Government departments failed to obtain high-level external legal advice about Robodebt despite their own lawyers questioning the legality of the scheme more than a year before it was implemented, a royal commission has been told.
The incident was raised in the first day of a Royal Commission inquiring into the Commonwealth scheme which was set up to recover alleged Centrelink debts from hundreds of thousands of Australians using an algorithm to estimate recipients' incomes.
The inquiry, which is headed by former Queensland chief justice Catherine Holmes SC, focused on legal advice that had been obtained for the scheme and then went on to hear evidence from two women who were wrongly targeted for debt collection, and one of their lawyers.
Counsel assisting Justin Greggery KC opened the hearing by highlighting that high-level external legal advice had not been sought about the scheme despite it seeking to recover millions of dollars from hundreds of thousands of Australians.
"In view of the scale of the debt recovery program initiated by the commonwealth against its citizens if now seems obvious that the advice from the solicitor general or other eminently qualified barrister ought to have been obtained before the scheme was implemented,'' he said.
"Plainly that was not done."
Mr Greggery said legal advice was provided by the Solicitor General in 2019 at the government's request following concerns being about the scheme.
He said this advice raised the question of whether the Commonwealth Government had been recklessly indifferent to the lawfulness or otherwise of the use of averaged PAYG data obtained from taxation office to allege and recover debts.
Mr Greggery also revealed that in 2014, the department's own lawyers had raised concerns about the scheme in relation to the way it estimated or "smoothed out" incomes.
"That advice at the very least raised significant questions about the legality of the scheme,'' he said.
"One such advice obtained by the Department of Social Services from its internal legal department in December 2014 concluded and I quote: 'The proposal to smooth a debt amount over an annual or other defined period may not be consistent the legislative framework'."
Mr Greggery said evidence to be adduced to the inquiry would show" why external advice was not obtained from the solicitor general or eminent counsel.
He said this evidence would show there was "an expectation within the departments that the external and authoritative advice may not be favourable in the sense it may not support the legality of the scheme".
Mr Greggery said the Social Services Department had also received policy advice about the proposed scheme in November 2014.
He said the advice which dovetailed with what the Solicitor-General would give years later, was that the use of average data was not supported on policy grounds and could cause reputational damage to the Department of Human Services.
The Robodebt scheme matched income data from the Australian Tax Office with income reported to Centrelink by welfare recipients.
If a discrepancy was detected, people were usually sent a letter asking for further information such as pay slips and bank statements, sometimes from years earlier.
The inquiry also heard evidence from two women who had been targeted by the scheme to recover payments.
Family 'appalled' department was aware of legal issues
Among those attending the inquiry was the mother of a young man who died by suicide in 2019, just hours after learning he owed a Centrelink debt notice.
Kath Madgwick's 22-year-old son Jarrad learned he owed a debt of $2,000 in May 2019, while the Robodebt scheme was in place.
"I want to see some accountability to see that nothing like this happens again, that there's some safeguards in there for people with mental health for people applying that have got no income," Ms Madgwick said.
She said she was "appalled" to learn the department had been warned about potential legal issues in 2014, before the scheme came into effect.
"It's just disgraceful that they had that advice and just continued anyway."
In November 2019, the scheme was found to be unlawful as a result of legal action undertaken by some of those targeted for debt recovery.
A class action brought by lawyers for hundreds of thousands of Australians who had debts raised against them led to a settlement, with the Commonwealth acknowledging liability.
It led to some $721 million in recovered debts being repaid to Centrelink recipients. More than $112 million in interest was also paid on top of that.
The Commonwealth acknowledged that raising debts purely by averaging taxation data was unlawful, and that imposing a penalty fee based on the information it had was unlawful.
