A judge has labelled the Federal Government’s illegal ‘Robodebt’ scheme as “a shameful chapter” in Australia’s history. 

Federal Court Justice Bernard Murphy has approved a settlement worth at least $1.8 billion for people wrongly issued debt notices by the federal government's Robodebt data-matching scheme.

The Commonwealth broke the law by raising $1.73 billion in debts against 433,000 people, leading to $751 million being wrongly recovered from 381,000 people.

“The proceeding has exposed a shameful chapter in the administration of the Commonwealth social security system and a massive failure of public administration,” Justice Murphy said.

The Commonwealth was also ordered to pay costs of $8.4 million to Gordon Legal, which brought the class action.

“This has resulted in a huge waste of public money,” the judge said.

Justice Murphy said thousands of Australian had suffered as a result of the scheme.

“One thing … that stands out … is the financial hardship, anxiety and distress, including suicidal ideation and in some cases suicide, that people or their loved ones say was suffered as a result of the Robodebt system, and that many say they felt shame and hurt at being wrongly branded ‘welfare cheats’,” he said.

The judge said that the ministers and public servants behind the Robodebt scheme should have known that using taxation income records to estimate a welfare recipient's average income was flawed.

“However, it is quite another thing to be able to prove to the requisite standard that they actually knew that the operation of the Robodebt system was unlawful,” he said.

“There is little in the materials to indicate that the evidence rises to that level.

“I am reminded of the aphorism that, given a choice between a stuff-up (even a massive one) and a conspiracy, one should usually choose a stuff-up.”

Federal Treasurer Josh Frydenberg says the government has accepted the settlement.

“We've apologised, the Prime Minister has said that himself, for the harm, for the hardship, for the hurt that has been caused by the administration of this scheme,” he said.

“It is very difficult when it comes to recovering debts but it's a process that has been adopted by successive governments.”

Mr Frydenberg also sought to distance the government from claims that its unlawful scheme had driven people to take their own lives. 

“Suicide, mental health issues, they're very complex and there are many factors at play. And they're human tragedies, I think you have to acknowledge that,” he said.

“But as the Prime Minister's made clear, previously, he apologised on behalf of the government for any hurt or harm that had been caused by the administration of that scheme.”