Moves to sue key Blue Chip personnel

Mark Bryers. Photo / Supplied

Blue Chip's liquidators are about to take court action against the key people involved in the failed business as the first step in recovering $80 million owed to investors.

Jeff Meltzer, Arron Heath and Lloyd Hayward of Meltzer Mason Heath will next month go to the High Court at Auckland in the first step of legal proceedings to cast their net wide to capture the most money.

If they succeed, they will then examine taking legal action against a big group of people involved in the failed property business. Yesterday they vowed to name all directors, former directors and close advisers.

At a hearing due to start on May 11, Brian Keene, QC, will ask Justice Geoffrey Venning to determine whether the liquidators can take action against key Blue Chip bosses and advisers under the Securities Act.

Their application will turn on whether Blue Chip was entitled to the act's real estate exemption or whether detailed offer documents should have been issued which would have complied with the act and might have revealed the true nature of the business. Blue Chip was selling debt securities instead of property, they will claim.

The liquidators will be arguing Blue Chip bosses were bound by the act because they were not selling real estate but products covered by the act. The act excludes any estate or interest in land which has a separate certificate of title under the Land Transfer Act or the Unit Title Act.

A large group of high-profile business people have had a relationship with Blue Chip over the years including co-founders Mark Bryers and Bob Bangerter, former directors and shareholders Neil Bell and Rikki Flowerday, chairman Jock Irvine, ex-National Party MPs Wyatt Creech and John Luxton, who were both directors, lawyer John Walters, who was Blue Chip's chairman, and accountant John Lowther, whose company Lowther & Associates worked closely with Blue Chip. Lowther is a former director of Blue Chip-related companies.

Heath said Blue Chip's liquidation had so far cost Meltzer Mason Heath $500,000 to $1 million but next month's moves had been funded by the Ministry of Economic Development's liquidation surplus account administered by the Public Trust and primarily made up of unclaimed dividends.

Meltzer said the liquidators got $275,000 from the ministry to fund the Securities Act move but emphasised it was not taxpayer money but funds from commercial insolvency specialists' work.

He said that, after eight months of investigation, his firm decided the Securities Act litigation was potentially the most lucrative.

"This is the best route to maximise returns for all investors and the most pragmatic and efficient way of using that money. The maximum penalty for directors is that they are personally liable for all the debts of the company. If the court says yes to our application, we will look at the complex structure of Blue Chip and determine the parties which will be directors and advisers."

Barrister Paul Dale, acting for about 250 investors claiming more than $12 million, scoffed at the liquidators' moves.

"They're making smoke where there was already a fire ... This just shows how stupid they are. I don't regard it as a significant development at all. It's a waste of money. They're not really suing anybody. They're just asking for directives.

"If they want to do something useful, they should sue the directors for reckless trading," Dale said, citing the affidavit of Auckland accountant David Ross, who said Blue Chip had been trading while insolvent in 2004, 2005 and 2006.

That affidavit has been filed in court for Dale's moves next month.

Meltzer said his firm would seek the financiers' co-operation not to move against Blue Chip investors struggling to pay mortgages before this latest legal action was resolved.

In a separate move, Bryers this week told the Australian Stock Exchange he would fight NZ Companies Office moves to liquidate his Northern Crest. In a notice posted on the ASX on Tuesday, Bryers as executive chairman said the matter would go for a hearing on April 27 and May 8.

NET CLOSING

Blue Chip action:
* Companies Office Registrar laid 60 charges against Mark Bryers.
* Barrister Paul Dale seeking $12 million for 250 investors.
* Blue Chip's liquidators about to cast a wide net against many involved in the company.