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A judge has described the botched robodebt scheme as a “very sorry chapter in public administration”, as a court hears the total of unlawful debts raised by the government exceeded $1.5 billion.

Federal court justice Bernard Murphy made the comment in response to personal stories aired by the court-appointed contradictor, Fiona Forsyth QC, who represents the interests of 600,000 members of a Gordon Legal class action that challenged the scheme.

Forsyth read from 10 of the more than 600 submissions objecting to a settlement reached between Gordon Legal and the government last year. The settlement includes $112m in interest payments, in addition to a guarantee unlawful debts – worth $1.5bn – will be refunded or “zeroed”.

Forsyth said objectors argued the “stress and anxiety” was not reflected in the settlement, which only covers economic loss.

Objectors described the “shame and anger” of being “treated like a welfare cheat”, including one woman who said she couldn’t eat or sleep when she received her debt.
Another person said they had fallen into “financial ruin” after a debt led them apply for a pay day loan.

Murphy said:

You don’t need to persuade me this is a very sorry chapter in Australian public administration.

About 200,000 people are set to miss out on compensation because their debts – which were initially invalid – were later substantiated by pay information welfare recipients provided in response to Centrelink’s debt letters.

The court has heard the legal case for these class members is considered “weak”. Bernie Quinn QC, for Gordon Legal, argued on Thursday that while these members will not get any financial benefit, they have been given clarity through the court process.

He argued the class action had forced the government to announce it would refund the other 400,000 victims.

Michael Hodge QC, for the commonwealth, on Friday questioned $4.4m in costs that Gordon Legal has asked to be deducted from the settlement to administer the compensation scheme.

Gordon Legal says much of those costs will go to communications with people who won’t receive anything from the settlement.

Hodge singled out “$14,000 for video production” contained in a costs report, and noted one of these videos posted to YouTube saw Gordon Legal promote legal arguments for people now excluded from the settlement.

Hodge said those people “should never have been included to begin with” – and thus Gordon Legal would be being paid for “promoting an unmeritorious claim”.

The firm’s total costs have previously been estimated at $14m.

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