Largest class action payout in Australian history for ‘heartless and disastrous’ scheme

Robo-debt victims and their families have been awarded the largest class action settlement in Australian history after the Albanese government agreed to settle an appeal for an extra $475 million in compensation.

A royal commission into the Coalition government’s policy, which hounded more than 500,000 Australians for welfare repayments they did not owe, said the scheme was illegal, cruel, and the fallout utterly mishandled.

The commonwealth had settled the case in 2020 for $112 million, but law firm Gordon Legal launched an appeal for further payouts following the royal commission in 2023, which revealed new evidence of serious misconduct from senior public servants who designed and ran the scheme while knowing it was unlawful.

The victims will receive a further settlement of $475 million in compensation from the government, pending approval from the Federal Court. Including legal and administration costs, the settlement will cost the Commonwealth up to an extra $548.5 million.

Former Labor leader Bill Shorten – who supported the initial class action in 2019, was government services minister at the time of the royal commission and apologised to the victims in parliament – said the settlement vindicated the push for justice.

“I know the Coalition laughed at me. Even some of the media thought it was relevance deprivation, and at different times, [Gordon Legal and I] were described as conspiracy theorists,” said Shorten, who is now vice-chancellor of the University of Canberra.

“There was arrogance and dishonesty and an awareness of unlawfulness in the highest levels of the previous government.”

Shorten said he hoped the result would usher in change for the most vulnerable in society.

“Battlers using the safety net, hopefully for the foreseeable future, won’t be treated as dole-bludging cheats, and they’ll be given the benefit of the doubt. I hope it means that the better angels of our nature will ... recognise there, but for the grace of God, goes any of us at any time in our lives.”

A spokesperson for shadow Attorney-General Julian Leeser said the Coalition had only seen the details of the settlement that had been reported publicly, but repeated the apology made by former prime minister Scott Morrison.

“As we’ve said before: to those Australians who have been adversely affected, we are sorry.”

The $587 million in compensation – $112 million from 2020 and the new $475 million settlement – for robo-debt victims eclipses the $500 million awarded to victims of the 2009 Black Saturday bushfires by power distributor SP AusNet and asset managers Utility Services Group in 2014.

Though victims will be awarded compensation proportionate to the harm caused, averaged among the 450,000 applicants the compensation comes to $1300 each.

Business owner and robo-debt victim Felicity Button said the result was more than vindication, which was achieved with the first settlement. She said the extra compensation went towards making up for the trauma victims endured, though it could never be enough.

“It actually confirms what we already knew, which was they knew what they were doing was wrong,” she said.

Button, who said she felt suicidal when the government seized $11,500 from her bank account with no warning, was a university graduate and new mum when the ordeal began. Now 37, she said the settlement sent an important message to the Australian government.

“Not only are you going to be held accountable, but you are going to be punished properly and reasonably for your corruption,” she said.

Attorney-General Michelle Rowland slammed the Coalition for the “heartless and disastrous” scheme during question time on Thursday.

“The robo-debt scheme has cost taxpayers over a billion dollars, and yet the most significant cost of robo-debt cannot be measured in dollars and cents. It can only be measured in human terms because the robo-debt scheme destroyed lives,” Rowland said.

“The Albanese government has been left to clean up this shameful mess left by [the Coalition] and that’s exactly what we’re doing ... This would be the largest class action settlement in Australian history, the size of which reflects the harm caused to vulnerable Australians by the policies of the former government.”

Gordon Legal partner Andrew Grech commended the victims who came forward and said the settlement would not have been reached without their persistence and bravery.

Gordon Legal said if approved by the courts, the final settlement would mean the scheme had cost the government more than $2.4 billion in compensation and costs, including repayments to victims and unlawful debts being dropped.

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