NSW Court of Appeal wades into meaning of section 83C
In Christian Community Ministries Ltd v Minister for Education and Early Learning [2024], a recent decision of the NSW Court of Appeal, we get further guidance in relation to the operation and construction of the not-for-profit requirements in section 83C of the Education Act 1990 (NSW) and the power of the Minister to recover funds from a school that has been declared to be ‘non-compliant’ in accordance with section 83E of the Act.
The NSW Court of Appeal ultimately upheld the decision of Basten AJ (the primary judge in the NSW Supreme Court) in Christian Community Ministries Ltd v Minister for Education and Early Learning [2023]. We wrote about the relevant takeaways from that case for NSW schools in a previous edition of Education Law Notes that you can read here.
This appeal related to the Minister’s decision (on 8 December 2021) to require Christian Community Ministries Ltd (‘CCM’) to repay the NSW Government $3,856,286.36, being funding paid to The Lakes Christian College from 1 January 2017 to 4 May 2021 while it was operating for profit. This decision came some time after the College was declared by the Minister to be ‘non-compliant’ on 10 May 2021 and a number of conditions had been imposed on the College.
In this case, CCM (the Appellant) did not challenge the primary judge’s findings in relation to the College operating for profit, or having been a non-compliant school, during past periods. What was challenged was the primary judge’s construction of section 83E, section 83F and section 83J, which had empowered the Minister to determine to recover the past funding paid to CCM.
On appeal, the issues were:
(i) whether the primary judge erred in holding that the College could have the status of a “non-compliant school” for the purpose of s 83E(3) of the Act prior to the Minister forming the state of satisfaction required by that subsection;
(ii) further, and in the alternative, whether the primary judge erred in holding that s 83F(1) of the Act permitted the Minister to declare that the School was, or had been, a non-compliant school with respect to periods prior to the Minister forming the requisite state of satisfaction under ss 83E(2) or (3); and
(iii) whether the primary judge erred in holding that s 83J(1) of the Act permitted the Minister to recover financial assistance provided to the College for any period prior to 1 May 2021 (when the non-compliance declaration was made).
CCM’s primary argument in the appeal was that the Minister’s power of recovery under section 83J of the Act was confined by section 83C. CCM contended that, where the Minister is satisfied of either of the matters specified in subsections 83C(4)(a) or (b) (that is, the relevant contravening conduct is either ‘of such a minor nature so as not to justify termination of financial assistance’ or ‘more appropriate action can be taken under section 83E’), this creates an election on the Minister’s part as to how to treat past for profit activity (which then precludes recovery of funding under section 83J).
CCM argued that, as the Minister had already imposed conditions on the College, recovery of funding under section 83J was not available because the Minister had elected to proceed under section 83E. Unfortunately for CCM and the College, the Court of Appeal held that a decision under section 83J of the Act is not confined by section 83C in regard to the recovery of funds for past for profit activities of a school.
Section 83C enables the Minister to continue to provide funding where the minor nature of contravening conduct by a school does not justify the termination of funding or where there is more appropriate action to be taken. Sections 83E and 83J were held to relate to different matters (being future and past funding, respectively). Thus, the decision of the primary judge was ultimately upheld (meaning that CCM is still required to repay the funding as per the decision of the Minister on 8 December 2021), and the appeal was dismissed (with costs).
Therefore, it is now very clear that the Minister is not precluded from recovering financial assistance paid to a non-government school in NSW during periods where the school has been declared to be ‘non-compliant’, even in circumstances where the Minister has taken action under section 83E, by imposing conditions on the school.
As a breach of section 83C can potentially jeopardise the provision of both NSW state government and Australian government funding, we expect this decision, along with the review of 83C, to be of great interest to the NSW education sector.
We regularly advise independent schools in relation to the operation of section 83C and assist with structuring transactions to comply with the not-for-profit requirements. Please contact David Ford or Stephanie McLuckie if you require any assistance in this area in relation to your school.