Pentana Stanton Lawyers recently represented a couple who had lost all of their superannuation after entering into an investment scheme proposed by their accountant and financial planner.

Background

In 2016, the clients’ accountant advised them that their existing superannuation portfolio was underperforming and that they should invest in an alternative investment that would yield higher returns. The accountant promptly introduced the clients to a financial planner (Terence Rio Rienzo Nugara “Rio Nugara”) who proposed that the couple invest all their superannuation into a property development. The advice included staggering (but what turned out to be outlandish) claims that:

  1. The investment included huge profit margins, exceeding 90% return within 24 months.
  2. The returns were guaranteed.
  3. The investment had almost zero risk.
  4. The returns would be much higher than that received from the clients’ existing superannuation fund.

Rio Nugara promptly setup a self-managed superannuation fund (“SMSF”) and arranged for the clients’ existing superannuation to be transferred into the SMSF. While setting up the fund, Rio Nugara, the financial planner, ensured that he was listed as an authorised signatory on the SMSF account and had full control over the funds.

The clients waited several unprofitable years for their returns to materialise. However, tragically, the funds in the SMSF had actually been depleted. Upon investigation, it was discovered that:

  1. The funds had never been invested into the proposed property development.
  2. There appeared to be a plethora of noncompliance with the proper procedures for these types of investments as required by the Corporations Act 2001 (Cth).
  3. The clients had not been provided with any of the relevant disclosure material which would have assisted them to make an informed decision about the investment.
  4. There was no evidence to suggest any assessment was undertaken to ensure that the advice given was right for the clients.

The financial planner became totally unresponsive to the couple’s contact. There remain unconfirmed reports that he fled the country.

Basis of Claim

The clients engaged Pentana Stanton Lawyers in 2019 to recover their funds. The avenues for recovery included the following:

  1. The financial planner Rio Nugara in his personal capacity and in respect of his company.
  2. The accountant.
  3. The Australian Financial Services Licensee. The financial planner did not hold an Australian Financial Services License (“AFSL”) and was merely a representative of an organisation holding an AFSL.

In respect of the financial planner, the case relied inter alia on the following causes of action:

  1. Tortious deceit.
  2. Misleading or deceptive conduct under section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) and section 18 of the Australian Consumer Law (“ACL”); and
  3. Negligence

 Recovery of Funds

When calculating damages, the accepted approach is to calculate the amount that would put the party who suffered the loss in the position that they would have been in but for the tortious or misleading or deceptive conduct.[1]

After the team at Pentana Stanton Lawyers was able to recover the money with interest, a further damages assessment was sought against Rio Nugara, the financial planner, and his company.

The additional sum sought was to compensate the clients for their mental anguish and distress. The court found that Rio Nugara’s conduct caused significant distress to the clients and was reasonably foreseeable. In the words of Her Honour Matthews AsJ:

The distress caused to the Williamses by Mr Nugara’s conduct is significant and cannot be addressed by a token amount. Mr Nugara’s conduct deprived the Williamses of their life savings as they approached retirement, and put the Williamses through considerable stress, fear and anxiety as they grappled with their future without those savings. The fact that the Williamses later recovered a substantial part of their savings from the Second and Third Defendant is highly relevant, and offsets the degree of ongoing distress suffered by the Williamses. Nonetheless, the distress suffered remains significant and, in my view, warrants the award of the full amount sought of $25,000 to each of the Williamses.[2]

In summary, beyond claiming the amount lost plus interests and costs, a further sum of $50,000 (‘$25,000 each’) was recovered in respect of the distress caused to the clients.

A full copy of Her Honour’s decision is available at Williams v Nugara [2021] VSC 331.

If you have also lost money following investment advice received from a financial planner or accountant, we encourage you to contact Pentana Stanton Lawyers on (03) 900 22 800 and speak to someone from our experienced team.

 

Mr Jesse LaGreca
Principal Solicitor

Pentana Stanton Lawyers

[1]See paragraph 42 of Williams v Nugara [2021] VSC 331; Orthodox position pursuant to the ACL, Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at [11-12]; in respect of tortious deceit, Toteff v Antonas [1952] CA 16 at [650]; in respect of the tort of negligence, Livingstone v Rawyards Coal Co [1880] UKHL 3.

[2] Williams v Nugara [2021] VSC 331 at [60].