Robo-debt: Liberals knew it was illegal before it started

Robo-debt: Liberals knew it was illegal before it started

David Mason was the first person to give advice about a thought bubble program that would become robo-debt. In an email, he called it for what it was: a program with no legal basis that would result in serious reputational harm if it was allowed to go ahead.

His assessment should have been the end of the perverse experiment. Instead, this algorithmic program was used to terrorise welfare recipients for more than five years.

Mason was an acting director within the Department of Social Services (DSS)  means testing policy branch when he was asked, in October 2014, to provide the advice. The service delivery arm of government, then known as the Department of Human Services (DHS), had cooked up a potential budget savings proposal that involved splitting taxation data into fortnightly blocks, when social security benefits are also paid, and using this to figure out if a welfare recipient had earned too much money and needed to pay back a debt.

“We would not be able to let any debts calculated in this manner reach a tribunal,” Mason warned. “It’s flawed, as the suggested calculation method averaging employment income over an extended period does not accord with legislation, which specifies that the employment income is assessed fortnightly.”

Again, Mason reiterated that the team could not “see how such decisions could be defended in a tribunal or court, particularly when DHS have the legislative authority to seek employment income information from employers”. He stressed that “the approach could cause reputational damage to DHS and DSS”.

On October 31, 2014, the team asked for a second opinion from within the DSS’s legal branch. The same person who had sought advice from Mason, Mark Jones, emailed principal lawyer Anne Pulford to note that the two departments were working together on payment assurance, as was normal, but noted “a strategy is being considered that requires legal advice prior to proposing it to government”.

This is important in establishing a provenance for the controversial robo-debt idea: although governments enthusiastically set expectations for savings in budget cycles, the robo-debt scheme itself was the brainchild of someone or some group within the DHS.

The legal advice from DSS, provided by lawyer Simon Jordan on December 18, 2014, was almost as unambiguous as David Mason’s: “In our view, a debt amount derived from annual smoothing or smoothing over a defined period of time may not be derived consistently with the legislative framework.”

This advice was a co-opinion from Pulford, who features repeatedly in the years to come.

“Unemployed people are… almost by definition, they have vulnerable cohorts within them. There would be people who would enter into agreements to repay debts which they had not incurred in the first place.”

Five days later, Scott Morrison became the minister for Social Services.

The end. Or there things might have rested were it not for a gruesome lack of imagination on behalf of dozens of players across government. It is not that they lacked the ability to conceive or design this wicked hunter’s trap of a debt policy – that is well recorded – but that these figures apparently possessed an inability, at all levels of the public service, to wonder what the final outcome of such a hideous program might be.

And it was this: at least seven families believe the suicide of a loved one was connected to the receipt of a robo-debt letter. Hundreds of thousands of Australians were hounded by government officers and debt collectors for money they never owed.

To be clear, these people owed no debt – not because of some administrative technicality but because the Department of Human Services concocted a system that literally made them up, despite the above advice being provided before the program even made it into pilot form.

“Commissioner, we anticipate that the evidence to be adduced may be sufficient to show that the reason why no authoritative advice on the legality of the robo-debt scheme – and by that I mean from the solicitor-general or other eminently qualified counsel external to the department – the reason why no advice was obtained prior to the advice of the solicitor-general in September 2019 was because advice in one form or another within the Department of Social Services or Services Australia [formerly DHS] created an expectation within those departments that the external and authoritative advice may not be favourable in the sense that it may not support the legality of the scheme,” senior counsel assisting the Royal Commission into the Robodebt Scheme, Justin Greggery, KC, said on Monday.

Indeed, what has emerged in an explosive first week of full hearings is information that has been actively hidden from the public for almost six years. This includes multiple rounds of “advice” seen by the most senior people in both departments over many years before officials finally scurried to ask the solicitor-general for advice in 2019. The answers to questions sought by Services Australia in September of that year should have surprised nobody who had been paying attention.

The solicitor-general was very clear: the use of smoothed or apportioned tax office data “cannot itself provide an adequate factual foundation for a debt decision”. Further, his advice noted that the government couldn’t use the same data in the same way to essentially shake down past or current welfare recipients by presenting it to them and demanding they provide evidence that they did not incur a debt.

This advice continued a piece-by-piece demolition of the entire framework for robo-debt, noting that – as Greggery put it – compliance officers are required to investigate other sources of information, such as employer records, to justify the assumption that a debt exists. They cannot simply outsource this to welfare recipients by issuing threatening letters.

“Failure to respond does not provide positive proof of a debt, and the decision-maker cannot speculate about why a person may have failed to respond and to treat that speculation as evidence of a fact,” Greggery said on Monday, summarising some of the solicitor-general’s reasons.

“The question raised by the solicitor-general’s advice is whether the Commonwealth government was, prior to that point, recklessly indifferent to the lawfulness or otherwise of the use of averaged PAYG ATO data obtained from the taxation office to allege and recover debts.”

“Reckless indifference” is a phrase no barrister uses lightly. It is also a crucial element in the civil law of misfeasance in public office. In its own advice on the tort, the Australian Government Solicitor notes that the element of “bad faith” requires one of two things: either intentional harm caused by knowingly acting beyond their legal power or the defendant having been “recklessly indifferent to whether the act was beyond power and recklessly indifferent to the likelihood of harm being caused to the plaintiff”.

The story of robo-debt is one in which those responsible for it gradually knew less and less, and with less certainty, about its dimensions, about what it was going to be used for and how. What happened between 2014, when departmental advice cast near total doubt over the legality of robo-debt, and 2019, when the solicitor-general’s advice was finally delivered and led to the scheme’s ultimate end, is a collective act of leaning in to a studied ignorance.

We now know, from the evidence so far, that departments had all the legal power needed to compel information from businesses but that, apparently, the government “didn’t want [the] burden to be on employers”, according to a senior official at the DHS.

We know that design decisions were made in relation to the debt letters sent to robo-debt victims, which shunted them deliberately online rather than providing a contact number, because “past experience shows that if an alternative phone number is provided a significant proportion of recipients won’t engage online”.

We know the DSS, faced with an investigation by the Commonwealth ombudsman in early 2017, considered withholding the 2014 legal advice from that office and, even though it appears to have relented, had new advice drawn up by the same co-author of the 2014 document, Anne Pulford, which was used to hoodwink the ombudsman’s office and “show” robo-debt was legal.

We know that, once this convenient deception was established in the eyes of the ombudsman, its subsequent reports declaring robo-debt to be consistent with the legislative framework were used by the DSS as de facto legal justification for a scheme that was – and that they had every reason to expect was – illegal.

“You must have understood,” Justin Greggery put to Pulford during questioning on Wednesday, “that you were being asked to walk back the clear terms of the 2014 advice in the context of what was happening in the public arena with the robo-debt scheme.”

It was Greggery’s contention that nothing had changed in the question put to Pulford in 2014 and again in 2017, but somehow the answer had.

“This was the most hypothetical advice that could be provided to legally justify some aspect of the scheme then in existence,” he pressed, adding that it had no practical application at all.

Pulford agreed it was “hypothetical” but said she believed she was answering a “quite narrow and quite technically focused general question” put to her by acting group manager Emma Kate McGuirk, who emailed on January 18, 2017, and asked: “As discussed, I am looking for advice, please, regarding a last resort method of debt identification for income support recipients … is it lawful to use an averaging method as a last resort to determine the debt?”

Pulford says she does not recall the robo-debt program being mentioned in this context. That being the case, Greggery pushed, why did emails written by Pulford mention a “business need” to “justify” the question being asked?

“The difficulty with you saying that you don’t believe the robo-debt scheme was raised is the evidence that you have given that you simply cannot recall the context of what was occurring socially, or politically, or within the office, or within your department, at the time that you were asked this question,” Greggery said.

“As a purely academic question about administrative decision-making, one doesn’t need to have regard to a business need do they?” No, Pulford agreed. She was then asked if she felt pressure from above to massage her advice.

“I believe I felt pressure from Ms McGuirk to provide an answer that justified taking action in circumstances which the broad general advice in 2014 would not have supported on its face,” she said.

“I now cannot recall whether that was done in full awareness of the robo-debt scheme being in full flight or not.”

McGuirk, who had involvement with robo-debt for only a matter of weeks and who took the stand briefly on Wednesday afternoon, said she could not recall this conversation with Pulford but accepted one must have happened, as it is referred to in the email.

Greggery and Pulford argued back and forth about whether the 2017 advice was just a “rehash” of the same 2014 question with a different answer. Greggery’s view concluded like this: “Despite all the investigation in the world, if all you’re left with is smoothed income, you still arrive at the same answer that you gave in 2014. Legally, the absence of evidence doesn’t amount to positive proof of a debt, correct?”

Pulford wrote a separate email in February 2017 to a colleague in which she noted that “DSS policy has become more comfortable with the DHS approach of using smoothed income, given it is being applied as a last resort”.

She continued, “This appears to represent a change in DSS position, although it doesn’t represent a change in the legal position.”

On the stand, Pulford accepted that this meant the robo-debt scheme was, and remained, “legally flawed”.

In isolation, it is conceivable that the different cogs in the social service machine really had become aligned with the original DHS proposal. After all, despite early and significant doubt over its legality, the idea still made it to the minister’s office in a joint executive minute alongside a bundle of options presented for the 2015-16 budget.

A new minister at that time, Scott Morrison, with his eyes on the Treasury, liked the “PAYG” element. Once he had seen it, there was apparently no turning back.

“Minister Morrison has requested that the DHS bring forward proposals for strengthening the integrity of the welfare system,” DSS branch manager Catherine Dalton wrote to Pulford in January 2015.

“DHS has developed the attached minute and, given the quick turnaround required to the Social Security Performance and Analysis Branch, has provided comments highlighting the need for legislative change, as well as the shift away from underlying principles of social security law.

“We would appreciate your scrutiny of the proposals and advice on any legal implications/impediments. What action would need to be undertaken to resolve legal issues, as well as some indication of the lead time required to obtain legislative change?”

This, of course, was never done. After the PAYG option was cleared for advancement by Morrison, DHS drafted a “new policy proposal”, including a checklist that indicated “no legislation is required”.

So far the inquiry has heard only from DSS public servants.

What began as an idea floated within the public service to please political masters had done exactly that. Now that it involved the knowledge of those politicians, the pressure to deliver was many orders of magnitude higher than before. All of this was happening despite additional “legal questions” being identified in 2015 by internal DSS lawyer David Hertzberg. Handling a jarring disconnect between what was now being asked, and the ever-growing certainty that robo-debt had no legislative basis whatsoever, required an unlearning of unhelpful facts or the almost comical evasion of knowledge.

Take the events of mid-2018, when the DHS referred an Administrative Appeals Tribunal to DSS to consider an appeal. At stake was a robo-debt case that threatened to derail the program, or at least add to mounting and sustained public backlash.

The AAT decision so alarmed DSS officials that they punctured a longstanding refusal to get outside legal counsel regarding the legality of robo-debt and enlisted the private law firm Clayton Utz to provide an opinion on the matter.

In the eyes of those same officials, it was not a good opinion.

“In our view, the Social Security Act in its present form does not allow the Department of Social Services to determine the Youth Allowance or New Starts recipient fortnightly income by taking an amount reported to the ATO for a person as a consequence of data-matching processes and notionally attributing that amount to or averaging that amount over particular fortnightly periods,” the draft advice says.

This draft advice was sent to DSS principal lawyer Anna Fredericks on August 14, 2018, and must have produced an extraordinary cognitive dissonance among legal officers there.

Fredericks emailed colleagues and said the advice from Cain Sibley and John Bird was “somewhat unhelpful”.

“[They] called me to discuss as the advice is somewhat unhelpful if the mechanism is something that the department wants to continue to rely on,” Fredericks said in the email, sent to Melanie Metz and Pulford. “Cain advised that they might be able to rework the advice subtly if this causes catastrophic issues for us, but that there is not a lot of room for them to do so.”

Backed into a corner, someone within DSS decided to deal with the problem by pretending it didn’t exist. The Clayton Utz invoice was paid but the department never asked for the draft advice to be “converted” to final, more “official”, advice.

Was this not extraordinary? No, Pulford said, because this kind of thing happened all the time. If the advice on any given matter was not favourable or judged as no longer needed, it would not be finalised.

Commissioner Catherine Holmes, who has shown herself to be a fair but direct chair of the inquiry, simply said: “I am appalled.”

Robo-debt continued its standover of welfare recipients for another year, at which time a class action threatened to tear down everything that political avarice and public service timidity had built.

The Commonwealth settled for $1.8 billion. The case was abandoned and, two months after receiving the solicitor-general’s advice, the Coalition announced that robo-debt was suspended. It was finally terminated in May 2020.

Greggery asked Pulford: “Where’s the line between losing something and active concealment in your mind?”

Pulford’s counsel objected for reasons that complicate this story: Pulford was a principal lawyer but she was not a director of the team, nor a branch manager that oversees teams. She was not, as it were, a decision-maker.

In the Australian public service there are many people who make decisions at every conceivable iteration of a policy, but there are very few “decision-makers”. Above the branch managers are the group managers and above them are the deputy secretaries in various bands and striations. Above them all are the secretaries. Within each of these categories there are ranks and hierarchies.

Greggery, when introducing each new name of a public servant, asked a variation of: Where did that person fit or what was their rank? This matters because, more so than most workplaces, the public service functions by splitting the breadth of an entire government into realms of productivity and effort, such that the collective knowledge of a government is amassed only at the top.

But these public servants also have obligations. This royal commission has already begun to signal that it is likely serious breaches have occurred. But by whom, and when?

DSS group manager Emma Kate McGuirk, who now heads the Redress Group within the department, said on Wednesday that she asked for more advice in 2017 because she was “new” to robo-debt and her team had “understood” that after the 2014 advice, DHS “had taken that on board and were implementing a system in accordance with legislation”. That was never so.

In dry legal argument, Timothy Begbie, acting for the Commonwealth, argued that some federal government documents should be kept out of the inquiry because they showed or could help reveal the deliberations of cabinet. For the most part, Commissioner Holmes has ignored this plea.

After the first full week of her royal commission, a few things are clear. Robo-debt was a wicked scheme. It was illegal, and many people knew or ought to have known it was illegal from its conception. Despite this understanding, which never vanished, it was rolled out in such a way as to herd past and current welfare recipients, like cattle, through deliberately designed gateways that maximised the amount of money they could be forced to pay.

For many, they never owed a cent. This was a particularly cruel abuse of the Australian public, at scale, by their own government, which persisted – indeed, which was covered up – for five years against truly overwhelming evidence that it should never have been allowed to begin.

To some senior public servants, it was always wrong. It targeted the most vulnerable, knowing they would be the least able to push back. “A lot of the individuals that would end up receiving these notices … the onus of proof would be a level of proof they simply would not be able to substantiate,” former DSS director of payment integrity and debt management Cameron Brown said during evidence on Thursday.

“Unemployed people are… almost by definition, they have vulnerable cohorts within them. There would be people who would enter into agreements to repay debts which they had not incurred in the first place. And I felt that that practice, as a result, would be unethical.”

Brown said the legal advice was “black and white”. For him, there was no doubting its meaning. “It was as definitive as I’ve ever seen. The proposal needed to change substantially in order to proceed.”

The hearings continue.

This article was first published in the print edition of The Saturday Paper on November 5, 2022 as “Robo-debt: Liberals knew it was illegal before it started “.

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