The National Redress Scheme for Institutional Child Sexual Abuse Amendment (Funders of Last Resort and Other Measures) Bill 2021 (the Bill) expands the funder of last resort provisions under the National Redress Scheme.
The Royal Commission into Institutional Responses to Child Sexual Abuse recommended, alongside a number of other suggestions aimed at supporting victims and preventing these crimes, that a national redress scheme be established. The reasoning behind this was that survivors should have access to financial compensation as well as institutional apologies and necessary counselling without having to navigate the court system.
This recommendation was accepted by the Australian Government, and a redress scheme was established through the passage of the National Redress Scheme for Institutional Child Sexual Abuse Act 2018 (the Act). The Explanatory Memorandum to the Bill which became the Act noted, at page 10, that the scheme ‘is intended to be an alternative to civil litigation’.
The Library’s Bills Digest at the time noted that the redress scheme contained three components:
- a monetary payment of up to $150,000
- access to counselling and psychological services under the scheme or a payment to access counselling and psychological services of up to $5,000 (depending on location) and
- a direct personal response from the responsible institution(s) (if requested by the survivor) (section 16 of the Act).
There are a number of eligibility criteria for applicants to meet to become eligible for redress, as follows:
- The Operator of the scheme (the Secretary of the Department of Social Services) must determine there was a reasonable likelihood the applicant was the victim of sexual abuse and one or more participating institutions are responsible for the abuse (sections 12 and 13 of the Act).
- The applicant must have been a child at the time of the sexual abuse, an Australian citizen or resident, and the abuse must have occurred prior to the scheme start date (1 July 2018) (sections 13 and 14).
- Applicants can only make one application and must waive their rights to take civil action against responsible institutions and officials (but not the abuser) in order to receive redress (sections 20 and 43).
Institutions were encouraged to join the scheme, both because it was regarded as a moral obligation (as stated later by Anne Ruston, Minister for Families and Social Services, in a media release), and also because the applicants’ agreement to accept redress from the scheme, and their consequent waiver of any right to take civil action, provides some legal protection to those institutions. Such legal protection is not available to institutions that have not joined the scheme. As set out in the Second reading speech to the Bill, as of 15 October 2021, 526 non-government institutions or groups of institutions, covering 69,000 sites (such as churches, schools and community groups), as well as all relevant governments, have joined the scheme.
It was always the intention of the scheme that any compensation should ideally be paid by the institution or institutions in which the abuse occurred – as stated at page 9 of the original Explanatory Memorandum, the scheme funding arrangements are based on the principle that the responsible entity pays. However, it was recognised that this may not always be possible – for instance, when the institution in question has become defunct.
A defunct organisation no longer exists and it can be either a government or a non-government institution. In the current provisions in Part 6-2 of the Act, where an institution has become defunct, and a government institution is determined to be equally responsible for the abuse with the defunct institution, the government would become responsible for funding the entire compensation package. This process is called the funder of last resort.
Section 192 of the Act requires a review of the scheme after it has been operational for two years. The relevant review was conducted by Robyn Kruk AO whose report, the Final Report of the Second Year Review of the National Redress Scheme, among other things, made recommendations that the funder of last resort scheme should be expanded, as people who otherwise had a right to compensation were still not being compensated. The Report noted that governments were wary of stepping in as funder of last resort in all such cases as this could be a positive disincentive for institutions to join the scheme and to pay when they had the means to do so (p. 168).
Consequently, the Report recommended (Recommendation 5.2) that:
Where an application names a responsible institution that is not participating in the Scheme and a determination would otherwise be suspended or delayed, governments should prioritise declaring themselves as the funder of last resort for:
- named institutions that are defunct and where no link to a parent or government institution can be found
- those named institutions that have been assessed to not possess the financial means to join the Scheme but are willing to do so.
The response to this recommendation is contained in Schedule 1 of the National Redress Scheme for Institutional Child Sexual Abuse Amendment (Funders of Last Resort and Other Measures) Bill 2021 (the Bill). This expands the funder of last resort provisions.
The provisions in the Bill allow participating jurisdictions (governments at state/territory and/or Australian government level) to agree to act as a funder of last resort in the situations set out above (item 100 of Schedule 1 to the Bill). That is, they can agree to be the funder of last resort for institutions that are defunct but where no link to a government institution can be found. They can also agree to be funder of last resort for existing institutions that still provide services but do not have the financial capacity to pay. This is because it is not the intention of the scheme to bankrupt such institutions when they still provide services to the public.
Schedule 1 also provides that institutions can partly participate in the scheme. This could occur, for example, where an institution has not joined the scheme because it does not have the financial resources to fully participate (section 115 of the Act and subsection 56(3) of the National Redress Scheme for Institutional Child Sexual Abuse Rules 2018). Partial participation would allow these institutions to fulfil other requirements, such as providing a direct response or apology to scheme applicants (items 19 and 100 of Schedule 1).
The funder of last resort provisions do not apply to institutions which have the capacity to fully participate in the scheme and either choose not to or neglect to do so. While this may adversely affect some applicants, at least in the short term, the moral obligation to provide redress remains with the institution.
Kruk’s review considered a loan scheme, where the Australian Government and/or participating institutions paid compensation and tried to recover it from institutions. The report noted however, at page 164, that ‘this would be administratively complex and the Australian Government would be unlikely to recoup all its outlay’. It would also appear to contain significant risk unless the non-participating institution agreed to accept responsibility for the redress payment in advance.
Financial responsibility for funder of last resort payments will be shared equally between the Australian government and the relevant state or territory government. The Bill’s Explanatory Memorandum notes that this will have a $22.8 million impact on the Australian government budget over the forward estimates period (p. 3).
Schedule 2 of the Bill will expand the ‘public naming and shaming’ provisions in the Act. The scheme Operator will have the power to disclose that institutions are not participating in the scheme and certain other relevant information, such as that an applicant has claimed abuse occurred in that institution; but only where the institution has been named as one where abuse occurred by an applicant to the scheme, and where the operator has reasonable grounds to believe that the institution may be connected with abuse that is covered by the scheme. The Operator can also disclose that an institution has agreed to partly participate in the scheme (item 1 of Schedule 2).
In doing so, the Operator must not disclose any information that may identify an abused person or a scheme applicant.
It might finally be noted that institutions that do not choose to participate in the scheme can face other consequences such as losing their charitable, and thus tax-free, status. These sanctions are not part of this Bill and are provided in charities legislation, rather than redress scheme legislation (see Governance Standard 6: Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector).