Former government services minister Stuart Robert was warned continuing the illegal Robodebt scheme could lead to civil legal action, a royal commission has heard.
Public hearings in Brisbane are focusing on criticism of the controversial Coalition-era debt recovery scheme from media and tribunals after it was implemented in 2015.
Annette Musolino, currently the chief operating officer at Services Australia, formerly the Department of Human Services (DHS), is giving evidence at the commission over two days.
As former chief counsel of the DHS – one of two government agencies that helped deliver the program – Ms Musolino had key oversight of departmental legal matters, including Robodebt.
For the first time, the commission was shown a brief sent to the then government services minister in November 2019, summarising advice from the solicitor-general that found the scheme was unlawful.
The brief, which was signed by Mr Robert, said: "The continued administration of the program in its current form may amount to misfeasance in public office."
"This is because the continued administration of the program … would contribute to an argument that the Department had been raising and recovering debts in bad faith."
Counsel assisting, Angus Scott KC, told the commission misfeasance in public office was a civil action that could be brought against someone in public office who unlawfully exercised their power, including being recklessly indifferent to the likelihood of causing harm to the plaintiff.
Mr Scott asked Ms Musolino: "Would you agree … there was a risk of an action of misfeasance in public office if the scheme was not brought to an end, at least in respect of the use of averaging?"
"Yes," Ms Musolino said. "I think I would have understood that potential risk."
'No doubt that there were massive failures'
The commission heard Ms Musolino had "no doubt" the scheme had "massive problems" when it started getting media attention in late 2016 and early 2017.
The former government continued to defend the scheme despite growing criticism.
"There's no doubt that anyone who was working in the Department of Human Services or frankly anyone working in government at that time … there was no doubt that there were massive failures in how this was implemented," Ms Musolino said.
"From the letters to the online portal, the content of the letters, the extent of training provided to staff, the extent of understanding across government of what was occurring.
"… all that media [coverage] told us is there were massive problems here."
Commissioner Catherine Holmes questioned Ms Musolino about her knowledge of two sets of legal advice delivered to senior department officials in 2014 and 2017 that found Robodebt's central method, income averaging, did not meet legal requirements.
Ms Musolino told the commission it was not her role to determine whether legal advice behind a budget proposal, such as Robodebt, was "sufficient".
Commissioner Holmes asked: "Did you look at the 2017 advice?"
"I think I read it at the time, yes," Ms Musolino replied.
Commissioner Holmes said: "Did you see anything in it which actually supported the notion that averaging would suffice for the requirements of the legislation?"
Ms Musolino said: "It was pretty short advice but I had no reason to second guess what was in it."
Commissioner Holmes continued: "As a lawyer, you didn't apply your own critical legal senses to it at all?"
Ms Musolino replied: "We're a service delivery agency … when we're given a program to deliver or implement, we don't generally look behind how that decision was made or designed or the legalities, we look to implement it in a lawful fashion."
"As far as I was aware we had a government budget measure we had to implement and deliver and so there was nothing in my reading of that material [the legal advice] that came to me that alarmed me."
The commission will hear from former Liberal ministers Christian Porter and Alan Tudge later this week.
Mr Tudge's former media adviser, Rachelle Miller, will give evidence on Tuesday.
The inquiry continues.
