Court approves $1.2b Robodebt settlement

A judge has approved a $1.2 billion settlement between Robodebt victims and the federal government while slamming the scheme for being a “shameful chapter”.

Justice Bernard Murphy on Friday said the use of flawed income averaging tools to raise debts caused financial hardship, distress and anxiety to many vulnerable people.

The settlement distribution scheme had also resulted in a “huge waste of public money”, he said.


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“The proceeding has exposed a shameful chapter in the administration of the Commonwealth social security system and a massive failure of public administration,” Justice Murphy told the Federal Court.

The federal government should have known that many welfare recipients do not earn a stable or constant income, he said, and may only be employed on a part-time, casual or intermittent basis.

However, Justice Murphy was not convinced the federal government knew the Robodebt scheme was unlawful from the start.

“I am reminded of the aphorism that, given a choice between a stuff-up and a conspiracy, one should usually choose a stuff-up,” he said.

The 648,000-strong class action was led by Gordon Legal.

Justice Murphy approved $8.4 million in costs to the firm and said the 680 people who objected to the settlement would be given the opportunity to opt out.

Gordon Legal partner Andrew Grech said the settlement approval would bring closure to the victims of the Robodebt scheme.

“We hope this outcome brings peace of mind and some certainty to all class action members and acts as a strong deterrent against similar callous welfare practices for both present and future governments,” Mr Grech said.

Fiona Forsyth QC, who represented the group members, previously said the use of flawed income averaging tools to raise debts caused vulnerable people stress and humiliation.

Victims were “treated like criminals” and left “feeling like welfare cheats” as they received rude calls from debt collectors and Centrelink staff, Ms Forsyth said.

They had their tax returns garnisheed, were forced to take extra jobs or expensive loans, and suffered detrimental effects in their relationships and mental health, sometimes leading to self-harm.

The automated matching of tax and Centrelink data to raise debts against welfare recipients the government claimed to have overpaid was ruled unlawful in 2019.

The Commonwealth subsequently settled the case without admitting legal liability.

Under the settlement, victims would receive $112 million in compensation, be repaid $720 million and have $400 million in unlawful debts wiped.

Justice Murphy earlier described it as a “good settlement”, but also questioned how fair the ultimate distribution of funds would be among the group members.

“You’ve got a series of people with strong claims and weaker claims,” he said.

“And rather than apportioning them, the strong claims get everything and weak claims get nothing.”

© AAP 2021