Masters in Building Training Pty Ltd v State of New South Wales

1. [1]

   HER HONOUR: This matter involves a dispute between the plaintiff, Masters in Building Training Pty Ltd (MIBT), a nationally registered training organisation (RTO) that at the relevant time provided online and workplace-based training to students in New South Wales, Queensland and the Australian Capital Territory, on the one hand, and the defendant, the State of New South Wales, on the other hand.

2. [2]

   The dispute arose in relation to the termination by the NSW Department of Education (Department) in March 2021 of the contractual arrangements pursuant to which MIBT obtained funds from the Department for the provision of training to students in New South Wales. The contractual arrangements (which were renewable on an annual basis) were due to expire in any event at the end of June 2021 and it would presumably have been open to the Department simply not to renew those contractual arrangements. However, the Department chose to proceed with an earlier termination of the contractual arrangements, which precipitated an urgent interlocutory application (as I will explain in due course) for an injunction in effect to compel the continuation of those arrangements pending determination of the issue as to the validity of the termination (and hence to extend the time during which training was provided under the then existing arrangements).

3. [3]

   The hearing of the proceeding was expedited but ultimately (and after at least one further application for interlocutory relief to which I will refer shortly) what now remains to be determined would not in my opinion have merited expedition over and above any other commercial dispute that comes before this Court in the ordinary course. That is because the issue that warranted expedition related to the continued provision of training by MIBT until 30 June 2021. After that date, the substantive dispute relates to liability for payment of amounts due under the contractual arrangements, including any set-off in respect of those amounts by reference to other amounts payable to the Department; and the quantum of those amounts – matters the determination of which (even though the amount in question is not small) did not appear to me to warrant any special need for expedition (and hence delivery of judgment was not prioritised over other matters in the list).

4. [4]

   At least as originally framed, the disputes between the parties related to MIBT’s contentions that the Department’s Notice of Termination dated 25 March 2021 was invalid and of no effect and that the Department had breached its contract with MIBT by its failure to pay all fees due to it (for which MIBT sought damages and equitable compensation, together with interest and costs), on the one hand, and, on the other hand, to the Department’s contentions (raised by its cross-claim) that it was entitled to withhold payment of “Subsidies” and “Loadings” otherwise payable to MIBT for various periods between 13 July 2020 and 30 June 2021 and that it was entitled to damages totalling $925,429.99 (plus interest and costs).

5. [5]

   However, it became apparent during submissions in the course of the hearing that the only relevance (or potential relevance) of the question as to whether the Department’s Notice of Termination had been validly issued was as to any claim that might be made on the usual undertaking as to damages that had been proffered by MIBT in relation to the mandatory injunction sought and obtained by it at the start of the proceeding. This is because MIBT does not now press any claim for damages in relation to the termination; rather, it simply seeks payment of moneys (Subsidies and Loadings) to which it says it is contractually entitled having performed the services it did in relation to the training of students enrolled in its courses or “qualifications”. Thus, in essence, MIBT’s claim is based in debt (as in essence is also the Department’s cross-claim although framed as including a claim for damages for breach of contract).

6. [6]

   Further, it appears that MIBT and the Department were at cross-purposes as to the basis on which the Department maintained it was entitled, after termination of the Contract, not to pay the claimed Subsidies and Loadings. The Department in its submissions devoted space to the contention that it was entitled in the relevant period up to 30 June 2021 to withhold the Subsidies and Loadings (i.e., while the suspension notices were in force) but made clear at the hearing that it does not contend that it has or had an unfettered discretion to reject what is referred to as Training Activity Data (on which the claim for payment is based) nor does it contend that the fact of termination of itself entitles it to withhold payment of the claimed amounts. Thus, the Department appears to accept that, after the termination of the contractual arrangements, its hitherto entitlement to suspend payment of Subsidies and Loadings (i.e., its entitlement to do so while there was a formal suspension in place) does not continue to operate. Rather, what the Department contends is that it has no liability now to pay moneys referable to Training Activity Data that it was entitled to reject or which was not uploaded within the time the Department had specified (and that this is the case even if MIBT might have documents establishing the underlying accuracy of that Training Activity Data). In those circumstances, and since no claim for damages for breach of the alleged implied term of good faith is pressed (the claim by MIBT in essence being for amounts it claims are owing under the now terminated contract), much of the debate in the submissions as to the ability to withhold the Subsidies and Loadings during the period of the suspension notice is now otiose.

7. [7]

   Thus, the fundamental issues in dispute at the hearing ultimately related to liability for, and the quantum of, any amount now payable to MIBT for services provided during the course of the Contract up to 30 June 2019 as well as in respect of the offsetting payments claimed by the Department. Those issues were not uncomplicated having regard to the mechanism by which claims for payments for services provided under the Contract are made through uploading of data through a particular software or online Portal operated by the Department and the data clarification or verification process that then occurs through the Department’s software program and/or by human review (see the explanations in the affidavit of Linna Nguon, affirmed 6 October 2021 at [13]-[37]) and the (unpleaded) complaint by the Department in effect as to the quality or content of the training that was provided and record keeping related thereto (which turned in large part on the definition of “Participation in Subsidised Training” as I explain in due course).

8. [8]

   Regrettably, it seems difficult not to conclude that at the heart of the disputes between the parties is a mismatch of expectation or understanding as to what was required to be provided by MIBT in order to address the Department’s queries in the course of its clarification or verification process, exacerbated by the view formed by the Department (seemingly, after the event or at least not expressed until then) as to the quality or otherwise of the training provided by MIBT (and, in particular, what was expected for satisfaction and reporting of the requirement for student “Participation in Subsidised Training”). This points at the very least to the desirability of amendment of the Department’s standard form contract to make clear exactly what it requires in terms of the content and delivery of training.

9. [9]

   MIBT’s contention is that it performed its contractual obligations until the expiry of the contract on 30 June 2021 and MIBT complains that, despite the Court’s orders in the interlocutory decisions to which I will refer shortly (Masters in Building Training Pty Ltd v State of New South Wales [2021] NSWSC 454 (MIBT No 1) per Kunc J and Masters in Building Training Pty Limited v State of New South Wales (No 2) [2021] NSWSC 747 (MIBT No 2) per Parker J), the Department has made no payment to it after 1 March 2021.

Summary

1. [10]

   The question as to validity of the Notice of Termination turns on whether there was an extant Event of Default as at 25 March 2021 on which the Department could rely to exercise the power of termination under cl 21.2(c) of the Contract. Although MIBT might well have a legitimate complaint as to the invocation by the Department of the more summary procedure for termination after, and before completion of, the process first invoked by it (i.e., what might be described as akin to a show cause procedure under which notification of, and an opportunity to remedy, identified or perceived Events of Default was provided to MIBT), nothing here turns on this because, as adverted to above, MIBT does not press its claim for recovery of damages or equitable compensation (see, for example, at T 256; T 289.9-39) nor does the Department contend that a valid termination precludes recovery by MIBT of moneys otherwise due under the Contract.

2. [11]

   The Termination Notice in effect incorporated the matters referred to in the December 2019 Suspension Notice and the 4 March 2021 letter (see below). Of those matters, in its submissions the Department relies on four Events of Default that it contends found the basis for valid termination of the Contract: first, that MIBT did not provide evidence to the Department of the reassessment of former students of a particular trainer; second, that MIBT did not provide sufficient or complete evidence in relation to the records of Recognition of Prior Learning for the Advanced Diploma of Building and Construction; third, the determinations by the Australian Skills and Quality Authority (ASQA) that MIBT was non-compliant with the relevant standards for RTOs; and, fourth, the making of allegations in the 4 March 2021 letter of lack of engagement with students and lack of face to face training. The Department maintains that it is sufficient that it held a belief as to those matters at the relevant time in order to exercise the right of termination.

3. [12]

   Of those four identified Events of Default, I have concluded that at least the third was an extant Event of Default at the time of the 25 March 2021 Termination Notice and hence that there was valid termination under cl 21.2(c) of the Contract (notwithstanding that the process earlier invoked under cl 21.2(d) had not by then been completed).

4. [13]

   As to the Department’s cross-claim, as noted above, I accept that the Department was entitled to withhold Subsidies and Loadings while the relevant suspension notices were in force (although I see no utility in the making of a declaration to that effect). However, I have concluded that, following termination of the Contract, the Department is liable to pay various of the claimed amounts for Subsidies and Loadings (as I set out in due course) to MIBT, although I consider that there should be a set-off against that amount for the moneys that have been conceded to be payable to the Department and the further amounts that I find have been established as payable to the Department; and I will make orders accordingly.

5. [14]

   As to the complaint made by the Department’s internal and external reviewers as to the content of the “Subsidised Training” or the manner in which it is conducted (particularly, the complaint as to lack of interaction and participation and that it is said to be “gap training”; and the Department’s belief that the training has in some fashion been abdicated to the employers of enrolled students), apart from the fact that this issue is not pleaded, on balance I do not accept that this criticism is made good (although it may have force in relation to individual students from time to time – a matter that it is neither practical nor necessary for me to test on a student-by-student basis by delving into the voluminous court books). I also do not accept that (although it was certainly open to the Department to issue directions with which MIBT under the Contract was obliged to apply) it was open to the Department in effect arbitrarily to set an end time for the uploading of Training Activity Data to its “Portal” and then to deny any claims supported by data that might otherwise have been available (and hence to refuse payment on that basis).

6. [15]

   As to the question of costs, I will ascertain at the time of publication of these reasons whether the parties seek the opportunity to provide brief written submissions as to costs but otherwise I would follow the general rule that costs should follow the event and that, MIBT having predominantly been successful in its contentions, the Department should pay MIBT’s costs.

Chronology of Events

1. [16]

   On 1 January 2015, the New South Wales Government implemented reforms to the Vocational Education and Training (VET) sector in New South Wales, resulting in the “Smart and Skilled” program, which is designed to subsidise training for students to complete VET for Certificate II level up to Advanced Diploma Level, including the level of Certificate III, in a variety of “competencies”.

2. [17]

   Under the Smart and Skilled program, students are given the opportunity to select an RTO through which their training is undertaken. RTOs are required to be registered pursuant to the National Vocational Education and Training Regulator Act 2011 (Cth) (NVETR Act). The Australian Skills and Quality Authority is the regulatory authority for all RTOs, save for those in Western Australia and Victoria.

3. [18]

   There are approximately 391 RTOs delivering training under the Smart and Skilled program in New South Wales. The relationship between those RTOs and the Department of Education (the Department) is governed by the terms of the (standard form) Smart and Skilled Contract Terms and Conditions (Contract) (see below). The relevant body within the Department that administers the Smart and Skilled program is Training Services New South Wales.

4. [19]

   The Department and MIBT have been parties to contractual arrangements in terms of the Contract since around 2015 (each Contract being for a term of twelve months and renewed on a yearly basis by the Department). The last such agreement was entered into between MIBT and the Department on or about 15 May 2020, effective from 1 July 2020 (and it was thus due to expire on 30 June 2021). The renewal process involves the Department issuing a Review Notice two months prior to the end of the “Activity Period” (defined to mean the period specified in the Approved Qualifications Activity Schedule), setting out the skills which may be provided by the RTO. If accepted, this brings into existence a new contract from 1 July of the relevant year. If no Review Notice is issued, then the then existing contract expires on 30 June of the relevant year (see the explanation given at T 2.29-45; and see cl 6 of the Contract).

5. [20]

   The Contract is comprised of: an outline of the training covered by the Contract; Operating Guidelines; the Approved Qualifications Schedule; and the policies published by the Department in connection with the Contract as added, amended or replaced by the Department from time to time. I set out in due course the relevant provisions of the Contract and summarise the evidence as to how the Smart and Skilled program operated in practice; and how claims for Subsidies and Loadings were made (and reviewed). At this stage, suffice it to note that (under the contractual arrangements) the Department agreed, subject to conditions, to pay MIBT for the provision of training to students in New South Wales by way of “Subsidies” and “Loadings”.

6. [21]

   Entitlement to payment was based on certain Unit of Competency (UoC) outcome codes, which represented milestones justifying payment for training. Those outcome codes relevantly included: Code 20 (a pass); Code 30 (a fail – although I understand that more commonly a student would not fail but would simply either continue or not continue the course); Code 40 (“withdrawn” – where a student has “Participated in Subsidised Training” in a “manner that exceeds mere attendance or accessing training material” but has withdrawn from the course; i.e., the RTO’s entitlement to remuneration is not dependent on the student ultimately passing the course or gaining the relevant competency); and Code 70 (“continuing enrolment” or “TNC” – which acronym means training not complete but where there is a continuing enrolment and, again, this outcome code is dependent on the student having “Participated in Subsidised Training” in the requisite manner). Much of the dispute over payments now claimed by MIBT (the “big ticket item” as it was described in submissions) relates to the “withdrawn” and “TNC” outcome codes (Codes 40 and 70), as I will explain in due course.

7. [22]

   On or around 22 May 2019, the Department wrote to MIBT, notifying MIBT that it wished to conduct a performance monitoring audit. That audit occurred during the months of June and July 2019 and was undertaken by the Illawarra and South East Regional Office of Training Services NSW.

8. [23]

   On 2 August 2019, the Illawarra Regional Office emailed the Department and prepared a memorandum concerning issues relating to the performance monitoring of MIBT. (This memorandum was not provided to MIBT at that stage.)

9. [24]

   On or around 25 September 2019, MIBT (of its own volition) reported to the Department allegations of fraudulent claims of Subsidies and Loadings. This followed an internal investigation within MIBT codenamed “Operation Fish”. The allegation, relevantly, involved the alleged falsification of data (including data relating to non-existent students).

10. [25]

    The evidence of Mr Paul Lawrence, the sole director, founder and Chief Executive Officer of MIBT, is that he became aware in July 2019 that MIBT’s then national training manager and certain trainers were involved in fraudulent activities – issuing certificates and qualifications without evidence that those students had completed the requisite assessment. Mr Lawrence has deposed that there was an internal investigation; the individuals involved were immediately dismissed; and the matter was reported by MIBT to the police as well as to the NSW Department of Fair Trading and ASQA in July 2019 (see the first affidavit of Paul Lawrence, affirmed 30 March 2021 at [29]-[31]).

11. [26]

    On 8 October 2019, the Department received an anonymous complaint from an employee from MIBT concerning allegations against MIBT such as “changing invoices, fabricating evidence, misinformation given to students, and signing up students to several courses without their knowledge or consent”. MIBT was not notified of the October 2019 complaint at that stage.

12. [27]

    On 13 November 2019, the Illawarra Regional Office concluded the performance monitoring audit of MIBT.

13. [28]

    Following that review, the matter was referred to the Department’s Quality Assurance (QA) section. Between 13 November 2019 and December 2019, QA retained an external reviewer, Mr Andrew Schofield, to review evidence provided to the Department in respect of MIBT’s performance under the Contract.

14. [29]

    On or around 9 December 2019, Mr Schofield provided his report to the Department, which identified two broad areas of default under the Contract, namely: breach of Record Keeping Requirements in relation to cl 17.2(i) of the Operating Guidelines and cll 13.1 and 14.1(a) of the Contract Terms and Conditions; and breach of Training and Assessment Requirements under cl 14.1(a) of the Operating Guidelines. These provisions are as follows.

15. [30]

    Clause 7(i) of the Contract Terms and Conditions provides as follows:

16. [31]

    Clause 13.1 of the Contract Terms and Conditions is as follows:

17. [32]

    Clause 14.1(a) of the Contract Terms and Conditions provides:

18. [33]

    The Operating Guidelines, in turn, provide at cl 14.1(a):

19. [34]

    On 13 December 2019, the Department, on the recommendation of QA, issued a suspension notice to MIBT under cl 21.2 of the Contract (December 2019 Suspension) (see below). This had the effect of preventing MIBT from enrolling or commencing any new students under the Contract (but did not prevent MIBT from providing training for those students already enrolled). The Department also withheld the payment of Subsidies and Loadings to MIBT.

20. [35]

    The December 2019 Suspension was expressed to be based on various Events of Default, within the meaning of cl 21.2(e) of the Contract (see below). The Department sought a response within 28 days (i.e., by 10 January 2020) and offered MIBT the opportunity to meet with representatives of the Department to discuss the alleged Events of Default. (MIBT notes that, while the December 2019 Suspension notice did not expressly refer to cl 21.2(d) of the Contract, it plainly followed the procedure there contemplated.) The notice advised that, if no response was received within the timeframe, it would be deemed to have denied the Events of Default and the Department would proceed to finalise the performance monitoring.

21. [36]

    The Events of Default there identified were: first, breach of warranty as to the qualifications of two trainers (Mr Lawrence himself, although the Department was ultimately satisfied as to this issue; and a Mr Dean Edser, who it does not appear to be disputed did not hold the requisite qualifications); second, as to the RPL (Recognition of Prior Learning) process in relation to two of 15 qualifications (the Advanced Diploma of Building and Construction Management; and Certificate III in Carpentry); third, a breach in relation to record keeping (insofar as MIBT did not keep records as to evidence supporting credit transfers for various students; nor as to evidence to support the granting of Recognition of Prior Learning; nor evidence of assessment and student responses as part of the Recognition of Prior Learning application; nor evidence of assessment for UoCs where outcome code 20 was reported); and, fourth, a failure to maintain records(insofar as there was: insufficient evidence of required skills in Recognition of Prior Learning; insufficient evidence of assessment of performance criteria, required skills, required knowledge or critical aspects of assessment; and third party reports were incomplete in relation to work verified by that third party). Pausing here, it is relevant to note that Mr Edser was not a trainer, as such. His role was in relation to the assessment of credit for prior learning (the RPL process). Hence, there was what the Department describes as the “flow-on” effect of the issue as to Mr Edser’s qualifications – that being the need to re-assess the competency of the relevant students whom he had assessed as part of the RPL process.

22. [37]

    On or around 14 December 2019, MIBT responded to the December 2019 Suspension, accepting the Events of Default and indicating that it would take steps to rectify those matters. (Pausing here, the Department says that some of those Events of Default were extant or unremedied by the time of termination of the Contract; in which context it is relevant to note that MIBT did not dispute the existence of those Events of Default at least at that stage (though see below as to Mr Lawrence’s position in relation to the subsequent “remediation” documents review).

23. [38]

    On 17 December 2019, there was a meeting between the Department’s representatives and MIBT. Nothing was made of this meeting in submissions.

24. [39]

    On 6 January 2020, MIBT provided a USB to the Department that contained documents referred to in the schedule to MIBT’s letter of 14 December 2019.

25. [40]

    On or about 21 January 2020, MIBT wrote to the Department, requesting that the December 2019 Suspension be lifted.

26. [41]

    On 24 January 2020, the Department responded to MIBT, advising that several of the Events of Default remained outstanding. The Department indicated that it would pay Subsidies and Loadings relating to enrolled apprentices, subject to Training Activity Data submitted by MIBT being approved; but that, for all other programs, Subsidies and Loadings would not be released until the outstanding Events of Default were remedied.

27. [42]

    On 31 January 2020, a further meeting was held between representatives of the Department (Mr Stephen Buddeke, the Leader of Performance Management (Reconciliation and Appeals), and Ms Madonna Lombardo, from QA) and representatives of MIBT (Mr Lawrence and MIBT’s Chief Operating Officer, Mr David Thompson) to discuss the Events of Default referred to in the 24 January 2020 letter (relating to the December 2019 Suspension) (see T 78.19-37). At the meeting, Mr Lawrence agrees that he accepted that the two trainers with older qualifications were to be “rescinded” (by which it seems he means that their qualifications were to be treated as rescinded) and that MIBT would re-assess the qualifications for those students that had been assessed by Mr Edser (see T 78.45-50). (As noted, Mr Edser was not involved in the training of students – rather, he was involved in assessing the recognition to be given for their prior learning.) Mr Lawrence said in his oral evidence that MIBT only rescinded qualifications for those students who were not yet competent – see T 79.3-4); but presumably in order to determine this what was involved was some assessment or re-assessment of the competency of those students.

28. [43]

    On 4 February 2020, the Department wrote to MIBT lifting the balance of the December 2019 Suspension. The Department in that letter acknowledged MIBT’s willingness to engage in a continuous improvement plan and advised that it had decided with immediate effect to lift all suspensions put into place. Despite the lifting of this suspension, the Department required MIBT to remedy the remaining outstanding Events of Default, which the Department advised would be further reviewed by it later in 2020. Thus, the position of the Department as here communicated was that there remained extant Events of Default.

29. [44]

    On 29 April 2020, the Department sent an email to MIBT with a review of the “remediation” documents, outlining the remedial steps that MIBT would be required to undertake following the meeting on 31 January 2020. The deadline to provide such information and evidence to the Department was apparently later extended from 1 May 2020 to 30 May 2020 perhaps at the January 2020 meeting.

30. [45]

    On 1 May 2020, representatives of the Department (Mr Buddeke and Ms Lombardo) and MIBT (Mr Lawrence and Mr Thompson) attended a meeting to discuss the progress of the remediation plan (see Ex PJL-1 to the affidavit of Mr Lawrence affirmed 30 March 2021, and marked as Ex A in the hearing). It was agreed that MIBT was to provide evidence of the assessments and provide information arising out of the 31 January 2020 meeting; and the time for this was extended to 30 May 2020 apparently due to the COVID pandemic (see T 79.48-50). It was agreed that MIBT would supply RPL (Recognition of Prior Learning) data for 10 students and would reassess 4 levels of competency for one student. In his evidence in cross-examination (see T 80.21-38), Mr Lawrence said that he did not necessarily agree with the entirety of the Department’s review of the remediation documents, as was articulated by Mr Lawrence in a letter of 30 May 2020 (see Ex A) but he accepted that what happened in the meeting was as there set out.

31. [46]

    On 15 May 2020, the Department issued MIBT with a Review Notice pursuant to cl 6 of the Contract.

32. [47]

    Pausing here, MIBT says that the issuing by the Department of the 15 May 2020 Review Notice had the effect of bringing the next Contract (i.e., the relevant Contract the subject of the subsequent 2021 termination notice) into existence, with a commencement date of 1 July 2020. MIBT accepts that, but for that step, the existing Contract (i.e., the one that was on foot as at 15 May 2020) would have come to an end on 30 June 2020. MIBT places emphasis on the fact that, whatever the concerns held by the Department about the Events of Default asserted on 13 December 2019, or the adequacy of MIBT’s efforts to address those matters in the five months following the December 2019 suspension notice, neither the Events of Default nor the steps taken to address them were apparently of sufficient concern to the Department to lead to it not renewing the Contract then on foot. I accept the force of that submission (particularly in circumstances where the ultimate termination notice referred to those Events of Default, which related to a by then previous contract) but I also note the Department’s rejoinder to this, which is in effect that the history of past default (under previous contracts) may permissibly inform the Department’s attitude to fresh defaults under the new contract and moreover, the Department contends that some or all of the earlier Events of Default were still subsisting.

33. [48]

    On 30 May 2020, MIBT wrote to the Department outlining the steps undertaken to remediate the Events of Default subject to the December 2019 Suspension.

34. [49]

    On 8 June 2020, the Department engaged the services of Ms Giselle Mawer, an external specialist reviewer, to review the evidence provided by MIBT in response to the Department’s request.

35. [50]

    On 15 June 2020, the Department sought further evidence from MIBT and on 19 June 2020 further documentation was provided.

36. [51]

    On 19 June 2020, ASQA informed the Department that it intended to suspend certain qualifications of MIBT. Following this, on 22 June 2020, ASQA sent to MIBT a notice of decision to suspend part of its scope of registration under the NVETR Act. The notice was limited to four qualifications (or courses) offered by MIBT in relation to its registration capacity, and the suspension was to be effective on 27 July 2020. The effect of that ASQA suspension was that MIBT could not register new students in those four courses until the suspension was lifted. MIBT lodged an objection to this (ASQA) suspension on or about 19 July 2020. (At some stage there was also a suspension imposed by the ACT Government, although it is not clear when this was.) It is relevant to note that the ASQA suspension would undoubtedly have been an Event of Default under the Contract within the meaning of cl 21.2€(vi) or (x) and that MIBT accepts that the ASQA suspension was an Event of Default under the Contract (see T 12.34-44).

37. [52]

    On 29 June 2020, Ms Mawer completed her review of the Advanced Diploma of Building and Construction (Management) and the Diploma of Building and Construction qualification courses and of the RPL (Recognition of Prior Learning) Process used to assess these qualifications.

38. [53]

    On 13 July 2020, the Department, by then having become aware of ASQA’s decision, suspended MIBT from the same four qualifications as had ASQA (July 2020 Suspension).

39. [54]

    Between 13 July 2020 and 11 September 2020, the Department continued to review the documents provided to the Department by MIBT in relation to the matters forming the basis for the previous December 2019 Suspension.

40. [55]

    On 27 July 2020, the Department received an email from ASQA noting that MIBT had written to ASQA for reconsideration of its decision and requested a stay. ASQA notified the Department that the Chief Commissioner of ASQA had agreed to stay the operation of the decision, pending the outcome of the reconsideration.

41. [56]

    On 21 August 2020, the Department’s Quality Review Committee endorsed the QA’s recommendations concerning Ms Mawer’s findings. The Committee determined that the issues with MIBT were systemic, and that MIBT’s contract should thus be suspended across all qualifications.

42. [57]

    On or around 23 August 2020, the Department was notified by the parent of one of MIBT’s enrolled students of a complaint concerning the lack of training afforded to her son (to whom I will refer as Student X). This complaint was not notified to MIBT at the time.

43. [58]

    On 11 September 2020, the Department provided MIBT with a further notice suspending all qualifications under the Contract; and invited a response from MIBT (September 2020 Suspension). The Department asserted that MIBT had not adequately addressed the Events of Default the subject of the December 2019 Suspension (i.e., the suspension relating to the previous contract, not to the Contract that was on foot at that time). MIBT says that Appendix A to the September 2020 Suspension notice shows that from the Department’s point of view there was only one issue with qualifications – that relating to Mr Edser (see T 81.46-50). At T 82.21-27, Mr Lawrence said that he had provided the Department with all information in relation to the re-assessments and rescinding of qualifications. Mr Lawrence made representations to the Department to the same effect in a letter sent on his behalf by his then solicitor, Mr Cribb (see Ex A). Mr Lawrence says that he had provided evidence of this back in the January and February 2020 meetings (see T 84.35-37). (Indeed a common theme in Mr Lawrence’s oral evidence was frustration with the Department’s continuing requests for information (see T 81.46-48) based, as I formed the impression from his evidence, on a genuine misunderstanding between the Department and MIBT as to what was required to satisfy the Department’s requests.)

44. [59]

    The suspension notice provided:

45. [60]

    The reason provided by the Department for this suspension thus referred to the responses by MIBT on 14 December 2019, 30 May 2020 and 19 July 2020 and said that MIBT had failed to show that all Events of Default did not occur or to demonstrate remediation. MIBT points out that the September 2020 Suspension was therefore relying on the failure of MIBT to do things in relation to the Events of Default referred to in the notice issued under the earlier contract.

46. [61]

    On 16 September 2020, Mr Lawrence contacted Mr Scott Andrew Molloy (a Manager, Quality Assurance and Compliance in the Department) to discuss the Events of Default. (Relevantly, I note that there is a distinction between those involved in the investigation of the complaints made about MIBT and the performance monitoring of MIBT as was explained at T 150.8-12.)

47. [62]

    On 29 September 2020, at a meeting between representatives of the Department (including Mr Buddeke) and MIBT it was agreed that MIBT would provide to the Department copies of documents in relation to the Events of Default.

48. [63]

    In early October 2020, MIBT provided the Department with further information as requested by the Department. At around this time, MIBT engaged lawyers to act on its behalf.

49. [64]

    On 6 October 2020, MIBT’s then lawyer, Mr Cribb, wrote to the Department. Again, on 7 October 2020, Mr Cribb wrote to the Department and in that letter disputed the July 2020 Suspension.

50. [65]

    MIBT’s solicitor argued in this correspondence, among other things, that there should not be a suspension from all of the qualifications but only those the subject of the ASQA notice. At T 92.38-44, Mr Lawrence explained that the letter was asking to lift suspension for the qualifications not affected by the ASQA notice and was asking the Department to clarify what it wanted from MIBT.

51. [66]

    On 9 October 2020, the Department asked for some time to respond to the letters of 6 and 7 October 2020 and indicated that it would try to respond by 16 October 2020.

52. [67]

    On 13 October 2020, MIBT provided further material to the Department following the 29 September 2020 meeting. This additional material was provided to the Department’s external reviewers, Ms Mawer and Mr Schofield.

53. [68]

    On 14 October 2020, the Department received Ms Mawer’s report. Ms Mawer determined that MIBT had failed to remediate the Events of Default.

54. [69]

    On the same day as the Department received Ms Mawer’s report (14 October 2020), ASQA decided to vary its suspension of MIBT; although, in so doing, it advised that MIBT remained non-compliant. MIBT was to take steps to rectify the issues identified by ASQA within 20 working days following receipt of notice of the decision.

55. [70]

    On 16 October 2020, ASQA revoked its suspension of MIBT. ASQA informed MIBT that it had varied its decision and would not be imposing a suspension. ASQA said that it had decided to issue a written direction requiring MIBT to rectify specified breaches within 20 working days. (MIBT emphasises the detail of that direction, noting that it related to non-compliance with only two (not four) of the relevant clauses (i.e., cll 1.8 and 3.1 of the Standards for RTOs) and that it was in relation to only four of the fifteen courses offered by MIBT.) MIBT explains that the ASQA report was not in relation to the Advanced Diploma course (referred to above); rather the ASQA notification of non-compliance related to the two carpentry courses. As noted earlier, MIBT also points out that Mr Edser did not teach; rather, he assessed previous skills and his role was in relation to the RPL process (see T 85.31-34; T 86.4-28).

56. [71]

    Pausing here, it seems clear from the cross-examination at T 89 that MIBT and the Department were at cross-purposes in relation to the assessment of students affected by the issue in relation to Mr Edser. Mr Lawrence agreed (at T 91.40-43) that the material provided by MIBT did not provide evidence in relation to the Advanced Diploma of Building and Construction (though, as noted, by this stage this was not the subject of the ASQA notification).

57. [72]

    On 16 October 2020, the Department wrote to Mr Cribb, responding to his letters of 6 and 7 October 2020. The Department informed Mr Cribb that it had arranged for a specialist reviewer to review the information provided by MIBT on USB on 29 September 2020, and the information contained in Mr Cribb’s letter of 6 October 2020. The Department represented that it would be in a position to respond to these matters by 23 October 2020. As to the 7 October 2020 letter, which sought to have the July 2020 Suspension rescinded, the Department noted the further suspension notice issued on 11 September 2020, stating that the broad nature of this September Suspension reflected the serious concerns of the Department in relation to MIBT’s performance as a Smart and Skilled Provider. The Department stated that, as the matters set out in the September 2020 Suspension remained outstanding, it would not lift the current suspension.

58. [73]

    On 19 October 2020, Mr Cribb wrote to the Department, again disputing the July 2020 Suspension. In that letter, Mr Cribb stated that his letter of 6 October 2020 related to the September 2020 suspension. As to the letter of 7 October 2020, Mr Cribb stated that this letter pertained to the July 2020 Suspension, which overlapped in part with the September 2020 Suspension. Mr Cribb emphasised that it would be necessary to lift the July 2020 Suspension, were the September 2020 Suspension to be lifted, in light of that overlap. Mr Cribb stated that, insofar as the July 2020 suspension was made “in line with” ASQA’s decision to suspend the four qualifications, that the Department ought, in line with ASQA’s handling of the suspension, delay the implementation of its suspension decision while ASQA conducted the review of its decision.

59. [74]

    On 20 October 2020, Mr Schofield provided a copy of his report to the Department.

60. [75]

    On 26 October 2020, the Department wrote to MIBT providing it with further information relating to the Events of Default. A copy of the Schofield report was not provided to MIBT at this stage.

61. [76]

    On 2 November 2020, in light of ASQA’s position, the ACT Government lifted a suspension of MIBT that it had itself imposed.

62. [77]

    Between November 2020 and December 2020, correspondence was exchanged between MIBT and the Department in relation to the ongoing Departmental suspension, in circumstances where the ASQA suspension had been removed.

63. [78]

    On 5 November 2020, the Department wrote to MIBT noting that the July 2020 Suspension and the September 2020 Suspension remained in force.

64. [79]

    On 6 November 2020, MIBT’s lawyer responded to the Department’s letter of 5 November 2020. Mr Cribb requested a copy of both Ms Mawer and Mr Schofield’s reports in order that MIBT could understand which outstanding Events of Default it had failed satisfactorily to remediate. Mr Cribb further requested copies of any other documents held by the Department to which the Department had regard in determining that the suspensions were to remain in force. Mr Cribb requested that the Department advise him of the avenues of review of the Department’s decision not to lift the suspensions.

65. [80]

    On around 9 November 2020, pursuant to an application by MIBT under the Government Information (Public Access) Act 2009 (NSW) on 7 November 2020, the Department provided both the Mawer and Schofield reports to MIBT.

66. [81]

    On 20 November 2020, MIBT wrote to the Department outlining various steps that it said were designed to address the Department’s concerns in relation to the assessment and reassessment of its students.

67. [82]

    On 25 November 2020, the Department emailed MIBT noting that it had determined that the Events of Default as they concerned Mr Edser had been remediated. However, the Department advised that the remaining issues had not been remediated.

68. [83]

    On 26 November 2020, Mr Cribb wrote to the Department seeking a substantive response to his earlier letter of 6 November 2020 (in which he had requested various documents from the Department, and claimed that MIBT had not been provided with adequate particulars in order to address the Department’s concerns). Mr Cribb reiterated his request for various documents in the 26 November 2020 letter.

69. [84]

    On 10 December 2020, the Department responded to Mr Cribb’s letters of 6 October 2020 and 26 November 2020, including reference to the ASQA direction and noting that MIBT had not been advised that the non-compliances had been remedied. The Department sought a list of students that had been taught by Mr Edser to confirm that those students had been reassessed by a qualified trainer. (Again, I note that MIBT says that Mr Edser’s role was not that of a teacher or instructor.)

70. [85]

    The above communication apparently crossed with an email from MIBT on 10 December 2020, enclosing a report from Mr Joe Newbery (an RTO compliance consultant and former ASQA auditor), who had been retained by MIBT, which report concluded that MIBT had in fact remedied the matters identified by ASQA. That email provided further information, which it was said answered all the outstanding Events of Default. MIBT argues that from the timing of the 10 December 2020 communications it seems that at the time of the Department’s response the relevant decision-maker, Mr Emil Tabone (see T 15.9-50) was not aware that ASQA had accepted that there had been rectification of the non-compliances it had identified; and that would seem to follow from the content of the Department’s 10 December 2020 response and the subsequent letter of 22 December 2020 – see below. (Mr Tabone did not give evidence in the proceeding.)

71. [86]

    On 22 December 2020, the Department advised MIBT that it was reviewing the information provided on 10 December 2020.

72. [87]

    On 23 December 2020, Mr Cribb sought further particulars of the Events of Default and commented upon the reports of Ms Mawer and Mr Schofield.

73. [88]

    The Department sent an interim response to Mr Cribb’s letter on 22 January 2021, and advised that the outstanding Events of Default remained. MIBT pressed the Department for a response. The Department responded that day again seeking further information. Relevantly, the Department requested updated evidence for two particular qualifications (or courses) and reassessment evidence for five students (though it did not identify any particular students in this regard) and said that the Department would then be able to complete a full review.

74. [89]

    During January and February 2021, the Department received two separate complaints from former trainers of MIBT. (MIBT was not advised of those complaints at that time; and when it subsequently became aware of these complaints it characterised the former trainers as disgruntled.)

75. [90]

    Between 10 and 19 February 2021, representatives of the Department interviewed former trainers and apprentices of MIBT.

76. [91]

    Meanwhile, on 3 February 2021, there was a meeting with representatives of the Department (Mr Molloy, Ms Linna Nguon and Mr Emil Tabone) and MIBT (Mr Lawrence and Mr David Thompson). Mr Lawrence agreed (T 77.19-25) that at the meeting he accepted the various stated Events of Default and that MIBT had worked towards, and would continue to work towards, rectifying them.

77. [92]

    On 4 February 2021, MIBT gave a detailed response to the Department and again requested that the suepensions be lifted in relation to all qualifications (excepting the Certificate III in Carpentry, the Advanced Diploma of Building and Construction (Management) and the Diploma of Building and Construction (Building)). MIBT further requested that the Department provide feedback in relation to the material already provided by MIBT. On 15 February 2021, MIBT again pressed the Department for a response.

78. [93]

    On 4 March 2021, the Department wrote to MIBT concerning alleged further breaches of the Contract and requested that a meeting take place on 12 March 2021. The Department in that letter advised MIBT that it had received feedback from various third parties relating to training being delivered and that there had been complaints, some of which (if true) may have amounted to very serious misconduct by senior management of MIBT (namely that senior management had instructed trainers to “manipulate” the “LMS” (Learning Management System, which was a software system used by MIBT to record and “track” the progress of students) so that it recorded false information). In cross-examination, Mr Buddeke readily conceded that these were serious allegations (T 140.39-41).

79. [94]

    MIBT responded on 10 March 2021, stating that the 4 March 2021 letter had failed to particularise any relevant breach and seeking full particulars (see T 140.43-47).

80. [95]

    On 12 March 2021, a meeting took place between representatives of the Department (Mr Tabone, Mr Buddeke and Ms Linna Nguon) and MIBT (Mr Lawrence, Mr Thompson and Ms Nora Nagy). At that meeting, MIBT’s representatives adamantly denied any wrongdoing. In an email of 12 March 2021, following the meeting, Mr Lawrence referred to the former trainers as being disenchanted (which on its face would surely have suggested that they might have an axe to grind against MIBT and which would warrant careful consideration and an attempt to corroborate those allegations). A transcript of the discussion at that meeting was in evidence.

81. [96]

    Relevantly, there was reference at the 12 March 2021 meeting to a “blended training model”. Mr Lawrence informed the Department representatives that a lot of the training happened with the employer and that the trainers would then go out and the students would “show us competency”. At T 100.35-50, Mr Lawrence explained this referring to “gap training”, by which he explained in effect that if a student already knew how to do certain things (say, how to hang a door) there was no point teaching that again and that the focus was on the gaps in their knowledge (giving an example of this). This is relevant because the Department appears to have understood the reference to “gap training” as suggesting that MIBT abdicated its training role largely to the employers. I did not understand the evidence to be to that effect.

82. [97]

    I note that Mr Lawrence identified in cross-examination that a complaint purportedly made by a former training coordinator was from a made-up email address (T 101.23-29). Mr Lawrence readily agreed that it was impossible to teach up to 15 UoCs per day (that being part of the complaint in question) but also later explained that some of the data uploaded on the same day by one of the trainers (for example) did not relate to training on that same day (suggesting that it was simply an error in uploading that was later corrected – see T 104.1-14).

83. [98]

    MIBT points out that there was no discussion at the meeting which indicated anything other than that the Contract was continuing and there was no assertion by the Department that any alleged event of default was likely to bring about termination.

84. [99]

    Mr Buddeke agreed that, at the 12 March 2021 meeting, he did not supply the documents that had been requested by Mr Cribb; nor did he do so prior to the termination of the Contract and that he did not explain to Mr Cribb why he did not do so. Mr Buddeke agrees that he did not tell MIBT the names of the people who had made the allegations against MIBT. At T 142.3-5, Mr Buddeke agreed that he had “pages and pages” of documents relevant to the allegations that had been made and that the Department’s investigation had been going on for some time. Mr Buddeke seems to have accepted that he made a conscious decision not to give the documents to Mr Cribb at any relevant time. Mr Buddeke’s investigation comprised speaking to other people first, providing information about the allegations and seeking a response “if needed” (see T 142.37-43). At T 149.46-49, Mr Buddeke did not accept that in the absence of giving the identity of the complainants or the documents there was not a fair opportunity for MIBT to respond thereto.

85. [100]

    By email dated 12 March 2021, following the meeting MIBT indicated that it was providing information to “clear the air”, and made it clear that the allegations of wrongdoing were denied. Mr Lawrence there summarised what he understood to be the outcome of the meeting and the nine things that he understood had been sought from the Department, in order to seek confirmation of the same. Further, Mr Lawrence asked to be told the names of the five students for the three qualifications across two units, so that the reassessments could be commenced.

86. [101]

    Pausing here, Mr Buddeke’s evidence in effect was that at the 12 March 2021 meeting he asked Mr Lawrence to provide him with information or documents that he, Mr Buddeke already had in his possession – apparently simply because Mr Lawrence had said that it was available (see T 160.10-41); and seemingly to give Mr Lawrence the opportunity to provide documents relevant to MIBT’s position. It is difficult to see what purpose was thought to be served by duplication of the provision of information – if Mr Buddeke wished to check the authenticity of documents he already had, a simpler course would have been to clarify that with Mr Lawrence.

87. [102]

    Mr Lawrence’s email referred to two timeframes – as to the documents referred to in the nine paragraphs, he sought confirmation that they were required to be sent to the Department within one week (but in cross-examination he says that he only received the confirmation he had requested as to the documents to be provided on 19 March 2021 – see T 93.43-47). As to the second timeframe, Mr Lawrence sought confirmation that the Department would advise MIBT of the five students within three weeks to enable MIBT to conduct the re-assessment of those students.

88. [103]

    On 19 March 2021, the Department emailed MIBT seeking further information and documents, including a video of a training session conducted in Hay, NSW, (to which reference had been made at the 12 March 2021 meeting). MIBT replied early that morning, thanking the Department for attending a training session on 16 March 2021 and requesting a response to the 12 March 2021 email.

89. [104]

    Mr Buddeke accepts (see T 150.11-14) that at the 12 March 2021 meeting (the transcript of which suggests it lasted 143 minutes) it was agreed that the Department was to provide MIBT with the identity of five students (i.e., five names) so that MIBT could respond and that MIBT could not respond until it received those names (T 154.3-11). At T 151.14-19, Mr Buddeke accepted that he understood that he had to come to a decision on the balance of probabilities as to whether he believed the circumstances as alleged by the complainants had occurred or not and that the process had to be a fair and reasonable one.

90. [105]

    As to the request by Mr Lawrence that Mr Molloy provide the identity of the five students within three weeks, at T 153, Mr Buddeke said that he did not read this as asking him for confirmation (and it seems he did nothing until he received the five names from Mr Molloy). Mr Buddeke says that he provided Mr Lawrence with the names of those students as soon as he received them. Mr Buddeke in fact provided those five names at 1.58pm on 19 March 2021, however it is unclear when he received that information. Mr Lawrence says he would not have seen this until he was back in the office on the following Monday morning (i.e., 22 March 2021). This is of some relevance given that the meeting to determine the termination was on 23 March 2021, before any reasonable opportunity for MIBT to reassess the five students (whose names had only just been provided late on 19 March 2021).

91. [106]

    Mr Buddeke agreed that at the meeting Mr Lawrence was saying that the complainants might be motivated to make false complaints – but did not see that the trainers might have an axe to grind (see T 152.20-24).

92. [107]

    Between 12 and 23 March 2021, various emails were exchanged between MIBT and the Department concerning further documents to be provided by MIBT.

93. [108]

    On or about 23 March 2021, the outcome of investigations undertaken by the Department were provided to the Department’s Quality Review Committee. It is relevant here to note that the Committee did not have any response by then from MIBT in relation to the queries relating to the five students (for obvious reasons given the delay in provision of the names for a start). Mr Buddeke appeared to accept that Mr Lawrence’s 6.52am email on 23 March 2021 would not likely have been before the committee.

94. [109]

    The interim investigation report appears to have been prepared by 2 March 2021 and Mr Buddeke accepted that it had been finalised sometime between then and 11.00am on 23 March 2021 when the committee meeting occurred (T 163.29-50).

95. [110]

    MIBT complains that the committee considered the accounts of the people who had made the complaints and accepted those: in preference to the denials by Mr Lawrence and Mr Thompson; without interviewing any other people such as current trainers; without the detail which the Department had itself requested (T 19.1-9); and without MIBT having an opportunity to assess whether any event of default could have been remedied. In this context, it is relevant to note that Mr Buddeke’s investigation report rejected the allegation of serious fraud (as he accepted at T 167.10-31).

96. [111]

    On 25 March 2021, the Department issued its Notice of Termination to MIBT, terminating the Contract (Termination Notice). The Termination Notice stated that it was issued pursuant to cl 21.2(c)(vi) of the Contract (see below). It did not in terms specify the particular Event of Default upon which reliance was placed. Rather, the Termination Notice referred to: the 13 December 2019 letter (i.e., the December 2019 Suspension Notice, which MIBT notes preceded entry into the Contract that was on foot as at March 2021) and the 4 March 2021 letter (see above). MIBT points out that some of the matters in the 4 March 2021 letter had been rejected at the 23 March 2021 meeting of the Committee.

97. [112]

    Mr Tabone is recorded in the minutes of the meeting as having said that responses had been provided and that the provider (i.e., MIBT) had “failed to show all the Events of Default did not occur or demonstrate satisfactory remediation”.

98. [113]

    Pausing here, MIBT says that it was not open to the Department (having embarked on the cl 21.2(d) exercise) simply to terminate before providing MIBT with anything resembling an opportunity to show that the alleged event of default had not occurred or had not been remediated (see T 19.32-38). Further, it is said that reliance on the Events of Default in the December 2019 Suspension Notice was problematic in that it was pre-contractual conduct that had only previously warranted, in the Department’s view, suspension of some (or all) of the courses going forward. It is said that it cannot have been reasonable to terminate on 25 March 2021 without giving notice to MIBT. (That may well have been the case in that embarking on the process may have conveyed or induced an expectation of due process but that is not the nub of the present complaint – which turns on whether as a matter of construction it was possible to terminate on one basis having commenced the process under another basis.)

99. [114]

    MIBT accepts that a history of problematic conduct might provide a factual context for a later decision to terminate (see T 20.3) but says that the catalyst for the termination on 25 March 2021 must have been the 4 March 2021 letter because, without that or the allegations referred to therein, the Department had not decided to terminate and had not responded to Mr Newbery’s opinion as to the remediation of the earlier Events of Default.

100. [115]

     MIBT says that the Termination Notice did not contain a valid reason for termination pursuant to cl 21.2(c)(vi) and that neither of the two letters to which reference was made in the Termination Notice contained a valid reason for termination.

101. [116]

     On 26 March 2021, MIBT responded thereto, claiming that the Termination Notice was an “extraordinary event” in light of its issuance based on the 13 December 2019 Suspension Notice and 4 March 2021 letter. Mr Cribb, MIBT’s solicitor, noted that the Department had not responded to his various letters seeking particulars of the matters raised in the Departments letter of 4 March 2021. Mr Cribb noted MIBT’s willingness and preparedness to address the Departments concerns. MIBT requested that the Department allow MIBT to continue to deliver Subsidised Training to enrolled students. Mr Cribb stated that, in view of the urgency of the request and the Department’s “past tardiness” in responding to his correspondence, MIBT would proceed on the basis that the Department agreed to the request to allow MIBT to continue to deliver Subsidised Training for enrolled students.

102. [117]

     The last payment of Subsidies and Loadings was made by the Department to MIBT on 1 March 2021.

103. [118]

     Between 25 March 2021 and 30 June 2021, MIBT continued to submit Training Activity Data via the Department’s Portal (see the definition of the Portal below).

104. [119]

     On 9 April 2021, MIBT wrote to the Department (and contacted the Department by telephone) seeking payment of amounts said to be overdue and payable to MIBT.

105. [120]

     In April 2021, MIBT commenced proceedings in this Court, seeking urgent interlocutory relief (by way of mandatory injunction) to compel the Department to continue to perform the Contract notwithstanding the purported termination of the Contract (see as explained in the reasons subsequently published on 30 April 2021 by Kunc J – MIBT No 1).

106. [121]

     Orders were made by Kunc J consent (without admission) on 12 April 2021 as follows:

107. [122]

     In MIBT No 1, Kunc J said the following at [7], [13] and [97]:

108. [123]

     On 13 April 2021, MIBT wrote to the Department demanding payment of $179,759.35, being an amount due and payable of the total debt owing to MIBT of $326,053.40. On 15 April 2021, MIBT wrote to the Department referring to its previous letter of 13 April 2021, asserting that a failure by the Department to pay the moneys demanded constituted a breach of the Contract and an actionable contempt by the Department.

109. [124]

     On 21 April 2021, the Department responded to MIBT asserting that the consent order made by the Court on 12 April 2021 did not affect the Department’s rights under the Contract but, rather, reverted the parties to the status quo that existed prior to the letter of 25 March 2021 (i.e., the Termination Notice), in other words, reverting the parties to their pre-termination position, which it was said “had the effect of permitting [the Department] to withhold payment of any subsidies and loading payable”. The Department asserted an entitlement to withhold what was then alleged to be owing in the amount of $326,053.40. That letter also foreshadowed an application by the Department under the Court’s supervisory jurisdiction to resolve the question as to whether the Department was entitled under the Contract to withhold Subsidies and Loadings as it asserted.

110. [125]

     On 22 April 2021, MIBT responded to the Department, denying that the Department was entitled to withhold all Subsidies and Loadings as alleged.

111. [126]

     On 28 April 2021, the Department responded to MIBT’s letter of 22 April 2021 and reiterated its position insofar as the rights to withhold Subsidies and Loadings were concerned.

112. [127]

     On 29 April 2021, MIBT responded to the Department’s letter and noted, amongst other things, that it would oppose the Department’s foreshadowed application for an order to withhold payments they alleged to be due under the Contract.

113. [128]

     On 4 May 2021, MIBT wrote to the Department indicating, amongst other things, that it would itself approach the Court if the Department’s foreshadowed (supervisory jurisdiction) application was not made (indicating that it would do so on the basis that the Department had committed contempt of Court).

114. [129]

     On 11 May 2021, the Department filed a notice of motion in relation to the issue of its entitlement to withhold the payment of Subsidies and Loadings (which was subsequently encompassed in its cross-claim in the proceeding before me).

115. [130]

     On 25 May 2021, a directions hearing took place before Kunc J sitting as duty judge. On 27 May 2021, Kunc J acceded to the orders sought by the Department, which included orders for payment of funds into court:

116. [131]

     On 28 May 2021, MIBT filed a notice of motion seeking orders restraining the Department relying upon its powers under the Contract to withhold payment of Subsidies and Loadings.

117. [132]

     It is relevant here to note that, between April and June 2021, the total value of Training Activity Data submitted by MIBT was approximately $2.74 million. The Department says that this amount exceeded what MIBT would typically submit during a 12-month period, noting by way of example that during the financial year 2019 to 2020, MIBT reported and was paid around $1.4 million. MIBT argues that this increased figure is not surprising since the termination of its Contract meant that an increased number of students “migrated” to other training providers and hence there was an increase in Code 40 and Code 70 outcomes.

118. [133]

     On 1 June 2021, MIBT emailed 245 of its New South Wales students demanding payment from them (on the basis that the absence of payment of Subsidies and Loadings meant that the students were liable for their courses) (MIBT Demand Email). The MIBT Demand Email (at best one would say most unhelpfully) stated that the students should contact the Department’s solicitors directly, naming the partner on the record in this proceeding and providing his email and telephone number.

119. [134]

     On 4 June 2021, MIBT wrote to the same 245 students withdrawing the demand for payment from those students.

120. [135]

     On 8 June 2021, MIBT provided to the Department a list of all students to whom the MIBT Demand Email was sent, together with bank statements of MIBT detailing what students, if any, had paid MIBT following the MIBT Demand Email.

121. [136]

     Pausing here, nothing appears to turn on the sending and withdrawal of the Demand Email – it is simply included here as part of the context in which the dispute proceeded.

122. [137]

     On 11 June 2021, the Department requested that MIBT provide security for its undertaking as to damages in the amount of $520,399.97, being the estimated amount to which the Department considered it would be entitled on its cross-claim and therefore representing an unrecoverable amount owing to the Department if MIBT were to be placed into liquidation prior to the conclusion of the proceeding.

123. [138]

     On 16 June 2021, MIBT responded to the Department, maintaining that: security in relation to the undertaking was not required or appropriate in the circumstances of the case (there referring to a letter of 3 June 2021 ); but that it would be agreeable to paying a further sum of $61,361.12 into Court, thereby bringing the amount paid into court up to the amount claimed by the Department.

124. [139]

     On 22 June 2021, MIBT obtained interlocutory relief restraining the Department from exercising or purporting to exercise the right to withhold payment of Subsidies and Loadings (MIBT No 2). This does not appear to have resulted in any interim resolution of the issue as to Subsidies and Loadings at least insofar as MIBT’s position at the hearing before me was that it had not been paid any such amounts since March 2021.

125. [140]

     On 30 June 2021, the Department issued a further termination notice to MIBT (presumably out of an abundance of caution) stating that, subject to the present proceeding, that notice constituted a termination of the Contract by virtue of cl 5. (It is not apparent to me why any such notice would have been considered necessary as the Contract had not been renewed so would have expired in accordance with its terms in any event; and since the Department does not here contend that MIBT is disentitled to payments simply by reason of the termination – but nothing turns on this further termination notice and thus it is not necessary to explore its purpose.)

126. [141]

     More relevantly, for present purposes, is the fact that on 30 June 2021 the Department issued a direction to MIBT in the following terms:

127. [142]

     Pausing here, the ability of the Department to issue such a direction (and the contractual requirement to follow such directions) is not really the issue here. Rather, what is at issue is the consequences of a failure (if there be a failure) to submit all relevant Training Activity Data by that perhaps arbitrarily imposed deadline. In other words, if MIBT did not submit within the stated time all the data that the Department’s assessors would now accept was sufficient to establish an entitlement to payment for services provided, would that disentitle MIBT to payment for those services (or would it simply sound in a claim for damages of some kind if the Department could show it was prejudiced by the late submission of the data)? I consider this further below.

128. [143]

     As at October 2021, some $2.7 million worth of Training Activity Data had been uploaded to the Department’s Portal (as adverted to above). Ms Nguon, who as noted above is the Senior Training Market Operations Officer in the QA unit within Training Services NSW (and who reports to Mr Molloy) (see her affidavit affirmed 6 October 2021), has deposed that one of her duties includes supervising case officers who manage performance monitoring matters and the evidence submitted to the Department by providers (see at [8]-[9]). Ms Nguon is familiar with the review process in relation to Training Activity Data, as she had been responsible for that process in her previous role in the Market Operations team at Training Services NSW for some 17 years (see at [11]).

129. [144]

     Ms Nguon has deposed that, as at 1 October 2021, the Department had accepted Training Activity Data submitted by MIBT with the equivalent value of $466,024.88 (see at [47]). Ms Nguon has deposed that this Training Activity Data was accepted by the Department as it did not raise any “flags” in the Payment Analysis Tool (PAT) (to which I refer below).

130. [145]

     As at 6 October 2021 (see the affidavit affirmed by Ms Nguon), the Department had rejected Training Activity Data commensurate to the value of $2,255,215.97 (comprised of a figure of $808,757.57 (see at [48]) and $1,446, 458.40 (see at [49]), the latter being referred to by Ms Nguon as the “Withdrawn Outcome TAD”).

131. [146]

     The Department has categorised the reasons for the rejection of Training Activity Data as follows: (a) failure to submit Training Not Complete (TNC) data, i.e., Code 70 data (with a value of $131,230.34) on the basis that MIBT had failed to comply with the eReporting Guide (see at [48](a) of Ms Nguon’s affidavit); (b) failure at the “clarification” stage of the review of Training Activity Data (see at [48](b) of Ms Nguon’s affidavit), which relates to the response made by MIBT to the request for clarification – the example provided by Ms Nguon being where dates were incorrect clarification (with a value of $593,562.72) (as corrected by Ms Nguon in her oral evidence on 28 October 2021 – see at T 176.35-37); (c) failure of MIBT to provide evidence following directions from the Department (with a composite value of $83,964.64) (see [48](c) of Ms Nguon’s affidavit); and (d) failure of MIBT to provide sufficient evidence of the UoC Outcome Achieved (i.e., of a Code 40 or Code 70 outcome (see Ms Nguon’s affidavit at [49]) (with a value of $1,446,458.40). Each of these categories of rejection is dealt with in due course.

132. [147]

     Ms Nguon has deposed (at [50]-[51]) that (in light of the volume of material supplied by MIBT and for independence) the Department outsourced the review of the evidence supplied by MIBT to demonstrate Participation in Subsidised Training to external consultants (Nemesis Consulting and MCC Consulting) and Ms Nguon exhibited to her affidavit the material provided to those reviewers and the findings of those reviewers. (Pausing here, it emerged in the course of cross-examination that the relevant spreadsheet provided to the reviewers had been created in July 2021 –see the letter of instructions to the reviewers at p 425 of Ex LN1.) Further, Ms Nguon said (T 203.41-46; T 206.19-36) that there was a difference between what was provided to the external reviewers and what was provided to the Court in the court book but Ms Nguon was unable to identify what that material was and Ms Nguon seemed to have had regard in the course of cross-examination to material on “our stored system” but I have no way of knowing what that material was.

133. [148]

     Ms Nguon has deposed (at [51]) that the Department then engaged Mr Schofield, an independent reviewer, to examine a sample of the “Withdrawn Outcome TAD”.

134. [149]

     At [53]-[54], Ms Nguon deposed that, as at the date of her affidavit (6 October 2021), the Department had rejected further Training Activity Data with a commensurate value of $17,336.12 (including students with duplicate enrolments and a student with a completion payment milestone which included a Withdrawn outcome) and had accepted further Training Activity Data with a commensurate value of $61,996.56. (It is not clear how those amounts factor into the overall claims as presented to me in submissions.)

135. [150]

     In addition to the rejection of Training Activity Data submitted by MIBT, the Department has calculated amounts that it says were paid to MIBT but to which it says MIBT was not entitled, these overpayments falling within the following four categories of overpayment: (a) Duplicated Training Activity Data (that it is said amounts to $230,833.24 worth of duplicated CIDs (being Commitment IDs, which are unique identifiers used by the Department to identify a student and course in respect of which Subsidies and Loadings are paid) but which, if the Withdrawn Outcomes are accepted in MIBT’s favour would reduce to $82,789.50); (b) “rollback” of payable outcomes to the value of $174,190.78 (which I explain in due course); (c) a payment continuity strategy sum (of $413,405.67) being an amount conceded to be repayable in relation to payments made by reference to COVID-19 relief; and (d) payment made to MIBT because of alleged fraud against the Department by MIBT’s former employees (the Operation Fish issue) in the sum of $106,994.30 (as to which, the obligation to make payment is not disputed but the quantum of the amount is disputed).

Relevant Provisions of the Contract

1. [151]

   It is convenient at this point to identify the relevant provisions of the Contract, which, as noted above, for the main part did not relevantly change during the time in question (though there was a deletion at some stage of an earlier express obligation of good faith to which the Department refers in response to the contention by MIBT that there was an implied obligation of good faith in the Contract). The Contract also comprises the Operating Guidelines and other Departmental documents as adverted to earlier.

2. [152]

   Clause 2 of the Contract sets out the purpose and objectives of the Contract. Clause 2(a) provides that the Contract sets out the terms and conditions for the payment of Subsidies and Loadings to MIBT for training delivered by MIBT to enrolled students under a Smart and Skilled Program or the School Based Apprenticeships and Traineeships Program (Subsidised Training) (this being seemingly the contract definition of “subsidised training”). Clause 2(b) outlines the responsibilities of MIBT vis-à-vis the delivery of Subsidised Training. Clause 2(c) provides that MIBT’s entitlement to Subsidies and Loadings requires MIBT to comply with all its obligations under this Contract and all Applicable Laws, including the RTO Standards. MIBT notes that the principal obligation on the part of the Department is the payment of Subsidies and Loadings (see below).

3. [153]

   Pursuant to cll 3 and 4 of the Contract, the Department retains the discretion to notify the RTO (i.e., here MIBT) which Qualifications or Part-Qualifications may be allocated Subsidies and Loadings under the Contract and concern the Approved Qualifications Activity Schedule.

4. [154]

   Clause 5 of the Contract provides that the term of the Contract ends on 30 June 2021, unless terminated earlier under the Contract.

5. [155]

   Pursuant to cl 6 of the Contract, the Department is entitled to renew the Contract with the RTO (again, here, MIBT) as long as MIBT complies with the various procedural requirements under this clause.

6. [156]

   Clause 7 of the Contract outlines the general obligations of the RTO (MIBT), which relevantly, include that the RTO must: (sub-cl (a)) maintain its registration with the VET Regulator (i.e., ASQA); (sub-cl (b)) ensure that all Approved Qualifications remain within the scope of its registration with the VET Regulator; (sub-cl (f)) maintain its operation to the standard required in the Contract; (sub-cl (i)) ensure that all information it provides to the Department (including Training Activity Data) is true, accurate, complete and not misleading in any way; (sub-cl (j)) ensure that it only charges correct fees in accordance with the Contract, including the Fee Administration Policy and with the required supporting evidence; (sub-cl (p)) act in good faith and not act in any way that could be seen to be unethical, reckless, illegal or dishonest conduct in relation to vocational education and training; and (sub-cl (t)) issue within 30 days Statements of Attainment and Testamurs in accordance with the Australian Qualifications Framework.

7. [157]

   Pursuant to cl 10 of the Contract, MIBT was required to prepare and provide to each enrolled student a Training Plan in accordance with the Operating Guidelines and ensure that the delivery of Subsidised Training be in accordance with the Training Plan and Contract, including all Applicable Laws and the Operating Guidelines and Policies.

8. [158]

   Pursuant to clause 11 of the Contract, the transfer of students to or from MIBT is required to be in accordance with the Operating Guidelines and the Fee Administration Policy.

9. [159]

   Clause 14 regulates what was required to be maintained by MIBT as “Training Activity Data” for each enrolled student.

10. [160]

    As to the reporting of Training Activity Data, cl 14 provides that: (cl 14.1), Training Activity Data must be reported by submitting such data in accordance with the Operating Guidelines; (cl 14.2) MIBT must submit Training Activity Data for an enrolled student every 28 days, even if no UoC Outcome Achievements have occurred; and (cl 14.3) MIBT must use corresponding UoC Outcomes Codes to submit Training Activity Data, as contained in a table there set out.

11. [161]

    Pursuant to cl 17.4 of the Operating Guidelines, which are incorporated by reference into the Contract, MIBT is required to retain all training activity records as evidence of the delivery of training and assessment, and outcomes achieved. Those records are required to identify the UoC to which they relate and the enrolled student to whom they belong. Clause 17.5 of the Operating Guidelines deals with record keeping for online delivery “where subsidised training is delivered via online delivery” (which I interpose to note clearly contemplates that it is both possible and permissible for Subsidised Training to be delivered online, though Ms Nguon appears to interpret this as being permissible only where there is no attendance sheet – see T 188.1-6, 28-50; T 191.8-27). Clause 17.7 of the Operating Guidelines requires MIBT to keep the relevant records for a minimum period of three years after the later of: the completion of each qualification; issuance of qualification; or an enrolled student’s exit from Subsidised Training. Clause 17.8 of the Operating Guidelines provides examples of evidence that is required to be kept.

12. [162]

    I note that Ms Nguon accepts at T 189.30-44 that there are examples in the evidence of emails requesting “evidence” of participation as well as other emails seeking “all evidence” of participation (see for example some emails of 13 July 2020) and Ms Nguon was taken to various emails requesting evidence in relation to particular issues. Ms Nguon maintained at T 194.19-22 “we only ask for evidence to report the outcome, which is [Outcome Code] 40 withdrawn”. Ms Nguon was taken in cross-examination to various examples. In particular, Ms Nguon was taken to the example of one student (to whom I shall refer as Student F) at T 195.42-47 in respect of whom Ms Nguon said that if that evidence had been supplied initially she would have regarded that as “good evidence” but where this was rejected on the basis of insufficient evidence of participation in Subsidised Training (T 196.28-33).

13. [163]

    Clause 18 of the Operating Guidelines provides further details on MIBT’s obligations to report Training Activity Data; including (see cl 18.6 of the Operating Guidelines) a checklist for reporting Training Activity Data.

14. [164]

    Returning to the main Contract itself, cl 15 of the Contract sets out how applicable costs are to be calculated.

15. [165]

    Clause 17 of the Contract outlines the way in which Subsidies and Loadings are calculated and when they will be paid; and deals with the provision of information by MIBT to the Department for the calculation and payment of the Subsidies and Loadings. For the purposes of cll 17.1 and 17.2 of the Contract, the Subsidy is the difference between the Price and Fee, whereas the Loading means the amount calculated in accordance with Schedule 3 of the Contract. Clause 17.3 of the Contract stipulates when MIBT will be entitled to payment of Subsidies and Loadings by instalment:

16. [166]

    Clause 17.4 of the Contract (on which the Department places emphasis) provides that: prior to acceptance of Training Activity Data, the Department may seek clarification of the submitted data, request evidence of the data; or reject the Training Activity Data; within 28 days of the Department’s acceptance of Training Activity Data, the Department will create and email invoices and will pay MIBT; and that acceptance of the Training Activity Data by the Department under cl 17.4 or payment of the Subsidies and Loadings does not mean the Department accepts that MIBT is entitled to Subsidies (and Loadings) under the Contract and does not affect the Department’s rights under the Contract or at law, including its rights under cl 22.

17. [167]

    Clause 18 sets out a cap for the maximum amount of Subsidies and Loadings to which MIBT was entitled in any set period.

18. [168]

    Clause 21 sets out a series of Events of Default and the various actions open to be taken in respect of them, including termination, partial or total suspension of MIBT’s rights under the Contract, and the imposition of conditions. It provides, relevantly:

19. [169]

    Where payments have been made to MIBT to which it is not entitled, cl 22 of the Contract makes provision for repayment to the Department in various ways. Clause 22 provides:

20. [170]

    Insofar as cl 22(b) of the Contract provides the Department with a right to set off any amounts that MIBT has received and to which it was not entitled, the Department says that there is no issue as to its entitlement to recover the amounts incorrectly received, and to do so by way of set-off; the issue here being simply as to the quantum of that set-off.

21. [171]

    Clause 34 of the Contract provides:

22. [172]

    Clause 36.6 of the Contract (which the Department notes appeared in the previous iterations of the Contract between 1 January 2016 and immediately prior to the entry of the Contract) provides that:

23. [173]

    In addition to these express terms, MIBT contends that the Contract included the following implied terms: an obligation of good faith; an obligation to do all things reasonably necessary to secure performance of the Contract and to enable each party to have the benefit of it; and a term that each party provide the other with reasonable time for the performance of any contractual obligation.

24. [174]

    In this regard, it should be noted that the Contract does not contain any express obligation of good faith as between the parties (as distinct from obligations owed by one party). Further, the Department points out that an express obligation of good faith was removed from the Contract in 2020. (MIBT maintains that this is not relevant to the construction of this particular contract.)

25. [175]

    As explained above, no issue ultimately arises as to the Department’s ability to withhold Subsidies and Loadings, which, as the Department points out in its submissions, is separate to the question of termination. However, for completeness I note that the Department places reliance on cll 21.2, 21.6 and 22 of the Contract as to its right to withhold in whole or in part any Subsidies and Loadings payable to MIBT where there has been an Event of Default.

26. [176]

    The Department says that the exercise of the right to withhold was also permissible for the purposes of determining the amounts of overpayments to MIBT because of the fraudulent activities referred to in the affidavits of Mr Lawrence and Mr Molloy (i.e., Operation Fish overpayments) as well as overpayments under the following three categories: duplication of CIDs, rollback and the payment continuity strategy. In this context, the Department notes that an unpaid overpayment to MIBT constitutes an Event of Default for the purposes of the Contract as it is expressly prohibited (reference here being made to cll 21.2(e)(i) and 22 of the Contract).

27. [177]

    The Department says that, given that there is no contest that MIBT has received overpayments contrary to the Contract (at least the existence of overpayments referable to Operation Fish, though not the quantum thereof, and the payment continuity strategy being conceded), it was therefore entitled to withhold in whole or in part any Subsidies and Loadings payable to MIBT for the purposes of cl 22 of the Contract. In the alternative, the Department bases its right (up to termination of the Contract) to withhold Subsidies and Loadings on the suspension notices issued on both 13 July 2020 and 11 September 2020, which continued up to 25 March 2021. Finally, the Department says that it was also entitled to exercise its right to withhold Subsidies and Loadings because of MIBT’s failure to comply with the broad requests for evidence made by the Department (in order to undertake a review, described by the Department as a “payment reconciliation”, to identify any overpayments prior to making a final payment to the relevant RTO).

28. [178]

    Pausing here, there seemed to be a suggestion in the Department’s written submissions that the Department cannot complete a payment reconciliation of the Subsidies and Loadings paid to MIBT, beyond those identified by it in its cross-claim, until such time as MIBT complies with the Department’s so-called “Broad Request for Evidence” and that it is entitled to continue to withhold Subsidies and Loadings until such time as there has been compliance with that request. However, as I understand Mr Lawrence’s evidence, MIBT has provided all the evidence it can supply in response to the Department’s requests and, indeed, the Department’s own submissions seem to emphasise that the Court must do its best to determine the claims based on the evidence now before the Court as unsatisfactory as that evidence may be. Therefore, I do not understand the Department’s submissions as to the withholding of Subsidies and Loadings to date to contemplate that there be a further process of submission and review of evidence. If that be wrong then I would simply refer the issue out to a suitable referee for determination of confined issues.

Performance of vocational training

1. [179]

   At this point it is convenient to summarise the way in which MIBT says it performs its vocational training.

2. [180]

   A student, in communication with his or her employer, enrols with MIBT in a particular course, and, upon enrolment, the student is issued a “Commitment Identification Number” (CID). MIBT then establishes a student profile for the CID in its Learning Management System (LMS) (that being an online cloud based proprietary system developed by MIBT to track student progress, which seems elsewhere to be referred to by the Department as the Student Management System or SMS). The LMS utilises “validity and authenticity technology” which: randomises online assessment to ensure that learning is being undertaken, rather than permitting students simply to “click through” online assessments without learning content; and utilises webcams to ensure that the student undertaking the online learning is the same student for whom a CID has been issued.

3. [181]

   Within the relevant course, the student is required to undertake various tasks, which contribute towards the completion of “units of competency” (UoCs). The student is assigned various tasks, being a mixture of: online training and assessment and “on the job” training and assessment. The student’s progress is “tracked” by MIBT in the LMS, which allows assessors to review, mark and upload data; and which also automatically records students undertaking activities (to ensure the actual student is undertaking the relevant tasks). As students progress in their course(s), MIBT uploads Training Activity Data (referred to in submissions as TAD) in accordance with the Operating Guidelines. Training Activity Data is effectively treated as MIBT’s claim for payment.

4. [182]

   When submitting Training Activity Data, MIBT is contractually required to classify it using UoC Outcome Codes, relevantly including (as referred to above): Code 20 - Competency achieved, being a pass grade; Code 30- Competency not achieved, being a fail grade; code 40 - Withdrawn; and Code 70 - Continuing enrolment.

5. [183]

   As is clear from cl 17.4 of the Contract (set out above), it is contemplated that the Department may accept the Training Activity Data or may, prior to acceptance seek clarification of the data, request evidence of the data or reject the data. Further, acceptance of the data does not mean that the Department accepts that there is an entitlement to the Subsidies and Loadings (although it does result in the creation of invoices and making of payments). (In other words, the data submission and acceptance process appears to be a contractual mechanism for processing payment but without prejudice to the Department later to contest particular amounts or data.)

6. [184]

   Relevantly, Ms Nguon deposed in her affidavit affirmed 6 October 2021 (at [12]-[25]) that the initial review of data submitted on the Portal is done by the Department’s software program and it is only at a later stage in the process that there is any human review (see further below).

7. [185]

   As evident from the outcome codes, Subsidies and Loadings payable under the Contract are not linked to a student necessarily passing the UoC. Rather, a payment entitlement is triggered by a student achieving a certain percentile of the UoC Outcome Codes (see cl 17.3 of the Contract). MIBT says that this recognises the fact that RTOs are paid for the services they provide (not the outcome the students achieve); and that this ensures that students are not simply passed by a “rogue RTO” for payment.

The Process for uploading and review of Training Activity Data

1. [186]

   The process for uploading and review of Training Activity Data may be summarised as follows.

2. [187]

   Provision of Training Activity Data from an RTO must initially satisfy computer formatting requirements so that it can be “read” by the Department’s computer systems. Those formatting requirements are based on a national standard – the Australian Vocational Education and Training Management Information Statistical Standard (AVETMISS).

3. [188]

   Once the raw data is received (from MIBT) it is exported in the form of a text file (a NAT file) from MIBT’s software management system (variously referred to as the LMS or Student Management System (SMS)), that being a system for MIBT to record the student information and training and assessment outcome of its students. Once that data is exported from the LMS (or SMS), it is uploaded to the AVS Validation System. This software system, which is provided by the National Centre for Vocational Education Research, reviews the NAT files and then produces results as a CSV file. The purpose of this review is to “flag” where the raw data submitted does not comply with the AVETMISS.

4. [189]

   The Department has an online portal known as the STS Online (Portal), which facilitates this process and allows MIBT to submit its Training Activity Data. Thereafter, various “validations” are undertaken by the Department’s software system to ensure compliance with formatting in accordance with the eReporting Technical Specifications and Business Validations (eReporting Guide).

5. [190]

   The Department’s software system then produces a report that outlines where there are errors in the data and/or where there are no errors in the data. In the former category, those errors are required to be corrected by uploading the data within a period of three days. If there are no errors in the data based on this automated review, the software system will then assess whether the Training Activity Data has reached a UoC Outcome Achievement stage and then assess what payment milestone has been reached in accordance with the Contract. If a payment milestone has been reached, then the software system will automatically generate an invoice, which then requires human review of the document. (As I understand it, this is the first point in the process that involves human review.)

6. [191]

   Once a payment milestone has been met, the Department sends the Training Activity Data through another software system known as a Payment Analysis Tool (PAT), which is designed to identify any issues with respect to the data (which issues are then “flagged” for human review to undertake the data clarification process, if the issues warrant it). This seems to be the second point at which human review is part of the process.

7. [192]

   Through the “data clarification” process, the Department will request clarification from the RTO in respect of the data with a response to be provided within a set time (usually within three days). A failure to respond in this timeframe (or within a further specified timeframe,) results in the data (automatically) being rejected.

8. [193]

   The Department says that, for the purposes of reviewing the provider’s response, if it appears to the Department that the provider does not understand the contractual requirement or cannot confirm elements of the data (namely whether it is true, correct and accurate, or, for example, if it does not meet the definition of “Participated in Subsidised Training”, or perhaps more accurately the Department’s view as to what is required by that definition), further evidence can be requested for submission.

9. [194]

   Provision of the evidence that substantiates the data submitted, following a review by a Quality Assurance Officer, will result in the acceptance of the Training Activity Data and the generation (again, presumably, by the Department’s software system) of a Recipient Created Tax Invoice. (In this respect, in simplistic terms it may thus be said that the uploading of the Training Activity Data is the RTO’s claim for payment.)

10. [195]

    If the Department concludes that the evidence does not substantiate the Training Activity Data or does not demonstrate the UoC Outcome Achieved for the payment milestone report, the data will be rejected.

11. [196]

    The Department says that, following the conclusion of a contract for a provider such as MIBT, the Department’s practice is to direct the provider to submit the remaining Training Activity Data within twenty-eight days of the contract’s termination with a request for supporting evidence of the matters relevant throughout the life of the contract, as outlined above. The Department says that the above process allows the Department to undertake a reconciliation of payments and to assess whether there have been any overpayments which the Department is entitled to recover.

12. [197]

    Pausing here, at this stage it is worth noting that there is no suggestion that, prior to the issues following the termination of the Contract in the present case, there had been any issue raised by the Department with MIBT as to non-compliance of its training programs with the definition of “Participation in Subsidised Training”; or indeed as to the content or quality of its training programs. Therein lies much of the difficulty, as I see it, in the present case. If the Department took a particular view of what was required in order to satisfy the requisite definition, then it would not be unreasonable to expect that it would have raised that at some early stage with the service provider. The lack of a challenge to the training methodology or programs adopted by MIBT over a period of some years would understandably lead it to assume that the training (whether it be described as a blended training model or gap training or the like) was satisfactory and met the requirements for payment under the Contract. No doubt this helps to explain Mr Lawrence’s frustration at the rejection of the Training Activity Data and persistent requests for documents and information from the Department after the Contract was terminated.

13. [198]

    This brings me to the issue (raised in the Department’s submissions and featuring prominently in the hearing, albeit apparently not raised as an issue during the term of the Contract itself) as to the proper construction of the term “Participated in Subsidised Training” as it appears in the Contract.

Proper construction of “Participated in Subsidised Training”

1. [199]

   Schedule 1 of the Contract defines “Participated in Subsidised Training” as:

2. [200]

   The relevance of this for present purposes is that the Department has exercised its discretion under cl 17.4 of the Contract to reject Training Activity Data submitted by MIBT (with a value of around $1.4 million) in which MIBT claims that the relevant student has attained a Unit of Competency (UoC) of “Withdrawn”.

3. [201]

   The Department maintains that in order for MIBT properly to claim that a student has Withdrawn (for a Code 40 outcome), the student must have “Participated in Subsidised Training” for the relevant UoC and be “withdrawn before completing all training and assessment criteria”. The Department says that the definition does not merely require MIBT to assert that there has been interaction and participation. It says that, in order to fulfil the definition (and in turn, to satisfy the condition precedent for payment), that interaction and participation must also be documented. Thus, the Department appears to take issue both with whether there was in fact the requisite participation and as to whether it was properly documented.

4. [202]

   As to what constitutes “participated”, the Department says that the real issue for determination is whether there has been “interaction and participation” by the student “in a manner that goes beyond mere attendance or accessing training materials”. The Department says that, on its proper construction, “interaction and participation” requires some form of communication between trainer and student. The Department (somewhat ironically perhaps) engaged Mr Newbery (who had prepared the report relied upon by MIBT to demonstrate that it had remedied the notified Events of Default) to express his opinion as to whether the requirement for participation in Subsidised Training was met (MIBT took objection to the admissibility of that report, which I address in due course). Suffice it for present purposes to note that the Department says that the common thread between the examples given in respect of the various modes of teaching considered by Mr Newbery in his report is a reciprocal action where: there is some form of instruction to a student; the student takes some action to demonstrate competency in relation to the instruction that they have received; and the trainer provides feedback on the student’s action to demonstrate competency.

5. [203]

   The Department argues that the words “in a manner that exceeds mere attendance or accessing training materials” further reinforce that a student has only “participated” (for the purpose of the relevant definition in the Contract) where the interaction between trainer and student goes beyond the relevant student merely accessing course materials (for example, materials on MIBT’s LMS) or attending a training session (whether that training session occurred virtually, for example by watching a video demonstration of a trainer, or through face-to-face learning).

6. [204]

   Further, it is noted that, if a student has interacted or participated in the Subsidised Training, MIBT is required to keep a record of that interaction and participation. The Department points out that the Contract defines in detail the records that MIBT must keep (and says that this is unsurprising considering the extent of practical supervision of MIBT’s performance of the Contract available to the Department).

7. [205]

   The Department notes that at all material times it was MIBT that had the day-to-day contact with the students; the Department’s responsibility under the Contract being to pay Subsidies and Loadings to MIBT upon a valid claim for payment being made by it. The Department says that, in paying those amounts, it was reliant on MIBT properly to report the Training Activity Data from which that right to payment is derived. The Department thus argues that the service provider’s record keeping and provision of information are matters critical to the Department’s ability to determine MIBT’s entitlement to payment (whether at the time of submission of the relevant Training Activity Data or subsequently); and that, until the Department takes a positive step, it has no way of assessing the UoC outcome reported by MIBT.

8. [206]

   Pausing here, it is of course the Department’s choice to set up the payment system in the largely automated fashion that it has done, which of itself contemplates that there will be limited human overview of the submission of data or content of the record keeping underlying that data. Nevertheless, as I understand it, the Department is here emphasising that there is a legitimate basis for the requirement for accurate and reliable record keeping and uploading of data that forms the basis for an RTO’s entitlement.

9. [207]

   The Department says that MIBT’s obligation to maintain adequate records of “Participation in Subsidised Training” flows from several aspects of the Contract and Operating Guidelines: cl 13.1 of the Contract (which creates a primary obligation on MIBT to create, collect and maintain records in compliance with its obligations under the Contract, and comply with any record keeping obligations set out in the Operating Guidelines; and that the records maintained by MIBT must be readily accessible); and cl 17.2(i) (which requires MIBT to maintain evidence of Participation in Subsidised Training; which evidence must be valid, readily accessible, current, sufficient, authentic, and capable of verification by the Department). It is noted that Table 1.8-2 of the Standards, which sets out the standards of evidence required in the context of assessment (Rules of Evidence), employs similar concepts of validity, sufficiency, authenticity and currency. Further, it is said that the Rules of Evidence have a specific meaning in the context of the Vocational Education Sector.

10. [208]

    In those circumstances, the Department submits that the obligation to maintain records of Participation in Subsidised Training includes that: the evidence will be valid if the documented record of training reflects the actual training delivered and shows evidence of the student’s participation in the training and the interaction with the trainer relating to the unit of competency being undertaken; and the evidence will be sufficient if the documented record of training has enough information to provide a valid record of the student’s participation in the training and the interaction with the trainer. It is said that the record should be relevant to the training delivered and be of such a quality that it can be understood in context and be “verifiable”.

11. [209]

    It is noted that the records that MIBT was required to keep are elaborated on in the table at clause 17.8 of the Operating Guidelines; and it is noted that cl 17.1 of the Operating Guidelines stipulates that the evidence and records kept by MIBT may be used by the Department for the purposes of, inter alia, verification. It is said that this plainly contemplates that the Department may use these records for the purposes of assessing a claim for payment of Subsidies and Loadings.

12. [210]

    The Department says that, where the Subsidised Training is delivered online, there are additional record keeping requirements set out in cl 17.5 of the Operating Guidelines (namely, that MIBT’s learning management system must be capable of capturing details of a student’s engagement and Participation in Subsidised Training). The Department says that this clause makes clear the importance of appropriate and proper documentation of “participation” where the relevant training is undertaken virtually, given the particular context in which the training is being delivered.

13. [211]

    The Department maintains that the example in cl 17.5 of the Operating Guidelines (i.e., that the Provider, if required, would be able to supply the Department with a report of when, what times, and for what UoCs an enrolled student logged onto the online delivery platform to undertake online learning and/or to complete an assessment task(s)) does not qualify or reduce the extent of the general requirement in cl 17.2(i) to demonstrate Participation in Subsidised Training (pointing out that the clause does not expressly state this). The Department says that, to suggest that the example in cl 17.5 provides an exhaustive list of the evidence of Participation in Subsidised Training that MIBT was required to keep, would elevate that example above the balance of cl 17 and the clear and unequivocal definition of Participation in Subsidised Training in the Contract. It is further said that such a construction would be inconsistent with the priority provision in cl 34 of the Contract (extracted earlier).

14. [212]

    The Department also maintains that the example in cl 17.5 of the Operating Guidelines does not expressly acknowledge any inconsistency with the definition of Participated in Subsidised Training; nor does it state that cl 17.5 applies in priority over the definition of Participated in Subsidised Training in the Contract. The Department says that it follows that the example in cl 17.5 cannot displace the obligation on MIBT to maintain and provide evidence of interaction and participation as referred to above.

15. [213]

    As to the proper construction of this term of the Contract, the relevant principles applicable to the construction of commercial contracts are well-known (see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[49] per French CJ, Nettle and Gordon JJ). The Department emphasises in this context that a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”, reflecting the parties’ intention to produce a commercial result (referring to Rares J’s observation in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38 at [53] in that regard). As to the position where there is ambiguity, reference is made to what was said by Mason J, as his Honour then was, in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24 at 352.

16. [214]

    In that regard, it is well-established that the provisions of a contract are determined objectively, by reference to its text, context and purpose; and that, in determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable business person would have understood those terms to mean taking into account: the language used by the parties in the contract; the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract; and, where necessary to identify the latter, recourse may be had to events, circumstances and things external to the contract. In Zhu v Treasurer of New South Wales (2004) 218 CLR 530; [2004] HCA 56 at [82], it was said by the unanimous Court that attention is to be drawn to the genesis of the transaction, the background, the context, and the market in which the parties were operating, as known to both parties.

17. [215]

    In that regard, I am not assisted by the views or opinions held by the external or internal reviewers of the meaning of “Participation in Subsidised Training”, particularly since it was clear from the evidence that there is not a standard or uniform industry understanding of that term.

18. [216]

    “Subsidised Training” takes its meaning from the definition in cl 2 of the Contract and simply means vocational training under the relevant program that is subsidised. The real issue is what is contemplated by “Participation”. The Contract itself makes clear that this is to comprise more than mere online attendance or accessing of online materials; but it is also clear that it is contemplated that a student may undertake the training (at least partially) online. Participation certainly contemplates that there will be some involvement by the student in the training process but there seems to me no reason why that participation cannot extend to completion of an online questionnaire or examination, as well as demonstration of activities via an online video. The nub of the Department’s complaint seems to be that the summary documents do not evidence or record trainers interacting – in the sense of commenting on, for example, or perhaps physically demonstrating activities. However, it is clear that in a number of instances they do – say, for example, reference to site visits or comments on material uploaded by the students.

19. [217]

    In my opinion, the words “Participation in Subsidised Training” mean what they say in common parlance – that a student has become involved in the training which is subsidised under the Smart and Skilled program; and the requirement that it be in a manner that exceeds mere attendance or accessing training materials means that a student has not “participated” in the training merely by logging on or accessing online materials (say if one were simply to record attendance and open up an online video or file) but has done something as part of that process (such as completing a questionnaire or answering questions or filming his or her attempts at a particular competency). It is pertinent that the definition focuses on the student having interacted and participated in the training (it says nothing about what the trainer must do as part of that training or to provide that training). If a teacher in the course of a pandemic issues an online test which must be completed by students and then uploaded; and this is marked by the teacher as satisfactory or not, the fact that the teacher has done no more by way of “interaction” than marking the online test may not be an ideal way of teaching but it would nonetheless not mean that the student has not interacted and participated in the teaching of the subject. A fortiori, where the teacher physically goes to observe a practical activity being undertaken (or observes it online). I accept that the provision of feedback is one way in which interaction and participation can be demonstrated. I do not accept that it is the only way it may be demonstrated.

20. [218]

    Thus, I consider that the practical supervision of a trainer by reviewing completed tasks (whether or not accompanied by feedback or instruction) is a form of interaction in the student’s training. If something more is required in every instance then it should be specified in the Contract or Operating Guidelines more clearly.

21. [219]

    As to the requirement for the provider or RTO to keep a record of the student’s interaction and participation in the Subsidised Training, it must be noted that the evidence shows that MIBT kept both summary records (which it submitted in relation to certain of the students and qualifications on request by the Department) and far more voluminous records (which it submitted when requested on other occasions to provide “all” evidence to support a particular outcome code or unit of competency). So, for example, there were in evidence some 170 pages of materials relating to a particular student’s participation in the training of the “use of carpentry tools”. Even though at one point Ms Nguon sought to maintain that even the larger reports would not suffice, Ms Nguon ultimately accepted that such evidence would be “good evidence” that the student had interacted and participated in the Subsidised Training in a manner that exceeded mere attendance or accessing training materials. On any view of things that must be the case.

22. [220]

    Therefore, I do not accept that in every instance there must be “reciprocal action” in the sense of feedback on the student’s action to demonstrate competency; nor do I accept that there has not been proper record keeping of the participation in Subsidised Training.

General observations regarding Subsidies and Loadings

1. [221]

   The Department submits that Ms Nguon’s affidavit, Mr Newbery’s Report and Mr Molloy’s fourth affidavit, establish MIBT’s non-compliance with the following so as to disentitle it to payment of Subsidies and Loadings under the Contract: failure to comply with its obligations under cl 13.2(b) (Reporting Obligations) and cl 17.2 of the Operating Guidelines as concerns record keeping; failure to comply with its obligations under cl 14 as to the submission of Training Activity Data; failure to comply with cl 18 of the Operating Guidelines as to submission requirements of data.

2. [222]

   The Department says that it is for MIBT to demonstrate that it has (per cl 17.3 of the Contract): complied with its obligations under the Contract, which includes compliance with cl 14 as concerns the submission of Training Activity Data; and reached the UoC Outcome Achievement Stage for an approved Qualification for an enrolled student. The Department submits that MIBT has not satisfied this requirement, such that its claim for relief must fail.

3. [223]

   As to the allegation by MIBT, by its statement of claim, that the Department has breached an express or implied term of the Contract by failing to pay Subsidies and Loadings, the Department contends, for the following reasons, that it was entitled to reject, and properly exercised its discretion to reject, the Training Activity Data submitted to it by MIBT.

4. [224]

   The Department points to the obligation of MIBT, during the term of the Contract, to submit Training Activity Data at least once every 28 days. It is noted that in practice Training Activity Data was often uploaded by MIBT much more frequently and that, during the period in which it had access to the Department’s online Portal, MIBT was free to re-upload Training Activity Data that had been rejected by the Department (as occurred in several cases where MIBT re-submitted Training Activity Data which had been rejected by the Department – and see Mr Lawrence’s evidence as to this).

5. [225]

   The Department notes that, following submission of the Training Activity Data, and prior to payment, cl 17.4(a) of the Contract provides the Department with a discretion to take one or more of three steps (seek clarification, request evidence, or reject the Training Activity Data) and the nature of the Department’s power is plainly discretionary given the use of the permissive “may”.

6. [226]

   The Department says that it was plainly entitled to make the direction issued by it on 30 June 2021 (see above) requiring finalisation of submission of Training Activity Data to the Portal within 28 days under its broad powers pursuant to cl 21.5 of the Contract. It says that these powers were enlivened on the termination of the Contract pursuant to cl 5 (by virtue of the expiry of the Contract’s term). It is submitted that broad powers are conferred upon the Department in this respect and demonstrate the requirement for finality under the Contract. It is said that to allow an unlimited time by which the Provider is able to re-submit Training Activity Data following termination would give rise to a perverse outcome.

7. [227]

   The Department contends that the practical effect of the directions made by it on 30 June 2021 is that MIBT is unable to submit any further Training Activity Data following MIBT’s access to the Department’s Portal being removed. It is noted that MIBT contends that it has additional evidence of Participation of Subsidised Training held on its LMS; and that Mr Lawrence contends that these documents purport to demonstrate that MIBT has evidence that students have Participated in Subsidised Training. I have already dealt with that issue. However, the Department says that (leaving aside whether those documents do demonstrate Participation in Subsidised Training), the documents are irrelevant to any claim that the Department has improperly exercised its discretion to reject Training Activity Data in which MIBT has claimed a “Withdrawn” outcome, pointing to the discretion under cl 17.4 of the Contract and submitting that once the Department exercises its discretion to request evidence it falls to MIBT to provide that evidence to the Department.

8. [228]

   In this regard, the Department emphasises that: it is MIBT, not the Department, which has access to the relevant evidence; MIBT is required to create, collect and maintain records of Subsidised Training, including supporting documentation which can be used as evidence to substantiate Participation in Subsidised Training (which evidence must be valid, readily accessible, current, sufficient and capable of verification by the Department); MIBT is required to provide the Department any information requested by it in relation to the Contract for the purposes of the Contract (and that information must be provided to the Department within the timeframe stipulated by it); and, on termination of the Contract, the Department may issue a direction to MIBT, which MIBT must comply with at its own cost.

9. [229]

   It is noted that the Department directed MIBT to submit to the Department all Training Activity Data and evidence to substantiate the payments claimed (including evidence to substantiate Participation in Subsidised Training): first, by way of the letters of 30 June 2021 and 25 March 2021 which relevantly directed MIBT to “submit to the Department [within 28 days of the final submission of its Training Activity Data] all participation, training and assessment evidence” to support the lodged Training Activity Data from the date of each of those respective notices (referred to by the Department as the broad requests for evidence); and, second, by multiple emails from the Department to MIBT requesting “evidence of Participation in Subsidised Training” (which the Department refers to as the specific requests for evidence). The Department says that these directions were made pursuant to cl 13.2(b) of the Contract and required MIBT to provide that evidence within 14 days of the relevant email.

10. [230]

    It is also noted that, on 30 June 2021, the Department directed pursuant to cl 21.5 of the Contract that all Training Activity Data be submitted to it by 28 July 2021, after which date, MIBT’s access to the Department’s portal, through which Training Activity Data was submitted, was terminated. The Department says that it follows that MIBT is unable to resubmit Training Activity Data to the Department in relation to Training Activity Data that the Department has elected to reject.

11. [231]

    The Department contends that the assessment of whether the Department has breached the Contract by rejecting Training Activity Data submitted by MIBT turns entirely on the Training Activity Data and the response to requests for clarification and evidence actually submitted by MIBT prior to 28 July 2021. It is said that evidence of information which MIBT may have held on its LMS (but which for whatever reason, did not supply to the Department) cannot affect that assessment because information the Department did not have access to at the time of exercising its discretion (and which MIBT, in breach of its contractual obligations, had failed to provide), cannot be relevant to the question of whether the Department had properly exercised its discretion under cl 17.4(a)(iii) to reject that Training Activity Data.

12. [232]

    In that regard, the Department says that the explanation proffered by Mr Lawrence (that he did not understand, and would have provided had he understood, what the Department was seeking in the specific requests for evidence) is irrelevant. It is said that the specific requests (which recite the definition of Participated in Subsidised Training) plainly called for documents that showed interaction and participation. To the extent that such a direction was unclear, it is said that MIBT would have suffered no prejudice if it had complied with the broad request for evidence because, if MIBT had complied with the broad request, the Department would have already had all the documents required by it to assess Participation in Subsidised Training. It is said that these matters, taken together, speak against any submissions of unreasonableness by MIBT insofar as they concern the Department’s requirements for sufficient material.

13. [233]

    Further, the Department says that any submission by MIBT that the Department could have satisfied itself of Participation in Subsidised Training had it only asked for the relevant documents belies the evidence that the Department did ask for all evidence in MIBT’s possession (and it is said that that direction – in breach of the Contract – was rebuffed).

Issues

1. [234]

   As adverted to above, the principal issues raised by MIBT’s claim in the present proceeding were initially identified as being: whether the Contract was validly terminated on 25 March 2021 (i.e., whether the Department lawfully exercised its right to terminate the Contract in the manner it did); what damages or moneys (if any), are payable by the Department to MIBT; and, to the extent that any Subsidies and Loadings are payable to MIBT, whether the Department is entitled to withhold payment.

2. [235]

   In respect of the Department’s cross-claim, the issues identified were as to the amounts which the Department contends that MIBT is obliged to repay: first, the repayment of amounts paid by the Department to MIBT pursuant to a “payment continuity strategy” occasioned by the COVID-19 pandemic (PCS Repayment) which is not disputed by MIBT; and, second, a series of overpayments identified by MIBT in its internal Operation Fish investigation (the Operation Fish Overpayment), as to which the only issue is as to the quantum of that amount.

3. [236]

   In summary, MIBT’s position with respect to the above issues is that: the Department’s termination of the contract was unlawful (although MIBT does not now press its claim for damages or equitable compensation in relation thereto); the Department’s contentions that it is entitled to withhold payment for the work MIBT has done under the contract since March 2021 are baseless and MIBT is entitled to be paid for that work, in the amount of $2,741,111; and MIBT concedes that it is obliged to repay the PCS Repayment in the sum of $413,405.68, and the Operation Fish Overpayment albeit only in the sum of $41,752.16. MIBT therefore claims the sum of $2,285,953.34 plus interest and costs.

4. [237]

   The Department contends that it is not obliged to make payments to MIBT for the work performed under the Contract on various bases (including by reference to the obligations under the Contract in relation to the submission of Training Activity Data in accordance with the express terms of the Contract).

5. [238]

   The issues were further refined or distilled in a statement of issues handed up in closing submissions by Senior Counsel for MIBT, as addressed below, but in the event issues 1-3 either now do not arise or nothing turns on them.

Evidence

1. [239]

   MIBT adduced evidence from each of Mr Paul Lawrence (affidavits affirmed 30 March 2021, 17 May 2021, 1 June 2021, 16 June 2021, 19 August 2021, 29 August 2021, and 22 October 2021) and Mr David Thompson (affidavits affirmed 17 May 2021 and 27 May 2021), and tendered the initial report of Mr Joseph Newbery (marked as Ex H in the hearing).

2. [240]

   The Department relied upon evidence from Mr Scott Andrew Molloy (affidavits sworn on 7 May 2021; 21 May 2021; 11 June 2021; and 1 October 2021, respectively), Ms Linna Nguon (an affidavit affirmed 6 October 2021), Mr Stephen Paul Buddeke (an affidavit sworn 4 October 2021), and Mr Joseph Newbery (an affidavit affirmed on 21 October 2021).

3. [241]

   I provisionally admitted (as Ex J) Mr Newbery’s report (in which Mr Newbery concluded that “Participated in Subsidised Training” carried the meaning of vocational education and training delivered by “trainers” as a person who provides training, requiring that the trainer and student communicate with each other by way of feedback on the student’s performance, and a corresponding improvement in the student’s performance. Mr Newbery furthermore concluded that the records he reviewed did not include evidence of the trainer interacting with, observing, or reviewing the student in the conduct of Subsidised Training, and that the evidence thus did not support the UoC outcome of “withdrawn”), subject to evidence of his understanding of the industry meaning (if any) of the term “Participated in Subsidised Training” and deferred ruling on this until final judgment.

4. [242]

   In the event, I consider that this report, insofar as it expresses opinions as to the meaning of the Contract terms, is not admissible. Mr Newbery’s evidence did not establish that there was a particular industry meaning of this contractual term and in those circumstances, applying the test in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [85] per Heydon JA, as his Honour then was, or Dasreef Pty Ltd v Hawchae (2011) 243 CLR 588; [2011] HCA 21 at [37] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ (that the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded), I am not persuaded that this is an issue on which Mr Newbery, with no disrespect to him, has the necessary expertise. The proper construction of the Contract is a matter for determination by the Court and Mr Newbery’s understanding does not assist me in this regard. Therefore, I reject Exhibit J.

5. [243]

   As to the oral evidence, I note briefly my observations as to the main witnesses.

6. [244]

   Mr Lawrence was a down to earth witness. He expressed some understandable frustration (and his evidence had the ring of truth) when he said that the Department was never satisfied or was always requesting evidence (see T 113.5-7 “I just think everything we did the Department rejected”). Mr Lawrence’s evidence was that MIBT had already uploaded the relevant data at the end of the Contract (see T 70.16-24) and that it supplied summary reports when asked to do so – and the whole competency reports when asked to do that (see T 71.1-13). I considered Mr Lawrence genuine in his expression of mystification as to what the Department required or why it had rejected the Training Activity Data (and in his evident frustration as to the process that had ensued in relation to the Training Activity Data).

7. [245]

   Mr Lawrence explained at T 104.1-14 the process for TNC data, including by reference to a particular student (see at T 108.30-37) where there was a TNC data request or error report on the software. In relation to that student, Mr Lawrence explained (quite plausibly) that although some of his units would have been withdrawn, the student was still in training so that MIBT could not report these as TNC while the student completed his actual unit. Mr Lawrence accepted that if the Department raised an issue and there was no response this would lead to an automatic rejection (see T 109.36-45) although I understood this to be his acceptance that this was how the software program would work, not that the Department was justified in so doing. Mr Lawrence explained at T 109 that MIBT used to get error reports (“1090” error reports) and then those would be changed to TNC or for ones that were not “TNC”, the Department would ask MIBT to re-upload the data. Mr Lawrence said that MIBT often asked the Department to reject data so that MIBT could re-upload it and it would do that in the next two to three days (T 111); so that for a particular student about whom he was cross-examined if there was a clerical error in the start dates MIBT would ask first for it to be rejected so that it could then be resubmitted (T 112.25-27). The explanation for multiple data being uploaded on the one day was of a clerical nature – and Mr Lawrence explained that it had been readjusted (T 113.9-20).

8. [246]

   Mr Lawrence explained (at T 116.12-36, T 117.1-15) the example of a student who was required to achieve 30 qualifications for a course. If that student passed 18 UoCs, had not started four and had withdrawn from eight, this would have mean that five milestone payments were achieved (18 UoCs being accredited for a Code 20 pass and eight UoCs for a Withdrawn Code). Mr Lawrence accepted (at T 118.11-14) that if MIBT was paid for a Withdrawn code and the student then restarted the course it would be paid for the Pass code but said that this was not an overpayment because there would be work done for the particular employer on that particular transaction code and that the student would restart then in the new qualification to preserve what was done in the old qualification – he described this as an evolving process (see T 118.28-32).

9. [247]

   As to the evidence of interaction between trainers and students (see T 123.12-31) Mr Lawrence seemed to accept that some of the trainers did not put details into the database but he maintained that the summary details evidenced such interaction.

10. [248]

    Mr Lawence explained (at T 125.40-50) that he had provided a summary table to Mr Tabone on 28 May 2020 (which the contained a calculation of the Operation Fish overpayments, calculating those overpayments at a value of $41,752.16, reduced from an initial estimate of $106,000, and a subsequent estimate of $47,000) and then he had reviewed Ms Nguon’s table (which he said had doubled up the amounts because Ms Nguon had taken the four spreadsheets MIBT was working on and had put them all together). Mr Lawrence explained that he had reviewed all the doubling up and had the actual names correlated with the names on Ms Nguon’s schedule and said that this reduced the amount further to the $41,752.16 that MIBT concedes.

11. [249]

    I considered Mr Lawrence to be a credible witness, who did his best to explain the (not uncomplicated) mechanism for uploading and re-uploading data in order to meet what he understood to be the Department’s requirements for data; and who had done his best to comply with demands for information over the six-month period or so in which such requests were received.

12. [250]

    Mr Thompson was only briefly cross-examined and his cross-examination did not add materially to his affidavit evidence. I have no reason to make any adverse findings as to his credit.

13. [251]

    Mr Buddeke espoused principles relating to the onus of proof (referring to Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34) but (unsurprisingly for someone without legal qualifications) did not seem to me to exhibit a clear understanding of the import of those principles (for example, Mr Buddeke made a statement to the effect that “[b]ased on the evidence available to this investigation, a strong inference can be drawn to discharge the civil onus of proof and find the alleged conduct not substantiated”, Mr Buddeke went on to say that the “onus was on [him]” to “discharge that … on the balance of probabilities”, that the onus had been satisfied, and immediately following this that it was not “substantiated in relation to [his] investigation”. In response to a question as to whether Mr Buddeke had legal qualifications, his answer was, unsurprisingly, that he did not – see generally T 167).

14. [252]

    Moreover, while clearly cognisant of the seriousness of the allegations (and indeed rejecting the most serious of those) as to the anonymous complaints, he did not appear to understand how procedural fairness should be addressed in a practical context – for example, how there could be a proper opportunity to respond without knowing the precise allegations or the material the Department was relying on to come to an adverse view of the conduct complained of; and the basis on which Mr Buddeke considered that there was reason to doubt Mr Lawrence’s honesty did not withstand scrutiny. One may accept that a particular person’s account of events is less plausible than another without making a finding of actual dishonesty; and it is difficult in any event to see how a finding of that kind could be made without testing all of the evidence.

15. [253]

    Therefore, while I do not doubt Mr Buddeke’s experience in carrying out investigations and the like, nor do I doubt his earnest intentions in carrying out the investigation in question, I am troubled by the manner in which this investigation appears to have been done without apprising MIBT of the full particulars of the allegations or the pages and pages of investigations; and without fully testing those allegations. This is all the more troubling since there is little doubt that the making of these allegations was a precipitating (if not determinative) factor for the ultimate decision by Mr Tabone to terminate the Contract.

16. [254]

    As to Ms Nguon, I accept that Ms Nguon and her staff have had a seemingly Sisyphean task in assimilating all the information in order to verify the Training Activity Data (and in disentangling uploaded and rejected and then re-uploaded Training Activity Data) – although to a large extent this seems to be a function of the software program requirements that the Department has itself mandated; and I attribute the fact that occasionally Ms Nguon was somewhat argumentative or defensive (see for example at T 192.45-40) to the fact that her opinion was based on a no doubt time consuming review of that material. However, the real difficulty is that it was not apparent to me how to assess that exercise when Ms Nguon made clear in cross-examination that it was based at least in part on other documents or data in the Department’s “stored system” and there was doubt cast on whether the material before the Court was the material provided to the external reviewers. With the best will in the world on Ms Nguon’s part, it makes it difficult to rely on the ultimate conclusions drawn by Ms Nguon from that (unable to be tested) material. Moreover, some of Ms Nguon’s evidence (for example, as to whether the larger reports would constitute “good evidence”) seemed to me untenable (as Ms Nguon herself appears later to have accepted) (see at T 195.42-50).

17. [255]

    Therefore, while I accept that Ms Nguon was genuinely attempting to assist in the process of determining the amounts properly payable, I am concerned that the state of the evidence is not complete in that regard.

Determination of Issues

1. [256]

   It is convenient to address the parties’ submissions as to the relevant issues as itemised by MIBT sequentially (but only briefly to address those in respect of which there is no real dispute, such as issues 2 and 3).

2. [257]

   MIBT says that the “snap” termination by the Department was contrary to the way in which matters had progressed up until the time the Termination Notice was issued. It is noted that the Events of Default the subject of the December 2019 Suspension preceded the inception of the Contract by more than six months (and, as adverted to above, MIBT says that these cannot have been regarded as sufficiently serious to stop the Department from taking the step of renewing the Contract in May 2020).

3. [258]

   MIBT says that it and the Department had been working (seemingly) cooperatively to address those issues since the 13 December 2019 Suspension Notice was issued. Thus, MIBT contends that the Events of Default the subject of the December 2019 Suspension (occurring more than six months prior to the inception of the Contract) could not have provided a reasonable basis to terminate the Contract in March 2021.

4. [259]

   As to the matters raised in the letter dated 4 March 2021, MIBT says that, while the assertions underlying the complaints were serious, there is no evidence that they were substantiated by the Department, and it points out that the Department in the present proceeding has not sought to establish the truthfulness of the allegations. MIBT notes that it denied those allegations at the time and it says that the Department did not regard the complaint as being established or serious enough to warrant termination upon receipt of the complaint; instead, the Department asked MIBT to report back and gave it an opportunity to address any alleged deficiency.

5. [260]

   MIBT says that, the Department having embarked upon that process, it was incongruous (and not open to the Department) for the Department simply to terminate the Contract in late March 2021 before MIBT could reasonably respond to those complaints and before the Department had itself investigated the accuracy of the complaints. MIBT says that this is especially so in circumstances where the parties were engaged in (seemingly) cooperative discussions to address the issues raised by the Department, and where the Department had available to it a range of options under the Contract to address its concerns in the interim while it investigated whether the issues raised had any substance (pointing in this regard to the option of a partial suspension, which it had used before; or the placement of conditions on MIBT (referring to cl 21(c)(iii) of the Contract)).

6. [261]

   MIBT further says that it is not open for the Department to support its termination of the Contract by matters other than those identified in the Termination Notice, noting that the Department has not pleaded any other matters which might support the termination. MIBT contends that in any event there is no evidence to support any matters other than those relied upon in the Termination Notice.

7. [262]

   MIBT notes that the Department in the 4 March 2021 letter (forming part of Ex PJL-1 to the Affidavit of Paul John Lawrence affirmed 30 March 2021, marked as Ex A in the hearing) invoked cl 21.2(d) of the Contract. As adverted to above, MIBT says that once the Department invoked that sub-clause it was obliged to comply with it. MIBT says that sub-clause (d) required the Department to afford MIBT an opportunity to show either that there had been no Event of Default or, if there had been an Event of Default, that the default was capable of being remedied.

8. [263]

   Further, it is contended that the Contract contained an implied obligation to cooperate (citing Butt v McDonald (1896) 7 QLJ 68 at 70-1) and an implied duty of good faith (citing Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 (Renard Constructions)). MIBT says that the fact that earlier Contracts contained an express term of this kind, but that the Contract entered into on 1 July 2020 did not, does not bear on whether the relevant Contract contained the implied term. (I am inclined to agree – since negotiations as to terms of draft contracts are in general inadmissible to construe the terms of the final version of those contracts and in any event there is no evidence as to the circumstances in which that clause was not included in the latest version of the contract.)

9. [264]

   MIBT says that it is evident from the Termination Notice, and the communications between the parties, that the matters in the 4 March 2021 letter were essential to the Department’s decision to terminate the Contract. MIBT says that the events between 4 and 25 March 2021 make it clear that the Department did not follow the requirements of cl 21.2(d), and breached the implied terms with respect to the 4 March 2021 allegations, when it issued the Termination Notice, for the following reasons.

10. [265]

    First, the notice of termination incorporates the 4 March 2021 letter by reference, in circumstances where it is noted that even Mr Buddeke rejected the most serious allegations of fraud contained in that letter.

11. [266]

    Second, that a large range of information which the Department considered was relevant at the 12 March 2021 meeting had not yet been supplied by MIBT, in circumstances where it is said that no fair opportunity to provide the information was afforded to MIBT.

12. [267]

    Third, that the Department had not answered Mr Cribb’s letter of 10 March 2021 seeking particulars of the serious allegations. It is said that at no time before terminating the Contract did the Department provide particulars of the allegations. MIBT complains that there was no explanation for the failure to provide this information, and that it was not given a fair opportunity of answering the allegations without that information (either as to whether the events occurred or, if so, whether they could be remediated).

13. [268]

    Fourth (and I interpose here to say that I consider this proposition to be undeniable), MIBT says that there should not be a finding that the Events of Default alleged in the 4 March 2021 letter occurred. It is noted that Mr Lawrence and Mr Thompson denied them (T 99-103, especially T 101.31-32; see also the transcript of the meeting of 12 March 2021, in Ex SPB1 to the affidavit of Mr Buddeke sworn 4 October 2021 wherein Mr Lawrence strenuously denied the allegations; and see the email of 12 March 2021 following that email, in which Mr Lawrence referred to the allegations as “ridiculas [sic]”); and that the Department elected to call no evidence from the complainants (the documents recording the complaints having been admitted into evidence only for the fact of the communications not for the truth of the complaints themselves). MIBT emphasises that the evidence of Mr Lawrence and Mr Thompson is the only evidence before the Court as to the truth of the allegations.

14. [269]

    Fifth, and related to this, that the Department had no basis to reject the truth of the denials by Mr Lawrence and Mr Thompson. It is said (and I interpose to note that I agree) that Mr Buddeke’s evidence about his reasoning in this respect was not impressive (see T 165.32-166; T 169.36-38). I have referred above to Mr Buddeke’s evidence in this regard. I agree that the basis on which Mr Buddeke considered there was doubt as to Mr Lawrence’s honesty would not satisfy the process of reasoning required for fact finding in the curial context but where that leaves the allegations of misconduct is simply that they cannot be regarded as more than allegations (and serious ones at that); thus if the making of such allegations without more could be said to be an Event of Default (which I do not accept) then there is no doubt that this was an Event of Default. However, if, as must be the case, more was required than the mere making of allegations, then to find that this was an Event of Default it would be necessary to determine the merits of the allegations (which was not adequately done by the investigation that Mr Buddeke carried out and which is not possible to determine on the material here before the Court).

15. [270]

    Sixth, that the true decision maker was Mr Emil Tabone (as Mr Buddeke confirmed at T 174.39-41) and the Department elected not to call him or explain his absence. MIBT invites an adverse inference that his evidence would not have assisted the Department’s case as to why he did not disclose to the meeting on 23 March 2021 that information was outstanding (noting that Mr Tabone was in attendance for part of the meeting on 12 March 2021), or why he referred to the 4 March 2021 letter without qualification in the Termination Notice (despite Mr Buddeke having rejected the most serious allegations that had been made). It is submitted that, in the absence of evidence from Mr Tabone, the inference should be drawn that Mr Tabone relied on all of the allegations in the 4 March 2021 letter in terminating the Contract.

16. [271]

    Pausing here, ultimately, nothing turns on this issue in my opinion, since what Mr Tabone relied upon when issuing the notice of termination is not relevant other than in relation to a claim for lack of good faith in the termination of the Contract. I accept that the overwhelming likelihood, having regard to the timing of events, is that all of the material provided by MIBT was not before the committee at the meeting on 23 March 2021; but the real question to my mind is whether there was an extant Event of Default that permitted termination of the Contract summarily under cl 21.2(c).

17. [272]

    Seventh, that no weight should be placed on Mr Buddeke’s reasoning process in his investigation report (which MIBT contends did not make sense – a contention which has no little force in my opinion) (see for example at T 165-167). Again, however, I consider that little turns on this issue for the same reasons explored above.

18. [273]

    Eighth, that the Department was bound to permit MIBT to respond to whether any Event of Default it found established could be remediated; and it did not do this. This submission turns on whether there was an obligation – either under the Contract or otherwise, say as a matter of procedural fairness or natural justice – for such an opportunity to be given. I do not accept the contention that, having commenced the process under cl 21.2(d), it was not open to the Department to choose to invoke the alternative right of termination under the preceding sub-clause – assuming that be available, for the reasons that I explain below.

19. [274]

    As to the Events of Default set out in the 13 December 2019 Suspension Notice, MIBT further says that there was no proper basis for the Department to terminate on account thereof because: first, (with the exception of the reassessment of five students, the names of which were to be supplied by the Department), Mr Lawrence gave evidence that those matters had been remedied by March 2021 (T 90-93) and the Department elected to call no evidence to the contrary (and, in particular, it is submitted that in the absence of evidence from the decision-maker, Mr Tabone, it should be inferred that Mr Tabone’s evidence as to whether the Events of Default in the 13 December 2019 Suspension Notice had been remedied by March 2021 would not have assisted the Department); second, that the remediation issue had not yet been resolved because the Department had only supplied information about the five student names on 19 March 2021 and the Department had still not properly considered the critical information in the email of 10 December 2020; and, third, it is said that there is no basis to conclude that whatever Events of Default from 13 December 2019 had not been remediated were of sufficient seriousness to warrant the contract being terminated.

20. [275]

    In this regard, MIBT again notes that the December 2019 Events of Default were pre-contractual and that the Department renewed the contract in May 2020. It is noted that the suspension that had sprung from the December 2019 Events of Default had been lifted in February 2020. Further, it is said that there was a range of remedies available – the most obvious being to continue the suspension of September 2020 until the contract naturally came to an end on 30 June 2021.

21. [276]

    In relation to the Termination Notice, the Department points out that the purpose of a notice of termination is to inform the recipient that a decision has been made to terminate the contract. It is noted that notices of termination are to be construed by reference to how a reasonable person would have understood the notice exercising common sense in the context and in the circumstances of the particular case; and that absolute clarity or an absolute absence of any ambiguity are not necessarily required.

22. [277]

    The Department maintains that even if such notices contain errors, they may be valid if they are sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate; that notices issued under commercial agreements should be construed practically to give effect to their presumed commercial purpose and so as not to defeat that purpose by a narrow and artificially restricted construction; and that a notice of breach provision requiring a period of notice to be given is a “practical instrument, and whether it is satisfied should be determined in a practical and not technical manner” (citing Duffy Bros Fruit Market (Campbelltown) Pty Ltd v Gumland Property Holdings Pty Ltd [2007] NSWCA 7 at [142] per Giles JA, Santow and Tobias JJA agreeing).

23. [278]

    The Department says that a notice of termination should not be analysed with the skills of a lawyer bringing to bear the benefit of hindsight and intent on discerning ambiguity where none truly exists; that legal perfection is not to be expected and that validity is to be determined objectively and business common sense should prevail (citing Al Jadeed TV v United Broadcasting International Pty Ltd (2011) 283 ALR 205; [2011] FCA 983 at [68] per Flick J).

24. [279]

    The Department says that the Contract was validly terminated. It is said that an objective reading of the words within cl 21.2(c)-(e) confers upon the Department the following rights under the Contract: first, that in circumstances where there is an Event of Default the Department may either immediately terminate the Contract or issue a notice to MIBT requiring MIBT to demonstrate that there is no Event of Default or that the Event of Default has been remedied; and, second, in the absence of the Department being “satisfied” of either of those matters, the Department is entitled to terminate the Contract by written notice. Further, it is submitted that there is no ambiguity in the construction of the relevant clauses, nor in existence any fetter or impediment on the exercise of those contractual rights.

25. [280]

    The Department says that critical to the above construction are the following matters relevant to the drafting of the Contract. First, that the clear objective intention between the parties that the basis for the Department to terminate the Contract is predicated solely on the Department being “satisfied” of the relevant condition precedent in cl 21.2(d) of the Contract. Second, the absence of any timeframe following the issue of a notice of remediation. Third, that the contemplated position that cl 21.2(d) does not take away or limit the rights that the Department has under cl 21.2(c) of the Contract, particularly the right immediately to terminate the Contract.

26. [281]

    The Department says that what is required to satisfy cl 21.2(d), on its proper construction, is that: the Department holds a belief that an Event of Default as defined has occurred; the Department (if it so chooses), has given notice of the Event of Default, as believed to exist, to the Provider; the notice requires the Provider to disprove or remedy the Event of Default; and, if the Department is satisfied that the Provider has failed to disprove or remedy the Event of Default, the Department may terminate the Contract. Alternatively, it is said that the Department can immediately terminate the Contract if an Event of Default has occurred under cl 21.2(c). The Department says that cl 21.2(d) does not limit the powers of cl 21.2(c).

27. [282]

    The Department contends that there were four bases on which it was entitled to terminate the Contract.

28. [283]

    First, that MIBT did not provide evidence to the Department of former students of Mr Edser being reassessed by MIBT. It is noted that such a request commenced on 13 December 2019; a response was provided by MIBT to this Event of Default on 6 January 2020; MIBT provided a further response on 30 May 2020 noting the reassessment of students of Mr Edser (but providing no evidence thereof); and that, on 11 September 2020, the Department wrote noting that not all students assessed by Mr Edser had been reassessed and found competent.

29. [284]

    It is noted that Mr Cribb’s letter dated 6 October 2021 made reference to [1.1]-[1.12] being a basis for the evidence of reassessment of those qualifications (at [1.13]), in response to which the Department sought further evidence of those students being reassessed as competent. The Department points out that its letter of 22 January 2021 specifically addressed the absence of such evidence by reference to Appendix A of that letter (which was the same appendix contained in the letter of 11 September 2020). It is said that there is no documentary evidence that MIBT provided, at any point after the 22 January 2021 letter, evidence to the Department of the reassessment of the Edser students or where the reassessment deems them competent (and that the highest to which the evidence goes on this issue is Mr Lawrence’s oral evidence that such evidence was provided). The Department submits that Mr Lawrence’s assertion to this effect should be doubted given the lack of engagement with the issue by Mr Cribb in his letters and the Department’s subsequent letters on this point.

30. [285]

    The Department says that the documentary evidence further supports the Department’s position that MIBT had not provided evidence of the reassessed students as at 25 March 2021, noting that the matter was not responded to by MIBT’s former solicitors following 4 February 2021. In the circumstances, it is said that the failure to provide evidence to the Department of reassessment constitutes a failure to comply with the rectification notice, particularly given that the matter was over 12 months old.

31. [286]

    Pausing here, one difficulty I have with this submission (even apart from the force of MIBT’s submission as to whether this was a breach of sufficient seriousness in all the circumstances to warrant termination in good faith of the Contract) is that the Department failed to provide Mr Lawrence with the names of the five students for reassessment until late on 19 March 2021 and then made the decision to terminate the Contract on 23 March 2021 (alluding to the fact that evidence had not been provided by MIBT) without affording a reasonable opportunity for MIBT to provide the evidence that the Department had itself called for.

32. [287]

    Second, that the documentary and oral evidence supports the contention that MIBT did not provide evidence (sufficient or complete) in relation to its records of Recognition of Prior Learning (RPL) for the Advanced Diploma of Building and Construction following the Department’s letter of 22 January 2021. It is noted that this letter was sent after MIBT provided the Department with evidence of review by Mr Newbery of its RPL Pathway documents in relation to two Certificate III Carpentry Units (not the Advanced Diploma of Building and Construction). The Department says that, in response to the 22 January 2021 letter, Mr Cribb did not provide any evidence relating to the Advanced Diploma of Building and Construction qualification. The Department thus maintains that MIBT therefore did not maintain adequate records for the purposes of the Contract (with respect, that argument seems to me to be syllogistic – in that it does not follow from the fact that there was not a response to that particular query that there was no such evidence available; all that can be drawn from this is that there was no such evidence produced in answer to the query). The Department says that, after 22 January 2021, the documentary evidence does not demonstrate the provision of any evidence with respect to the Advanced Diploma of Building and Construction (and points to Mr Lawrence’s apparent acceptance that no such information had been provided). Thus, it is said that the Event of Default is based upon cl 13.1 of the Contract and subsisted up and until 25 March 2021.

33. [288]

    As to this, it is also relevant to note that the ASQA notification of non-compliance did not relate to the Advanced Diploma of Building and Construction (which may well explain why it was that the Newbery report did not address this). Therefore, I cannot infer from the (admitted) lack of provision of this information that MIBT did not have the evidence in question. That said, insofar as there was an extant request, I accept that non-compliance with that direction would be capable of constituting an Event of Default. I am, however, concerned that the course of correspondence may have been such as to suggest that satisfaction of ASQA’s concerns would be sufficient compliance. However, it is not necessary to determine this in light of the conclusion I have reached below.

34. [289]

    Third, that, following MIBT’s non-compliance with the standards set by ASQA, there are no more than self-serving statements by MIBT in relation to its compliance with ASQA’s administrative sanction. It is said that although oral evidence was provided by Mr Lawrence that, based on evidence from Mr Newbery, that the ASQA non-compliance had been rectified, it is said that there is no evidence that such evidence was retained and provided to ASQA and examined by ASQA at some future point in time.

35. [290]

    I accept that there is a lack of evidence as to what happened in relation to the ASQA direction, although I would regard the lack of further action from ASQA as supporting Mr Lawrence’s assertion that ASQA had been satisfied that there was compliance. Again, however, it is not necessary to determine this in light of the conclusion I have reached below.

36. [291]

    The Department maintains (and I would accept) that ASQA’s determinations that MIBT was non-compliant with the Standards for Registered Training Organisations (RTOs) 2015 (Cth) (Standards) on 22 June 2020 and 16 October 2020 as required by the NVETR Act constitute Events of Default on the basis that given that they are adverse regulatory decisions within the meaning of cl 21.2(e)(x) of the Contract. It is said that these decisions impacted upon the ability of MIBT to comply with the Contract, as the breach related to MIBT’s obligations in relation to training and assessment, being the same types of Events of Default identified in Appendix A to the September 2020 letter.

37. [292]

    I accept that the ASQA determinations amounted to Events of Default (and indeed Mr Lawrence accepted as such) and that those would be sufficient to ground a notice of termination (in the absence of the Department confirming that it accepted that the issues underlying those determinations had been resolved).

38. [293]

    Fourth, the Department refers to the allegations referred to in the letter of 4 March 2021 from third parties as to a lack of engagement with students and a lack of face-to-face training (including the allegations to the effect that MIBT trainers were asked to falsify the learner management documents to give the impression of higher contact times); and notes that there were allegations (and, it is said, concessions by Mr Lawrence) that MIBT used a “blended” training model whereby much of the training was undertaken by the employer, rather than the trainer (which the Department understands to be what was referred to as “gap training”), which training model was the same model that MIBT had been using since it started.

39. [294]

    I do not accept that the making of these allegations of itself amounted to an Event of Default, as I explained above (particularly in the absence of it being determined, following an appropriate investigation, that they were substantiated). Nor do I accept that the evidence in relation to a blended training model or gap training either corroborates the allegations or itself amounts to an Event of Default. Indeed, the evidence as to “gap training” leads to the conclusion that the Department and MIBT were at cross-purposes in relation to this criticism of MIBT’s training.

40. [295]

    The Department argues that, as all that is required is a belief by the Department that there existed an Event of Default, each of the four examples above satisfies the criterion; and that those constitute Events of Default as they demonstrate a failure to provide Subsidised Training delivered by MIBT to enrolled students under the Contract. In the circumstances, it is submitted that the matters above demonstrate a failure to remedy the Events of Default such that the Department was entitled to terminate the Contract (pursuant to cl 21.2(d)).

41. [296]

    I accept that, in order to invoke the cl 21.2(d) process, all that is required is a belief on the part of the Department (albeit that it may well be that it should be implied that any such belief must be held on reasonable grounds and in good faith) but the mere holding of a belief is not, in my opinion, sufficient to enliven a right of termination. What cl 21.2(d) clearly provides is a facilitative process where, if the Department believes an Event of Default has occurred and if it chooses to do so (although it is not obliged to do so – hence the use of the facilitative “may”), then the Department may issue a notice in order to set in train a process by which it can satisfy itself one way or the other as to the existence of an Event of Default and as to whether it can be remedied to its satisfaction. Such a process would, for example, permit the Department the opportunity to test further the veracity of its belief without exposing the Department to (say) a claim for wrongful termination of contract were it simply to act immediately on its belief and terminate the contract under cl 21.2(c) or in the exercise of any general common law rights without affording the provider an opportunity to persuade it otherwise. Moreover, here, the Department clearly chose to exercise the power under cl 21.2(c) of the Contract.

42. [297]

    Alternatively, it is submitted that if the Department did not validly terminate under cl 21.2(d), the Contract was validly terminated under cl 21.2(c), noting the Department’s express reliance upon that clause.

43. [298]

    The Department submits that the Termination Notice was validly issued, given (what it perceives to be) the clear presence of Events of Default that continued to exist up to and following the Termination Notice. In summary, as at 25 March 2021, the Department says that those Events were relevantly: (i) MIBT’s failure to assess or rescind the qualifications of students that had been assessed by an unqualified trainer; (ii) MIBT’s failure to maintain adequate records establishing that credit provided for Recognition of Prior Learning (RPL) had been awarded (which included records of students who did not have the required skills to attain the relevant RPL) to substantiate students’ assessment results; (iii) MIBT having been assessed as non-compliant with the standards set for Registered Training Organisations (RTO) by ASQA; and (iv) MIBT failing to engage with students and conduct face-to-face training and quality training during practical sessions.

44. [299]

    It is submitted that, of the four grounds, they constituted relevant Events of Default capable of giving rise to an entitlement to terminate the Contract, whether or not they were present in the Termination Notice in accordance with the principles of Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 (Shepherd) at 377 per Dixon J (as his Honour then was).

45. [300]

    It is submitted that the grounds of termination included within the Notice of Termination were referred to with the necessary clarity required in the Termination Notice.

46. [301]

    The Department says that MIBT in its evidence makes relevant concessions that certain Events of Default remain outstanding, referring to [36] of Mr Lawrence’s affidavit affirmed 30 March 2021 and [14] of Mr Thompson’s affidavit affirmed 17 May 2021.

47. [302]

    The Department thus contends that the Contract was validly terminated on 25 March 2021.

48. [303]

    As already noted, issue 1 is relevant (if at all) only to the question as to any claim on the undertaking as to damages, since MIBT does not now seek any damages for breach of contract.

49. [304]

    For reasons addressed in dealing with the Department’s submissions, I do not accept that the notice of termination was validly issued under cl 21.2(d) (in circumstances where the opportunity to remediate the alleged Events of Default had not been completed) but I consider that there was an extant Event of Default (relating to the adverse regulatory ruling from ASQA) and that this permitted termination under cl 21.2(c) of the Contract. The letter itself says:

50. [305]

    I do not accept the construction proffered by MIBT to the effect that there is no power to terminate under cl 21.2(c) if the process under cl 12.2(d) has been invoked and is not complete; not least because cl 21.2(d) expressly provides that it does not limit the Department’s rights under the preceding sub-clause or at law. In other words, I accept that it would be open to the Department in effect legitimately to change its mind as to the position in relation to an earlier default that had been identified – the fact that at some stage it might have considered it sufficient simply to suspend the position in relation to certain qualifications does not mean it could not later decide that it should terminate for defaults including the earlier Events of Default. While, as adverted to above, there might have been arguments based on a duty of good faith (perhaps an estoppel) arising out of the fact that the cl 21.2(d) process had been commenced, they were not here pursued. Of course, insofar as the more summary procedure for termination was followed, then the Department would be at risk if it terminated for an Event of Default that was not later established to have been extant at the time.

51. [306]

    Insofar as it is suggested that the Department cannot rely on grounds of termination (or Events of Default) not specified in the notice of termination, I do not accept that as a general proposition this is correct. There is a long-standing line of authority that, at common law, a failure to specify the reason for termination will not invalidate the notice of termination, provided that a valid basis for termination existed at the time the party gave notice of termination.

52. [307]

    At common law, an unequivocal election to terminate the contract is essential, but it is not necessary to state the reason for termination with precision (see Becker Group Ltd v Motion Picture Company of Australia [2004] FCA 630 per Sackville J, sitting in the Federal Court as his Honour then was) at [86], his Honour there referring to Shepherd at 377-378 per Dixon J, as his Honour then was; Carr v JA Berriman Pty Ltd (1953) 89 CLR 327; [1953] HCA 31 at 343 and 348 per Fullagar J, with whom Williams, Webb and Kitto JJ agreed; and GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 at [747] per Finn J). See also, in this context, the commentary in Seddon, Cheshire & Fifoot Law of Contract (11th ed, 2017, LexisNexis Butterworths) (Law of Contract) at [21.23] and Carter, Breach of Contract (2nd ed, 1991, Law Book Company) (Breach of Contract) at [1006]. Rather, what is required is that reasonable person in the position of the recipient is “left in no doubt” that the right to terminate has been exercised (see Lord Steyn’s judgment in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 768).

53. [308]

    Accordingly, reliance on an event of default not specified in the notice of termination does not by itself affect the validity of termination (although there may be circumstances in which a party is precluded, say by reference to principles of estoppel, from relying upon a ground of termination not specified in the notice – see, for example, the discussion by Carter in Breach of Contract at [1007]).

54. [309]

    It may also be noted in this context that contractual rights to terminate are not strictly construed by courts; and that regard is given to substance over form (see Torbey Investments Corporated Pty Ltd v Ferrara [2017] NSWCA 9 at [34]-[41] per Basten JA with McColl and Simpson JJA agreeing). Further, it is relevant to have regard to the understanding and expertise of the recipient, in addition to the surrounding circumstances, in determining what would reasonably be understood by a notice of termination (see FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 at [150] per Basten JA, with Beazley JA, as her Excellency then was, agreeing, applying obiter dicta in Eriksson v Whalley [1971] 1 NSWLR 397 at 401 per Collins J).

55. [310]

    For completeness, I note that the exercise a right of termination may be constrained in certain circumstances by an implied duty of good faith and reasonableness (see, for example, the discussion in Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 at [164] per curiam (Burger King); see also Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 at 93 per Kirby P). In Burger King the Court recognised an implied obligation that each party must do what is reasonably necessary to enable the other party to have the benefit of the contract (at [144]). While there is some debate as to the source of any such duty of good faith (whether arising as a matter of construction or as a matter of law as a legal incident of a commercial contract – see Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 at [189] per Giles JA, Sheller and Ipp JJA agreeing), there is no doubt that in appropriate circumstances such a term may be implied if not inconsistent with the express language of the contract or necessary implications therefrom (see Robert McDougall ‘The Implied Duty of Good Faith in Australian Contract Law’ (Speech, 9 March 2006).

56. [311]

    That said, provided that the party electing to terminate acts reasonably in all the circumstances, the duty to act in good faith will ordinarily be satisfied (see Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903 at [37] per Finkelstein J (Garry Rogers Motors)). Professor Carter notes that the requirement of communication of termination does not by itself imply that the promisor is to be given an opportunity to be heard; but that the rationale for giving notice is generally to give the promisor an opportunity to remedy or cure the breach by performing relevant obligations within a specified or reasonable period of time (see Breach of Contract at [1011]). Where the contract contains a termination clause which requires the promisee to give the promisor an opportunity to show cause, it has been said that there is a more onerous requirement of good faith (see Carter and Peden “Good Faith in Australian Contract Law” (2003) 19(2) Journal of Contract Law 2, 169; see also Renard Constructions).

57. [312]

    While a purpose found to be extraneous, capricious or arbitrary is ordinarily sufficient to establish a breach of good faith (see Seddon, Law of Contract at [10.46]; see also Garry Rogers Motors where Finkelstein J held that the duty of good faith had not been breached as the promisee had good commercial reasons for electing to terminate and had given a reasonable length of notice); where there is a show cause requirement, bona fide and proper consideration will be required (see Renard at 271 per Priestley JA).

58. [313]

    Given the uncertain scope and content of the duty of good faith, and the general reluctance shown by Australian courts to treat good faith as a term implied in all contracts (see, for example, Kirby P, as his Honour then was, in Hughes Bros at 93; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 at [25] per Buchanan JA), it seems unlikely that an implied duty of good faith would extend to requiring that there be an opportunity to remedy a breach (at least where there was no such requirement as part of the contractual process of termination).

59. [314]

    In the present case, as noted earlier, no claim for damages for breach of an implied duty of good faith in the exercise of the contractual power to terminate the Contract was pressed. Therefore, it is not necessary to determine the precise scope of any duty of good faith implied into the Contract.

60. [315]

    Accordingly, I find that the Contract was validly terminated by the letter dated 25 March 2021.

61. [316]

    This issue no longer arises as the Department does not assert that it has (or had) an unfettered discretion to reject Training Activity Data (see T 278.38-50).

62. [317]

    For completeness I note that MIBT’s contention in this regard was that the right of the Department to reject Training Activity Data under cl 17(a)(iii) is not absolute, MIBT noting the observation in JD Heydon, Heydon on Contract (2019, Thomson Reuters) at 852 to the effect that “[t]he right accorded to one party to decline to proceed on grounds of unsatisfactoriness is not generally seen … as an absolute or unfettered right, or as having been left in the sole determination of one party” and that it is not unfettered because it depends at least on good faith. I see considerable force in that submission.

63. [318]

    This issue is also not pressed by the Department’s (compare with its outline submissions at [168]-[170]) (see T 30.40-424). The Department does not contend that suspension of the Contract permits the withholding of payments to continue after the Contract has been terminated.

64. [319]

    At the outset, it is relevant to note that an issue arose as to which of the parties bears the onus in respect of these issues.

65. [320]

    The Department maintains that it is for MIBT to establish that it is entitled to payment of Subsidies and Loadings based on the records submitted complying with the terms and conditions of the Contract (having regard to the evidence of the Department’s findings in relation to the Assessment of the submitted Training Activity Data).

66. [321]

    MIBT points to the summary of principles with respect to evidentiary onus by Spigelman CJ in Coshott v Sakic (1998) 44 NSWLR 667 at 670-672. It says that none of the elements of its cause of action has anything to do with the various complaints raised by the Department by way of confession and avoidance; and, therefore, the Department bears the onus of establishing those complaints. It is noted that (at [62] of the statement of claim) it is pleaded that moneys owing under the contract continue to accrue; that the Department’s defence contains a bare denial, and then a positive pleading ([61](b)) that the “amount” is not “owing” or that the Department is entitled to withhold payment. It is said that this amounts to a positive assertion by the Department, although without any identification of the basis for that contention.

67. [322]

    The amended cross-claim seeks declaratory relief to the effect that the Department is entitled to withhold payment of Subsidies and Loadings payable to MIBT, to the extent that there be any to pay, for various periods between 13 July 2020 and 30 June 2021. MIBT says that that prayer 1(c) is directed at the Department’s case that it is entitled to withhold Subsidies and Loadings on the basis that the training does not fall within the definition of “participation” in Subsidised Training in the Contract (see also [45A], [45B] and [63]).

68. [323]

    MIBT says that, through its evidence rather than by pleading, the Department has asserted (by reference to what is effectively an administrative process under cl 17 of the Contract), that it is entitled to withhold payment of Subsidies and Loadings for work done by MIBT. It is noted that the Department has not pleaded those issues. MIBT says that the Department bears the evidentiary onus with respect to each of issues 4-11, being matters essential to its case, and not being matters essential to MIBT’s cause of action.

69. [324]

    Both parties made reference to the discussion of onus in Phipson, Phipson on Evidence (14th ed, 1990, Sweet & Maxwell). At [4-02], the authors note the uncontroversial proposition that “[t]he burden of proof lies upon the party who substantially asserts the affirmative of the issue”. MIBT notes that the authors go on at [4-05] to observe that “[t]he true meaning of the rule is that where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegation rests on him”. Reference is made to what was said by Walsh JA in Currie v Dempsey (1967) 69 SR (NSW) 116; [1967] 2 NSWR 532 at 539, namely that:

70. [325]

    In the present case, the position is perhaps somewhat obscured by the framing of the issues as to whether the Department is entitled to withhold payments rather than whether it is obliged to make payments (although that may be mere semantics).

71. [326]

    In the present case, MIBT alleges that the Contract was invalidly terminated and it clearly bears the onus on that issue. It contends that the Department is obliged to pay the claimed Subsidies and Loadings and it thus bears the onus of establishing that it is entitled under the Contract to those payments. To the extent that the Department raises a positive defence to that claim (by way of raising the set-offs under the cross-claim) then the Department bears the onus of establishing the material facts on which it relies for that positive defence. Where the position is complicated is that the Department has sought in its cross-claim declaratory relief (on which it would bear the onus). However, that declaratory relief relates to an issue now broadly not pressed.

72. [327]

    The fact that the Department has accepted the Training Activity Data does not in one sense assist MIBT since cl 17.4 of the Contract makes clear that acceptance of the data or payment of the Subsidies and Loadings is not an acceptance that MIBT is entitled to those amounts (it is a payment mechanism but no more). However, if the Department’s rejection of that data is raising a positive defence to the claimed amounts then it would bear the onus on that positive defence.

73. [328]

    Therefore, broadly speaking MIBT bears the onus of establishing the facts essential to its claim to be entitled to the Subsidies and Loadings in issue (which it meets by establishing not simply that it uploaded certain Training Activity Data but that, as established by the documents provided in answer to the Department’s requests for clarification, it provided the services underlying the submission of that data); and the Department bears the onus of establishing its entitlement to the off-setting of amounts claimed by it and any positive defence to the amounts claimed by MIBT.

74. [329]

    Turning then to the particular categories in respect of which MIBT claims amounts and/or the Department claims off-setting amounts, they are as follows.

75. [330]

    This issue is dealt with in Ms Nguon’s affidavit at [49]-[52]. Ms Nguon was the relevant officer of the Department who deposed as to the withholding of payment for Training Activity Data under Codes 40 and 70 (see [8]-[9] of her affidavit).

76. [331]

    MIBT says that the Department has not made out its case for withholding payment of these amounts (and, implicitly contends that it is entitled to these amounts) for the following reasons.

77. [332]

    First, MIBT points to Ms Nguon’s cross-examination and complains that, insofar as the decision to withhold payment for that Training Activity Data was made on the basis that there was no evidence that the enrolled students Participated in Subsidised Training, this depended upon (at least) an understanding of the way in which the Contract operated. It is noted that Ms Nguon had not read the relevant clauses going to what comprises “Subsidised Training” (T 180.34-37; 181.17-50, 182.1-25), or the relevant part of the Operating Guidelines (cl 17.5) as to the content or meaning of the phrase Participated in Subsidised Training where that training is delivered online (see at T 185-189).

78. [333]

    As to this, whether Ms Nguon had read or understood the relevant provisions is probably of little relevance – it might be relevant to an allegation of breach of a duty of good faith but the question here is as to the entitlement to those amounts under the Contract as properly construed having regard to the evidence before me.

79. [334]

    Second, that the Contract makes clear that Subsidised Training is not limited to on-site in person attendance by any representative of MIBT (MIBT referring to the definition of Training and Training Package, together with cl 17.5 of the Operating Guidelines). As noted above, I agree.

80. [335]

    The definition of training is:

81. [336]

    Third, that cl 17.5 of the Operating Guidelines makes clear what the requirements are where Subsidised Training is provided via online delivery, and how they are met. It is submitted that the summary evidence provided by MIBT plainly satisfies the requirements of cl 17.5 and the definition of “Participated in Subsidised Training” in the Contract. Again, I agree.

82. [337]

    Fourth, that, in any event, further material for some students was provided to the Department. It is noted that Ms Nguon admitted that that information satisfied the definition (see T 203.50, T 204.1-4). MIBT says that that evidence of Ms Nguon ought to be accepted (perhaps ironically, the Department submits that this particular evidence should not be accepted – see closing submissions at T 293-294). MIBT says that that material plainly could have been sought by the Department if it had wished (since the Department knew about the existence of it at the relevant time). Also, it is said that the existence of that material makes it clear that the summary evidence in the summary documents is sufficient evidence of “Participation in Subsidised Training”. Again, I agree.

83. [338]

    Fifth, that the Department’s case is not established on the evidence that it adduced by way of external reviewers reviewing material which was not properly identified and in circumstances where those external reviewers were not called to explain their decision making (and it is noted that their reviews are not admitted into evidence other than for the fact of the communications). I accept that there is a difficulty with the lack of explanation for the conclusions reached but, in any event, ultimately this is an issue for the Court.

84. [339]

    Finally (despite some observations made during the course of argument as to some of the contents of the questions in the online materials – see T 229.42-48) MIBT says (and I accept) that the quality of the contents of certain of the questions in the training material is not in issue in this proceeding by the pleadings or the Department’s evidence. It is said that that content is regulated by ASQA and there is no relevant complaint about the contents of the materials in this proceeding.

85. [340]

    As to the sum of $1.4 million rejected by the Department concerning “withdrawn outcomes”, the Department says that this is on the basis that the evidence sought by the Department from MIBT does not demonstrate evidence that “[t]he Enrolled Student has Participated in Subsidised Training for the Unit of Competency …” within the meaning of cl 14.3 of the Contract.

86. [341]

    Reference is made to the definition of Participated in Subsidised Training and to the record keeping obligations for the purposes of cl 17 of the Operating Guidelines. In particular, it is noted that the provider is required to create, collect and maintain records for all Subsidised Training and for all enrolled students, as evidence of the delivery of Subsidised Training, including evidence of Participation in Subsidised Training or as otherwise required by the Department. This record keeping practice applies to all platforms of presentation of the relevant training. The reference in cl 17.5 of the Operating Guidelines to online delivery is said to be merely an additional requirement to that provider, rather than a separate “carveout”. It is said that, if the latter were to be so, one would expect clear language delineating a separate requirement for online delivery in relation to cl 17.2 of the Operating Guidelines.

87. [342]

    The Department notes that there are two documents presented by MIBT as evidence in support of the withdrawn outcomes under the Contract, namely a summary of evidence alleged to be the basis of the submission of Training Activity Data and a further document containing a full suite of material on the relevant student. It is submitted that a close examination of both documents demonstrates that they do not evidence that the relevant student Participated in Subsidised Training, within the meaning of the Contract (as discussed above).

88. [343]

    The Department says that the summary reports reviewed by Mr Newbery represent a statistically significant sample of 347 of the 3538 such reports provided to Mr Newbery (referring to this as the Withdrawn TAD Sample). Accordingly, it is submitted that this amount is representative of the documents received by Mr Newbery. The Department says that, of these summary documents, there are task summary tables that contain the following: the task, date/time commenced, date/time completed and the task outcome. According to Mr Newbery’s review, in some records “[o]f the 347 records reviewed in the Withdrawn TAD Sample, only three (3) records had no Task Summary tasks entered”.

89. [344]

    Based on a review of the summary documents the Department submits that they do not provide valid or sufficient evidence of the trainer reviewing the work of the student or providing feedback for the student to respond to any other form of communication between the trainer and the student. It is said that any reliance upon cl 17.5 of the Operating Guidelines does not remedy this deficiency, since this clause does not limit the scope of what is required by MIBT for the purposes of record keeping that it consistent with the definition of Participated in Subsidised Training.

90. [345]

    The Department says that it is not the role of the employer or supervisor to deliver training for the purposes of the Contract; that MIBT is required to be training the student as it is the one that is receiving the subsidy under the Contract. It is said that the requirement within cl 1.8 of the Standards of valid evidence of student interaction and Participation in Subsidised Training requires monitoring of the student, observations, and feedback by the trainer. The Department submits that, (based on the Newbery Report, and separate reviews of random samples from the Withdrawn TAD Sample), the summary documents do not record Participation in Subsidised Training. The critical element that the Department says appears to be lacking is evidence of interaction between the student and the trainer. It is said that such a position does not appear unlikely given the concession of Mr Lawrence that MIBT’s model is akin to “gap training”, which places a higher significance on the employer to train the student than the trainer.

91. [346]

    As to the more detailed document included in Mr Lawrence’s affidavit of 22 October 2021, (which is asserted to be a compliant document for the purposes of the Contract definition of “Participated in Subsidised Training”), the Department submits that these documents are not necessarily representative of what Mr Lawrence allegedly has in MIBT’s possession. The Department refers to the following entries in that material.

92. [347]

    First, as to the student identified in Ex of PJL-9 to the affidavit of Mr Lawrence sworn 22 October 2021 (marked Ex G at the hearing) at p 61, the Department says that, for the purposes of completed LMS tasks, section 4: Dismantle Scaffolding, there is no evidence in the communications log at of these matters; there is no evidence in the communications log of the practical task referred to; with respect to the workplace task entries, there is an absence of feedback in the communications log for various tasks, such as alterations, additions, and renovation.

93. [348]

    Second, as to the student identified in Ex G at p 187, it is said that there is an absence of any feedback in the communications log for the tasks plan and repair; inspect, repair and alter scaffold; and dismantle scaffolding.

94. [349]

    Third, as to the student identified in Ex G at p 344, it is said that for the course Plan and Prepare there is an absence of feedback in the communications logs at page. Further, with respect to the workplace task entries, there is an absence of feedback in the communications log.

95. [350]

    The Department accepts that there is at least one student in the documents provided by MIBT that indicates that he has received the delivery of training, namely the student identified in Ex G at p 558 of the communication log but says that, on closer review, that the person writing the message (Marcin Antosz) is not a trainer.

96. [351]

    It is submitted that these documents do not provide sufficient evidence of trainer and student interaction in the delivery of training, namely Participation in Subsidised Training. The Department notes that during cross-examination, Mr Lawrence conceded that these more comprehensive document would not ordinarily contain feedback from trainers (which the Department says further supports its argument) (check transcript at T 123.21-31).

97. [352]

    I have referred above to the definition of Participation in Subsidised Training and broadly I accept the submissions of MIBT on this issue. It is clear from the material to which I was taken in the larger documents that there was evidence of participation in Subsidised Training (and evidence kept of it) as a general matter. The fact that the Department now considers the quality or content of the training or record keeping is not to the point.

98. [353]

    I find that MIBT is entitled to the amounts claimed under this item.

99. [354]

    This is dealt with in Ms Nguon’s affidavit at [48](a). Ms Nguon says that the Training Activity Data was rejected on the basis that MIBT failed to finalise the records in accordance with the eReporting Guide.

100. [355]

     MIBT says that the Department has not adduced evidence to discharge the onus it bears with respect to this issue. It is said that the cross-examination of Mr Lawrence (at T 105-107 – especially at T 107.4-10, along with T 108 and T 110) is an answer to the Department’s issue in relation to this data. Relevantly, MIBT complains that Ms Nguon has not identified how this figure is calculated (and this complaint has some force having regard to Ms Nguon’s evidence – see T 210.9-44, T 211.5-44).

101. [356]

     The Department has rejected Training Activity Data with a commensurate value overall of $808,757.57 (for reasons other than the position considered above in issue 4 that the evidence does not support the UoC Outcome claimed) namely: for failure to submit Training Activity Data in accordance with the Contract, specifically the eReporting Guide; MIBT’s responses to requests for clarification by the Department that it is said indicated that the Training Activity Data submitted by MIBT was incorrect; and MIBT’s failure to comply with directions to provide clarification or evidence. The first of those (TNC rejections) is raised by issue 5.

102. [357]

     The Department notes that MIBT must submit Training Activity Data in accordance with the process specified by the Department; and that the process is that if the Training Activity Data is not correctly submitted, it will be rejected. The Department points to cl 18 of the Operating Guidelines which provides that when uploading Training Activity Data to the Department, MIBT must comply with the technical specifications in the eReporting Guide. These specifications include reporting a “TNC” (or Training Not Complete) code in the raw data files which comprise the Training Activity Data.

103. [358]

     The Department says that the circumstances in which Training Activity Data was rejected because of a failure to report a “TNC” code are as recorded in Tab 5 of the Exhibit to Ms Nguon’s affidavit (marked as Ex 5 in the hearing).

104. [359]

     The Department points to Mr Lawrence’s explanation of this process during his cross-examination (at T 109.36-45):

105. [360]

     The Department says that this evidence demonstrates that it was a valid exercise of the Department’s discretion pursuant to cl 17.4(a) of the Contract to reject data submitted were there was a failure to report TNC data; and that it was expected that the Department would reject this Training Activity Data so that MIBT could subsequently re-upload it.

106. [361]

     I have some difficulty here, in that it is not clear whether this data was re-uploaded. If it was, then it would be rejected. However, in the absence of anything to show that it was re-uploaded, the position here is simply that there was a rejection of data for failure to report a code; and it is not clear from Ms Nguon’s evidence how this figure was calculated.

107. [362]

     In the absence of evidence as to the value of this “training not complete” data, and the method by which that value was arrived at, I cannot determine this issue in favour of the Department. I find that the Department’s claims as to issue 5 are not made out.

108. [363]

     This issue is dealt with in Ms Nguon’s affidavit at [48](b), where an example is given of a case where it is said that dates were incorrect as to when the student had actually commenced training in a different activity period.

109. [364]

     MIBT points out that the one example referenced by Ms Nguon in her affidavit is the student K. MIBT says that not only does the spreadsheet prepared by Ms Nguon not make good the Department’s claim, but that Mr Lawrence’s cross-examination answered this complaint (see T 112.1-50, 113.1-20).

110. [365]

     The Department submitted that it is entitled to withhold the sum in question. The Department says that, having rejected the data in question, were there no errors with that data one would expect that it would have been re-uploaded and subsequently approved, and that, in the absence of any evidence that such data was re-uploaded, the inference can be drawn that the Department was entitled to reject that data, in accordance with the Contract.

111. [366]

     I do not consider that the Department has here satisfied its onus with respect to issue 6. The Department’s submissions require some degree of reverse engineering. I accept MIBT’s submissions that this complaint is not made good on the evidence, and has been satisfactorily answered by MIBT.

112. [367]

     This is dealt with in Ms Nguon’s affidavit at [48](c)(i). I address it together with issue 8 below. It relates to an automatic rejection for failure to respond to request for clarification in time. Further, the Department complains that, while MIBT provided “evidence” it failed to provide “all evidence” of participation and instead provided summaries of the evidence (see T 73. 25-45). (I interpose here to note that this appears to be another example of MIBT and the Department being at cross-purposes, insofar as the Department failed to specify precisely what evidence it sought, and MIBT sought to provide the most accessible information to the Department, cognisant of the volume of that evidence.)

113. [368]

     This is dealt with in Ms Nguon’s affidavit at [48](c)(ii). It relates to failure to supply evidence within seven days.

114. [369]

     MIBT says that the Department’s contention appears to be that the Department could impose a seven day time limit. MIBT says that there is no contractual support for that.

115. [370]

     As to the rejection for errors in the Training Activity Data, the Department says that it gave MIBT various directions to provide clarification in respect to the Training Activity Data it had submitted (see the requests and MIBT’s responses are recorded in Tab 5 of the Exhibit to Ms Nguon’s affidavit, being Ex 5 and pages 4-52 Ex G).

116. [371]

     The Department points out that in several instances, MIBT responded to the Department’s request for clarification and those responses requested that the Department rejected the Training Activity Data so it could be resubmitted by MIBT, noting that this was accepted by Mr Lawrence in cross-examination (see above). It is said that there can be no complaint by MIBT that the Department had failed properly to exercise its discretion to reject Training Activity Data in such circumstances, given that the Department was merely doing as MIBT had requested.

117. [372]

     In other instances, the Department says it exercised its discretion to reject the Training Activity Data submitted by MIBT because MIBT’s responses to the requests for clarification indicated errors with the Training Activity Data submitted. It is noted that, under cl 18.4 of the Operating Guidelines, the start and end dates of a UoC must be accurate. On this basis, it is said that the Department was entitled to reject the Training Activity Data.

118. [373]

     The Department contends that MIBT’s own evidence establishes that the relevant Training Activity Data did in fact contain errors which meant that the Department was entitled to reject it.

119. [374]

     As to the rejection based on failure to respond to requests within a specified timeframe, the Department points to cl 13.2(b) of the Contract which provides the Department with a right to direct MIBT to supply any information in relation to the Contact (including Subsidised Training) within a stipulated timeframe. It is said that this empowers the Department to impose a timeframe in which a response to a request for clarification or evidence under sub cll 17.4(a)(i)-(ii).

120. [375]

     The Department says that, based on the Department’s review of the Training Activity Data submitted by MIBT, the Department has issued directions to MIBT to provide clarification or evidence. The Department says it requested that clarification or evidence because it formed a view (based on its review of that TAD with the assistance of the Department’s systems) that the Training Activity Data may not have been correctly submitted. Those directions specified that, if MIBT failed to provide a response within a stipulated timeframe (between seven and 14 days), the Training Activity Data referable to those requests would be rejected.

121. [376]

     Tab 6 of the exhibit to Ms Nguon’s affidavit (Ex 5) sets out the Department’s record of the requests for clarification and evidence issued to MIBT and the dates upon which MIBT responded. The Department notes that this spreadsheet also records requests for clarification and evidence made to MIBT in relation to specific students and UoCs which the Department’s records indicate went unanswered.

122. [377]

     The Department says that Mr Lawrence’s global assertions that MIBT has complied with all the Department’s requests is not borne out on the evidence. Tab 6 is said to demonstrate that there were several instances in which no response was received to the Department’s directions (something said to be accepted in cross-examination). The Department says that MIBT bears the onus in establishing that a response to a request for clarification or evidence has been provided and that MIBT has not provided any evidence of it responding to the requests identified by the Department. It is said that MIBT’s evidence does not satisfy that onus.

123. [378]

     I am of the opinion that issues 7 and 8 are not made out, and the Department is not entitled to set off the two sums ($26,887 and $57,076) against the amount it owes MIBT. It was not open to the Department arbitrarily to set an end time for the uploading of Training Activity Data to its “Portal” and then to deny any claims supported by data that might otherwise have been available (and hence to refuse payment on that basis). This is further suggestive of the Department and MIBT being at cross-purposes (and that this could have been rectified by the Department providing greater clarity in the terms of the Contract, or through effective communication between the parties).

124. [379]

     This issue is dealt with in Ms Nguon’s affidavit at [55]-[72].

125. [380]

     MIBT says that the Department has not established its case in relation to overpayments (referring to T 221-222) but that if any aspect of the case is accepted, it is only $82,790 and not $230,833 (referring to T 221.28-35; 222.14-22).

126. [381]

     As to the duplicate CID issue, the Department has identified circumstances in which MIBT has enrolled the same student in the same course pursuant to multiple CIDs.

127. [382]

     For each CID, MIBT is entitled to claim a Subsidy and Loading calculated in accordance with cll 17.1 and 17.2 of the Contract. Ms Nguon has prepared a spreadsheet identifying the CIDs referable to the Duplicate CIDs issue (at tab 13 of Ex 5) and has listed that amount under the heading “Qualification Price incl. Loadings”. The Department says that there was no challenge to that evidence concerning each student attending the same course with two CIDs; and that, despite the price qualification list not being in evidence, there was no challenge to Ms Nguon that the numbers the subject of that analysis were wrong following her review of that material.

128. [383]

     It is noted that MIBT is paid Subsidies and Loadings upon reporting Training Activity Data with the sufficient number UoC codes listed in the table in clause 17.3 of the Contract. It is said that having two CIDs in respect of the same student undertaking the same course can result in overpayment.

129. [384]

     The Department says that this is best demonstrated by the following example from tab 13 of Ex 5, referring a student identified by the Department as having two CIDs: C160537586 (First CID) and C181675180 (Second CID). The qualification price for the First CID was $13,072; for the Second CID it was $5,874.00. The course that the student was studying has 30 UoCs. It is accepted that because the course is an apprenticeship (see the “Program” column), MIBT is entitled to seven milestone payments under the Contract. In the First CID, the student attained a pass (outcome code 20) in 18 UoCs, a withdrawn (outcome code 40) in eight UoCs and has not started (outcome code 85) four UoCs. Because MIBT reported that the student has either attained a pass or a withdrawn in at least 83% of the UoCs referable to the CID, the Department says that MIBT is entitled to claim progress payments in the table at cl 17.3 up to “Apprenticeships Progress 5”. The Department says that this means that MIBT was entitled to (and was paid) all save for the last payment milestone payable for this CID. In the Second CID, the student has attained 18 UoCs as a credit transfer (60) and 12 UoCs as a pass. Considered separately from the first CID, MIBT was entitled to all seven milestones payable for this CID. The Department says that this has resulted in an overpayment in the amount of $3,782.48 (assuming that the withdrawn outcomes were validly claimed); i.e., that MIBT has in effect being able to claim and be paid twice for the eight withdrawn UoCs when MIBT has claimed Subsidies and Loadings once the students are assessed as a Pass.

130. [385]

     The Department says that the explanation provided by MIBT (that the Department was aware of the fact MIBT had multiple CIDs in respect of the same students studying the same course) does not change the conclusion that MIBT must repay those overpayments. The Department points out that the Contract provides that any funds incorrectly received by MIBT must be repaid to the Department.

131. [386]

     The Department says that in Ms Nguon’s analysis from the information contained on the Department’s systems, Ms Nguon has adopted two different methodologies: the first assumes that the Department’s findings in relation to the withdrawn outcomes reported by MIBT (if reviewed) would demonstrate that the withdrawn outcomes claimed by MIBT would not be supported by evidence of Participation in Subsidised Training; the second on the assumption that the withdrawn outcomes are accepted.

132. [387]

     On the first analysis, it is said that MIBT is required to repay the Subsidises and Loadings received by it in relation to the withdrawn outcomes listed in the spreadsheet at tab 13 of Ex 5 to a value calculated at $230,833.24. On the second analysis, it is said that the minimum value of the overpayment (if withdrawn outcomes are accepted) is $82,789.20 (the delta between the qualification price of the first CID in respect of the relevant student and course and the total amount paid to MIBT).

133. [388]

     There is much considerable logic to the Department’s submissions on this issue (which rests on the premise that there is a cap on the amount that can be awarded by way of Subsidies and Loadings for each particular course or qualification). The difficulty is that there is no evidence of the cap for each course.

134. [389]

     In the circumstances, where I have accepted MIBT’s submissions on the withdrawn outcomes (issue 4) and where there has been no challenge to the premise of the cap for the respective courses (or as to the calculations contained in Ms Nguon’s spreadsheet) I consider it appropriate to adopt the second of the analyses (and hence find that the overpayment in respect of duplicate CIDs is $82,789.20 and is payable to the Department) to be offset against the amounts payable to MIBT.

135. [390]

     This issue is dealt with in Ms Nguon’s affidavit at [73]-[78]. It relates to the Department’s calculation of payments made where the payment milestone was not reached.

136. [391]

     MIBT says that the Department has not established its case in relation to the rollback of overpayments (referring to T 224.1-17, being Ms Nguon’s response to the proposition put to her in cross-examination that she had not identified any basis for the Department’s position as to the rollback, to which she responded “Well it’s a massive database. Unless you wanted to see the database, I can only provide you with a commitment ID, the outcomes the provider would have and look at”.).

137. [392]

     As to rollback of overpayments, It is noted that in Ms Nguon’s evidence she outlines a process whereby she has accessed the Department’s records to determine payments to MIBT that it should not have received based on payment milestones not being reached. Ms Nguon has identified a practice of the Department to run a report concerning the overpayment of subsidies. That process is outlined in Ms Nguon’s evidence, which it is said remained unchallenged during the proceedings.

138. [393]

     Based on Ms Nguon’s evidence and Mr Lawrence’s failure to present any evidence to rebut the amount of rollback overpayments, it is submitted that this evidence from the Department would be accepted.

139. [394]

     In the absence of any substantive challenge on this issue, I accept the calculations carried out by Ms Nguon and find that the amount repayable to the Department for rollback of overpayments is $174,190.

140. [395]

     This issue is addressed in Ms Nguon’s affidavit at [86]-[89]. There is no issue as to the obligation to repay amounts overpaid by reference to the outcome of the investigations in relation to Operation Fish – just a difference as to the quantum. MIBT contends that the quantum of overpayment is $41,752.16. The Department, on the other hand, has assessed the quantum of this overpayment at $106,994.30.

141. [396]

     MIBT submits that the Department has not established its case in relation to the quantum claimed and refers to the evidence that Ms Nguon “doubled up” the figures in various iterations of the spreadsheet provided to her to arrive at the calculation that she did (at T 125.40-50, T 126.1).

142. [397]

     Ms Nguon’s evidence is that she has calculated the value of the overpayment to MIBT by reviewing the Department’s systems to ascertain the value of Subsidies and Loadings actually paid by the Department to MIBT.

143. [398]

     The Department says that, as explained by Ms Nguon during cross-examination, these figures have been derived by reference to the Department’s databases (which are not readily reducible to documentary form). Mr Lawrence contends that the information to support his table is available on MIBT’s LMS. It is said that there is no evidence to the effect that Mr Lawrence would have any difficulty in providing the source documents from which his table is derived. The Department says that an inference can be drawn that such documents would be readily available, noting: the record keeping obligations imposed on MIBT under the Contract, including in respect of the Subsidised Training provided by it; and the vast quantity of documents from MIBT’s LMS which have been exhibited to affidavits filed on behalf of MIBT in these proceedings.

144. [399]

     The Department accepts that the evidence before the Court on this issue is less than satisfactory but it maintains that the Court must do the best it can to quantify the loss suffered by the Department based on the documents to which the Department has access to given MIBT’s concession that an overpayment has occurred. I have certainly reviewed those documents to which I have been taken in the course of submissions. However, for obvious reasons I am unable to review documents stored on the Department’s systems (and to which Ms Nguon had reference during the course of her cross-examination).

145. [400]

     The Department submits that, given that its assessment of the overpayment is referable to the Department’s records of the amounts actually paid to MIBT in respect of the students MIBT has identified as being affected, the Department’s calculation of the figure of $106,994.30 ought be preferred.

146. [401]

     The Department’s contention (see from [61] of the Department’s cross-claim), relevantly, is that MIBT breached the Contract by, inter alia, the Overpayments pleaded at [22]-[26] of the cross-claim (those being the Overpayments identified by the Department as due to Operation Fish). The Department contends that by virtue of MIBT’s breach of contract it has caused the Department loss and damage, that relevantly being particularised as the Overpayments pleaded in the abovementioned paragraphs (see [62]).

147. [402]

     It was not wholly clear whether the alleged breach (“by” the Overpayments) is contended to be the receipt, per se, of moneys to which the Department says MIBT was not entitled or the failure by MIBT to pay amounts owing pursuant to the Contract by reference to those Overpayments (see cll 23 and 38.6 of the 2018 contract or cll 22 and 36 of the 2019 version of the contract). In either case, absent some consequential loss referable to the loss of use of the money in the interim (of which there was no evidence) it is hard to see what loss the Department has sustained other than the moneys themselves (and it would have its claim for interest on those moneys); and it is for the Department to quantify that loss. If the complaint is as to the accuracy of the information supplied (or compliance with record keeping requirements in general – for example, MIBT’s failure to provide or confirm all students involved in or having caused the Overpayments; see [26](b)) then again it is hard to see what loss has been sustained other than the moneys that were paid out and to which MIBT was not entitled (other than perhaps its exposure to the difficulty of calculating those amounts but on the evidence before me I cannot quantify that by reference to any particular monetary amount nor was it suggested how that might be done). If what is suggested is some kind of loss of opportunity claim (say, loss of the ability to establish the amount of the Overpayments by reference to inadequacy of records or the like) of the kind in which observations as to the need to do one’s best to quantify loss are commonly made (see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54 at 83 per Mason CJ and Dawson; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79 at 411-412 per Dixon J (as his Honour then was) and Fullagar J), then all that can be said is that this is not how the claim in the cross-claim is pleaded.

148. [403]

     Thus, in essence, and having regard to the fact that there is no dispute that the Department is entitled to recover the Overpayments, the only relevant issue is the quantification of those amounts. I accept that the assessment of loss must be done as best as can be done on the material before the Court. However, the difficulty lies in the fact that I cannot assess those of the Department’s records that are not in evidence. I am left in the position that I cannot be satisfied that the loss should be assessed at $106,994.30; and therefore the amount payable by MIBT to the Department under this heading will be the amount conceded by MIBT to be payable (i.e., $41,752.16). (The difference in the scheme of things is not great – $65,242.14.)

149. [404]

     There is no dispute as to this amount. MIBT has conceded that the Department is entitled to repayment of $413,405.67 in respect of the COVID-19 payment continuity strategy.

Quantum

1. [405]

   Accordingly, the above findings result in the following amounts being payable to MIBT: $1,446,458.40 (the Withdrawn Outcomes Training Activity Data); $131,230.34 (TNC data); $593,562.72 (rejection for failure to respond to requests for clarification or rejection of reasons); $83,964.64 (rejection for failure to provide evidence following directions from Department), $466,024.88 (accepted Training Activity Data), $61,996.56 (further accepted Training Activity Data), totalling $2,783,237.54; and the following amounts being payable to the Department: $413,405.67 (COVID-19 payment continuity strategy sum); $82,790 (duplicate CID overpayment); $174,190 (rollback of payable outcomes); $41,752.16 (Operation Fish overpayments), totalling $712,137.83. Setting those amounts off against each other, the amount payable to MIBT is $2,071,099.71.

2. [406]

   It is not necessary to make any findings or orders in relation to the loss allegedly suffered loss due to the Department’s alleged breach of cl 17 and the alleged implied terms of good faith and cooperation in circumstances where the claim now rests on the proposition that these amounts are recoverable as being due under the Contract.

3. [407]

   I do not consider that the declaratory relief sought by the Department has any utility and therefore will not grant that relief.

Orders Determination

1. [408]

   For the above reasons I make the following orders:

   1. (1)

      Order that the defendant pay the plaintiff the amount of $2,071,099.71.

   2. (2)

      Subject to any submissions on costs, order that the defendant pay the plaintiff’s costs.