A class action from welfare recipients who wrongly received massive debts under the unlawful ‘Robodebt’ system has been settled for more than $1.2 billion, with the federal government agreeing to pay huge compensation to members of the legal action.

Labor’s Labor’s shadow government services minister, Bill Shorten, called the scheme “the single greatest social security scandal in this nation’s history”.

“The settlement, for approximately 400,000 class action members, is both the most costly and involves the most people of any settlement by an Australian government,” he said.

Government services minister Stuart Robert. Photo: AAP

Robodebt involved an automated system matching data from multiple government services, and calculating if recipients had been paid too much.

It was ruled illegal by the Federal Court because it had little human oversight, with countless people handed big debts for money they did not actually owe.

The federal government suspended the program officially in February, and a class action suit from law firm Gordon Legal was launched to seek compensation for victims of unfair debts.

Families, social advocates and charities have linked stress from incorrect debts to mental health issues and suicide.

On Monday, the case was due to begin in the Federal Court. But it was delayed as a last-minute settlement was reached.

Gordon Legal have secured a landmark settlement of the Robodebt Class Action. If approved by the Federal Court, more than $1.2 billion in financial benefit will have been provided to approx. 400,000 group members since the commencement of the class action. https://t.co/hygBuSJt2h

— Gordon Legal (@gordonlegal_au) November 16, 2020

Gordon Legal said that, pending Federal Court approval, the government would have to pay $112 million in compensation and legal costs to some 400,000 class action members.

The government will also drop claims for nearly $400 million in debts that are still being chased, according to Gordon Legal.

An earlier settlement had seen the government already agree to refund more than $720 million in debts already paid.

All up, the full settlement represents more than $1.23 billion – an average of more than $3000 for each of the 400,000 members.

“Subject to court approval, a settlement distribution scheme will provide that eligible individual group members’ entitlements will be assessed and all amounts due to them be paid in 2021,” Gordon Legal said in a statement.

“In settling the class action, the Commonwealth has not admitted that it was legally liable to group members.”

The New Daily contacted Government Services Minister Stuart Robert for comment. His office supplied a joint statement from Gordon Legal and Services Australia, the government department responsible for administering welfare.

The statement stresses that the settlement isn’t an admission of guilt.

“Both the applicants and their solicitors, Gordon Legal, acknowledge that the Commonwealth’s agreement to settle the matter is not an admission of liability by the Commonwealth, and does not reflect any acceptance by the Commonwealth of the allegations that the Commonwealth, or any of its officers, had any knowledge of unlawfulness associated with the income compliance program,” the statement read.

Services Australia said class action members “do not need to take any action at this stage”.

Gordon Legal partner Andrew Grech made particular mention of Mr Shorten, in a statement welcoming the outcome.

Bill Shorten is still calling for a Robodebt Royal Commission. Photo: AAP

“We want to acknowledge the courage of the lead applicants; Katherine, Elyane, Steven, Felicity, Shannon and Devon, who led these proceedings on behalf of all Robodebt victims in pursuit of this class action, which has allowed this outcome to be achieved today,” Mr Grech said.

“Our clients have asked us to especially thank Bill Shorten for his relentless pursuit of this issue, for his compassion over the last four years for vulnerable Australians hurt by robodebt and for bringing the case to Gordon Legal’s attention when it seemed that all other options had been exhausted and only resorting to the legal system would help.”

Mr Shorten repeated his earlier calls for a Royal Commission into Robodebt.

He claimed Prime Minister Scott Morrison and Population Minister Alan Tudge, who was human services minister from 2016 to 2017, had questions to answer.

“In the meantime Mr Morrison must explain what the consequences will be for ministers including Mr Tudge and Government Services Minister Stuart Robert for their involvement in the single greatest social security scandal in this nation’s history, and the subsequent cover-up,” he said.