High Court decision provides much needed clarity about the law surrounding social security fraud – but more questions remain to be answered

Director of Public Prosecutions (Cth) v Keating [2013] HCA 20 (8 May 2013)

Summary

The High Court of Australia has provided much needed clarity on the question of when an omission to do an act can constitute an element of the Commonwealth offence of obtaining a financial advantage.

Whilst the High Court found a key piece of retrospectively enacted legislation to be insufficient to establish the relevant legal duty, it found that notices, sent out from time to time by Centrelink, are capable of creating such a duty.

The decision has far reaching implications for the future conduct of low level social security fraud prosecutions in Australia. It also has the potential to affect around 15,000 previous prosecutions, where people have been charged with welfare fraud because they omitted to tell Centrelink of a change in circumstances.

Background

Social security recipients, when charged with a crime due to overpayment, are usually charged under section 135.2 of the Criminal Code Act 1995 (Cth). Charges are based on commissions (false statements) and/or omissions (failure to declare).

Section 135.2 states that a person is guilty of the offence of obtaining a financial advantage from a Commonwealth entity where the person “engages in conduct” that results in the person knowingly obtaining a financial advantage, to which they are not entitled, for themselves or another person.

Section 4.1(2) of the Code defines “engage in conduct” as doing an act or omitting to perform an act. Further, section 4.3 provides that an omission to perform an act can only be a physical element of an offence if the law creating the offence makes it so, or impliedly provides that the offence is committed by an omission to perform an act that by law there is a duty to perform.

Victoria Legal Aid acted for Ms Keating who was charged with three offences under section 135.2, in relation to a debt of parenting payments of $6,292 for the period May 2007 to September 2009. Whilst Ms Keating had reported her initial fortnightly income she was not required to report on a regular basis. Her fortnightly income fluctuated – sometimes over and sometimes under her initial report. During this time, Centrelink issued a number of notices to Ms Keating requiring her to advise of various matters, including changes to her income. However, it was not agreed that Ms Keating ever received these notices.

Relevant to Ms Keating’s prosecution was an earlier decision of the High Court in Director of Public Prosecutions (Cth) v Poniatowska (2011) 244 CLR 408 which considered section 135.2 of the Code. In Poniatowska the High Court held that for a person to breach section 135.2(1) by omitting to do something, the omission needs to relate to an act that the person was under a legal duty to perform.

In response to Poniatowska (and, in fact, prior to the High Court handing down its decision), the Social Security and other Legislation (Miscellaneous Measures) Act 2011 (Cth) (“the Amending Act”) was passed and received Royal Assent on 4 August 2011. This Amending Act, introduced a new section 66A into the Social Security Administration Act 1999 (Cth) (“the Administration Act”). Section 66A stipulates that if an event or change of circumstances occurs that might affect the payment of a social security payment, a person must notify the Department within 14 days after the event or change occurs.

As the Amending Act provided that section 66A was taken to have commenced on 20 March 2000, this amendment retrospectively imposed a legal obligation on welfare recipients.

On 23 July 2012, VLA lodged an application with the High Court under section 40 of the Judiciary Act 1903 (Cth), seeking the removal of Ms Keating’s prosecution from the Magistrates' Court of Victoria to the High Court, in order to test the validity and construction of section 66A. The removal application was granted on the basis that it involved a matter in need of “urgent decision” by the High Court.

Decision

In relation to section 66A, the High Court unanimously agreed that the section created a “statutory fiction”. It has the effect of attracting criminal liability for failure to advise of an event within 14 days of its occurrence, notwithstanding that at the time of the failure, there was no legal requirement to inform the Department of the event. The duty is therefore incapable of discharge. The Court also noted that there must be a “clear statement of legislative intention” before a court will retrospectively find criminal liability.

In relation to the “information notices”, which are typically sent to Centrelink customers at irregular intervals, the Court observed that the duty to comply with notices from the Department is contained in section 74 of the Administration Act. There is a legal obligation on a person to comply with a notice “only to the extent to which the person is capable” and does not apply where a person has a reasonable excuse for refusing or failing to comply with the notice. Whilst the Court considered that an intentional failure to comply with a notice, where the failure results in a financial advantage, could amount to an offence under section 135(2) of the Code, whether it actually did so in a particular case would depend on the scope of the obligation contained in the relevant notice, and whether the limits on the obligation in section 74 applied.

Commentary

In finding that section 66A does not create a retrospective duty, the decision affirms one of the fundamental tenets of criminal law – that the law should be certain and only an intentional failure to comply with a legal duty should give rise to a criminal offence. Therefore, the case has provided urgently needed reassurance against the harsh and unfair effects of retrospective legislation.

In finding that the information notices sent by Centrelink are capable of creating a legal duty for the purposes of the Code, the Court has left for determination by the Magistrates’ Court, the scope of the obligation created by individual notices, which are in varying terms.

Accordingly, a defence may be available where:

• there is a live issue regarding the person’s capacity to comply with the notices;
• a person did not receive the notices; or
• a person had some other reasonable excuse for not complying with the notices.

So, for a large number of vulnerable welfare recipients experiencing mental health, intellectual disability or language and literacy issues, which may compromise their ability to comply with Centrelink notices, this High Court decision provides some clarity around the legal obligation imposed by such notices. Whilst a number of questions remain to be tested, such as the actual scope and effect of the notices, at the very least, the legal waters affecting some of the most vulnerable members of our community are now less murky.

Lawyers acting for clients with past and pending prosecutions that may be affected by this decision are encouraged to seek advice from VLA.

The full decision can be found at: http://www.austlii.edu.au/au/cases/cth/HCA/2013/20.html

Nive Achuthan, David Grove and Fiona Brice are lawyers at Victoria Legal Aid.