Morrison Government expects to be forced to refund est. $555.6 million unlawfully taken from at least 449,500 Centrelink clients

Photograph: The Guardian graphic, 27 March 2020

In July 2016 the federal Coaltion Government began to issue income compliance notices based on automated data matching.

At the time the then Minister for Social Social Services Scott Morrison expected to clawback an est. $1.7 billion dollars over five years from individuals who were, or had been in the past, receiving a Centrelink pension, benefit or allowance.

From its beginning this income compliance scheme was seen as flawed.

By 2019 at least 570,000 of those over 600,000 income compliance notices were considered to be unlawful. As were Australian Taxation Office garnishee notices associated with these alleged debts.

A total of 18,000 individuals who consented to automated data matching to calculate an alleged debt are also considered to have been subject to an unlawful action.

Refunding these wrongfully raised debts would see at least $555.6 million returned to Centrelink clients.

A class action on behalf of victims of the unlawful ‘robodebt’ scheme has been commenced by Gordon Legal.

Becoming a member of a class action does not expose a ‘robodebt’ recipient to any additional legal liability with regard to the alleged debt.

However, the Morrison Government is possibly hoping many victims will not realise this and sign the Centrelink “Opt Out Notice – Federal Court of Australia – ‘Robodebt’(Social Security Debt Collection) Class Action (VID1252/2019)” notices it is currently sending out.

Gordon Legal has outlined possible court dates:

On 6 March 2020 the Honourable Mr Justice Murphy of the Federal Court ordered that the parties hold a mediation prior to 19 June 2020. This is an opportunity for the matter to be resolved with the consent of both parties.

Justice Murphy also ordered that, if the matter does not settle at mediation, a trial will begin in the Federal Court on 20 July 2020 (or if that date is not available, on 21 September 2020).

Services Australia (formerly the Dept. of Social Services-Centrelink) despite its denials continues to raise alleged debts and send out notices.

While the very unhappy Morrison Government probably hoping to discourage future class actions is also pushing ahead with a parliamentary inquiry into the class action industry, including the profits made by litigation funders that bankroll claims on behalf of Australians.

The Guardian, 18 May 2020:

Hundreds of thousands of Australians affected by the government’s robodebt scheme will receive notices from Centrelink about an upcoming class action under orders from the federal court.

Guardian Australia last month revealed secret government advice showing the commonwealth hopes to settle the case and has privately admitted more than 400,000 welfare debts were unlawfully issued under the scandal-ridden “income compliance program”.

But the parties are yet to reach a settlement, setting up a potential trial as early as July where law firm Gordon Legal will seek interest and compensation as well as the repayment of debts unlawfully claimed by the government.

Under court orders issued in March, the government has been told to identify all potential class action members and send out notices via MyGov or by post about the upcoming court challenge by 25 May.

More than 12,000 people have registered with the firm, but under Australian law people identified as members of the “class” are considered part of the action unless they “opt-out”, which would allow them to pursue their own individual claim.

Labor’s government services spokesman, Bill Shorten, said the government should “settle this case immediately, restore public confidence in Centrelink by allowing the court to be the independent umpire, and pay the victims back their money as well as interest”.

“This would allow the hundreds of Centrelink workers working on limiting the government’s robodebt exposure to be moved back to the frontlines of helping their fellow Australians with their social security needs in this time of national challenge,” he told Guardian Australia.

Since July 2015, more than 600,000 debt notices had been sent out under the scheme, which the government conceded was unlawful in federal court in November, while thousands more received letters demanding they prove they were not overpaid by Centrelink.

Some debt recipients had their tax returns seized over the debts, while others were also forced to pay a 10% “recovery fee” on top of the alleged debt.

Gordon Legal believes the case would represent one of the largest class actions in Australian history.

Late last week, the government declined to answer several written questions about the robodebt scheme, successfully applying for public interest immunity in the Senate.

Services Australia declined to answer how many debts had been issued using the unlawful “income averaging” method or whether it would repay victims, including debts recovered from deceased estates.

“This question relates to a court case that is currently before the federal court of Australia,” the agency said. “Services Australia will abide by any decision of the court.”

But a ministerial submission to cabinet, leaked to the Guardian, revealed the government hopes to settle the case and that Services Australia expects to “administer 449,500 refunds determined under the programme”, worth $555.6m.

The robodebt class action notices come as the government pushes ahead with plans for an inquiry into class actions in Australia.

Porter last week claimed a “lack of regulation governing the booming litigation funding industry is leading to poor justice outcomes”.

But Labor has argued the inquiry is a response to Gordon Legal’s class action against the robodebt scheme.

If the parties do not reach a settlement, a trial is expected between July and September.

The government’s legal advice shows it expects to lose the class action under Gordon Legal’s claim of “unjust enrichment”, although it believes the compensation claim is less likely to be successful.

“This is likely to result in the commonwealth being ordered to repay debts within a timeframe set by the Court, and to pay interest and legal costs,” the advice said.

Court documents show the number of potential victims expanded in March after the government withdrew an earlier claim that people receiving Carer Payment were not subjected to the scheme.

The government has conceded in court that debts that relied on income averaging were invalidly raised, but claims it should not have to pay compensation because it does not hold a common law duty of care to welfare recipients…...