Immigration New Zealand could be facing a claim for more than $400,000 after a High Court judgment last month ruled it had wrongfully suspended the processing of student visas at one private training establishment.
Edenz College was one of four private educational institutions the agency said was "non-compliant with its obligations to international students" following its investigations, codenamed Operation Medusa, into alleged illegal labour scams involving international students.
Steve Stuart, Immigration's acting deputy chief executive, made a decision on November 22 to suspend the processing of visa applications for study at the four schools, including Edenz.
But the High Court's Judge Ronald Young said the decision was an "error of law" and was made based on "incorrect factual assumptions".
"There is no evidence in this case provided by Immigration New Zealand or the New Zealand Qualifications Authority which in any way links Edenz with any alleged illegal labour scam involving international students," the judgment said.
"Edenz deny any such link and ... there is currently no evidence to justify any such inference."
Medusa governance group chairman Peter Elms told Mr Stuart in a memo that Edenz had been found to have fraudulent attendance records and visa applications, students working in excess of the permitted 20 hours per week, poor facilities and breaches of NZQA requirements and immigration instructions.
In a statement released on Christmas Eve, Immigration said it was resuming the processing of all student visas from the "High Court decision in respect to Edenz".
Edenz president Tim Cooper said the suspension was a "needless nightmare" for his college, and had resulted in $305,000 in direct losses because of student cancellations and a legal bill of nearly $100,000.
"There's no doubt we will be getting costs, but we are seriously considering to seek claims for the losses and damages as well," he said.
Mr Cooper said Edenz employed more than 50 staff but jobs and staff hours had been cut, with some in management working without pay "to keep the school going".
Managing director Vivian Fan said it had been an "extremely difficult" time for both staff and students, who faced uncertainty about whether they could renew their visas.
Operation Medusa was launched on September 3 following concerns about education providers believed to be involved in the exploitation of foreign students by facilitating labour exploitation by employers.
In a document submitted to the court, operation commander Dean Blakemore said: "It is almost certain that financial exploitation of foreign students is occurring."
He said the operation would include four distinct phases, which would include unannounced visits to schools and their satellite campuses in regional locations.
The first investigation phase found the National Institute of Studies to have students studying at a different location to that listed on their visas and fees not lodged with Public Trust.
Aotearoa Tertiary Institute was found to have provided substandard courses and students working in excess of 20 hours, and the New Zealand School of Business and Government was found to have fraudulent attendance records and a non-compliant course-delivery model.
Mr Elms, who is also Immigration's general manager, said he did not think the Edenz judgment was a set-back to the investigations.
"The High Court's decision in the case of Edenz related to the process followed by Immigration in making its suspension decision in the circumstances of that particular case," Mr Elms said. "Immigration does not consider that this in any way impedes its ability to investigate or take future suspension action in respect of any PTE."
He said Immigration had been engaging with all four establishments regarding the concerns that had been raised but was unable to say how long the process would take.
"It's hoped that this approach will lead to a satisfactory outcome for everyone concerned, but Immigration retains the ability to consider suspension action in future if warranted."
Mr Elms said Operation Medusa was continuing along with the agency's other investigations into international student fraud and scams.
"Immigration is determined to maintain the integrity of the export-education industry and New Zealand's reputation as a quality destination," he added.
"It would not hesitate to take appropriate action against any PTEs which do not comply with their legal obligations."
Export education is worth about $2.7 billion annually.
What is it?
A multi-agency investigation, which began in September, into the exploitation of international students for illegal labour.
Who is involved?
Immigration New Zealand is leading the operation, with NZQA and other Ministry of Business, Innovation and Employment branches
What are they investigating?
The main focus is on the supply of migrant labour for the horticulture and viticulture industries by private training establishments.
What have they found?
Four institutions were found to be non-compliant with education and immigration laws. Their ability to apply for visas was suspended, then restored after a High Court challenge. Immigration NZ says the operation is continuing.