FEDERAL COURT OF AUSTRALIA

McDonald v Commonwealth of Australia [2025] FCA 380

Summary

In accordance with the practice of the Federal Court in some cases of public interest, importance or complexity, the following summary has been prepared to accompany the reasons for judgment and orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment which will be available on the internet at www.fedcourt.gov.au together with this summary.

This proceeding is a class action, a particular type of court case where one individual, the applicant, brings the proceeding on behalf of a number of other people with similar claims. These other people are known as group members. The parties have reached an agreement to settle this proceeding, but a class action settlement requires the approval of the Court to be put into effect.

The Court has approved the settlement of this class action.

The applicant is an Aboriginal woman, Ms Minnie McDonald, who was born around 1938 and grew up at Lake Nash Station, in the Northern Territory near the border with Queensland. She then worked at a number of other stations in the Northern Territory over a number of years.

The group members include other Aboriginal and Torres Strait Islander people who worked in the Northern Territory between 1 June 1933 and 12 November 1971. They worked in places such as pastoral stations, other private workplaces, Aboriginal institutions and missions, or government-run stations or settlements.

The claim is made against the Commonwealth government, which accepts it had governance responsibility over the Northern Territory at the time.

In summary, Ms McDonald says that she, and other Aboriginal and Torres Strait Islander workers in the Northern Territory over this time period were not paid properly for their labour, that labour often being performed in bad conditions. She claims that she, and other workers, were sometimes underpaid. She claims that she, and other workers, were sometimes only paid “keep” and no wages at all. She claims sometimes wages were not paid to the workers, but to government officials who were supposed to look after the wages and distribute them. She claims the government officials at the time, including people such as the Director of Native Affairs, did not look after the workers’ wages as they should have. The claims are put in legal terms in a number of different ways. The legal basis for the claims is set out in detail in the Court’s judgment at [19] to [26].

The Court sent the parties to mediation, and they reached an agreement to settle the proceeding. The Commonwealth has not admitted it is legally liable under any of the claims made but it has agreed to pay money to all of the group members who register by a certain date — 31 August 2025. Group members register by filling out a registration form and being assessed by the administrator as ‘eligible’. Ms McDonald’s lawyers, Shine Lawyers, have told the Court they are planning to visit and hold registration sessions in 114 communities across the Northern Territory including in towns such as Katherine, Darwin, Alice Springs, Maningrida, Galiwinku and Tennant Creek.

Sadly, some of the Aboriginal and Torres Strait Islander workers have passed away before this case was settled. However, the settlement will include payments to the surviving spouses or children of group members. Children of workers will need to share the amount with their siblings. To receive a share of the settlement, group members who are spouses and children also need to register for the distribution scheme by 31 August 2025.

The Commonwealth has also agreed to make certain payments to the lawyers for the costs of running the class action, and to suitably qualified people (here from the firm Deloitte) who act as “administrators” and are the people who decide if group members meet the eligibility criteria to receive payments. The administrators are also the people who make the payments of money.

This proceeding was backed by what is called a litigation funder. In this case it is a company called LLS Fund Services Pty Ltd. A litigation funder provides up-front money for lawyers like Shine Lawyers to act for an applicant like Ms McDonald. They also make an agreement with an applicant to pay any legal costs the court might order her to pay the Commonwealth if a class action proceeding does not succeed. So, a litigation funder very much reduces the risk for a person like Ms McDonald in being the lead applicant in a claim such as this, and their backing means lawyers are paid upfront to represent a lead applicant like Ms McDonald.

Litigation funders run commercial businesses backing legal proceedings, so they seek to make a profit, like any other business. LLS made an agreement with Ms McDonald that they would get a commission on any compensation the court ordered after a trial, or if the proceeding settled, the litigation funder would get a cut, or commission, of the settlement money. Ms McDonald agreed to this. In a class action like this, once approved by the Court, Ms McDonald agreement also binds all the group members to a commission being paid out of the settlement fund.

However, the Court must approve all these payments to the lawyers and the litigation funder. It must approve the amounts of money they get for legal costs and for the LLS commission. In doing so, it must decide what is just and appropriate for the lawyers and the litigation funder to get.

The Commonwealth agreed to pay up to $180 million in compensation to Ms McDonald and group members. The Commonwealth has also agreed to some separate payments to Shine Lawyers, to the administrators and to a person called a costs assessor. The job of a costs assessor is to look at the legal fees that have been charged by the lawyers and the work they have done for those fees, and give the Court their opinion about whether the charges are reasonable.

In these sorts of circumstances, the role of the Court is not to work out what the facts were, whether workers did or did not get paid, or how much anyone is owed for their work. The Court’s role is not to decide whether Ms McDonald’s legal claims are correct, and should succeed. This would have been the Court’s role if the proceeding went all the way to a trial, but not when it is settled by agreement.

Instead, the Court has a very specific task, which is to work out whether the settlement is fair and reasonable, and in the interests of group members. If it is fair and reasonable, the Court can approve it. If the Court decides it is not fair and reasonable, the Court will not approve it. This task involves the Court looking at all the different payments proposed to be made, as well as looking at the risks if the proceeding went to trial, plus a range of other factors discussed in the judgment at [147] to [217].

This task is important because, subject to any appeals, this judgment will bind all of the group members, even those who do not register. This means that Aboriginal and Torres Strait Islander people who are group members but have not registered, will not be able to bring any further claims about the non-payment or inadequate payment of wages during the claim period. People who register and receive money will also not be able to bring such claims. The Court’s task is also important because, unlike in ordinary litigation, the group members may not have much power, or an opportunity to tell the lawyers what they want them to do. The applicant makes the decisions about whether or not to settle, but she does so on behalf of group members. The Court needs to protect the interests of the group members and make sure the settlement is fair. Group members can object to the settlement but in this proceeding the Court did not receive any objections from group members.

The settlement does not have to be perfect, or generous. It does have to be fair and reasonable, when balanced against the risks of going all the way to a trial with an uncertain outcome.

Ms McDonald and the Commonwealth had to put a lot of information (evidence) before the Court, and persuade the Court why the settlement was fair and reasonable. They, and the litigation funder, also had to persuade the Court why it was fair and reasonable for Shine Lawyers, the litigation funder, the administrators and the costs assessor all to get the money they said they should get.

The Court examined the evidence, and decided that the settlement reached between the Commonwealth and Ms McDonald is fair and reasonable. However the Court has not agreed that every part of the settlement, and every amount claimed by the lawyers and the litigation funder is fair and reasonable. The Court’s explanations about what it has and has not accepted are in its reasons for judgment.

In summary, but depending on precisely how many people sign up and register, the total settlement fund available will be $180 million.

A considerable portion of this money (about $30 million) will go to LLS as funder for its commission, and for covering its insurance costs.

Separately from the $180 million, the Commonwealth will also pay up to $22 million for Shine Lawyer’s legal costs in running the proceeding, for the administrators’ costs of deciding who is eligible and managing the payments to group members, and for the costs of the report to the court from the costs assessor. The largest proportion of this $22 million (up to $15 million) goes to Shine Lawyers as Ms McDonald’s lawyers. Shine Lawyers have already received almost $10 million in legal costs from the funder LLS, and LLS will get this money back as part of the settlement, on top of its commission.

Shine Lawyers have asked for a lot more in legal costs to conduct the outreach program and registration process that will be run to get as many eligible group members as possible to sign up. They have asked for another $8 million. The Court has not approved any payment like this.

The Court has found that Shine Lawyers should have been using local Aboriginal and Torres Strait Islander organisations to run this outreach program, and if they had done so, it would likely have cost a lot less. The outreach program involves travelling to many remote communities in the Northern Territory to make sure group members know about the settlement and to help them fill out the form so they can receive some money. The Court has found Shine Lawyers should partner with regional and local organisations to run the outreach program from December 2024 until 31 August 2025 when registration finishes.

The Court has found Shine Lawyers should come back later after the outreach program is finished and the Court will assess how much it is reasonable for it to receive as extra legal costs for this program, and for the registration process. The Court has asked the lawyers to make sure, as far as they can, that they are using local resources and organisations already working in community because the Court has found this is likely to cost less money and will also be better for group members as they will be able to talk with people and organisations they are used to. If the legal costs are less, there will be more money to distribute to eligible registered group members.

The parties have told the Court that each group member is likely to receive at least $10,000 (except for descendants, who may share around $10,000 between their siblings).

Some of the group members, or their estates if they have passed away, will receive additional payments of $5,000 or $10,000 if they have already given evidence in the case, or if they agreed to be one of the sample group members. In the Court’s reasons these are called “Reimbursement Payments”. All these people, around 20 aside from Ms McDonald, gave up a lot of their time to tell their stories, and then went through the time consuming and stressful process of being witnesses before a judge and having their evidence recorded. Ms McDonald gets a larger extra payment for being the one who has carried the responsibility, and the worry, of the whole proceeding.

There is currently no fixed date for when the group members will receive their payments. The Court has ordered that priority be given to workers who are still alive, to receive interim payments of $10,000 each. There are estimated to be about 1000 of these people. Those people should have been paid, or be paid soon because the Court ordered this to happen from 27 January 2025. Ms McDonald and the other specific people who were witnesses or agreed to be sample group members should also have been paid, or be paid soon, because the Court also ordered this to happen from 27 January 2025.

Otherwise, Shine Lawyers and the funder LLS say they, and the administrators and the costs assessor should all get paid before registered group members. That is because only then will the administrators and the Court know how much is available to pay group members.

The Court did not agree these people should get all their money first. The Court agreed they should get some money upfront, but otherwise they have to wait until after registration finishes on 31 August 2025, when the Court will know how many people have registered. Then the parties will have to make some suggestions to the Court about when and how all the registered group members should be paid, and how and when the lawyers and the litigation funder should get the rest of the money approved for them.

The Court acknowledges that the sums that individuals may receive do not seem very large. The Court understands the strong sense of injustice and unfairness that is felt in Northern Territory communities about the way Aboriginal and Torres Strait Islander people were treated when they worked during this period, often in terrible conditions and while suffering a number of other deprivations and restrictions. However, the overall settlement is what the Court has to focus on, as well as the Court’s assessment that a positive outcome at a trial was very uncertain and risky, and would have probably taken many, many years to get through the whole court process, including appeals.

The Commonwealth said in Court in Alice Springs on 7 November 2024 that

The Commonwealth recognises the claims the subject of this proceeding arise from a deeply regrettable period in Australian history, during which First Nations people in the Northern Territory were subject to unfair laws…..

The Commonwealth intends to make an apology in Parliament to the applicant, the group members, and the Australian community for the unfair laws in place in the Northern Territory that are the subject of this proceeding. The Commonwealth wishes to acknowledge the presence today of the applicant, Ms McDonald, and the substantial efforts of the applicant and her representatives and other First Nations peoples in bringing this class action forward to seek compensation, acknowledgement, and healing. We offer condolences to families and communities of those who gave evidence last year who have passed and thank them also for their contribution.

The Court is grateful for the assistance it has received from all those who have participated in this proceeding.

MORTIMER CJ

17 APRIL 2025