Malek Fahd Islamic School Limited v Non-Government Schools Not-For-Profit Advisory Committee

Malek Fahd Islamic School Limited v Non-Government Schools Not-For-Profit Advisory Committee - [2020] NSWCATAP 19 - NSWCATAP 2019 case summary — Zoe

Overview

Malek Fahd Islamic School Limited is a non-government school providing education for kindergarten to year 12 students from three campuses in Sydney. The school was established in 1989 by the Australian Federation of Islamic Councils Inc. The Minister may provide financial assistance in respect of non-government schools but must not provide financial assistance to a school that operates "for profit": Education Act 1990 (NSW), s 83B(1) and s 83C(1). On 1 June 2017, the Non-Government Schools Not-for-profit Advisory Committee (the Advisory Committee) notified the School that it had found that the School was operating "for profit" in the calendar years 2014 and 2015 and had determined to recommend to the Minister that "noncompliance declarations" be made. The Advisory Committee also recommended that financial assistance be suspended until the School had provided evidence of various matters, and that financial assistance provided in 2014 and 2015 be repaid.
The total amount of financial assistance paid by the Minister to the School in respect of the calendar years 2014 and 2015 was $11,065,584.69. The Advisory Committee recommended to the Minister that this amount be repaid "by reducing the amount that would otherwise be payable to the School by 50% until the amount is fully recovered." If the suspension was not removed by 1 March 2020, the Advisory Committee recommended that the total amount of $11,065,584.69 be repaid by the School in full before resuming financial assistance. We will call these recommendations the "repayment recommendations".
The School applied to the Tribunal for an administrative review of the Advisory Committee's recommendations. The Tribunal confirmed each of the recommendations: Education Act, s 108. The School has appealed to the Appeal Panel from the Tribunal's decision: Civil and Administrative Tribunal Act 2013 (NSW), s 80. The School does not challenge the Tribunal's confirmation of the Advisory Committee's recommendations to make non-compliance declarations for the 2014 and 2015 calendar years. Their case is that they have recovered the majority of the "for profit" payments made to the Australian Federation of Islamic Councils Inc and have otherwise accounted for all of the "for profit" payments except for $112,522.32. We note that, in Supreme Court proceedings, the School sought and obtained equitable relief against the Australian Federation of Islamic Councils Inc: Malek Fahd Islamic School Limited v The Australian Federation of Islamic Councils Inc [2017] NSWSC 1712.

[5]

Advisory Committee's decision

The Advisory Committee found that the School operated for profit in 2014 and 2015. Rather than recommend that the Minister make a "for profit declaration" resulting in the termination of financial assistance, the Advisory Committee recommended that the Minister make a "non-compliance declaration." The reason for doing so was that "more appropriate action can be taken under s 83E". Having made that recommendation, the Advisory Committee went on to recommend that all financial assistance be suspended until the School satisfies the Minister that it has complied with certain conditions.
We set out the Advisory Committee's determination in full below. The last two recommendations are the "repayment recommendations". Advisory Committee's decision The advisory committee finds that the School operated for profit in 2014 and 2015 and recommends that a non-compliant declaration be made for each of the years, rather than for profit declarations, because more appropriate action can be taken in respect of the school under section 83E(2) and 83F. The action the Advisory Committee recommends be taken is: (a) All financial assistance be suspended until the School provides evidence to the Minister that satisfies the Minister that it: (i) has received payment from the Australian Federation of Islamic Councils Inc (AFIC) for all funds loaned by the School to AFEIC and that the loan agreement, in whatever form, is terminated; and (ii) is released from all ongoing financial support provided to AFIC that is beyond reasonable market value, whether by way of direct payment or guarantee, for property, goods or services that are required for the operation of the school; and (iii) is released from all ongoing financial liability to AFIC that is beyond reasonable market value, whether by way of direct payment or guarantee, for property, goods or services that are required for the operation of the school; and (iv) has renegotiated, executed and registered the leases of properties owned or controlled by AFIC at a rental that is a reasonable market value for the unimproved value of the land; (v) has established and implemented governance arrangements to the satisfaction of the NSW Education Standards Authority; and (vi) has established and implemented governance arrangements to ensure that no part of its proprietor's assets (in so far as they related to the school) or its proprietor's income (in so far as it arises from the operation of the school) is used for any purpose other than for the operation of the school; and (vii) has established and implemented governance arrangements that ensure that all payments by the School are only for property, goods or services required for the operation of the School and at no more than reasonable market value. (b) The amount paid to the School in 2014 and 2015, $11,065,584.69, be repaid following the lifting of the suspension from the financial assistance which would otherwise be payable to the School by reducing the amount that would otherwise be payable to the School by 50% until the amount is fully recovered. (c) if the suspension from financial assistance in (a) is not removed by 1 March 2020, regardless of whether or not the conditions on the suspension are subsequently met, the amount paid to the School in 2014 and 2015 ($11,065,584.69) be repaid by the School in full prior to the resumption of financial assistance.

[6]

Tribunal's jurisdiction

The Tribunal has such jurisdiction and functions as may be conferred or imposed on it by or under the NCAT Act or any other legislation: NCAT Act, s 28. The Administrative Decisions Review Act 1997 (NSW) (ADR Act) provides for the circumstances in which the Tribunal has administrative review jurisdiction over the decision of an administrator. Section 9 of that Act provides that the Tribunal has administrative review jurisdiction if "enabling legislation provides that applications may be made to the Tribunal for an administrative review" of a decision. The Education Act is enabling legislation. Section s 107(1) lists eleven decisions in respect of which an application can be made to the Tribunal for administrative review.
Under s 107(1)(e2) the School may apply for an administrative review of the recommendation of the Advisory Committee to make a non-compliance declaration: (e2) a recommendation of the Non-Government Schools Not-for-profit Advisory Committee under Division 3 of Part 7 that the Minister make a for profit declaration or a non-compliance declaration in respect of a school (including a recommendation on any consequent suspension or reduction of, or imposition of conditions on, the provision of financial assistance)
The Tribunal has jurisdiction to review the Advisory Committee's recommendation that the Minister make a non-compliance declaration for 2014 and 2015. It also has jurisdiction to review the recommendations that financial assistance be suspended until the School provides evidence of certain matters.
Even if the Advisory Committee did not have power to make the repayment recommendations, the Tribunal has jurisdiction to review the purported decision: Administrative Decisions Tribunal Act 1997 (NSW), s 6(3). Section 6 of the ADR Act is headed "Meaning of 'decision'". Section 6(3) provides that: (3) Decisions made without power For the purposes of this Act (and without limiting subsection (2)), a decision that purports to be made under enabling legislation is taken to be a decision made under the enabling legislation even if the decision was beyond the power of the decision-maker to make it.
That provision adopts the principle first expressed in Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (NSW) (1978) 1 ALD 167 (AATA) and upheld in Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 41 FLR 338 at [18] (FCAFC). The Tribunal has jurisdiction to review a decision that was purported to be made in the exercise of powers conferred by enabling legislation. The Tribunal should make a "different recommendation" (or no recommendation) to the Minister concerning the subject matter of the application, if it was beyond the power of the Advisory Committee to make those recommendations: Education Act, s 108(1)(b).

[9]

Minister's unqualified powers

The Minister may provide financial assistance to non-government schools: s 83B(1). However, under s 83C(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.
The circumstances in which a school operates for profit are set out in s 83C(2).
Section 83C(4) provides that even if a school operates for profit, the Minister is not obliged to terminate the provision of financial assistance in two circumstances: (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.
If the Minister is satisfied that either of the circumstances listed above applies to a school that operates for profit, the school is a "non-compliant school": s 83E(3). The "more appropriate action" that may be taken under s 83E includes the Minister suspending, reducing or imposing conditions on the provision of financial assistance: s 83E(1).
The scheme in Division 3 of Part 7 gives the Minister the full range of powers in the Division regardless of whether a non-compliance declaration is made or whether the suspension, reduction or imposition of conditions is recommended by the Advisory Committee: s 83F(6). These powers were referred to by the then Minister in the Second Reading Speech as "reserve powers". (NSW Legislative Council, Parliament Debates (Hansard), 22 October 2014 at page 6.)
The Minister may recover the amount of any financial assistance that was provided "in respect of a period when the school operated for profit or was a non-complaint school": s 83J(1). Under s 83J(3), the Minister may recover such an amount: (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.
Section 83J was inserted by the Education Amendment (Not-for-profit Non-Government School Funding) Act 2014. The Second Reading Speech for that legislation was delivered by the then Minister, the Hon. John Ajaka. He noted that, at the time, the only means of seeking repayment of funds paid to a school when the school was ineligible to receive those funds, was through the courts. The former Minister went on: By inserting section 83J, the Minister will be able to recover the money either as a debt in court, under section 83J(3)(a), which is the current situation, or by offsetting it against future funding under section 83J(3)(b). In some cases, both provisions will need to be applied. The intention of the debt-offset provision is to simplify any potential recovery proceedings. This means that if a school is currently compliant but was not so during a past period, deductions can be made from future payments until the school has repaid the debt. . . . The outcome of the measure is simply to ensure there is a practical avenue for recovery of New South Wales Government funds beyond an expensive and protracted court process.

[14]

Consideration

Section 83J(1) gives the Minister, and only the Minister, express power to recover amounts of financial assistance given when a school was operating for profit or was a non-complaint school. One way those amounts may be recovered is by reducing future amounts of financial assistance payable by the Minister. As the former Minister said in the Second Reading speech, that option gives the Minister a practical avenue for recovering the funds, beyond an expensive and protracted court process.
Under s 83F(3), if the Advisory Committee recommends that the Minister make a non-compliance declaration, it may also include a recommendation on any consequent suspension or reduction of, or imposition of conditions on, the provision of financial assistance." Contrary to the Advisory Committee's submission, the powers given to the Advisory Committee in s 83F(3) do not overlap with the powers in s 83J. They are discrete powers. The powers in s 83F(3) allow the Committee to recommend that financial assistance be reduced, but not for the purpose of recovering amounts provided when the school was operating for profit or was a non-compliant school. That power is given exclusively to the Minister.
The Second Reading Speech for the Education Amendment (Not-for Profit Non-government School Funding) Bill 2014 confirms that the meaning of the provision is the ordinary meaning conveyed by the text of the provision: Interpretation Act 1987 (NSW), s 34. In that speech the Hon. John Ajaka made the following observation about s 83F(3): The Not-for-profit Advisory committee may also recommend that the Minister impose funding conditions or other sanctions under s 83F(3) to ensure that the school rectifies any issues.
Those observations may be contrasted with the former Minister's observations about the meaning and effect of s 83J set out above. That provision gives the Minister exclusive power to recover amounts "by reducing future amounts of financial assistance payable by the Minister for the benefit of the school".
The second repayment recommendation in 5.2(c) (see para 7 above) is that, in the certain circumstances, the School must re-pay the full amount of financial assistance. In our view, that is not the imposition of a condition on the provision of financial assistance. Rather, it the recovery of an amount of financial assistance that has been paid during a period of ineligibility
These conclusions are not affected by the prohibition on the Minister providing financial assistance to or for the benefit of a school that operates for profit: s 83C(1). That provision is about the provision of financial assistance to a school that is currently operating for profit. We note that the obligation on the Minister to terminate the provision of financial assistance does not apply if the Minister is satisfied that "more appropriate action can be taken under s 83E": s 83C(4).

[15]

Orders 1. The appeal is allowed. 2. The following orders of the Tribunal made on 6 September 2019 are set aside: In accordance with s 108 of the Education Act 1990 the decision under review is confirmed. 1. In accordance with s 108(1)(b) of the Education Act 1990, the following recommendation is made to the Minister concerning the subject matter of the application: The advisory committee finds that the School operated for profit in 2014 and 2015 and recommends that a non-compliant declaration be made for each of the years, rather than for profit declarations, because more appropriate action can be taken in respect of the school under section 83E(2) and 83F. The action the Advisory Committee recommends be taken is: (a) All financial assistance be suspended until the School provides evidence to the Minister that satisfies the Minister that it: (i) has received payment from the Australian Federation of Islamic Councils Inc (AFIC) for all funds loaned by the School to AFEIC and that the loan agreement, in whatever form, is terminated; and (ii) is released from all ongoing financial support provided to AFIC that is beyond reasonable market value, whether by way of direct payment or guarantee, for property, goods or services that are required for the operation of the school; and (iii) is released from all ongoing financial liability to AFIC that is beyond reasonable market value, whether by way of direct payment or guarantee, for property, goods or services that are required for the operation of the school; and (iv) has renegotiated, executed and registered the leases of properties owned or controlled by AFIC at a rental that is a reasonable market value for the unimproved value of the land; (v) has established and implemented governance arrangements to the satisfaction of the NSW Education Standards Authority; and (vi) has established and implemented governance arrangements to ensure that no part of its proprietor's assets (in so far as they related to the school) or its proprietor's income (in so far as it arises from the operation of the school) is used for any purpose other than for the operation of the school; and (vii) has established and implemented governance arrangements that ensure that all payments by the School are only for property, goods or services required for the operation of the School and at no more than reasonable market value.

At a glance

Court

Decision date

Source

Judgment (16 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (5)

Cited By (1)