The defendant (and cross-claimant) is a registered training organisation ('RTO') which is in the business of delivering vocational education and training ('VET') services which are quality-assured and nationally recognised. RTOs are accountable to a regulator, the Australian Skills Quality Authority, and must ensure that their services comply with quality standards and other requirements under the applicable legislative framework [1] .
The plaintiff (and cross-defendant) is a supplier of accredited training and assessment services. In practical terms, the plaintiff is a sub-contractor for the teaching and assessment of students at vocational educational institutions and the defendant has oversight of the quality of such services.
On 10 October 2012, the plaintiff and defendant entered into a written agreement, titled a 'Cooperation Agreement', by which the plaintiff promised to deliver accredited training and assessment services for the issue of a nationally accredited qualification. The plaintiff issues invoices to the defendant and those invoices are paid through funding which the defendant obtains in its capacity as an RTO.
This case concerns two levels of funding in relation to the services, one at the Commonwealth Government, level called Vocational Education Training Fee Help funding ('VET Fee Help funding') and the other at the NSW Government level, called the New Entrant Traineeship funding ('NET Help funding'). The Commonwealth level of funding commenced from about the middle of 2013, at which time the Co-Operation Agreement was varied.
By the terms of the Co-Operation Agreement, as varied, the plaintiff was entitled to recover 60% of VET Fee Help funding and 67% of the NET Help funding received by the defendant from the different levels of government.
By this proceeding, the plaintiff brings a money claim in respect of two invoices which the defendant accepts that it did not pay. One invoice was dated 7 December 2016 ($33,600). The other was dated 20 January 2017 ($90,498.91). The aggregate sum of the unpaid invoices is $124,098.91. By this proceeding, commenced in 2018, the plaintiff seeks to recover that amount, and also interest.
At the Commonwealth level, for the VET Fee Help funding, there is an added complication. As explained by the defendant's Counsel in his Opening Address, at that level, there is something like the HECS scheme in operation. Monies are effectively granted to students as a loan in the form of credits paid by the Commonwealth to RTOs, like the defendant for the delivery of services and delivery of training material.
Some students, of course, may not complete their training or even commence the courses with the plaintiff that they are enrolled in. When this happens, they might receive a notice from the Commonwealth indicating that they are in debt. In such a case, they have a year to apply to the defendant for a determination to 're-credit'. The defendant applies certain statutory criteria to make the determination and, if it does, the student's debt to the Commonwealth is extinguished. This extinguishment may take the form of a repayment by the defendant to the Commonwealth government, or, alternatively, an off-set against the amount which the Commonwealth Government pays to the defendant in respect to future payments. In either case, the defendant, as an RTO, loses some funding that it would otherwise have received but for the 're-credit'. This case raises the question whether the plaintiff should also lose its commensurate share of the funding. The defendant contends that it should. The plaintiff contends that it should not. The plaintiff's central contention is that once the defendant nominally receives the funding provided by the Commonwealth, then its obligation to pay the plaintiff is triggered without reference to any re-credit; that is, whether or not the defendant actually receives its full share of the funding provided by the Commonwealth.
By its cross-claim, the defendant, as cross-claimant, seeks damages relevantly representing overpayments made to the plaintiff (as cross-defendant) for students who have, as a result of the cross-claimant's determinations, had their debts extinguished.
[2]
Procedural background
On 29 October 2020, the matter came for hearing before me. After hearing brief opening submissions by counsel, the proceeding was referred for partial reference to quantify the plaintiff's claim: Tred Consultants Pty Ltd v Kirana Training Pty Ltd [2020] NSWDC 690.
On 22 March 2021, the firm RTO Accountants prepared a report, following a referral that the Court made to it. The report is contained within Exhibit 2 on the adoption application. (Exhibit 2 was later tendered in the substantive proceeding).
Shortly after the receipt of the report, directions were made for the parties to move for the adoption of the report and for any such application to be heard concurrently with the substantive hearing of the matter, which resumed on 26 April 2021.
The question of whether the referee's report should be wholly or partly adopted was itself affected by my determination to refuse the plaintiff's application, filed on 22 April 2021, for leave to further amend its pleading. That merits some brief explanation.
In the referee's report, the referee dealt with a 'Second Calculation' case. This was, essentially, that monies invoiced to the defendant by the plaintiff had not been claimed by the defendant of the relevant level of government. The referee made some calculations, but only with a reservation, or qualification; in that the referee opined that such amount could not be confirmed without completing a thorough audit of student records to reconcile the progress or completion of students of the courses with the student claims. Ms Fabbri, an employed solicitor of the firm representing the defendant, deposed in her affidavit affirmed 14 April 2021, that the defendant had initially objected to the referee considering this basis for calculation on the basis that it was for amounts which formed no part of the plaintiff's pleaded claim ([43]). Amongst other things, by way of what was effectively a submission, Ms Fabbri observed in her affidavit that the plaintiff had not pleaded this 'Second Calculation' case; nor was this basis of calculation referred to in the plaintiff's 'Outline of Case', which had been supplied to the Court on 29 October 2020 ([44]-[46]).
These were the background circumstances which explain why, on 22 April 2021, the plaintiff filed its application to further amend its pleading; so as to enable it to run a case that the defendant was in breach of implied obligations; most notably, breach of an obligation to submit claims on the plaintiff's behalf. The effect of my reasons for refusing that amended application (Tred Consultants Pty Ltd v Kirana Training Pty Ltd (No.2) [2021] NSWDC 138), was that the plaintiff was not entitled to run a case based upon amounts owed to the plaintiff for student claims invoiced by the plaintiff, which the defendant, in breach of posited obligations (either express or implied) did not make claims to the government for; but was, rather, limited to its existing pleaded case that it was entitled to percentages of payments based upon what the defendant received from the tiers of government.
The defendant's objection to the 'Second Calculation' was maintained at the hearing for the adoption of the report ([44]-[51]).That objection is sustained with the result that, in my view, the part(s) of the referee's report that treat with this basis of calculation should not be adopted on the basis that qualified findings have been made in relation to irrelevant questions.
[3]
NET funding
The referee confirmed that the findings were based upon the evidence provided by not only the parties but also by the State government. The referee attended, where it was possible, to reconcile the evidence of the parties with the data received by the State government. The referee considered that the State government data was considered a true and independent source of information in the referee's methodology.
The referee assumed that the plaintiff was entitled to 67% of the NET funding received by the defendant for students enrolled in courses taught by the plaintiff.
In relation to the NET funding, in respect to which the plaintiff should recover 67%, the referee calculated that the defendant received the sum of $89,717.47. That being so, the plaintiff was entitled to the sum of $60,110.70. But in circumstances where, the referee found, the sum of $19,554.06 had already been paid by the defendant to the plaintiff, the balance owing was $40,556.64 (A).
[4]
VET funding
The referee made two assumptions in its calculations of the amount owed by the defendant to the plaintiff arising from VET Fee Help funding. The first was that the plaintiff was entitled to 60% of that funding for students enrolled in courses taught by the plaintiff.
The second was that the defendant was entitled to deduct from that amount (or otherwise have returned to it) any VET Fee help funding paid by the defendant to the plaintiff which had been the subject of a re-credit by the Commonwealth Government.
Dealing first only with the calculations based upon the first assumption, the defendant received VET Fee Help funding relating to students enrolled in courses supplied through the plaintiff in the sum of $405,000. On the basis of the 60% entitlement, the plaintiff was entitled to receive $243,000.
Addressing now the aspect of the re-credit, this was in the sum of $81,000. Applying the same percentage (60%) to that sum (an amount of $48,600), the plaintiff was required to return to the defendant, or alternatively have deducted from the sum of $243,000 to which the plaintiff was otherwise entitled to receive from the defendant, the amount of $48,600. That yielded a total sum owing of $194,400.
But the defendant had already paid the plaintiff the sum of $259,600; meaning that it had overpaid the sum of $65,200. The plaintiff owed that sum to the defendant (B).
Viewing the matter only on the basis of funding which the defendant had received from both levels of government, the referee calculated that the plaintiff actually owed the defendant the sum of $24,643.36 (A - B).
[5]
Principles for adoption
The Court's task under r 20.24 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') is to exercise its discretion judicially. It must be exercised having regard to the object and purpose of the rules giving rise to the referral procedure: Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 per Gleeson CJ at [563]. In Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 ('Chocolate Factory Apartments'), McDougall J set out (at [7]) a list of principles, distilled from his Honour's consideration of case-law, which has received a significant measure of endorsement at intermediate appellate level [2] and which I respectfully adopt in this case.
These observations are not rules - as McDougall J himself later indicated (in BestCare Foods v Origin Energy [2012] NSWSC 574 at [18]) they were simply relevant helpful guidelines. In Bellevarde, the Court of Appeal noted (at [47]) that adoption has to be considered in light of the nature of the issues and circumstances of the case.
I also observe the emphasis that was given by the Court of Appeal in Bellevarde (at [55]-[56]) to the case management imperative in the referral procedure that "parties express their cases clearly and without equivocation, ambiguity or opacity. If a party complains about how a referee has dealt with the issues on the reference, it may be difficult to persuade a judge that a referee has not dealt with an issue, or not dealt with it adequately, if that issue had not been placed before the referee with the requisite clarity".
[6]
The defendant's submissions
The defendant was the moving party on the application to adopt. Through the affidavit of its employed solicitor, Ms Fabbri, affirmed 14 April 2021 (paragraphs [1]-[35]) (being the only part relied upon in the application for adoption) it submits that there was no evidentiary basis for any alternative conclusion than that which was reached by the referee. It submits that the referee provided a thorough and analytical approach, manifested not only in the body of the report, but also in the detailed calculations and factual data contained in Appendix 1. That being so, the Court should be inclined to accept the correctness of the conclusions. Further, it submits that the referee's findings of fact should not be reactivated in the Court where there was factual material sufficient to entitle the referee to reach the conclusions expressed: Chocolate Factory Apartments at [7(7)-(8), (10) & (12)].
The defendant also notes that the referee's conclusions may be conservative, if not generous to the plaintiff, in circumstances where the referee had observed that the plaintiff stated that he had received from the defendant an additional sum of $85,801.21, a figure which the referee was not able to verify from the evidence. However the defendant has eschewed any entitlement to that additional amount; and asserts only that the plaintiff owes at the sum of $24,643.36.
[7]
The plaintiff's submissions
At the outset of the hearing, resuming on 26 April 2021, Counsel for the plaintiff endorsed the full adoption of the referee's report. That endorsement, however, was expressed before determination of the plaintiff's application to amend. Upon the Court's determination to refuse the amendment application, the plaintiff's position wavered. First, it applied to have the proceeding adjourned to put on evidence for the purpose of substantiating the 'Second Calculation' basis. That would not have altered the plaintiff's pleading problem unless it was proposed to bring another application to amend on the basis of fresh evidence obtained from further inquiries enabled by such adjournment. But that would run counter to two of the reasons for rejecting the amendment application, being the delay in the matter and the sufficiency of opportunity for the plaintiff to present its case. Following the rejection of the adjournment application, on 26 April 2020 counsel for the plaintiff verbally expressed its opposition to the adoption of the referee's report.
But in his written submissions supplied to the Court on 27 April 2020, Counsel for the plaintiff noted that the referee's report was "not ... objected to" (paragraphs 1 & 5).
At any rate, the plaintiff sought to rely upon that part of Ms Fabbri's affidavit of 14 April 2021 ([36]-[53]) which had not been relied upon by the defendant. Since the evidence contained within that part of Ms Fabbri's affidavit was addressed only to the 'Second calculation' undertaken by the referee, which exceeded the plaintiff's pleaded case, I rejected this evidence; for the same reasons for why I declined a further adjournment. No other evidence was relied upon by the plaintiff in opposition to the adoption application. Thereafter, the plaintiff did not advance any meaningful submission why the report should not be adopted.
[8]
Consideration
I accept the defendant's submissions that the report should be adopted, to the extent that it is consistent with the plaintiff's pleaded case as to its entitlements. There was no suggestion of any error of principle, misapprehension by the referee of the evidence that the parties placed before the referee, or manifest unreasonableness in the factual finding. Having regard to the detailed appendix and work generating the conclusions, those conclusions manifest a thorough, analytical and professional approach in assessing the terms of reference.
Pursuant to r 20.24 of the UCPR and subject to the following qualifications, the referee's report of 22 March 2021 is adopted. The qualification is that the content of section E (paragraphs 4 & 8, 9(a)(2), 9(b)(2) & 9(d) and Table 9.7 is rejected.
[9]
Consequences of adoption for the substantive hearing
As was observed by McDougall in Chocolate Factory Apartments (at 7-(8)), the consequence of adoption of the referee's findings is that findings of fact should not generally be re-agitated. This would frustrate the purpose of the reference. In this case, the referee not only had regard to the evidence emanating from the parties, but also, relevantly, in the context of the NET aspect of the claim, independent data from the NSW Government.
In particular, as McDougall J observed (7] "the right to be heard does not involve the right to be heard twice". As a default position, my approach, therefore is to accept factual findings made by the referee absent exceptional cause being demonstrated by the parties.
[10]
The plaintiff's challenges to factual findings
In part of his written submissions (paragraphs 20-21), the plaintiff appeared to cavil with conclusions reached by the referee. At paragraph 20, Counsel submitted that the referee 'failed to include' certain matters that were before her in her assessment, so that the conclusions "require further investigation". Counsel for the plaintiff had not, however, suggested that any such omission, if it be correct, should vitiate the Court's adoption of the referee's opinions in any way. That being so, it appears that the Court is being invited to consider factual matters afresh. The Court is generally disinclined to accede to any such invitation, where the plaintiff cannot demonstrate how, if at all, the conclusions of the referee would have altered if the matters which, it is suggested, should have been alluded to would have affected the referee's ultimate conclusions. In the absence of being able to show how the matters would, or should, have made any difference, it seems to me that the criticism amounts merely to a quibble.
[11]
Findings of law, or mixed fact and law
Where a party is dissatisfied with a part of a referee's report raises a question of law, or the application of legal standards to established facts, the court is required to consider and determine the matter afresh: Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563E.
As indicated, one of the qualifications to the adoption of the referee's report is that to the extent that the referee acted upon the contentious assumption that the defendant was entitled to deduct from the VET Fee Help funding amounts representing 're-credits'. Acceptance of such assumption is a conclusion of (at least) mixed fact and law and does not bind the Court. That is amenable to judicial determination.
[12]
THE AGREEMENT
The Co-Operation Agreement is located in Exhibit 2, at pp 61-2. It was entered into in 2012.
It is common ground that under the express terms of the Co-Operation Agreement (the 'Agreement'), the plaintiff was entitled to 67% of NET funding received by the defendant from the NSW Government and 60% of VET Fee Help funding which the defendant received from the Commonwealth Government.
Because of the narrowness of the issues dividing the parties, it is sufficient to refer only to the following provisions of the agreement.
Clause 7 of the Agreement relevantly provided:
"All fees to be paid (to the plaintiff, as an 'Enterprise') will be identified in the specific schedule of fees and services agreements. The fees paid to the Enterprise (the plaintiff) are only due and payable 21 days after the date the payment is received by the RTO from the relevant funding authority or organisation for the relevant payment stage identified within the Schedule of Fees and Services. Payments when necessary may be based on the actual fees received and not necessarily on any nominal amount specified in the Fees Schedule (for example where credit transfer is applicable and the client does not pay for Direct Credit under the arrangement with the client." (emphasis supplied)
Annexure A to the agreement is the Schedule of Fees and Services referred to in cl 7. A note underneath cl 1 of the Schedule was that "…other qualifications/packages can be added to subsequent schedules of fees and services."
By clause 2(a) of the Schedule to the written agreement provided that:
"This funding will be claimed by the RTO. The Enterprise (ie the plaintiff) will receive 67% of the funding where all services provided by the Enterprise meet the requirements of this agreement and the RTO receives the full fees payable by the funding authority for those services. Payments to the Enterprise will be made in alignment with payments received by the RTO. Where the RTO receives pro-rata payments for services provided to the funding body and the enterprise will receive equitable pro rata payments based on 67% of each pro-rata payment…" (emphasis supplied)
Although the VET Fee Help funding was not referred to in the Co-Operation Agreement entered into in October 2013, the defendant observes that the Schedule contemplated other packages being added to the subsequent schedule of fees and services. It is common ground that the agreement was varied on or about 20 June 2013, through oral and written communications to extend to the VET Help Fee funding.
[13]
EVIDENCE FOR THE PLAINTIFF
The plaintiff relied upon affidavits of its chief executive officer, Mr Amit Sabharwal, affirmed on 16 February 2019 (the 'First Sabharwal Affidavit') and 8 August 2020 (the 'Second Sabharwal Affidavit'). The latter affidavit was partially an affidavit in reply to affidavit evidence served and relied upon by the defendant; specifically the affidavits of Zeeshan Rana (29 June 2020) and Lloyd D'Silva (26 June 2020). All of this evidence was before the referee. However, before the Court, the plaintiff only relied upon the affidavits, and not the exhibits to those affidavits.
Mr Sabharwal was not required to attend for cross-examination, so his evidence was unchallenged. Nevertheless, his evidence was limited in a way which meant that it could not controvert the findings made by the referee (where that was applicable).
[14]
Mr Sabharwal's evidence
In the First Sabharwal Affidavit, Mr Sabharwal deposed to his understanding of the business of the parties ([5]-[7]) the circumstances in which the co-operation agreement was entered into in October 2012, and his understanding as to the parties' obligations under that agreement ([8]-[12]). He understood that the document regulated the circumstances through which the plaintiff would provide training and assessments, that the defendant would claim government funding and the plaintiff would invoice and be entitled to receive payment of 67% of that which was received from the NSW Government.
He deposed to the agreement being varied in June 2013 through (purely) verbal conversations between himself and Mr Stephen Pasfield, now deceased, but who at that time was the industry engagement and partnerships manager of the defendant, on the subject of the Vet Fee Help funding obtainable at the Commonwealth Government level. The substance of the conversations was to extend the agreement reached in October 2012 so as to facilitate the plaintiff's receipt of 60% of the funding associated with the VET fee help model ([13]-[14]). Further detail as to how this variation occurred was supplied in the Second Sabharwal Affidavit ([50]-[53]).
On 7 December 2016, an invoice (designated 'Kirana/VFH') was sent to Andrew Croft, an employee of the defendant, enclosing an invoice to the defendant in the amount of $33,600. That invoice was, and remains, unpaid.
On or about 20 January 2017, an invoice (numbered 20117) was sent to the defendant for the sum of $90,498.91. The amount reflected a spreadsheet internally prepared within the plaintiff, which was titled 'Reconciliation Traineeship Claims'. Mr Sabharwal asserts that the spreadsheet contained the total amount for claims that the defendant should have lodged with the NSW Government. For each claim, there was a certain base amount of funding, with certain loadings available, depending upon whether the person was working for a small business, was an Indigenous Australian or had a disability. But the spreadsheet only adopted the base amount and the small business loading applicable for each student. This was designed so as to ensure that the amount owing to the plaintiff for the New Entry Traineeships could not be lower than the sum of $90,498.91. ([19]-[20]). The spreadsheet had been emailed to Mr Croft, on 1 December 2016, but had not been responded to. It appears that the authorship of the spreadsheet is disputed (Mr Sabharwal elaborated upon the content of the spreadsheet and made assertions responding to the defendant's affidavit in the Second Sabharwal Affidavit ([44]-[48])). Hence the issue of the invoice. ([26]). Mr Sabharwal also asserted that the services the subject of the invoice included marketing, the recruitment of students, training and assessment of students before submission of marked assessments to the defendant. These services, it was said, were all engaged in on the defendant's behalf ([26]). This invoice had not been paid.
The total of unpaid invoices was accordingly $124,098.91. The First Sabharwal Affidavit refers to correspondence in which demands were made for payment, but this was in an exhibit to the affidavit which was not before the Court.
In the Second Sabharwal Affidavit, the deponent provided some further explanation as to how the funding scheme worked. In relation to New Entry Traineeship claims, the Department of Education stipulated a precise fee to be paid for training of each student, which varied according to the course undertaken by a student and the length of the course. Payments would not be made by the State Government until the student had obtained employment in the relevant industry sector to which the training related. In this way, the teaching was directed to specific skills students needed to acquire for their employment. Ordinarily, traineeship claims were made in three stages. Where the traineeship concerned a diploma, generally six claims were made ([8]-[10]).
Mr Sabharwal deposed that VET claims activated a loan by the federal government to students, but not in a form involving payment to the student. Instead the 'loan' was paid to an RTO like the defendant and thereafter paid to the relevant training facility. The obligation to repay the monies only applies if the student attains a minimum threshold salary ([12], [14]).
In the Second Sabharwal Affidavit, Mr Sabharwal also referred to the plaintiff's dependence upon the defendant to lodge claims with the relevant federal or state department, and lack of visibility in the dealings as between the defendant and those levels of government ([23]-[28]). He complained of an absence of information supplied by the defendant, particularly after the death of Mr Pasfied in June 2014, about the progress of claims lodged by the defendant ([30]-[37]), despite requests by the plaintiff for information.
He deposed that the last fees recovered by the plaintiff were received in March 2015. There followed numerous requests for payment, but no substantive response from the defendant which satisfied the plaintiff.
The balance of the Second Sabharwal Affidavit was evidence in reply to matters raised in the defendant's affidavit evidence. Mr Sabharwal deposed, in reply to the affidavit evidence of Ms Rana, that:
1. the re-credit system was applicable only to the VET Fee Help scheme and the defendant had not referred to it prior to February 2017 ([19]-[22]);
2. he was unaware of Ms Rana's reference (in the latter's affidavit of 14 June 2019) to a letter the defendant received from the Commonwealth Department of Education and Training dated 13 November 2014, featuring complaints about the marketing and training delivery of VET Fee-Help by the plaintiff and other concerns expressed by child care workers approached by individuals representing the plaintiff ([58]);
3. he denied Ms Rana's assertion that the plaintiff had failed to notify the defendant of students withdrawing from the plaintiff's courses and deposed that the plaintiff had submitted to the defendant all attendance records of students ([59]-[60]);
4. he denied that the plaintiff enrolled students on behalf of the defendant ([61]);
5. to the extent that the defendant received complaints about the plaintiff, the defendant had not lodged them in response to the plaintiff's demands for payments ([62]-[63]);
6. there was no valid basis for any contention that the defendant did not obtain income because of the lack of completion of courses or necessity to re-credit funds which the defendant received from students ([64]);
7. complaints referred to by Ms Rana regarding plagiarism concerned only two students - Roukayah Krayani and Zeinab Krayani - but those complaints had been addressed and the defendant had issued completion certificates to both students, a fact which the defendant had confirmed to the plaintiff. This being so, there was no valid basis for deduction for the costs of an internal audit the subject of the cross-claim ([69]-[72]);
8. there was no valid concern about whether two other students - Baria Elskaf and Hanadi Rachid - were trained and educated by the plaintiff. The defendant had not consulted the plaintiff about the two students before initiating an audit or investigation about them ([74]). Six other students the subject of investigation were not trained by the plaintiff nor registered with the plaintiff ([75]);
9. he disputed Ms Rana's assertion (made in the latter's affidavit of 29 June 2020) that the defendant did not have an agreement with the plaintiff relating to training delivery and/or marketing for a Diploma in Early Childhood Education and Care ([76(f)-(h)](;
10. the defendant did not engage with the plaintiff about the 'issues' raised by the defendant in its correspondence with the Commonwealth Department of Education and Training dated 28 November 2014 ([76(i)]);
11. the defendant did not substantiate to the plaintiff the existence of the 'special circumstances' warranting a re-credit the 'FEE-HELP balance' for the VET Fee-help scheme; or verify re-credits to students ([77]-[78]);
In reply to the affidavit of Lloyd D'Silva, the defendant's group accountant, dated 26 June 2020, in addition to denying that the former created the spreadsheet in February 2017, Mr Sabharwal deposed that:
1. three students (Glenda DeGuzman, Tracy Zhao, Trudie Paula Pawson) were enrolled within the defendant's network ([77]-[80]);
2. after experiencing the misplacement of assessments for completed units of studies for students, the plaintiff adopted a practice of dropping off assessments at the defendant's office in Liverpool, signed off by one of the defendant's employees ([81]-[84]).
[15]
Other documentary evidence
The plaintiff also relied upon some of the documents that were part of a 'court book' supplied to the Court on the first day of the hearing, on 29 October 2020. That Court book had not been tendered on that day prior to the proceeding being adjourned for the reference. But some documents were referred to in the plaintiff's written submissions. When this was pointed out to the plaintiff's Counsel by the Court, Counsel sought, and was granted, the Court's leave to furnish those documents from the old 'Court book' which he relied upon and which had not been tendered in Exhibit 2 (after notification to the defendant). A small bundle of such documents was supplied to the Court and the Court grants leave to the plaintiff to re-open his case for the purpose of adducing those documents. The small bundle will be marked Exhibit 'A'. It is subject to the same limitation referred to at paragraph [49], above.
Those documents were:
1. Two 'Assessments drop off' documents. These were referred to in footnote 64 to the plaintiff's written submissions, which submission was directed to the plaintiff's complaint that the defendant did not make claims, wholly or partially. Although, for convenience, these documents are included within Exhibit A, I note that they relate to a point that I had determined adversely to the plaintiff when refusing his amendment application. Accordingly, they are in fact, irrelevant.
2. Documents referred to in footnote 88 of the plaintiff's written submissions. The submission was that the defendant ceased serving claim reports to the plaintiff after 21 November 2013.
3. More 'Assessments drop off' documents, referred to in footnote 94 of the plaintiff's written submissions. These documents were relied upon to support the submission that following the defendant's cessation of serving claim reports, the plaintiff introduced procedures to ensure that the defendant had correct records.
4. An email, dated 8 February 2017, referred to in footnote 95, to support the submission that the defendant admitted that it is indebted to the plaintiff.
5. A document referred to in footnote 106 of the plaintiff's submissions on the subject matter of plagiarism by students. I note that the defendant did not ultimately refer to plagiarism as a basis for denying payment to the defendant.
[16]
THE DEFENDANT'S EVIDENCE
The defendant relied in the substantive hearing upon the evidence that sustained its application for adoption of the referee's report (Exhibit 2). This included, but was not limited to, the referee's report itself (Exhibit 2, pp 2-39), but also referred to a mass of other material relating to the reference. Some of that material, particularly that of the referee's material, may inextricably have referred to a basis for calculation - 'the Second Calculation' - which I have excluded as being beyond the pleading; but was inexpedient to excise from the Exhibit. The defendant's Counsel acknowledged that he could not assume that the Court would consider material within Exhibit 2 which was not specifically referred to by him in his submissions.
[17]
Legislative framework
The defendant brought to the Court's attention certain provisions of the Higher Education Support Act 2003 (Cth) [3] .
Section 137-18(4) of that legislation stated that a person's 'VET FEE-HELP' debt in relation to a VET unit of study is taken to be remitted if the person's FEE-HELP balance is re-credited (relevantly) under cl 46 of Schedule 1A in relation to the unit.
Clause 46(2) to Schedule 1A of that legislation provided that:
"The VET provider must, on the Secretary's behalf, re-credit a person's FEE-HELP balance with an amount equal to the amounts of the VET FEE HELP assistance if:
(a) the person has been enrolled in the unit with the provider; and
(b) the person has not completed the requirements for the unit during the period during which the person undertook, or was to undertake, the unit; and
(c) the provider is satisfied that special circumstances apply to the person (see clause 48); and
(d) the person, applies in writing to the provider for re-crediting of the FEE-HELP balance; and
(e) either:
(i) the application is made before the end of the application period under clause 49; or
(ii) the provider waives the requirement that the application be made before the end of that period, on the ground that it would not be, or was not, possible for the application to be made before the end of that period.
Clause 48 defined 'special circumstances' as being applicable:
"…if and only if the VET provider receiving the application is satisfied that circumstances apply to the person that:
(a) are beyond the person's control; and
(b) do not make their full impact on the person until on or after the *census date for the *VET unit of study in question; and
(c) make it impracticable for the person to complete the requirements for the unit in the period during which the person undertook, or was to undertake, the unit."
Clause 56 identified the effect of the FEE-HELP balance being re-credited: "the provider must (generally) pay to the commonwealth an amount equal to the VET FEE-HELP assistance to which the person was entitled for the unit."
Clause 91 provided that a refusal by a VET provider to re-credit a person's FEE-HELP balance is reviewable.
[18]
The defendant's internal policy
The defendant relied upon an internal policy for students in relation to re-credits (Ex 2, pp 99-102). That internal policy was said to reflect the Higher Education Support Act 2003 (Cth). Amongst other things, it identified the reasons why students could seek re-credits (cl 4.0) and provided rights of internal review and external review to students dissatisfied with determinations by the defendant not to re-credit a student's VET FEE HELP balance (cl 6.0 and 8.0).
[19]
Evidence of student complaints
There were 6 students whose VET Fee Help debts were re-credited by the Commonwealth Government wholly, or partly. They were:
1. Hanadi Rachid;
2. Baria Elskaf;
3. Ayipey Asare;
4. Josie Marcus;
5. Lara Cassar; and
6. Yoanna Anugrawati.
In relation to Ms Rachid, she made a complaint to Dr Doverty on or about 27 October 2016; which complaint was on-sent to the defendant for its action. Dr Doverty reported that Ms Rachid had referred to the circumstances in which she had started a diploma but the training course had ceased within a few weeks and she was distressed at receiving a HELP debt. Dr Doverty had also made reference to a similar experience of Baria Elskaf.
Specifically, in relation to Ms Rachid and Mr Elskaf, they said that their classes were terminated due to the teacher's illness, without the teacher making any further contact with the students; so that the students could not complete the courses. That evidence was uncontested by the plaintiff.
Ayipey Asare complained to the Commonwealth Department; and on 13 July 2016, Dr Doverty passed that complaint on to the defendant. Dr Doverty summarised the student's complaint as being that she was ignorant of being informed of being enrolled in two diploma course with the plaintiff and, accordingly, had not engaged in any study with the plaintiff. Eventually, the defendant agreed to re-credit one of those diplomas.
Josie Marcus complained directly to the defendant on 4 August 2015. She had signed up for a course and attended a course introduction, but after contacting a director of the plaintiff, she did not hear back from her and thereafter texted her to say that she was no longer interested in the course; and assumed that the course no longer existed or if it did, she never commenced it.
Mr Rani gave (unchallenged) evidence deposing to a complaint by Yoanna Anugrawati in which the latter had indicated that she had never commenced a course.
There were no particular details in relation to Lara Cassar's circumstances.
[20]
Submissions on the principal claim
Counsel for the plaintiff relied upon detailed written submissions as the plaintiff's submissions in chief. He also made some verbal submissions in reply to Counsel for the defendant's submissions.
The plaintiff submitted that the defendant was obliged to submit all claims to the relevant tier of government; upon receipt of funding, remit 67% or 60% of the receipts to the plaintiff within 21 days. In breach of that obligation, the defendant failed or refused to lodge claims with the tier of government, contrary to implied obligations; failed, or refused to remit the relevant percentage of funds within 21 days; failed to give appropriate notices affecting the business relationship between the parties and its obligation to remit funds; and failed to give notice of any irregularities in the plaintiff's conduct (save for the plagiarism issue).
It may be noted, at once, that these submissions on breach go substantially beyond the plaintiff's pleaded case of breach of contract, as set out in the Amended Statement of Claim filed on 26 September 2018. The submissions were pressed after I had refused an amendment application. There is no reference in the pleading to implied terms; only express terms. It was not pleaded, expressly or implicitly, that the defendant failed or refused to lodge claims or, if it did so, that this amounted to a breach of contract. No pleaded reference was made to notices of any kind which were not, and which should have been, supplied to the plaintiff. Further, it was not pleaded (either in the Statement of Claim or in a Reply) what legal consequence may follow from breach of any implied term, on administrative-type obligations such as a suggested obligation by the defendant to report monthly to the plaintiff. A number of the plaintiff's complaints about the defendant did not, with respect, have any clear destination, in terms of consequences of breach.
The plaintiff submits its entitlement to receive communications for all complaints which the defendant received about the plaintiff, and the opportunity to respond (and rectify any error). Reference was made to regulations promulgated by the Australian Skills Quality Authority (which were not in evidence) stipulating a record in a Complaints Register. Since this procedure was not complied with, it followed that there was no basis for assertions about student complaints and the plaintiff was entitled to receive its remuneration.
The plaintiff submits that until it issued its letter of demand, no suggestion was made that either of the two subject invoices issued by the plaintiff were false or erroneous.
On the principal issue in dispute, the plaintiff submits that the assumption that the referee made, that it was open to the defendant to unilaterally deduct re-credits or refunds from the amount owing to the plaintiff, was erroneous. This was, it was submitted, not a matter dealt with in the parties' contract and there was no communication between the parties about it. It was, it was said, not to the point that re-credits may have been reflected in the defendant's internal policy or required by Commonwealth law. There was no implied term in the contract permitting the defendant to have recourse to either the internal policy or Commonwealth statutory provisions to deprive the plaintiff of funding even if a re-credit resulted: that would be inconsistent with provisions such as the requirement to record complaints and thereafter, activate a dispute resolution process to investigate them.
The plaintiff was entitled to the sum of $178,400 and, if not, the amount claimed in its pleading.
The plaintiff also made submissions directed to the cross-claim, however, they were directed to matters which the cross-claimant abandoned.
[21]
The defendant's submissions
The defendant's essential submission was that on the basis of the referee's findings, the court should dismiss the plaintiff's claim and order, on the cross-claim, that the cross-defendant pay the cross claimant the sum of $24,643.36, plus interest and costs.
[22]
Submissions on the plaintiff's claim
Counsel for the defendant submitted (paragraphs 50-53) that the referee's calculations of the amounts of re-credit could not be impugned on the facts; that is, by reference to arguments about whether or not there was evidence to sustain the defendant's determinations of re-credits. He accepted, however, that although the Court generally had adopted the referee's calculations about re-credits, these were calculations based upon the contestable assumption that the defendant was entitled to make the re-credits. Counsel accepted that whether the defendant had such entitlement was a matter of law (or mixed matter of fact and law) and the Court was bound to form its own view as to whether such entitlement existed; irrespective of the referee's calculations.
The defendant submitted that the Agreement expressly limited the entitlement in the plaintiff to the percentage of fees which the defendant "actually" received from the government in respect of any student. This was consistent with the plaintiff's pleaded case.
The defendant submitted, with reference to the VET Fee Help funding, provided by the Commonwealth government, that as a matter of construction it must follow that the plaintiff was not entitled to 're-credited' amounts, since they were not reflected in payments which the defendant actually received from the Commonwealth. It submits that the construction of the expression 'actual fees received', where it appears in cl 7, refers to the fees which the defendant ultimately keeps or retains and does not embrace amounts re-credited which must be remitted to the Commonwealth Government by direct action taken by the defendant, or which are automatically offset against other amounts paid to the defendant by the government.
Counsel submitted that cl 7 of the Agreement not only expressly identified an entitlement in the plaintiff to a proportion of the 'actual' fees which the defendant received, but also provided an indication that the defendant might receive something less than that which would ordinarily be supplied by government. Reference was made to the example in the wording contained within the parentheses about 'credit transfers'. The Court was taken to some examples (Exhibit 2, pp 402 & 444) of invoices issued by the State Government which showed that, from a sum reflecting a nominal payment to the defendant, there was deducted a credit transfer. Clause 7 indicated that the plaintiff could not receive its proportion from the nominal payment without taking into account the credit transfer. This example was analogous to the position when the federal funding scheme later was absorbed within the Co-Operation Agreement: the plaintiff could not receive nominal payments which the defendant received from the Commonwealth Government without reference to the re-credits taken out.
The defendant's construction was said to be supported by the underlying legislative framework, referred to earlier. The defendant submits that it would be an absurdity to say that amounts 'momentarily' paid by the government to the defendant which, having been paid, needed to be repaid or offset, represented the "actual fees" received by the defendant; and that it would be commercially nonsensical that the defendant would be required to pay the plaintiff the full 60% of payment; some of which never was ultimately received from the Commonwealth. To similar effect, it contends that a construction suggesting that re-credited amounts fell within the notion of actual fees received would be unworkable in practice. This is because the government routinely offset re-credits against future VET Fee Help payments, which meant that those future VET Fee Help amounts could never be 'actual fees received'. The plaintiff's entitlement to fees would depend, arbitrarily, on whether the defendant directly refunded amounts to the Commonwealth or allowed an offset against other amounts.
The defendant says that there is no proper basis for suggesting, as the plaintiff does, that the defendant had to consult with the plaintiff in advance about the decision-making process for re-credits. It had statutory obligations and students had public remedies, including internal and external rights of review on the merits (and also presumably a right of judicial review). The defendant contents that the plaintiff was impermissibly seeking to distil a right of prior consultation about such determination impliedly under the contract. Aside from the circumstance that no such right was pleaded or could be proven, it could be very disruptive in the defendant's performance of its obligations. It might, for example, give rise to a legitimate complaint in a student that the defendant, in taking into account the plaintiff's views through the course of such consultation, took into account irrelevant considerations.
Since it has overpaid the sum of $65,200 in VET Fee Help payments, that amount needs to be offset against the sum of $40,556.64 which the defendant owes the plaintiff under the NET funding payments.
In oral argument, Counsel for the defendant abandoned pleaded contentions about the plaintiff's breach of contract which might have otherwise justified the defendant's refusal to pay the monies claimed by the plaintiff under its invoices.
[23]
Submissions on the cross-claim
The defendant, as cross claimant pleaded in its cross-claim that from 2013 it had received applications from students enrolled by the cross-defendant, seeking re-credits for VET FEE-HELP debts and, further, the cross-claim and incur the costs of issuing payments to the cross-defendant for students that had since been issued re-credits (paragraphs 14 and 17).
By the cross-claim, the cross-claim expressly claimed the VET FEE-HELP payments made by the defendant to the plaintiff that had been the subject of a re-credit. The costs of re-credited in those payments were also claimed as damages for breach of the agreement (paragraph 18).
In oral argument, Counsel for the cross-claimant also abandoned claims to other amounts said to flow from alleged breaches of contract by the cross-defendant.
The cross-claimant contends that the underlying question of whether or not the cross-defendant was in breach of the Agreement, which caused the student's request for a re-credit, is moot. So, too, are questions of whether sufficient notice and an opportunity to be heard were extended to the cross-defendant. Since the cross-defendant was not entitled to payment of re-credited amounts, then if the cross claimant had paid such an amounts to the cross-defendant, that amount must be returned.
But against the possibility that that argument is not accepted, the cross-claimant contends that the cross-defendant's complaints are ill-founded.
It says that the cross-defendant, through the evidence of Mr Sabharwal, did not deny the allegations in the cross-claim that the cross-claimant received applications from students for re-credits of their VET-HELP debts in the circumstances pleaded by the cross claimant or that the cross-claimant incurred the costs of paying the cross-defendant monies which were ultimately re-credited.
It says that Mr Sabharwal acknowledged that re-credits applied to courses for which there was VET Fee Help funding, even if he stated that the cross claimant had not referred to re-credited amounts prior to 8 February 2017. But as to the last matter, the issue of re-credits had been raised shortly after the dispute arose (that is, within 19 days receipt of the second invoice of 20 January 2017) well before the proceeding commenced. Mr Sabharwal accepted that the calculations underlying the cross-defendant's invoices paid no regard to the re-credits: this was admitted in his letter of demand of 31 January 2017.
It says that in circumstances where the referee has already determined that in relation to the VET Fee Help Funding, the defendant overpaid the plaintiff, thus rendering otiose the plaintiff's argument that the defendant adduced no evidence of re-credits or refunds. At any rate, the referee's calculations were based upon spreadsheets generated by the Commonwealth Department of Education and Training.
Counsel for the cross-claimant submitted, further, that the Court should accept that it acted properly in determining that re-credits should apply. There was evidence of complaints from 6 students (who, it was commonly accepted, made up the amount of the re-credits) and determinations made in accordance with the defendant's statutory obligations. It was not appropriate for the Court to look behind those determinations.
But even if the Court did look behind them, the content of the complaints was not disputed by the plaintiff. Moreover, it could not be said that the defendant would want to determine that re-credits applied. That would be contrary not only to the plaintiff's financial interests, but also its own financial interests: it would lose 40% of that component of Commonwealth funding that was re-credited. Where circumstances arose, it was bound to grant re-credits.
Further, there was evidence of complaints; which evidence was also before the referee; and there was evidence of the determinations to the students (Exh 2, pp 103 - 109). Neither during the referral process nor in the hearing did the plaintiff adduce evidence, in response, to suggest that it was wrong for the determinations of re-credits to be made. Thus, if the plaintiff was permitted (which it should not now be permitted) to run any argument about an implied right to be consulted before that determination was made, the plaintiff could not establish how, even if the consultation had been activated, it may have produced any different result; given that the defendant was bound to make the determination that it did.
[24]
The Plaintiff's submissions in reply
Counsel for the plaintiff verbally submitted that it could not be right that the defendant had a unilateral right to determine re-credits, but instead the contract required it to give notice, and thereafter consult, with the plaintiff about such decisions. The plaintiff had an implied right to be consulted about anything affecting its rights; otherwise the contract could not effectively operate and another party could be deprived of entitlements. There were several instances in the Co-Operation Agreement where a notice requirement subsisted. A requirement to notify 'pervaded' the operation of the Agreement.
The plaintiff reiterated its argument that there was no evidence of complaints or other circumstances which might even trigger a process for creating a re-credit. The defendant's internal re-credit policy was irrelevant. Without evidence of complaints and a proper process for dealing with them - including consultation with the plaintiff - there was no entitlement in the defendant to make the re-credits.
Counsel submitted that the credit transfer analogy, as it appears in cl 7 of the Agreement, was inapposite: the referee had not referred to it. Counsel reiterated that the plaintiff had an express and unqualified right, in cl 2 of the Schedule to the Co-Operation Agreement, to receive its agreed share of funding.
Accordingly, the re-credit values taken into account by the referee should not have been and the Court should make the order that should have been made without regard to them.
Counsel for the plaintiff also maintained that the evidence of the 'Second Calculation' made by the referee, though unverified and not audited, should be accepted by the Court.
[25]
Written argument
A question arises as to whether the Court should entertain the plaintiff's proposed written supplementary submissions in reply, supplied to the Court after judgment was reserved on 28 April 2021. That question falls to be considered in the following circumstances.
The defendant's written submissions were supplied to the Court (and I presume the Plaintiff's Counsel) by 8:17am on the last day of the hearing, 28 April 2021. The previous day, 27 April 2021, the plaintiff's Counsel indicated that he merely relied upon his written submissions for his submissions in chief and did not wish to supplement them with oral argument. When the hearing resumed at 11am on 28 April 2021 (the extra hour being granted to the plaintiff's Counsel as additional time to consider the defendant's written submissions), Counsel for the defendant presented his oral argument; after which Counsel for the plaintiff responded with verbal argument in reply. At the close of the hearing, Counsel for the defendant was granted leave to deliver a short note to the Court, limited to the topic of what were the correct statutory provisions that he relied upon in his written submissions.
In the circumstances that occurred on the last day of the hearing, the plaintiff's Counsel had opportunity, before Court, to consider the defendant's written submissions. He then had, and availed himself, of the opportunity to reply to the defendant's written (and oral) submissions in reply. At no stage on 28 April 2021, however, did Counsel for the plaintiff seek further opportunity to prepare and supply further written submissions in reply to the defendant's written submissions.
As is well-established, it is at the trial when Counsel have the opportunity to present evidence and argument (Carr v Finance Corporation of Australia Ltd (No.1) (1981) 147 CLR 246 per Mason J at 259). It does not constitute an exceptional circumstance to that principle that after judgment is reserved, Counsel thinks of a new argument or arguments that it might have wanted to make. If Counsel were permitted to supplement argument after judgment is reserved because they think of new points, then the already burdensome responsibilities of trial judges (who, in practice, direct their attention to new trials) are worsened. They would potentially be inundated by potentially unlimited or cascading supplementary arguments which could not be the subject of testing by questioning by the trial judge. A further and associated concern is the risk that something might be submitted which might prompt legal representatives for an opposing party(s) to say something which they could not say (with the judgment reserved) but which might have been capable of being said if the hearing was still on foot.
The plaintiff's application to serve further written submissions in reply to the defendant's submissions is refused.
[26]
Consideration
The principal issue dividing the parties is whether the defendant was entitled to deduct from payments to the plaintiff the amounts representing re-credits under the Commonwealth funding scheme. This involves a question of construction of the Agreement.
[27]
The construction issue
The issue of construction is whether the payments due to the plaintiff, under cl 7 of the Co-Operation Agreement (and which are delineated in cl 2 of the Schedule) should take into account the payments re-credited to the Commonwealth government; with the result that the plaintiff only receives a percentage share of the funding which the defendant ultimately receives from the Commonwealth.
[28]
The text
Clause 7 in the Agreement provides that fees payable by the defendant to the plaintiff are to be in accordance with the schedule. That schedule is Annexure 'A'. As has been pointed out, however, cl 7 contemplates the possibility that that the payments made to the plaintiff, following the defendant's receipt from the relevant funding authority (here the relevant Commonwealth department), in respect to a 'payment stage', will be based on what the defendant "actually" receives.
Clause 2 in the Schedule indicates that the payments to the plaintiff will "align" with the payments received from the defendant. The clause then accommodates, as one (but not necessarily exhaustive) example, that where the defendant receives only pro-rata payments from the Commonwealth government, then the plaintiff will receive an equitable pro-rata payment to reflect the agreed percentage. Subject to the difference in percentage share (60% for the plaintiff; 40% for the defendant), there is no other basis for distinguishing the entitlement of the parties to share the funding provided by the Commonwealth. That being so, the language strongly suggests that, subject to the split in the percentage share, the plaintiff will only take a share of that which the defendant ultimately or effectively receives from the Commonwealth; including the effect of any re-crediting.
I accept also that the defendant's submission that the language in cl 7 is supportive of its construction of payments actually received from government. Further, I accept that the practice relating to funding at the state level, where the plaintiff is only paid for funding after taking into account 'credit transfers' provides a good analogy to the approach that would or should apply in relation to Commonwealth funding. In other words, the defendant's construction reflects the practice of the parties, at least in relation to the provision of state funding.
The text favours the defendant's construction but, contrary to the defendant's submission, is not, in my view, conclusive of it. An ambiguity may arise in what is embraced by the word 'received': is it an amount that the defendant receives from the Commonwealth ultimately (taking into account the re-credit) or perhaps initially, so that the defendant may have to repay the Commonwealth subsequently. To the extent that the law continues to require an 'ambiguity gateway' before the reception of extrinsic evidence, that gateway has, in my view been passed.
[29]
Context & purposes
In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], the plurality stated that "[t]he meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean" in context. The Court stated that "it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract": see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[49]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 at [78]; Victoria v Tatts Group Ltd (2016) 328 ALR 564; [2016] HCA 5 at [51]; and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16].
In Mount Bruce Mining it was pointed out (at [46]) that context includes "the entire text of the contract as well as any contract, document or statutory provision referred in the text of the contract". The High Court's decision in Victoria v Tatts Group Limited exemplifies how a statutory regime may provide part of the context for construction of a commercial agreement, where such provisions were manifested in the recitals, operative terms and annexures to the contract in that case.
The 'surrounding circumstances' known to the parties may include matters of law that a reasonable person in the position of the parties is taken to have known (HDI Global Speciality SE v Wonkana No.3 Pty Ltd [2020] NSWCA 296 per Meagher JA and Ball J at [26]-[28]). That, in my view, includes legislation that circumscribes the entitlement to a statutory benefit which is at the heart of the present dispute.
In this case, as I understood the parties' positions as they developed in oral argument, it was accepted that the Co-Operation Agreement entered into in October 2012 was at that time directed only towards the regulation of the provision of state funding; but at the same time, the contract (and the Schedule, in particular) also envisaged that other funding might be available; most obviously, federal funding.
I also understood, but in any event, find, that the purpose of the variation of the Co-Operation Agreement in June 2013 was to accommodate the additional scheme of federal VET-FEE HELP funding (Schedule, cl 1); and, further, the parties also accepted that such funding was to be received in accordance with federal law. That being so, the proper construction of cl 7 is based upon its effect from and after June 2013, after the variation.
In this way, although the provisions of the Higher Education Support Act 2003 are not expressly referred to in the Co-Operation Agreement, their content forms part of the context, or 'surrounding circumstances' known to the parties, which may help inform the proper construction of cl 7, and cl 2 in the Schedule. A reasonable observer would not think that the parties could have agreed to the (mutual) beneficial receipt of funding from the Commonwealth without also being taken to have agreed to be bound by the prescribed requirements (including limitations) for such funding.
The plaintiff's argument that the defendant's construction would mean that it has a unilateral and arbitrary power to negate its entitlement to funding by withholding amounts which it has determined should be re-credited to the Commonwealth, is misconceived. Such power that the defendant has is not arbitrary at all, is not exercisable at large, but is exercisable in accordance with a statutory framework which, amongst other things, provides independent review and scrutiny.
Further, it seems to me that the defendant's construction is consistent with the purposes of the relevant part of the agreement that the fees which an 'Enterprise' like the plaintiff's receives from an RTO, like the plaintiff, which appear to be based entirely upon funding from government. The purpose of the relevant part of the agreement is to divide the share of the funding in proportions. But aside from the distinct proportions of the shared funding, reflecting the different business activities of the parties, there is nothing in the relevant part of the Agreement to suggest an intention that one party should be better off than the other, in terms of what funding it receives. Both the plaintiff and the defendant both stood to lose, financially, from re-credits, in the respective proportions. The effect of acceptance of the plaintiff's construction is that it would be placed in a more beneficial position than the defendant: it would receive its full share, undiminished by the re-credit, whilst the defendant's share of the funding would reduce. A reasonable businessperson would not have understood cl 7 would bear that meaning.
[30]
Commercial convenience
Further, it is well-established that a commercial contract should be construed (where the language permits) in a businesslike fashion and not in a way which (absent strong language to the contrary) will generate commercial inconvenience: International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at [8]; Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at [83].
I also accept the defendant's argument that the plaintiff's construction would be impracticable. This arises from the circumstance that one of the forms through which re-credits are made by the Commonwealth is through offsets of future VET Fee Help payments. The defendant could not practicably pay to the plaintiff money which it did not receive from the Government.
For these reasons, I accept the defendant's construction and that, as a matter of law, it would be entitled to subtract from the payments made to the plaintiff the amounts representing re-credits.
[31]
The plaintiff's suggested implied term to consult
The plaintiff argued that if the defendant was entitled to subtract from the payment it made from Commonwealth funding, it had to first notify, and then consult with the plaintiff that it should do so. This was an argument amounting to a contention that, in the facts and circumstances, there was an implied term (or alternatively, perhaps implied condition precedent).
The defendant's argument concerning its entitlement to subtract was not set out in its Defence. However, it referred to its conduct in determining applications by students for re-credits and issuing payments to the cross-defendant for students issued re-credits in the Cross-Claim (paragraphs 14 and 17(b)-(c)). The plaintiff, as cross-defendant, did not raise in its Defence to that Cross-Claim (filed 31 October 2019) the existence of an implied obligation on the part of the cross-claimant to consult with the cross-defendant before it determined to issue re-credits; or breach of such obligation. Since such obligation could only realistically arise in fact, it would be important for it to be pleaded.
Be that as it may, it is difficult to see how the putative obligation could satisfy the test for implied terms in fact (BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3). The plaintiff/cross-defendant did not articulate how each of the various matters stipulated by that test could be satisfied. Indeed, as I have already indicated, it is particularly hard to see how the standard of business efficacy to the contract could be given in the way that re-credits are treated. Further, it appears to me to be an obligation of indeterminate reference, which makes it far from being so obvious that it goes without saying (let alone necessary): it was not suggested what was entailed within the notion of 'consultation'.
The plaintiff/cross-defendant then has the additional difficulty of identifying what would follow from recognition of a duty to consult. There is force in the defendant's submission that any requirement for notice and consultation could expose the defendant to public remedy at the behest of a student dissatisfied with the defendant's decision.
Nor was it articulated what damages might result from its breach. For example, to argue that the plaintiff/cross-defendant was deprived of the opportunity to persuade the defendant not to decide to issue the re-credits would presuppose that the opportunity had some compensable value. But as the defendant pointed out, in this hearing, the plaintiff - who would carry the onus of proof on any allegations of breach of such implied term and loss - did not articulate much less prove that the determinations were wrong.
There was no implied duty to consult with the plaintiff prior to the defendant deciding to issue the re-credits.
[32]
Whether the entitlement to subtract was factually established
Subject to a qualification, I reject the plaintiff's submission that no evidence was furnished by the defendant to support the determinations that it made. As it had done in the process of referral, the defendant gave unchallenged evidence of the nature of the complaints, save for Ms Cassar and the reasons for the determination in the case of the 6 students. No limitation was sought by the plaintiff as to the evidentiary content of that documented evidence, so the documents were admissible for the truth of their contents. It also furnished spreadsheets which provided the basis for the referee's calculations.
Mr Sabharwal did not demonstrate that the determinations that re-credits should be made were wrong.
In the absence of any arguable suggestion that the determinations are actually wrong, I am not persuaded that the defendant had cause to call the students as witnesses; that the circumstances of the students requires further investigation or, more generally, that the Court even should look behind the determinations.
[33]
Conclusion
In the circumstances, I find that the defendant was entitled, by law and in fact, to subtract from the amounts it paid to the plaintiff any VET Fee Help funding amount which was the subject of a re-credit by the Commonwealth Government. That being so, the assumption made by the referee has been verified.
Accordingly, taking into account the amount that the defendant owed the plaintiff under the state (NET) scheme, offset against the amount that the cross-defendant owes the cross-claimant, the overall result is that the defendant is entitled to the sum of $24,643.36.
I direct the defendant bring in short minutes of order to give effect to these reasons, including, in addition, appropriate orders for interest on the judgment sum and costs, within 7 days.
It should do so after conferring with the plaintiff. In the event that dispositive orders are consented to, orders can be made in Chambers. In the event that disagreement persists, the parties should each supply my Associate with short outlines of submissions (not exceeding 3 pages, excluding any relevant attachments) within a further 3 days from the date that the defendant supplies to the Court its proposed short minutes; and the Court will determine appropriate orders on the papers.
[34]
Endnotes
The National Vocational Education and Training Regulator Act 2011 (Cth)
Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228 ('Bellevarde') at [46]-[48]; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 310 ALR 113 at [7].
Substantially similar provisions were contained in the VET Student Loans Act 2016 (Cth) which came into force on 1 July 217. The re-credits were applied prior to this legislation coming into force.
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Decision last updated: 07 May 2021