Unique International College Pty Ltd v Australian Council for Private Education and Training

The evidence

1. The plaintiff relied on the following evidence: 1. affidavit of Catherine Ann Hamilton-Jewell, the plaintiff's solicitor, sworn 9 May 2016 (and Exhibit CHJ-1); 2. affidavit of Amarjit Singh, the plaintiff's Chief Executive Officer, sworn on 9 May 2016; and- 3. the application and amended statement of claim filed by the Australian Competition and Consumer Commission (ACCC) in the Federal Court in proceedings NSD1277/2015 (the ACCC Proceedings) in which the ACCC claims relief (including declarations, civil penalties and non-party consumer redress) against the plaintiff on the basis of alleged breaches of s 21 of the Australian Competition Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)), which prohibits unconscionable conduct in connection with the goods or services.
2. The defendant relied on the affidavit of its Chief Executive Officer, Rodney Camm. Mr Camm was required for cross-examination but was not available. The plaintiff indicated, in a document handed up in the course of the interlocutory hearing, the challenges it would have made had Mr Camm been available for cross-examination. These challenges relate to matters concerning the balance of convenience, which comprises the principal dispute between the parties in the interlocutory hearing.

The plaintiff's business

1. The plaintiff offers vocational courses including in Hairdressing, Business, Hospitality and Marketing to students in Australia and abroad. It has about 35 employees, including trainers, assessors and student support officers. Presently, about 667 students are enrolled in its courses either at its Granville campus or online. Almost all of the students enrolled in the plaintiff's courses are eligible to receive financial assistance for their tuition fees.
2. For present purposes it is sufficient to say that, in order to maintain its accreditations, including as an approved vocational education training (VET) provider, the plaintiff must comply with regulatory standards and guidelines which require education providers to have arrangements in place that effectively insure a portion of tuition fees that are collected in advance from all students. There are also requirements for arrangements to provide alternative education providers with whom students can complete the subjects that comprise their courses if necessary (for example, if the education provider loses the requisite approval, is wound up or otherwise ceases to operate).
3. The plaintiff was approved by the Commonwealth Department of Education and Training as a VET provider on 27 November 2013

The defendant and its role

1. The defendant, which is a public company limited by guarantee, is a national industry association for independent providers of post-compulsory education and training to Australian and international students. Its activities and operations, as well as its tuition assurance schemes, are relevantly governed by its Constitution; its By-laws; its Code of Ethics and its Corporate Governance and Complaints and Dispute Resolution Policies (the Governing Instruments).

The significance of the plaintiff's membership of ACPET

1. Since 2007, the plaintiff has been a member of ACPET. Its membership entitles it to be a member of certain tuition assurance schemes operated by the defendant which are open only to its members. Membership of these tuition assurance schemes allows the plaintiff to maintain its status as a registered training organisation (RTO) and a VET provider under the relevant statutory regimes.

The membership regime by reference to the Governing Instruments

1. Clause 6 of the defendant's constitution confers a power on its Board to terminate the membership of any member if the Board is of the reasonable opinion of certain stipulated matters, including, for example, that the member has engaged in conduct that is or could reasonably be considered as likely to be prejudicial to the defendant's interests. Clause 6.3 provides that a member may, by written notice, within 7 days of a Board resolution terminating its membership, elect to have the question dealt with by the defendant in General Meeting.
2. The defendant's By-laws make provision for what appears to be a different regime and stipulate that members may only be expelled or suspended from ASTAS in accordance with the defendant's Code of Ethics. Clause 12.5 also provides for a right of appeal.
3. The defendant's Code of Ethics provides, by cl 11, for the "Treatment of members". It provides, in part, that all members must have access to grievance and appeal processes as these relate to their continuing membership rights and status (reference is made in the Code to the defendant's Complaints and Dispute Resolution Policy). Clause 11.3 provides that the defendant's Chief Executive Officer must not fail to ensure that all principles of natural justice are applied in all grievance hearings and associated processes.
4. The defendant's Complaints and Dispute Resolution Policy covers various complaints or grievances, including those about a person who is a member of ACPET. The policy contains the following passage: "Judicial Notice The complaint and investigation process does not have to strictly follow rules of evidence and can take notice of any information considered relevant. Where possible the principles relating to natural justice will be followed. It is intended that as far as possible all proceedings be held informally, confidentially, in a timely manner, and without strict adherence to obligations of compliance."

The statutory regime

1. The Higher Education Support Act 2003 (Cth) provides for the making of instruments. The Higher Education Support (VET) Guideline 2015 (the Guideline) is an instrument made under the Act. The Guideline relevantly provides, by cl 9(1), that, in order to meet the VET course assurance requirements, a body (such as the plaintiff) must demonstrate that it has in place arrangements that are sufficient to cover all students enrolled as VET students. The kinds of arrangements envisaged are set out in cl 9(2) and include, in cl 9(2)(a), membership of a "VET tuition assurance scheme" that is operated either by the plaintiff or TAFE Directors Australia (TDA). The other arrangements that can be made are legally binding agreements with other VET providers (i.e. persons in the plaintiff's position); or a legally binding guarantee provided by someone who can ensure, in effect, that the plaintiff's courses can be provided (if the plaintiff is unable to provide them) and who has the necessary financial and administrative resources to fulfil such arrangements.

The events that led to the Termination Decision

1. In September 2015 the plaintiff applied for membership of the TDA assurance scheme (being the alternative scheme referred to in cl 9(2)(a) of the Guideline referred to above). However, TDA refused its application for membership. On 19 October 2015 the national regulator, Australian Skills Quality Authority (ASQA), gave notice to the plaintiff that it had cancelled its registration (the Cancellation Decision). The plaintiff challenged the Cancellation Decision in the Administrative Appeals Tribunal (AAT). A stay of the Cancellation Decision was granted by consent on condition that the plaintiff would not enrol any new students or market or advertise its courses.
2. On 27 October 2015 the ACCC commenced proceedings against the plaintiff for declaratory relief and civil penalties for alleged unconscionable conduct. The details of the allegations made by the ACCC (in the application and pleadings which were tendered by the plaintiff at the hearing for interlocutory relief) do not need to be considered. It is sufficient to say that the amount claimed by the ACCC is not identified in these documents.
3. By letter dated 3 December 2015, the defendant informed the plaintiff that the announcement that the ACCC had brought proceedings against the plaintiff and the Cancellation Decision are "of a serious enough nature that the Board must now consider your ongoing membership". It referred to cl 6.2 of the Constitution (referred to above) and said: "Section 6.2 of the ACPET Constitution provides that the Board may by resolution and in its sole discretion terminate the membership of a Member if the Board is of the reasonable opinion that the Member: (b) has engaged in conduct which amounts to impropriety affecting professional character and which is indicative of a failure either to understand or practise the values required by the Council; (c) has engaged in unsatisfactory professional conduct where the conduct is such that it involves a substantial or consistent failure to reach reasonable standards of competence and diligence; or (d) has engaged in conduct that is or could reasonably be considered as likely to be prejudicial to the interests of the Council."
4. The defendant invited the plaintiff to attend a meeting with its Governance Audit and Risk Committee to respond to matters of concern and assist the Committee in forming its recommendation to the Board.
5. On 9 December 2015, Mr Singh received an email from the defendant regarding the plaintiff's tuition assurance options. He was informed no insurance cover could be offered to the plaintiff and that a security arrangement had been prepared to "formalise the security deposit and assurance limit". The security deposit provided for was $3.754m. The amount was said to have been calculated "on a worksheet".
6. On 11 December 2015 the plaintiff executed the Security Agreement proffered by the defendant and deposited the amount of $3.754m (the Security Amount) into an account in the name of the defendant's solicitors. The description and purpose of the payment was said to be "ASTAS Security for ACPET from Unique International College". According to Mr Singh, whose evidence was not challenged, at the time the security deposit was calculated, the number of students enrolled was 1,197. However, as at the present date, the plaintiff has only 659 students enrolled with the assistance of the VET-FEE HELP scheme for which it is obliged to have VET coverage. If the same formula is applied to the current number of students, the security deposit required would be $1.977m. On this basis, Mr Singh said that the Security Amount is presently in excess of what would be required by at least $1.7m.
7. On 11 December 2015 the plaintiff met with the defendant's Governance Audit and Risk Committee to discuss the matters raised in the defendant's letter of 3 December 2015 referred to above.
8. A week after the meeting, the plaintiff's solicitors wrote to the defendant about the meeting and said that the plaintiff expected to be given an opportunity to respond to concerns raised before the Board made a decision about its membership of ACPET. No response was received. The plaintiff was not provided with an opportunity to address the Board or to respond to the report or recommendation of the defendant's Governance Audit and Risk Committee.
9. On 27 January 2016 Mr Camm invited the plaintiff to renew its ASTAS coverage for the period 1 April 2016 to 31 December 2016. Mr Singh deposed that the plaintiff remains "ready, willing and able to pay its membership fees" upon receipt of an invoice from the defendant.
10. On 12 February 2016 the plaintiff received a letter informing it of the Termination Decision. The letter said, relevantly: "Thank you for attending the Governance Audit and Risk meeting on 11 December 2015 and for the additional information you provided subsequent to that meeting. I am writing to advise that, in accordance with clause 6.2 of the Constitution, the Board of ACPET has resolved to terminate the ACPET Membership of Unique International College effective at the expiration of 90 days from the date of this letter. This follows a meeting of the Board of ACPET on Friday 5 February 2016 in which it considered all the information provided by you and the ACPET Governance, Audit and Risk Committee. In accordance with ACPET By-Laws the Board is providing 90 days' notice of its intention to terminate your ASTAS Membership. During the 90 day period your Tuition Assurance will continue as per normal provided the Assurance Amount remains held in the ACPET Member Security Trust during this period. Unique International College will need to make alternative arrangements under the Higher Education Support (VET) Guidelines 2015 or other relevant regulations to meet its tuition assurance requirements and notify the Regulator of these arrangements. This termination will take effect unless, within 7 days, Unique International College requests that the matter be referred to a general meeting of ACPET in accordance with clause 6.3 of the Constitution. Unique would need to meet all reasonable costs of calling the meeting but this payment would be refunded if the appeal of the decision to terminate was successful. Subject to the foregoing, ACPET will formally cancel your ACPET and ASTAS membership, will cease the provision of services and notify the Regulator and ACPET members of the termination."
11. On 19 February 2016 the plaintiff gave written notice pursuant to cl 9.3 of the defendant's Constitution, that it required the question of its membership to be dealt with by the defendant in General Meeting. I note that notwithstanding the plaintiff's invocation of cl 6.3, the defendant maintained that the termination of the plaintiff's membership of ACPET would be effective on 12 May 2016 (unless interlocutory relief was granted).
12. By letter dated 26 February 2016 the defendant wrote to the plaintiff requiring that the sum of $19,600 be paid to cover "the reasonable costs for the calling of the Extraordinary General Meeting". The plaintiff paid that sum on 11 March 2016. On 29 March 2016 the plaintiff's solicitors wrote to the defendant asking that the General Meeting be deferred until it had been provided with information as to the grounds on which its membership (of the plaintiff and ASTAS) had been terminated.
13. Between 31 March 2016 and 6 May 2016 the plaintiff and defendant have, through their solicitors, attempted to resolve the dispute concerning the plaintiff's membership of the defendant. These attempts have been unsuccessful. The defendant did not suggest that the plaintiff had been guilty of laches or that interlocutory relief ought be refused on the grounds of delay.
14. On 28 April 2016 the Commonwealth Department of Education and Training wrote to the plaintiff and noted that its membership will expire on 12 May 2016 and that the Department may suspend or revoke the plaintiff's coverage as a VET provider.

The principles

1. The applicable principles are not in doubt and were summarised in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at 68 per Gleeson CJ and Crennan J; at 81-84 per Gummow and Hayne JJ. The plaintiff must show, in substance, that: 1. there is a serious question to be tried; 2. damages will not be an adequate remedy; and 3. the balance of convenience favours the granting of an injunction.

Serious question to be tried

1. Ms Morgan, who appeared for the defendant, did not wish to be heard against (1). In any event, I have been persuaded by the submissions made by Mr Pritchard SC, who appeared with Mr Jedrzejczyk on behalf of the plaintiff, that there is a serious question to be tried, at least as to whether the Termination Decision is void by reason of the defendant's denial of procedural fairness to the plaintiff.
2. The "hearing rule" is an aspect of natural justice. In Kioa v West (1985) 159 CLR 550, Mason J explained the principle as follows, at 582: It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it.
3. The hearing rule relevantly requires that a person whose interests may be adversely affected by a decision be given an opportunity to deal with matters adverse to the person's interests: Kioa v West at 629 per Brennan J.
4. The requirements of the hearing rule vary by reference to the context. However, its application is not limited to those exercising governmental powers and may be attracted if there is a public element to the exercise of the relevant powers: see, for example, Minister for Local Government v South Sydney City Council [2002] NSWCA 288; 55 NSWLR 381 at [7] per Spigelman CJ and CECA Institute Pty Ltd v Australian Council for Private Education and Training [2010] VSC 552; (2010) 30 VR 555.
5. From the material adduced, there is an arguable case that the defendant not only did not comply with its own procedures (as to the relevant body to make the decision) but that it did not give the plaintiff an opportunity to be heard (by the Board, being the operative decision-maker) before terminating its membership and therefore did not comply with the hearing rule. Although the plaintiff also put its case on the basis of failure to give reasons, it is not necessary, for present purposes, to consider whether there is a serious question to be tried on that issue.

Whether damages will be an adequate remedy

1. Ms Morgan did not make submissions as to (2) and confined her arguments to the third matter, the balance of convenience (see below). I am also satisfied that, if the plaintiff makes out its claims, damages will not be an adequate remedy. Accordingly it is necessary to address the balance of convenience.

The balance of convenience

1. The balancing exercise required to be undertaken in determining whether to grant interlocutory relief was summarised in the following terms in Kolback v Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 by McLelland J at 535: Where a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of the relief to which the plaintiff may ultimately be held to be entitled.

Potential prejudice to the plaintiff if interlocutory relief is refused

1. I accept Mr Singh's unchallenged (for the purposes of this hearing only) evidence that if interlocutory relief is refused the consequences for the plaintiff will be likely to include the following. As of 12 May 2016, the plaintiff will no longer be a member of any approved tuition assurance scheme, thereby putting it in breach of the tuition assurance requirements of the relevant statutory provisions. Mr Singh believes that it is "extremely unlikely" that the plaintiff would be able to find another VET provider to enter into an arrangement for tuition assurance that would meet the requirements. He also believes that it is "extremely unlikely" that the plaintiff would be able to find an unrelated body corporate who could act as a VET course assurance guarantor.
2. I note that Mr Camm took issue with this conclusion and said: "The Guidelines do not state that the arrangements specified in clauses 9 and 10 of the Guidelines are the only arrangements that will be to the satisfaction of the Secretary, only that they are the kinds of arrangements that will be satisfactory."
3. Notwithstanding Mr Camm's submission (in his affidavit) I am satisfied, on the basis of Mr Singh's evidence that the other avenues open to the plaintiff to comply with cl 9 of the Guideline referred to above, would appear to be, as a matter of practical reality, unavailable to the plaintiff, at least in the short term (during the period of any interlocutory relief).
4. If no satisfactory arrangement could be made, the Minister of the Commonwealth Department of Education and Training is likely to revoke the plaintiff's approval as a VET provider (since the Department has already written to the plaintiff foreshadowing its intention to suspend or revoke the plaintiff's approval). In this event, the plaintiff will no longer be entitled to offer the VET courses in which 659 (of its total of 667) current students are enrolled. If the plaintiff is not entitled to offer VET courses to its students, those students with have to find an alternative provider if they are to continue their studies without undue interruption. In these circumstances, the plaintiff will no longer require its staff, whose services will probably be terminated. Potential hardship to, or interference with the rights of, innocent third parties is a relevant consideration to the Court's discretion whether to grant interlocutory relief.
5. I note that the defendant has given no undertakings that would render the grant of interlocutory relief unnecessary.

Potential prejudice to the defendant if interlocutory relief is granted

1. Ms Morgan relied on Mr Camm's evidence which included the following: "I believe that in the proceedings currently between the ACCC and the Commonwealth and Unique [the plaintiff], the ACCC and the Commonwealth are seeking to recover $54,000,000 from Unique. Should ACPET [the defendant] be required to continue to provide Unique with tuition assurance coverage and should the ACCC and the Commonwealth be successful in the proceedings, ACPET would be exposed to an unquantified level of potential financial liability".
2. Ms Morgan submitted that there would be substantial prejudice to the defendant if interlocutory relief were granted because of the defendant's inability to obtain insurance in respect of the plaintiff's students, which led to the Security Agreement entered into in December 2015 referred to above. She contended that the defendant would be, potentially, exposed to a significant liability if the effect of the Termination Decision were stayed pending determination of the proceedings (even if they could be heard expeditiously).
3. Mr Pritchard submitted that there was not only no evidence that the granting of an interlocutory injunction will cause any hardship or prejudice to the defendant, but that the evidence was to the contrary. He relied on the existing security arrangements which, on the basis of Mr Singh's calculations referred to above, provide a buffer of at least $1.7m of what could reasonably be required by way of security (being $1,977,000 based on the current number of 659 VET students at $3,000 each per current enrolled unit of study). He relied on the plaintiff's audited accounts for the year ended 30 June 2015 which showed assets of $34,050,505.
4. As to the figure of $54m referred to by Mr Camm, Mr Pritchard said that the provenance of the figure appeared to be an article in the Financial Review on 27 October 2015 which reported the commencement of the ACCC proceedings against the plaintiff. He relied on the absence of any mention of such a figure in either the application or the statement of claim (which were tendered by the plaintiff). I note that the article (which is in evidence but was not admitted as to the truth of its contents) commenced by reporting that the ACCC "will try to recover up to $57m from a private college [the plaintiff] that is alleged to have breached consumer laws in selling courses to potential students". According to the article, the $57m is the total of student fees received by the plaintiff.
5. Mr Pritchard also submitted that the amount of $3.754m would not be available to satisfy any order against the plaintiff (as respondent) in favour of the ACCC or the Commonwealth in the ACCC Proceedings, if it was required by the defendant to fulfil the plaintiff's obligations to students since it was quarantined in the defendant's solicitors' account for that purpose. I understand that that sum is still intact and has not been the subject of any reduction since its lodgement in December 2015.

Other matters

1. I understood it to be common ground that the parties could be ready for final hearing in a matter of about a fortnight (subject to the Court's availability) and that the hearing would take one or two days.

Conclusion

1. I am satisfied that the balance of convenience favours the grant of interlocutory relief in the terms sought by the plaintiff in its notice of motion. The likely imminence of a final hearing is a significant consideration, as is the substantial sum which was deposited in the defendant's solicitors' account last September, which appears to be in excess of the amount that would be required to provide security for the assurance requirements. I regard this sum as likely to be more than sufficient, at least in the short term, to protect the defendant against any shortfall, irrespective of the outcome of the ACCC Proceedings (which are listed for hearing in the Federal Court for two weeks commencing 6 June 2016) and irrespective of whether the plaintiff's net asset position is as it was recorded in the accounts for the last financial year. I note that the plaintiff's student numbers are constrained to their present level by reason of the (agreed) conditions of the stay granted by the AAT.
2. I am not satisfied that any prejudice that the defendant might suffer if the interlocutory relief is granted (which I regard as largely speculative) outweighs the real and immediate prejudice that the plaintiff will suffer if it is refused. I also take into account, as a relevant factor, the interests of the plaintiff's staff and students, which presently favour the grant of interlocutory relief.
3. I am also persuaded that it is appropriate that relief be granted to restrain the defendant, on the limited interlocutory basis identified, from holding the General Meeting pursuant to cl 6.3.
4. I note that the plaintiff gives an undertaking as to damages.

Orders

1. Upon the plaintiff by its counsel giving the usual undertaking as to damages, I make the following orders: 1. Until further order, an order that the defendant by itself, its servants or agents be restrained from taking any act or making any omission in furtherance of, or to give effect to, the decision made by the defendant on or about 12 February 2016 purporting to terminate the plaintiff's membership of the Australian Council for Private Education and Training (ACPET) including, without limitation, the plaintiff's membership of the Australian Student Tuition Assurance Scheme and the Australian Student Tuition Assurance Scheme-VET (ASTAS). 2. Until further order, an order that the defendant by itself, its servants or agents be restrained from: 1. convening or holding any extraordinary general meeting of the members of ACPET in respect of the purported termination of the plaintiff's membership of ACPET, ASTAS and/or ASTAS-VET; and 2. using any portion of the amount of $19,600 that was paid to the defendant by the plaintiff on or about 11 March 2016 for the purposes of convening or holding any extraordinary general meeting, 3. until such time that the defendant has provided to the plaintiff: 4. at least 28 days prior to any extraordinary general meeting, written notice of the grounds on which the defendant has purported to terminate the plaintiff's membership of ACPET, ASTAS and ASTAS-VET and the underlying evidence and facts that support those grounds, including any recommendation prepared by the defendant's Governance, Audi and Risk Committee concerning the plaintiff together with all supporting documentation; and 5. at least 14 days prior to any extraordinary general meeting, an opportunity to provide a written response to the matters raised in the notice, underlying evidence and supporting documentation referred to above. 1. Order that the final hearing of the plaintiff's claims for relief in these proceedings be expedited. 2. Grant leave to the parties to approach the Listing Manager for allocation of a hearing date, having regard to the need for expedition. 3. Grant liberty to apply to restore the matter to the list before me on 3 days' notice. 4. Reserve the question of costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 May 2016