IFM Investors was grilled by Liberal MPs in a hearing of the House economics committee on Thursday on its investment in Tandem, which was placed in administration in early July after a multimillion-dollar class action around the group’s alleged Fair Work breaches made the business unsustainable.
IFM chief executive David Neill said the move had been “an unfortunate outcome” for the company, which had been 50 per cent owned by IFM through its private equity fund since 2016.
“Through to the end of 2018 that business grew profitably. Around that time there was a litigation brought against the business from Shine Lawyers, a class action they brought that’s been running for over two and a half years,” Mr Neill said.
“It’s never been to trial but the impact of that on the organisation has been very detrimental, it’s made it hard to secure contracts and the funding it needed to support its activities.”
Mr Neill said as a result of the class action, Tandem’s directors had “felt they had no choice but to put the company into administration”.
“That is their legal responsibility if they feel it can’t meet liabilities as they fall due. It then goes into control of administrators who are tasked with ensuring creditors are met as best they can be, and as I understand it directors of Tandem have worked through that process to secure the sale of some of the assets of the business,” he said.
“That has allowed a number of employees to go over with those assets and retain jobs – I think about 1,000 contractors will maintain their work, so that is the directors working with administrators to achieve a successful outcome.”
Mr Neill said the litigation against the business had been “a great frustration” and hit back against Liberal MP Tim Wilson’s claims in a previous committee hearing that Tandem had “dudded contractors of their full entitlements”, saying the class action had been “speculative” and had “no foundation”.
“I think it’s relevant to this situation that this class action was brought because there was a view that the contractors should have been employees,” he said.
“The company paid those contractors $1.4 billion, and the lawyers bringing the action estimated those contractors would have been paid $800 million had they been employees. The contractors were paid $600 million more than they would have been had they been employees, but for some reason this firm decided to continue to pursue this class action.”
Mr Neill said “a fair number” of the asset manager’s industry fund stakeholders had been concerned by the news of Tandem being placed into administration.
“We were heavily restricted in what detail we could provide, to explain that once a business has gone into administration it’s up to administrators to decide how that’s managed. We were not able to explain the background but we had a number of people concerned,” he said.
