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[2017] VSC 138
General information, not legal advice.
Supreme Court of Victoria
2017-03-28
J FORREST J
Original judgment source is linked above.
Subpoena - Public Interest Immunity - Evidence Act 2008 (Vic) s 130 - Production of documents - Manual of investigative techniques for Registered Training Organisation audits.
For the Secretary to the Department of Education and Training
1 This defamation trial has now occupied 17 sitting days. Nationwide's evidence in defence of its plea of justification is part heard. This ruling concerns a claim by the Department of Education and Training ('DET') for public interest immunity (pursuant to s130 of the Evidence Act 2008 (Vic)) in relation to parts of a VTG Audit Manual ('the Manual')[1], produced in response to a subpoena issued by Mr Charan's solicitors.
2 The heart of Nationwide's defence is that prior to December 2014:
(a) Mr Charan engaged in unscrupulous conduct in his management of a number of vocational educational and training ('VET') companies controlled by him and Mr Ivan Brown; and
(b) The VET Companies managed by Mr Charan failed to comply with quality standards set by State and Federal regulators.
3 In 2015, audits were commissioned by DET into two of the companies that it is alleged were under Mr Charan's management in 2014. The evidence of the auditors and the tender of their reports underpins much of Nationwide's justification defence.[2]
4 On 1 March 2017, during the course of the trial, Mr Charan's solicitors issued a subpoena to the Secretary of the DET, for production of documents relating to the audits. There were five categories of documents including the following:
The Department's "Victorian Training Guarantee Contract Compliance Audit Manual" referred to in the letters from Garran Duncan, Protiviti to Peter Graham, Department of Education and Training dated 4 May 2015 and 15 May 2015 in relation to Protiviti's EOE and EOP audits of CTT
5 A number of documents were produced by DET in response to categories 1, 3, 4 and 5, and released to parties for inspection. However, the Manual - used by the auditors as a guide in preparing their reports - was produced in a redacted form.
6 It was not suggested that the entirety of the manual was unavailable for production. However, the redacted parts are based on a claim by DET of public interest immunity ('PII'), and are the subject matter of this ruling. It is what is colloquially known as a 'contents claim'[3] and is primarily founded on the proposition that disclosure of the unredacted version of the manual would reveal the investigative techniques underpinning VET audits. I have determined that, in the main, the claim is made out. My reasons now follow.
7 In mid-December 2015, Australian Careers Network ('ACN') listed on the ASX. It was the parent company of a number of VET providers, including Thoan, which traded under the name of Australian Management Academy ('AMA') and Consider This Training Pty Ltd ('CTT'). Each was a registered training organisation ('RTO') and had entered into at least one contract ('VET funding contract') with DET under a program, known as the Victorian Training Guarantee ('VTG'). These two companies, as well as other companies in the ACN group (and over 500 others in the VET sector), received large amounts of public funding for the provision of training courses to students who qualified to undertake such instruction.
8 At the heart of the VTG scheme is a computerised program, Skills Victoria Training System ('SVTS'). It is not necessary for the purpose of this exercise to go into that program in any detail, save to say that to enable payment for the training of a student, specified documentation in the form of electronic data had to be uploaded through the SVTS web portal. If the SVTS program was satisfied with the information or data provided, payment was automatically authorised. There was marginal (and certainly no real) human assessment of the uploaded data that would ultimately trigger a payment for the student's training - usually but not always a month in arrears from the date on which the information was uploaded. This was appropriately described by Senior Counsel for DET as an 'honour system'. It is not necessary to say any more about the system other than payments would be made periodically, provided the uploaded material complied with the SVTS parameters.
9 Integral to the VTG scheme was the existence of a post-payment audit system in relation to claims made by RTO via the SVTS and the manual was the guide for the auditors to carry out that task.
10 I mentioned earlier the VET funding contract. Clause 10 reads as follows:
10.1. The Department (or persons authorised by the Department) may conduct an audit or review of the RTO at any reasonable time:
10.2. The RTO must, in accordance with the Department's directions:
10.3. If an audit or review conducted by, or on behalf of, the Department concludes that there has been non-compliance by the RTO with the VET Funding Contract, the Department may, in its absolute discretion:
11 In 2015 DET instructed auditors to investigate and report on two of the companies which operated under the ACN umbrella:
(a) A 2014 'Evidence of Eligibility' audit of the AMA - instructed in April 2015;
(b) A 2014 'Evidence of Participation' audit of CTT - instructed in April 2015; and
(c) A 2015 'Contract Review' audit of AMA - instructed in July 2015.
12 Two of the audits - (a) and (b) - were undertaken by Protiviti and the third - (c) - by Ernst & Young. Each of the reports were delivered to DET in 2015 (the two Protiviti reports in May and Ernst & Young in September).
13 In carrying out these audits the Department provided the auditors with the Manual, which in general terms set out the parameters of the audit to be undertaken. It was provided on a confidential basis:
This document is for the sole use of the Department of Education and Training and its auditors. This documents or any parts are not to be circulated outside of the Department or its auditors.[4]
14 Mr Glenn Sullivan, Acting Director of Training Market Quality and Manager of the Special Investigations Unit within the Training Market Quality Division of DET, swore two affidavits (6 March 2017 and 8 March 2017). The second affidavit identified with precision those parts of the manual in respect of which PII was claimed. The unredacted parts of the manual contain the following:
(a) Background to the contract compliance audit program;
(b) An overview of contract compliance audit objectives;
(c) A summary of the contract compliance audit process;
(d) Responsibilities of the RTO, the Department and Auditor;
(e) The Department's focus on encouraging process improvement within RTOs, with the aim of increasing compliance with the VTG Service Agreements and VET Funding Contracts;
(f) A description of the risk review process to be undertaken annually, prior to the commencement of contract compliance audit activity;
(g) A description of the audit planning process to be undertaken annually, prior to the commencement of contract compliance audit activity;
(h) An overview of the audit approach and guidance on the key processes for conducting audits under the contract compliance audit program.
(a) A comment about Business Process Audits in chapter 1.5;
(c) Details of audit processes in chapter 5, including key audit processes, transactional compliance audits, follow up audits, evidence of eligibility audits, evidence of concession audits, evidence of participation audits;
16 I should add this: although not specifically referred to, I am prepared to assume from Mr Sullivan's affidavit that the manual, or a similar version, is still used by DET for the purpose of instructing auditors.
17 DET contends that the redacted parts of the manual contain highly sensitive information relevant to the techniques under which auditors carry out their important work. The audit process, it is argued, is essential to the integrity of the system and to divulge the instructions given to auditors as to how and in what way they were to go about their tasks - including forensic investigation - would be highly prejudicial to the undertaking of audits of RTOs generally. To put it bluntly, it was said that unscrupulous operators could use this information - once it was in open court - to anticipate and avoid detection of certain practices, both in anticipation of and in response to an audit.
18 Mr Charan, correctly, asserts that the audit reports form a central plank of the justification defence of Nationwide. He contends that if he is precluded from inspecting the unredacted manual and particularly the investigatory methods utilized by auditors, he is hamstrung in mounting a challenge to the contents of the report - and particularly so in the cross-examination of the auditors by his counsel.
19 The principles applicable to a claim of public interest immunity are contained in s 130 of the Evidence Act 2008 (Vic), "exclusion of evidence of matters of state".
20 Section 130(1) provides:
If the public interest in admitting into evidence information or a document that relates to matters of state is outweighed by the public interest in preserving secrecy or confidentiality in relation to the information or document, the court may direct that the information or document not be adduced as evidence.
21 Section 130(4) sets out a non-exclusive list of circumstances in which the information or document will be taken to relate to ―matters of state for the purposes of s 130(1), including (relevantly) sub-section 130(4)(f), which provides that information or a document will be taken to relate to matters of state where adducing the evidence would "prejudice the proper functioning of the government of ... a State".
22 Then section 130(5) sets out a non-exhaustive list of the matters that the court may take into account for the purposes of s 130(1):
(a) the importance of the information or the document in the proceeding;
(b) if the proceeding is a criminal proceeding - whether the party seeking to adduce evidence of the information or document is [a defendant/an accused] or the prosecutor;
(c) the nature of the offence, cause of action or defence to which the information or document relates, and the nature of the subject matter of the proceeding;
(d) the likely effect of adducing evidence of the information or document, and the means available to limit its publication;
(e) whether the substance of the information or document has already been published;
(f) if the proceeding is a criminal proceeding and the party seeking to adduce evidence of the information or document is [a defendant/an accused] - whether the direction is to be made subject to the condition that the prosecution be stayed.
24 For the purpose of this exercise it is only necessary to refer to two recent decisions of this court: that of Ryan and Matthews v SPI Electricity Pty Ltd & Ors (No 11).[7]
25 In Ryan, Mark Ryan commenced proceedings against the State of Victoria and a police officer for assault and battery. Mr Ryan sought damages for injuries he alleged were sustained by the conduct of a police officer, in the control of her horse, "Troophorse Upwey", whilst Ryan was participating in a demonstration outside the Maribyrnong Immigration Detention Centre.
26 As part of pre-trial discovery, an affidavit was provided by a police officer claiming PII over various redacted parts of a number of documents, including 'The Mounted Branch's Defence Tactics Manual 2012'.
27 A County Court Judge upheld a claim by the State under s 130 of the Evidence Act 2008, on the basis that the documents in dispute were 'of nominal, or no importance in the proceeding' and that, even if the documents in dispute were relevant to the proceeding, on balance the public interest in preserving confidentiality outweighed the public interest in disclosure. The Judge inspected the manual and concluded that disclosure would prejudice police operations and would equip people with that information to neutralise the tactics of the Mounted Branch of Victoria Police.
28 Mr Ryan then unsuccessfully appealed that decision.
29 Tate JA (with whom Santamaria and Ferguson JJA agreed) said that [at 53]:
Assessing whether a claim of public interest immunity ought to be upheld requires the court to weigh the public interest that would be harmed by the production of the evidence against the frustration or impairment of the administration of justice if the evidence was withheld.
30 Tate JA referred then to the following statement made by Gibbs ACJ in Sankey v Whitlam, as being the 'foundational common law statement of principle in public interest immunity':
The general rule is that the court will not order the production of a document, although relevant and otherwise admissible, if it would be injurious to the public interest to disclose it. However the public interest has two aspects which may conflict. These were described by Lord Reid in Conway v Rimmer, as follows:
'There is the public interest that harm shall not be done to the nation or the public service by disclosure of certain documents, and there is the public interest that the administration of justice shall not be frustrated by the withholding of documents which must be produced if justice is to be done.'
It is in all cases the duty of the court, and not the privilege of the executive government, to decide whether a document will be produced or may be withheld. The court must decide which aspect of the public interest predominates, or in other words whether the public interest which requires that the document should not be produced outweighs the public interest that a court of justice in performing its functions should not be denied access to relevant evidence. In some cases, therefore, the court must weigh the one competing aspect of the public interest against the other, and decide where the balance lies.[8]
31 The nub of the decision is to be found in the following two paragraphs of her Honour's judgment:
A party asserting a claim of public interest immunity to protect a document from disclosure is required to identify with precision the 'character of the particular information in issue and the nature of the particular litigation' in which the public interest issue arises. The party seeking access to the document must demonstrate a legitimate forensic purpose in disclosure.
In undertaking the balancing exercise, the court will generally have regard to a number of considerations. These include whether non-disclosure would impede the accused's right to a fair trial, the evidentiary value and importance of the documents to the issues, whether ordering disclosure would cause sources of information to 'dry up', whether preserving candour would facilitate the public function in issue, and whether the material is already in the public domain or has current sensitivity. The court is also to accord weight to an assertion by an authorised representative of government that the public interest would be at risk in the event of disclosure.[9]
32 Tate JA held that the Judge was correct in concluding that the documents in dispute are exempt from production and inspection, and are inadmissible in the proceeding, because they lacked relevance to the proceeding. In any event, her Honour considered that the Judge was correct in concluding that the documents in dispute are protected by public interest immunity under the Act. There was a risk that once the information contained in the manual became public, it would be used to undermine police protocols for controls during protests, with the consequent risk of safety to the public:
In my view, it is necessary to be mindful of the comments of Spigelman CJ that the 'public interest' in this context is not intended to subsume any public policy that might be served by non-disclosure. Nevertheless, it is also important to recognise that there is a public interest in the safeguarding of the proper functioning of the police in their control of public gatherings, including lawful protests, without which there are real risks to the safety and protection of individuals who participate in those gatherings, or who find themselves caught up in them, and to the police officers themselves. If information on police methods of crowd control were released into the public domain in a court of law those methods could be undermined and subverted, including by those intent on committing criminal offences. These are the matters which underpin the recognition of police methods of crowd control as a 'matter of state' within the context of s 130(4). Whether, in any individual case, the balance lies in favour of disclosure or non-disclosure under s 130(1) will depend upon the balancing exercise to be undertaken in the circumstances of the case in accordance with the factors in s 130(5). However, in my view, it would be wrong not to recognise that the documents in dispute 'relate to matters of state' and thus give rise to a public interest in their protection from release to be balanced against factors in favour of disclosure.
I consider that it would be wrong to exclude police methods from the statutory immunity, when Eastman; Young v Quin; and Skrijel v Mengler demonstrate that there is a similar underlying public interest in their protection from disclosure as that supporting the exclusion from evidence of the identity of informers, namely, that release would hinder the police 'in their duty of preventing and detecting crime'. There is no indication that such exclusion is what the legislature intended. Nor can support be gained for that exclusion by the remarks of Warren CJ and Maxwell P in Royal Women's Hospital, especially where the documents are assessed according to their content and not as a class, as required in Conway v Rimmer and Ahmet v Chief Commissioner of Police. As observed in Conway v Rimmer, the police, although they 'are not servants of the Crown and they do not take orders from the Government ... they are carrying out an essential function of Government'.[10]
33 I think it clear that the decision in Ryan sits comfortably with the approach adopted by Derham AsJ in Matthews[11] in applying a three step process to this exercise:
(a) Determining whether there is a risk that production and inspection of the manual in an unredacted form would be injurious to the public interest;
(b) Determining whether there is a public interest in a party having access to the manual in an unredacted form because such access is in the interests of the fair administration of justice; and
(c) Determining whether the public interest in the fair administration of justice outweighs the desirability that the unredacted parts of the manual not be disclosed.
Injury to the public interest in disclosure of the redacted parts of the manual
34 In Mr Sullivan's affidavits he deposes as follows as to the purpose of the manual and the asserted damage to the efficacy of the VTG program:
The Victorian Training Guarantee is Victoria's Vocation Education and Training program. An important element of the VTG involves the Department tendering for the provision of Training Services (assessment of suitability of training, provision of vocational education and training, and course assessment) to be provided by RTOs to students resident in Victoria, selecting suitable RTOs, entering into VET Funding Contract with suitable RTOs, and then managing the contractual relationships with such RTOs including by receiving claims that such RTOs have provided the relevant Training Services and payment of relevant funds. The Department exercises statutory authority in its activities in relation to VET Funding Contracts under the Education Training and Reform Act 2006, Part 3.1. The Department has an audit program to assist it in ensuring that funds expended pursuant to the Victorian Training Guarantee program are being claimed and paid in accordance with the terms of the VET Funding Contracts, to assist continuous improvement of the program and to avoid fraud in relation to the very significant amounts of public moneys that are involved. As part of this audit program, the Department utilises the services of contracted panel firms who are retained to perform audits on contracted RTOs.
The Manual was created by the Department for the sole use of the Department and its auditors in connection with the performance of that audit program and more particularly with the conduct of audits by the panel firms. It is marked that the document or any of its parts "are not to be circulated outside of the Department or its auditors" at the foot of the covering pages. The Manual sets out information as to criteria the Department uses to decide whether to perform audits, and to decide what kind of audit to perform. There are various types of audit which by reference to the area of operations to be audited and the degree scrutiny to be applied. The Manual also sets out detailed requirements and guidance to auditors including as to the manner of arranging for the conduct of audits, communications with RTOs targeted for audit, the performance of audits, risk areas to be scrutinised during audit, particular audit techniques, contact with students and staff, and the reporting of findings. If contracted RTOs were to have access to this information, they could take steps that would diminish the efficacy of the audit program. For example, knowledge of targeted risk areas would allow an unscrupulous RTO to place disproportionate resources into improving documentation in those areas so as to present a misleading impression of overall compliance, or knowledge of the guidance given to auditors in relation to how long may be allowed for an RTO to produce particular kinds of records would allow an unscrupulous RTO to arrange its affairs so that such records could be reviewed and improved before being produced. In my opinion the production of such contents of the Manual would impair the effectiveness of the audit program in detecting non-compliance by contracted RTOs with their obligations in the provision of Training Services under VET Funding contracts with the Department.[12]
It has been a key concern of the Victorian Government that there have been instances of poor quality training by RTOs. Since 2015, the Government took the step of conducting a 'blitz' on RTOs to identify instances of non-compliance where action could be taken. So far, the blitz has resulted in the investigation of 62 RTOs, the termination of 21 RTOs VTG Funding Contracts (Contract) with the Department, and earmarking several million in funds for recovery. A key tool of the Department in investigating RTOs and being able to take action to rectify these issues is its audit program.
The Department's VET Funding Contracts place substantial obligations on RTOs in order to support an effective vocational education training market. Amongst those obligations are an obligation to assess students for suitability to undertake training. RTOs are also required to record Evidence of Eligibility in relation to students, that is, evidence of an Eligible Individual's eligibility for government subsidised training in accordance with the eligibility requirements set out in the Contract and the related guidelines. In addition, RTOs are required to record Evidence of Participation, that is, evidence of an Eligible Individual's participation in training and assessment provided by the RTO, as detailed in Clause 10 of Schedule 1 of the Contract. The aims of these obligations are to ensure quality training to support the Government's agenda in the vocational education training space. Policing or monitoring compliance with these obligations is crucial to the vocational training market, and non-compliance with contractual obligations can be revealed (or proven) by audits. Specific knowledge of the audit process and methodologies, as well as what could lead to RTOs being targeted for audits, could diminish and stifle the effect of the audit program and ultimately the level of compliance with the Contracts. The Contracts, and working to ensure compliance with them, is the Department's key means of regulating the vocational education training market to ensure quality.[13]
35 The affidavits of Mr Sullivan satisfy me that disclosure of the details of the audit process is inimical to the public interest. As Tate JA explained in Ryan, it is not necessary that the public interest be limited to matters of 'high level' public policy. Rather, the functioning of government extends to many levels including those at which operational decisions are made. In my view, there is no principled differentiation between the mounted police manual in Ryan and the audit manual in this case. Both contain sensitive matters patently relevant to good governance in the sense of maintaining the law and, in this case, ensuring that public funds are not abused by those who may gain advantage by a greater understanding of the audit process.
36 In addition, the manual is not in the public domain and is provided to the auditors on a confidential basis.
37 Turning now to the contents of the manual, I note that several of the claims for PII were abandoned by DET shortly prior to the hearing, as identified in Mr Sullivan's second affidavit. I have inspected an unredacted copy of the manual and am satisfied that there is a public interest in maintaining the confidentiality of the following parts: - by reference to paragraph 7 of Mr Sullivan's second affidavit: (d)(ii), (f)(i)(A), (f)(ii), (f)(iv), (f)(v), (f)(vi), (f)(vii), (f)(viii), (f)(x), (f)(xii), (f)(xiii), (f)(xiv), (f)(xv), (f)(xvi), (f)(xvii).
38 In my opinion, the following do not fall within a legitimate claim for PII: 7a, 7d(i), 7d(iii), 7(f)(ix), 7(f)(xi), 7(f)(i)(C) - including footnotes 6, 7 and 8.
Relevance and importance of the redacted parts of the manual to Mr Charan's case
39 I accept that the redacted contents of the manual which, prima facie, attract PII have relevance to the issues in this proceeding.[14] The defence of justification to Mr Charan's claim, to a large extent, relies upon the contents of the audit manual and the evidence of the auditors. Undoubtedly germane to that issue are the instructions to the auditors as to the manner in which the audit is to be conducted. I also accept that an unredacted copy of the manual would provide the lawyers for Mr Charan with greater insight as to the processes and systems that were to be applied in auditing the two companies.
40 However, that benefit is to be balanced against the following.
41 Nationwide will call the auditors of both companies. There is nothing which prevents the lawyers for Mr Charan questioning the auditors as to how they carried out their task and, if possible, exposing any flaws in the process and more importantly, the results. Such a cross-examination is not dependent upon the contents of the manual.
42 Of course, Mr Charan will have access to portions of the manual that will, hopefully, give him an understanding, admittedly imperfect, as to how the auditors went about their task.
43 It is also to be noted that this is not a case in which it is said that the auditors were negligent and therefore the manual is vital to the claim in determining whether the auditors conformed (or failed to conform) with the instructions contained in the manual.
44 I conclude that whilst relevant, the manual is by no means critical and its importance to Mr Charan's case is at best, moderate.
45 In my view, the disclosure of the redacted parts of the manual is contrary to the proper functioning of DET and its administration of the VTG scheme (or its current analogue). The audit system is the fundamental check that the DET has in determining that huge payments of government funds made to RTOs are legitimate. I accept Mr Sullivan's evidence that disclosure of details of the system is inimical to the public interest as it could enable those who were so minded to devise strategies to defeat the audit process.
46 On the other hand, I do not think that the forensic disadvantage to Mr Charan is large and, when balanced, the scales tip powerfully in favour of the claim made by DET in respect of the documents that attract arguable PII.
47 The claim by DET for public interest immunity or exclusion of evidence of matters of state is sustained over those parts of the manual that I have identified in paragraph [37].
48 I will make orders that those parts of the manual not be disclosed to the parties and that the copy of the unredacted manual be returned to DET.
[1] VTG stands for Victorian Training Guarantee, which was the name of the large program of RTO (Regional Training Organisation) providers of VET programs.
[2] The admissibility of the reports has not yet been determined.
[3] See: Ryan v State of Victoria [2015] VSCA 353 ('Ryan'), [56].
[6] Dupont v Chief Commissioner of Police [2015] Fam CAFC 64, [49]; referred to in Ryan [64].
[10] Ryan [118] - [119] (emphasis added).
[12] Affidavit of Glenn William Sullivan, dated 6 March 2017, [4], [7].
[13] Supplementary affidavit of Glenn William Sullivan, dated 8 March 2017, [4], [5].
Charan
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