Clients of Storm Financial (Storm) should seek independent legal advice before considering a proposed new class action against insurance companies tied to the failed advice firm, a litigation firm has said.
Legal firm, Russell and Company sent letters to members of the Storm Investors Consumer Action Group (SICAG) with concerns over an alleged class action lead by rival firm Slater & Gordon.
In a copy of a letter obtained by InvestorDaily, Russell and Company managing partner Stephen Russell advised SICAG members to be cautious of the action, which Slater & Gordon are apparently seeking payments of $1,000 to join.
The letter details a number of concerns Russell and Company has regarding the proposed action.
"The first is that, ordinarily, a claim against a professional person (or a tradesperson for that matter) to recover the whole of the fee paid to that person is usually on the basis that there has been "a total failure of consideration". That is, the client received nothing of any value whatsoever for the fee paid," the letter said.
"This proposition is, in our view, difficult to sustain. Those critics of advice given by Storm to clients (which critics of course include Slater & Gordon) have, so far as we are aware, based their criticisms on a contention that the advice was inadequate in some way, or did not take account of a risk profile in some way, and so on; rather than utterly useless and constituting no advice at all."
Other concerns raised in the letter include the notion that an insurance policy might respond to such a claim, the letter said.
Russell and Company, who disclosed they act on behalf of Storm founders Emmanuel and Julie Cassimatis, recommended all SICAG members consult their solicitors, the letter said.
The letter comes in response to a note about the Slater & Gordon action in SICAG's newsletter of 21 November, 2009.
Slater & Gordon were unavailable for comment.
