HIS HONOUR: This judgment concerns a notice of motion filed by the plaintiff, the State of New South Wales (the "State") and the cross defendant, the Minister for Education (the "Minister"), seeking orders pursuant to r 28.2 of the Uniform Civil Procedure Rules for the determination of separate questions.
The background to the proceedings is set out in the judgment in State of New South Wales v Malek Fhad Islamic School Limited [2016] NSWSC 1529 ("Malek Fhad"). That judgment should be read together with this judgment. It is only necessary to note the following.
In the proceedings the State seeks recovery of funding provided to the defendant, the Malek Fhad Islamic School Limited ("the School"), for the period 1 January 2010 to 30 July 2012 pursuant to former s 21(1) of the Education Act 1990. It does so because it alleges that, during that period, the School was operated for profit within the meaning of former s 21A of the Education Act. The State seeks the recovery of that amount pursuant to the principle said to be derived from Auckland Harbour Board v The King [1924] AC 318. It also seeks recovery pursuant to the provisions that were inserted into the Education Act 1990 with effect from 28 October 2014: see Malek Fhad at [14] to [19].
The School resists the claim by the State. By its cross‑claim, the School seeks relief which seeks to cut across the State's entitlement to recover those amounts and to secure funding for the period 1 August 2012 to 31 December 2013.
It seems that, prior to the various decisions being made to seek recovery of funds and to deny further funds, and again in this Court, the core of the factual debate between the parties was and is whether or not the School was operating for a profit because of payments said to have been made to a related entity. Relevantly, former s 21A(3)(c) and (d) of the Education Act 1990 had the effect of providing that a school was not to be taken to operate for profit just because it paid income to any other person because of "any payment that its proprietor makes to a person in connection with the provision, at no more than reasonable market value, of property, goods or services required in relation to the running of the school" (s 21A(3)(c)) or "any payment that its proprietor makes to a related organisation that does not operate for profit within the meaning of this section in connection with the provision of property, goods or services required in relation to the running of the school" (s 21A(3)(d)).
In particular, one part, albeit small, of the State's claim, and a significant component of the School's cross‑claim in seeking to deny or undermine the State's ability to recover amounts paid and to challenge the refusal to provide further funding, is a contention that as a matter of objective fact throughout the period 1 January 2010 to 1 January 2014, or at least for part of that period, the School either was or was not operating for profit.
In Malek Fhad, I determined a series of objections made on behalf of the State and the Minister to the then form of the cross‑claim filed on behalf of the School, as well as to an application by the School for leave to file a further cross‑claim. One of the objections raised by the State was that, under the Education Act as in force from time to time, neither the validity of its claim for recovery nor the validity of any decision made by the Minister to deny funding was in any way dependent on whether, as a matter of objective fact, the School was operating for profit within the meaning of the Education Act.
I was not sufficiently persuaded that the School's position in this respect was so untenable that the objected‑to parts of its existing cross‑claim should be struck out or that the School should be otherwise denied leave to file an amended cross‑claim on that basis: Malek Fahd at [13] and [23]. Thus, in the end result, I granted the School leave to file an amended cross‑claim that maintained that allegation although other aspects of its contentions were not allowed to go forward.
In so concluding, I observed as follows (at [56]):
"One consequence of this judgment, and the manner in which the parties have pitched their respective cases, is that the pleadings raise a factual issue for the Court as to whether the School operated for a profit according to the relevant definition in the Education Act during the two periods noted in [4]. It may be that a determination of those factual issues will be time consuming and expensive. Depending upon the proper construction of the Education Act and the issues, they may ultimately prove to be irrelevant. While it is a matter for the parties, they should consider whether it is appropriate to approach the Court to have the Court first determine all issues in the proceedings other than whether as a matter of objective fact the School operated for profit during the two periods referred to in [4]."
Following the publication of the judgment in Malek Fhad, the School filed a second further amended statement of cross‑claim in conformity with the findings I made. The cross‑claim sought judicial review of various decisions made by the Minister, both in determining that the School was operating for profit in the period for which recovery by the State was sought as well as in the period where funding was sought but refused.
The grounds of judicial review sought are extensive. Some of the grounds assert or assume a jurisdictional fact, namely, the objective fact as to whether throughout part or all of the relevant period the School was operating for profit. Otherwise the grounds of review include unreasonableness, illogicality, failure to take into account relevant considerations and in some respects a denial of procedural fairness.
By its notice of motion the State seeks to take up the observation in [56] of the judgment in Malek Fhad. Its fundamental point is that the most efficient and expeditious way of pursuing these proceedings is to separate out from all other issues in the proceedings the question as to whether, as a matter of objective fact, the School was operating for a profit during all, or part of, the period 1 January 2010 to 1 January 2014.
In short, it seeks to do so because of the fundamentally different nature of the inquiry that would need to be conducted if the Court was hearing both an application for judicial review of the various decisions of the Minister including so much of those decisions as rested upon an opinion formed by the Minister that the School was operating at a profit and was also determining, as a matter of objective fact, whether the School was operating for a profit. This proposed course is strongly resisted by the School. Although I will deal with its specific objections shortly, in broad terms Counsel for the School, Mr Cheshire SC, contended that there is such an overlap of evidence to be considered in the two inquiries, that severance was not warranted.
I considered the principles relevant to an application for the posing of a separate question in Crawley v Vero Insurance Limited [2012] NSWSC 593 at [13ff] ("Crawley"). It is unnecessary to restate those principles other than to note that an interlocutory order for the separate determination of issues is an exceptional measure distinct from the ordinary course of determining the issues in their totality: see Street v Luna Park Sydney Pty Ltd [2007] NSWSC 697 at [5].
The objection to the posing of a separate question that there may be an overlap of evidence is a matter that is often raised and often persuasive. Two of the reasons for this are that the overlap in evidence means that the parties are put to the expense of effectively preparing and analysing the same evidence twice and the existence of the overlap in evidence creates problems for the trial judge in having to reconsider the same material at a second hearing. A common problem with the latter is where the trial judge at the first hearing makes adverse findings about a witness's credibility which could lead to that judge having to disqualify themself from conducting a further hearing. Otherwise the posing of separate questions can create an illusion of efficiency whereas in fact they can prolong the proceedings.
In this case, the suggestion that there is an overlap of evidence needs to be considered very carefully. Mr Cheshire pointed to the material that was placed before the Minister at or around the time that the various impugned decisions were made and which bore upon the question as to whether or not the School was operating for a profit especially the issues raised by s 21(A)(3)(c) and (d). Mr Cheshire submitted that this material, which would be generally of a financial nature, is also the material that would be the primary material relied on by his client in seeking to prove that the School was not operating for profit. An affidavit sworn by his instructing solicitor indicates that around 10 binders of material was placed before the Minister relevant to this issue. Mr Cheshire also pointed to the extensive discovery that had occurred. He contended that this material needed to be considered both in conducting judicial review of the Minister's decision as well as determining whether, as a matter of objective fact, the School was operating for a profit.
Mr Cheshire submitted that, while the analysis undertaken by the Court in conducting judicial review proceedings of the Minister's decision would be different to that undertaken if it was determining the matter de novo, the extra court time and expense that would be involved in litigating the latter at the same time as the former would not be significant. He otherwise submitted that the onus was on the State and the Minister to persuade the Court to pose a separate question, and they had not discharged it.
Finally, as something of an alternative, Mr Cheshire suggested that there be severed for separate determination certain confined questions concerning the validity of the deemed declaration in clause 33 of Part 14, Schedule 3 of the Education Act (see Malek Fhad at [17]) as well as the bare question as to whether the validity of various decisions said to have been made by the Minister can be impugned on the grounds that the School did not, as a matter of objective fact, operate for profit in the period the subject of the deemed declaration.
Notwithstanding these submissions, I am of the view that the posing of a separate question is warranted. There is a very strong potential for a significant amount of additional evidence to be placed before the Court for the purpose of any determination by it de novo as to whether the School operated at a profit compared to that placed before the Minister. It is to be expected that the material that was placed before the Minister included various submissions and the like which explained the nature and basis of the payments that were made to the related organisation. If the Court was hearing the matter de novo, then it seems likely that that material would have to be proved in a way that conforms with the Evidence Act 1995. More importantly, it can be expected that the State would be entitled to test it.
Moreover, the State would be entitled to expand upon whatever reasons the Minister may have had for concluding that the School was operating at a profit. The State would also be able to use the compulsive powers of the Court to explore the payments in much greater detail than occurred at the time the Minister was considering it.
Most significantly, a very different type of analysis has to be undertaken by a Court when exercising a judicial review function as to determining a matter de novo. If a combined hearing was to occur, then at the point of the admission of any of this material the basis of its admission would have to be clearly identified. Each document would have to be considered as to whether it was being admitted because it was before the Minister and whether it was also being admitted as relevant to a determination as to whether, as a matter of objective fact, the School was operating at a profit. At each point, the question as to whether or not one party or another would be entitled to respond to that material would arise. However, if the Court was only undertaking judicial review of the Minister's decision, then the outer bounds of the relevant material is that which was before the Minister.
It is not the case that every time a question arises as to whether some particular legislative criteria is a jurisdictional fact in the sense of being a matter that must be objectively determined, or is only jurisdictional in the sense that the relevant decision‑maker must form an opinion about it, that the contest has to be litigated in two phases. However, what is significant in this case is the nature of the test set out in s 21A(3)(c) and (d) of the Education Act 1990. Those provisions involve matters of judgment and degree as well as some commercial complexity. The task of conducting both a judicial review of a Minister's decision concerning those provisions and then determining, whether as a matter of objective fact those provisions are satisfied would be particularly difficult. Most importantly I am satisfied that the former task could be undertaken within a much short hearing than the latter.
When the matter is considered in this way the suggestion that there is overlapping evidence justifying a refusal of the application does not withstand scrutiny. The common dangers that exist with overlapping evidence I referred to earlier do not arise in these circumstances.
As noted, Mr Cheshire's alternative submission was that there should be a separate determination of certain narrow legal questions, namely, the validity of clause 33 of Schedule 3 to the Education Act and the bare question as to whether the validity of certain decisions can be impugned on the ground that the School did not, as a matter of objective fact, operate for profit during part or all of the relative period.
The difficulty with that course is that, irrespective of the answers to those questions, the proceedings will not be concluded. If the course proposed by the State, however, is adopted and the questions are resolved in its favour then that will complete the proceedings without the necessity to consider the large and expensive question as to whether, as a matter of objective fact, the School was operating for profit in the period the subject of the decision.
Finally there remains an issue as the form of the questions. In its notice of motion the State poses a series of questions framed by reference to the pleadings which seek to isolate out for determination in advance the questions that arise on the pleading other than the question as to whether, as a matter of objective fact, the School operated for a profit from 1 January 2010 to 1 January 2014 or part thereof.
In her submissions counsel for the State and the Minister, Ms Davidson, explained this was done in order to meet what I had stated in Crawley at [19]; namely, that the separate question must be identified with precision. However, in Crawley at [20] I also referred to the fact that UCPR 28.2 confers a power to order a question be decided after all other issues in the proceedings. Ms Davidson was cognisant of that and proposed an alternative form of question, namely, one that involved simply separating the question whether, as a matter of objective fact, the School operated for profit from 1 January 2010 to 1 January 2014 for determination after all other issues in the proceedings. That is the course that I will adopt. I do so because it means that, at the (first) hearing of the proceedings, the parties will be free to litigate all other questions in the proceedings other than the separate question. Posing a question in those terms allows for the possibility of amendments to pleadings whereas the questions posed by the State in the notice of motion incorporate references to parts of the existing cross‑claim.
Accordingly, pursuant to r 28.2 of the Uniform Civil Procedure Rules the Court orders that the following question be decided separately after the trial of all other issues in the proceedings, namely:
Whether as a matter of objective fact the defendant/cross‑claimant operated for profit within the meaning of former s 21A of the Education Act 1990 from 1 January 2010 to 1 January 2014 or any part thereof.
[3]
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Decision last updated: 10 March 2017