The Department of Social Services held internal legal and policy advice casting doubt on the legality of the robodebt scheme almost five years before the Coalition government accepted it was unlawful, a royal commission has heard.
The inquiry, called by the Albanese government, is investigating the botched Centrelink scheme that ended in a $1.8bn settlement between the commonwealth and hundreds of thousands of people issued unlawful social security debts.
On the first day of hearings on Monday, it was revealed the Department of Social Services and the Department of Human Services had sought internal legal advice “before and during” the implementation of the scheme in 2015.
“That advice, at the very least, raised significant questions about the legality of the scheme,” said senior counsel assisting the commission, Justin Greggery KC.
But the royal commission heard the departments did not seek an authoritative legal opinion from the solicitor general until August 2019, in response to a legal challenge from Victoria Legal Aid. The solicitor general’s advice, which said legislative change was needed for it to be lawful, prompted the government to concede that legal case.
The robodebt scheme was established in July 2015 and ran until November 2019, using a process in which a person’s annual income reported to the tax office was averaged or “smoothed” and then compared to the pay they reported fortnightly to Centrelink.
Greggery alleged that while administering the robodebt scheme, the department did not seek “authoritative advice” because the other advice “created an expectation within those departments that the external and authoritative advice may not be favourable”.
That prompted the question for the commission of whether the government was “recklessly indifferent to the lawfulness or otherwise” of the scheme.
Greggery said advice provided by the Department of Social Services’ internal legal department in December 2014 found the “proposal to smooth a debt amount over an annual or other defined period may not be consistent with the legislative framework”.
The advice was prepared by Simon Jordan and “second counselled” by Anne Pulford, both lawyers at the department.
The advice “was generally consistent with the central part of the opinion of the solicitor general provided almost five years later”, Greggery said.
The Department of Social Services also sought policy advice that cast doubt on whether the robodebt process was in line with social security law.
The policy advice, sought by Department of Social Services official Mark Jones, suggested the Department of Human Services proposal could “cause reputational damage to DHS and DSS”.
Greggery said Jones would have sought the advice “with approval from his superiors”. Jones is due to give evidence on Tuesday.
The inquiry heard other internal advice was obtained over time but “what is clear is that … did not dispel the real doubt raised about the lawfulness of the scheme” in the 2014 advice.
In response to a commonwealth ombudsman’s investigation in 2017, Department of Social Services officials sought new internal legal advice due to a “departmental business need to have some means of legally justifying” the process used in the robodebt scheme, Greggery said.
“The language adopted by Ms Pulford might be observed in this advice to be slightly different in its flavour to the 2014 advice,” Greggery said.
It suggested income averaged data could be used as a “last resort” to a raise a social security debt.
Greggery said Pulford would be called to give evidence on Tuesday and asked whether she intended there to be a “variation” in the advice between 2014 and 2017.
The inquiry heard the scheme was established after a proposal from the Department Human Services.
Greggery said it had been projected to recover about $1.7bn when it was announced.
He said the inquiry would consider “what pressures, including political or department performance pressures, may have existed to implement the scheme without authoritative advice on its legality”.
The inquiry also heard from two victims of the scheme, including Madeleine Masterton, who was the first plaintiff in the Victoria Legal Aid legal challenge.
Masterton had been receiving youth allowance while working varied hours as a university student.
Masterton said she was “shocked” to receive a $4,000 debt – including a 10% recovery fee – from Centrelink in 2018. She said she was later contacted by a “very pushy” debt collector from Probe Group, leading her to reluctantly agree to a payment plan of $50 a week.
“They asked me at the time what my income was and how much money I had,” she said.
After seeking help from Victoria Legal Aid, Masterton’s case was allocated to a lawyer, Miles Browne.
“I … indicated to her at that stage that we had received advice that the way in which the scheme operated may be unlawful,” Browne said.
Browne said he advised that one of her options was to challenge the debt in the federal court.
Asked why she took on the case and continued with it when the debt was reduced to $600 by Centrelink to fix a “double counting” error, Masterton said she “felt testing the lawfulness … would have a greater impact socially”.
As Guardian Australia revealed in May 2019, Centrelink wiped Masterston’s debt completely and then argued there was no longer a legal issue for the court to determine.
Browne said Centrelink never explained how it had recalculated the debt to zero, given Masterton had not provided any further information.
The inquiry heard that in doing so, the Department of Human Services had simply decided to accept Masterton reported her income correctly.
“Did you commonly find that all a customer had to say was, ‘but I reported accurately’ and they would zero the debt,” the royal commissioner, Catherine Holmes, asked.
Browne responded: “I’m not aware of another instance in which that occurred.”
Victoria Legal Aid subsequently brought another legal challenge on behalf of Deanna Amato in June 2019, which prompted the government to concede the scheme was unlawful in November of that year.
The royal commission continues.
