Blue Chip victims target lawyer

Pensioners Bruce and Judy Bartle have been left with $629,000 in mortgages. Photo / Martin Sykes

A lawyer accused of not giving a Blue Chip investor couple proper advice is facing numerous similar claims.

Jonathan Mathias confirmed in the High Court yesterday that several other victims of the Blue Chip property investment collapse are also planning action against him over his legal advice.

Mathias was giving evidence in the case of Whangarei pensioners Bruce and Judy Bartle, who claim he failed in his duty of care when he did the legal work on their Blue Chip joint venture investment.

With the collapse of the scheme the Bartles have been saddled with $629,000 in mortgages over their home and a central Auckland apartment.

The Bartles say they thought the joint venture involved them borrowing just $137,000 against their house.

Mathias said he acted for around 150 Blue Chip investors over a three-year period, all referred to him by Blue Chip advisers. Blue Chip clients accounted for about 75 per cent of his practice.

Earlier, a former Blue Chip adviser gave evidence that the group schooled its advisory force not to send prospective clients to external lawyers, because it claimed they would not understand the Blue Chip products.

Property law expert Peter Nolan, who reviewed documents relating to the Bartles' investment, told the court that there were a number of risks associated with it that should have been pointed out to them. These included:

No conditions that benefited them as purchasers, such as solicitor's approval.

The Blue Chip subsidiary that was to lease the apartment had no obligation to buy it at the end of the investment, as was supposed to happen.

The purchase price of the apartment was $552,000, but the Bartles were being charged more than $630,000 for the joint venture.

There was no independent valuation.

A "working capital" facility of $55,000 they were required to pay initially covered the borrowing costs, rather than Blue Chip making those payments as was their understanding of the deal.

"I have no doubt that a reasonably competent solicitor would have advised [the Bartles] that the risks they faced were so great that they should refrain from entering into the transaction," Nolan said.

He said there were numerous legal issues with the documents, and described the Joint Venture Agreement as "complex, confusing and ambiguous".

Under cross-examination by the Bartles' lawyer, Paul Dale, Mathias said that he did not accept any responsibility for the predicament Blue Chip investors now found themselves in.

Dale asked him whether he thought it was prudent for a couple in their late 60s whose only income was national superannuation to borrow $630,000 to invest in an apartment worth $552,000.

"It wasn't my job to think whether it was good or not. My job was conveyancing," Mathias said.

Dale pointed out that he had regular contact with Blue Chip staff but never suggested that any of its documents should be improved.

Mathias said he felt comfortable with the investments because Blue Chip was a large company with well-known directors, and none of the other investors he had acted for had ever had a problem.