Canberra agrees to AU$112m compensation in Centrelink robo-debt class action settlement

The Commonwealth has agreed to pay AU$112 million in compensation to approximately 400,000 eligible individual group members, including legal costs.

The class action lawsuit brought on by Gordon Legal against the Commonwealth of Australia in relation to the Centrelink Online Compliance Intervention (OCI) scheme, colloquially known as robo-debt, was meant to begin on Monday, with court dates scheduled for the next fortnight.

While counsel for the Commonwealth and those for the applicants all appeared for the 10:00am AEDT online hearing, within minutes, counsel for the applicants, Bernard Quinn QC, asked Justice Bernard Murphy for indulgence until 11:00am, allowing the parties to continue discussions.

"Last Wednesday I informed the court that discussions were ongoing … those discussions have continued over the weekend and have been very productive," Quinn said. "Discussions are still occurring."

The online Federal Court of Australia hearing resumed at 1:00pm local time, with Quinn assuring Justice Murphy that it was not wasted time.

"I'm delighted to be able to inform … that the matter, subject to court approval, has been resolved," he said.

"We have agreed terms … in a settlement deed, which will be executed over the next couple of days by the parties. That really leaves … simply the matter of an application pursuant to section 33V to be made and for possible dates to be set."

Gordon Legal launched the robo-debt class action in November last year on behalf of five representative applicants and approximately 400,000 people who were included in the case as group members. 

The Commonwealth has today agreed to pay $112 million in compensation to all of the eligible individual group members, including legal costs. The Commonwealth is also repaying more than AU$720 million in debts that Gordon Legal said was collected from group members invalidly.

The Commonwealth has also agreed to drop claims for approximately AU$398 million in debts Gordon Legal said it had invalidly asserted against group members of the class action.

Subject to court approval, a settlement distribution scheme will be created to ensure that eligible individual group members' entitlements will be assessed and all amounts due to them be paid in 2021.

Justice Murphy congratulated the parties.

"Let me just congratulate the parties on their efforts in resolving this case. It's large, it's complex, there were many issues to deal with and it's a credit … [you've] saved the community a lot of time and expense, and no doubt the parties," he said. "Congratulations."

Former Opposition Leader and now Shadow Minister for Government Services Bill Shorten was less congratulatory, saying government made a last minute, pre-trial admission conceding it owed the applicants their money back plus compensation. He estimates the cost to be over AU$1 billion.

The essence of the applicants' case was that debts raised by robo-debt were unlawful, and all recipients should be compensated by the federal government. Gordon Legal was previously seeking interest payments and damages, and in an amended statement of claim filed in September, it was asking for exemplary damages due to the government's continued running of the scheme in light of its new claims.

Such claims included that two Australian ministers and a handful of government officials had alleged knowledge robo-debt was causing harm to vulnerable Centrelink customers.

The Department of Human Services, now Services Australia, kicked off the data-matching program of work in 2016, which saw the automatic issuing of debt notices to those in receipt of welfare payments through the Centrelink scheme. 

From 1 July 2016 through 31 August 2019, Centrelink's OCI program saw 1,159,662 assessments be initiated using the automated data-matching technique.

The government has since paused the automated data-matching element of the initiative and in May announced it was refunding an estimated AU$721 million back to Australians relating to 470,000 "debts" paid.

Refunds begun in July, and as of 26 October 2020, the total amount refunded was AU$697 million, accounting for 94% of all refunds that are due.

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