The consumer watchdog has won court approval to continue its action against a defunct vocational education provider accused of misleading vulnerable members of the community into signing up for appropriate courses.
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The Federal Court on Friday decided to permit the Australian Competition and Consumer Commission to pursue the Phoenix Institute for penalties despite it not technically being a creditor to the parent of the company, Australian Careers Network, which collapsed in 2015.
The ruling is important as it stops companies trying to avoid prosecution by regulators by placing themselves into administration and then being shortly after resurrected through a deed of company arrangement.
"If the allegations made by the ACCC are established, the respondents sought to procure a very substantial sum of up to $360 million from public revenue through misleading, deceptive and unconscionable conduct," Justice Melissa Perry said.
Justice Perry's decision also reveals forensic accountants from McGrathNicol appointed by the federal government to audit the enrolment data had been frustrated by "unacceptable" delays from the administrators of Australian Careers Network earlier this year in April.
"McGrathNicol advised that they had not been provided with access to the information required to undertake the audit and enclosed a report prepared by McGrathNicol detailing the various requests for information by them and responses received," Justice Perry said.
According to the judgment, Ferrier Hodgson partner George Georges assured the court that since May the administrators had provided extensive amounts of data to the auditors from McGrathNicol.
Australian Careers Network is presently subject to an Australian Federal Police investigation into allegedly fake student enrolments at Phoenix Institute, which, if proven to be true, would mean Phoenix received millions in government funding to which it was not entitled.
McGrathNicol's audit is also investigating potentially fake student enrolments at Phoenix Institute. Its audit is ongoing. A date for a trial in the Federal Court matter between ACCC and Phoenix Institute is yet to be set.
