Victims of the Robodebt scheme are poised to receive a further $475 million in compensation from the government under a historic class action settlement agreement.
On Thursday (4 September), the Albanese government reached a historic agreement to settle an appeal in the case of Knox v The Commonwealth (a follow-on from the original class action brought by Gordon Legal) that could mark the largest class action settlement in Australian history.
As first reported by The Adviser sister brand Lawyers Weekly, the Commonwealth would pay $475 million in compensation to eligible members of the class action affected by the Robodebt scheme, which the Attorney-General’s office has described as “illegal and immoral”.
The payout – which will require approval by the Federal Court – would represent the largest-ever class action settlement in Australian history.
The Attorney-General’s office confirmed the $475 million figure, adding that the settlement also includes a framework for the Federal Court to approve reasonable legal costs, capped at $13.5 million, and administration costs, capped at $60 million.
It comes in addition to the $1.2 billion already distributed as part of the original 2020 class action (Prygodicz v The Commonwealth), which covered repayments of unlawful debts and interest.
‘Illegal and immoral’ scheme
In a statement, Attorney-General Michelle Rowland said the deal demonstrated the government’s commitment to righting the wrongs of the Coalition-era program.
“Today’s settlement demonstrates the Albanese Labor Government’s ongoing commitment to addressing the harms caused to hundreds of thousands of vulnerable Australians by the former Liberal government’s disastrous Robodebt Scheme,” she said.
“The Royal Commission described Robodebt as a ‘crude and cruel mechanism, neither fair nor legal’. It found that people were traumatised on the off chance they might owe money and that Robodebt was a costly failure of public administration, in both human and economic terms.
“Settling this claim is the just and fair thing to do.”
Andrew Grech, a partner at Gordon Legal, which has represented the victims since the case began in 2019, described the outcome as the product of years of persistence.
“It has been a great privilege to act on behalf of the applicants and group members for the last six years and to help them to achieve such an outstanding result in very complex and difficult circumstances,” he said.
“The team at Gordon Legal are thrilled by and very proud to have achieved this historic result for those harmed by the Robodebt scheme. Without the bravery and persistence of so many victims that came forward to tell their story, this day would never have come.”
Representative applicant Nathan Knox welcomed the agreement and noted the relief it will bring to thousands of Australians.
“I am very pleased that our legal challenge has been so successful and that group members can finally begin to put this terrible chapter behind them. Everyday Australians should now know that they can stand up and demand respect and fairness, especially from their government,” Knox said.
What was the issue with Robodebt?
The deal follows the damning 2023 royal commission into Robodebt, which delivered a 900-page report labelling the scheme “cruel and unlawful”.
Running from July 2015 to November 2019, Robodebt used income averaging to raise $1.73 billion in unlawful debts against more than 400,000 Australians.
Many were wrongly pursued for repayments, with the inquiry hearing harrowing accounts of stress, financial hardship, and even suicides linked to the program.
The royal commission made 56 recommendations, which the government has agreed to implement. These included reforms to Centrelink, greater resourcing for the Commonwealth Ombudsman, reinstatement of the Administrative Review Council, and measures to strengthen the way legal advice is sought and used in government decision making.
Since taking office, the Albanese government has committed more than $1 billion in new funding for Services Australia, as well as $22.1 million over four years (plus ongoing annual funding) to strengthen oversight and accountability in line with the commission’s recommendations.
If approved by the Federal Court, the $475 million settlement will be distributed to eligible group members, alongside costs for legal and administrative processes.
