to "an action or arbitration" for which a limitation period is fixed by or under another enactment. [15] The similarity of language, it was submitted, warrants the adoption of the same approach in relation to s 14(1).

Construing the Limitation Act

As to the first limb of the Minister's contention, the appellant submitted that, the definition of "action", being merely inclusive, warranted an expansive construction extending beyond the category of "proceedings in a court". Accepting that proposition, the concept of "proceedings in a court" must remain the core of the relevant expanded category or it serves no purpose. A course of action which involves no application to any external body denies the definition any practical purpose.
However, inclusive definitions may serve a variety of purposes. As observed in Herzfeld and Prince, Interpretation: [16] "The word 'includes' is ordinarily non-exhaustive. It is principally used to expand the ordinary and natural meaning of the defined term or to remove doubt that certain things fall within the meaning of the defined term. In such cases, [presumably referring to the latter category] it does not restrict the ordinary and natural meaning of the defined term. However, in some contexts the word 'includes' can be construed as being equivalent to 'means and includes'. That form of definition provides an exhaustive explanation of the meaning to be attached to the defined term, but indicates that certain things fall within the definition either by way of expansion or clarification".
The term "action" as used in the context provided by a Limitation Act does not bear the ordinary and natural meaning of any form of conduct. It has a legal meaning derived from its context, which is to identify the temporal limit of enforceable rights. For example, in Vezitis v McGeechan [17] Taylor J held that proceedings for a declaration as to a prisoner's rights were not precluded by a section in the Prisons Act 1952 (NSW) which protected the Commissioner from any "action or claim for damages". Clearly the proceedings did not involve a claim for damages, but did they involve an "action"? Taylor J, holding that they did not, stated: [18] "The word 'action' in its proper legal sense is a generic term and includes every sort of legal proceeding; see Re Carter Smith; Ex parte Commissioner of Taxation [19] per Street J where the learned judge cited a passage from the decision from the House of Lords in Clarke v Bradlaugh [20] the passage being approved of by the House of Lords on appeal. [21] Street J went on to say [22] that when used by the legislature it - that is the word 'action' - must be construed according to its true legal meaning, unless it is apparent upon the face of the act in which it is used that it is intended to bear a more restricted meaning."
To similar effect, this Court has consistently construed the right of appeal granted by s 127(1) of the District Court Act 1973 (NSW) from a judgment or order "in an action" as excluding statutory appeals to the District Court, [23] including all claims made in a statutory jurisdiction, such as a claim for victims' compensation. [24]
In its context, the purpose of the definition is to expand the category of proceedings in a court to include "any proceeding", thus including proceedings which would not normally be identified as "actions". Relevantly to the public law nature of the present dispute, proceedings in the supervisory jurisdiction do not fall within the conventional understanding of an "action" but would be covered by the extended definition using the phrase "any proceedings". Thus, to seek an order by way of mandamus ordering a public authority to make a payment could fall within the terms of the Limitation Act. An example may be found in the process adopted by the respondent company in Commissioner of State Revenue (Vic) v ACN 005 057 349 Pty Ltd. [25] The Commissioner having conceded an overpayment for two years, the landowner sought to have the relevant assessments amended for a lengthy period covering earlier years. When the Commissioner declined to make the amended assessments, the company sought mandamus in the Supreme Court seeking to oblige the Commissioner to make the amended assessments and then to pay a refund from public funds. For reasons which will be considered further below, the proceedings were unsuccessful: however, if the issue had arisen, such proceedings would arguably have fallen within the definition as any proceeding in a court for the purposes of s 14(1).
Although the Minister correctly submitted (and the primary judge accepted) that steps taken under s 83J(3)(b) do not themselves fall within s 14(1) of the Limitation Act, the primary judge nevertheless held that once the debt under par (a) was extinguished there was no money which could be recovered by reduction of future financial assistance under par (b). Although the judge held that the cause of action in debt had not been extinguished because steps to recover the moneys had been taken within the limitation period, the finding as to the application of the limitation period was challenged.

Construing the Education Act

In resisting the finding that any right to recover was extinguished when the debt created under s 83J(3)(a) was extinguished by force of s 63(1) of the Limitation Act, the Minister submitted: [26] "The effect of recovery action under s 83J(3)(b) is not to assert the Minister's right or title to money. It is rather to give effect to the statutory scheme that a school operating for profit should not receive financial assistance when operating for profit and an appropriate mechanism to achieve that, when a school has operated for profit during a past period, is to adjust future payments accordingly." That submission suggested that the primary focus of attention should not be the generic provisions of the Limitation Act, but the specific statutory scheme which gave rise to the right of recovery, namely Pt 7, Div 3 of the Education Act.
Before addressing that issue, it is desirable to identify the long-standing principles of statutory construction, and some examples of their recent application, with respect to schemes for the provision of fiscal benefits and the imposition of taxes.

Construing statutory schemes for fiscal benefits or imposts

As was suggested during the hearing of the appeal, the Minister's contention is supported by authorities dealing with statutory schemes for recovery of money by or from public authorities. The schemes broadly fall into two categories, namely, first, those where the government is imposing a tax or other impost and, secondly, those where the government is paying a benefit to an individual recipient. In either case, there may be under- or over- payments resulting in statutory provisions for refund or recovery. There are two different sets of principles at stake. In the case of taxation, legislation will confer power on the government authority to recover amounts due but, in the case of an overpayment by the taxpayer, there will be an assumption that the taxpayer can recover the overpayment, if necessary by proceedings in a court. On the other hand, in the case of benefits provided by the government, clear statutory authority will be required to provide for payment to a beneficiary. That is to comply with the Auckland Harbour Board principle that public funds cannot be expended without a statutory appropriation. [27] Thus, where there has been an overpayment, the government needs no express statutory authority to recover the money, although there may be limits on the general law power to do so.
Most of the cases fall within the former category, although the present case falls within the latter category. The underlying principle, common to both categories, may be traced to Josephson v Walker, [28] in which the High Court considered a claim by a plumber for wages said to be due pursuant to an industrial award. The claim was brought in the Supreme Court, rather than the relevant industrial tribunal. The question was whether the Supreme Court had jurisdiction to hear the claim. Isaacs J described the nature of the claim as follows: [29] "It is an action to enforce payment of moneys due to the plaintiff, not by virtue of any contract, express or implied, but by virtue of a statutory obligation. … Prima facie, where the same Statute creates a new right and specifies the remedy, that remedy is exclusive. The natural presumption to begin with is that Parliament in creating the novel right attaches to it the particular mode of enforcement as part of its statutory scheme. To that extent the enactment is a code." [30]
Federal Commissioner of Taxation v Official Receiver (Travis' Case) [31] involved a dispute as to whether the taxpayer or his trustee in bankruptcy was entitled to the refund of an overpayment of income tax. Fullagar J (with whom Dixon CJ agreed) noted that the arguments had turned upon an assumption: [32] "That assumption was that on assessment of tax a chose in action came into existence which… vested in the respondent under s 50(1) and s 91(i) of the Bankruptcy Act. The correctness of the assumption depends not on the Bankruptcy Act but on the Assessment Act. It is natural enough to say that, when s 221H(2)(b) of that Act comes into operation, it creates a 'debt', but it is apt to be misleading. Division 2 of Part VI of the Assessment Act contains an elaborate and carefully worked out scheme for the collection of tax by instalments from 'employees'. … The scheme is such that it is inevitable that, at the end of a financial year, it will be found that some taxpayers of that class have paid too much tax, so that a refund to them is necessary. … And, when the Act comes to prescribe what is to be done in the case where the deductions exceed the tax payable, we find it saying simply that 'the commissioner shall pay to the employee' an amount equal to the excess. Those words mean, in my opinion, literally what they say, in the sense that they are to be regarded as requiring the commissioner to pay the amount of the excess to the taxpayer and not to anyone else. … In another sense, of course, the words do not mean literally what they say. They do not mean that the commissioner is personally liable to make the payment. Section 221U speaks of the commissioner as being 'liable to pay', but provides that payment is to be made out of the Consolidated Revenue Fund, which is 'to the necessary extent appropriated accordingly'. I would not think that any action would lie against the commissioner for recovery of the amount of any excess. What s 221H(2)(b) really means is that the commissioner is to take all necessary steps to see that payment is made in the course of normal departmental procedure out of Consolidated Revenue Fund. Mandamus might lie against him to compel him to take those steps. An action might lie against the Commonwealth. It is not necessary to determine these matters, but a consideration of them serves to emphasise that we have here nothing really analogous to an ordinary 'debt', but simply a statutory direction to an officer of the Commonwealth to cause a payment to be made out of consolidated revenue to a specified person and an appropriation of a consolidated revenue for the purpose of that payment and of no other payment." [33]
In Health Insurance Commission v Peverill [34] a medical practitioner challenged the constitutional validity of a scheme for reduction in the payment of medical benefits (he being the assignee of benefits accruing to his patients) as an acquisition of property by the Commonwealth without just terms. As explained by Brennan J: [35] "A practitioner's right to the payment of a medicare benefit assigned by a patient is conferred by statute exclusively upon the assignee practitioner when the conditions prescribed by the Principal Act are satisfied. It is not capable of assumption by third parties. It is a right ultimately to be paid by the Commission a sum of money out of Consolidated Revenue. The Commission is under a corresponding statutory duty. ... Once it is appreciated that the right conferred by the Principal Act upon an assignee practitioner is to be discharged by a statutory authority when certain statutory criteria are fulfilled, it is clear that that Act does not create a debt enforceable by action." After referring to Travis' Case, Brennan J repeated the proposition that the practitioner's right to be paid medicare benefits "does not create a debt". [36]
In Commissioner of State Revenue (Vic) v Royal Insurance Australia Limited, [37] Royal Insurance sought to recover amounts paid by way of stamp duty on premiums which, although correctly paid at the date of payment, had by later retrospective legislation been overpaid. Mason CJ, noting that the payments had been made under a mistake of law (albeit one which only became mistaken subsequently and retrospectively) stated: [38] "In David Securities it was accepted that: [39] 'the payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment'. And, prima facie, that is all that is required where, as here, the recipient has no legal entitlement to receive or retain the moneys. The recipient has been unjustly enriched. … The belated recognition in David Securities that moneys paid away as a result of a causative mistake of law are recoverable enables us to discard some of the complications associated with the old law governing the recovery of moneys paid as and for taxes which were not due and payable because the causative mistake of law was not thought to be a sufficient basis of recovery."
Brennan J, relying on the authority of Travis' Case, stated that "[m]andamus will go where there is a duty to pay money".
Closer to the present category, are cases involving the payment of social security benefits. In Walker v Secretary, Department of Social Security, [40] Spender J stated: [41] "Chapter 5 of the Social Security Act 1991 (Cth) is a code providing for the methods of recovery by the Commonwealth of, inter alios, debts owed to the Commonwealth of the kind owed by the appellant. If the department wished to apply the [amount] payable to Mr Walker for sickness benefits in reduction of the debt… owed by Mr Walker to the Commonwealth, in my opinion, it was, and still is, necessary to comply with the provisions of s 1233, dealing with recovery by way of a garnishee notice."
Drummond J stated: [42] "In Commonwealth v Burns [1971] VR 825 Newton J rejected an argument that a provision in the Repatriation Act 1920 (Cth) similar in effect to ss 1224(2)(b) and 1232(1) of the Act provided the sole means by which the Commonwealth could recover benefits purportedly paid under the Repatriation Act but to which the recipient in truth had no entitlement, and that the Commonwealth's rights at common law under the principle in Auckland Harbour Board… were thus not excluded. … Chapter 5, however does in my opinion reveal an intention to state, in an exclusive way, how the Commonwealth can recover certain kinds of overpaid benefits. … The Chapter then defines these recovery procedures and makes provision for recovery in two other ways (viz, by instalments and by consent deductions). It concludes with provisions empowering the Secretary to forego the Commonwealth's entitlement to recovery of such payments. In my opinion, the opening words of s 1222(1) and the structure of Chapter 5 show that it is a code which prescribes the exclusive methods whereby recovery can be lawfully effected of those social security and other benefits listed in s 1222(1)."
Noting that Chapter 5 of the Social Security Act 1991 (Cth) was limited to the "recovery" of certain debts, Drummond J further observed: [43] "There are numerous cases in which, in various statutory contexts, the word 'recover' and its derivatives have been held to bear a meaning wider than its strict legal meaning of 'recover by action'. … In view of the procedures made available by Chapter 5 to the Commonwealth for recovering overpaid benefits that do not involve court action, it is in this larger sense that the terms 'recovery' and 'recoverable' are there used."
Neither the precise language of the Social Security Act, nor the fact that Drummond J was in dissent in the outcome of the appeal, affects the approach adopted in this reasoning. The Court (by majority) held that the entitlement of the appellant to a sickness benefit arose by statute and remained an entitlement "unless payment was intercepted by some lawful process". [44] The court denied that the Secretary had a right of setoff.
In 1988, s 181 of the Social Security Act 1947 (Cth) provided: 181 Rate reduction determination (1) Where, in consequence of a false statement or representation, or in consequence of a failure or omission to comply with any provision of this Act, an amount has been paid by way of pension, allowance or benefit under this Act which would not have been paid but for the false statement or representation, failure or omission, the amount so paid is a debt due to the Commonwealth. (2) Notwithstanding anything contained in this Act, where - (a) an amount has been paid by way of pension, benefit or allowance under this Act that should not have been paid; … and the person to whom that amount was paid is receiving, or is entitled to receive, a pension, benefit or allowance under this Act … that amount … shall, unless the Secretary takes action [to write off the debt or waive recovery] in relation to that amount, be deducted from the last mentioned pension, benefit or allowance by reducing each payment of that pension, benefit or allowance by a proportion of that pension, benefit or allowance … decided by the Secretary in each particular case, until the sum of the amounts by which the payments are reduced equals that amount.
In Taylor v Secretary, Department of Social Security [45] the applicant, then bankrupt, alleged that because of the overpayment being categorised under s 181(1) as a "debt" due to the Commonwealth, the Commonwealth was limited to proving in the applicant's bankruptcy. Lockhart J observed: [46] "The overpayments by the Commonwealth to the applicant constitute a debt which upon her bankruptcy became a provable debt, thus converting the right of the Commonwealth to sue into a right to prove and share in her estate. But it does not follow that the statutory directive of s 181(2) of the Social Security Act has been countermanded. Nor does the operation of the subsection depend upon the existence of a debt due and owing to the Commonwealth."
Beaumont J also held that the Commonwealth's authority to deduct payments survived remedies available under the general law, [47] whilst Wilcox J agreed with both Lockhart and Beaumont JJ.
There are two respects in which the statutory scheme in Taylor is distinct from the present scheme. First, the debt in Taylor was not extinguished by her bankruptcy because the Bankruptcy Act does not in terms extinguish debts. Section 63 of the Limitation Act, if engaged, would have that effect. Secondly, the two limbs of s 181 of the Social Security Act were understood as discrete and self-sufficient statements. Indeed, subs (2) commenced "[n]otwithstanding anything contained in this Act". On the other hand, there is an aspect of the legislative scheme which is reflected in both sets of provisions. Thus, in Taylor, it was not the "debt" which was recoverable from future payments, but "the amount" which should not have been paid. Similarly under s 83J(3) of the Education Act, the entitlement of the Minister is to "recover the amount" which should not have been paid (subs (1)), language which is picked up in the chapeau of subs (3), permitting the Minister to "recover an amount… by reducing future amounts of financial assistance…". Thus, s 83J(3)(b) does not refer to a debt.
A further point, which supports the conclusion that the remedies are distinct in this case, is that s 181(1) of the Social Security Act stated that "the amount so paid is a debt due to the Commonwealth". Section 83J(3) is in different terms: it states that the amount which should not have been paid may be recovered "as a debt" in a court of competent jurisdiction. It does not state that the amount "is a debt".
While much will turn on the precise language of the statute in determining the extent to which the general law operates with respect to specific statutory entitlements, the principle stated in Josephson will still apply. That is, "[t]he natural presumption to begin with is that Parliament in creating the novel right attaches to it the particular mode of enforcement as part of its statutory scheme. To that extent the enactment is a code". However, the separate mode of recovery by an action under the general law (or by way of garnishee [48] ) will, in the absence of a contrary provision in the statute, attract generally applicable constraints. As the Minister submitted, it is necessary to characterise the power of recovery. [49]

Application of principles

In applying these principles, one starts by identifying the nature of the statutory "right" which is at the source of the dispute. In the present case, it is the power to provide financial assistance to "non-government school children", pursuant to s 83B(1). Although the section identifies a power (the Minister "may" provide financial assistance), rather than an entitlement, it should be assumed for present purposes (in favour of the appellant) that the scheme, which is subject to the National Education Reform Agreement between the State and the Commonwealth, creates an obligation to provide such assistance in circumstances where the relevant criteria are met. The remainder of Pt 7, Div 3 (in which s 83B appears) is directed to the imposition of both substantive and administrative conditions on recipients, together with a scheme for the enforcement of such conditions. As s 83B(7) recognises, each payment of financial assistance must be the subject of an appropriation of money by Parliament.
In circumstances where there has been a payment to a school which was operating for profit or was otherwise non-compliant, s 83J(1) confers on the Minister a power to "recover" the amount of any such financial assistance. Again, the term "may" implies the existence of a power, but in the circumstances of a payment which is not authorised, and is indeed prohibited, the power may constitute a duty (subject to any discretion conferred on the Minister under the Education Act).
To the extent that the Minister is empowered to recover the amount as a debt in a court of competent jurisdiction, the statute engages the judicial system, including its procedural and other constraints. Thus, if, under the Limitation Act, the cause of action in debt is extinguished, it may well not be recoverable by court process.
On the other hand, the system of recovery by reducing future amounts of financial assistance is distinct, both linguistically and in providing a mechanism which is dependent upon the operation of the statutory scheme. That mechanism should therefore be presumed to operate to the exclusion of the constraints which might apply to proceedings in a court.
The linguistic elements which support this conclusion are three-fold. First, what may be recovered is "an amount" and not something identified as a "debt". Secondly, although one mechanism for recovery of the amount is by court process, even then the amount is not stated to be a debt but merely an amount recoverable "as" a debt. Thirdly, pars (a) and (b) in subs (3) are expressed in the alternative. The structure of the provision thus isolates recovery by reduction of future assistance and uses language which is distinct from that of debt recovery in a court.
It follows that the Limitation Act has no operation with respect to steps taken under s 83J(3)(b).
This conclusion is consistent with the construction of the Limitation Act set out above. Thus, the right of recovery under s 83J(3)(b) does not constitute "action" on a cause of action within s 14(1) of the Limitation Act. Furthermore, although s 14(1)(d) refers to "a cause of action to recover money recoverable by virtue of an enactment", it may be doubted that s 83J(3)(b) constitutes a "cause of action". [50] Like the term "action", the phrase "cause of action" is a legal term which connotes the availability of proceedings in a court of law.
For one or both of these reasons, the power conferred on the Minister by s 83J(3)(b) does not fall within s 14(1) of the Limitation Act. Accordingly, the Minister's contention should be upheld, with the result that the Limitation Act had no operation in relation to the proposed recovery by reduction of future amounts of financial assistance.

Date "cause of action" arose

If the unlawful payment were sought to be recovered as a debt in a court of competent jurisdiction, a separate question would arise as to the time the cause of action arose. As noted above, there is no power to make a declaration of non-compliance until two statutory preconditions have been satisfied, namely the existence of a recommendation by the Advisory Committee and the giving of notice of the recommendation to the affected school. Once those conditions have been met, it is open to the Minister to be satisfied that the basis for recovery has been established. In her submissions as to the date at which the right of recovery came into existence, the Minister accepted that a cause of action arose either when she was relevantly satisfied that the appellant was non-compliant, or when she exercised her discretion to commence recovery under s 83J(3)(b).
As also noted above, the primary judge took the view that the cause of action arose at the date of the recommendation of the Advisory Committee. The reasoning underlying this conclusion was not entirely clear. The judge correctly noted that the powers of the Minister to suspend, reduce or impose conditions on the provision of financial assistance in relation to a non-compliant school, pursuant to s 83E(1), were not dependent on the Minister declaring a school to be non-compliant: s 83F(6). It would seem that the power "under this Division" to "reduce" the amount of assistance provided includes the power conferred by s 83J(3)(b). As it is only the non-compliance declaration (relevantly for present purposes) which is subject to a precondition, being the recommendation of the Advisory Committee, it is not entirely clear why a cause of action should arise upon the making of that recommendation, when the declaration to which it is a precondition is not itself a precondition to recovery by reduction of future payments of financial assistance. [51]
There is, however, merit in the appellant's submission that the decision to seek recovery, albeit a discretionary decision, is equivalent to the decision of a creditor to commence proceedings to recover a debt. A decision to seek recovery of an amount would appear to assume that the Minister is already satisfied that there is a recoverable amount. Absent that state of satisfaction, no discretionary power would be considered.
Although it is not necessary to determine the matter for present purposes, the better view appears to be the alternative view proffered by the Minister, namely that a right of recovery arises upon the satisfaction of the Minister that a school has been the recipient of an unlawful payment, or that the school is otherwise a non-compliant school.

Conclusions

Because the right to recover by way of reducing future financial assistance is not subject to the operation of s 14(1)(d) of the Limitation Act, and in circumstances where no other basis for relief was pursued, the judgment of the primary judge refusing relief must be upheld. The appeal must be dismissed. In the Common Law Division, costs were awarded in favour of the Minister. The appellant sought its costs in the notice of appeal, and, as there was no reference to costs at the hearing of the appeal, it may be assumed that the parties accept that costs should follow the event.
The Court should make the following orders: 1. Dismiss the appeal. 2. Order that the appellant pay the respondent's costs in this Court.

Endnotes

Malek Fahd Islamic School Limited v Minister for Education and Early Childhood Learning [2022] NSWSC 1176 at [188] (primary judgment).
Auckland Harbour Board v The King [1924] AC 318 at 327; Pape v Commissioner of Taxation (Cth) (2009) 238 CLR 1; [2009] HCA 23 at [58]-[59] (French CJ).
Sims v Commonwealth of Australia (2022) 109 NSWLR 546; [2022] NSWCA 194 at [78]-[80] (Bell CJ), [121] (Meagher JA); [156] (White JA).
Commencement of Education Amendment (Not-for-profit Non-Government School Funding) Act 2014 (NSW).
See Christian Community Ministries Ltd v Minister for Education and Early Learning [2023] NSWSC 272 at [45].
Primary judgment at [281].
Primary judgment at [280].
Primary judgment at [285].
Ibid.
Primary judgment at [286].
Primary judgment at [298].
Ibid.
Respondent's written submissions, par 25.
[1954] 1 QB 178 at 185-186.
Section 7.
P Herzfeld and T Prince, Interpretation (2nd ed, Law Book Co, 2020) at [21.40].
[1974] 1 NSWLR 718.
Vezitis at 719-720.
(1908) 8 SR (NSW) 246 at 249.
(1881) 7 QBD 38 at 50.
(1883) 8 App Cas 354 at 361, 374.
Clarke at 249.
Muldoon v Church of England Children's Homes Burwood (2011) 80 NSWLR 282; [2011] NSWCA 46 at [38]-[42]; Wende v Horwath (NSW) Pty Ltd (2014) 86 NSWLR 674; [2014] NSWCA 170 at [20].
Victims' Compensation Fund Corporation v District Court of NSW (1997) 92 A Crim R 224; Grzybowicz v Smiljanic [1980] 1 NSWLR 627.
(2017) 261 CLR 509; [2017] HCA 6.
Respondent's written submissions, par 36.
See fn 2 above.
(1914) 18 CLR 691; [1914] HCA 68.
Josephson at 700, 701.
See also Griffith CJ at 697; Powers J at 703.
(1956) 95 CLR 300; [1956] HCA 24.
Travis' Case at 323.
See also at 311-312 (Williams J).
(1994) 179 CLR 226; [1994] HCA 8.
Peverill at 241-242.
Peverill at 243.
(1994) 182 CLR 51; [1994] HCA 61.
Royal Insurance at 67.
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378; [1992] HCA 48.
(1995) 56 FCR 354.
Walker at 355-356.
Walker at 359D.
Walker at 360E-G.
Walker at 374A-B.
(1988) 18 FCR 322; [1988] FCA 70.
Taylor at 331.
Taylor at 339.
Secretary, Department of Social Security v Southcott (1998) 82 FCR 100; [1988] FCA 323.
Respondent's supplementary submissions, 7 June 2023, par 4.
Contrary to the assumption noted at [14] above.
See also Christian Community Ministries at [57]-[58]. 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: 29 June 2023

Social Security Act 1947(Cth)

Prisons Act 1952(NSW)

Repatriation Act 1920(Cth)

Commencement of Education Amendment (Not-for-profit Non-Government School Funding) Act 2014(NSW)

(2022) 109 NSWLR 546

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