Supreme Court notice offers hope for investors

Barrister Paul Dale. Photo / Greg Bowker

Blue Chip property investors have been given new hope in a Supreme Court battle after what barrister Paul Dale describes as "an important and promising" change.

The investors are fighting to get out of deals to buy units in five inner-city Auckland high-rise blocks. Last year the Supreme Court granted them leave to challenge a Court of Appeal decision which went against them.

Dale argues that the way Blue Chip marketed apartments might have been illegal so investors could be off the hook.

"The court issued a minute expressing a tentative conclusion that the marketing by Blue Chip of its products was in breach of the Securities Act and has gone on to raise a further issue about the impact that has on the enforceability of the sale and purchase agreements," Dale said.

After initially calculating the chance of winning at about 51 per cent, he thinks it would now be at least 60 per cent. He expects the Supreme Court decision in a few weeks.

"The Supreme Court has signalled in its minute that there is a possible new argument available to us and which is that the developers themselves might be held to be issuers in terms of the Securities Act."

Parties were given 14 to 21 days to make submissions, Dale said. "Although a further delay is regrettable, this is nevertheless a promising development, particularly since it looks as though we have got over what we have always seen as the most difficult hurdle: namely that the Blue Chip transactions were in fact in breach of the Securities Act."

Anyone in negotiation with developers to settle property deals should immediately call a halt, he said, in light of the initial court note.

But now might be the best time to strike a deal with the developers. "They are likely to be concerned by the minute and would probably now offer a substantial concession in return for any settlement," Dale said.

Investors taking the Supreme Court case include Neil Tony Hickman, David John Lester, Anthony Collingwood and Norman and Marie Herrick. Respondents in the litigation are Turner and Waverley (formerly Turn and Wave), Greenstone Barclay Trustees and Grafton Projects (formerly Icon Central).