Mechanisms in the ART Bill to Thwart Robodebt-type Maladministration

Download RTF - 279 KB

Australian Academy of Law conference, Melbourne

The report of the Royal Commission into the Robodebt scheme^[1] has been the catalyst for some significant provisions in the Administrative Review Tribunal Bill 2023 (‘ART Bill’). Those provisions are aimed at thwarting another similar systemic departure from lawful and transparent administrative decision-making at the Federal level.

In the next 30 minutes, I am going to refer to those provisions of the ART Bill and discuss how they would enable the Administrative Review Tribunal (‘ART’) to prevent systemic maladministration of the kind involved in the Robodebt scheme.

In addition to the ART Bill, there are also currently before Federal Parliament a number one and a number two Consequential and Transitional Provisions Bill.

I will be providing you with a high level summary of key features of the Bills in their current form. It is a matter for Parliament to decide whether to amend the Bills and, indeed, whether to pass them. Likewise, the policies underpinning the various provisions of the Bills are matters for the Government. For obvious reasons, I am not going to comment either on the Government policies or the Parliamentary process.

For ease of reference, I will assume that the three Bills will be enacted in their current form and refer to them as Acts. The Robodebt scheme involved two Departments, the Department of Human Services and the Department of Social Services. For convenience, I will refer to them as ‘the Department’ without distinguishing between them.

Before explaining how the ART might thwart Robodebt-type maladministration, I will provide some background to the Robodebt scheme.

What was Robodebt?

The Robodebt scheme was first introduced in 2015 in order to recover alleged social security overpayments. The scheme relied upon the use of an income averaging technique.

A full-time employee who works an entire year will usually receive the same fortnightly income. However, the income of part-time and casual workers such as students can vary in some fortnights.

Many welfare recipients who work part-time or casual hours are required to report their fortnightly income, as that income may affect the amount they receive from Centrelink.

Income averaging involved using a welfare recipient’s income as derived from PAYG information provided by their employer to the Australian Taxation Office (‘ATO’) and averaging the figure into fortnightly amounts for the PAYG period in order to derive what Centrelink considered to be the recipient’s ‘true’ income for that fortnight. In deriving a fortnightly amount, the Department did not take into account a welfare recipient’s actual income for each relevant fortnight. Based upon the averaged fortnightly income, the Department would then calculate the amount of social security payments that the Department considered the recipient should have received for the relevant fortnights.

When a discrepancy was detected between the averaged amount and the amount the welfare recipient had reported to the Department such that it appeared that the recipient may have been overpaid, welfare recipients would be required to explain the discrepancy. If they did not respond or they provided an explanation of the discrepancy that was considered unsatisfactory, the Department would assume that the recipient had been overpaid. A debt would be raised, and steps would be taken to recover it.

The Department would also assume that the overpayment had occurred due to the fault of the welfare recipient, and would apply a ‘recovery fee’ of 10% of the value of the ostensible overpayment.

Where the welfare recipient was still receiving benefits, deductions would be made from the welfare benefits being paid. Where the recipient was no longer receiving benefits, the recipient would be required to enter a repayment arrangement. Debt collectors would be involved if a welfare recipient did not respond, and income tax refunds were often garnished.

The whole process was designed to occur automatically with little, if any, involvement by compliance officers. In most instances, the entire process was conducted online without human involvement. Given its automated nature, the moniker of ‘robodebt’ was assigned to the scheme.

This automated Robodebt process is to be contrasted with the approach the Department had adopted previously. Then, data matching was used by the Department and ATO officers. However, where the data matching identified a discrepancy, a manual review of the files which exhibited the strongest likelihood of overpayment and the highest levels of discrepancy would be conducted by a Departmental compliance officer.^[2] The review often involved a compliance officer seeking further information from the welfare recipient and their employer.

Such a review did not take place under the Robodebt scheme. Compliance officers no longer engaged with welfare recipients or used powers to seek information from employers to determine whether a debt existed. Instead, welfare recipients were given an income figure and the onus was placed upon them to provide details to contradict it.

As it transpired, the Robodebt scheme was unlawful because the Department was not authorised to use income averaging to derive a welfare recipient’s actual fortnightly income, except as a last resort in very rare circumstances. Moreover, there was no justification for the Department applying a ‘recovery fee’ in any circumstances.

In December 2014, prior to the introduction of the Robodebt scheme, the Department obtained an opinion from in-house lawyers on the legality of the then proposed scheme.^[3] That advice emphasised that the Department needed to rely upon the fortnightly income actually received by a welfare recipient, rather than an averaged amount. The advice also stated that income averaging was inconsistent with the legislative framework. Despite knowing that the proposed scheme might be unlawful without legislative change, the Government proceeded to implement the scheme without legislative change.

The Robodebt scheme began as an initial pilot program in 2015 and was rolled out with its online platform in September 2016. It continued in various iterations for four years^[4] until it was finally terminated in June 2020.

Findings by the Royal Commission regarding the AAT and Robodebt

Welfare recipients who were informed that they owed a debt could seek review of that debt in the Social Services and Child Support Division of the Administrative Appeals Tribunal (‘AAT’). A review by that Division is known as a Tier 1 review. Hearings at Tier 1 are conducted in private and in an inquisitorial style, with the applicant being the only party present. For privacy and historical reasons, decisions made in the AAT at Tier 1 are not published. A party who is unhappy with the result at Tier 1 has a right to seek a second merits review of the original decision in the General Division of the AAT. A review by that Division is known as a Tier 2 review. Hearings at Tier 2 are conducted on an adversarial basis, with both parties being required to appear. Decisions made by the AAT at Tier 2 are usually published.

Between 2016 and 2022, the AAT at Tier 1 made 431 decisions that questioned the legal basis for using income averaging to provide evidence of actual income or overpayment and the existence of a debt.^[5] In those decisions, the AAT was not satisfied that the Department’s calculations of the alleged debt were accurate because income averaging was used to calculate the debt or part of the debt.^[6] Some decisions held that debts raised on the basis of averaging were unlawful.^[7] There were also around 114 decisions during the same period, in which the AAT accepted that income averaging was appropriate in the circumstances of those cases.^[8]

Because the Tier 1 decisions were not published, they did not receive any public scrutiny.

One of the AAT decisions was made by Professor Carney in March 2017. He set aside the Department’s decision on the basis that income averaging calculated by reference to PAYG data could not provide a sufficient evidentiary foundation to prove an overpayment or give rise in law to a debt.^[9] For this reason, he held that the methodology of income averaging was unlawful.^[10]

Prior to making this decision, Professor Carney exercised the power available under s 39AA(5) of the Administrative Appeals Tribunal Act 1975 (‘AAT Act’) to require the Department to make submissions on particular questions of law.^[11] He also invited the Department to participate in the hearing.

The Department did not appear at the hearing but made written submissions. The submissions did not address two of the questions posed by Professor Carney and did not consider whether income averaging was lawful.^[12]

The Department concluded that there were no grounds to challenge Professor Carney’s decision.^[13] However, the Department did not alert the AAT of that decision in future cases. The Department should have done so in accordance with its model litigant obligations.^[14]

The Department did not seek to challenge any other adverse Tier 1 AAT decisions by way of Tier 2 review by the AAT. Instead, it felt free to reject the reasoning of those decisions and continued to apply income averaging on the basis that it was not uniformly rejected by every AAT member.^[15]

The Department’s lawyers who reviewed AAT decisions made at Tier 1 concluded that there was no error of law and therefore no ground of challenge.^[16] Indeed on one occasion in May 2018, a recommendation was made to not pursue a challenge because it would put the income averaging methodology ‘squarely into the public arena’ and there would be ‘a risk that the whole approach of the [Robodebt scheme] would be undermined.’^[17]

The Robodebt Royal Commission concluded that, because the adverse AAT decisions were not published, the Department was able to continue with a scheme based on unlawful debt raising by not bringing the AAT decisions to the attention of applicants or the AAT in other cases.^[18] It also found that the Secretary of the Department was not informed of the adverse AAT decisions and therefore was not able to meet the Secretary’s obligation^[19] to have due regard to relevant AAT decisions in administering social security laws.^[20]

Recommendation 20.4 of the Royal Commission was that the Tribunal that replaces the AAT should devise a system for the publication, on a readily accessible platform, of first instance social security decisions which involve significant conclusions of law or have implications for social security policy. The aim of this recommendation is to ensure that important decisions, like those that were made by the AAT during the Robodebt scheme, are not effectively buried to avoid public scrutiny.

ART Act

Both the explanatory memorandum to the ART Act^[21] and the Attorney-General’s second reading speech^[22] make it clear that that some provisions of the ART Act have been included to implement the recommendations of the Robodebt Royal Commission.

By way of illustration, the word ‘Robodebt’ appears 10 times in the explanatory memorandum to the ART Act, three times in the explanatory memorandum to the First Consequential and Transitional Act^[23] and once in the explanatory memorandum to the Second Consequential and Transitional Act.^[24] Robodebt is also mentioned four times in the Attorney-General’s second reading speech on the ART Act.

The word ‘systemic’ is referred to 12 times in the ART Act, four times in the Attorney-General’s second reading speech on the ART Act, 42 times in the explanatory memorandum to the ART Act and 16 times in the explanatory memorandum to the First Consequential and Transitional Act.

I will now outline five key changes which the ART Act will introduce to prevent Robodebt-type maladministration recurring. They are:

1. The requirement that the ART’s leaders identify and report systemic issues in administrative decision-making.

2. The establishment of an internal second merits review panel called the Guidance and Appeals Panel (‘GAP’).

3. The re-establishment of the Administrative Review Council (‘Council’).

4. The power of the ART to compel an agency to attend and participate in a hearing.

5. The requirement that the ART publish certain decisions.

I will discuss these mechanisms in turn.

Identification and reporting of systemic issues

Section 193(i) of the ART Act provides that one of the President’s functions is ‘to inform relevant Ministers, relevant Commonwealth entities and the Council of any systemic issues related to the making of reviewable decisions that have been identified in the caseload of the Tribunal’.

In relation to this function, the explanatory memorandum to the ART Act refers to the findings of the Robodebt Royal Commission and states that, in performing its role, the ART will from time to time identify patterns of error or other systemic defects in administrative decision-making. It also states that the President is required to inform Commonwealth government agencies and Ministers of those issues so that they may be addressed.^[25]

The ART Act establishes eight jurisdictional areas which are to be overseen by a deputy president who is appointed by the Attorney-General as a jurisdictional area leader. The ART Act also establishes a Tribunal Advisory Committee (‘TAC’) to advise the President. The functions of the jurisdictional area leaders include ‘to identify systemic issues related to the making of reviewable decisions arising in the caseload of the jurisdictional area and to inform the President of those issues’.^[26] The TAC’s functions include ‘to oversee … systemic issues arising in … the jurisdictional areas’ and to advise the President of them.^[27]

The obligation of jurisdictional area leaders and the TAC to report systemic issues to the President has three objectives.^[28] First, to enable the President to inform Ministers and agencies of systemic issues relating to the making of decisions so that they can address them. Secondly, to enable the President to decide whether to refer systemic issues to the GAP. Thirdly, to enable the President to refer systemic issues to the Council for detailed investigation. Each of these steps avoids a systemic issue being buried or ignored.

Section 242 of the ART Act requires the President to prepare an annual report which the Attorney-General must table in each House of the Parliament. Section 242(2)(i) provides that the annual report must include a summary of actions taken by the President or jurisdictional area leaders during the year to identify systemic issues related to the making of reviewable decisions and to inform relevant Ministers, Commonwealth entities and the Council of those issues.

Guidance and Appeals Panel

I will now discuss the establishment of the GAP under Part 5 of the ART Act.

This represents a very significant reform.

The President has a discretion to refer an application for review of an agency’s decision to the GAP to conduct a first instance merits review if the President is satisfied that the application for review raises an issue of significance to administrative decision-making and that it is appropriate in the interests of justice to do so.^[29]

The President also has a discretion, upon application by a party, to refer a decision of the ART for further merits review by the GAP. This discretion applies if the President is satisfied that the decision of the ART raises an issue of significance to administrative decision-making or may contain an error of fact or law materially affecting the ART’s decision.^[30] Despite the word ‘appeal’ forming part of the GAP’s name, the further review by the GAP is not in the nature of an appeal. That is because the GAP conducts a fresh merits review and can consider all the evidence – including new evidence – and make findings of fact which differ from the findings of the ART in its first instance decision.

Thus, a matter may be referred to the GAP on the basis that it raises an issue of significance to administrative decision-making either at first instance or following the making of a first instance decision by the ART. In both situations, the GAP must be constituted by two or three members, one of whom must be the President or a deputy president.^[31]

Unless the President otherwise declares, decisions of the GAP in cases raising an issue of significance to administrative decision-making are deemed to be Tribunal guidance decisions.^[32] Tribunal guidance decisions are not formal precedential decisions that bind other Tribunal members in the same way as court decisions. However, when making a decision in future cases, a non-judicial member must have regard to a Tribunal guidance decision that the member considers raises similar facts or issues.^[33]

Because decisions of the GAP in cases raising issues of significance to administrative decision-making will be made by a panel that includes one of the most senior members of the ART and those decision will usually be deemed to be Tribunal guidance decisions, it would be expected that they will become well known and influential in future decision-making. It would be very difficult for an agency or an ART member to ignore a decision of the GAP on a systemic issue of the type involved in the Robodebt scheme. In effect, unless an agency appeals to the Federal Court from a GAP decision, the agency will have to comply with the decision in future cases.

Administrative Review Council

I now turn to the re-establishment of the Council.

The Council was established by Part V of the AAT Act to, among other things, keep the Commonwealth administrative law system under review, monitor developments in administrative law and recommend improvements that might be made to the system.^[34] The Council was defunded and effectively discontinued in the 2015–16 budget, although the provisions in the AAT Act have never been repealed.

Part 9 of the ART Act re-establishes the Council.^[35] Section 249 provides that the Council’s functions include ‘to monitor the integrity and operation of the Commonwealth administrative law system’ and ‘to inquire into systemic issues related to the making of administrative decisions and the exercise of administrative discretions.’ Other functions are to develop and publish guidance in relation to the making of administrative decisions and the exercise of administrative discretions, and to support education and training of Commonwealth officers in relation to those matters.

The members of the Council will include the President of the ART, the Commonwealth Ombudsman, the Australian Information Commissioner and up to 10 others.^[36]

When the Council prepares a report on a matter, it must give the report to the Attorney-General who in turn must table it in each House of the Parliament.^[37]

The Robodebt Royal Commission concluded that the Robodebt scheme was within the remit of the Council’s functions, and that the Council could have monitored Tier 1 AAT decisions, inquired into the Department’s conduct and reported its findings to the Attorney-General.^[38] The Commission’s recommendation 20.5 was that the Council be re-instated. Recommendation 23.4 was that the Council provide training and develop resources to inform the Australian public service about the Commonwealth administrative law system.

It is likely that if the Council had been operational when the AAT began to make decisions that the Robodebt scheme was invalid, the Council would have made strong public recommendations that the scheme be discontinued.

Section 264 of the ART Act provides that the Council’s annual report must include a description of any systemic issues related to the making of reviewable decisions that the President has informed the Council of during the year. The section also provides that the report may include a description of any actions taken by the Council in response to a systemic issue and any response that the Council is aware of that was taken by a Commonwealth entity or a Minister.

Compelling an agency to attend

I will now discuss the AAT’s power to compel an agency to attend and participate in a hearing.

As is currently the case in Tier 1 of the AAT, hearings conducted by the ART where Centrelink is a party will be in private and proceed without Centrelink participating.^[39] However, whereas currently the Social Services and Child Support Division of the AAT only has the power to compel the Department to make submissions, the ART will have the power to compel the Department and other non-participating agencies to attend and participate in a hearing.^[40] This power will reduce the likelihood of a situation like that which occurred in Professor Carney’s March 2017 decision, where the Department made deficient written submissions and declined to attend the hearing.

Non-participating parties still have obligations to assist the Tribunal and can be directed to give documents or make submissions.^[41] The ART will be able to compel an agency to assist the ART to make the correct or preferable decision by providing submissions on matters relevant to the ART’s decision.

If a matter is referred to the GAP, all parties must participate in the proceeding before the GAP.^[42]

Publication of decisions

Finally, I will discuss the requirement in section 113(2) of the ART Act that the ART publish certain decisions.

This reform directly responds to recommendation 20.4 of the Robodebt Royal Commission.^[43] Section 113(2) provides that the ART must publish a decision and the reasons for decision if the President considers that the decision involves a significant conclusion of law or has significant implications for Commonwealth policy or administration. For any other decisions of the ART, as is the position at present, the ART will have a discretion whether to publish them.^[44]

The explanatory memorandum to the ART Act states that section 113(2) will promote transparency, public trust and confidence in the ART and reflects the expectation that government agencies will act consistently with ART decisions, particularly those involving significant conclusions or implications.^[45]

Section 113(2) of the ART Act will assist in preventing the recurrence of the circumstances that arose in relation to the Robodebt scheme, where the AAT was regularly making decisions rejecting income averaging as a valid basis to calculate a debt, but those decisions were not published and were effectively ignored.

Conclusion

In conclusion, I am confident that the five mechanisms in the ART Act which I have discussed would be sufficient – certainly when considered collectively – to thwart Robodebt type maladministration in the future.

Looking at the history of the Robodebt scheme, I would like to think that, if the ART Act had been in force, the Tribunal would have taken steps to address the scheme no later than March 2017, when Professor Carney made his decision. It is likely that, at that time, the issue of invalidity of the scheme would have been drawn to the attention of the President by a jurisdictional area leader either directly or through the TAC.

The President could then have instructed registry staff to identify the next case which involved the issue of invalidity and referred that case to the GAP for determination on the basis that it raised issues of significance to administrative decision-making. The Department would have been obliged to attend the hearing before the GAP. The decision of the GAP would have been deemed to be a Tribunal guidance decision which non-judicial members of the ART would have had to take into account in cases they considered raised similar facts or issues. The President would have been obliged to publish the decision of the GAP.

It is true that the Department could have avoided a decision by the GAP by offering to settle the proceeding on terms favourable to the applicant. In such a case, the GAP would probably have made a consent order in accordance with section 103(1) of the ART Act.

However, simultaneously with a referral to the GAP, the President could have alerted relevant Ministers of the issue of invalidity and referred the matter to the Council for investigation and report.

With so many options at the President’s disposal, it is highly unlikely that the issue of invalidity could have escaped public scrutiny for as long as it did under the current legislation.

Thank you very much.