InterPrac targets First Guardian victim, disputes AFCA ruling

InterPrac Financial Planning is taking action against a former client and victim of the First Guardian Master Fund collapse for an Australian Financial Complaints Authority (AFCA) determination it is vehemently contesting.

The new proceeding comes off the back of InterPrac's lawsuit against AFCA filed on February 24.

The concise statement filed with the Federal Court dated May 7 shows InterPrac adding Melinda Kee, a former investor in First Guardian, as a defendant in the case related to its proceedings against AFCA, claiming the complaints body treated it unfairly.

Kee was contacted by lead generator Aus Super Compare or AusCompare and subsequently referred to an InterPrac financial adviser that moved her superannuation into First Guardian.

Kee recently told Financial Standard she lost $380,000 of her retirement savings following the collapse of First Guardian and has been advocating for other victims of First Guardian as well as Shield.

AFCA determined InterPrac should compensate Kee for $368,093.11 plus interest.

InterPrac, however, is contesting this, saying in the concise statement the "determination is unreasonable because it contains multiple errors and unsupported conclusion."

InterPrac said there was no basis to recommend Kee switch from her Macquarie product to AusPrac and a reduction in fees is not sufficient to recommend a switch. It also did not agree with AFCA determining Kee's investments into the FG Diversified Option were not diversified and consequently inappropriate. AFCA concluded InterPrac was liable for 100% of Kee's calculated loss.

"AFCA has determined Ms Kee's loss on the presumption that she has lost all monies invested into the fund. In circumstances where Falcon Capital is in liquidation and the liquidator has advised that it has already recovered some of the assets with the majority still being investigated, it is unreasonable for AFCA to conclude that Ms Kee has suffered a loss," the concise statement read.

"Ms Kee's loss (if any) has not crystallised and is not possible to determine whilst liquidation is ongoing and distributions to unitholders are expected."

Callun Blurton, the lawyer for Kee and director of Financial Dispute Legal, told Financial Standard there are a range of issues which InterPrac says are relevant to the assessment of its liability which AFCA failed to properly consider.

"I am concerned that InterPrac is really just trying to delay paying compensation to investors," he said.

"I act on behalf of a large number of people invested in Shield and First Guardian. But my concern now is that all InterPrac complaints with AFCA, which I understand there are about 700 of them, may all be paused."

What is also concerning is that victims have been urged to lodge their complaints with AFCA - but are now facing setbacks.

"A lot of work has been done by Melinda and other people to rightly get complaints lodged. All those people have been doing what they're being recommended to do. I am concerned that they are now in no man's land," said Blurton.

"It is terrible conduct by InterPrac to delay Melinda's case. No reasonable adviser in the circumstances, in my opinion, ought to have recommended or provided those recommendations."

Furthermore, AFCA, as an independent party, has thoroughly assessed Kee's case and made a conclusive determination that the financial advice was not appropriate.

"For the other cases we're handling, there were many problems with the advice provided. In some cases, the financial adviser never even spoke to the client. In other cases, investments were made without the client's consent. There's just no accountability," Blurton added.

In a statement to Financial Standard, Kee said: "Victims are no longer just fighting to recover their retirement savings. We are now being forced to fight the very systems that was supposedly created to protect us."

"What is the point of having a mandatory external dispute resolution scheme if financial firms can simply refuse to pay determinations and drag victims into Federal Court proceedings instead? That is not consumer protection. That is consumer exhaustion."

Kee is part of the First Guardian and Falcon Superannuation Discussion group on Facebook, which has some 2000 members. Many are in the process of recovering or have recovered their money. For many, they find the support, resources and encouragement they need to navigate the complex complaints and compensation system.

She also spearheads the SOS Save Our Super website, an advocacy group fighting for justice for victims.

"In my view, the fact that victims are now being dragged into Federal Court proceedings simply to defend AFCA determinations is exactly why Part 23 should be seriously considered. Australians should not be forced through years of legal warfare while regulators, trustees and financial firms argue over liability," Kee said.

"If ASIC itself has described this conduct as industrial-scale misconduct, then the question becomes how much more evidence is needed before APRA and Treasury seriously move toward a Part 23 solution."

InterPrac did not respond to Financial Standard's request for comments.