Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission (No 2)

Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission (No 2) [2025] FCA 1442 is a Federal Court judicial review case about NDIS banning orders and related regulatory steps taken against an NDIS provider and one of the people behind it. The Court’s published orders show that it quashed the original banning order made against Mrs Karunarathna on 3 May 2024, and also quashed the later internal review banning order and the review decision to make it.

The case also dealt with preparatory notices sent to Sunflower about possible suspension of registration, revocation of registration and a banning order against the company. Those parts of the dispute were affected by written undertakings given by the Commissioner to the Court. The result is a useful case for providers because it combines administrative law issues with very practical business risks: worker screening, key personnel status, governance records, actual operational control and business continuity.

Sunflower was registered as an NDIS provider in 2021 for the period from 30 October 2021 to 30 October 2024. It was required to be registered because of the kinds of supports or services it provided under participants’ plans, including specialised disability accommodation, high intensity daily personal activities, support with day-to-day management of medication and implementing restrictive practices. By May 2025 it was providing supports or services to six people with quite severe disability.

The business structure mattered. Mr and Mrs Karunarathna owned the four residential premises used for the accommodation side of the business. The premises were used by Sunflower without a lease agreement, but with fees paid for use. Mrs Karunarathna was a registered nurse with long experience in disability care. Mr and Mrs Karunarathna had incorporated Sunflower, and Mrs Karunarathna was its sole member. The company was therefore closely tied to the founders both operationally and through the premises from which services were delivered.

The immediate trigger for the dispute was worker screening. The judgment explains that registered NDIS providers must only allow an individual who is employed, engaged or part of key personnel to engage in a risk assessed role if the individual has a clearance. Mr Karunarathna applied for an NDIS worker check clearance in December 2022. He was issued with an interim bar, that bar was upheld, and in June 2023 he was issued with an exclusion certificate. The Court said the effect of the exclusion certificate was that he was not permitted to be engaged in a risk assessed role for Sunflower. That included not being a director and not having authority, responsibility or significant influence over planning, directing or controlling Sunflower’s activities.

Despite that, the Court noted that ASIC historical records showed Mr Karunarathna as a director until 17 April 2024. The reasons also record that the Commissioner considered he had evident ongoing participation in management and was engaging with participants and providing supports and services to NDIS participants. On 27 March 2024, the Commission made a one-month banning order against him.

The next step was action against Mrs Karunarathna. On 10 April 2024, the same Assistant Commissioner sent her a preliminary letter saying he had formed the view that it might be appropriate to make a permanent banning order because he reasonably believed she was not suitable to be involved in the provision of supports or services to people with disability. The letter set out the facts, matters and allegations said to support that view and invited submissions. Her lawyers responded on 26 April 2024.

On 3 May 2024, the Assistant Commissioner made a banning order against Mrs Karunarathna under s 73ZN(2)(a)(iii), with effect from 17 May 2024. The order permanently prohibited her from being directly or indirectly involved in the provision of supports or services to people with disability in the NDIS. Between 3 and 17 May 2024, she resigned as a director of Sunflower. Mr Neupane became and remained the sole director, while Mrs Karunarathna remained sole member and shareholder.

At the same time, the Commission took preparatory steps toward action against Sunflower itself. The reasons describe letters dated 22 May 2024 giving notice that the decision-maker was considering suspension of Sunflower’s registration under s 73N, and also considering revocation of registration under s 73P together with a banning order against the company under s 73ZN(1). Sunflower and Mrs Karunarathna then moved urgently. On 5 June 2024, they obtained interlocutory injunctive relief and an interlocutory order suspending the operation of the banning order.

The procedural path then became more complicated. A final hearing was held on 27 June 2024 because of the apparent urgency. Meanwhile, the Commissioner gave undertakings, in effect, not to act on the preparatory steps regarding Sunflower. Mrs Karunarathna also sought internal review of the original banning order. The reasons say that on 5 August 2024 the internal review decision varied the original banning order and issued a new varied banning order. That led to applications to re-open the hearing and amend the originating application so the Court could deal with the review decision as well.

The judgment gives useful context about banning orders under the NDIS Act. It says the Commissioner may, by written notice, make a banning order prohibiting or restricting a person from engaging in specified activities in certain circumstances. One pathway is where the Commissioner reasonably believes the person is not suitable to be involved in the provision of supports or services to people with disability. Another pathway discussed in the reasons concerns immediate danger to the health, safety or wellbeing of a person with disability. In this case, the order against Mrs Karunarathna was made on the suitability pathway, after she was given an opportunity to make submissions.

That context matters because the case was not simply about whether the Commission had concerns. It was about whether the statutory power was exercised in a way the law allowed. The Court’s catchwords and introductory issues show a broad set of administrative law questions, many of which are highly practical for providers facing urgent regulatory action.

The Court identified ten main issues. First, whether the Commissioner’s undertakings were enough to dispose of Sunflower’s judicial review challenge about the preparatory steps taken against the company. Second, whether the notices sent to Sunflower about possible suspension, revocation and banning action were unauthorised on the grounds raised. Third, whether Mrs Karunarathna’s challenge to the original banning order had become futile because the internal review decision had varied the original order. Fourth, whether the Court should allow the hearing to be re-opened and the originating application amended to add grounds dealing with the review decision.

Subject to those threshold issues, the Court then had to consider whether the original and varied banning orders should be set aside because the written notices did not conform with the formal requirements of a banning order under s 73ZN(2), whether the original decision was otherwise unauthorised, whether the review decision was legally unreasonable because it lacked intelligible justification as to scope and duration, whether the original decision-maker had delegated authority, whether the review decision purported to operate retrospectively, and whether procedural fairness was denied on internal review because Mrs Karunarathna was not given an opportunity to make submissions on the varied duration and scope of the order.

The formal orders show that the applicants achieved substantial relief in relation to the banning orders against Mrs Karunarathna. The Court ordered that a writ of certiorari issue to quash the written notice dated 3 May 2024, described as a purported banning order made under s 73ZN(2) of the NDIS Act. The Court also ordered certiorari to quash the written notice dated 5 August 2025, described in the orders as a purported banning order made by the review decision-maker, and separately quashed the review decision-maker’s decision to make that purported banning order.

Those orders are significant because they show the Court did not merely identify a technical problem with one step in the process. It set aside both the original banning order and the later review banning order, as well as the review decision itself. The extract does not reproduce every part of the Court’s reasoning on each successful ground, so care is needed before making more specific statements about exactly which arguments succeeded and why. But the orders clearly establish that the challenged banning orders against Mrs Karunarathna did not stand.

The Court also dealt with the procedural complications created by the internal review decision. It granted leave to re-open the final hearing to apply for leave to further amend the originating application, and granted limited leave to amend in specified respects. At the same time, it dismissed broader amendment attempts. That part of the outcome matters because it shows the Court was prepared to allow the case to adapt to new developments after the hearing, but only to a limited extent and in a way consistent with finality and the interests of justice.

For Sunflower’s separate challenge to the preparatory notices, the Court ordered that, upon the respondent’s written undertaking to the Court in the schedule to the orders, there be no order for further or other relief on certain grounds in the originating application. In practical terms, the undertakings resolved those parts of the dispute. The reasons describe the undertakings as, in effect, not to act on the preparatory steps regarding Sunflower, and the catchwords note that the undertakings were treated as equivalent to final injunctive relief. That is an important practical point for businesses because undertakings can remove the immediate threat without the Court needing to decide every pleaded ground.

The first practical point is concentration risk. The Court recorded that Sunflower’s solvency depended entirely on NDIS funding from six participants. Many specialist providers operate with a small participant base, but this case shows how exposed that model can be when a regulatory issue affects a founder, director or key person. A banning order, suspension or revocation process can quickly become a cashflow crisis, a staffing crisis and a participant continuity crisis all at once.

The second point is that paper compliance and real-world conduct must match. The reasons connect worker screening status, key personnel rules, ASIC records and actual management involvement. If a person is no longer permitted to hold a risk assessed role or key personnel position, it is not enough to make an informal internal adjustment. The company register, ASIC filings, role descriptions, access rights, communications with staff, participant contact and actual decision-making all need to reflect the legal position.

The third point is about indirect involvement. The catchwords show the Court considered the power to prohibit or restrict indirect involvement in the provision of NDIS supports or services, and whether a prohibition or restriction was reasonably capable of obedience. That is especially relevant in family-run or founder-led businesses. A person may resign as director but still influence staffing, participant decisions, premises, finances, compliance responses or strategic direction. If the regulator says a person is banned from direct or indirect involvement, the practical boundaries of that order become critical.

The fourth point is procedural urgency. The timeline in this case moved quickly: preliminary letters, submissions, a final banning order, urgent interlocutory relief, a final hearing, undertakings, internal review, then re-opening and amendment. Businesses should not treat a preliminary notice as routine correspondence. It may be the best chance to correct the factual record, explain governance changes, show how risk has been managed and avoid more serious action.

The fifth point is that undertakings can matter a great deal. Here, the Commissioner’s undertakings meant the Court made no further or other relief on certain grounds concerning Sunflower. For a business owner, that means a dispute can sometimes be narrowed or practically resolved without a final ruling on every issue. But it also means you need to understand exactly what the undertaking covers, what it prevents the regulator from doing, and what issues remain live.

Finally, this case is a reminder that judicial review is about legality, not simply merits. The Court was concerned with whether the Commission had acted within power, followed the required process and produced legally sustainable decisions. Even where the regulator has serious concerns, the statutory pathway still matters. For providers, that means both sides of the problem need attention: substantive compliance on the ground, and careful legal analysis of any notice, order or review decision.

The timeline is important because the case involved both an original banning order and a later internal review decision. The reasons say the original banning order against Mrs Karunarathna was made on 3 May 2024 and took effect from 17 May 2024. The applicants obtained urgent interlocutory relief on 5 June 2024, and a final hearing was held on 27 June 2024. The reasons then state that, in the meantime, Mrs Karunarathna sought internal review and that on 5 August 2024 a decision was made on internal review to vary the original banning order and issue a new varied banning order.

However, the formal orders refer to quashing a written notice dated 5 August 2025 and the review decision-maker’s decision to make that order. Because the reasons and the orders point to different years for the review notice, readers should treat that date point with caution until checked against the sealed court record. The broader sequence is still clear: original order first, internal review later, then re-opening and amendment so the Court could deal with both.

The judgment itself is dated 21 November 2025. Costs were reserved, with directions for written submissions and proposed orders by 5 December 2025. On the material available, the public explanation can confidently state the parties, the factual setting, the issues identified by the Court and the relief granted in the formal orders. It should be more cautious about attributing particular successful grounds unless the full reasons are checked in detail.