The Victorian government has agreed to settle a long running, major class action brought by 1000 businesses over losses linked to its COVID-19 hotel quarantine program in 2020.
The case, brought in the Supreme Court of Victoria, was led by Melbourne hospitality business 5 Boroughs NY Pty Ltd with 1,000 other Victorian companies. The plaintiffs argued that failures in the state’s hotel quarantine system allowed COVID-19 to escape into the community, triggering Victoria’s devastating second wave and the lockdowns that followed. Businesses involved in the action were mostly hospitality, tourism, retail and events related.
The Victorian government agreed to pay approximately $50 million to settle the claim, subject to court approval. The payment will be distributed among eligible businesses that were part of the class action after their legal costs and funding, which will account for over 30% of the settlement. Estimated losses by the businesses involved in the claim run into hundreds of millions of dollars.
Over and above this the Victorian government is believed to have spent over $40 million on the case.
The class action centred on the state’s quarantine program introduced in early 2020 to isolate returning international travellers. According to the claim, inadequate infection-control practices at several Melbourne quarantine hotels enabled the virus to spread beyond the facilities and into the broader community. ‘Inadequate practices’ include poor recruitment screening & inadequate training of private security guards, which resulted in complaints of intimidation of nurses and guards ‘hitting’ on the staff. Not to mention accusations of guards engaging in sex with travellers in isolation.
Labour argued that businesses should have learnt their lessons from earlier COVID restrictions (to come up with strategies to survive further lockdowns). A commissioned report on its behalf suggested that paying compensation would create a ‘moral hazard’ for the state.
It was expected that both present & past Victorian Premiers Jacinta Allan and Daniel Andrews would have been compelled to give evidence on the reasons for the virus escaping, if the case had continued.
Anthony Ferrara, the owner of the New York themed restaurant that led the claim, had previously stated that business owners “have a right to fight for compensation” after paying the price for the state’s mismanagement.
That outbreak eventually led to Victoria’s second COVID-19 wave in mid-2020, prompting strict public health measures including Stage 3 and Stage 4 lockdowns across Melbourne and regional areas. Businesses across sectors—including hospitality, retail, events and tourism—were forced to close or operate under heavy restrictions for extended periods.
Melbourne ultimately endured one of the longest cumulative lockdown periods in the world during the pandemic, with hundreds of days of restrictions across 2020 and 2021. Many businesses argued they suffered severe financial losses during this period, particularly those in industries reliant on in-person trade.
The settlement avoids what would likely have been a lengthy and high-profile trial examining the government’s handling of the quarantine system. The legal proceedings were expected to involve detailed scrutiny of the policies, staffing arrangements and infection-control measures used in Melbourne’s quarantine hotels at the time.
While the Victorian government has not admitted liability as part of the agreement, the settlement represents one of the largest pandemic-related class action payouts involving an Australian government.