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Investors in failed residential property business Blue Chip got mixed news this week from a barrister who holds out hope of recovering money for some people but warned that more failures are likely.
Paul Dale, the Auckland barrister working with Daniel Grove on behalf of more than 300 investors, wrote to clients saying there was little or no likelihood of any recovery from the current string of liquidations.
But he hopes to get deposits back for some investors, have agreements to buy properties cancelled and backed the prospect of getting money through litigation from mortgage businesses, valuers and lawyers.
Investors should abandon all hope they had in Mark Bryers, who founded Blue Chip. Dale said he had not fulfilled promises he made earlier this year to find money and pay investors.
"The promises from Mr Bryers, not surprisingly, have not led to any funds being forthcoming. Our view is that no investors should rely upon any steps that may be taken by the liquidator to recover any of your funds," Dale wrote.
Dale predicted further liquidations of Blue Chip businesses. These were imminent but again creditors would get no dividends, he forecast.
But Dale also delivered some of the first good news to various investors.
Those in Blue Chip's premium income product were advised they had good cause to cancel their agreements and get a full refund of their deposit and Dale said he had already sent letters on behalf of the investors demanding these terms.
Clients in Blue Chip's joint venture schemes also got good news, with Dale telling them their money was held in a trust account and might be paid back.
"We believe that we have grounds for cancellation of these agreements and seeking a release of the deposit," Dale wrote, noting that most of these investors had bought into the Barclay apartment project on Albert St.
The vast majority of investors have no capability to complete the purchase of Barclay units but the developer of this project was anxious to talk to the investors with a view to people completing their purchases, Dale noted.
A third group of investors got bad news: those who bought Blue Chip properties under the old joint venture arrangement had lost their deposit and working capital, Dale said.
But this group could make a claim of negligence against the advising solicitor. The solicitors had professional indemnity insurance so any claim "may be one of the strongest", Dale advised.
Blue Chip clients who bought properties which were vastly over-valued might have a claim against a valuer, Dale wrote.
If valuations were inflated, investors would have a claim for relying on the valuation in making their purchase.
"Subject to evidence demonstrating an inflated valuation and the ability of the valuer to pay damages awarded, this course of action would significantly reduce or in fact extinguish the investors' losses," Dale wrote.
A claim against Tasman Mortgages or Executive Mortgages, formerly associated with Blue Chip, might succeed, he wrote.
Investors who wanted to pursue these claims were advised to instruct Dale or Grove to begin legal proceedings.
Chips are down
* About 3000 investors spent more than $80 million on Blue Chip investments.
* 21 Blue Chip companies are in liquidation.
* The Serious Fraud Office has begun a probe.
* Melzter Mason Heath are liquidators.
