NDIS Service Agreement & Contract Breaches: A Litigation Guide for NFPs

Introduction

For not-for-profit (NFP) organisations, National Disability Insurance Scheme (NDIS) service agreements and contracts are high-stakes documents that define rights, obligations, and compliance expectations. When disputes or breaches arise, the consequences can affect funding, regulatory compliance, and the organisation’s ability to deliver essential services.

This guideline offers practical support for NFPs facing NDIS service agreement and contract investigations, highlighting the importance of seeking legal advice from an NFP lawyer to protect your organisation’s interests and ensure compliance with complex legal and regulatory requirements.

Understanding Your NFP Service Agreement as a High-Risk Asset

The Critical Role of a Written Service Agreement

Although a written NDIS service agreement is not always mandatory, it is highly recommended to ensure all parties have a clear and mutual understanding of the arrangement. The primary purpose of the agreement is to establish a shared set of expectations about what supports will be delivered and how they will be provided.

A formal contract sets out the rights and obligations for both your organisation and the NDIS participant. It also clearly documents the fees that the participant has agreed to pay for the NDIS service.

This documentation is essential for:

• Submitting invoices to the National Disability Insurance Agency (NDIA) or plan managers
• Ensuring your organisation can be paid for the supports it delivers

Furthermore, the service agreement plays a crucial role in documenting the participant’s consent to receive supports. Obtaining valid consent is a critical legal step, as providing any service that involves physical contact without it can potentially lead to criminal charges.

Key Compliance Risks & Legal Obligations for Your Organisation

NDIS service agreements are subject to a complex web of legal and regulatory obligations that your organisation must follow. The NDIA can take action if the terms of your agreement do not align with the NDIS Act 2013 (Cth) or the NDIS Pricing Arrangements and Price Limits. The NDIS Quality and Safeguards Commission (NDIS Commission) is the primary body responsible for regulating providers and ensuring compliance.

Your service agreement is also governed by Australian Consumer Law (ACL), which protects consumers from unfair contract terms. A term in your contract may be considered unfair if it meets the following criteria:

• It creates a significant imbalance in the rights and obligations between your organisation and the participant.
• The term is not reasonably necessary to protect the legitimate interests of your organisation.
• It would cause financial or other detriment to the participant if it were to be enforced.

Privacy laws also impose significant obligations on your organisation. A service agreement is the standard method for obtaining a participant’s consent to collect, use, and disclose their sensitive personal information.

Operating without a clear, written agreement exposes your NFP to several risks, including:

• Compliance action from the NDIS Commission
• Demands for fee refunds
• Claims for breaches of privacy

Consulting a lawyer who specialises in the NFP sector can help ensure your NDIS service agreement meets all legal requirements and aligns with best practices for NFP governance and ACNC compliance.

Common Disputes & Breaches Involving Government Funders

Commonwealth Disputes: Funding Clawbacks & Quality of Care Breaches

Disputes with Commonwealth funders, such as those involving the NDIS, frequently arise from an organisation’s failure to meet the obligations set out in their service agreements.

Breaches related to the quality and safety of care are particularly serious and can lead to severe consequences after an investigation. These failures often involve not providing supports and services in a safe and competent manner, with the required level of care and skill.

A prominent example is the case involving Commissioner of the NDIS Quality and Safeguards Commission v Valmar Support Services Ltd [2025] FCA 11, a not-for-profit NDIS provider. The NDIS Commission initiated legal action against Valmar for systemic failures that put participants at significant risk, ultimately leading to the death of one participant.

The investigation revealed several critical breaches of their service contract, including:

• Failure to train staff: The organisation did not provide any training to its staff or ensure they held adequate qualifications for their roles.
• Disregarding expert advice: Valmar failed to follow the dietary plans created by participants’ dieticians, which specified requirements such as cutting food into bite-sized pieces to prevent choking.
• Using unqualified personnel: The provider engaged unqualified staff to create meal plans without consulting experts like a speech pathologist, even after being advised to do so.

As a result of these breaches, the Federal Court ordered Valmar to pay a civil penalty of $1,916,250, the highest ever imposed on an NDIS provider. This case highlights the significant legal and financial repercussions of failing to comply with care standards and contractual obligations under an NDIS service agreement.

Breaches of NSW State-Based Contracts

NFP organisations also enter into contracts with state government bodies, such as NSW Health or the Department of Communities and Justice, which can lead to disputes if obligations are not met. These state-based service agreements come with their own specific compliance requirements that must be carefully managed.

A breach can occur if an NFP fails to adhere to the unique terms stipulated in these contracts. Since each agreement is different, understanding the specific performance metrics, reporting timelines, and administrative duties is essential for maintaining regulatory complianceGiven the complexity and the distinct legal frameworks that apply at the state level, consulting a lawyer who specialises in NFP law can provide crucial guidance. An experienced legal advisor can help your organisation interpret its obligations under the contract and ensure all state-specific requirements are being met, reducing the risk of a complaint or dispute.

First Response & Legal Strategy for a Breach of Contract Notice

What Is a Notice to Remedy Breach

A notice to remedy breach is a formal written notification sent to a party that is failing to meet its contractual obligations. Its primary purpose is to inform the other party of the breach, detail what must be done to fix it, and provide a specific timeframe for doing so.

This document is a critical step in managing a contract dispute, and a compliant notice should clearly:

• Identify the specific breach and reference the relevant clause in the service agreement.
• Outline the precise actions required to remedy the breach.
• Set a reasonable deadline for the correction to be made.
• Explain the potential consequences if the breach is not fixed, such as termination of the contract or legal action.

The requirement to issue such a notice often originates from the terms of the contract itself. Many agreements mandate a formal notice and a cure period before further action can be taken.

Key Steps for Your Initial Response

Upon receiving a notice of breach, your organisation’s first step should be to carefully review the service agreement.

Pay close attention to the following clauses to understand your rights and obligations:

• Breach provisions
• Termination clauses
• Dispute-resolution steps
• Notice requirements

This initial check will confirm the required content for a response, any specified cure period, and the correct method for delivery.

Before drafting a reply, it is highly advisable to seek legal advice from a lawyer who specialises in working with NFP organisations. A legal expert can interpret the contract, assess the validity of the alleged breach, and guide your strategy to ensure compliance.

When drafting your response, remain professional and factual. Your notice should:

• Clearly name both parties and reference the specific contract and date.
• Describe the facts of the alleged breach and the obligation in question.
• State exactly what must be done to fix the issue.
• Provide a reasonable and clear deadline for the remedy.
• Outline the consequences of non-compliance as permitted by the contract.

Finally, deliver the notice using the exact method specified in your agreement—whether registered post, hand delivery, or email to a nominated address. Always retain proof of delivery, such as a postal receipt or email confirmation, to create a clear record.

Common Mistakes Your NFP Must Avoid

When responding to a breach notice, several errors can undermine your position. The most significant is failing to check the contract’s notice requirements, which can lead to a non-compliant response that is later challenged.

It is also crucial to avoid vague descriptions of the breach. Your notice must be specific, factual, and reference the exact obligation that has not been met.

Ambiguity can make the notice ineffective and easy to ignore.

Other critical mistakes to avoid include:

• Setting unreasonable timeframes that do not align with the contract.
• Using the wrong delivery method, such as emailing when registered post is required.
• Threatening overreaching consequences not permitted under the contract or relevant laws.

Exploring Alternative Dispute Resolution

Identifying if Mediation or Arbitration Is Mandated in Your Agreement

Many service agreements include clauses that require alternative dispute resolution (ADR) before legal action can be taken. It is important to review your contract to determine if it mandates specific processes for handling disagreements. Two common forms of formal dispute resolution are commercial mediation and arbitration, each with a distinct approach.

• In mediation, a neutral third party, known as a mediator, facilitates discussions to help both parties resolve the issue themselves. The mediator does not impose a decision but guides the conversation toward a mutually acceptable outcome. This method is often faster, less formal, and more cost-effective than court proceedings.
• Arbitration is a more formal process where an independent third person, the arbitrator, is appointed to make a binding decision on the dispute. While it can be less complex than litigation, arbitration can still be costly, and the outcome may not satisfy either party.

An NFP lawyer can provide essential legal advice to help you understand your obligations under any ADR clauses in your agreement.

The Role of Negotiation & Escalation

Before resorting to formal dispute resolution methods, less formal processes like negotiation and escalation should be attempted. These initial steps are often the most efficient way to manage a complaint or disagreement and can preserve the working relationship between your organisation and the funder.

Negotiation involves calm, open, and constructive conversations with the other party to reach a mutual understanding and resolve the issue. The goal is to achieve a fair and equitable outcome for everyone involved.

• It is crucial to keep detailed records of all negotiations, as any agreement reached must align with the terms of the existing contract.

If direct negotiation fails to resolve the problem, the next step is often escalation. This process involves moving the issue up the organisational hierarchy so that senior management from both your NFP and the other party can attempt to find a solution.

• Many contracts outline a specific escalation process that must be followed before formal dispute resolution can begin.

The Unique Challenges of Suing the Government

Understanding the Government’s Model Litigant Obligation

When your organisation enters into litigation with a government body like the NDIA, it is important to understand that the agency must adhere to the model litigant obligation. This requirement, outlined in the Legal Services Directions 2017 (Cth), compels government bodies to act with complete honesty, fairness, and integrity throughout the legal process. This obligation can significantly influence the strategy and timeline of your dispute.

The model litigant obligation requires the government to handle legal matters in a specific way, including a duty to:

• Deal with applications and legal proceedings promptly and avoid causing unnecessary delays.
• Act consistently when handling different legal applications and decisions.
• Participate in ADR processes to resolve the matter where appropriate.
• Assist the court or tribunal in reaching the correct and preferable decision.

However, this obligation does not prevent a government agency from acting firmly to protect its interests or the principles of the scheme it administers, such as the National Disability Insurance Scheme Act 2013 (Cth). An NFP lawyer can provide crucial legal advice on how this obligation may affect your case and help ensure the government body adheres to these standards.

Why Public Law Review Is Often Unavailable for Your NFP

When government services are outsourced to NFP organisations and charities, it can create a gap in legal accountability. Traditionally, decisions made by government bodies can be challenged through public law mechanisms like judicial review. However, this avenue is often unavailable for decisions made by an NFP delivering a government-funded service.

This limitation arises because judicial review typically applies to decisions made “under an enactment,” meaning those directly authorised by legislation. When an NFP delivers a service under a contract or funding agreement, its decisions are generally based on the terms of that contract, not a specific law.

As a result, courts have often found that these decisions fall outside the scope of public law judicial review. This places disputes into the private sphere, making contract litigation one of the few remaining legal pathways for holding a government funder accountable.

Given these complexities, seeking legal advice from a lawyer who specialises in the NFP sector is essential to understanding your organisation’s rights and the best course of action in a contract dispute.

Proving Your Case with Evidence & Documentation

The Importance of Performance Monitoring & Records

Effective performance management is essential for ensuring that the goods and services outlined in your NDIS service agreement are delivered as required. This process involves collecting accurate and timely data to assess whether the supplier’s performance meets the standards defined in the contract.

This documentation is critical for demonstrating compliance and achieving value for money. Performance management allows your organisation to identify any gaps between the supplier’s actions and their contractual obligations.

It is important that the information used to assess performance is accurate, fair, and verifiable, especially if it is used to justify corrective actions.

Typical performance measures that should be monitored and documented include:

• Comparing the quality of services delivered against the specifications in the NDIS contract.
• Ensuring the volume of services or number of items delivered matches the contracted amount.
• Tracking actual costs against the budget specified in the service agreement.
• Measuring the responsiveness of the supplier to requests against agreed-upon timeframes.
• Gauging the satisfaction level of NDIS participants receiving the services.

An NFP lawyer can provide legal advice on which performance metrics are most important from a legal standpoint and how to document them in a way that will be effective in an investigation or dispute.

Maintaining a Clear Audit Trail Through Contract Administration

Maintaining a complete and organised set of records is a crucial aspect of contract administration and is required under the Archives Act 1983 (Cth). A systematic approach to record-keeping provides a clear audit trail, offering evidence of business conduct and decisions made, which is invaluable during a contract investigation.

This documentation helps your organisation manage legal risks and meet accountability obligations. Key documents that should be meticulously filed and managed include:

• The signed NDIS service agreement and any subsequent variations.
• Minutes from meetings with the funder or supplier.
• All relevant correspondence, including emails and formal letters.
• Progress reports and performance reviews.
• Records of delivery and acceptance of services.
• Financial documents, such as invoices and payment receipts.

Conclusion

Effectively managing NDIS service agreement disputes requires understanding your contract’s legal risks, responding correctly to breach notices, and exploring ADR before considering litigation. Proving your case in an investigation relies on meticulous performance monitoring and maintaining a clear audit trail of all documentation and correspondence.

Given the intricate legal and regulatory compliance challenges, it is essential to consult with the experienced not-for-profit lawyers at LawBridge for tailored legal advice to help manage your NDIS service agreements and resolve any contract disputes effectively.

Frequently Asked Questions