The social services department received “catastrophic” draft legal advice warning the robodebt scheme was unlawful from a top private law firm in 2018, a royal commission has heard.
The inquiry is investigating the failed debt recovery scheme, which ran from July 2015 until November 2019 and culminated in a $1.8bn settlement covering hundreds of thousands of people issued unlawful Centrelink debts.
On the third day of hearings, the inquiry was told the Department of Human Services progressed its proposal for the scheme, despite serious legal doubts within the Department of Social Services, after it earned the backing of Scott Morrison.
It heard that nearly four years later – after the robodebt scheme was up and running – the Department of Social Services received external legal advice also casting significant doubt on the scheme’s lawfulness.
The draft advice, prepared by a partner and senior counsel at Clayton Utz in August 2018, suggested the use of income averaging to raise welfare debts was unlawful.
While the inquiry heard the law firm was paid for the draft advice, it remains unclear whether it was finalised or how it was subsequently used.
The robodebt scheme continued to run until November 2019, following a legal challenge from Victoria Legal Aid that prompted damning advice from the solicitor-general which also found the scheme unlawful.
The Clayton Utz advice was sent to a team of lawyers at the Department of Social Services including Anne Pulford, the inquiry heard.
Pulford had warned the scheme was likely unlawful in 2014, before it was established. She subsequently said it could be legally justified in 2017, though she told the inquiry that advice was only to be applied to very specific circumstances. .
The inquiry heard Clayton Utz indicated it might be able to rework the legal advice subtly if this “causes catastrophic issues” for DSS but that there was “not a lot of room” to do so.
The advice was potentially “catastrophic” because it called into question the future of the robodebt scheme as a whole.
The senior counsel assisting, Justin Greggery said it was “one of the more significant legal advices” on the robodebt scheme, which Pulford had been “dealing with since November 2014”.
The inquiry heard Pulford wrote an email to other DSS officials asking what they’d like to do with the advice. She said she did not know what happened to it after that.
She said in general the department would decide whether external advice would represent its view or not.
Asked by the royal commissioner, Catherine Holmes, whether it was common to discard draft advice that was not favourable, Pulford said it had happened “many times”.
“I’m appalled,” Holmes replied.
Pulford’s initial advice, from November 2014, suggested the basis for the robodebt scheme would not be possible without legislative reform.
Despite that, the inquiry heard on Wednesday that the DSS drew up a brief for what became the scheme in early 2015.
The inquiry was told that was because Morrison, who was then the social services minister, wanted the proposals worked up for the 2015 budget process.
It heard this put significant time pressure on the DSS officials who had already raised grave doubts about the proposal’s legality.
The royal commission has not heard any evidence the advice warning against the scheme reached Morrison. He has been granted leave to appear at the royal commission if he wishes.
Greggery said by late 2014 the Centrelink compliance proposal had “become part of the budget” and the Department of Human Services had indicated Morrison wanted the proposals progressed.
By early 2015, officials within DHS began drafting the “strengthening welfare integrity system” measures, which expected to save the budget $1.2bn.
The inquiry heard that one of the measures – which became the basis for the robodebt scheme – was “broadly consistent” with the proposal which the DSS had raised legal doubts about a few months earlier.
The inquiry heard while an initial draft for the policy proposal said the scheme would need “legislative change”, a later draft said this was not required. It is so far unclear what the final copy of the policy proposal said.
The royal commission heard this raised alarm within DSS, with one official, Catherine Dalton, asking for “urgent advice” on the proposals.
“And what we know now from the benefit of hindsight is that this particular proposal did become included in the 2015-16 budget ... as the strengthening welfare integrity system,” Greggery said.
While the DSS officials noted some of the assumptions used to form Pulford’s damning advice had “changed”, the royal commission heard that officials had only two days to review the policy proposal.
Greggery asked: “It appeared that the very tight timeframe and the pressure was coming from a clearance by Minister Morrison to have a new policy proposal developed to the point that it might be submitted to the Department of Finance?”
Pulford replied: “Correct.”
Under questioning, Pulford agreed that due to time pressure, from late 2014, the DSS legal team was only able to “identify” potential legislative problems without “providing meaningful advice”.
Asked why Pulford or the legal team never “agitated” about the fact the scheme was legally flawed once it was running, she noted “a government decision had been made”.
She said the “internal legal area continuing to query the legal underpinnings of the decision which had been made and presumably taken into account” would not have been “regarded as helpful”.
Pulford said in her view the role of the department’s legal team was to “make clear risks which government then decides”.
The royal commission continues.
