As a psychologist, Nihal Kucuk has spent the last 16 years helping clients overcome stress, but now the Gold Coast practitioner is the one under enormous pressure.

She now is at risk of losing her property as a result of a failed business venture.

Three years ago, Ms Kucuk borrowed more than $260,000 to join a psychology franchise called Life Resolutions.

In order to get approval for the loan, she had to stump up her family home as security — a decision she considers to be her "biggest regret".

"I haven't received a single dollar from Life Resolutions — zero," Ms Kucuk said.

As a result, she has been unable to make loan repayments for two years and has recently been threatened with debt recovery action by the lender.

A psychology franchise

Think about franchises and Domino's, 7-Eleven and fast food might immediately spring to mind — but probably not psychology clinics.

In the past decade, dozens of mental health practitioners across Australia signed up to Life Resolutions with high hopes.

More than 30 disgruntled psychologists claim they were misled or have left the franchise in a worse-off financial position. ( ABC News: Patrick Stone )

However, the ABC has spoken to 31 disgruntled psychologists who either claim to have been misled, or to have departed the business financially worse-off.

Only two psychologists the ABC spoke to described their experience as "good", saying they left the franchise in better financial shape than when they entered into the arrangement.

Two Melbourne-based women, Mary Magalotti and Jodie Brenton, founded Life Resolutions in 2001. Ms Magalotti was a high-ranking executive of the Australian Psychological Society and Ms Brenton has a background in marketing and advertising.

The pair sold prospective franchisees a dream: "success without the stress".

Mary Magalotti and Jodie Brenton, the founders of psychology franchise Life Resolutions. ( Supplied: LinkedIn/Twitter )

All the marketing, advertising, client referrals and bookings would be handled by head office. The practitioners merely had to do what they do best, and watch the cash roll in.

But the dream quickly unravelled. Many psychologists who had borrowed heavily to buy in found they were unable to earn enough to repay their debt.

They claim the head company charged exorbitant fees, failed to deliver clients in sufficient numbers, and was tardy in paying franchisees for clients they had counselled.

They say their experience was at odds with the bold promises that have appeared on Life Resolutions website — including a "100 per cent success rate", "guaranteed" minimum income of $120,000 during the first year, "extensive" support and "ongoing new clients" — that lured them in.

In Ms Kucuk's case, she signed up to be a master franchisor or "area representative", which required her to sell as many franchises as possible to other psychologists. For each new recruit, she would earn $55,000.

When asked why she signed up as an "area representative", she said it was because Ms Magalotti had promised she would "definitely" be making enough to repay the hefty loan "within a really short amount of time".

In Ms Kucuk's contract, the company even guaranteed she would receive a full refund if she failed to sell two Life Resolutions franchises, worth a total of $110,000, to other psychologists in her first year.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 4 minutes 40 seconds 4 m 40 s Troubled psychology franchise Life Resolutions is back on the beat

'The money you invested is gone'

On October 12 last year, Ms Kucuk received a voicemail from Ms Magalotti.

"Nihal … Life Resolutions Australia Pty Ltd [LRA] has gone into liquidation this week," Ms Magalotti said.

"Our agreement is therefore null and void and the money you invested is gone.

"The Life Resolutions brand … we're still going to use that brand, but in a different entity.

"We're setting [new] practices up for ourselves … company-owned practices.

"I don't hate you, and I hope you don't hate me. Things didn't work out as we both planned."

The companies behind the psychology franchise — LRA and Life Resolutions Pty Ltd (LR) — went into liquidation, in early October.

Liquidation timeline: August 30, 2018 : Ms Brenton creates new companies Here to Help Pty Ltd (HTH) and Good to Listen (GTL)

: Ms Brenton creates new companies Here to Help Pty Ltd (HTH) and Good to Listen (GTL) August 31 : Ms Magalotti resigns as director of old companies (LR and LRA), leaving Ms Brenton as sole director

: Ms Magalotti resigns as director of old companies (LR and LRA), leaving Ms Brenton as sole director September 10 : LR and LRA enter "sale of asset agreement" with new company (HTH) — transferring assets worth $125,000 and secured debt owed to banks and lenders totalling $301,000

: LR and LRA enter "sale of asset agreement" with new company (HTH) transferring assets worth $125,000 and secured debt owed to banks and lenders totalling $301,000 September (throughout) : Ms Brenton informs franchisees their franchise agreements with LRA will be transferred to GTL

: Ms Brenton informs franchisees their franchise agreements with LRA will be transferred to GTL October 4 : LRA goes into liquidation, appointing Mackay Goodwin (Mackay) as liquidator



: LRA goes into liquidation, appointing Mackay Goodwin (Mackay) as liquidator October 9 : LR goes into liquidation, appointing Courtney Jones & Associates (CJA) as liquidator

: LR goes into liquidation, appointing Courtney Jones & Associates (CJA) as liquidator November 22 : Mackay advises that LRA owes $2.3 million to more than 40 creditors

: Mackay advises that LRA owes $2.3 million to more than 40 creditors December 7 : CJA reports LR may have traded insolvent since June 30, 2017

: CJA reports LR may have traded insolvent since June 30, 2017 January 4, 2019 : Mackay reports LRA also may have engaged in insolvent trading

: Mackay reports LRA also may have engaged in insolvent trading March 20: LR is deregistered — with no assets, and no dividends payable to any creditors Source: ASIC searches, liquidator's reports and ex-franchisees

Between them, they owe more than $2.2 million to the Australian Taxation Office (ATO), several major banks and a long list of psychologists.

The biggest creditors are the Mary Magalotti Trust ($1.17m), ATO ($280,000) and Melbourne-based People Psychology ($191,000).

The "different entity" Ms Magalotti mentioned in her voicemail is called Here to Help Pty Ltd (HTH) — one of several companies created by her business partner Ms Brenton, several weeks earlier, on August 30.

On September 10, almost a month before the voicemail, Ms Brenton sold $125,000 worth of LR's and LRA's assets — like office equipment, furniture and a Volvo XC60 vehicle — to her new company.

In exchange, the new company assumed $300,000 worth of debt. But it only took on the secured debt that was owed to the banks.

The unsecured debt, worth around $2 million and which included the money owed to the psychologists, was left with the old company, LRA, which was put into liquidation later.

Ms Brenton also created a company called Good to Listen Pty Ltd (GTL) in late August.

In the weeks leading up the liquidation, she transferred Life Resolutions' most valuable assets to GTL — its franchise agreements with all the psychologist franchisees.

The new companies (HTH and GTL) now operate the Life Resolutions franchise business.

Ms Magalotti resigned as a director of Life Resolutions just a month before it collapsed, but still plays an active role recruiting psychologists for the new companies.

'No secret' the company was struggling

Life Resolutions' former general manager Alistair Way is highly critical about his ex-employer's conduct.

"It was no secret the business was struggling to meet its financial obligations," he said.

"Personally, I don't think any business should be able to dump that much money, slide straight into a new shell, and continue like nothing has happened or to hide it under the guise of a 'normal' restructure."

The company's former general manager Alistair Way says the company was "struggling to meet its financial obligations". ( ABC News: Amy Bainbridge )

Mr Way, who managed the franchise in 2016–2017, said he left the company because he was unhappy with its "chaotic" environment, "running from fire to fire".

Life Resolutions earned much of its income from franchisee sign-up fees — $260,000 for master franchisors, and $55,000 for franchisees.

It also charged up to 17 per cent commission from every counselling session and $357.50 for every five hours of "marketing effort".

The group targeted lucrative Employee Assistance Programs; staff counselling services provided to some of the biggest employers across the nation.

The franchisees were essentially sub-contractors, earning $88 per counselling session for which they billed the head company, Life Resolutions.

In the months leading up to its liquidation, with its financial position deteriorating, Life Resolutions was collecting cash from clients, but not passing it on to the psychologists.

According to court documents, one of the ex-franchisees, psychologist Heidi Smith, was owed about $10,000, which she says pertained to more than 110 hours of counselling work over six months.

Ms Smith sued Life Resolutions and was awarded full repayment in a default judgment, after Life Resolutions failed to attend court.

'Misleading or deceptive'

Ms Kucuk is not the only master franchisor who blames Life Resolutions for her dire financial situation.

Life Resolutions Australia advertised it was "expanding" in March 2019, five months after it went into liquidation. ( Twitter )

Psychologist June Staunton, 70, is also at risk of losing her home, after borrowing $260,000 to invest in the psychology franchise and using her Queanbeyan property as security.

She has also been unable to repay the business loan, and is currently defending a debt recovery claim lodged by her business lender.

Ms Staunton is even suing Ms Magalotti and LRA in the Supreme Court of NSW, for "misleading or deceptive conduct".

She argues in her statement of claim that she was induced to join the franchise as a result of Ms Magalotti's false claims.

It is alleged one of Ms Magalotti's claims was: "You would easily be able to recruit six business associates [franchisees] in a year [worth $330,000], and so would be able to pay off the proposed loan in two years."

According to Ms Staunton, another of Ms Magalotti's alleged promises was that numerous psychologists in south-eastern NSW were already "waiting" to be contacted by Ms Staunton about being signed up.

Ms Magalotti and LRA have filed a defence denying all of those allegations, arguing that Ms Staunton's financial problems were a result of her "inactivity" and failure to "take up assistance" from Ms Magalotti.

They also claim the psychologist's failure was due to her being "distracted" and "impacted" by "various personal and legal matters".

Furthermore, Ms Brenton and Ms Magalotti told the ABC in a statement: "It is simply untrue that people were misled or deceived. No level of income was guaranteed."

However, the Life Resolutions website tells a different story. A section called Income Guarantee promises franchisees they will earn at least $85,000 in their first 12 months.

This is a significant drop from the $120,000 minimum income the franchise used to guarantee nearly a decade ago.

"Likewise, no promises were ever made in relation to [the] number of clients [psychologists] would receive," the co-founders said.

'May have traded while insolvent'

Ms Brenton and the old Life Resolutions companies (LR and LRA) may have broken the law, according to their liquidators.

"My preliminary view is that the company may have traded while insolvent," liquidator Matthew Gollant of Courtney Jones & Associates wrote in his report to LR creditors.

Jodie Brenton promotes her "expanding" business in January 2019, three months after it went into liquidation. ( LinkedIn )

The ABC has confirmed with Mr Gollant that this was his final position, and that LR was in a "negative net asset position" since June 30, 2017.

Meanwhile, the other liquidator, Domenic Calabretta of Mackay Goodwin, wrote to LRA creditors: "A claim may be available against the director for breaches of the insolvent trading provisions of the [Corporations] Act."

Under the law, directors cannot take on extra liabilities if they are unable to pay existing debts.

But given the costs of pursing the matter through the courts (up to $20,000 to get started), Mr Gollant believes a case would not be worth it.

"I regrettably advise that a dividend will not be paid to any class of creditor, given the lack of funding to take recovery action," he said.

In a statement, the Life Resolutions' co-founders said: "The liquidation was not a deliberate attempt to burn people, but instead a restructure to protect franchisees who then chose to breach their franchise agreements and not to stay with us."

Still recruiting, despite the liquidation

Brisbane psychologist Coral Palmer said she was "outraged" when in late November, one of the companies tried to recruit her inexperienced psychology intern as an "area representative".

Coral Palmer is "outraged" that Life Resolutions is still trying to recruit new investors. ( ABC News: Curtis Rodda )

Ms Palmer was not a franchisee, but LRA owes her $11,000 for more than 100 hours of counselling she performed on its behalf via an Employee Assistance Program.

In an email sent nearly two months after the liquidation, Ms Magalotti used the same sales pitch as before.

The intern could earn large amounts of cash for each psychologist she recruited. All she had to do was stump up a $275,000 joining fee.

"Obviously if we were to partner up together, all of our IP [intellectual property] would be shared with you and other opportunities would inevitably unfold," Ms Magalotti wrote in the email.

Having been burnt herself, Ms Palmer was shocked by the audacity of the offer.

"Supposedly they have no money and here they are making this kind of offer to [the intern]," she said.

In a statement, Ms Magalotti and Ms Brenton said Life Resolutions' business was to "recruit to grow its network to then be able to provide mental health services to the general public".

Franchisees have lodged complaints with the Australian Securities and Investments Commission (ASIC) but it has declined to act, a response one psychologist described as "fairly pathetic".

When asked to reflect on her time with Life Resolutions, Ms Kucuk offered a scathing assessment.

"My time with Life Resolutions I could describe as a complete waste of time, effort and money," she said.

"It's definitely not something that I would ever consider doing again."