No, it works in the opposite way. As Michelle has performed more consistently throughout the year, she gets the 1st internal rank. The 1st rank is awarded the HIGHEST EXTERNAL MARK. So, if Bob comes first in the external, Michelle gets Bob's EXTERNAL mark as her assessment mark. Bob, if he was ranked in the middle of his cohort, gets the middle external mark. In this situation, both would turn out with the same HSC mark (assuming the distribution of ranks is accurate).
With numbers:
In a Modern History class of 10 -
Michelle is ranked 1st
Bob is ranked 5th
- Their actual marks do not matter, only the rank and the space between the ranks
In the external:
Michelle - 72% 5th
Bob - 92% 1st
Thus, Michelle assessment mark is 92% and her external is 72%. You always get your external mark, as this doesn't need moderation.
Michelle's HSC mark = the average of her two marks = 82%
Bob however, gets the 5th rank's external mark, that being Michelle's external 72%. His external however, is still his suprising 92%. Thus, Bob gets the same overall HSC mark as Michelle.
On the day results are recieved, Michelle cries her eyes out and Bob thanks the powers of last minute cramming.