An Aboriginal-owned business behind a service housing children and teenagers on bail and in the youth justice system is suing the Northern Territory government for axing its contract more than three years before it was due to expire.

Court documents obtained by the ABC reveal First Step Development Enterprises (FSDE) is accusing the NT government of withholding more than $1 million in payments, as part of what it alleges is a “campaign” to cut the youth justice contract short.

FSDE was contracted by the NT’s previous Labor government in mid-2024 to run Darwin’s only residential youth justice facility, as an alternative place for courts to sentence children and teenagers instead of youth detention, for a five-year term.

It was also contracted to run supported bail accommodation for youth who were yet to be sentenced, out of the same precinct, which was established following the 2016 Royal Commission into the NT’s youth detention system. 

A lounge room with a black leather L-shaped couch, blue single chairs, gray rug and tv behind a glass panel

First Step Development Enterprises’s residential youth justice facility offers an alternative to incarceration for young people. (ABC News)

FSDE is the only Aboriginal company to run supported bail accommodation at an NT government-owned building, with two other government facilities in Tennant Creek and Alice Springs both operated by government staff.

That’s despite the vast majority of children and teenagers in youth detention being Indigenous, and the Royal Commission into the NT’s youth detention system recommending the government prioritise Aboriginal organisations in the delivery of bail support services.

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An email sent by FSDE to external stakeholders on December 5, leaked to the ABC, revealed the service would be shutting down on December 31, with the NT Department of Corrections having confirmed it would take over both services from the government-owned facility until a replacement was found.

“Approximately 30 roles will be affected,” the email said.

“We acknowledge that this news may be difficult and that it will have an impact on young people, families, staff and the broader community.”

A department spokesperson declined to comment on why FSDE had shut down. 

A bare bedroom, laminate wood floors, single bed with towels and clothes on bed, and a small window and door.

The residential youth justice facility first started operations in mid-2024. (ABC News)

An amended statement of claim filed in the Federal Court last week revealed a messy legal dispute between the Aboriginal-owned service and the NT government over the contract change. 

In the court document, lawyers for FSDE allege that the NT government wrongly cut the service’s contract following a “campaign”, which included refusing to pay two invoices for the December quarter worth a combined total of $1.125 million.

The statement alleges that after withholding the first of those payments, the NT government warned FSDE it may withhold further payments “pending the outcome of an audit and further review of the services”.

A large while building with a metal coat of arms out the front.

First Step Development Enterprises’s lawyers allege the NT government wrongly cut their client’s contract. (ABC News: Michael Parfitt)

FSDE alleges the “campaign” to scrap its contract also included:

Conducting irrelevant and unnecessary audits, then acting on audits without giving FSDE an opportunity to respond”Placing” an employee at FSDE’s office “as a disruptive, intrusive, inhibiting, supervisory, monitoring and reporting presence”.Falsely attributing limitations on the number of youths at the supported bail accommodation to FSDE, rather than the size of the NT government-owned building.

The court documents allege the NT government then relied on an inappropriate provision in the contract to make a “unilateral” adjustment and scrap the residential youth justice facility from FSDE’s contract in late October.

In late November, the documents state, the NT government terminated the contract altogether, and with it, FSDE’s licence to run supported bail accommodation from the government facility.

A focused shot of a tool, with a blurred silhoutte in the background of a teacher and student in high vis learning material tech

First Step Development Enterprises has previously run youth mentoring, training and employment programs in Darwin. (Facebook: First Step Development Enterprises)

The FSDE is seeking damages for breach of contract, and alternatively compensation for “‘unconscionable conduct” under Australian consumer law.

In a statement, a spokesperson for the NT Department of Corrections said there would be “no disruption to services” at either facility.

“NT Corrections are working with First Step to smoothly transition from the service,” the statement said.

Both the Department spokesperson and FSDE’s law firm, De Silva Hebron, declined to comment on the proceedings while they were before the Federal Court.