Commonwealth of Australia v Prygodicz

B THE PROPOSED APPEAL 6 Although the written and oral submissions refined and attenuated the argument advanced by the Commonwealth, the relevant "opposed paragraphs" of the 2FASOC were [70A], [80], [81], [82], [83], [84] and [85], and the amended draft notice of appeal was in the following terms: 1. The learned primary judge erred in granting leave for the [applicants] to file and serve their [2FASOC] (other than in respect of the unopposed paragraphs) because: 1.1 …; 1.2 the allegations in the opposed paragraphs would be likely to be struck out because they are embarrassing and do not comply with rules 16.02, 16.41, 16.43 and 16.44 of the Federal Court Rules 2011 (Cth); 1.3 the allegations in the opposed paragraphs would cause substantial prejudice or injustice to the [Commonwealth] because: 1.3.1 the particulars of the allegations of knowledge do not adequately support or particularise the allegations of knowledge introduced by the 2FASOC; 1.3.2 …; 1.3.3 the [Commonwealth] is not fairly appraised [sic] of the case that it is required to meet in respect of those allegations; 1.4 the learned primary judge misdirected himself as to the test to apply and the matters to take into account in determining whether to grant leave to amend the pleading in that he: 1.4.1 approached the question of the grant of leave on the basis that "[i]n some form or another, this pleading is going forward" and "the pleading is going to go through one way or another"; 1.4.2 approached the question of the grant of leave on the basis that unfairness to the [Commonwealth] in respect of being fairly appraised [sic] of the allegations introduced by the 2FASOC was addressed by the [applicants] having delivered their written opening submissions to the [Commonwealth]; 1.4.3 did not properly consider and give effect to section 37M of the Federal Court of Australia Act 1976 (Cth); 1.4.4 relied upon and accepted submissions and reasons that were not put at the time leave was granted. … 7 Although, unusually, the relief sought in the amended draft notice of appeal is that the opposed paragraphs in the 2FASOC "be struck out", I will proceed on the basis that what is being sought is that the order of the primary judge granting leave to file the 2FASOC be set aside and, in lieu thereof, the application for leave to amend be dismissed.

C THE FOCUS OF THE COMMONWEALTH'S ARGUMENT 8 As the primary judge recorded (at [36]), the Commonwealth's objections to the 2FASOC focussed on [70A(h)]-[70A(k)], which contain what the primary judge described as the "critical allegations of knowledge of unlawfulness"; those paragraphs were then linked to the 2FASOC at [80]-[84], which plead that because the Commonwealth knew the matters set out in [70A], the applicants are entitled to exemplary and aggravated damages. Indeed, that part of the pleading goes further and in fact contends that exemplary and aggravated damages ought to be awarded because the Commonwealth "ought to have known" of the matters pleaded in [70A], a matter to which I will return below. 9 In essence, however, the core complaint of the Commonwealth is that the primary judge's decision to grant leave is attended by sufficient doubt and, if not addressed, would give rise to a substantial injustice because the opposed paragraphs are vague and embarrassing; they do not give notice of the precise case to be met; or of the evidence required to be obtained. More specifically, it is said that the critical allegation of knowledge at [70A(k)] of the pleading illustrates the difficulties occasioned by the grant of leave. That sub-paragraph is in the following terms: (k) the Commonwealth acted unlawfully in: (i) determining and asserting against any Applicant or Group Member any Asserted Overpayment Debt, or recalculation of it; (ii) requesting or demanding repayment by any Applicant or Group Member of any Asserted Overpayment Debt, or recalculation of it; and/or (iii) recovering from any Applicant or Group Member and retaining any Asserted Overpayment Debt, or recalculation of it. PARTICULARS i. The Commonwealth knew of these matters (including their unlawfulness) because: a. it was party to Administrative Appeals Tribunal reviews in which Asserted Overpayment Debts had been set aside on the basis that the fortnightly income assumption could not lawfully support the existence of a debt, and which it elected not to appeal or have reviewed (AAT Unlawful Debt Decisions), including the 76 decisions of: i. [Here followed a list of 76 decisions of the AAT constituted by various different members from 17 February 2017 until 3 December 2019] … b. section 8(f) of the SSA provided that in administering the social security law, the Secretary was to have regard to the need to apply government policy in accordance with the law and with due regard to relevant decisions of the Tribunal, which included the AAT Unlawful Debt Decisions; c. it had conducted analysis of these decisions described by Mr Storen on 5 June 2018 [CTH.2000.0008.1516]; d. on or around 27 November 2019 it consented to orders and declarations, and agreed to a statement of facts upon which these orders and declarations were made, in the Federal Court of Australia (Davies J) in Amato v Commonwealth of Australia VID611 of 2019; ii. The Commonwealth also knew of these matters (including their unlawfulness) because the following officers of the Commonwealth knew the matters set out below, knowledge of such persons being knowledge of the Commonwealth by reason of the positions held by those persons: a. by 4 April 2018, Mr Storen had become aware of criticism by Professor Terry Carney questioning the legality of Robodebt-raised debts [CTH.2000.0007.5561]; b. by 13 April 2018, Deputy Secretaries and Ms Musolino had become aware of criticism by Professor Carney questioning the legality of Robodebt-raised debts [CTH.2001.0009.6833]; c. by 22 April 2018, Ms Musolino and Mr McNamara had become aware of further criticism by Professor Carney questioning the legality of Robodebt-raised debts [CTH.2001.0009.7055]; d. on 15 May 2018, Ms Musolino chaired a meeting with the Ombudsman in which the 'issues raised in the article by Professor Carney' were discussed' [CTH.2001.0009.8585]; e. on 19 December 2018, Mr McNamara, Mr Storen and Ms Musolino had become aware of an article by Professor Carney in which the Robodebt system was described as 'unlawful' [CTH.2001.0012.1134, CTH.2001.0012] 10 As to this aspect of the proposed appeal, the Commonwealth advances arguments which seem to come down to two propositions, both of which were advanced before the primary judge but which exhibit a degree of internal tension: first, the pleading of knowledge is hopeless and wholly deficient to make out an allegation that actual knowledge of the Commonwealth of illegality can be proved; and secondly, by allowing the pleading to go forward, it places the Commonwealth in the invidious position of being forced to choose between accepting the risk of having a Jones v Dunkel (1959) 101 CLR 298 inference drawn against it, or calling the specified individuals and waiving privilege. 11 The primary judge accepted (at [53]-[56]) that the pleading could be correctly criticised for being a "weak basis for asserting knowledge of unlawfulness", but that it was incorrect to characterise it as "impossible" or "hopeless". One suspects that the primary judge described the pleading as weak because, inter alia, it asserts actual knowledge of unlawfulness because of the communication and consideration of criticisms of a third party (Professor Carney, who allegedly questioned the legality of Robodebt-raised debts), without excluding the prospect that those criticisms were considered by the relevant officers the Commonwealth at the time as arguably not representing the correct legal position. In any event, his Honour also expressly found (at [53]) that the pleading put the Commonwealth sufficiently on notice of the case it is required to meet. 12 In the light of those findings, the basic function of the pleading was, according to the primary judge, met: to provide procedural fairness by disclosing an arguable (albeit, weak) cause of action and ensuring the opposing party is apprised of the case to be met. 13 It appears the real difficulty in this case is twofold. The first is that opening submissions have been filed by the applicants, which, on any proper reading of the pleading, travel beyond both the terms of the 2FASOC and his Honour's explication as to how the pleading is to be read. This is further reflected in the submissions made on the application for leave to appeal, where counsel for the applicants, at least on one view, seemed to hint that not all material facts upon which the primary judge will be invited to draw an inference of knowledge have been pleaded because they might "emerge" from the evidence. No doubt the primary judge meant what he said when he made it pellucid that the case will be heard and decided upon the pleadings and evidence relevant to the issues joined, and that unpleaded material facts and allegations that travel beyond the pleadings will be disregarded. 14 The second is the extent of the weakness of some of the allegations. The primary judge's characterisation of the pleading of actual knowledge of illegality by the Commonwealth as "weak" might be seen as an example of his Honour's characteristic polite understatement; it might be thought, albeit on an impressionistic basis, that aspects of the pleading suggest a real question arises as to whether there currently exists, within the knowledge of those acting for the applicants, a reasonable basis for some of the allegations made. One example will suffice. 15 The class action has been commenced on behalf of four categories of persons. Each of whom, following what is described as a Robodebt notification, received an assertion of overpayment of one or more Social Security Payments recoverable by the Commonwealth as a debt, and defined in the pleading as an "Asserted Overpayment Debt". One category of the group members (and, apparently, the third applicant in respect of what is described as the Second Debt Period) had an Asserted Overpayment Debt that was neither wholly nor partly a Robodebt-raised debt at all, but simply had a debt determined by the Commonwealth based upon income information provided subsequent to a Robodebt notification. These are called the "Category 4 Group Members" in the pleading. In respect of these persons, even if there was not a relevant Robodebt-raised debt, it is nevertheless alleged that the Asserted Overpayment Debt was determined and based upon income information provided "in response to a Robodebt notification": see 2FOSAC [1(b)(ii)], [41A(d)] and [45]. As I understand the pleading (and my understanding was not disputed by Senior Counsel for the applicants), it is said, even though there was no Robodebt-raised debt, given that a debt was raised in the circumstances pleaded, the Commonwealth was not only unlawfully alleging a debt, but that by virtue of [70A(k)], the Commonwealth actually knew it was acting unlawfully. Given the seriousness of the allegation and the novelty as to this aspect of the argument as to illegality, prima facie, this seems to me to be a most remarkable allegation to be made on the basis of the material identified. 16 At the end of the day, I am not the primary judge and it may be my understanding is deficient and what, on an impressionistic basis, is a somewhat surprising pleading may be shown to have had some foundation; but those acting for the applicants will no doubt be required to reflect closely upon whether they had, and have, a reasonable basis for making an allegation of dishonesty on the basis of the materials currently in their possession in accordance with their professional obligations. 17 When one understands, however, how the primary judge approached the pleading (as reflected at [53]), his Honour came to the conclusion that, although what I might describe as the "core" case of actual knowledge may be weak, it was sufficiently arguable to go to a trial. Indeed, on balance, when one has regard to how the primary judge characterised the nature of the allegations (at [53]), there is insufficient prospect of establishing error in his Honour forming the view that the case was not sufficiently "hopeless" or "impossible" (as alleged by the Commonwealth) to mean that it ought not to proceed to a trial. Whether the applicants can prove the material facts alleged and persuade the Court, in the light of the whole of the evidence, that the inferences pleaded as to actual knowledge of illegality should be drawn, is quite another matter but was regarded by the primary judge as a matter for trial. 18 In granting leave, the primary judge sought to ensure that the real questions in controversy, as identified by the parties, be decided. While aspects of the pleading are troubling, given the way it was characterised and explained by the primary judge, it seems to me it was open to his Honour to give leave. It is beyond the scope of these reasons to comment on whether the forensic choice of the applicants to expand this case beyond a straightforward claim focussing on restitutionary relief is a sound one, or is consistent with the overarching purpose provisions enumerated in Pt VB of the Federal Court of Australia Act 1976 (Cth) (Act). 19 Even if I was wrong as to this conclusion, I do not consider that there is any substantial prejudice occasioned to the Commonwealth by refusing leave to appeal and I am not satisfied, in the exercise of my discretion, that the grant of leave would best promote the overarching purpose: see 37M(3) of the Act. 20 I will deal with the overarching purpose in terms below, but as to substantial prejudice, the Commonwealth is required to meet a case that has now been pleaded - no more and no less. If the pleaded case is successful at the initial trial, it would be open to the Commonwealth on appeal to maintain its current argument that any conclusion as to knowledge of actual illegality could not logically be drawn from the facts pleaded, particularised and proved (that is, in effect, the case was akin to being demurrable); if an unpleaded case was successful at the initial trial (contrary to how the primary judge has made clear the case will be conducted), then no doubt the Commonwealth would also be in a position to appeal. 21 The focus of the alleged prejudice appears to be on the forensic decisions now confronting the Commonwealth. It seems to me this is overstated. It is trite that the applicants will be required to prove the serious allegations they have made to the civil standard having regard to the degree of satisfaction required by s 140 of the Evidence Act 1995 (Cth). However, in deciding whether it is satisfied that the case has been proved, the Court is to take into account, relevantly (by virtue of subsection (2)), the nature of the cause of action and the gravity of the matters alleged. Indeed, although the standard of proof remains the balance of probabilities, the degree of satisfaction varies according to the seriousness of the allegations made and the gravity of the consequences. In the present case, as I have noted, the applicants seek to prove, by a process of inferential reasoning, actual knowledge of individuals that should be attributed to the Commonwealth. As I recently explained in a very different context in Katragadda v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCAFC 143 (at [77]), this requires proof of a fact: as Bowen LJ famously said, "the state of a man's mind is as much a fact as the state of his digestion": Edgington v Fitzmaurice [1885] 29 Ch D 459 (at 483). Further, as Sir Owen Dixon emphasised in a number of cases, when the law requires proof of any fact, the tribunal of fact "must feel an actual persuasion of its occurrence or existence before it can be found" (Briginshaw v Briginshaw (1938) 60 CLR 336 (at 361, with emphasis added)); a party bearing the onus will not succeed unless the whole of the evidence establishes a "reasonable satisfaction" on the preponderance of probabilities such as to sustain the relevant issue (Axon v Axon (1937) 59 CLR 395 (at 403)); and the "facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied" (Jones v Dunkel (1959) 101 CLR 298 (at 305)). 22 Given the Commonwealth's perception of manifest deficiencies in the applicants' pleaded case, and the principled approach to onus, the apparent vexation of the Commonwealth related to Jones v Dunkel might be thought to be exaggerated. But, in any event, forensic decisions often need to be made in litigation when facing an allegation which might be objectively thought to be weak. This does not, however, in my view, amount to substantial prejudice. As was explained in Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 (at 412-3 [165]-[167] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ), "[d]isputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led". When considering the alleged substantial prejudice, it is important to bear in mind that the rule does not enable the absence of a witness to make up any deficiency of evidence and it will not support an adverse inference unless the evidence otherwise provides a basis on which that unfavourable inference can be drawn. 23 Finally, in exercising my discretion to refuse leave, it is necessary to have regard to the overarching purpose and its promotion: see s 37M(3) of the Act. This is a large class action which has already seen a delay in the commencement of a hearing. If leave to appeal was granted, there is almost an inevitability, given that the list for the November sitting period of the Full Court has already been set, that the hearing will be adjourned until a Full Court could be convened next year and the Full Court has heard and determined any appeal. Given the commitments of the docket judge, this could delay the commencement of the initial trial for a very considerable period of time, well into the latter part of next year. In the present circumstances, leave to allow a collateral dispute regarding a practice and procedure decision to be resolved would lead to a considerable delay meaning the real issues between the parties would be determined less quickly, more expensively and less efficiently. 24 For the above reasons, the application for leave to appeal in relation to the core complaint of the Commonwealth ought to be refused.

D OTHER CONTENTIONS OF THE COMMONWEALTH 25 Although not the focus of submissions, it is appropriate to deal briefly with the miscellany of other points made by the Commonwealth as to why leave should be granted on an impressionistic basis. 26 First, as to proposed ground 1.4.1 (that the primary judge approached the question of leave on the basis that the pleading is going to go through "one way or another"), such a comment was obviously a reference to the fact that his Honour was determined to ensure that all issues raised (and then properly framed by the parties) would be determined at the initial trial. His Honour's evident care to ensure a maladroit pleading did not go forward is evident from his refusal of leave to amend in respect of an earlier proposed pleading on 31 August 2020. 27 Secondly, as to proposed ground 1.4.2 (that the primary judge approached the question of leave on the basis that deficiencies in the pleadings were addressed by the applicants having delivered their written opening submissions to the Commonwealth), this misunderstands what the primary judge meant by those comments. Pleadings are about procedural fairness and, to the extent submissions advance a case as pleaded, the pleadings are given context and serve to identify and elucidate the evidence that will be adduced to make out the material facts and causes of action pleaded. Although given aspects of the content of the opening submissions filed by the applicants the Commonwealth's apprehensions are perhaps understandable, his Honour could not have made it plainer that this case will be determined on the pleadings, not on the basis of some evolving case theory shifting around like mercury on a plate in submissions. 28 Thirdly, as to proposed ground 1.4.3 (that the primary judge did not properly consider and give effect to the overarching purpose), this unparticularised proposed ground adds nothing and is not reflected by the way in which the primary judge pragmatically dealt with the question of leave. 29 Fourthly, as to the belatedly advanced proposed ground 1.4.4 (that the primary judge relied upon and accepted submissions not put at the time leave was granted), this does not do justice to his Honour's reasons. It is asserted that a submission made by the applicants providing an explanation of the essence of the case advanced with respect to knowledge of unlawfulness was accepted by the primary judge (at [53]), notwithstanding it was made two weeks after leave was granted. Accordingly, it is said that: (a) it is apparent that this aspect of the reasons does not explain the primary judge's process of reasoning in granting leave; (b) it was not possible for the Commonwealth to respond to or address the "submission" accepted; and (c) the "submission" accepted by his Honour does not accord with the 2FASOC. The difficulty with these points is that what the primary judge was evidently doing was adopting a convenient summary of how his Honour, at the time he considered the grant of leave, conceptualised the core nature of the case proposed to be advanced by the 2FASOC. I am not satisfied that there was a denial of procedural fairness in the way which matters proceeded before the primary judge and this does not give rise to any arguable error. 30 Fifthly, there is what is described in the Commonwealth's submissions as the "aggregation problem". The Commonwealth complains that the 2FASOC fails to plead or particularise how the knowledge of the named persons is said to be aggregated and then attributed to the Commonwealth, when authority requires that the bases of imputation and any aggregation must be pleaded. In response, the applicants contend the problem is chimerical and agree with the primary judge that the particulars to [70A], in naming specific individuals, plead (and only plead) that their actual knowledge "is the knowledge of the Commonwealth by reason of the positions held by those persons" and accept, including in submissions before me, that there is no process of aggregation relied upon as that concept has been considered, and often disparaged, in the authorities. 31 Having assessed these additional arguments advanced by the Commonwealth at a reasonably impressionistic level, I do not consider any proposed appeal on these grounds is sufficiently arguable nor, for reasons I have explained above, do I consider that supposing these aspects of the decision to be wrong, substantial injustice would result if leave were refused. Finally, I am satisfied a grant of leave would not serve to best promote the overarching purpose.

E TWO ADDITIONAL MATTERS 32 For completeness I should mention two further matters. 33 The first was not the subject of any written submissions, being the applicants' pleading at 2FASOC [83], which was in the following terms: Further, the Applicants claim exemplary damages with respect to their own and Group Members' claims in unjust enrichment and monies had and received. 34 I have not heard any argument on this aspect of the pleading, but if this had been the subject of complaint by the Commonwealth below, I think it should have been upheld. But there is no error below because the issue was not advanced in terms before the primary judge (and hence, entirely understandably, his Honour did not deal with it). It suffices to note that the pleading is unsupported by authority and intuitively makes no sense. Unjust enrichment is not a cause of action. It is a concept performing a taxonomical function referring to categories in which the law allows recovery by one person of a benefit retained by another. The enquiry undertaken in relation to restitutionary relief in Australia (being an enquiry directed to who should properly bear loss and why) is conducted by reference to equitable principles. "Damages" is a common law remedy, and the use of the term "exemplary damages" in relation to an enquiry undertaken by reference to equitable principles is heterodox. To say the least, the notion that a form of punitive monetary award could be made in the circumstances pleaded is a highly surprising one when it is fundamental that a restitutionary claim (advanced by the common law action for "money had and received") is based solely on the informing principle of the prevention and reversal of unjust enrichment. I mention this matter not to make an irrelevant point on the leave application, but because the mere fact that this would be pleaded (together with the matter mentioned at [15] above), has given me some pause because it might be thought to be a tell-tale that insufficient care and attention has been given to the pleading generally. 35 Secondly, there is the passing reference in the 2FASOC (at [80]) to recklessness. Although it has been said that reckless indifference amounts to a state of mind "close to deliberate dishonesty" (see, eg, Kaur v Minister for Immigration and Border Protection [2019] FCAFC 53; (2019) 269 FCR 464 (at 501 [137] per Murphy, Mortimer and O'Callaghan JJ)), it is important to bear in mind that reckless indifference is not to be equated with deliberate dishonesty, in that it does not amount to actual knowledge; rather, the law attaches to recklessness the same consequences as knowing conduct. It has been made clear, however, during the course of oral submissions, that there is no case of recklessness being run and the applicants have nailed their colours to the mast in pleading out and seeking to establish a case of actual knowledge of illegality by the Commonwealth.

F COSTS 36 As was explained by Gleeson CJ, Gummow, Hayne and Crennan JJ in Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 (at 62-3 [25]), although there is "no absolute rule", one of the "general propositions" regarding an award of costs is that "the award is discretionary but generally that discretion is exercised in favour of the successful party". But the Court has a broad power to award costs under s 43 of the Act. It has often been remarked that the discretion as to costs is unfettered, but in exercising the discretion to award costs, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, namely to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see s 37M(1). 37 Although they may be dispelled by events at the initial trial, from the present application and my previous involvement in determining aspects of this matter, I presently have some concerns that this litigation is not being conducted by the applicants in accordance with the overarching purpose, and what might be a straightforward restitutionary claim of apparent potential merit has been made unnecessarily complex by the applicants advancing amendments which are presently weak and might, upon examination at a hearing, be demonstrated to have always had an insecure foundation in fact and law. 38 In the circumstances, I propose to reserve the question of costs and will determine it after the delivery of judgment following the hearing of the initial trial. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

SCHEDULE OF PARTIES VID 648 of 2020 Respondents Fourth Respondent: FELICITY BUTTON Fifth Respondent: SHANNON THIEL Sixth Respondent: DEVON COLLINS