Federal Court approves $548.5m robodebt settlement and halves the litigation funder's fee

Justice Jonathan Beach of the Federal Court of Australia approved a $548.5 million settlement of the robodebt litigation on 23 June 2026, in orders made in the Victoria Registry in proceeding VID1252/2019, Prygodicz and others v Commonwealth of Australia. The first order on the page is the unusual one. Acting under rule 39.05(f) of the Federal Court Rules 2011 (Cth), the judge set aside paragraphs 1 to 4 of the orders made on 11 June 2021, the orders that had approved the original robodebt settlement five years earlier. Only then did he approve the new settlement under section 33V of the Federal Court of Australia Act 1976 (Cth).

The orders divide the money precisely. The Commonwealth is to pay $475 million, defined as the Compensation Sum, into the scheme administrator's interest bearing controlled monies account within ten business days. It is to pay $13.5 million including GST to Gordon Legal for legal costs across both the class action and the appeal proceeding, and a further amount not exceeding $60 million, in increments, for the cost of running the settlement scheme. Those three figures are the $548.5 million that was reported.

The sharpest change made on the day concerns the litigation funder. The Notice of Proposed Settlement, issued under court orders and dated 31 October 2025, told group members that the applicants and Omni Bridgeway would ask the court to approve a funding commission of $71.25 million, leaving $403.55 million available to pay claims. Order 14(d)(1) of 23 June 2026 instead directs the scheme administrator to pay Omni Bridgeway (Fund 5) Lion Pty Ltd $35 million. The legal trade publication Lawyerly reported the same day that the judge had halved the funder's payout despite argument that a single digit percentage commission was unprecedented. On the face of the orders, that reduction leaves about $439.7 million for claimants, after $170,000 approved for the eight representative applicants and up to $130,000 for the contradictors' costs.

The litigation has run in two stages. The first class action was commenced on 19 November 2019 and settled on 16 November 2020, the scheduled first day of trial. That settlement, approved on 11 June 2021, paid $112 million in compensation to about 400,000 people and was accompanied by more than $751 million in repayments and around $1 billion in abandoned debt claims, on Gordon Legal's own account. In 2024 two group members, Nathan Knox and David Mandell, applied for an extension of time to appeal from the 2021 approval, arguing that on evidence which had since emerged the settlement had not been fair and reasonable. That appeal proceeding, VID982/2024, and the original case were settled together on 3 September 2025 for $548.5 million, subject to approval.

The approval hearing ran over two days, on 22 and 23 June 2026. Registration for the new scheme opened on 24 November 2025 and closed at 4pm on 6 March 2026, and the orders permit people who registered late, up to 15 May 2026, to take part. They also reinstate 386 group members who had opted out and later applied to come back, and a further 145 who registered without applying for reinstatement. Gordon Legal was appointed scheme administrator, with effect from the later of 6 July 2026 or the date of the orders. The Commonwealth made no admission of liability.

SBS News and The New Daily, reporting on 23 and 24 June 2026 from an AAP account of the hearing, both put the number of registered claimants at about 125,000 and described the outcome as the largest class action settlement in Australian history. The New Daily quoted Justice Beach describing the episode as a fiasco and criticising officials who were insulated from the consequences of their decisions. Both reports said the 125,000 claimants would share $475 million. The orders show a smaller pool, because the funder's commission and the representatives' payments come out of the Compensation Sum before any claim is assessed.

What happens next is set out but not settled. Eligible group members fall into five categories and may choose a fixed payment or an individualised assessment. Gordon Legal's published timeline has fixed payments beginning in December 2026 and individualised assessments running through 2027 and 2028. Anything left in the controlled monies account when the scheme ends returns to the Commonwealth, so the amount actually reaching claimants is not yet fixed by anything on the record.

Several things remain unknown. How many of the 125,000 registrants will be found eligible, and what an average payment will be, cannot be read off the orders. Written reasons for judgment were not among the documents published by the scheme administrator when this was written, and non publication orders made under section 37AF of the Act cover the applicants' evidence and the submissions of the funder and the contradictor, so the argument that produced the halved commission is not fully public.