The Appco class action was started on 20 October 2016 by Mr Bywater (the lead representative). The Appco class action made allegations in respect to sham contracting and contraventions of the Fair Work Act 2009 (Cth) including underpayments by Appco to group members. From 20 October 2016 until February 2020, Mr Bywater was involved in various stages of litigation against Appco, including attendance at case management hearings, interlocutory applications, the discovery process and gathering evidence.  

In December of 2019, an order was made that the parties attend mediation with Ray Finkelstein. At the time, the parties proposed to attend that mediation at a date in February or March of 2020 in order for necessary preparation of discovery and quantum evidence to be developed. The impact of COVID-19 on the east coast of Australia in March of 2020 resulted in the mediation process moving to a virtual platform by which the parties conducted the mediation via letters and videoconferencing.  

The mediation resolved with a proposed settlement decision that now requires the approval of the Court. The settlement decision is made on the basis of all the factors outlined in this FAQ.  

Adero Law and Mr Bywater believe that Appco currently has assets of approximately $2 million, which has been confirmed by Appco’s lawyers, Baker McKenzie. Appco’s financial position appears to result from its decision to cease trading in 2019. As a result, Appco has not had any new clients or income for a significant period and it is Adero Law and Mr Bywater’s understanding that Appco will enter into a form of deregistration following settlement.  

As a result, any further litigation will continue to deplete Appco’s current funds, which could leave it with no available finances to pay group members. Given these circumstances, Mr Bywater and Adero Law believes that it is now necessary to settle the Appco Class Action prior to any additional legal fees being spent by either Appco or Mr Bywater to continue the litigation.  

If settlement is approved by the Court, the class action will be considered complete. The conclusion of the class action does not prevent an individual group member who has opted out from pursuing their own claims. Further, it does not prevent individuals from pursing claims against:  

• Marketing companies, who are also liable for the employment underpayments, in Adero Law’s view, and their directors and officers;  
• Commonwealth statutory schemes, such as the Superannuation Guarantee (Administration) Act 1992(Cth).  

A separate note regarding these surviving claims is available below. 

The current settlement requires Appco to pay $1.9 million. Based on available financial reports, Mr Bywater and Adero Law consider that Appco has assets of approximately $2 million.  

The amount that you will receive will depend on how long you worked for Appco. However, Adero Law values your claim for the following amount based on the current circumstances of the settlement negotiations, via the following Loss Distribution Formula:  

Tier 1 = individuals who worked less than six months will be allocated one Part of the settlement value. 

Tier 2 = individuals who worked between six months and one year will be allocated two Parts of the settlement value. 

Tier 3 = individuals who worked more than one year will be allocated three Parts of the settlement value.  

           

As a litigation funder, Harbour Fund III covered legal fees on a no-win no-fee basis, meaning it paid Adero Law’s legal costs in addition to counsel costs and other payments relating to the class action. When you signed up to be a part of the Appco class action, you agreed to enter into a Litigation Funding Agreement with Harbour Fund III which allowed Harbour Fund III to deduct moneys from a settlement value or damages. 

Harbour Fund III has expended substantial resources in funding the class action well in excess of the settlement value and has agreed not to enforce the Litigation Funding Agreement terms. Mr Bywater, Adero Law and senior and junior counsel for Mr Bywater consider that this is an appropriate contribution in light of the risk that Harbour Fund III has taken and represents a substantial loss to the funder on its investment.

Class action litigation involve substantial resources and requires the involvement of barristers, experts and experienced lawyers to prosecute the claim for both the Applicant and Respondent. In this situation, Harbour Fund III deployed an amount in excess of $4.08 million to meet the abovementioned costs. Of this sum, $2.328 million was paid in relation to professional fees in running the litigation.  

Adero Law notes that the limited capacity of Appco to meet the purported damages is unfortunate given the projected claim value was $64 million. On this basis, the legal costs expended amounted to less than 10% of the expected claim value, which Adero Law considers within a reasonable range for class actions. 

Pursuant to the retainer you entered into with Adero Law or Chamberlains Law Firm, you have the right to review any professional fees and disbursements, pursuant to section 292 of the Legal Profession Act (ACT). You can seek an independent assessment of these costs. However, given Harbour Fund III will receive 11.6% of its deployed capital as a return under the current settlement, it is unlikely that such a review will result in a material return noting the funder has borne the risk of the litigation.  

Harbour Fund III has agreed to receive 25% of the settlement, which Mr Bywater and Adero Law considers is consistent with the longform return provided to litigation funders in similar class actions. However, the Court ultimately gets to approve settlements relating to class actions and must be satisfied that the settlement is fair and reasonable and in the interests of the group members as a whole, although each case must be determined on its own merits. This means that the Court has the discretion to decide whether the settlement between Mr Bywater and Appco is fair and, if it isn’t, the Court can choose not to approve the settlement.  

Adero Law notes that under the current settlement, Harbour Fund III will receive 11.6% of its deployed capital as a return.   

Adero Law recommends that you obtain independent legal advice prior to 4:00pm on 6 October 2020 and consider the following factors when considering whether to opt out of the Appco Class Action:  

1. Whether you have a stronger separate claim because:  
2. You were engaged in the Appco business for a period longer than 12 months or reached a position within the Appco career structure of Owner, Managing Director or higher; 
3. You incurred substantial net out of pocket costs (as distinct from underpayment of wages or income) as a result of your involvement in the Appco business;  
4. Moneys were withheld from you via a bond account or other arrangement by Appco Group or a marketing company and such an amount was significantly more than the identified settlement distribution amount which applies to you; or  
5. You had direct day to day contact with Mr Niarchos or other directors or officers of the Respondent and relied to your detriment on representations made by such individuals in relation to your marketing business resulting in loss or damage. 
6. That the settlement sum is much smaller than the amount claimed by Mr Bywater on behalf of the group members, meaning that you will receive a very limited proportion of any underpayment, due to the current financial circumstances of Appco; and 

7. That the settlement sum comprises the vast majority of Appco’s remaining assets and Appco is no longer trading.  

If you do not opt out, and take part in the settlement, you will:  

1. Receive your portion of the $1.9 million paid by Appco in accordance with the terms of settlement;  
2. Lose your right to bring an action against Appco, its directors, officers, employees, related companies and Chubb Insurance in respect to the following:  
3. The claims raised in the Appco Class Action;  
4. Any claims in relation to alleged contraventions of the sham contracting provisions of the Fair Work Act 2009 (Cth) concerning the status of independent contractors; and  
5. Similar claims to (a) and (b) above under other legislation, including the Australian Consumer Law (both in Australia and overseas).  

This will prevent you from bringing claims regarding sham contracting, the Fair Work Act (Cth) or the Australian Consumer Law, or similar claims, which are typically claims in which a representation has been made to you, which you have relied on, resulting in loss or damage.  

If you believe that you may have such a claim which you wish to pursue, it is important that you seek independent legal advice prior to making a decision about opting out or objecting to the settlement. 

You will no longer be a part of the class action. This means that you will lose your right to get any monetary compensation out of the class action, but you keep your right to try and get different monetary compensation by bringing an action against Appco, its directors, officers, employees or related entities.  

If you choose to opt out, you will not be charged any legal fees by Adero Law or required to pay any money to Harbour Fund III.

If you remain in the class action and do not opt out you will not be able bring an action against Appco, its directors, officers, employees, related companies and Chubb Insurance in relation to:  

1. The claims raised in the Appco Class Action;  
2. Any claims in relation to alleged contravention of the sham contracting provisions of the Fair Work Act (Cth) concerning the status of independent contractors; and  
3. Any similar claims under other legislation including the Australian Consumer Law (both in Australia and overseas). 

You may have other claims outside the scope of the settlement. Please refer to our advice. 

Adero Law strongly recommends that you consider opting out of the current proceedings and seek independent legal advice if you had direct, day to day contact with one or more of Appco’s directors, officers or senior employees, including Mr Chris Niarchos, or a corporate entity related to Appco. Please be aware that there may be a requirement that these individuals or entities made representations that you relied on to your detriment.  

Adero Law considers that circumstances may exist where representations by Appco’s directors, officers or senior employees could be established and that certain group members may have relied on those representations resulting in material damage. The nature of the Insurance Policy and potential recovery may be substantially higher than the settlement value.  

Adero Law cannot determine your individual circumstances or whether you may personally have a greater chance of recovering moneys than the proposed settlement. This will have to be independent considerations determined on a case by case basis.  

Adero Law notes that there may be difficulty in bringing claims against Directors such as Mr Niarchos or foreign corporate entities because they are not within the physical jurisdiction that Australian courts have. 

Adero Law recommends that you consider opting out of the current proceedings and seek independent legal advice if you worked for Appco for more than 12 months and reached a position within Appco of Owner, Managing Director or higher.  

Adero Law considers that where someone worked for more than 12 months, they could have progressed in the establishment of their own business and incurred personal and direct expenses, being distinct from a wage underpayment claim.  

Adero Law recommends that you consider opting out of the current proceedings and seek independent legal advice if you paid substantial out of pocket costs while working for Appco, as distinct from underpayment of wages or income, if that amount is more than you would otherwise receive as a part of the class action. 

Adero Law considers that certain group members may have progressed in the establishment of their own business and incurred personal and direct expenses, being distinct from a wage underpayment claim. 

Adero Law recommends that you consider opting out of the current proceedings and seek independent legal advice if Appco withheld any money from you via a bond account or any other arrangement, if that amount is more than you would otherwise receive as a part of the class action.  

It is Adero Law’s understanding that funds were held by marketing companies in bond accounts by marketing companies and not Appco. However, if the value of your bond account was material, you should consider whether the settlement value you will reflects a better alternative than the private debt claim you may have.  

Appco informed Mr Bywater and Adero Law that it ceased trading in a letter sent in November 2019. Appco’s current financial records confirm that its business is not ongoing and Appco’s lawyers, Baker McKenzie, have informed Mr Bywater and Adero Law that Appco will be wound up after settlement. Adero Law is not aware of any client engaging Appco to provide marketing services.  

However, Adero Law is aware that senior individuals are involved in marketing activities in new entities. Those arrangements are not, however, in Appco’s corporate chain. It is Mr Bywater and Adero Law’s view that it was not in the best interests of the class to bring an action against these new entities.  

It appears that in 2018, individuals involved in Appco’s business were released from Appco and formed a new and separate business. This new business is fully owned by the same Hong Kong-based parent company as Appco. While Mr Bywater and Adero Law are concerned that this new business is in all effects represents Appco’s actual business, the available funds of that business are not substantial and therefore pursuing a claim against this entity is not likely in the best interests of the group members. Adero Law has formed this view after reviewing the financial accounts of these new businesses, which reflect approximately $3 million in assets.  

Appco is insured by Chubb Insurance. There were four categories of indemnity which related to the proceedings under the insurance:  

1. Statutory Liability;  
2. Employment Practices Liability;  
3. Corporate Legal Liability; and  
4. Directors and Officers Liability.  

Due to carve out clauses in relation to Employment Practices Liability, Corporate Legal Liability, and Directors and Officers Liability (meaning that the insurance policy did not cover the breaches alleged by Mr Bywater), only Statutory Liability applied in the class action. Statutory Liability had a limit of $1 million under the policy, which was exhausted at the date of settlement production.  

On this basis, Chubb Insurance has generally denied coverage under the existing Insurance Policy in respect of the class action and have otherwise refused to participate in the mediation process. Adero Law considers that the Insurance Policy may have certain value for some group members based on business losses and misrepresentations, other than representations in respect to sham contracting.  

If you consider that you have had genuine business losses as distinct from damages arising from an employment claim, Adero Law recommends that you consider opting out of the current proceedings and seek independent legal advice. 

The directors were not named respondents to the proceedings. However, a release is sought on their behalf under the settlement. Mr Bywater and Adero Law could not form a view that overseas assets held by Mr Chris Niarchos could be recovered in a commercially viable way and/or could not be satisfied that a claim was capable of being made within a class action could trigger a response under the Chubb Insurance Policy.  

However, if you had direct, day to day contact with Appco’s directors, Adero Law strongly recommends that you opt out of the current proceedings and seek independent legal advice.

Adero Law understands that Appco Group Australia (the Respondent) and Appco Group plan to enter into insolvency after settlement approval. A liquidator will, in the ordinary course, conduct a review of any claims that may exist in favour of creditors. However, if you remain in the class action and receive payment under the settlement, you will not be able to be a creditor for claims relating to the class action during liquidation.    

Contractors who are paid wholly or principally for their labour are considered employees for the purpose of superannuation payments.  

However, the ATO is unlikely to get involved where individuals have presented themselves as contractors by claiming large business deductions or the entrepreneur’s tax offset. 

The ATO may investigate an employer’s superannuation compliance at their own initiative or in response to an employee enquiry.  

The ATO will work with employers who engage with them to address their superannuation debts; however, if an employer is unresponsive then it is possible for the ATO to issue director penalty notices or garnishee notices. 

These are ways in which the ATO can enforce payment of superannuation entitlements owed to you. 

There is no applicable limitation period with respect to claims for unpaid superannuation brought through the ATO; however, the ATO does not usually pursue unpaid superannuation enquiries where the complaint concerns underpayments occurring more than five years ago. 

This is because employers are only required to keep employment records for a period of five years. 

If you were hired under a contractual arrangement and reported personal services/business income, then the ATO cannot pursue any superannuation enquiries occurring more than five years ago. 

If your superannuation complaint concerns a period which ended more than five years ago then it still may be possible for the ATO to assist, as long as you reported your income as salary/wages and can provide the following supporting documentation: 

• original payment summaries or income statements received from the employer for the years in question; and 

• copies of super fund statements for the years in question, plus a further six months. 

The steps to follow in lodging a complaint with the ATO about unpaid superannuation are listed on the webpage accessible via the following link: https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Unpaid-super/  

If you require further assistance with lodging an unpaid superannuation claim, you may wish to contact the ATO on 13 28 61 to discuss their requirements with respect to your individual circumstances.