NDIS firm Cocoon SDA Care loses court bid for payments
Rogue disability provider Cocoon SDA Care has lost its bid to have delays in releasing NDIS payments declared unreasonable.
Rogue disability provider Cocoon SDA Care has lost its bid to have delays in releasing NDIS payments declared unreasonable.
In the latest blow to the suspended company as it faces multiple investigations, Federal Court judge Michael Wheelahan dismissed two applications filed by Cocoon’s parent company, Horizon Solsolutions Australia, on Tuesday.
“In each of these applications I have determined to dismiss the application and I publish my reasons,” Justice Wheelahan said.
“The orders of the court in each application will be that the applicant’s application be dismissed with costs.”
The company took the National Disability Insurance Agency to the Federal Court, claiming delays in processing NDIS claims were unreasonable.
The NDIA began a manual audit of all of Horizon’s claims in March due to concerns about the operations of the business.
In the same month, watchdog the NDIS Commission issued Horizon with notice it was proposing to permanently ban Horizon and its sole director, Muhammad Latif.
Horizon staff have not been paid wages or entitlements and say superannuation is missing from their accounts.
The commission this month suspended Horizon for 30 days after site visits found serious safeguarding issues.
Numerous company insiders have told The Australian the Cocoon group is being run by former bankrupt Zaffar Khan, who goes by the title “corporate strategist”.
Mr Khan on Tuesday said the Federal Court decision “means we are now unable to immediately backpay our staff and update their superannuation”.
He said the decision “affirms that a multimillion-dollar business can be completely shut down if a NDIS bureaucrat simply has questions over less than 1 per cent of that businesses’ invoices”.
NDIA chief executive Rebecca Falkingham welcomed the decision, saying the agency would “continue to take all necessary actions to protect the interests of participants and the scheme”.
Justice Wheelahan said substantial payments had already been made to Horizon, but substantial sums had not. More than 9300 claims worth about $6.4m were under manual review.
Horizon said the usual processing time was two to three days but that had stretched into weeks because of the manual review.
The company wanted the Federal Court to order the NDIA to make a decision on the claims, excluding any specific ones flagged as requiring further information.
Justice Wheelahan said Cocoon had provided support and services across Australia to people with disabilities since October 2016. At the time of the hearing, the company supported more than 190 people with disabilities, and employed 1200 people in 185 specialist disability homes.
More than $5m a month was being spent on employee expenses including salaries, wages, WorkCover levies, payroll tax, and superannuation, the judge said. “Until early March, the applicant had submitted tens of thousands of claims for payment which were processed … within days in the usual way through its online portal,” he said.
“There were some isolated instances where a claim for payment was reviewed and more information was sought. Typically, the agency would make a decision on these claims within four weeks after the further information was submitted. The delay in processing particular claims did not significantly affect the applicant’s cashflow situation.”
The judgment confirms prior reporting in The Australian about the sequence of events.
On March 10, the NDIS Quality and Safeguards Commission sent Horizon notice of a proposal to refuse the company’s registration application because it wasn’t complying with the NDIS Code of Conduct.
The commission said Horizon submitted “fraudulent” claims worth $26,062.63 for services provided to three people while they were incarcerated, and “fraudulent claims” worth $77,554.16 for services provided to people after they had died. An employee had also uploaded a YouTube video disclosing the personal details of 30 NDIS participants, contrary to privacy obligations.
“The delegate expressed a preliminary view based upon this information that the applicant was not suitable to provide supports or services to people with disability and that its application for renewal of registration should be refused,” Justice Wheelahan said.
“The delegate stated that the applicant had until 28 March, 2025, to make submissions about the proposed refusal of registration before a final decision.”
A separate letter from the commission, also dated March 10, gave notices of proposed permanent banning orders against Horizon and its director, Mr Latif, on essentially the same grounds.
Horizon and Mr Latif disputed the allegations and submitted a response on April 15 after being given a time extension. They argued “there had been administrative failures and honest mistakes in relation to a small subset of claims which were isolated and not systemic and not of a nature that would compromise the applicant’s business”.
Horizon said the very serious allegation of fraud “was not supported by the evidence”, and the company did in fact provide services to participants while they were incarcerated, and with the full knowledge of the agency.
In instances where participants were unexpectedly incarcerated, claims were made for short notice cancellations in accordance with the NDIS Pricing Arrangements and Price Limits policy, the company said.
However “some staff had omitted to select the ‘cancellation’ option in the portal when submitting the payment”, the company submitted.
Claims made following participant deaths were authorised under the NDIS Bereavement Addendum, which allows weekly payments for up to four weeks.
Mr Latif said the company identified some instances of incorrect claims for payment that would be refunded to the agency, including $20,385.22 where Horizon’s accounts team was not notified promptly of the death of some participants.
“The applicant’s case is that these instances were isolated and, in the scheme of things, did not indicate any systemic issues that would warrant the action proposed by the commissioner,” Justice Wheelahan said.
Karen McDonald, director of the serious and complex non-compliance section of the NDIA, gave evidence, saying 32 tip-offs about the Cocoon group, the issuing of NDIS commission infringement notices in 2023 when three women were locked out of their homes, and a damning financial audit contributed to suspicions of integrity and record-keeping problems.
“Ms McDonald accepted that while the investigations were ongoing, no claim of fraud against the applicant had yet been made, and no decision had been made that the applicant had been fraudulent,” Justice Wheelahan said.
“In relation to the contested allegation that the applicant had incorrectly claimed for services provided to participants while they were incarcerated, Ms McDonald gave evidence that her view about that issue had not changed, but that it might change after considering the applicant’s response and clarifying the issue with the agency’s legal team.
“Ms McDonald accepted that it was possible to provide services under the scheme to a person while incarcerated, but maintained that this question remained the subject of investigation. She denied she had been under the incorrect impression when making her recommendation of manual review that services under the scheme could not be provided to participants who were incarcerated.”
The investigation into Horizon was the largest investigation currently on foot in her “space”, Ms McDonald told the court.
On March 7, the NDIA advised Horizon in a letter that a manual review of claims was under way, and began requesting information such as invoices, service agreements, support notes, pay slips of support workers, rosters, time sheets, contact details of support workers, and travel logs.
Nicholas Winton, from the scalable integrity responses branch, gave evidence that sampling of NDIS claims showed payment errors and anomalies had quadrupled to 4.97 per cent in 2023-24 from 1.23 per cent in 2020-21.
“As a result, the agency is now undertaking more work in relation to payment integrity,” Justice Wheelahan stated.
“As at 10 April, 2025, there were approximately 2000 entities and 44,500 individual claims that were the subject of manual review. There are approximately 25 full-time equivalent staff currently working in the review team. There have been recent additions to the number of staff, and further recruitment is under way.”
The manual review of Horizon’s payment claims was “the largest review that the agency was undertaking … of the staff in the review team, 12 people were working solely on the manual review of the applicant’s claims. Many of the staff were working overtime, including on weekends, to deal with the workload.”
A number of staff in the review team had been flagged as working “excessive hours”
Horizon had been asked to explain some claims that had been identified as being of concern.
“The exceptions raised related to discrepancies in the invoices, invoices not matching rosters or claim information, overclaiming where the amount claimed did not match the rostered hours, claims that appeared to be overlapping with other claims, and the absence of certain records supporting the claims that were made,” the judge said.
“Mr Winton stated that after a period of review of approximately two months, he had not found any fraud by the applicant, but said many claims had been the subject of written communications to the applicant raising concerns and deficiencies.
“The overall picture painted by Mr Winton’s evidence was that all the batches of claims were at different stages of review, that the staff allocated to the review were working at maximum capacity, and that while some payments had been made, none of the reviews was complete, and that the process of review was ongoing.”
Submitting that the ongoing manual review was justified, the agency said it was discovered in one part of the review that Horizon may not have been entitled to $246,480.93 in payments that had been made for purported specialist disability accommodation.
Justice Wheelahan said the NDIA made a “considered decision” and there had not been administrative oversight, incompetence or maladministration.
“The decision to subject the applicant’s claims to manual review has not been shown to be unreasonable,” he said,
It was up to the NDIA to determine the best way to ensure the integrity of the scheme, he added.
“Having regard to the separation of powers, which underlies the high threshold for making a finding of unreasonableness, the court should be slow to conclude that there have been unreasonable delays that warrant the making of declarations and coercive orders of the court.”
Such orders would inevitably amount to interfering with agency processes to review claims.
“I find on the evidence that the staff who have been allocated to the review of the applicant’s claims are working at full capacity,” the judge said.
In a completely separate case, Maysan Holdings trading as Support Services for NDIS and Aged Care has also lost its case against the NDIA in the Federal Court.
Maysan initiated legal proceedings against the NDIA, asking the court to declare invalid the agency’s decision to launch a manual review of the company’s payment claims in July last year.
Maysan also sought to set aside the NDIA’s decision in January to reject 6362 payment claims, and argued there had been an unreasonable delay in determining its payment claims.
The NDIA started the manual review as a result of integrity concerns arising from 28 tip-offs about the company in less than three years. Maysan has denied all allegations against it.
Judge Geoffrey Kennett dismissed Maysan’s application on Friday and ordered the company to pay agreed costs to the NDIA, The Australian has learned.
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