Prygodicz v Commonwealth of Australia

THE EVIDENCE 32 The applicants relied upon the following material: (a) the affidavits of Andrew Grech, a partner of Gordon Legal, affirmed 25 November 2020, 2 December 2020, 9 April 2021, 16 April 2021, 22 April 2021 and 29 April 2021 and 20 May 2021 (the First, Second, Third, Fourth, Fifth, Sixth and Seventh Grech Affidavits). The applicants claimed legal professional privilege and made claims of confidentiality in relation to parts of the Third, Fourth and Seventh Grech affidavits which I allowed after some reductions in those claims. The relevant annexures to those affidavits include: (i) the Deed of Settlement between the parties (the Settlement Deed), and the execution pages of the counterparts signed by the parties on various dates between 20 and 30 November 2020; (ii) the confidential Counsels' Opinion; (iii) the various conditional costs agreements signed by each of the representative applicants; (iv) the supplementary report of Mr Dudman, the expert costs consultant engaged by Gordon Legal, dated 16 April 2021; (v) the Framework of Settlement Distribution (SDS Framework); and (b) the affidavit of Peter Gordon affirmed 9 April 2021. The applicants filed short written submissions dated 9 April 2021, and made oral submissions at the approval hearing. 33 The Commonwealth relied upon the following materials: (a) three affidavits of Emma Gill, a senior executive lawyer in the employ of the Australian Government Solicitor, the solicitors for the Commonwealth, affirmed on 20 April 2021, 30 April 2021 and 6 May 2021; and (b) the affidavit of Robert McKellar, acting General Manager of Debt & Integrity Projects within Services Australia, affirmed on 5 May 2021 which, amongst other things, annexes the Implementation Plan for the Settlement Distribution (Implementation Plan). Together, the SDS Framework and the Implementation Plan comprise the "SDS". The Commonwealth filed written submissions in respect to the application for settlement approval dated 19 April 2021, the applicants' reasonable legal costs dated 30 April 2021, and the Contradictor's submissions dated 5 May 2021; and made oral submissions at the hearing. 34 The Contradictor filed written submissions dated 23 April 2021, and further submissions in respect to the applicant's legal costs dated 30 April 2021, and made oral submissions at the hearing. 35 In relation to legal costs, the following materials were before the Court: (a) the Costs Referee's Report dated 1 April 2021, and the Costs Referee's Second Report dated 26 April 2021; and (b) the report of Mr Dudman dated 31 January 2021, the supplementary report dated 16 April 2021 and the further report dated 29 April 2021 (the First, Supplementary and Third Dudman Reports).

THE ROBODEBT SYSTEM 36 On about 1 July 2015, through Services Australia, the Commonwealth introduced the Robodebt system. Services Australia is the Executive Agency, created as a successor to the Department of Services Australia (formerly the Department of Human Services) (Department), responsible for administering social security payments under the SSA. At all relevant times the Department was responsible for the payment of social security payments under the SSA, doing so through Centrelink. 37 Under the SSA the amount of any benefit that social security recipients are entitled to receive is affected, amongst other things, by income tests set out in Chapter 3. From July 2010, the income tests were prescribed to be applied to a person's income calculated on a fortnightly basis, and thus, where a person worked irregular hours or periods, the person's entitlement to a social security benefit might vary from fortnight to fortnight. Social security recipients were required to report their income to Centrelink on a fortnightly basis so that the correct amount of the relevant social security benefit could be paid to them. 38 The Robodebt system was aimed at identifying and recovering overpayments of social security benefits from social security recipients and it was forecast to achieve very substantial recoveries of such overpayments for the Commonwealth. As I have said, the system attempted to identify overpayments of social security benefits in a review period through data matching, which was automatically conducted by: (a) utilising the PAYG income information of social security recipients kept by the Australian Taxation Office and evenly apportioning that income over fortnightly increments in the review period (in a process the parties called "income averaging) to determine that person's notional or assumed fortnightly income; and (b) comparing the notional or assumed fortnightly income of the person with the actual fortnightly income information provided by the person (which was the basis upon which the level of social security payments had been assessed and paid to the person); to determine whether the person had been overpaid social security benefits, and where that had occurred, to raise and recover that asserted debt. 39 Where the comparison indicated an overpayment of social security payments to a person during fortnightly periods in the review period, a letter was automatically sent to the person stating that the information received from the ATO was different to that which the person had told Centrelink, and telling the person that they were required to confirm or update their income information within a specified period, and if they did not do so the Commonwealth would rely on the ATO income information which might result in a debt that the person would have to pay. 40 If by the specified date the person had supplied no or insufficient further information, including payslips and bank statements, to explain the discrepancy, the Robodebt system made an assumption that the person's previously reported income was incorrect and that the person had earned the amounts indicated in the ATO income information in equal fortnightly amounts during the relevant period of employment (the Fortnightly Income Assumption). The materials before the Court indicate that group members often experienced substantial difficulties in producing pay slips, statements by former employers and bank statements for review periods that sometimes related to periods that were some years earlier. 41 If the Robodebt system determined, based on the Fortnightly Income Assumption, that the person was entitled to a lesser amount of social security benefits for the review period, the system sent the person a letter stating that they owed a debt to the Commonwealth in the amount specified (Asserted Overpayment Debt), which was a notice for the purposes of s 1229(1) of the SSA. The letter advised the recipient of the availability of rights of administrative merits review pursuant to Parts 4 and 4A of the Social Security (Administration) Act 1999 (Cth) (the SSAA). 42 If the asserted debt was not repaid by the person within the period specified the Commonwealth was able to require repayment of the amount by a variety of methods, including by garnishing tax returns, recovering monies from the person's bank account or commencing legal proceedings against the person, and to impose an additional amount by way of a statutory penalty.

The class 43 The applicants commenced the class action on 19 November 2019. The group description in the Second Further Amended Statement of Claim filed 17 September 2020 (2FASOC) defines the represented class as all persons (group members): (a) who at any time after 1 July 2010 received the benefit of one or more of the following social security payments from the Commonwealth: Newstart Allowance, Youth Allowance, Disability Support Pension, Austudy Allowance, Age Pension, Carer Payment, Parenting Payment, Partner Allowance, Sickness Allowance, Special Benefit, Widow A Allowance Payments and Widow B Allowance Payments (Social Security Payments); and (b) in respect of whom the Commonwealth, at any time after 1 July 2015: (i) generated correspondence or other notification referring to a difference between the income information obtained by Centrelink from the ATO and that used by Centrelink in assessing Social Security Payment entitlements and requesting, requiring or reminding the Social Security Payment recipient to check, confirm or update employment income information (Robodebt notification); (ii) by or following the Robodebt notification, asserted an overpayment of one or more Social Security Payments recoverable by the Commonwealth as an Asserted Overpayment Debt; and (iii) requested or demanded repayment of any Asserted Overpayment Debt or part thereof; and (c) who: (i) have paid, had paid on their behalf, or had recovered from them, any Asserted Overpayment Debt or part thereof; and/or (ii) have not been informed by the Commonwealth that no recovery action will be pursued in respect of their Asserted Overpayment Debt.

The claims 44 I have previously set out the two broad claims made in the proceeding; (a) a restitutionary unjust enrichment claim; and (b) a claim in tort for negligently inflicted economic loss. 45 The Originating Application filed in November 2019 sought the following relief: (a) declarations that: (i) the Commonwealth does not have and has not had any statutory power to raise and recover or seek to recover any Robodebt raised debts or impose any penalty thereon; (ii) the Commonwealth was unjustly enriched by receipt of each Commonwealth recovered amount and is liable to make restitution of each Commonwealth recovered amount to the applicants and group members; (iii) the Commonwealth recovered amounts are moneys had and received by the Commonwealth to the use of the applicants and group members return of which they are entitled to; (iv) the Commonwealth owed and owes a duty of care to the applicants and group members as alleged in the Statement of Claim; and (v) the Commonwealth breached its duty of care to the applicants and group members in the manner alleged in the Statement of Claim. (b) restitution of all of or the aggregate of Commonwealth recovered amounts and interest earned by the Commonwealth thereon; (c) return of all of or the aggregate of Commonwealth recovered amounts as money had and received by the Commonwealth to the use of the applicants and group members; (d) damages in negligence; (e) interest pursuant to statute; and (f) costs. 46 By an Amended Originating Application filed 1 July 2020 the applicants sought two further declarations, being that: (a) the Commonwealth does not have and has not had any statutory power to use any income information provided by on behalf of an applicant or group member in response to a Robodebt notification to determine or assert an Asserted Overpayment Debt; and (b) the Commonwealth acted unlawfully in: (i) using calculations or other outputs of the Robodebt system to procure or compel the provision by any applicant or group member to the Commonwealth of income information and/or to generate or send to any applicant or group member any Robodebt notification; (ii) determining and asserting against any applicant or group member any Asserted Overpayment Debt, or recalculation of it; (iii) requesting or demanding repayment by any applicant or group member of any Asserted Overpayment Debt, or recalculation of it; and (iv) recovering from any applicant or group member and retaining any Asserted Overpayment Debt, or recalculation of it. 47 In the 2FASOC, the pleading was amended to add claims for aggravated damages in respect of the negligence claims, and exemplary damages in respect of both the negligence claims and the unjust enrichment claims. The claims for aggravated and exemplary damages are founded in allegations that through identified Ministers of the Crown and senior public servants the Commonwealth had actual knowledge: (a) of the vulnerabilities of some of the applicants and group members; (b) that the automated system for identifying asserted overpayments and raising and recovering debts based on income averaging from ATO data led to the assertion of Asserted Overpayment Debts against the applicants and group members for amounts which may not have been, and in many cases were not, actually owed; (c) that it had no statutory or other power to seek to recover such Asserted Overpayment Debts; and (d) that it was acting unlawfully in asserting such debts.

The categories of group members 48 The initial Statement of Claim and the Amended Statement of Claim did not break the group members down into categories. Both the applicants and the Commonwealth said that it was not until about June 2020 that the parties came to understand that there were several different categories of group members within the class description. 49 On 1 July 2020, the applicants filed a Further Amended Statement of Claim (FASOC) which described four categories of group members (at paragraph 41A). Paragraph 41A of the Defence describes those four categories in different terms, but the differences are not material. To avoid confusion I use the categories as described in the Defence and the Settlement Deed. 50 "Category 1 Group Members" are those who have or had a debt that is alleged to be an Asserted Overpayment Debt that was determined wholly or partially based on apportioned ATO PAYG income information, but from whom the Commonwealth has not received or recovered any monies. 51 "Category 2 Group Members" are those who have or had a debt that is alleged to be an Asserted Overpayment Debt that was determined wholly or partially based on apportioned ATO PAYG income information, part or all of which has been received or recovered by the Commonwealth. 52 "Category 3 Group Members" are those who have or had a debt that is alleged to be an Asserted Overpayment Debt, part or all of which has been received or recovered by the Commonwealth, that was initially determined based on apportioned ATO PAYG income information, part or all of which was paid to or recovered by the Commonwealth, but which was later recalculated by the Commonwealth in the context of a subsequent review under s 126 of the SSAA based on information provided by or on behalf of the group member (such as payslips and/or bank statements) and not based on apportioned ATO PAYG income information. 53 A practical example of a Category 3 Group Member is a person who first received an Asserted Overpayment Debt determined based on income averaging from ATO data, and then provided income information which the Commonwealth used to assert a validly determined debt. The applicants alleged that the circumstance of the group member providing information which the Commonwealth then used against the group member "tainted" the subsequent debt with illegality, such that it is not recoverable by the Commonwealth, notwithstanding that the ultimate debt when viewed in isolation was lawfully raised. 54 Under the proposed settlement Category 3 Group Members are divided into two subcategories being: (a) Eligible Category 3 Group Members; and (b) Ineligible Category 3 Group Members. I later explain the basis for this sub-categorisation. 55 "Category 4 Group Members" are those who have or had a debt that is alleged to be an Asserted Overpayment Debt, all, part or none of which has been received or recovered by the Commonwealth, that was wholly determined based on information provided by or on behalf of the group member (such as payslips and/or bank statements) and not based on income averaging from ATO PAYG income information. 56 A practical example of a Category 4 Group Member is a person who first received a Robodebt notification and provided income information in response to the notification, which allowed the Commonwealth to validly determine a debt. The applicants alleged that the circumstance of the group member providing information which the Commonwealth then used against the group member "tainted" the subsequent debt with illegality.

Other relevant matters and steps 57 On 17 September 2019, Gordon Legal announced that it was investigating a class action against the Commonwealth in relation to the Robodebt system. On 19 November 2019 the firm commenced the proceeding. 58 On 27 November 2019, the Commonwealth consented to declarations in Amato which stated that the demand by the Commonwealth for payment of the alleged social security debt in that case was not validly made because the information before the decision-maker was not capable of satisfying the decision-maker that the debt was owed by the applicant to the Commonwealth within the scope of ss 1222A and 1223(1) of the SSA in the amount of the alleged debt. The alleged debt was a debt raised wholly or partially based on income averaging from ATO data. 59 In its Defence filed 14 February 2020, the Commonwealth did not contest that a social security recipient's notional fortnightly income based on income averaging from ATO data did not provide a legal basis for the Commonwealth to assert that the person owed an Asserted Overpayment Debt to the Commonwealth. Even so, the Commonwealth denied that the applicants and group members had an entitlement to restitution from the Commonwealth on the basis of unjust enrichment or for compensatory damages in negligence. 60 Amongst other things, the Commonwealth asserted a "juristic reason" as a defence to the unjust enrichment claims, and contended that it permitted the Commonwealth to retain the Commonwealth-recovered amounts. The juristic reason alleged in relation to the first, third, fourth and fifth applicants and an unspecified number of group members was that those persons, in fact, had a debt payable to the Commonwealth pursuant to s 1223(1) of the SSA (even though the original basis upon which the debt was asserted was invalid, it being based on income averaging from ATO data). 61 In relation to the negligence claim, the Commonwealth denied the existence of the alleged duty of care. 62 On 1 July 2020, the applicants filed the FASOC by which the sixth applicant was joined to the proceeding. It set out four categories of group members and advanced different claims for the different categories. As I have said, the claims in respect of Category 3 Group Members and Category 4 Group Members do not rely on debts based on income averaging from ATO data. 63 On 29 May 2020, the Hon Stuart Robert MP, the Minister for Government Services, publicly announced that from July 2020 the Commonwealth would refund all repayments made on debts raised wholly or partially using income averaging of ATO income information and any interest charges and/or recovery fees paid on related debts (the 29 May 2020 Announcement). 64 On 1 July 2020, the Commonwealth publicly announced that: (a) from 13 July 2020, it would write to people who were eligible for a refund in respect of a debt raised wholly or partially using income averaging of ATO income information and would start making refunds in respect of such debts from 27 July 2020; and (b) debts raised using averaging of ATO income information, in respect of which no amount had been paid to the Commonwealth, would be reduced to zero, (the 1 July 2020 Announcement). The evidence shows that shortly thereafter the Commonwealth then commenced to act upon those promises. 65 On 17 July 2020, the Commonwealth filed its Defence to the FASOC. It referred to the Minister's public announcements on 29 May 2020 and 1 July 2020, and admitted that the existence of a debt in a particular amount could not be validly established for the purpose of s 1223(1) of the SSA where the decision that the person owed a debt in that amount depended, wholly or in part, on income averaging from ATO data, without other information capable of supporting a conclusion that the social security recipient received a consistent fortnightly income over the relevant period. 66 The Commonwealth continued to deny that it was required to make restitution for unjust enrichment. It continued to advance the "juristic reason" as to why it was entitled to retain any enrichment it had obtained by reason of its recovery of the Commonwealth-recovered amounts. It also continued to deny the existence of the alleged duty of care. 67 On 26 August 2020, the applicants sought to file the first proposed 2FASOC to include claims for aggravated damages in negligence, and for exemplary damages in respect of the claims for unjust enrichment and negligence. These additional claims were founded in allegations that the Commonwealth had actual knowledge that the Robodebt system of raising debts based on income averaging from ATO data led to the assertion of debts for amounts which may not have been and in many cases were not actually owed, knowledge that it had no statutory or other power to seek to recover such debts, and knowledge that it was acting unlawfully in asserting such debts. The proposed amendment was opposed by the Commonwealth. Following a hearing on 31 August 2020, leave was refused to file the first proposed 2FASOC because it did not adequately plead or particularise the serious allegations of knowledge of unlawfulness. 68 On 14 September 2020, the applicants served a second proposed 2FASOC which further pleaded and particularised the allegations that through identified Ministers and senior public servants the Commonwealth had actual knowledge that the Robodebt system was unlawful. The Commonwealth again opposed the amendment. Following a hearing on 16 September 2020 leave was granted for the amended pleading: Prygodicz v Commonwealth of Australia [2020] FCA 1454. 69 The Commonwealth unsuccessfully sought leave to appeal the decision to allow the 2FASOC: Commonwealth of Australia v Prygodicz [2020] FCA 1516 (Lee J). Although Justice Lee refused the application for leave to appeal, his Honour relevantly observed (at [14]-[15]: The primary judge's characterisation of the pleading of actual knowledge of illegality by the Commonwealth as "weak" might be seen as an example of his Honour's characteristic polite understatement; it might be thought, albeit on an impressionistic basis, that aspects of the pleading suggest a real question arises as to whether there currently exists, within the knowledge of those acting for the applicants, a reasonable basis for some of the allegations made. One example will suffice. The class action has been commenced on behalf of four categories of persons. Each of whom, following what is described as a Robodebt notification, received an assertion of overpayment of one or more Social Security Payments recoverable by the Commonwealth as a debt, and defined in the pleading as an "Asserted Overpayment Debt". One category of the group members (and, apparently, the third applicant in respect of what is described as the Second Debt Period) had an Asserted Overpayment Debt that was neither wholly nor partly a Robodebt-raised debt at all, but simply had a debt determined by the Commonwealth based upon income information provided subsequent to a Robodebt notification. These are called the "Category 4 Group Members" in the pleading. In respect of these persons, even if there was not a relevant Robodebt-raised debt, it is nevertheless alleged that the Asserted Overpayment Debt was determined and based upon income information provided "in response to a Robodebt notification": see 2FOSAC [sic] [1(b)(ii)], [41A(d)] and [45]. As I understand the pleading (and my understanding was not disputed by Senior Counsel for the applicants), it is said, even though there was no Robodebt-raised debt, given that a debt was raised in the circumstances pleaded, the Commonwealth was not only unlawfully alleging a debt, but that by virtue of [70A(k)], the Commonwealth actually knew it was acting unlawfully. Given the seriousness of the allegation and the novelty as to this aspect of the argument as to illegality, prima facie, this seems to me to be a most remarkable allegation to be made on the basis of the material identified. (Emphasis in original.) 70 The case was listed for a two week trial to commence on 16 November 2020. On the first day of trial the parties reached the in-principle agreement which is now the subject of the settlement approval application. The parties' agreement was subsequently recorded in the Settlement Deed.

The opt out notices 71 Pursuant to orders made 6 March 2020, by 25 May 2020 the Commonwealth was required to send group members an opt out notice in the form set out in Annexure B to those orders. The orders fixed 4:00 pm on 29 June 2020 as the time and date by which group members could opt out of the proceeding. I am satisfied on the evidence that group members were given notice of their right to opt out in accordance with the orders made on 6 March 2020. 72 The opt out notice informed group members as to the scope of the proceeding as follows: The Applicants allege in the statement of claim in this proceeding that since 1 July 2015, Centrelink has sent to class members a notification (by mail, email, 'myGov' or the 'Centrelink Express' app) claiming that there was a difference between the income information obtained by Centrelink from the Australian Taxation Office and that used by Centrelink in assessing Centrelink payments, claiming that class members had been overpaid, and demanded that the claimed overpayment had to be paid back. Class members have received these demands and have paid, had paid on their behalf, or had recovered from them (by, for example, demands from debt collectors, or having had their tax returns garnished) amounts for these claimed overpayments. The Applicants allege that Centrelink had no right to demand or recover any part of these overpayments, and that in doing so, the Commonwealth has been unjustly enriched, and has been negligent. The Respondent to the class action is the Commonwealth of Australia, being the legal entity responsible for Centrelink. The Respondent admits that it has made demands and recovered parts of some overpayments, but says that in some cases, there was a valid basis known as a 'juristic reason' to recover the overpayments because the recipients were actually overpaid. The Applicants say that there is no such thing as a 'juristic reason' in Australian law. The Respondent denies that it was negligent as alleged by the Applicants. The notice did not mention that the proceeding also sought damages for stress, anxiety and stigma associated with the request or demand for, and threatened or actual, recovery of their asserted debts. 73 The opt out notice expressly informed group members that if they did not opt out they would be bound by any outcome in the proceeding, including if the proceeding was not as successful as they wished. The notice said: Class members are "bound" by the outcome in the class action, unless they have opted out of the proceeding. A binding result can happen in two ways being either a judgment following a trial, or a settlement at any time. If there is a judgment or a settlement of a class action class members will not be able pursue the same claims and may not be able to pursue similar or related claims against the Respondent in other legal proceedings. Class members should note that: (a) in a judgment following trial, the Court will decide various factual and legal issues in respect of the claims made by the Applicants and class members. Unless those decisions are successfully appealed they bind the Applicants, class members and the Respondent. Importantly, if there are other proceedings between a class member and the Respondent, it may be that neither of them will be permitted to raise arguments in that proceeding which are inconsistent with a factual or legal issue decided in the class action. (b) in a settlement of a class action, where the settlement provides for compensation to class members it may extinguish all rights to compensation which a class member might have against the Respondent which arise in any way out of the events or transactions which are the subject-matter of the class action. If you consider that you have claims against the Respondent which are based on your individual circumstances or otherwise additional to the claims described in the class action, then it is important that you seek independent legal advice about the potential binding effects of the class action n before the deadline for opting out... (Emphasis in original.) 74 In relation to the binding nature of any outcome in the proceeding, the opt out notice also said: What will happen if you choose to remain a class member? Unless you opt out, you will be bound by any settlement or judgment of class action. If the class action is successful you will be entitled to share in the benefit of any order, judgment or settlement in favour of the Applicants and class members, although you may have to satisfy certain conditions before your entitlement arises. If the action is unsuccessful or is not as successful as you might have wished, you will not be able pursue the same claims and may not be able to pursue related claims against the Respondent in other legal proceedings. 75 Subsequently, by orders made 17 August 2020, the Court varied its earlier opt out orders in respect of the following two groups: (a) persons who were not identified as group members by the Commonwealth as at 25 May 2020, but who the Commonwealth subsequently identified as such; and (b) the representatives of deceased estates of persons who were group members, where the Commonwealth held contact details for those representatives. Pursuant to the August orders, by 24 August 2020, the Commonwealth was required to send group members in those two groups an opt out notice in the form set out in Annexure A to those orders, being similar in form to the earlier notice. The orders fixed 4.00 pm on 14 September 2020 as the time and date by which such group members could opt out of the proceeding. 76 I am satisfied on the evidence that those group members were given notice of their right to opt out of the proceeding in accordance with the orders made 17 August 2020. 77 In my view the opt out notice informed group members in straightforward terms that if they did not opt out of the proceeding and the action was unsuccessful or not as successful as they might have wished, they would not be able pursue the same claims and may not be able to pursue related claims against the Commonwealth in other legal proceedings.

The Notice of Proposed Settlement 78 Pursuant to orders made 23 December 2020, by 25 January 2021 the Commonwealth was required to send a Notice of Proposed Settlement to group members (Notice of Proposed Settlement). I am satisfied on the evidence that the Notice of Proposed Settlement was sent to group members in accordance with the orders of 23 December 2020. 79 The Notice of Proposed Settlement informed group members as follows: CATEGORIES OF GROUP MEMBERS AND WHAT THE PROPOSED SETTLEMENT MEANS 10. If the proposed settlement is approved by the Court, you will not need to repay any 'invalid debt'. The Court will declare debts to be invalid where: a. the rate of the social security payment for the group member was dependent upon the person's ordinary income on a fortnightly basis; b. the Commonwealth based its decision on an assumption (Assumption) that the person's ordinary income for a fortnight (relevant fortnight) was greater than the amount of ordinary income that the person had reported to the Commonwealth for the relevant fortnight; c. the Commonwealth relied solely on PAYG employment income data from the ATO (ATO data) to make the Assumption and did not have evidence that the person was likely to have earned employment income at a constant fortnightly rate during a period covered by the ATO data, or other evidence to support the Assumption; d. the Assumption was based on an assessment of the person's employment income for the relevant fortnight derived from averaging the ATO data, for a longer period that included the relevant fortnight, as if the person had earned income at a constant rate during that period. 11. If the settlement is approved by the Court, $112 million will be made available to be paid to eligible group members, less an amount to be deducted for the Applicants' reasonable legal costs (as approved by the Court) in bringing the proceeding and to pay Gordon Legal for performing its functions under the Settlement Distribution Scheme. 12. Under the proposed settlement, group members are in different categories. Not all categories of group members will receive a payment. A group member can be in more than one category if they had more than one debt. People who will receive a settlement payment are known as 'eligible group members'. Further information about the categories and who will receive a settlement payment is in the Table at paragraph 15 below. 13. If you are an eligible group member, you may also have the amount you paid to Services Australia refunded (if it has not been refunded already) or no longer be required to pay the balance of your debt or both. 14. The amount eligible group members receive will depend on when they paid an amount towards an ATO income averaged debt and when that money was paid back to them. 15. This means that eligible group members who paid back more and were without their money for longer will receive a bigger settlement payment than those who paid back less and were without their money for a shorter time. The Table below explains how the proposed settlement will operate. Category Definition of category What the proposed settlement means for this category Category 1 You are in category 1 if you had a debt that was either partly or wholly based on averaged ATO income information, but did not pay any money to Centrelink in respect of the debt. Not eligible for settlement payment Category 1 group members: - will get the benefit of a declaration made by the Court that they do not have to pay back a debt based on averaged ATO income information to Centrelink - will not have to pay back the debt based on averaged ATO income information to Centrelink; and - will not receive a settlement payment. Category 2 You are in category 2 if you had a debt that was either partly or wholly based on averaged ATO income information, and you paid back some or all of the money to Centrelink. Eligible for settlement payment Category 2 group members: - will get the benefit of a declaration made by the Court that they do not have to pay back a debt based on averaged ATO income information to Centrelink - will have their debt refunded (if it has not already been refunded); - will not have to pay back the balance of the debt owing to Centrelink; and - will receive a settlement payment. Category 3 You are in category 3 if you had a debt that was initially partly or wholly based on averaged ATO income information, but with the debt later being recalculated: Some members only eligible for settlement payment based on information (payslips or bank statements) provided to Centrelink and Category 3 group members: not on the basis of averaged ATO income information - will get the benefit of a declaration made by the Court that they do not have to pay back a debt based on averaged ATO income information to Centrelink (this will be relevant to the initially calculated debt only, not the final recalculated debt); and paid back some or all of the money to Centrelink. - will only receive a settlement payment if the amount they have paid to Centrelink for a debt partly or wholly based on averaged ATO income information was more than the value of the recalculated debt using other information provided to Centrelink Category 4 You are in category 4 if you had a debt that was not based on averaged ATO income information. Not eligible for settlement payment Category 4 group members: - will not receive a settlement payment because their debt was not based on averaged ATO income information.

80 The Notice of Proposed Settlement also informed group members as follows: 36. An independent organisation will check that Services Australia correctly categorises group members and pays group members the right amount. Gordon Legal will also be told about how Services Australia has categorised group members and will have an opportunity to check that the categorisation is correct. If the Court approves the settlement, group members will be told if they are an eligible group member or not, and if they are an eligible group member, how payments will be calculated. 81 The Notice of Proposed Settlement set out the process by which the Court would decide whether to approve the proposed settlement. It also explained that the Court had appointed the Contradictor to represent the interests of group members, and had appointed the Costs Referee who was responsible for inquiring into and reporting on the reasonableness of the legal costs proposed to be deducted from the Settlement Sum. 82 In relation to the right of group members to object to the proposed settlement, the Notice of Proposed Settlement said the following: IF YOU DON'T WANT TO OBJECT TO THE PROPOSED SETTLEMENT 25. There is nothing you need to do if you don't want to object to the proposed settlement. If the settlement is approved, Services Australia will notify you about the category you are in, the amount of any payment you will get, and information about what to do if you don't agree with your categorisation. IF YOU WANT TO OBJECT TO THE PROPOSED SETTLEMENT 26. If you think you might want to object to the proposed settlement of the Class Action, you may want to get independent legal advice now (this can't be from Gordon Legal). 27. If you want to ask the Court not to approve the settlement, you must send a completed copy of the attached Notice of Objection form by 5 March 2021 either: a. by email to the Victoria registry of the Federal Court of Australia at the email address robodebt@fedcourt.gov.au; or b. if you don't have access to email, by post to the postal address; Victoria Registry Federal Court of Australia Owen Dixon Commonwealth Law Courts Building 305 William Street Melbourne VIC 3000 28. If you want to, you can file with the Court any written submissions, which further state the reasons why you object to approval of the proposed settlement, and any evidence upon which you may rely, by 19 March 2021. If you want to, you can also file further submissions after the Costs Referee's report is available on 12 April 2021, doing so by 19 April 2021. 29. Written submissions and any evidence should be in approved Court forms. You might want to get an independent lawyer to help you fill these out. 30. You can attend (or send a representative to) the hearing 6 May 2021 when the Federal Court will consider whether to approve the settlement and you or your representative may make oral submissions in support of your objection. The hearing will take place at: Federal Court of Australia Owen Dixon Commonwealth Law Courts Building 305 William Street Melbourne VIC 3000 31. Information about how to attend will be available on the Federal Court's website, and may include options to attend online or by telephone. 83 The Notice of Proposed Settlement broadly informed group members of the effect of the release to be provided under the proposed settlement, as follows: OTHER INFORMATION ABOUT THE PROPOSED SETTLEMENT 32. If the Court approves the proposed settlement, group members won't be able to make the same legal claims made in this Class Action in new proceedings, unless the group member opted out of the Class Action. 84 In my view the Notice of Proposed Settlement gave group members timely notice of the salient elements of the proposed settlement, informed them that they had an opportunity to take steps to protect their own position by objecting to court approval if they wished to do so, and informed them that they would lose their rights (if any) to make the same legal claims if the settlement is approved. As I said previously, the opt out notice had earlier informed group members that if they did not opt out of the proceeding and the action was unsuccessful or not as successful as they might have wished, they would not be able pursue the same claims and may not be able to pursue related claims against the Commonwealth in other legal proceedings.

THE PRINCIPLES RELEVANT TO SETTLEMENT APPROVAL 85 The principles to be applied in a settlement approval application under s 33V of the FCA are well-established. The central question is whether the proposed settlement is a fair and reasonable compromise of the claims of the applicants and group members. That requires consideration of whether the proposed settlement is fair and reasonable, first, as between the applicants and group members and the respondent, and, second, as between the group members: Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70 at [17] (Beach J); Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recs & Mgrs Apptd) (In Liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476 at [81] (Beach J). The Court assumes an onerous and protective role in relation to group members' interests which is not unlike the role the Court assumes when approving settlements on behalf of infants: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [8] (Jacobson, Middleton and Gordon JJ); Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; (2016) 335 ALR 439 at [62] (Murphy J); Blairgowrie at [81]-[85]; Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [12] (Murphy J). The relevant principles were usefully summarised by Moshinsky J in Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468 at [5]. 86 In Botsman v Bolitho [2018] VSCA 278; (2018) 57 VR 68 at [203]-[208] (Tate, Whelan and Niall JJA) the Victorian Court of Appeal said: [203] It is an essential starting point to identify the settlement and its terms. It is commonplace that a deed of settlement may address more than the settlement of the claims against the defendant and will also deal with the distribution of settlement money, including to a litigation funder. The structure of sub-ss 33V(1) and (2) suggests that such payments may be distributions of money that has been paid under a settlement to which the Court has given approval under s 33V(1). Those distributions are the subject of separate Court approval under s 33V(2). [204] The question of fairness interposes itself at various levels. Most obviously, there will need to be consideration of the fairness of a proposed settlement sum. [205] The Court is being asked to approve a compromise of litigation. Inevitably, that will require an assessment of whether the plaintiff is likely to succeed in the action, the measure of damages that a successful judgment would yield, the prospects of recovery, and the expenditure in costs, time and effort that would be required to bring the proceedings to a conclusion. [206] That assessment does not involve a simple calculus but calls for matters of judgment based on imperfect knowledge and is influenced by the appetite for risk. It will be informed by the complexity and duration of the litigation and the stage at which the settlement occurs. It is important to acknowledge that it is the state of imperfect knowledge and the existence of risks that will have likely induced the settlement. It follows that those matters should be accorded a degree of prominence in any assessment of the reasonableness of the settlement. [207] Those considerations mean that there will rarely, or ever, be a single correct settlement. Strategic decisions must be factored into account but it is not the role of the Court to second guess those decisions. [208] The question of fairness will also be relevant to the distribution of the settlement sum, particularly where, as is usually the case, the group members will receive less than their claimed losses and the costs of bringing the proceeding (both in terms of legal costs and funding costs) will need to be accounted for. It follows that there will often be questions of fairness as between group members, particularly where some, but not all, of the group members have funded the litigation or where it may be necessary to apportion the settlement sum between group members based on differences in their respective claims. (Citations omitted.) 87 The Court's assessment as to whether the applicants and group members are likely to succeed in their claims at trial, and as to the quantum of the damages they may obtain if they do succeed, involves the exercise of judgement based on imperfect knowledge. In making an assessment as to the reasonableness of the proposed settlement the Court must take into account the appetite for risk of the applicants and/or the applicants' lawyers. As I said in Kelly at [74]: It is established that the Court should not second-guess the applicant's lawyers as to whether the settlement ought to have been accepted, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The Court takes the applicant's lawyers as it finds them, recognising that different applicants and different lawyers will have different appetites for risk. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether it is the best outcome which the Court considers might have been won by better bargaining. (Citations omitted.) 88 The factors stated in Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925; (2000) 180 ALR 459 at [19] (Goldberg J), now reflected in the Class Actions Practice Note (GPN-CA) at 15.5, are a useful guide to the considerations relevant in deciding whether a proposed settlement is fair and reasonable. They include: (a) the complexity and likely duration of the litigation; (b) the reaction of the class to the settlement; (c) the stage of the proceedings; (d) the risks of establishing liability; (e) the risks of establishing loss or damage; (f) the risks of maintaining a class action; (g) the ability of the respondent to withstand a greater judgment; (h) the range of reasonableness of the settlement in light of the best recovery; (i) the range of reasonableness of the settlement in light of all the attendant risks of litigation; and (j) the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.

The key terms 89 The benefits accruing to different categories of group members are set out in cl 2.4.1 of the Settlement Deed. Clause 2.4.1 relevantly provides among other matters that, without admission of liability, the Commonwealth: (1) will consent to the Court making Declarations in the following form: cl 2.4.1(e): In respect of asserted overpayment debts raised against Representative Applicants and Group Members, the Court declares that: 1. A decision that a Representative Applicant or Group Member owed the Commonwealth a debt under s 1223 of the Social Security Act 1991, because the person had obtained the benefit of a social security payment to which they were not entitled, was not validly made where all of the following apply: a. the rate of the social security payment for the Representative Applicant or Group Member was dependant upon the person's ordinary income on a fortnightly basis; b. the Commonwealth based its decision on an assumption (Assumption) that the person's ordinary income for a fortnight (relevant fortnight) was greater than the amount of ordinary income that the person had reported to the Commonwealth for the relevant fortnight; c. the Commonwealth relied solely on PAYG employment income data from the Australian Taxation Office (ATO data) to make the Assumption and did not have evidence that the person was likely to have earned employment income at a constant fortnightly rate during a period covered by the ATO data, or other evidence to support the Assumption; d. the Assumption was based on an assessment of the person's employment income for the relevant fortnight derived from averaging the ATO data, for a longer period that included the relevant fortnight, as if the person had earned income at a constant rate during that period. (2) will not demand, raise or recover from Category 1 Group Members and Category 2 Group Members any "invalid debt" as described in the Declarations: cl 2.4.1(b). (3) will pay to each Category 2 and Eligible Category 3 Group Members the Distribution Sum, being the amount left from the Settlement Sum of $112 million after deduction of Court-approved legal costs, with each such group member's share to be determined in accordance with the SDS; (4) will pay Category 2 Group Members and Eligible Category 3 Group Members a share of the Distribution Sum calculated by reference to the amount of the money received or recovered from them and the time they were without the money prior to the amount being refunded; and (5) will refund to each Category 2 Group Member any debt raised using income averaging from ATO data to the extent any such refund has not already been made 90 Under the proposed settlement Category 3 Group Members are broken down into two sub-categories: (a) "Eligible Category 3 Group Members", being those for whom the validly recalculated debt (not being based on income averaging from ATO data) is an amount less than the amount recovered or received from them by the Commonwealth; and (b) "Ineligible Category 3 Group Members", being those for whom the validly recalculated debt is equal to or more than the amount recovered or received from them in relation to the initial debt. Only Eligible Category 3 Group Members, whose recalculated debt is less than the amount of the invalidly raised debt the Commonwealth received or recovered from the group member, will receive a share of the Distribution Sum. That is on the basis that they are the only Category 3 Group Members who have suffered a loss by reason of the initial wrongly asserted debt. 91 Category 1 Group Members and Ineligible Group Members (that is, Ineligible Category 3 Group Members and Category 4 Group Members) will not receive a share of the Distribution Sum. 92 In return the Commonwealth will receive the benefit of the release in cl 2.2 of the Settlement Deed. Clause 2.2.1 of the Settlement Deed provides that, subject to Court approval of the settlement: …the Applicants on their own behalf and on behalf of the Group Members release the Respondent and its Related Persons [defined to mean past and present ministers, officers, employees, agents, professional advisers, executors, administrators or assigns of a party to the Settlement Deed] from all Claims in the Proceeding, other than claims that arise under this Deed (including the Settlement Distribution Scheme). The release is by all group members who have not opted out of the proceeding, including Category 1 Group Members and Ineligible Group Members.

The benefits and burdens of the proposed settlement for the different categories of group members

Category 1 Group Members 93 Category 1 Group Members are those whose debts were based on income averaging from ATO data, but who have made no repayments of such debts. The evidence shows that there are approximately 52,000 Category 1 Group Members and the total value of their debts is approximately $268 million. As at 17 March 2021, the debts of around 50,518 such group members had been withdrawn by the Commonwealth and that process was ongoing. 94 Category 1 Group Members will not receive a share of the Distribution Sum. The Contradictor submitted that the proposed Declarations and the Settlement Deed (which provides that the Commonwealth will not demand, raise or recover from any Category 1 Group Member any invalid debt as described in the Declarations) have little practical benefit for them because they get little more than what had already been promised to them by the Commonwealth. On that basis the Contradictor contended that the proposed settlement is not in their interests, because they will be bound the release yet get little more. 95 In my view the Contradictor overstated the position. Although at the point the settlement was reached the Commonwealth had publicly announced that it would withdraw all Asserted Overpayment Debts based on income averaging from ATO data, in my view the Declarations and the Settlement Deed provide some benefit for Category 1 Group Members. 96 First, the Declarations provide that the Asserted Overpayment Debts of Category 1 Group Members are invalid insofar as they were raised based on income averaging from ATO data. They achieve one of the key aims of the proceeding, being to ensure that debts raised based on income averaging from ATO data are declared invalid by the Court. It is in the interests of Category 1 Group Members that the Declarations be made. 97 Second, the evidence shows that there are (or were) approximately 52,000 people with debts of approximately $268 million against which no repayments have been made, and who were eligible to have their debts withdrawn pursuant to the Commonwealth announcements. The evidence does not, however, show how many of those group members had not yet had their debts withdrawn when the case settled on 16 November 2020. As at 17 March 2021 the debts of 50,518 such group members had been withdrawn. On the assumption that approximately 10% to 15% of Category 1 Group Members had not yet had their debts withdrawn at the point of settlement, there were at that time approximately 5,200 to 7,800 such group members with debts of between $26.8 million and $40.2 million (on the rough and ready assumption that debts were evenly apportioned between group members). For those group members the proposed Declarations and the relevant settlement term provide a means for them to legally enforce that entitlement in the event that their debts were somehow overlooked in the Commonwealth program or if the Commonwealth altered its position. When it is all said and done the Commonwealth program was a political promise, which could later be changed or withdrawn. Further, even if not changed it can be expected that the program will come to an end at some point. After the program comes to an end anyone who was somehow missed (because for example they were overseas) may then be unable to have their debt withdrawn (or if they are a Category 2 Group Member or Eligible Category 3 Group Member to have their debt refunded). The advantage of the Declarations is that their debts will be declared invalid in perpetuity. 98 Third, for many Category 1 Group Members the Declarations are likely to provide a sense of vindication and "closure" through the Court's declaration that their debts were unlawfully raised. 99 Fourth, the Declarations will mark the Court's disapproval of the Commonwealth's conduct in invalidly raising Asserted Overpayment Debts based on income averaging from ATO data; and also inform the public more broadly in that regard. It is in the interests of Category 1 Group Members for the Declarations to be made as they serve to vindicate their claims that it was unlawful for the Commonwealth to raise debts based on income averaging from ATO data: see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [74]-[79] (Gordon J) and the cases there cited. 100 In my view the proposed settlement does provide some benefits for Category 1 Group Members in return for the release.

Category 2 Group members 101 Category 2 Group Members are those whose debts were wholly or partially based on income averaging from ATO data, and who have made a repayment towards those debts. The evidence shows that there are approximately 381,000 Category 2 Group Members from whom Commonwealth received or recovered approximately $751 million of such debts. At the time the settlement was reached about $707.9 million had been refunded. 102 For the same reasons as in relation to Category 1 Group Members the Contradictor contended that the Declarations provide little practical benefit to Category 2 Group Members, as they provide for little more than what had already been promised to them. For essentially the same reasons as in respect of Category 1 Group Members, I do not accept that the Declarations are of little practical benefit to Category 2 Group Members. They: (a) meet one of the keys aims of the proceeding and it is in the interests of Category 2 Group Members that the Declarations are made; (b) benefit Category 2 Group Members because at the point the settlement was reached approximately $707.9 million had been refunded, against a total of $751 million in Commonwealth-recovered amounts. Thus, about $43 million remained outstanding to group members at that point. For those Category 2 Group Members who had not been provided with refunds at that point, the Declarations provide a means for them to legally enforce that entitlement in the event that their debts were somehow overlooked in the Commonwealth program or if the Commonwealth altered its position; (c) are likely to provide a sense of vindication and "closure" through the Court's declaration that their debts were unlawfully raised; and (d) record the Court's disapproval of the Commonwealth's conduct and inform the public in that regard. 103 The Contradictor did not though submit that the proposed settlement is not in the interests of Category 2 Group Members; that could not be so when the proposed settlement provides them with substantial financial benefits. They will receive a share of the Distribution Sum calculated by reference to the amount of money the Commonwealth received or recovered from them and the time they were without the money prior to it being refunded.

Eligible Category 3 Group Members 104 It is not clear on the evidence how many Eligible Category 3 Group Members exist, but in the course of the settlement approval hearing the Commonwealth estimated that there were approximately 13,000 such persons. I proceed on that basis. 105 For the same reasons as in relation to Category 2 Group Members, the Contradictor submitted that the Declarations provide little practical benefit for Eligible Category 3 Group Members. I do not accept that for essentially the same reasons as apply to Category 2 Group Members. 106 The Contradictor did not submit that the proposed settlement is not in the interests of Eligible Category 3 Group Members. Again, that could not be so because they will receive substantial financial benefits under the proposed settlement. They will receive a share of the Distribution Sum calculated by reference to the amount of money the Commonwealth wrongly received or recovered from them (over and above their validly recalculated debt) and the time they were without the money prior to it being refunded.

Ineligible Group Members 107 As explained above, "Ineligible Group Members" comprises Ineligible Category 3 Group Members and Category 4 Group Members. 108 Ineligible Category 3 Group Members do not receive a share of the Distribution Sum and do not get the benefit of the Declarations. That is on the basis that their debts have been recalculated on a valid basis, which debt is equal to or more than the invalid debt that the Commonwealth received or recovered from them, such that the Commonwealth can no longer be said to have received or recovered from them an invalid debt based on income averaging from ATO data. As their recalculated debts are not based on income averaging from ATO data they will remain liable to pay such debts. 109 Category 4 Group Members do not receive a share of the Distribution Sum and do not get the benefit of the Declarations. That is on the basis that they never had a debt determined based on income averaging from ATO data. 110 The Contradictor contended that the proposed settlement is not in the interests of Ineligible Group Members because they receive no financial benefit but are burdened with the release. 111 In response the applicants contended that Ineligible Group Members do receive some benefit under the proposed settlement. They noted, and I accept, that the categories of group members in the proceeding bear no relationship to the way the Services Australia's customer information is recorded or its systems are structured. To categorise group members into the four categories in the proceeding requires analysis and manual inspection of records, which is time consuming and expensive. Outside of the requirements of the SDS no such categorisation is likely to be undertaken. The applicants contended, and I accept, that the evidence tends to show that many group members do not understand what category they fall into nor the basis upon which any such categorisation would be made; whether they are entitled to a refund or to have their debts withdrawn under the Commonwealth program; or whether they should be entitled to share in the Distribution Sum. They also submitted, and I accept, that the evidence tends to show that many group members have little trust that Centrelink will properly or accurately categorise them or adequately explain the basis upon which they have done so. 112 On that basis the applicants contended that under the proposed settlement Ineligible Group Members will receive the benefit of a transparent process with independent oversight to assess what category they fall into, and therefore whether they have any entitlement under the proposed settlement. At the end of that process they will know where they stand and understand the basis upon which any such decision was made. While that asserted benefit can be criticised as not amounting to much, I accept that it has some value to Ineligible Group Members.

WHETHER THE PROPOSED SETTLEMENT IS FAIR AND REASONABLE 113 For the reasons I now explain, I am well-satisfied that the proposed settlement is fair and reasonable as between the parties. Whether the proposed settlement is fair and reasonable as between the different categories of group members is more difficult, but ultimately I am satisfied that it is. 114 The following matters are important to my views in this regard.

Counsels' Opinion 115 The Counsels' Opinion was prepared by the senior and junior counsel briefed for the applicants in the proceeding, provided on the basis that counsel candidly and frankly disclose the factors material to the decision to recommend the settlement for approval by the Court. I cannot go into the detail of Counsels' Opinion as it is confidential. That confidentiality is important because counsel frankly appraise the relative strengths and weaknesses of the applicants' claims in circumstances where settlement approval cannot be taken as a given. If Counsels' Opinion were not kept confidential, and the settlement approval application was refused, the applicants and group members would be disadvantaged in any negotiations for another settlement and/or in the conduct of any trial. It must suffice to note that Counsels' Opinion addressed the fairness and reasonableness of the proposed settlement both as between the parties and as between group members by reference to the complexity and likely duration of the litigation, the reaction of the class to the settlement, the stage of the proceedings, the risks of establishing liability for each of the causes of action, the risks in relation to quantum, and the reasonableness of the settlement in light of the attendant litigation risks, and recommended that the Court approve the settlement as fair and reasonable. The authorities provide that it is appropriate to give significant weight to Counsels' Opinion and I have done so.

The Contradictor's submissions 116 The Contradictor made detailed written and oral submissions which comprehensively addressed the salient issues in the application. It is plain from those submissions that the Contradictor conscientiously represented the interests of group members. The careful and comprehensive approach the Contradictor took gave me confidence in reaching the conclusions that I have. 117 I accept the Contradictor's submission that the proposed settlement is fair and reasonable as between the applicants and group members and the Commonwealth. I do not however accept that the proposed settlement is only fair and reasonable as between group members if Category 1 Group Members and Ineligible Group Members are now permitted to opt out of the proceeding should they wish to do so. 118 In passing, I should deal with the Contradictor's submission that by a media release on 16 November 2020 Gordon Legal suggested that the value of the proposed settlement was approximately $1.2 billion. The media release relevantly said: The settlement reached with the Commonwealth of Australia means that if approved by the Court, since the commencement of the Robodebt Class Action, more than $1.2 billion in financial benefit will have been provided to approximately 400,000 group members. … The total financial outcome achieved is made up as follows: - The Commonwealth has today agreed to pay $112 million in compensation to approximately 400,000 eligible individual Group Members, including legal costs; - The Commonwealth is repaying more than $720 million in debts collected from Group Members invalidly and will continue to provide refunds; - The Commonwealth has agreed to drop claims for approximately $398 million in debts it has invalidly asserted against group members of the class action;… 119 The Contradictor contended that the press release obscured the fact that, as at the date of settlement, the Commonwealth had already announced and embarked on a program to withdraw debts based wholly or partially on income averaging from ATO data, and to refund any such debts which had been recovered from them. 120 The evidence shows that, at the time the proceeding was commenced, the claims in the proceeding had a monetary value of at least $1.763 billion, being the amount of the Asserted Overpayment Debts which the Commonwealth raised based on income averaging from ATO data. It sought declarations that those debts be declared invalid, and the return of the Commonwealth-recovered amounts to the applicants and group members, which the evidence indicates total at least $751 million. 121 The monetary value of the principal claims for relief was, though, substantially reduced when the Commonwealth made the 29 May and 1 July 2020 Announcements, under which it promised to withdraw all debts based on income averaging from ATO data and refund all such Commonwealth-recovered amounts. Between July 2020 and the settlement in November 2020, the Commonwealth performed the promises it had made, and was continuing to do so. 122 As a result, at the time the settlement was reached, the monetary value of the applicants' and group members' unjust enrichment claims had been reduced to the claims for interest or quasi-interest earned on the Commonwealth-recovered amounts during the period the Commonwealth held that money. The Contradictor estimated those claims to have a potential quantum of between approximately $39 million and $194 million. 123 It can readily be accepted that the monetary value of the proposed settlement is not $1.2 billion, but the media release Gordon Legal did not say that in terms. It is unnecessary to determine what representations may have been conveyed by the media release because nothing turns on it. It is appropriate to assess the fairness and reasonableness of the proposed settlement having regard to the benefits provided under it, not by reference to any other benefits the litigation may have generated for the applicants and group members. But I do not see the Commonwealth's decision to reverse its previous position and to withdraw all debts based on income averaging from ATO data and refund all Commonwealth-recovered amounts as being unrelated to the class action. Of course, I cannot know what lay behind the Commonwealth's decision to reverse its position, but it is open to infer that the Commonwealth's view as to the applicants' prospects of success on the claims in the class action, the pending mediation and the approaching hearing date were material to the decision. I am not persuaded it was misleading for Gordon Legal to say that "the total financial outcome" for approximately 400,000 group members through the proceeding (as distinct from through the proposed settlement) was more than $1.2 billion.

The release 124 Clause 2.2.1 of the Settlement Deed releases the Commonwealth from "all Claims in the proceeding. "Claims in the proceeding" is defined to mean: …a claim made in the Proceeding or arising out of or in relation to the subject matter of the Proceeding, but does not include a claim that arises from rights under this Deed (including the Settlement Distribution Scheme). 125 The release in cl 2.2.1 is limited by a carve-out in cl 2.2.2, which states: The release provided by the Applicants and Group Members in clause 2.2.1 does not affect in any way a Group Member's right or ability to: a. enquire about, object to, or challenge a debt decision of the Respondent that is not the subject of the Proceeding; and b. enquire about, object to, or challenge a decision of the Respondent with respect to his or her entitlement to any social security payment. 126 In the settlement approval hearing, in response to concerns about the ambiguity of the carve out, the Commonwealth offered the following undertaking: The respondent undertakes to the Court that the intended operation and interpretation of clauses 2.2.1 and 2.2.2 of the Settlement Deed, when read together, is that: a. Group Members are precluded from objecting to or challenging a debt decision that was the subject of the proceeding if the nature of their objection or challenge is of the same nature as the claims made in the proceeding; however, b. Group Members are not precluded from enquiring about, objecting to or challenging (including by exercising their statutory rights of review) debt decisions which were the subject of the proceeding if the basis of their enquiry, objection or challenge is different in nature to the claims made in the proceedings. The proposed settlement is approved on the basis of this undertaking, as recorded in the orders. 127 The meaning of the phrase "a claim made in the Proceeding" in the release is plain. It can only mean the common claims based in unjust enrichment and for negligence advanced by the applicants on their own behalf and on behalf of the group members. 128 The meaning of a claim "arising out of or in relation to the subject matter of the Proceeding" is not as clear, particularly the scope or extent of the phrase "in relation to". The breadth of this phrase gave rise to a concern on my part that the release might purport to effect a release of group members' non-common claims based in their individual circumstances. Such a release would be impermissible as the applicants do not have representative authority under Part IVA of the FCA beyond the scope of the common claims under s 33C. The applicants represent group members "only with respect to the claim the subject of that proceeding, but not with respect to their individual claims": Timbercorp Finance Pty Ltd (in liquidation) v Collins; Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2016] HCA 44; (2016) 259 CLR 212 at [39], [49], [53]-[54] (French CJ, Kiefel (as her Honour then was), Keane and Nettle JJ), [122] and [141]-[142] (Gordon J); Dyczynski v Gibson [2020] FCAFC 120; (2020) 381 ALR 1 at [96], [106(a)], [201], [249]-[251] (Murphy and Colvin JJ), at [395]-[396] (Lee J). 129 As Gaudron, Gummow and Hayne JJ observed in Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; (2002) 211 CLR 1 at [34], what is decided in a class action is "the claims that are made, or could be made, against the defendant by all those in the "class" or "group" that is identified in the proceeding" (emphasis added). Accordingly it is only appropriate to approve the proposed settlement on the basis that the release does not go beyond the common claims of the applicants and group members which are or could have been advanced in the proceeding, as the applicants' authority to provide a release does not extend beyond that. 130 The scope of the carve-out in cl 2.2.2 is somewhat unclear, but that concern was addressed to an extent by the undertaking the Commonwealth provided. The undertaking provides that group members are precluded from challenging a debt decision only if the basis of their objection or challenge is of the same nature as the claims made in the proceeding. That is, if the challenge is based in an assertion that the debt was raised based on income averaging from ATO data, or based on information provided in response to a Robodebt notification or a notification of a debt based on income averaging from ATO data. 131 I do not purport to decide any question that may arise in other subsequent proceedings as to whether any particular group member's claim for damages for personal injury arising from the Commonwealth's assertion or recovery of a debt based on income averaging from ATO data (or alternatively based on information provided in response to a Robodebt notification or notification of a debt based on income averaging from ATO data) is in fact precluded by the release. But for the purposes of the settlement approval application I proceed on the assumption that the release will preclude group members from making such a claim. For the reasons I set out, I do not consider that the release means that the proposed settlement is not fair and reasonable as between the parties or as between group members.

The complexity and likely duration of the litigation 132 I have previously outlined the claims in the proceeding, the nature of the relief sought, and the steps taken in the proceeding and I need not do so again. The quantum of the amount in dispute is large, the case having a monetary value of approximately $1.763 billion at its commencement. Even after the Commonwealth had withdrawn all debts based on income averaging from ATO data and refunded all Commonwealth-recovered amounts, the claims for interest or quasi-interest have a value estimated by the Contradictor at between approximately $39 million and $194 million. 133 The proceeding was brought on for final hearing within one year of being filed, and it involved a substantial and expedited discovery process, including disputed claims for legal professional privilege and public interest immunity. Discovery was still proceeding as the hearing date approached. 134 The applicants and group members claim aggravated and exemplary damages in the negligence claims, and exemplary damages in the unjust enrichment claims, founded in allegations that the responsible Ministers and senior public servants actually knew that the Commonwealth had no statutory or other power to seek to recover debts based on income averaging from ATO data, and that the Commonwealth was acting unlawfully in asserting such debts. Those are serious allegations and they are strenuously denied. 135 Because the applicants' case is primarily based in documents discovered by the Commonwealth the factual substratum of the case is unlikely to be contentious, but the proceeding raises a number of novel or contentious questions of law and is therefore legally complex. These include questions as to: (a) the existence of a novel duty to exercise reasonable care in the performance of the relevant Commonwealth-controlled functions under the SSA; (b) the existence of a "juristic reason" for the Commonwealth to retain so much of the Commonwealth-recovered amounts as the Commonwealth believes were "in fact" owed by them under other debts to the Commonwealth; (c) the availability of a claim for exemplary damages in an unjust enrichment claim and for both exemplary and aggravated damages in a tortious claim in negligence; (d) the contention that the debts of Ineligible Group Members, which were not based on income averaging from ATO data, were somehow "tainted" with illegality; (e) the availability of a claim for damages for stress, anxiety and stigma in the absence of evidence of any recognised psychiatric injury or condition; and (f) the availability of a claim for distress damages in a tortious claim in negligence for economic loss. The applicants filed an outline of written submissions for trial running to 148 pages in relation to these issues, and the Commonwealth filed an outline of written submissions running to 96 pages. 136 Having regard to the novelty of the issues in the proceeding and the quantum at stake, whichever way the decision went on some of those issues at trial there is a likelihood that the unsuccessful party will appeal. An appeal would add at least a further year before the case could be concluded and some of the issues (including the existence of the alleged duty of care, the availability of the juristic reason defence to the unjust enrichment claims, and the availability of distress damages in a claim in negligence for economic loss) might result in an application for special leave to the High Court. There was a possibility that this would further delay any resolution of the dispute. It is in the interests of group members to receive a fair settlement as early as possible. This consideration points in favour of approving the settlement.

The stage of the proceedings at which settlement was reached 137 The proceeding was listed for trial commencing on 16 November 2020 and settled on the first day. The evidence shows that the parties participated in a mediation on 4 and 5 June 2020 and had continued to negotiate thereafter. By the time settlement was reached the applicants had the benefit of substantial discovery, had filed their lay and expert evidence, and the parties had the benefit of understanding how the evidence was said to support a claim that through the responsible Ministers and senior public servants the Commonwealth actually knew that it was unlawful to raise debts based wholly or partially on income averaging from ATO data. Both parties had filed lengthy opening submissions. 138 The parties and their lawyers were in a position to make a well-informed assessment of the strengths and weaknesses of their respective cases on liability and quantum; the costs likely to be incurred by proceeding to trial, and of the risks of appeal on the contentious issues. These considerations also point in favour of approving the settlement.

The risk of establishing liability 139 It is necessary to understand that in setting out the risks of establishing liability (and also in relation to the risks in establishing quantum) I do not purport to decide any question or issue regarding the respective strengths and deficiencies in the parties' cases in the proceeding. My remarks as to the prospects of success on liability (and quantum) are merely in aid of setting out why I consider the proposed settlement to be fair and reasonable.

The unjust enrichment claims 140 Broadly, for the applicants and Category 2 Group Members and Eligible Category 3 Group Members to succeed in their unjust enrichment claims, they must establish that: (a) the Commonwealth has been enriched by the recovery or receipt of monies; (b) the receipt or recovery of those monies by the Commonwealth was at the expense of the applicants' and group members; (c) the receipt occurred in circumstances where it would be unjust for the Commonwealth to retain the enrichment (sometimes called an "unjust factor"); and (d) the claim is not subject to a defence: Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 267 CLR 560 at [212]-[213] (Edelman J). 141 Subject to a defence being made out by the Commonwealth, if the applicants prove the first three elements they will be entitled to an order for restitution, requiring the reversal of the transfer of value received by the Commonwealth so as to restore the parties to the status quo ante, being their pre-transfer position, inclusive of the transfer of the benefit derived or obtained by the Commonwealth from its use and retention of the monies. 142 There is some confusion in the 2FASOC in relation to the unjust enrichment claims. The 2FASOC is pleaded on the basis that there are a variety of claims available to the applicants under the heading of unjust enrichment. In the alternative, the applicants plead a distinct or separate claim for monies had and received. Then, in opening submissions for trial, the applicants appear to articulate that what were pleaded as individual alternative claims for unjust enrichment in the 2FASOC are in fact alternative unjust factors giving rise to a right to restitution. These unjust factors are that the Commonwealth was enriched: (a) without lawful basis - as the asserted debts were recovered from the applicants and group members ultra vires and unlawfully, as there was no lawful basis for the Commonwealth to raise and recover them; (b) by reason of a mistake of law - as the applicants and group members were mistaken as to their legal obligation to repay or have recovered from them the amounts received by the Commonwealth; (c) on "a basis that failed" - as the basis upon which monies were received by the Commonwealth was not satisfied; (d) by "compulsion or duress colore officii" - as illegitimate pressure was applied, by apparent or claimed authority of the State, upon the applicants and group members that caused or contributed to their decision to pay money to the Commonwealth; and (e) by unlawful conduct - as the Commonwealth was enriched in consequence of its breach of a duty of care said to be owed to the applicants and group members. 143 It should be kept in mind that unjust enrichment is a unifying legal concept which illuminates why the law recognises, in a variety of distinct categories of case, an obligation on the part of the defendant to make fair and just restitution for a benefit derived at the expense of the plaintiff: Pavey v Matthews [1987] HCA 5; (1987) 162 CLR 221 at 256-257 (Deane J); Muschinski v Dodds (1985) 160 CLR 583 at 617 (Deane J). To my mind the monies had and received claim sits within the concept of unjust enrichment, not as an alternative claim. What the applicants pleaded as "claims" in unjust enrichment are better understood as unjust factors within the monies had and received claim, which together or severally would have, if proven, provided a proper basis to require the Commonwealth to make restitution of the value of the benefit it held to the detriment of the applicants and Category 2 Group Members and Eligible Category 3 Group Members. For convenience, when I refer to the unjust enrichment claims of the applicants and group members I mean their monies had and received claim, as that is the better prism through which to view their claims. 144 Save in relation to the sixth applicant and Category 4 Group Members the Commonwealth conceded the first two elements of the unjust enrichment claim, but it denied the existence of any "unjust factor" which would provide a principled ground for recovery. 145 In my view the applicants and group members have good prospects of making out the money had and received claim on the basis that the Asserted Overpayment Debts were recovered from the applicants and group members ultra vires and unlawfully, as there was no lawful basis for the Commonwealth to raise and recover them, or, alternatively, on the basis of a mistake of law. Essentially that is because, at least in respect of the ultra vires claim, it is likely that the Court would hold that the reformulation of the law in Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70; [1992] 3 All ER 737 applies in Australia. 146 In Woolwich the House of Lords held that money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authorities is prima facie recoverable as of right. Lord Goff observed at 171-172: The revenue has made an unlawful demand for tax. The taxpayer is convinced that the demand is unlawful, and has to decide what to do. It is faced with the revenue, armed with the coercive power of the state, including what is in practice a power to charge interest which is penal in effect…. …the revenues position appears to me, as a matter of common justice, to be unsustainable; and the injustices rendered worse by the fact that it involves…the revenue having the benefit of a massive interest-free loan as the fruit of its unlawful action. Similarly at 197 Lord Browne-Wilkinson said: If the revenue is right, it will be enriched by the interest on money to which it had no right during that period. In my judgment, this is the paradigm of a case of unjust enrichment. 147 The High Court has not been called on to rule on the applicability of the Woolwich principle, but as Justice Edelman and Professor Elise Bant, the learned authors of Unjust Enrichment noted, the principle has "been mentioned without criticism, and even approval, in a number of Australian cases". In State Bank of New South Wales Limited v Commissioner of Taxation for the Commonwealth of Australia [1995] FCA 893; (1995) 62 FCR 371 at 378 Wilcox J said "I see no reason why the reformulation of the law effected in Woolwich should not be adopted in Australia." His Honour went on to hold (at 381) that the bank was "as a matter of general principle" entitled to restitution of the interest earned on the monies held by the Commissioner, because an entitlement to such interest did not fall outside the "restitution principle applied in Woolwich". In Chippendale v Commissioner of Taxation [1996] FCA 80; (1996) 62 FCR 347 at 366 Lehane J said that it "seems likely" that Woolwich will be followed in Australia. The principle in Woolwich also sits comfortably with other Australian authorities: Commissioner for State Revenue (Vic) v Royal Insurance Australia Limited [1994] HCA 61; (1994) 182 CLR 51 at 69 (Mason CJ) and Sargood Brothers v Commonwealth [1910] HCA 45; (1910) 11 CLR 258 at 276 (O'Connor J) and Mason v New South Wales [1959] HCA 5; (1959) 102 CLR 108 at 129 (Kitto J). 148 In my view it is unlikely that the Court would distinguish the position in Woolwich from that in the present case on the basis that the present case is not concerned with the recovery of unlawful taxes or levies, instead being concerned with overpayments of social security benefits under the SSA. Nor can I see much force in the Commonwealth's contention that the SSA indicates a legislative intent that a notice issued for the purpose of s 1229(1) of the SSA will have legal effect even if the notice was issued ultra vires and unlawfully.

The juristic reason defence 149 The Commonwealth raises by way of defence that it has a "juristic reason" for retention of so much of the Commonwealth-recovered amounts that it believes is in fact owed as a debt by the applicants and group members. The Commonwealth alleges that there exists a valid debt arising by operation of s 1223(1) of the SSA where it is able to show that a debt is actually payable pursuant to that provision, even though the original basis upon which a debt was claimed and recovered from the social security recipient was no longer correct, citing David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 380 and 384 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ), 392 (Brennan J), 405 (Dawson J). In David Securities (at 379) the plurality said: …the recipient of a payment which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust. In opening submissions for trial the Commonwealth contended that, in respect to any amount that was "in fact" owed by a person, it was not unjustly enriched at the expense of the applicant and group members by its recovery from them of invalidly raised debts. 150 The Commonwealth further argues that, having raised a juristic reason for retention of the monies it had received, the burden falls on the applicants to negative that basis for retention, and if the applicants did not discharge that burden they are not entitled to recover the value of the benefit retained, citing: National Mutual Life Association of Australasia Ltd v Walsh (1987) 8 NSWLR 585 at 592 (Clarke J); Griffiths v Commonwealth Bank of Australia [1994] FCA 402; (1994) 123 ALR 111 at 123-124 (Lee J); Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337 at [168], [177]-[183] (Debelle J); Clarke v Abou-Samra [2010] SASC 205 at [69]-[72], [103]-[106] (Kourakis J). 151 In my opinion the prospects of the Commonwealth making out the juristic reason defence are poor. There is force in the applicants' submission that the juristic reason defence boils down to the proposition that the Commonwealth having recovered monies from vulnerable social security recipients through the coercive powers of the state, to which monies it had no lawful entitlement, it should then be permitted to retain those funds to set off other allegedly owed debts it asserts. This is distinct from the position in Clarke where such a retention was said to be good in law where the claim was one for recovery of money paid under a mistake of fact. In my view it is for the Commonwealth to show that the existence of some other debt means that its receipt or retention of unlawfully recovered monies is not unjust. I would not readily accept that the Commonwealth is able to retain those amounts because it believes those persons have some other debt that it could apply that money to instead. 152 That is particularly so when there is no prejudice to the rights of the Commonwealth if the juristic reason defence is not allowed. There is nothing to prevent the Commonwealth from asserting and recovering any debt that is "in fact" owed by any of the applicants or group members. It is more likely that the Court would find that if the Commonwealth can establish that any applicant or group member actually owes a debt it should seek to enforce that debt. I doubt that the Court would find that it was permissible for the Commonwealth to hold onto monies which it had unlawfully obtained and to apply those monies in satisfaction or set off of a different debt it says is owed, when that debt is not proven. At a minimum, requiring the Commonwealth to assert any entitlement to a different debt through the procedure provided under the SSA, rather than simply applying monies unjustly recovered by it as a set off, would afford the alleged debtors natural justice and would facilitate their rights to challenge such newly asserted debts through administrative merits review under Parts 4 and 4A of the SSAA. 153 The Commonwealth had put on no evidence for the trial to show that any group member has other debts to the Commonwealth which are not based on income averaging from ATO data; how any amount said to be owed was determined; and if not determined how long such a determination may take. In my view it would be for the Commonwealth to show that, in fact, group members have other debts to the Commonwealth. There is nothing to show that it had gathered that information or made such assessments other than in respect of the applicants themselves. Allowing the Commonwealth to determine at its leisure whether and to what extent some other alleged debt is owed to it is unlikely to be seen as a proper foundation to permit it to retain monies which it unjustly obtained to its benefit. 154 Even so, as the Contradictor submitted, it must be accepted that the applicants faced at least some risk in relation to the juristic reason defence. The proposed settlement of the monies had and received claim should (and does) reflect the likely success of the applicants and group members, with some allowance for the risk, either at first instance or on appeal, that the juristic reason defence might succeed. Again, this consideration points in favour of approving the settlement.

The liability risks having regard to the different categories of group members 155 I now turn to apply the above analysis to the different categories and sub-categories of group members. Category 1 Group Members 156 There can only be a viable monies had and received claim if the Commonwealth was in fact monetarily enriched. In my view there is no viable unjust enrichment claim on behalf of Category 1 Group Members because the Commonwealth was not in receipt of any monies from Category 1 Group Members obtained at the expense of those group members. Category 2 and Eligible Category 3 Group Members 157 In my view the unjust enrichment claims of Category 2 Group Members and Eligible Category 3 Group Members enjoy good prospects of success. That is so having regard to the evidence and to the Commonwealth's concession in its Defence that it did not have a legal basis to raise and recover debts wholly or partially based on income averaging from ATO data. Where the Commonwealth recovered such asserted debts (or in the case of Eligible Category 3 Group Members recovered more than the subsequently validly recalculated debts), the applicants and group members have good prospects of establishing that the Commonwealth was: (a) enriched by the receipt of monies; (b) at the expense of those group members; (c) in circumstances where it would be unjust for the Commonwealth to retain the enrichment because the Commonwealth admitted such debts were not validly raised. Ineligible Group Members 158 In their opening submissions for trial in relation to Ineligible Category 3 Group Members' unjust enrichment claims, the applicants submitted that while Asserted Overpayment Debts raised against them were not based on income averaging from ATO data, they were raised on the basis of income information procured by unlawful means, being "tainted" by the initial raising of a debt based on income averaging from ATO data which would have been unlawful if imposed. The applicants contended that the threat of imposition of an unlawful debt could never constitute a legitimate means of procuring actual income information from a group member who would not otherwise have been required to provide it. 159 In relation to Category 4 Group Members the applicants submitted that, while the ultimate debt was lawfully raised, it was raised on the basis of income information procured by unlawful means because the process of debt raising was "tainted" by the initial Robodebt notification based on income averaging from ATO data, which threatened the imposition of an unlawful debt in order to procure the provision of actual income information. 160 Thus the prospects of success in the unjust enrichment claims of Ineligible Group Members are entirely dependent on the novel "tainting" argument. In opening submissions for trial the applicants submitted that this argument has a solid foundation in first principles. They contended that unjust enrichment involves an examination of the conduct of both parties, and while it might be said that equity might or ought not come to the aid of someone who is actually owed a debt, the relevant debts of Ineligible Group Members were only raised after they responded to Robodebt notifications based on income averaging from ATO data, or to debts raised on that basis. On the applicants' argument, but for the Robodebt system, Ineligible Group Members would not have laboured under any misapprehension that they had to furnish (accurate) income information to the Commonwealth, which the Commonwealth then used against them in raising a validly calculated debt. 161 In its opening submissions for trial (and in submissions in the settlement approval application) the Commonwealth strongly argued that the "tainting" claim is hopeless; has "no prospect of success" and "no value". It contended that had the proceeding gone to trial the claims of Ineligible Group Members would have failed and there would have been a strong basis for awarding indemnity costs against the relevant representative applicants. It argued that the "tainting" argument is plainly flawed because at its centre is the proposition that a decision to raise a debt that is validly made in accordance with the statutory power under the SSA, and which is unaffected by jurisdictional error, is somehow deprived of statutory effect because: (a) in the case of Ineligible Category 3 Group Members an earlier decision that is no longer operable was invalidly made; or (b) in the case of Category 4 Group Members for no reason capable of rational articulation. 162 The Commonwealth submitted that the unjust enrichment claim on behalf of Ineligible Group Members fails to engage with the statutory scheme, in particular with the effect of s 1223(1) of the SSA and (in relation to Ineligible Category 3 Group Members) with the consequences of engaging the internal review procedures under s 126 of the SSAA. It said that the tainting argument is founded in the false proposition that where a group member either provides income information (such as payslips or bank statements) in response to a Robodebt notification, or provided such information in support of an application for internal review by the Secretary of an original debt decision, the Commonwealth had "procured" information "by unlawful means". 163 The Commonwealth submitted that the "tainting" argument misunderstands the relevant provisions in the SSAA and the SSA. In relation to Category 3 Group Members the Commonwealth accepts that the debts that were initially invalidly raised were affected by jurisdictional error, because the decisions were based on income averaging from ATO data. Nonetheless, it says that the debt amount ultimately raised following a review by the Secretary of the original decision reflected a decision validly made pursuant to s 126 of the SSAA. 164 The Commonwealth submitted that: (a) s 126 confers on the Secretary a broad power to review a decision of an officer if there is a "sufficient reason" to do so, on the Secretary's own motion or on the application of a person affected by the decision, see: ss 126(2)(a) and 129(1) of the SSAA; (b) on review, the Secretary may affirm, vary or set aside the decision and substitute a new decision: ss 126(3) and 135(1)(b) of the SSAA; (c) a decision by the Secretary or an authorised review officer may be reviewed on the merits by the AAT: s 142(1), SSAA; (d) for the purposes of such a review, the "decision" of the Secretary or the review officer that is the subject of the review is, where the original decision was affirmed or varied, that decision as affirmed or varied: s 142(4)(a) and (b); and (e) if the original decision is set aside and a new decision is substituted, the decision the subject of the review by the AAT is the new decision: s 142(4)(c). 165 The Commonwealth contended that the effect of these provisions is that, even if the initial debt decision is invalidly raised and is affected by jurisdictional error, once a s 126 review is undertaken, the question whether a debt has been validly determined turns on consideration of the review decision. If a new decision is substituted, that review decision will be effective to identify a debt where the asserted overpayment of social security benefits is determined based on probative information such as payslips or bank statements. The Commonwealth said that the applicants seem to accept that the debt ultimately identified in relation to Category 3 Group Members is "lawfully raised" and argues that, unless the review decision that identified the recalculated debt is somehow impugned, the applicants cannot succeed in claiming restitutionary relief of the amounts ultimately retained by the Commonwealth. 166 The Commonwealth further submitted that s 1223(1) of the SSA provides that the amount of any overpayment is a debt due to the Commonwealth which "is taken to arise when the person obtained the benefit of the payment", that is, at the time of the overpayment. It said that it is not apparent how it could be unjust for the Commonwealth to receive from a Category 3 Group Member an amount that was no greater than the amount in respect of which the person was always indebted to the Commonwealth pursuant to s 1223 of the SSA. 167 In their opening submissions for trial in relation to Category 4 Group Members, the applicants submitted that they "have had legitimate debts raised against them only after the Robodebt System calculated and threatened the imposition of an unlawful debt based upon income averaging and deployed that threat to procure the provision of actual income information." In response, the Commonwealth again contended that, once an overpayment debt is validly raised it is taken to have arisen when the person obtained the overpayment. It said, again, that it is hard to see how it could be unjust for the Commonwealth to receive money from a Category 4 Group Member which the group member legitimately owed as a debt. 168 The Contradictor accepted that the "tainting" argument is weak and described the argument as "probably among the most difficult and tenuous aspects of the applicants' case" and carrying "very substantial risk". The Contradictor also described the claims of Ineligible Category 3 Group Members as "novel and probably best characterised as weak". 169 In my view there is force in the Commonwealth's argument regarding the construction of the SSAA, and an air of unreality in the applicants' submission that it is unlawful for the Commonwealth to raise a debt based, for example, on payslips or bank statements supplied by a social security recipient, even if that followed an initially wrongly determined debt. It is important to understand that the Robodebt system included an initial letter to social security recipients (which the applicants characterised as a Robodebt notification) stating that the information received from the ATO was different to that which the person had told Centrelink, and telling the person that they were required to confirm or update their income information within a specified period, and if they did not do so, the Commonwealth would rely on the ATO income information which might result in a debt that the person would have to pay. 170 I am not, without more, inclined to accept the applicants' characterisation of Robodebt notifications as coercing people to provide actual income information by threatening the imposition of an unlawful debt in order to unlawfully procure such information. The form of the Robodebt notifications changed over time and I was not taken to every example of such notifications, but having regard to the pro forma Robodebt notification provided to the Court in the settlement approval hearing it is difficult to see much force in the contention that it is coercive. Relevantly, it said: We have information from the Australian Taxation Office (ATO) that we need your help to confirm or update. The employment dates or income details are different to what you told us when getting a payment. We use your employment information so you get paid the right payment. This is not a debt letter. Please check the ATO information with this letter carefully. You must confirm or update the information within 28 days of receiving this letter. Go online and check today The easiest way is to sign into your Centrelink online account link to your myGov account. … Please note, if you don't confirm or update the information within 28 days, we may apply the employment dates and income from the ATO to your record. This may result in a debt you will need to repay. After you have confirmed or updated the details, we will write to you to let you know the outcome and what you need to do next. If you need help If you don't have internet access or need help to sign in, go into any one of our service centres. If you need help with the employment information provided, call us on 1800 086 400. (Emphasis in original.) 171 In my view the Ineligible Group Members' unjust enrichment claims are weak and have little prospect of success. That is central to my conclusion that the proposed settlement is fair and reasonable both inter partes and as between group members.

The negligence claim 172 The applicants allege the existence of a duty to exercise reasonable care in the performance of Commonwealth-controlled functions under the SSA to avoid foreseeable economic loss to persons in the position of the applicants and group members, including: (a) assessing and determining whether they are or were entitled to Social Security Payments; (b) assessing and determining the amount of the Social Security Payments to which they were entitled on the basis of their respective reported fortnightly income; (c) raising and recovering debts arising from overpayments of Social Security Payments; (d) obtaining information evidencing, demonstrating or verifying actual fortnightly income for use in performing those functions; (e) raising and recovering such debts using the actual fortnightly income rather than the notional fortnightly income of persons; and (f) requesting or demanding repayment of any overpayment of Social Security Payments and any associated penalties. (the Commonwealth-controlled functions) 173 It is common ground that the alleged duty of care does not fall within an existing category of known duties. The existence of and appropriateness of imputing such a novel duty of care to avoid foreseeable harm would therefore fall to be determined by a close analysis of the facts bearing on the relationship between the applicants and group members and the Commonwealth by reference to the "salient features" or factors described in Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649 at [102]-[103] (Allsop P (as his Honour then was)). 174 In the context of a settlement approval application it is unnecessary to go to each of the salient features in the present case. It suffices to note, as the Contradictor submitted, that the applicants face a weighty challenge in establishing such a novel duty of care. 175 In its opening submissions for trial the Commonwealth submitted that the alleged duty of care is excluded as a matter of construction of the SSA, and set out a number of authorities in support of that submission. 176 In Scott v Secretary, Department of Social Security [1999] FCA 1774; (1997) 57 ALD 627 at [51] (Heerey J), upheld on appeal in Scott v Secretary, Department of Social Security [2000] FCA 1241; (2000) 65 ALD 79 at [20]-[23] (Beaumont and French JJ (as his Honour then was), with Finkelstein J dissenting), rejected the proposition that Department had a common law duty of care under which it had obligations to inform persons in the position of the applicants of the potential benefits to which they were entitled under the SSA. 177 In Scott v Pedler [2003] FCA 650; (2003) 74 ALD 424 at [65] Gray ACJ said that the extensive system for merits review provided by the social security law was: …a powerful indication that the legislature did not intend that the correctness of a particular decision should be challenged collaterally in proceedings in a court, such as proceedings for damages for negligence in the exercise of the statutory function. 178 That decision was upheld on appeal in Scott v Pedler [2004] FCAFC 67; (2004) 80 ALD 283 at [63] (Conti J, with whom Gyles J and Allsop J (as his Honour then was) agreed). The Full Court did not accept that the respondents owed the applicants a duty under the SSA or at common law to decide their claims under the SSA with care and with due expedition. Conti J explained (at [101]: The authorities which have been cited in these reasons reveal a confined or restricted availability of any viable causes of action for damages at the instance of persons claiming to have been injured by the exercise of administrative power. So much has been exemplified by the High Court decisions in Crimmins, Sullivan, Graham Bailey [sic] Oysters and Shaddock, and by the majority judgment of the Full Federal Court in the earlier Scott litigation. The circumstances of the appellants which I have outlined and reviewed stand outside the principal cited earlier from those authorities. 179 The Scott decisions have been consistently applied in other cases: (a) In Wang v Secretary, Department of Employment & Workplace Relations [2006] FCA 898 at [48], upheld on appeal in Wang v Secretary, Department of Employment & Workplace Relations [2007] FCAFC 17 at [19] (Sundberg, Dowsett and Bennett JJ), Heerey J cited the Scott decisions as authority for the propositions that: "[b]reaches of the Social Security Act do not confer private rights for damages…[n]or is there any duty of care owed." (citations omitted) (b) In Pickering v Centrelink [2008] FCA 561 the applicant alleged that Centrelink's actions had contributed to his mental illness. McKerracher J said (at [16]) that where a statutory power is subject to a right of review and the decision-maker exercises the power in good faith, the exercise of the power will not give rise to a common law duty of care. His Honour also said (at [17]-[21]) that the Scott decisions and Wang applied similar principles in the context of the SSA and the SSAA and should be followed. (c) In Underdown v Secretary, Department of Education, Employment and Workplace Relations [2009] FCA 965 at [59]-[60] McKerracher J considered an appeal from the AAT by the deceased applicant's spouse, and a claim for damages by the applicant's former spouse against Centrelink for alleged breaches of the SSA in connection with a finding that his former spouse had been paid an overpayment of social security benefits. His Honour cited the Scott decisions with approval and said at [59]-[60]: All decisions taken by Centrelink as to the grant, cancellation, suspension or rate of payment of a social security benefit are subject to the extensive review procedures in Pt 4 of the [Social Security Administration Act]. It follows that no claim for damages can be made out. His Honour dismissed the 'appeal' on the basis that it had no prospect of success. (d) In EOX17 v Commonwealth of Australia [2018] FCA 1656 at [2] and [40] the applicant challenged a decision to refuse a disability support pension on the basis that the applicant's psychiatric impairment had not been assessed as permanent. Perry J cited the Scott decisions, Pickering and Wang and held that the case had no reasonable prospect of success including because (at [40]): …no common law duty of care arises with respect to the exercise of powers under the Social Security Act… … The reason for this is that the statutory power is subject to review. That review process is regarded as obviating that necessity for a common law duty of care. Nor has the Act been interpreted as evincing any intention to confer a private right of damages for breach of statutory duty given, as noted above, the stipulation by the Social Security Act of mechanisms for the review of decisions and the Act overriding purpose being for the benefit of society in general, as opposed to individual recipients of social welfare. (Citations omitted.) 180 It can be accepted that the alleged statutory duty and duty of care in the Scott cases is different to the duty of care alleged in the present case. The present case is not a claim for breach of statutory duty or breach of a duty of care based in a failure to take particular steps in the context of social security entitlements; it is a claim alleging breach of a duty of care in the exercise of the relevant Commonwealth-controlled functions. But having regard to the terms of the SSA and the SSAA, the levels of administrative merits review provided in those Acts, and the authorities in relation to the existence of a common law duty of care with respect to the exercise of powers under the SSA, in my view the applicants are unlikely to be able to establish the alleged duty of care. 181 Even putting the Scott decisions to one side, as the Contradictor submitted, the Commonwealth's submissions with respect to the Caltex factors and the six criteria in Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; (1999) 200 CLR 1 at [3] and [93] (McHugh J, Gleeson CJ agreeing) show that the alleged duty of care is novel and untested; it involves consideration of authorities about which the parties make substantially different submissions; it is attended by substantial complexity and as a consequence it should be characterised as having "at best uncertain and at worst weak prospects of success." 182 The Commonwealth further submitted that the courts have always taken a cautious approach to claims in negligence for economic loss, out of concerns in relation to the indeterminacy of liability. It cited McHugh J in Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 at [106], where his Honour referenced the remarks of Cardozo CJ in Ultramares Corporation v Touche (1931) 225 NY 170 at 179 and said that such caution was appropriate to avoid 'the imposition of liability "in an indeterminate amount for an indeterminate time to an indeterminate class." His Honour went on to say (at [107]) that '[l]iability is indeterminate only when it cannot realistically be calculated." Justice Kirby said (at [298]) that "[a] line must be drawn to limit indeterminate liability". The Commonwealth's contentions regarding indeterminacy are not without force but I am not persuaded as to their correctness when the Commonwealth knows or has the means to know the ascertainable class affected by its conduct and the nature of the likely losses, in these circumstances its liability is not indeterminate: Perre at [109]. 183 My view that the applicants' prospects of establishing the alleged duty of care are low is significant to my conclusion that the proposed settlement is fair and reasonable both inter partes and as between group members.

The risks having regard to the different categories of group members 184 My views in relation to the risks on liability which face the unjust enrichment claims for the different categories of group members also apply in relation to the negligence claims. In summary: (a) Category 1 Group Members cannot have a claim in negligence for economic loss as the Commonwealth did not receive or recover any amounts from them; and (b) Ineligible Group Members claims for negligently caused economic loss are not based in debts raised by income averaging from ATO data. Their success in these claims depends upon the "tainting" argument which, for the reasons previously explained, is weak and likely to fail at trial. Again, this is material to my conclusion that the proposed settlement is fair and reasonable both as between the parties and as between group members.

Category 1, Category 2 and Eligible Category 3 Group Members' claims 185 As I have said, in my view: (a) Category 1 Group Members do not have a claim for unjust enrichment as the Commonwealth did not receive or recover any Asserted Overpayment Debts from them. The potential quantum of their claims is zero; and (b) the quantum of Category 2 Group Members and Eligible Category 3 Group Members' claims for unjust enrichment is only the value of their claims for interest or quasi-interest.

Ineligible Group Members' claims 186 The potential quantum of Ineligible Group Members' unjust enrichment claims is in my view modest because the practical value of success on the "tainting" argument is unlikely to be a refund of the wrongly determined debts. The Commonwealth has authority under s 192 of the SSAA to require a person to give information or produce a document where the Secretary wishes to investigate whether Social Security Payments were payable to the person or as to the rate of social security payment that is or was applicable. Therefore the Commonwealth was, and is, able to require group members to produce income information such as payslips and bank statements, without relying on any Robodebt notification or any previous debt determination based on income averaging from ATO data. Once the Commonwealth obtains such income information from group members it is able to raise and recover debts assessed on the basis of that information, in circumstances where it cannot reasonably be said that debt is "tainted" with illegality. Thus, the potential quantum of any success in the "tainting" argument is likely to be limited to the value to the Commonwealth of its temporary possession of any monies prematurely recovered, that is, interest or quasi-interest.

The claims for interest or quasi-interest 187 The applicants' Amended Reply expressed the claim for interest or quasi-interest as follows: …if and to the extent that the Commonwealth was but is no longer enriched at the expense of any Applicant or Group Member, the Commonwealth remains liable to make restitution of any interest or other benefit obtained by the Commonwealth by reason and during the period of the enrichment. (Emphasis added.) 188 In opening submissions for trial the Commonwealth challenged the asserted entitlement to interest or quasi-interest and also contended that any interest entitlement is far less than that put by the applicants. 189 In relation to the asserted entitlement to interest at common law, the Commonwealth relied on Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285 at [72] where McHugh and Gummow JJ doubted that there exists "a 'free-standing' right to the recovery of interest where the defendant has had the use of the plaintiff's money in circumstances which indicate an unjust enrichment at the expense of the plaintiff." Their Honours said that the existing state of authority does not favour acceptance of such a broad proposition. 190 The Commonwealth also submitted that any entitlement to interest at common law that is found to exist runs from the time when the cause of action is complete, citing Edelman, Interest Awards in Australia (2003, LexisNexis Butterworths) at pg. 96. It contended that the cause of action giving rise to an entitlement to restitution of Commonwealth-recovered amounts cannot have arisen until the debt that formed the subject of the s 1229(1) notice was set aside. On its argument, a debt identified for the purpose of s 1223(1) of the SSA exists in fact, regardless of whether the debt was determined by a process involving jurisdictional error. Thus, a notice issued for the purpose of s 1229(1) in relation to such a debt is legally effective to make the debt due and payable, and to engage the Commonwealth recovery powers under Pt 5.3 of the SSA. Because an obligation on the part of the debtor to pay the debt is created, there can be no right to restitution of an amount paid by a debtor (or otherwise recovered by the Commonwealth) in relation to a debt unlawfully determined unless and until the debt is set aside or varied on review, or set aside by a court on judicial review. The invalidly determined debts of the applicants and group members were not set aside until after July 2020. 191 In relation to s 51A of the FCA, the Commonwealth submitted that any entitlement to interest depends on two questions. First, whether the Commonwealth refunded the relevant amount prior to commencement of the proceeding, as if it had done so the statutory jurisdiction to award interest will not be enlivened, citing SCI Operations at [42] (Gaudron J). Second, when the relevant cause of action giving rise to the entitlement to restitution "arose". For the reasons already outlined, the Commonwealth contended that the cause of action in restitution did not arise until the debt that had been unlawfully determined was set aside or varied on review, or set aside by a court on judicial review. 192 In my view it is doubtful that the Commonwealth's contention that the cause of action for unjust enrichment only crystallised at the time the Asserted Overpayment Debt is set aside or varied will succeed at trial. An administrative decision to raise a debt which is made outside power is void ab initio. I find it difficult to see why the common law would treat an invalidly determined debt, which the Commonwealth had no power to raise, as being regular up to the date that the Commonwealth admitted it had no power or authority to raise the debt. Even so, and as the Contradictor submitted, the claims in the nature of interest or quasi-interest are fairly to be characterised as having "considerable complexity and uncertainty". If the Commonwealth succeeds in its various arguments it will dramatically reduce the value of the applicants' and group members' claims for interest at common law. In such circumstances a discount for risk is appropriate. 193 There is also a risk in relation to quantum in relation to the appropriate interest rate. At trial the applicants intended to rely upon the evidence of Jerome Fahrer, an economist, who set out some theoretical floor and ceiling rates for the interest to be applied in relation to the period over which the Commonwealth retained the Commonwealth-recovered amounts. In his opinion the appropriate floor rate is 1.8% being the weighted average of the five year bond rate, and the appropriate ceiling rate is 9% being the weighted average return over the period between 2015 and 2019 if the Commonwealth had transferred the Commonwealth-recovered amounts to the Future Fund for investment. The applicants also contended that the rate of interest should be no lower than that available under s 51A of the FCA, which averaged 5.5% over the relevant period. 194 The Contradictor made some "back of the envelope" calculations as to the likely recovery in respect of the interest or quasi-interest claims based on high-level assumptions that: (a) the invalid debts were raised between 2015 and 2020; (b) where some group members had their invalidly raised debts reviewed, that review took some years to be finalised; (c) some invalidly raised debts were repaid by group members in full and others were repaid in instalments over time, with a substantial number of group members probably repaying invalidly raised debts to the Commonwealth between around 2017 and 2019; (d) on the basis of the above, somewhere between approximately one year and three years is likely an appropriate timeframe for assessing the length of time during which the Commonwealth retained group members' monies received or recovered in respect of invalid debts; and (e) in July 2020 the Commonwealth publicly announced a commitment to refund all debts based on income averaging from ATO data and, in fact, refunded approximately $707.9 million by 2 December 2020 (and $723.7 million by 13 April 2021). 195 On the basis of those high-level assumptions, in the table set out below, the Contradictor estimated the potential ranges of recovery with respect to claims for interest or loss of use of money in respect of $721 million for 1-3 years, using as alternatives the floor and ceiling rates identified by Mr Fahrer as well as the interest rate that may be payable pursuant to s 51A of the FCA. Interest is calculated on a simple basis. Rate 1 year 2 years 3 years 5 year bond rate - 1.8% $12.98 m $25.96 m $38.93 m Federal Court pre-judgment rate - 5.5% $39.66 m $79.31 m $118.97 m Investment in Future Fund - 9% $64.89 m $129.78 m $194.67 m

196 In my view, it is not sound to base the applicable rate of interest on the returns that the Commonwealth may have achieved had it invested the Commonwealth-recovered amounts in the Future Fund. There is no evidence as to what the Commonwealth did with the Commonwealth-recovered amounts and I do not accept it would be appropriate to set an interest rate based on Future Fund returns. In my view it is more likely that the Court would apply an interest rate approximating the Federal Court pre-judgment rate, averaging at around 5.5%, which would provide a range of recovery of approximately $40 million to $119 million. 197 By reference to the estimated recovery ranges the Contradictor submitted that the proposed $112 million settlement represents a very favourable outcome with respect to the interest or quasi-interest component of the claims. I agree. That is particularly when the most likely recovery range of $40 million to $119 million, does not take into account the risks that: (a) the applicants and group members might not succeed in their unjust enrichment claims; and (b) the Commonwealth's arguments in relation to the availability of claims of interest or quasi-interest and in relation to when interest should commence, might succeed. 198 The risks in relation to the quantum of the interest or quasi-interest claims is material to my view that the proposed settlement is fair and reasonable inter partes and as between group members.

The exemplary damages claim 199 The proceeding claims exemplary damages in the unjust enrichment claims, based in the contention that the conduct of the Commonwealth was outrageous and contemptible and showed contumelious disregard for the rights of the applicants and group members. In opening submissions for trial the applicants submitted that while exemplary damages are "rarely" awarded in claims for restitution they may properly be awarded where the Court considers it is necessary to do so to achieve justice, citing the dissenting judgment of Mason P in Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298 at [224] (Spigelman CJ, Mason P and Heydon JA (as his Honour then was). In that case his Honour said that, in an appropriate case where disgorgement was an inadequate means of enforcing common decency, equity in its exclusive jurisdiction ought not be prevented from awarding exemplary damages. The applicants also cited Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29; [2002] 2 AC 122; [2001] 3 All ER 193 at [60]-[68] (Lord Nicholls), which considered the availability of exemplary damages in a case alleging the tort of misfeasance in public office. 200 The applicants were, however, unable to take the Court to any decision where exemplary damages had been allowed in a claim for restitution. In Harris, the ratio decidendi of the judgments of Spigelman CJ and Heydon JA is that the New South Wales Supreme Court has no power to make a punitive monetary award for breach of fiduciary duty where the duty arises in the context of a contractual relationship: at [5], [44], [57], [63] (Spigelman CJ), [233] and [470] (Heydon JA). Heydon JA also said in obiter (at [233], [470]) that there is no power in the law of New South Wales to award exemplary damages for equitable wrongs. In J D Heydon, M J Leeming and PG Turner, Meagher, Gummow and Lehane's Equity Doctrines & Remedies (Fifth edition, p 865) the learned authors said: "[e]quity and penalty are strangers….Punishment through monetary awards or otherwise is contrary to the basis and purpose of equity…. The learned authors went on to say while awards of [sic] aggravated wrongdoing are an accepted remedy at common law, they are alien to equitable principle." 201 In Prygodicz, Lee J said at [34]: The enquiry undertaken in relation to restitutionary relief in Australia (being an enquiry directed to who should properly bear loss and why) is conducted by reference to equitable principles. "Damages" is a common law remedy, and the use of the term "exemplary damages" in relation to an enquiry undertaken by reference to equitable principles is heterodox. To say the least, the notion that a form of punitive monetary award could be made in the circumstances pleaded is a highly surprising one when it is fundamental that a restitutionary claim (advanced by the common law action for "money had and received") is based solely on the informing principle of the prevention and reversal of unjust enrichment. 202 In my opinion the applicants have little prospect of establishing that exemplary damages are available in an unjust enrichment claim. Further, as I later explain, even if exemplary damages are available in such a claim, I doubt that the applicants are able to prove to the requisite standard that the responsible Ministers and senior public servants actually knew that the Commonwealth's conduct in raising and recovering debts based on income averaging from ATO data was unlawful. 203 Overall, the quantum risks in the unjust enrichment claims are significant to my conclusion that the proposed settlement is fair and reasonable both as between the parties to the proposed settlement and as between group members.

The quantum risks in the negligence claim 204 As I have said, the negligence claim is centrally concerned with obtaining relief in the same amount as in the unjust enrichment claim. Both claims principally seek recovery of the Commonwealth-recovered amounts plus interest or quasi-interest. The analysis of the quantum risks in the negligence claims is therefore something of a distraction because those claims have substantially lower prospects of success than the unjust enrichment claim. The better prism through which to assess whether the proposed settlement is fair and reasonable in the interests of group members is through their unjust enrichment claims.

Category 1, Category 2 and Eligible Category 3 Group Members' claims 205 As I have said, in my view: (a) Category 1 Group Members do not have a claim for damages for negligently inflicted economic loss as they have not suffered any economic loss. The Commonwealth did not receive or recover any amounts from them; and (b) putting to one side their claims for distress damages, aggravated damages and exemplary damages, the quantum of Category 2 Group Members and Eligible Category 3 Group Members' negligence claims is only the value of their claim for interest, which is essentially the same amount as in their unjust enrichment claims.

Ineligible Group members' claims 206 For the same reasons as in the unjust enrichment claim the practical value of Ineligible Group Members' negligence claims is modest. Any success they are able to achieve on the "tainting" argument is unlikely to be a refund of the wrongly determined debts.

The interest claims 207 My observations in relation to the complexities and difficulties in relation to the quantum of group members' claims for interest or quasi-interest in the unjust enrichment claims apply equally to their negligence claims. Those risks are material to my view that the proposed settlement is fair and reasonable both as between the parties to the settlement and as between group members.

The claim for distress damages 208 In their negligence claims the applicants and group members seek damages for "significant concern, stress, anxiety and stigma" caused by "any request or demand by the Commonwealth for repayment of an Asserted Overpayment Debt and associated penalty, and any threatened, foreshadowed or actual recovery action in respect thereof". Senior counsel for the applicants expressly disavowed any claim for damages for personal injury including psychiatric injury, and accepted that the claim is for damages for economic loss and any consequential stress, anxiety and stigma. 209 This claim faces significant uncertainty and real risks that it will fail. 210 First, I doubt that significant concern, stress, anxiety and stigma which does not amount to a recognised and diagnosable psychiatric disorder is compensable in a claim in negligence for damages for personal injury: Tame v State of New South Wales [2002] HCA 35; (2002) 211 CLR 317 at [7] (Gleeson CJ) and [193] (Gummow and Kirby JJ); s 35 Civil Law (Wrongs) Act 2002 (ACT); ss 72 and 74-75 Wrongs Act 1958 (Vic). The proceeding does not claim damages in negligence for personal injury per se, and it is worth noting that none of the applicants put on medical evidence to show that they suffered any recognised psychological injury or condition. 211 If a claim for stress, anxiety or stigma, which does not amount to a recognised psychiatric disorder, is not available in a tortious claim for damages for personal injury, in principle it is difficult to see why it would be available as a form of consequential loss in a tortious claim for damages for economic loss. As Gummow and Kirby JJ said in Tame (at [194]) the basis for the distinction drawn by the law of torts between recovery for recognised psychiatric injury or illness and mere emotional distress is the reduction in: …the scope of indeterminate liability or increased litigation. It restricts recovery to those disorders which are capable of objective determination. To permit recovery for recognisable psychiatric illnesses, but not for other forms of emotional disturbance, is to posit a distinction grounded in principle rather than pragmatism, and one that is illuminated by professional medical opinion rather than fixed by purely idiosyncratic judicial perception. 212 Second, for their alleged entitlement to distress damages the applicants and group members relied on the decision in Moore v Scenic Tours [2020] HCA 17; (2020) 377 ALR 209 (Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ, Edelman J agreeing). In Moore the plurality (at [43]-[44]) allowed damages for disappointment and distress consequent on a breach of contract. That is a quite different factual and legal context to the present case. The plurality in Moore applied the reasoning in Baltic Shipping v Dillon [1993] HCA 4; (1993) 176 CLR 344, where Mason CJ, with whom Toohey and Gaudron JJ agreed, said at 363 that Courts had recognised exceptions to the ordinary rule precluding distress or disappointment damages for breach of contract where the disappointment or distress was "caused by the breach of a contract…the object of the contract being to provide pleasure or relaxation". The applicants could not point to any Australian case in which distress damages have been awarded in a damages claim for negligence causing economic loss. 213 As the Contradictor submitted, the claim for distress damages consequent on a claim in tort can properly be described as tenuous and subject to very considerable litigation risk. In my view the claim is novel and weak.

The claims for aggravated and exemplary damages 214 The applicants sought aggravated and exemplary damages based in the allegation that the responsible Ministers and senior public servants had actual knowledge of the unlawfulness of the Robodebt system. 215 I have no difficulty in accepting that, if the applicants can establish the existence of the alleged duty of care and its breach, and if the applicants can prove to the requisite standard that the responsible Ministers and senior public servants actually knew that the operation of the Robodebt system was unlawful, and it continued it, then exemplary damages would be available. In my view it would be a paradigm case for such damages. As Gordon J said in Lewis v Australian Capital Territory [2020] HCA 26; (2020) 94 ALJR 740 at [111]: Exemplary damages may also have particular significance in restraining executive power. In Ibbett, the Court considered exemplary damages for trespass to land and said: "The common law fixes by various means a line between the interests of the individual in personal freedom of action and the interests of the State in the maintenance of a legally ordered society. An action for trespass to land and an award of exemplary damages has long been a method by which, at the instance of the citizen, the State is called to account by the common law for the misconduct of those acting under or with the authority of the Executive Government." The Court went on to say that it is "well established ... that an award of exemplary damages may serve 'a valuable purpose in restraining the arbitrary and outrageous use of executive power' and 'oppressive, arbitrary or unconstitutional action by the servants of the government'". (Emphasis added, citations omitted.) 216 But in the present case the prospects for the applicants making out a claim for aggravated or exemplary damages are weak. 217 First, the applicants' prospects of establishing the alleged duty of care are low, and the claims for aggravated and exemplary damages can be no stronger than the cause of action in respect of which they are sought. 218 Second, the prospect of the applicants being able to prove to the requisite standard the allegations that the identified responsible Ministers and senior public servants had actual knowledge of the unlawfulness of the Robodebt system are low. At the least, as the Contradictor submitted, the prospects of their substantiating the pleaded allegations are uncertain and attended by considerable risk. 219 As I said earlier, it is one thing for the applicants to be able to prove that the responsible Ministers and senior public servants should have known that income averaging based on ATO data was an unreliable basis upon which to raise and recover debts from social security recipients. It is, however, quite another thing to prove to the requisite standard that they actually knew that the operation of the Robodebt system was unlawful, and yet continued to operate it. 220 The applicants' case in this regard relies upon Commonwealth documents, as neither side proposed to call the relevant Ministers or senior public servants. I was not taken to all of the documents upon which the applicants would have sought to rely, but it is appropriate to infer that the applicants' opening submissions for trial referred to those excerpts which most supported their case. Those excerpts did not in my view establish actual knowledge. 221 In deciding whether the applicants proved that the identified Ministers and senior public servants actually knew that the Robodebt system raised debts unlawfully and yet supported its continued operation, the Court is required to take into account the seriousness of such allegations, their inherent unlikelihood, and the gravity of the consequences flowing from a finding that the Ministers and senior public servants engaged in the conduct alleged: s 140(2)(b) and (c) Evidence Act 1995 (Cth). Having regard to the applicants' opening submissions for trial, I seriously doubt that the evidence was sufficient to substantiate the allegation that the Ministers and senior public servants actually knew the Robodebt system was unlawful. 222 Overall, the quantum risks in the negligence claim are significant to my conclusion that the proposed settlement is fair and reasonable both between the parties and as between group members.

The reasonableness of the proposed settlement in light of the attendant litigation risks

Fairness and reasonableness as between the parties 223 While the unjust enrichment claims of Category 2 Group Members and Eligible Category 3 Group Members have good prospects of success, because of the Commonwealth program to withdraw and refund unlawfully asserted debts those claims are effectively limited to claims for interest or quasi-interest based on the amount of the Commonwealth-recovered amounts and the length of time over which the Commonwealth held them. I earlier discussed the risks in relation to liability, and the complexities and uncertainties associated with the quantum of the claims for interest or quasi interest. It is unnecessary to do so again. 224 The same is true of the negligence claims, which centrally concern the same losses as the unjust enrichment claims. To the extent the negligence claims encompass claims beyond those within the scope of the unjust enrichment claims (eg, distress damages, and aggravated and exemplary damages) those claims are weak. 225 Having regard to these matters, in light of the attendant risks of the litigation I consider the proposed $112 million settlement to be plainly fair and reasonable as between the applicants and group members on the one hand and the Commonwealth on the other. As the Contradictor submitted, it constitutes a "very favourable outcome".

Fairness and reasonableness as between group members

Category 1 Group Members 226 For the reasons earlier given, I do not accept that Category 1 Group Members receive no benefit from the proposed settlement. They receive the benefit of the Declarations which achieve one of the key aims of the proceeding, being to ensure that debts raised based on income averaging from ATO data are declared invalid by the Court. The Declarations and the relevant settlement terms also provide a means for those who had not yet had their debts withdrawn to legally enforce that entitlement in the event that their debts were somehow overlooked in the Commonwealth program or if the Commonwealth altered its position. 227 Fundamentally, the limited benefit that Category 1 Group Members receive under the proposed settlement reflects the fact that no monies were recovered from them by the Commonwealth and therefore they cannot succeed in either their unjust enrichment claims or their claims for negligently caused economic loss. 228 Insofar as it might be argued that the proposed settlement is not in the interests of Category 1 Group Members because they receive nothing for any psychiatric or psychological injury they have suffered, yet are bound by the release, the proceeding does not allege that the applicants and group members seek damages for any recognised psychiatric injury. The claim in tort is for negligently inflicted economic loss and consequential stress anxiety or stigma, when Category 1 Group Members cannot show economic loss. 229 In my view it is not unfair or unreasonable as between group members that the benefits for Category 1 Group Members under the proposed settlement are less than those for Category 2 Group Members and Eligible Category 3 Group Members. They receive the benefit of the Declarations but get no financial benefit because they have not suffered any loss. Having regard to the attendant risks of litigation on liability and quantum in my view the proposed settlement is fair and reasonable as between Category 1 Group Members and the other categories of group members.

Category 2 Group Members and Eligible Category 3 Group Members 230 As I have said, Category 2 Group Members and Eligible Category 3 Group Members will receive substantial financial benefits under the proposed settlement through an entitlement to share in the Distribution Sum. It is uncontentious that the proposed settlement is in their interests, the only question is whether the disparity in the benefits they obtain as compared to the other categories of group members means that the settlement is not fair and reasonable as between group members. 231 For the reasons previously explained, it is not unfair or unreasonable as between group members that the benefits for Category 2 Group Members and Eligible Category 3 Group Members under the proposed settlement are more than those for Category 1 Group Members, and that Ineligible Group Members receive little or nothing. I have already explained why that is so in relation to Category 1 Group Members and I need not reiterate that. The proposed settlement simply reflects the strength of the Category 2 Group Members and Eligible Category 3 Group Members claims and the weakness of the claims of Category 1 Group Members and Ineligible Group Members. 232 In my view the Distribution Sum principally represents a compromise for interest or quasi-interest on Commonwealth-recovered amounts based on income averaging from ATO data. That is apparent from the terms of the Declarations and because the SDS apportions payments between Category 2 Group Members and Eligible Category 3 Group Members on the basis of the amount the Commonwealth-recovered amounts and the length of time group members were "out of the money". 233 The proposed $112 million settlement sits comfortably in the upper end of the range of reasonable outcomes in relation to the claims for interest or quasi-interest on debts based on income averaging from ATO data that were recovered by the Commonwealth. 234 Having regard to the attendant risks of the litigation on liability and quantum, as I explain further below, in my view the proposed settlement is fair and reasonable as between Category 2 Group Members and Eligible Category 3 Group Members and the other categories of group members.

Ineligible Group Members 235 Ineligible Group Members will receive no financial benefit under the proposed settlement. The applicants said that Ineligible Group Members receive the practical benefit of a comprehensive process for categorisation of group members with independent oversight by the Scheme Assurer, and representation of group members' interests by Gordon Legal. The applicants likened the benefit to the situation of a person who receives legal advice. The recipient may not like the advice received, but he or she has had the benefit of it. 236 In my view, by the end of the process under the SDS there are reasonable grounds to be confident that group members will be appropriately categorised. They will all have had the benefit of a flexible, fair and cost free mechanism to ensure the identification of all debts raised after 1 July 2015 that are invalid on the basis set out in the Declarations. At that point all group members should be able to know where they stand and understand the basis upon which any such decision was made, which is otherwise unlikely to occur. While this can be criticised as not amounting to much, it has some value. 237 First, as I have said, I consider the claims of Ineligible Group Members to be weak and more likely than not to fail at trial. I am not persuaded that the fact that Ineligible Group Members receive no or little benefit under the proposed settlement, yet are burdened with a release shows that the proposed settlement is not fair and reasonable as between group members. I am not persuaded that a settlement which provides: (a) substantial benefits for Category 2 and Category 3 Group Members who have claims with good prospects of success; (b) no financial benefits for Ineligible Group Members with claims which are palpably weak and more likely than not to fail; and (c) that all group members will be bound into a release; means that it falls outside the range of reasonable outcomes. The settlement simply reflects the weakness of the Ineligible Group Members' claims and the strength of the claims of Category 2 and Eligible Category 3 Group Members. 238 It is not the role of the Court to second guess the applicants' lawyers as to whether the settlement ought to have been recommended, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether some better outcome might have been won, nor whether it is the best outcome that could have been achieved: Botsman at [207]; Kelly at [74]. In saying this I do not intend to suggest that some better outcome could have been achieved. In my view the settlement falls in the upper end of the range of reasonable outcomes. 239 Second, the Contradictor's submission that the claims of Ineligible Group Members should be ascribed at least some value somewhat misses the point when the applicants' lawyers were unable to negotiate an outcome to benefit Ineligible Group Members. Having regard to the Seventh Grech Affidavit, I am satisfied that the applicants' lawyers endeavoured to negotiate a settlement which would provide some financial benefit for Ineligible Group Members, but the Commonwealth refused to meet that demand. The applicants' solicitors and counsel are very experienced and competent class action litigators and I infer they concluded that no better outcome was achievable through negotiation. 240 Having been unable to negotiate a settlement which gave some financial benefit to Ineligible Group Members, the only way that the applicants' lawyers could recover anything for them was if the case proceeded to trial. At trial their claims faced a binary outcome, that is, either their claims would succeed or they would fail. As I have said, in my view their claims are weak and it is more likely than not that they would have failed and costs would have been awarded against the relevant representative applicants. 241 Third, the Seventh Grech Affidavit also shows that the applicants' lawyers were alive to the potential conflicts of interest between the different categories of group members, and provided separate written advice to the representative applicants for each of the categories. Each of the representative applicants provided instructions to accept the proposed settlement knowing that Ineligible Group Members (and Category 1 Group Members) would be bound in the settlement but would not share in the Distribution Sum. 242 Insofar as the interests of Ineligible Group Members are concerned, having regard to the attendant risks of litigation on liability and quantum, I consider the proposed settlement to be fair and reasonable as between them and the other categories of group members.

Should all Category 1 Group Members and Ineligible Group Members be permitted another opportunity to opt out? 243 I now turn to deal with the Contradictor's submission that unless Category 1 Group Members and Ineligible Group Members are given an "informed opportunity" to opt out of the proceeding the proposed settlement is not fair and reasonable. I do not accept this submission. 244 First, for the reasons previously given it is not unfair or unreasonable that Category 1 Group Members and Ineligible Group Members receive no financial benefit under the proposed settlement. The proposed settlement reflects: (a) that Category 1 Group Members have suffered no economic loss and therefore cannot make out their unjust enrichment claims or their claims for negligently caused economic loss; and (b) that Ineligible Group Members' claims are weak and more likely than not to fail. 245 Second, the parties, including the representative applicants representing the interests of Category 1 Group Members and Ineligible Group Members, oppose allowing Category 1 Group Members and Ineligible Group Members to opt out at this stage. 246 The Commonwealth went as far as to contend that the Court does not have power to fix another date so as to extend the period during which a group member may opt out of the proceeding pursuant to s 33J(3) of the FCA, because no application has been made by a group member or party. It contended that s 33ZF of the FCA, understood in light of BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 94 ALJR 51, is not a source of power for the Court on its own motion to order that a person cease to be a group member, particularly in light of the specific power conferred by s 33J(3). It said that an order extending the opt out period to allow group members to opt out of the settlement is not capable of being characterised as an order "to ensure that justice is done in the proceeding" as between the parties to the proceeding. 247 In my view the Court has power to extend the time for opt out without there being an application by the parties or a group member. The power in s 33ZF is not restricted to ensuring justice is done in the proceeding only as between the parties as the Commonwealth submitted. Understood in the context of the representative regime, and taking into account the Court's protective role in relation to group members' interests in an application under s 33V, in my view the power in s 33ZF extends to ensuring that justice is done in the proceeding as between group members. In my view the ratio in Brewster does not extend as far as the Commonwealth contended. 248 In any event, 19 of the in time objections indicated that the objector would prefer to opt out of the proceeding. It is open to treat these as an application to extend the opt out period pursuant to s 33J(3) of the FCA. 249 Putting the question of power to one side, in circumstances where the Contradictor's proposition is strenuously opposed by the parties, making the order sought would risk an appeal and consequential delay and cost. There is also a risk that the Commonwealth's argument as to power might succeed. 250 Third, experienced lawyers representing the parties have reached an in-principle settlement on a particular basis, doing so after the time for opt out had expired. The Commonwealth's opposition to a further opt out at this stage is understandable when an important aspect of the utility of the class action regime is that it provides finality for the respondent: Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194; (2016) 343 ALR 662 at [68] and [70] (Beach J). 251 Fourth, Ineligible Group Members have already had an opportunity to opt out of the proceeding. Of course, at that point group members did not know into which category they fell but the opt out notice informed them that the proceeding could be resolved either by a settlement or a judgment, and that if they did not opt out of the proceeding they would be bound by the outcome, including if the outcome was unsuccessful or not as successful as they might have wished. 252 Fifth, it is common ground that many group members fall into more than one category. I accept Mr Grech's evidence that many group members had difficulty in understanding the opt out notice, and that a further opt out notice is likely to be even more confusing, following as it would their receipt of the Notice of Proposed Settlement. Any confusion may lead some Ineligible Group Members to opt out of the proceeding when it is not in their interests to do so because they are also Category 2 Group Members or Eligible Category 3 Group Members. 253 Sixth, allowing a further opt out would result in: (a) major cost both in relation to the publication of the further opt out notice to approximately 254,000 group members and in responding to the tens of thousands of enquiries which are likely to ensue. Such costs will be carried at first instance by Gordon Legal but they will then be able to claim those from the Distribution Sum, which will reduce the compensation payable to Category 2 Group Members and Eligible Category 3 Group Members; and (b) substantial delay in the distribution of the Distribution Sum, as before an "informed" opt out process could begin it will first be necessary to categorise all group members, which is likely to take approximately two months and that completion of an opt out of such magnitude will take up to 10-12 months. Given the weakness of the Ineligible Group Members' claims I do not consider it appropriate that the compensation payable to Category 2 Group Members and Eligible Category 3 Group Members be reduced, nor materially delayed. 254 In the circumstances of the present case I am not persuaded the proposed settlement is not fair or reasonable unless a further opt out is allowed.

A limited further opt out? 255 Although the applicants opposed an order to allow Category 1 Group Members and Ineligible Group Members another opportunity to opt out of the proceeding, they embraced the Court's suggestion that there was some benefit in allowing group members who filed objections, including late objections, to now opt out if they wish. The Commonwealth said that it neither consented to nor opposed that course. I made that suggestion not because I considered that the settlement was not fair and reasonable unless Category 1 Group Members and Ineligible Group Members were given an opportunity to opt out at this stage, but rather because allowing group members who objected to the proposed settlement to now opt out of the proceeding would improve fairness. The proposed settlement has been approved on the basis that some 680 group members who filed objections to settlement approval, including late objections filed up to the close of business on the day prior to the settlement approval hearing, are to be given the opportunity to opt out.

The reaction of the class to the proposed settlement 256 596 group members filed objections to the proposed settlement within time, and a further 84 group members filed late objections in the period up to the settlement approval hearing on 6 May 2021. I have granted leave for those late objections to be filed out of time, but not in relation to any objections filed after the settlement approval hearing. 257 269 of the within time objections specified no reason for the objection, and there are reasons to doubt that they were intended as objections. 130 of the within time objections set out a statement of the group members' personal experience or contained information relevant to the proceeding, but did not set out any coherent objection to settlement approval. Many of the objections raised arguments against the debt said to be owed by the group member, and it is hard to tell whether these are objections to settlement approval or to the debt that was raised against them. It is usually not possible to determine which of the identified categories of group members each objector falls into, so as to understand whether or not they will receive any financial benefit under the settlement. 258 Mr Grech said, and I accept, that the overall reaction of the class to the settlement was positive. Only 680 out of approximately 648,000 group members objected to the proposed settlement, and of those it appears that 415 are arguably not objections at all. Put another way, only somewhere between 0.1% and 0.04% of group members objected to the proposed settlement. 259 Even so, the fact that only a small proportion of group members object to settlement approval is not determinative of fairness and reasonableness; they provide a convenient focus by reference to which the Court may assess the fairness and reasonableness of a proposed settlement and it is the Court's task to make that assessment: Darwalla Milling Co Ltd v F Hoffman-La Roche (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at [39]. 260 Many of the objections reflect the financial hardship, inconvenience, lasting anxiety and distress that group members experienced because the Commonwealth raised and in many cases, recovered debts from them when it had no lawful basis to do so. It is plain that many group members continue to feel upset and anger in relation to the Robodebt system and many objectors said that the Robodebt system has had profoundly negative and damaging effects upon them. 261 Some group members, including Ms Prygodicz, first learned of their Asserted Overpayment Debt when the Commonwealth, through the ATO, garnished their tax return. Others only found out that they owed a debt when their attempt to pay for something by credit or debit card was rejected by their bank due to insufficient funds, which they found humiliating. Many objectors felt demeaned by having to prove that they were not "welfare cheats", particularly when they believed they had made full and frank disclosure of their income to Centrelink, and considered that they were honest people. Some group members said they had taken out high interest loans in order to pay off the asserted debts, which later turned out to have been unlawfully asserted. Tragically, some group members said that they had contemplated suicide or attempted to take their own lives, and two objectors said that their loved ones had committed suicide. I have given the numerous objections serious consideration but for the reasons I explain I do not consider they justify refusing to approve the proposed settlement. 262 I have grouped the objections into some broad categories and I set out below some examples of the objections. In part I do so in order that group members understand that their concerns have been heard.

Jennifer Miller 263 Jennifer Miller filed an objection to settlement approval on behalf of her deceased son, Rhys Cauzzo, and she appeared at the settlement approval hearing. Tragically, her son, Rhys, committed suicide on 26 January 2017. Ms Miller presented as an honest person who was deeply aggrieved by the circumstances leading to her son's death. Ms Miller said that her son committed suicide following receipt of three letters of demand and final notices from Dun & Bradstreet, a debt collection agency engaged by the Commonwealth, in the period between 8 November 2016 and 3 January 2017. The debts asserted to be owed by her son totalled $27,603.39. 264 Ms Miller said that her son was very creative and intelligent but had always suffered from a major depressive illness, and frequently had panic attacks. He was receiving support for his mental health but he was working and attending university. While she accepted that her son had pre-existing mental health problems, Ms Miller was clear in stating that the Commonwealth's pursuit of the asserted debts contributed to him committing suicide. 265 It is not clear on the materials as to whether or not the asserted debt was based on income averaging from ATO data and Ms Miller had been unable to obtain such information from the Commonwealth. She said though that her son did not owe the debt and she objected to the proposed settlement because, among other matters, she considered that it inadequately compensated those who had suffered emotional and psychological distress through the operation of the Robodebt system and because she considered that the settlement would mean that those she considered responsible, principally the responsible Ministers and senior public servants, would not be held accountable for the damage done to vulnerable people like her son.

Harold Baeck 266 Harold Baeck filed an objection to settlement approval and appeared at the settlement approval hearing. Mr Baeck is a welder and sheet metal worker by trade and he came across as an ordinary, honest, hard-working Australian. He said that he obtained employment through various job placement agencies, as well as working for various small businesses, but he also received social security benefits from time to time. He said that around one and a half years ago he received a letter from the Commonwealth, which he believes was generated by the Robodebt system, stating that he had been overpaid social security benefits of approximately $3,200 and he had a debt in that amount. He did not accept that he owed that or any other amount, but said that his attempts to persuade Centrelink of its error fell on deaf ears. It took him around six months to obtain all the paperwork he needed from the various job placement agencies and small businesses he had worked for or been placed through to challenge the asserted debt, which involved significant work, stress and anxiety. Having provided the information to Centrelink he said the debt was reduced from $3000 to $400, which he paid. During some of that period he said he could not work as a result of the stress caused by the wrongful assertion of the debt. 267 Mr Baeck's objection reveals some of the damage caused by the Robodebt system, but having regard to the attendant risks of the litigation and the size and terms of the proposed settlement, it does not justify refusing to approve the proposed settlement.

Jordan Chadwick 268 Ms Chadwick filed an objection to the proposed settlement and appeared at the settlement approval hearing. She said that the Commonwealth asserted that she owed a $16,000 debt and that she was harassed by Dun and Bradstreet in relation to that asserted debt by telephoning her continuously. She said that her telephone "rang every single day - every single day", including in the days after her father had committed suicide. She said that she was told that if she did not agree to enter into a payment plan with Dun & Bradstreet that "all my wages will be garnished. My car will be taken." She also said that she raised queries and complaints about the asserted debt, but they "just fell on deaf ears." She also opposed approval of the proposed settlement because she did not consider it compensated people for the emotional distress, anguish and anxiety that they suffered through the Robodebt system. 269 Ms Chadwick also said that she had been placed under immense financial pressure through the Robodebt system. She said that approximately $11,000 of the $16,000 asserted debt was garnished from her tax returns in part payment, and that during the period in which she was said to owe a debt she did not receive any social security benefits. On her account this meant that she had to work three jobs while studying to be a social worker. She said that she had been affected by the Robodebt system for approximately six years and it had taken a "huge mental toll". The Commonwealth later accepted that the debt was wrongfully raised and recovered from her. The $11,000 she repaid has now been refunded to her and the remaining balance of $5,000 has been zeroed. 270 Again, Ms Chadwick's objection reveals some of the damage caused by the Robodebt system, but having regard to the attendant risks of the litigation and the size and terms of the proposed settlement, it does not justify refusing to approve the proposed settlement.

Kathryn Stanley 271 Ms Stanley opposed settlement approval on the basis that the proposed settlement discriminates against those group members who were threatened or coerced into supplying information. To that extent her objection appears to reflect the likely concerns of Ineligible Group Members. For the reasons previously explained, I do not accept that the proposed settlement unfairly discriminates against Ineligible Group Members; the proposed settlement merely reflects the weakness of their claims as compared to the claims of Category 2 Group Members and Eligible Category 3 Group Members. 272 She also requested the Court make additional orders for damages for the harm caused to group members and to impose a moratorium on debts based on overpayments of income support payments incurred before the Robodebt system was suspended in early December 2020. The Court has no power to make such orders in the context of a settlement approval application.

Thomas Burns 273 Mr Burns filed an objection to settlement approval and appeared at the settlement approval hearing. He made a number of objections to settlement approval, two of which bear particular reference. 274 First, he said that settlement approval orders should not be made until such time as group members are informed as to which category they fall into. This objection has some merit but I was ultimately not persuaded that it justified a refusal to approve the settlement. Categorising group members before seeking any objections to settlement approval would have had the benefit of providing group members with better information before they are required to decide whether or not to object, but: (a) the objections which have been filed raise every conceivable ground for objection, and they have been considered; (b) where a group member falls into the category of Ineligible Group Member, there is nothing that he or she can do to change that; and (c) there would be significant delay and cost in requiring categorisation to be undertaken now, which would be at the expense of Category 2 Group Members and Eligible Category 3 Group Members without Ineligible Group Members obtaining any commensurate benefit. I am not persuaded that it is appropriate for Category 2 Group Members and Eligible Category 3 Group Members to suffer such extra expense and delay when, where a group member is an Ineligible Group Member, there is nothing that he or she can do to change that, and the proposed settlement is fair and reasonable as between the different categories of group members. 275 Second, he objected to the Commonwealth charging interest on the debts of Ineligible Group Members because such group members may have held the mistaken belief that they would not have to pay any such debt, let alone the interest accruing on it, as it had been invalidly raised. There is little force in this objection when their debts were not raised based on income averaging from ATO data, but were instead based on information such as payslips and bank statements provided by those group members. In any event, the Court has no power to change the terms of the proposed settlement; only to approve or refuse to approve the proposed settlement on the terms that it was made.

Fleur Hawke 276 Ms Hawke filed an objection to settlement approval. She described herself a single parent attempting to support herself and two children on a single low income. She said that the Commonwealth raised a debt against her based on the Robodebt system, which meant that she had to struggle to support her family while also making repayments toward the Asserted Overpayment Debt. While she was repaying that debt her entitlement to claim an advance payment from the Commonwealth, which helped her to pay for essential items, was suspended and in desperation she turned to pay day loans and "shonky credit providers". This led her into either further debt. She said that the Robodebt system "ultimately led me down the road to financial ruin." 277 Again, Ms Hawkes's objection reveals some of the damage caused by the Robodebt system, but having regard to the attendant risks of the litigation and the size and terms of the proposed settlement, it does not justify refusing to approve the proposed settlement.

The categories of objection 278 Gordon Legal categorised the within time objections as follows, which categorisation is in my view broadly accurate. Nature of objection Number of objections 1 Grounds for objection 1: debts calculated or recalculated on the basis of payslips/bank statements should be refunded 49 2 Grounds for objection 2: settlement does not account for distress and inconvenience 21 3 Grounds for objection 3: settlement sum too low 9 4 Grounds for objection 4: settlement inappropriate because it prevents trial occurring/Respondent should be held to account/no apology 10 5 Grounds for objection 5: legal costs 3 6 Grounds for objection 6: group members who received no benefit from the settlement should not be precluded from pursuing separate legal action regarding their debt 1 7 Objection relates to two or more of grounds 1-6 listed above 54 8 No grounds of objection noted 269 9 Statement of personal circumstances or other information relevant to proceeding; no specific grounds provided 130 10 Irrelevant information or outside the scope of the proceeding 11 11 Intending to opt out 19 12 Grounds were unclear or unable to be interpreted 15 13 Miscellaneous documents not objection forms 5 Total 596

Ground 1 279 The 49 objections grouped under Ground 1 broadly concern Ineligible Group Members. For the reasons I have set out above this objection does not in my view justify refusing to approve the settlement. The central failure of the Robodebt system was the raising and recovery of Asserted Overpayment Debts based on income averaging from ATO data. The debts asserted against Ineligible Group Members Based were not, however, based on income averaging from ATO data; they were calculated or recalculated on the basis of payslips or bank statements provided by the group member. For Ineligible Group Members to establish an entitlement to be refunded such debts they must succeed in the "tainting" argument which is weak. For the reasons previously explained, I am not persuaded that it is appropriate to refuse settlement approval.

Ground 2 280 The 21 objections grouped under Ground 2 concern the hardship, stress, anxiety and inconvenience many group members have suffered through the Robodebt system. As I have said, some of the objections are heart-rending and it is plain that many group members suffered significant financial hardship, anxiety and distress as a result of the Robodebt system. The objections underline the massive failure in public administration that occurred; and the damage the system has caused, which could and should have been avoided. But as I have explained, in my view it is unlikely that the applicants can establish the existence of the alleged duty of care. If they could establish the existence of the alleged duty of care and its breach, it is unlikely that they can establish an entitlement to distress damages; and their claims for aggravated and exemplary damages are weak. I am not persuaded that these objections justify refusal to approve the proposed settlement.

Ground 3 281 The nine objections grouped under Ground 3 contend that the settlement is too low. In some of these objections that complaint is grounded in other matters, including that it does not take account of the stress, anxiety and inconvenience caused, the lack of any compensation for Ineligible Group Members, or a comparison of the settlement amount compared to the much greater amount of wrongly asserted debts. It is, however, appropriate to view the proposed settlement alongside the Commonwealth's program under which it has withdrawn Asserted Overpayment Debts totalling approximately $1.763 billion and it has or will refund approximately $751 million of Commonwealth-recovered amounts. For the reasons previously explained, the proposed settlement reflects a very favourable outcome measured against the remaining claims in the proceeding - being for interest or quasi-interest on the Commonwealth-recovered amounts - and having regard to the attendant risks of the litigation on liability and quantum. I am well-satisfied that the proposed settlement is not too low; in my view it is fair and reasonable as between the parties and as between group members. These objections are not grounds to refuse settlement approval.

Ground 4 282 The 10 objections grouped under Ground 4 contend that settlement approval should be refused because it would prevent the trial from occurring which would hold the Commonwealth to account, and because the Commonwealth has made no apology. One can readily appreciate the desire of group members to have a trial and to receive an apology, but in circumstances where the proposed settlement represents a very favourable outcome in relation to the claims which were likely to succeed at trial, these objections have little force. 283 First, if the case proceeded to trial and the applicants succeeded, the Court has no power to compel an apology. Second, the proposed settlement, without an apology, is consistent with s 37M of the FCA which provides that the overarching purpose of the civil practice and procedure provisions of the FCA is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

Ground 5 284 The three objections grouped under Ground 5 concern the applicants' legal costs and their proposed deduction from the settlement sum. 285 One of these objections suggested that there was a relationship between legal costs and their entitlement to share in the financial benefits of the proposed settlement. That is not the case. The fact that Category 1 Group Members and Ineligible Group Members will not share in the financial benefits of the proposed settlement is unrelated to the reasonableness of the applicants' legal costs. Another objection appears to be made on the basis that group members will somehow be liable for legal costs, and that their share of the Distribution Sum will have legal costs deducted from it, effectively leaving them with no money in hand. That is not the case. 286 Another objection is made on the basis that the applicants' legal costs are too high and that amount should more appropriately be paid to group members. This objection has no force in my view. The proceeding would not have been possible without Gordon Legal bringing the case on a no win-no fee basis and indemnifying the applicants against adverse costs. The proceeding has achieved a substantial settlement in favour of the applicants and approximately 400,000 group members. It is appropriate that Gordon Legal be fairly remunerated for its work pursuant to the conditional costs agreements the applicants entered into. 287 It is also fair and reasonable that those group members who stand to benefit from the proposed settlement should pay a pro rata share of the costs incurred in achieving the settlement. Those group members who do not receive any financial benefit under the proposed settlement will not pay any share of the costs. 288 As I later explain in more detail, the question as to whether Gordon Legal's costs are reasonable and proportionate has been the subject of careful scrutiny by the Costs Referee, by the Contradictor who was specifically appointed to represent group members' interests in relation to the reasonableness of legal costs, and by the Court. These objections do not justify refusal to approve the proposed settlement.

Ground 6 289 The sole objection under Ground 6 contends that group members who receive no benefit from the settlement should not be precluded from pursuing separate legal action regarding their debt. This objection has some merit, and this contention was the subject of detailed submissions by the Contradictor. However, for the reasons I have explained, I concluded that it is not a basis to refuse to approve the settlement. 290 First, as I have explained: (a) the settlement is approved on the basis that the release is not concerned with the non-common claims of group members based in their individual or unique personal circumstances; and (b) the release does not preclude group members from enquiring about, objecting to or challenging debt decisions which were the subject of the proceeding, including by way of statutory review under the SSAA, if the basis for the challenge or objection is different in nature those made in the proceedings. Thus, it leaves open a broad avenue for group members to object to or challenge debt decisions of the Commonwealth. 291 Second, the claims of Ineligible Group Members are based in the "tainting" argument, and in my view they are weak and more likely than not to fail at trial. 292 Third, the opt out notice informed group members that the proceeding could be resolved either by a settlement or a judgment, and that if they did not opt out of the proceeding and the action was unsuccessful or not as successful as they might have wished, they would not be able pursue the same or similar claims in other legal proceedings. Thus, Ineligible Group Members were informed that, if they did not opt out, and the proceeding was resolved they may be bound into the outcome without receiving any benefit. 293 Fourth, the Notice of Proposed Settlement informed group members as to the terms of the proposed settlement and any group member who took the trouble to file an objection, including those who were late in doing so, will be permitted to opt out of the proceeding and will therefore not be bound by the release. 294 In the circumstances this objection does not justify refusal to approve the proposed settlement.

Ground 7 295 The 54 objections grouped under Ground 7 raise two or more of the matters raised under Grounds 1-6 addressed above. I need not say any more about those grounds.

Ground 8 296 The 269 objections grouped under Ground 8 do not set out any reason for objection. There are reasons to doubt that they were intended as objections, and they are not a basis upon which settlement approval should be refused.

Ground 9 297 The 130 objections grouped under Ground 9 provide little more than a statement of personal circumstances or other information arguably relevant to the proceeding. They do not specify reasons for the objection and they are not a basis upon which settlement approval should be refused. There are also reasons to doubt that they were intended as objections.

Ground 10 298 The 11 objections grouped under Ground 10 contain irrelevant information or matters which go outside the scope of the proceeding. They are not a basis upon which settlement approval could be refused.

Ground 11 299 The 19 objections grouped under Ground 11 indicate that the objector would prefer to opt out of the proceeding. The proposed settlement is approved on the basis that those group members who objected to the proposed settlement up to the point of the settlement approval hearing will be given the opportunity to opt out of the proceeding. These objections do not justify refusing to approve the proposed settlement.

Ground 12 300 The 15 objections grouped under Ground 12 set out reasons for objection which are unclear, and cannot justify a decision to refuse to approve the proposed settlement.

Ground 13 301 These five purported objections comprise miscellaneous documents. They are not objections to settlement approval and do not justify refusing to approve the proposed settlement.

The risks of maintaining a class action 302 There is no risk that the application could not be continued as a representative proceeding under Pt IVA of the FCA. Indeed, the case is a paradigm example of the appropriate use of the regime.

The ability of the respondent to withstand a greater judgment 303 The Commonwealth could unquestionably satisfy a judgment in a sum greater than the proposed settlement, and indeed greater than any amount that could possibly be achieved through the litigation. No discount has or should be applied based on any purported risk that the Commonwealth would be unable to satisfy a greater judgment.

WHETHER THE SETTLEMENT DISTRIBUTION SCHEME IS FAIR AND REASONABLE 304 The SDS is Annexure B to the Settlement Deed. Clause 3 of the SDS requires the Commonwealth to develop an Implementation Plan for distribution of the settlement. It is appropriate in my view to give particular attention to the SDS because, somewhat unusually, the distribution will be undertaken by the respondent to the proceeding rather than by a scheme administrator nominated by the applicants. 305 The SDS sets out the processes required to be undertaken in categorising group members so as to determine whether they are eligible to a share of the Distribution Sum, for communicating with group members and for paying Category 2 and Eligible Category 3 Group Members a share of the Distribution Sum calculated by reference to the terms of the SDS. The administration of the settlement is to be undertaken by the Commonwealth through Services Australia, with independent oversight by the Scheme Assurer, and with Gordon Legal having a role to protect group members' interests. The SDS includes processes for resolution of any disputes, and also allows matters to be brought before the Court if necessary. 306 The SDS is designed to manage the distribution of the settlement funds only amongst Category 2 Group Members and Eligible Category 3 Group Members as they are the only persons eligible to be Scheme Claimants under the Settlement Deed. Any suggested unfairness to Ineligible Group Members arising from the fact that they do not receive any financial benefit under the proposed settlement does not arise as a result of the SDS. Instead, it is a result of the Settlement Deed. It is accordingly appropriate to approach the fairness of the SDS by reference to whether it is fair and reasonable having regard to the interests of Category 2 Group Members and Eligible Category 3 Group Members, as they are the only persons entitled to a distribution.

The Scheme Assurer 307 Clause 2 of the SDS provides for the appointment of the Scheme Assurer, which is responsible for providing assurance of the Commonwealth's calculation and distribution of entitlements under the SDS to ensure that the SDS is administered fairly and reasonably in accordance with its terms. Under the SDS the Commonwealth must provide information and data relating to group members to the Scheme Assurer to allow it to undertake its assurance functions. The costs incurred by the Scheme Assurer will be met by the Commonwealth independently of any funds paid by way of settlement. The Scheme Assurer is required to assure: (a) the appropriate categorisation of Group Members, which process will include sampling of categorisations; (b) the Commonwealth's Information Communications Technologies system design, build and release for the administration of the SDS; and (c) the calculation of the "Scheme Claimants" entitlements from the Distribution Sum and the payment of those entitlements. The Scheme Assurer must also provide an independent review mechanism for group members who dispute the categorisation of their claim or the entitlement calculation.

The Implementation Plan 308 The Implementation Plan was prepared and agreed between the parties. It details the functions to be performed by the Commonwealth (principally by Services Australia). In large part, the Implementation Plan provides greater detail around the processes, obligations and rights set out in the SDS Framework. In written submissions the Contradictor raised various concerns about aspects of the SDS, and also consulted with Services Australia in relation to those changes. By and large the Commonwealth took on board the Contradictor's concerns and made appropriate changes. The Implementation Plan now provides as follows.

Phase 1 309 The Commonwealth is required to categorise group members to determine those who are eligible for a distribution from the Distribution Sum and those who are not. In respect of the categorisation process, during Phase 1 the follows steps are required to occur: (a) by a specified date the Commonwealth is to provide the Scheme Assurer with a random sample (using the methodology advised by the Scheme Assurer) of a categorised cohort of group members to allow the Scheme Assurer to review the data and ensure that, broadly, the categorisation process has been accurate and effective (see: Step 1.2 and SDS cl. 4.a.i); (b) by a specified date the Scheme Assurer is to provide a report to Services Australia and Gordon Legal which contains a full analysis of the results of the sample and an assessment of the adequacy of the verification process (see: Step 1.3 and SDS cl 4.a.iii); (c) following receipt of the Scheme Assurer's verification report, Gordon Legal will advise Services Australia and the Scheme Assurer as to whether or not it is satisfied that group members have been correctly categorised (see: Step 1.4 and cl. 4.a.iv); and (d) Services Australia will process the categorisation file and until that processing has taken place Phase 2 of the Implementation Plan will not commence.

Phase 2 310 Phase 2 of the Implementation Plan provides: (a) for the exclusion of Group Members who have opted out of the proceeding; (b) within 9 weeks of the Court making the settlement approval orders or completion of the opt-out process, whichever is later, and subject to confirmation by Gordon Legal of their satisfaction with draft correspondence, Services Australia is to send a letter which details: (i) how the categorisation of group members works under the SDS; (ii) whether or not the Group Member is eligible for a settlement payment based on the categorisation of their debts (iii) what dispute options there are if a group member disagrees with their categorisation; and (iv) the deadline by which (unless a relevant exception applies) the group member must provide or update their bank details or provide a residential contact address to enable the distribution of their share of the Distribution Sum (see: Step 2.2). 311 At the same time as letters are sent out, Services Australia is to set up a dedicated inbound and outbound call centre and a website so that group members can obtain information and lodge disputes about their categorisation, as well as provide additional methods by which Category 2 Group Members and Eligible Category 3 Group Members can provide bank account details or a residential contact address (see: Step 2.3). Step 2.4 contemplates that Services Australia will undertake a non-exhaustive list of steps to contact group members who Services Australia have not already been able to contact for the purposes of verifying their contact or bank account details. Services Australia will take these mandatory and non-exhaustive steps by a series of specified dates. The mandatory non-exhaustive list requires Services Australia to contact all Category 2 Group Members and Eligible Category 3 Group Members by: (a) checking whether the group member's contact details have changed, using information held by other Commonwealth agency databases and external collection agencies; (b) outbound telephone call to the group member's mobile phone or landline (where those contact details are held by Services Australia); (c) sending two SMS messages, an initial and a final message, where Services Australia possess a mobile phone number for the group member; (d) an advertising campaign on radio and social media; and (e) making available information on a web portal. 312 Step 2.5 provides a two-tiered dispute process which allows Group Members to dispute their categorisation and thus their eligibility for a payment from the Distribution Some. The first tier of the dispute process is to be managed by Services Australia. If the tier 1 review does not satisfy the group member then they can escalate their complaint to the Scheme Assurer. All disputes will be finalised by a specified date (see: SDS cl 4.f). 313 Step 2.6 allows application to the Court in circumstances where, after notification by the Commonwealth that it considers that it has taken "all available steps" to contact group members for the purposes of Step 2.4, Gordon Legal considers that all reasonable steps have not been taken (see: SDS cl. 4.b). 314 Similarly, Step 2.6 permits Gordon Legal, within a reasonable timeframe after its receipt of the report by Services Australia regarding all available steps it took in respect of Step 2.4 to contact group members, to write to the Commonwealth setting out what steps the firm considers have not been taken or have not been taken adequately and proposing a further time period in which that should occur. This is an alternative process to approaching the Court to resolve the dispute over the reasonableness of the steps taken by the Commonwealth to contact Group Members. If Gordon Legal remain unsatisfied that all reasonable steps have not been taken after the period of extended time has elapsed, then it can approach the Court. 315 Step 2.7 provides that Category 2 Group Members and Eligible Category 3 Group Members will be deemed to be Scheme Claimants. After 22 weeks have elapsed from the date of the orders or from the end of the opt-out process for objectors, whichever is the later, where Scheme Claimants' bank accounts and preferred payment methods have been identified they will be deemed members of the "registered cohort" who are eligible to receive a payment from the Distribution Sum.

Phase 3 316 Under Step 3.1 the entitlement to a share of the Distribution Sum is contingent on group members having either a current bank account recorded with Centrelink or by having provided Centrelink with a nominated address to which a cheque can be sent by registered post. 317 Step 3.1 has also been amended so as to provide greater clarity to the circumstances in which a Category 2 Group Member and Eligible Category 3 Group Member will be taken to have provided current bank account details or a nominated contact address. 318 Step 3.1 of the Implementation Plan details that the period between the date from which the repayment of an Asserted Overpayment Debt was received by the Commonwealth to the date of refund is used as the time during which the parties have agreed to calculate the applicable Federal Court pre-judgment interest rates. 319 Under Step 3.2, within 7 days of the registered cohort being identified, the Scheme Assurer is required to undertake a random sample process to ensure that the calculation of payments to eligible Group Members is being conducted on an appropriate methodological basis and provide assurance that the entirety of the Distribution Sum is being distributed to eligible group members. 320 Under Step 3.3 Services Australia are required to notify eligible group members of the amount of the payment, the formula by which their payment was calculated, and the dispute process. An inbound call centre and Web Portal will be available to group members for 48 weeks after the court approval of the settlement or the end of the opt-out period for objectors, or whichever is later. The period that registered group members can receive information about their entitlement to a payment from the Distribution Sum through the web portal and the telephony line will start the day the notice is issued and end when the 48 week period has elapsed. 321 Step 3.4 of the Implementation Plan now includes specified dates for payments to the registered cohort to be made. The majority of payments will be made over a four-week period, from 32 weeks after the Court makes the settlement approval orders or completion of the opt out process, whichever is later. This step was amended to include a non-exhaustive list of circumstances that will result in payments being made by manual processing or tailored services. Where the processing of a payment is manual or otherwise individually tailored, then the Commonwealth is required to notify the relevant group member that payment could take up to 16 weeks to process. 322 Step 3.5 provides: (a) the steps Services Australia will implement to ensure that returned or rejected payments are recorded; (b) the non-exhaustive list of steps Services Australia must take to ensure that all reasonable steps are taken to reissue those payments; and (c) how the Commonwealth will treat monies received in respect of a returned or rejected payments and whether such funds may be used to pay persons who have not been contactable, for an identified reason, and are therefore eligible to share in the Distribution Sum. 323 Step 3.6 provides for the Scheme Assurer to conduct a final assurance process and will report to the Court that Services Australia has followed the processes set out in the Implementation Plan.

Gordon Legal's function under the SDS 324 Gordon Legal's functions under the SDS include that the firm: (a) had a role in relation to preparation of the Implementation Plan; (b) must advise the Commonwealth as to whether it is satisfied that all group members have been correctly categorised. There is a dispute resolution procedure for determination of disputes relating to the categorisation of group members; (c) must be satisfied that the Commonwealth has used all reasonable endeavours, including by taking the mandatory steps, to contact and verify the contact and current bank account details of Category 2 and Eligible Category 3 Group Members; (d) must agree to any notifications to and correspondence with group members under the SDS. There is a dispute resolution procedure in default of agreement; (e) shall be given an opportunity to provide input into the website text and call scripts to be used by the Commonwealth in answering group members' questions regarding the SDS; (f) may provide information and assistance about the SDS to group members who request it, limited to advice explaining how group members have been categorised and explaining the methodology employed to calculate group members' entitlements; and (g) must have a detailed FAQs section on their website which addresses issues and provides generic information to group members. Gordon Legal anticipates that it will be required to field and answer enquiries from tens of thousands of group members. 325 The calculation of the entitlement of Category 2 Group Members and Eligible Category 3 Group Members under the SDS involves a simple interest calculation on the Commonwealth-recovered amounts based on the period over which the Commonwealth held those monies in respect of each such group member. The costs, delay and difficulties associated with some more individualised assessment method would likely have outweighed the benefits to group members. 326 In my view the SDS is fair and reasonable and in the interests of Category 2 Group Members and Eligible Category 3 Group Members including because: (a) the claims of all group members are subjected to the same procedures in relation to categorisation; (b) the claims of all Category 2 Group Members and Eligible Category 3 Group Members are subjected to the same principles and procedures for assessing the value of their entitlements under the scheme; (c) the assessment methodology is likely to deliver a broadly fair relative assessment of group member's entitlements under the scheme as between Category 2 Group Members and Eligible Category 3 Group Members; (d) does not provide special treatment to the applicants or group members by way of a reimbursement payment; (e) provides appropriate procedures and timelines for categorising group members and determining the entitlements under the scheme; (f) incorporate meaningful opportunities for review and objection by group members, and allows Gordon Legal to represent group members' interests; (g) incorporates appropriate independent oversight through the appointment of the Scheme Assurer; and (h) provides reasonable grounds to be confident that group members will be appropriately categorised and that Category 2 Group Members and Eligible Category 3 Group Members will receive their appropriate entitlements.

WHETHER THE APPLICANTS' LEGAL COSTS ARE FAIR AND REASONABLE? 327 Clause 2.8.4 of the Settlement Deed provides for the reasonable Court-approved legal costs incurred by Gordon Legal in acting for the applicants and group members in the proceeding, and in undertaking its functions under the SDS, to be deducted from the Settlement Sum and to be paid to Gordon Legal as directed by the Court.

Relevant principles 328 Clause 2.8.4 reflects the Court's protective role in relation to costs proposed to be paid by group members. Judicial oversight of such costs is an important part of the Court's role in protecting class members' interests. In Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842; 132 ACSR 258 at [88] I explained: In class actions the requirement for judicial supervision of legal costs proposed to be charged is obvious because: (a) the applicant's solicitor is in a more dominant position vis-a vis a class member than in a solicitor-client relationship in individual litigation; (b) class members are commonly not told about the mounting costs as they are incurred and they suffer a significant information asymmetry in that regard; (c) it is not necessary for class members to retain the applicant's solicitor and commonly they do not, yet they are usually made liable for a pro rata share of the costs; (d) even where class members retain the applicant's solicitor they do not provide instructions as to the running of the class action and have no control over the quantum of costs, yet they are usually made liable for a pro rata share of the costs; (e) class members are unlikely to pay much attention to legal costs because they are usually only payable upon success and from the successful outcome; (f) it is usually not until after settlement is achieved that class members are told the total costs claimed, but they are not told (and it is commonly very difficult to accurately estimate) what their pro rata share of the costs will be; and (g) the Court has a protective role in relation to class members' interests. 329 As I said in Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [91] in the context of the settlement approval application: The Court should satisfy itself that the arrangements in relation to legal costs meet any relevant legal requirements, contain reasonable and proportionate terms relative to the commercial context in which they were entered, and that the costs and disbursements are in accordance with the terms of the relevant agreements and are otherwise "reasonable". (Citations omitted.) The Court must be satisfied that the legal costs sought to be recovered from group members are, in all the circumstances, reasonable and proportionate: Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 at [32] (Gordon J); Petersen; Lenehan v Powercorp [2020] VSC 82 at [9]-[12] (Nichols J). 330 "Proportionality" is concerned with "the relationship between the costs incurred and the value and importance of the subject matter in issue": Petersen at [130] citing Skalkos v T & S Recoveries Pty Ltd (2004) 65 NSWLR 151; [2004] NSWCA 281 at [8] (Ipp JA, Grove and Sheller JJA agreeing); Lenehan at [11]. It involves a forward-looking assessment at the time the work is performed, concerned with the benefit reasonably expected to be achieved, not the benefit actually achieved: Williams v Ausnet Electricity Services Pty Ltd [2017] VSC 474 at [110] (Emerton J). 331 In Petersen (at [134]) I cited with approval the explanation of proportionality by Beach J in Blairgowrie at [181], where his Honour said. …what is claimed for legal costs should not be disproportionate to the nature of the context, the litigation involved and the expected benefit. The Court should not approve an amount that is disproportionate. But such an assessment cannot be made on the simplistic basis that the costs claimed are high in absolute dollar terms or high as a percentage of the total recovery. In the latter case, spending $0.50 to recover an expected $1.00 may be proportionate if it is necessary to spend the $0.50. In the former case, the absolute dollar amount as a free-standing figure is an irrelevant metric. The question is to compare it with the benefit sought to be gained from the litigation. Moreover, one should be careful not to use hindsight bias. The question is the benefit reasonably expected to be achieved, not the benefit actually achieved. Proportionality looks to the expected realistic return at the time the work being charged for was performed, not the known return at a time remote from when the work was performed; at the later time, circumstances may have changed to alter the calculus, but that would not deny that the work performed and its cost was proportionate at the time it was performed. Perhaps the costs claimed can be compared with the known return, but such a comparison ought not to be confused with a true proportionality analysis. Nevertheless, any disparity with the known return may invite the question whether the costs were disproportionate, but would not sufficiently answer that question. (Emphasis added.) 332 I went on to note, however, that there are inherent uncertainties in class action litigation which mean that the determination of what the applicant's lawyers might reasonably expect to achieve in the litigation may not be as straightforward as in ordinary inter partes litigation. As I explained in Caason at [152]: In circumstances where the applicant's solicitors cannot be expected to be completely accurate in assessments they make at the commencement of a case about the level of risk, the likely aggregate claim value and the likely quantum of legal costs, the proper question in relation to proportionality of legal costs is what settlement or judgment amount it was reasonable for the applicant's solicitors to expect would be achieved by class members, not what they actually achieved. It is true that the applicant's solicitors know more about the risks of the case than the class members, but that does not mean they should not be paid costs reasonably incurred in pursuing a benefit for class members which they reasonably expected to be achievable. Nor does it mean that the applicant's solicitors should be punished when, by reason of the strenuous defence of the proceedings, the costs blow out. (Emphasis added.) 333 Upon the Court determining the quantum of reasonable legal costs in a proceeding there can be no real question that it is appropriate to order that amount be deducted from the settlement sum and paid to the applicants' lawyers. It is fair and reasonable that group members that will enjoy the benefits of a settlement should pay a proportionate share of reasonable Court-approved legal costs incurred to obtain and then distribute the settlement. Such orders are routinely made in settlement approval applications: see Thomas v Powercor Australia Ltd [2011] VSC 614 at [30] (Beach J); Modtech at [24]; Kelly at [325]-[326].

The application for deduction of costs from the settlement 334 The Notice of Proposed Settlement sent to group members stated that, at that time, Gordon Legal estimated that the applicants' legal costs would be "up to approximately $16.0 million". In their written submissions the applicants said that they sought an order for costs in the amount of $16 million. 335 The Notice of Proposed Settlement informed group members of their right to object to the proposed settlement including in relation to the reasonableness of the legal costs proposed to be deducted from the proposed settlement. It also informed group members that: (a) it was a matter for the Court to determine what amount of legal costs is reasonable, and should be deducted from the settlement; (b) the Court had appointed the Costs Referee to report to the Court as to the reasonableness of legal costs; and (c) the Court had also appointed the Contradictor to represent group members' interests in relation to the reasonableness of legal costs.

The appointment of the Costs Referee and Gordon Legal's appointment of an expert costs consultant 336 In the First Grech Affidavit filed on 25 November 2020, Mr Grech said that the applicants had retained an expert costs consultant, Michael Dudman of Blackstone Legal Costing on 19 November 2020. Mr Dudman was retained to assess and provide an independent expert report in relation to the reasonable legal costs incurred by Gordon Legal in acting for the applicants in the proceeding. Shortly thereafter, my chambers telephoned Mr Grech to inform him that my usual practice was for the Court to appoint an independent costs referee under s 54A of the FCA rather than rely upon an expert appointed by the solicitors for the applicant. 337 At a case management hearing on 2 December 2020, counsel for the applicants informed the Court that Mr Dudman's retainer was still on foot and he was working towards producing a report as to the applicants' reasonable legal costs in the proceeding. I told counsel that it was likely that I would rely on the report of the Costs Referee rather than upon a cost consultant engaged by the applicants' solicitors and that it was unlikely that I would allow the costs incurred in obtaining his report as a deduction from the settlement. 338 On 23 December 2020, I made orders pursuant to s 54A of the FCA to appoint a costs referee. Order 11 provided as follows: Pursuant to s 54A of the Act Ms Cate Dealehr of the Australian Legal Costing Group is appointed as a referee (Costs Referee) to inquire into and report to the Court (Report) stating, with reasons, the Costs Referee's opinion on the following matters: (a) the reasonableness of the Applicants' legal costs for work done up to the hearing of the settlement approval application, including costs anticipated but yet to be incurred as at the date of the Report; (b) the lump sum amount of reasonable legal costs that the Court should approve as fair and reasonable and allow to be deducted from the settlement sum to be applied to payment of the legal costs of the Applicants and Group Members incurred in conducting the class action; (c) the approximate proportion of the Applicants' legal costs for work done up to the Settlement Approval Hearing that are: (i) attributable to making and advancing the claims made on behalf of Category 4 Group Members and ineligible Category 3 Group Members; and (ii) attributable to making and advancing the allegations introduced by the Second Further Amended Statement of Claim, including but not limited to the cost attributable to the first unsuccessful application to introduce those allegations, the second successful application to introduce those allegations, the application for leave to appeal, the grant of leave for those allegations to be made and preparation for the trial of those allegations; and (d) the reasonableness of the sum proposed to be charged by Gordon Legal to perform its functions under the Settlement Distribution Scheme (being Annexure B to the Settlement Deed), being: (i) those set out in clauses 3b, 3.c, 4.a.iv, 4.b, 4.d.ii, 4.e.ii, checking whether the Commonwealth has correctly categorised Group Members into members who are entitled to a distribution under the Settlement Distribution Scheme, and members who are not entitled to a distribution under the Settlement Distribution Scheme; and (ii) those set out in clause 5, providing information and assistance to those Group Members who request it, being limited to: (A) explaining how Group Members have been categorised under the Settlement Distribution Scheme; and (B) explaining the methodology employed to calculate Group Members' entitlements.

The Contradictor's role in relation to legal costs 339 The orders of 23 December 2020 also appointed the Contradictor to represent group members' interests in relation to whether the legal costs proposed to be deducted from the Settlement Sum are fair and reasonable. The orders permitted the Contradictor to seek documents and information from Gordon Legal and/or the Costs Referee, and to confer with the Costs Referee in relation to the reasonableness of the legal costs proposed to be charged to group members.

The reasonableness of costs proposed to be charged in the proceeding 340 As set out above, Mr Dudman provided three reports to Gordon Legal. 341 In the First Dudman Report, Mr Dudman assessed Gordon Legal's reasonable legal costs up to the date of the settlement approval application as follows (excl. of GST): Professional fees $9,654,123.33 Disbursements including counsel's fees $1,757,702.69 Total Reasonable Recoverable Costs $11,411,826.02

342 The Costs Referee provided two reports to the Court. The first report dated 1 April 2021 (First Costs Referee's Report) and a supplementary report dated 26 April 2021 (Second Costs Referee's Report). 343 The First Costs Referee's Report concluded that Mr Dudman's assessment of legal costs up to the date of the settlement approval application was unreasonable, in particular that his assessment of professional fees of $9.65 million was excessive. The Costs Referee assessed reasonable legal costs up to the date of the settlement approval application in a total of $7.64 million of which $5.34 million was professional fees. The precise figures are set out in the table below. DESCRIPTION AMOUNT ALLOWABLE (A) UP TO 23 MARCH 2021 Professional Fees $5,136,735.12 Disbursements $1,945,206.58 SUB-TOTAL $7,081,941.70 (B) ESTIMATED COSTS TO APPROVAL Professional Fees $201,715.32 Disbursements $353,565.00 SUB-TOTAL $555,280.32 TOTAL PROFESSIONAL FEES & DISBURSEMENTS (A) + (B) $7,637,222.01

344 In relation to the specific questions in Orders 11(c)(i) and (d) of the orders made on 23 December 2020, the First Costs Referee's Report said that: (a) the Costs Referee was unable to provide an opinion as to the appropriate proportion of the applicants' legal costs for work done up to the settlement approval hearing attributable to making or advancing the claims of Ineligible Group Members; and (b) the approximate proportion of the applicants' reasonable legal costs for work done up to the settlement approval hearing that is attributed the making or advancing the allegations of actual knowledge of unlawfulness in the 2FASOC is between 5-6.5%. Those two questions arose out of opposition the Commonwealth had flagged to costs incurred by Gordon Legal in pursuing the claims of Ineligible Group Members, and in pursuing aggravated and exemplary damages. As it eventuated there is no need to address those questions because the Commonwealth did not maintain those submissions, and instead contended that the Costs Referee's Second Report should be adopted (at least in relation to the costs incurred in the proceeding up to the date of the settlement approval application). 345 In response to the First Costs Referee's Report the applicants filed the Fourth Grech Affidavit dated 16 April 2021, the Supplementary Dudman Report dated 16 April 2021 and the applicant's submissions in relation to legal costs dated 19 April 2021 (the further cost materials). The Supplementary Dudman Report made some criticisms of the Costs Referee's methodology and conclusions and the Fourth Grech Affidavit contained information which sought to underpin Mr Dudman's approach. 346 The further cost materials had not been put to the Costs Referee. On 19 April 2021, I made orders requiring that the Costs Referee be provided with the further costs materials filed by the applicants and that the Costs Referee submit a supplementary report stating her opinion in relation to the further cost materials and any alteration or clarification to the opinions expressed in her first report. 347 The Second Costs Referee's Report rejected Mr Dudman's criticisms of the methodology she used and maintained her opinion that Mr Dudman's assessment of reasonable legal costs to the date of the settlement approval application was excessive. However, as flagged in her first report, the Costs Referee determined that there was a proper basis to allow an increased loading for skill, care and attention. The Second Costs Referee's Report concluded that it was appropriate to increase the loading for skill care and attention to 30% having regard to the complexity of the matter, the difficulty and novelty of the questions involved, the amount in dispute in litigation and the time within which the work was required to be done. That resulted in a significant increase in the total costs allowed. 348 On that basis the Second Costs Referee's Report provided an increased assessment of reasonable legal costs (inc. GST) up to the date of the settlement approval application in the amount of $8,413,795.71, made up of $6.096 million in professional fees and $2.316 million in disbursements. That was an increase of $776,573.70. The precise figures in relation to the Costs Referee's assessment, as compared to Mr Dudman's assessment are set out in the table below: DESCRIPTION AMOUNT ASSESSED BY DUDMAN AMOUND ASSESSED BY DEALEHR (A) UP TO 23 MARCH 2021 Professional Fees $9,821,676.75 $5,868,955.37 Disbursements $2,031,402.68 $1,950,107.08 SUB-TOTAL $11,685,526.01 $7,819,062.45 (B) ESTIMATED COSTS TO APPROVAL Professional Fees $224,134.28 $228,026.01 Disbursements $353,565.00 $366,707.25 SUB-TOTAL $577,699.28 $594,733.26 TOTAL PROFESSIONAL FEES & DISBURSEMENTS (A) + (B) $12,430,778.70 $8,413,795.71 DIFFERENCE $4,016,982.99

349 As is apparent from the table, the Costs Referee assessed the applicants' reasonable legal costs up to settlement approval in an amount $4 million less than Mr Dudman. 350 The differences in the assessments of the Costs Referee and Mr Dudman essentially concerned two matters. First, they concerned the assessment and quantification of the legal costs incurred in relation to discovery review work performed by Gordon Legal. The Costs Referee considered that the discovery review work should be assessed on a time spent basis, that is, the time actually recorded by Gordon Legal for discovery, being $244,000 (before application of a scale percentage reduction.) In contrast, Mr Dudman allowed $2.66 million for discovery review by excising the time-based costs and then recalculating discovery review using the perusing/scanning/examining items provided for in the Victorian Supreme Court costs scale. Mr Dudman sought to cost discovery not on the basis of actual time spent but on an item basis. 351 Second, the difference concerned the assessment and quantification of the legal costs incurred in relation to the work of casual paralegals employed by Gordon Legal. The firm employed 27 casual paralegals to work on the case. Mr Dudman assessed the costs in respect of the work by the casual paralegals at $1,850,090. In contrast the Costs Referee allowed those costs in an amount of approximately $1 million. 352 The difficulty with accurately assessing these costs arises principally from the fact that no time records were kept in respect of these casual workers to substantiate the claim in respect of their work. Mr Dudman's analysis was based upon an assumed daily average of 7.2 hours per casual paralegal, as provided in an excel spreadsheet prepared by Gordon Legal which set out the casual rosters on the basis for the calculation of the time said to have been spent by the relevant workers. The Costs Referee expressed the opinion that Mr Dudman's approach was not reasonable as there was: (a) no acceptable explanation as to why time records are not maintained; (b) the spreadsheet did not substantiate that the work was in fact undertaken; and (c) there was no basis for an assumption that casual paralegals rostered 7.2 hours per day could claim 100% of that time.

Whether to adopt the Costs Referee's Second Report in relation to costs incurred in the proceeding 353 If it was necessary to decide, I would prefer the Costs Referee's opinions to those of Mr Dudman in respect to the costs incurred in the proceeding up to the date of the settlement approval application. As the Contradictor submitted, the Costs Referee's Reports show a considered, moderate and principled approach, which is robustly independent and ought be preferred. 354 It is, however, unnecessary to decide that question in circumstances where the Contradictor and the Commonwealth submitted that the Costs Referee's assessment should be adopted, and neither the applicants nor Gordon Legal opposed their adoption. It is established that the reference procedure is not to be treated as some sort of warm up for the real contest: Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563-4 (Gleeson CJ (as his Honour then was)) and 566-7 (Mahoney JA). 355 In Caason (at [132]) I set out the principles that apply to adoption of a referee's report as follows: (a) an application contending that a report not be adopted is not an appeal; (b) the discretion to not adopt a report should be exercised consistently with the purpose of the reference; (c) where the report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition to accept the report; (d) where the report reveals some error of principle, patent misapprehension of the evidence or manifest unreasonableness in fact finding, then there would arise reasons for rejecting it; and (e) the referee should give sufficient reasons to enable the parties and the Court to know that the conclusion is not arbitrary or influenced by improper considerations, and is not affected by the flaws described in (d) above. Where, as in the present case, the Court has the benefit of a costs referee's report that uses a reasonable methodology and shows an analytical and thorough approach there are good reasons for the Court to adopt it. It is appropriate that I do so. 356 Insofar as the costs incurred up to the date of the settlement approval application are concerned, I consider the Costs Referee's Second Report shows a fair, analytical and scientific approach, and there was no suggestion to the contrary by the applicants or Gordon Legal. I could see no error of principle, patent misapprehension of the evidence or manifest unreasonableness in fact finding, and there was again no suggestion to the contrary. The detailed report provides sufficient reasons to enable the parties and the Court to know that conclusions are not arbitrary, influenced by improper considerations or affected by any of the flaws described above, and again there was no suggestion to the contrary. In the circumstances it is appropriate to adopt the Costs Referee's Second Report to the extent of the assessment of reasonable legal costs up to the date of the settlement approval hearing. 357 To those unexperienced in the conduct of large, complex class action litigation, costs of $8.41 million may seem an extraordinary amount. But any such view would be naïve in relation to the costs involved in such litigation. This is a case which, at its commencement, had a potential value of more than $1.763 billion to the applicants and group members. Even after the Commonwealth withdrew the assertion of debts totalling approximately $1.763 billion and agreed to refund all Commonwealth-recovered amounts based on income averaging from ATO data, the applicants were left with a substantial claim for interest or quasi-interest. The case is large, involves novel and complex questions of law, involved substantial discovery of Commonwealth documents, was expedited and was strenuously contested. It required the applicants' solicitors to interact with thousands of group members and to use a large team of solicitors, barristers and paralegals. Almost inevitably it was very expensive. 358 For those group members with concerns about the quantum of approved costs, they should take comfort from the fact that: (a) the amount of $8.41 million is the result of a detailed review by an independent expert costs consultant appointed by the Court, and was approved by the Contradictor who is specifically charged with the obligation to represent group members' interests in relation to the reasonableness of legal costs. Having regard to the detailed and careful consideration given by the Costs Referee and the Contradictor there are good reasons to be confident that the amount is fair and reasonable in the circumstances of the case; (b) costs in that amount fall comfortably within the range of what the Court commonly allows for costs in "standard" class actions which settle at the door of the Court, and this case is not standard; and (c) the amount allowed is $4 million less than that recommended by the expert costs consultant engaged by Gordon Legal, which represents a substantial improvement for group members.

The reasonableness of the costs to be incurred in settlement administration 359 In relation to the costs associated with the work to be undertaken by Gordon Legal in performing its role under the SDS the firm assumed that it would be required to respond to enquiries from approximately 40,000 group members. On that basis the firm estimated its costs as follows: 360 Mr Dudman assessed the reasonable costs for Gordon Legal in undertaking its role under the SDS as follows: Professional Fees $4,525,687.00 Disbursements $245,760.38 Total Likely Reasonable Future Costs $4,771,447.38

361 In the First Costs Referee's Report, Ms Dealehr said that she: (a) was unable to verify the disbursements claimed; (b) did not accept Mr Dudman's view that it was appropriate to charge for such work on the Supreme Court scale rather than on the basis of reasonable hourly rates; (c) expressed concerns as to the proposed hourly rates; and (d) said that the greatest difficulty was the assumption that Gordon Legal would be required to deal with 40,000 enquiries from group members. 362 With those disclaimers, the Costs Referee allowed $65 per unexceptional query and $315 per difficult query, and estimated total administration costs at $2.689 million. Allowing for disbursements, that assessment was approaching $2 million less than Mr Dudman's assessment. 363 In the Second Costs Referee's Report, which followed the provision of the applicants' further cost materials, Ms Dealehr reached a different conclusion. In this report the Costs Referee: (a) accepted that the hourly rates proposed by Gordon Legal for all classes of lawyers and other operators to be engaged in settlement administration work were reasonable and at the middle end of the "market" range; (b) reduced the amount allowed for estimated disbursements by $95,694.62; and (c) on the basis of an acceptance of Gordon Legal's estimate that it would receive approximately 40,000 queries from group members (and that those queries could be broken down into 38,000 unexceptional queries and 2,000 difficult queries) the Costs Referee estimated the settlement administration costs likely to be incurred by Gordon Legal at $4,299,536.17. That total is made up of $4,147,000 for professional fees and $82,536.17 for disbursements. 364 The Costs Referee set out the foundations for allowing settlement administration costs of $4.22 million as follows: PROFESSIONAL FEES RATES IN WIP Description of work paralegal $300 solicitor $450 partner $650 no loading Paralegals to review questionnaires, provide phone advice (unexceptional circumstances) $2,820,000.00 Providing further detailed advice (difficult circumstance) $600,000.00 Providing further detailed advice (supervision, unexceptional circumstances) $216,000.00 Providing further detailed advice (supervision, difficult circumstances) $104,000.00 Sub-total $3,770,000.00 Loading N/A Total professional fees (ex GST) $3,770,000.00 Total professional fees (inc GST) $4,147,000.00 *GST originally omitted DISBURSEMENTS Third party costs for online portal, Case management System development and software licence fees $70,032.88 Admin Work - Accountancy Fees for 'checking' work $5,000.00 Total disbursements (ex GST) $75,032.88 Total disbursements (inc GST) $82,536.17 TOTAL ADMINISTRATION COSTS $4,229,536.17

Whether to adopt the Costs Referee's Second Report in relation to settlement administration costs 365 The Contradictor submitted that the Costs Referee's Second Report should be adopted. The Commonwealth opposed adoption of the Costs Referee's Second Report and said that the Court should allow a lower amount and noted that the Costs Referee's opinion was based on assumptions that: (a) Gordon Legal will receive 40,000 enquiries from group members, with 38,000 classified as "unexceptional" and 2000 classified as "difficult"; (b) a paralegal will spend 15 minutes on each of the 38,000 unexceptional queries and one hour on each of the 2,000 difficult queries; (c) a lawyer will supervise the paralegal team six hours per day, five days per week in relation to the unexceptional queries, and two hours per day, five days per week in relation to the provision of advice in response to the difficult queries. 366 The Commonwealth did not challenge the reasonableness of Gordon Legal's estimates both as to the number of likely enquiries from group members or the time involved in responding to those queries. It submitted, however, that Gordon Legal's estimates suggest that most of the likely enquiries will be from Category 4 Group Members or Ineligible Category 3 Group Members, who will not receive any financial benefit under the proposed settlement. In making that submission the Commonwealth relied on the Fourth Grech Affidavit in which Mr Grech said that: (a) it is likely that a relatively large proportion of Category 4 Group Members (approximately 170,000 people) will seek further information and advice from Gordon Legal because they may find it difficult to understand or accept the significance of their debts being calculated using income information other than by income averaging from ATO data; (b) it is likely that a relatively large proportion of Category 3 Group Members (approximately 40,000 people) will seek further information and advice from Gordon Legal because they may find it difficult to understand or accept the significance of their debts being recalculated other than by income averaging from ATO data, or may have difficulty understanding why they have or have not been assessed as an Eligible Category 3 Group Member; (c) a large proportion of group members who have more than one debt, which Mr Grech estimates to be around 100,000 people, may find it difficult to understand and/or accept the impact of the settlement having regard to the relative complexity of their situation; and (d) it is unlikely that more than a relatively small number of Category 1 Group Members (approximately 50,000-70,000 people) and Category 2 Group Members (approximately 370,000 people) will seek advice or assistance from either Centrelink or Gordon Legal in relation to the settlement. 367 The Commonwealth argued that it is not fair and reasonable for Gordon Legal to receive millions of dollars for explaining to Ineligible Group Members why they do not receive any payment under the proposed settlement when Gordon Legal: (a) caused the claims on behalf of Ineligible Group Members to be brought, which the Commonwealth maintains were always hopeless; (b) promoted the claims on behalf of Ineligible Group Members and the class action generally, thereby creating expectations in the minds of those group members; and (c) supports the settlement of the proceeding on the basis that Ineligible Group Members will receive no payment. The Commonwealth also contended that it is not fair and reasonable for Gordon Legal to be paid from the Settlement Sum for providing advice to Ineligible Group Members which amounts would otherwise be distributed to Category 2 Group Members and Eligible Category 3 Group Members. 368 There are several difficulties with the Commonwealth's arguments. 369 First, the Commonwealth's argument boils down to the proposition that, it having agreed to settle the proceeding on terms which include Gordon Legal having a significant role to represent group members' interests under the SDS, the firm should not be fairly remunerated for that work. I am not persuaded that would be fair or reasonable, particularly when the fact that Gordon Legal will represent group members' interests in the categorisation process is material to my conclusion that the SDS is fair and reasonable. 370 Second, it is common ground between the parties that it was not until about June 2020 that they came to understand that that there were four categories of group members within the class. While persons in each of those categories always fell within the group definition (as it did not require that a person have a debt calculated on the basis of income averaging) the only causes of action pleaded in the initial statement of claim were pleaded on the basis of debts based on income averaging from ATO data. But no one at that stage understood that there are approximately 202,000 group members on behalf of whom no cause of action was pleaded. 371 It was not until the FASOC was filed on 1 July 2020 that the applicants identified the four categories of group members, and pleaded a claim in respect to Category 3 Group Members and Category 4 Group Members, based not on income averaging from ATO data but on the argument that their debts are tainted with the illegality of the Robodebt system. The applicants submitted, and I accept that, it was not until they were able to identify the four categories of group members that they came to understand the different claims in the different categories, and thus could reach any view as to the strength of those different claims. Even now the parties are unable to provide the Court with an accurate breakdown of Category 3 Group Members between those who are "Eligible" and "Ineligible". In my view it is incorrect to say that Gordon Legal commenced claims on behalf of Ineligible Group Members when it knew or should have known they were hopeless. 372 Third, there is nothing wrong about capable and experienced solicitors and senior and junior counsel pursuing what, as I infer, they saw as the reasonably arguable claims of Ineligible Group Members. For the purpose of assessing the fairness of the proposed settlement it is necessary for the Court to reach a view as to the merits of those claims, but my view cannot be said to be conclusive and it does not show that the applicants' lawyers should have abandoned those claims. 373 Even if it is assumed that the applicants' lawyers should have understood the weakness of Ineligible Group Members' claims by midway through the case, and concluded that it was appropriate to abandon those claims, that could only occur on notice to Ineligible Group Members. When notice was given to the Ineligible Group Members it was always going to be necessary to deal with their queries and concerns, and likely that the costs of that process would form part of the applicants' costs of the proceeding. 374 Finally, in my view it is more than a little rich for the Commonwealth - it having caused the problem by wrongly raising $1.73 billion in debts based on income averaging from ATO data when it lacked a legal basis to do so in relation to which a class action was commenced against it which encompasses approximately 648,000 group members with disparate claims -to complain about the legal costs involved in unwinding the mess that it created. 375 Even so, while I am unpersuaded by the Commonwealth's submissions, I do not presently consider it appropriate to adopt the Cost Referee's Second Report in relation to Gordon Legal's future work under the SDS. That is because, at this stage, it is unsafe to assume that Gordon Legal will receive 40,000 enquiries from group members, of which 38,000 queries will be "unexceptional" and 2,000 will be "difficult". The reality is that it is impossible to know how many group members are likely to raise queries or how long they will take to resolve, but at some point an estimate will have to be made because distributions to group members cannot commence until an amount has been set aside to cover Gordon Legal's costs associated with its functions under the SDS. 376 There are real difficulties in reaching a reasonably accurate estimate of the likely costs to be incurred, but I am not satisfied that it is reasonable to fix an amount of $4.22 million in advance. Instead, I have ordered that: (a) as soon as practicable the Costs Referee shall confer with Gordon Legal, and any other person the Costs Referee considers appropriate, and then determine the best methods: (i) to assess the reasonableness and proportionality of Gordon Legal's costs for performing its functions under the Scheme on an ongoing basis, and for such costs to be considered for approval by the Court and paid at either monthly or two monthly intervals as the Costs Referee determines; and (ii) to permit the Costs Referee to make an updated and more accurate estimate of Gordon Legal's future reasonable and proportionate costs for performing its functions under the Scheme, intended to assist the Court to consider approval of a lump sum amount for future costs so that the distribution of settlement monies to the Scheme Claimants can proceed without material delay. (b) the Costs Referee provide short reports to the Court providing her opinion as to the reasonableness and proportionality of the: (i) costs in the invoices rendered by Gordon Legal for the firm's ongoing work; (ii) updated estimate of Gordon Legal's future costs in a lump sum amount; and the Court will decide whether to approve such costs on the papers. 377 An obvious problem with this course is that the Settlement Sum is fixed, and distributions cannot be made to group members until the total amount of future costs are fixed. The applicants expressed concerns as to the difficulties that may arise in taking this course. There is some force in that concern but, as Mr Grech said, it is likely the majority of queries will be from Ineligible Group Members, and the majority of the costs will be incurred when group members are informed as to the category into which they fall. In my view, at some point during the period in which the categorisation process is ongoing, or perhaps after the categorisation process is finished but before distributions begin, the Costs Referee should be in a better position to estimate the further legal work that will be required. For the present, it is appropriate to proceed on the basis that the Court will consider the invoices rendered by Gordon Legal on a monthly or two-monthly basis.

CONCLUSION 378 For these reasons I have made the attached orders. I certify that the preceding three hundred and seventy-eight (378) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.

SCHEDULE OF PARTIES VID 1252 of 2019 Applicants Fourth Applicant: FELICITY BUTTON Fifth Applicant: SHANNON THIEL Sixth Applicant: DEVON COLLINS