This guidance note discusses the factors that are considered by the Administrative Appeals Tribunal (AAT) when making orders under s 41(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act), to stay implementation of decisions. In particular, how the Tribunal balances these factors when dealing with decisions to cancel, suspend or refuse to renew registrations and licenses.

BY KAI SINOR

 

Details of the legislation and resources cited in this article are available in the full text guidance note here. Refer to our guidance Asking the AAT to stay or alter a regulatory decisionfor more general information on stay orders and how they are obtained.

What is a stay order?

Subsection 41(2) of the AAT Act allows the Tribunal to make orders to “stay” or “affect” the implementation of a decision that is under review.  A stay order preserves the position of the affected person until the review is completed.  In a regulatory context, these orders are appropriate when implementation of the decision puts the business at risk of insolvency.

Stay order considerations

The central question for the Tribunal is whether the order is necessary to secure the effectiveness of the review.  The test for making a stay order is whether it is “desirable to do so after taking into account the interests of any persons who may be affected by the review”.

When assessing an application for a stay order, the AAT will consider:

  • whether the hearing on the decision under review, if successful, would be rendered pointless if the stay is not granted.
  • prospects of success or merits of the application for review;
  • consequences for the applicant if the stay is refused (i.e. hardship);
  • whether it is in the public interest to grant the stay;
  • functions and responsibilities of the statutory decision maker, nature and purpose of the reviewable decision, and the public interest in relation to it.
  • The effect that the decision under review will have on the individual (person or business) is a principal factor in deciding whether to stay a decision.  The context for regulatory decisions necessarily requires the Tribunal to balance the hardship to the affected individual against the danger to the public if the applicant continues delivering services (that the decision affects) to the public.  Other factors and circumstances of the case must also be considered, including the “interests of persons who may be affected”.

The factors discussed in this article are not a “check list” and should not be regarded as a comprehensive list of all relevant matters.  What is relevant in a particular case will depend on the circumstance of each case and the legislation under which the original decision made.

Necessary for securing effectiveness of the review

The purpose of a stay order is to preserve the status quo so that the so that the rights affected by the decision under review can eventually be reinstated (if that is the ultimate outcome of the AAT’s review). Where the applicant is genuinely likely to become insolvent if the stay is not granted, the review will be rendered pointless.  In these circumstances, a stay order may be necessary to “secure the effectiveness” of the review.  This weighs in favour of granting a stay order.

As the purpose of a stay order is to preserve the status quo, the applicant needs to demonstrate that the order will restore the position as it stood before the decision. If the applicant’s position cannot be restored, the order is unlikely to be necessary to secure the effectiveness of the proceedings.

Prospects of success

When assessing prospects of success, it is not the role of the Tribunal to conduct a “mini trial” of evidence and issues to be raised at the final hearing of the decision under review.  The task of the Tribunal is to consider whether there exists facts and circumstances which would provide some basis for success. The prospects of success must be more than “hopeless”. The Tribunal accepts the prospects of success are favourable where:

  • The applicant satisfies the Tribunal that there are factual and legal arguments that, if accepted, may result in a final decision that registration should not be cancelled.
  • There is a “serious question” as to the decision-maker’s interpretation of the provision purported to have been breached.
  • The alleged breaches relate to a lack of clarity or detail in documentation that is required to conform with a regulatory standard and there is material that demonstrates a significant difference in the interpretation of the regulatory standards and what is required to comply.
  • There is a “genuine and substantial dispute” as to the degree of the applicant’s non-compliance at the time of the regulator’s findings and the degree of non-compliance at the time of the stay order hearing.

Remedial actions

The Tribunal will evaluate the prospects of success at the time of trial based on the provider’s capacity to take the necessary remedial actions.  In doing so, the Tribunal will take into account the nature and extent of the alleged breaches and the steps undertaken to address those issues.  Steps to engage consultants and appoint persons to compliance and oversight roles are relevant, however merely engaging a consultant is itself insufficient without evidence of what is planned to address the problems in the business.

Hardship

Hardship to the applicant is a significant factor, particularly where the effectiveness of the review is consequently at risk (i.e. where financial hardship risks causing insolvency).  Hardship is balanced against other factors, but the Tribunal places particular emphasis on the public interest. Note that if a person suffers a loss as a result of a decision, there is pressure to bring the matter to hearing quickly – this increases pressure to prepare and consider the case as quickly possible.  A stay order removes this pressure, so if there is hardship to the applicant and the public is not going to be adversely affected, the case for a stay order is strong.

Financial hardship is a legitimate concern, but evidence that is speculative and dependent on questionable and uncertain bases is unlikely to persuade the Tribunal that the orders are necessary to secure the effectiveness of the review. When assessing hardship, the Tribunal has observed the following:

  • Speculations and bare assertions about the likely impact on the business are not enough.
  • Arguments about the immediate financial impact of refusing to grant a stay are insufficient without evidence to satisfy the Tribunal that the business will become insolvent.
  • Evidence must demonstrate how implementation of the decision will cause insolvency.  If adverse affects of the decision will still occur even if the stay is refused, the order may not be necessary or “desirable”.
  • An applicant may have difficulty demonstrating that their reputation was damaged to such a degree prior to hearing that it could not “effectively recover commercially”.

Other factors influencing the assessment of hardship

  • Whether the applicant’s financial position was brought about by its own actions.
  • Whether the evidentiary material gives the Tribunal “any certainty” about what the applicants reserves/liquid assets are or what the legal costs required to progress the review proceedings would be.
  • Income that is available to the applicant from delivery of unregulated or unsubsidised services to other clients (to whom business can deliver services to without registration, license or authority etc.).
  • The applicant’s capacity to engage consultants to remedy compliance problems may indicate the financial hardship is not so severe that the order is necessary to secure the effectiveness of the review.

Interests of persons who may be affected

Before granting a stay order, the Tribunal must consider the “interests of any persons who may be affected by the review” and how competing interests are resolved.  Persons with an interest affected by decisions to cancel, suspend or refuse to renew a registration or license is taken to include:

  • clients of service providers;
  • contractors and employees; and
  • the public.

Public interest

Hardship to the person affected by the decision is weighed against the danger to the public if the applicant is allowed to carry out the regulated activities.  The integrity of the regulatory scheme, the role of the regulator and the protection of public revenues are factors taken into account.

How the Tribunal balances the interest of the regulatee and the public will depend on the circumstances of the case. Where the alleged breach occurred previously and action was not taken by the regulator, this may indicate to the Tribunal that there is no immediate danger to the public in staying the decision.

In Transcon Holding Pty Ltd and Aged Care Quality and Safety Commissioner (Transcon) the Tribunal emphasised that there is a substantial public interest in ensuring that vulnerable persons are not exposed to the risks that follow from receiving care of non-compliant providers.

Clients and staff

The position of clients receiving regulated services who may be affected is an important consideration. The provision of services to people in remote communities where it is difficult to source alternative services weighs in favour of a stay.  The impact on the incomes of staff is a relevant consideration. The Tribunal will also take into account whether staff employed have any specialised training that increases their “reasonable prospects” of finding alternative employment. The approach taken in Transcon however, suggests that the interests of clients and staff are given less weight where there are breaches of standards for quality and safety to persons that are vulnerable.  In the case of staff, this is because these statutory schemes are directed at ensuring health, safety and well-being; they are not directed at ensuring the ongoing employment for those engaged in the provision of that care.

For more information, contact Michael Pagsanjan (info@mpslaw.com.au).