Time almost up on Blue Chip
Former Cabinet ministers Wyatt Creech and John Luxton, lawyer Jock Irvine and founder Mark Bryers are likely to walk away from the collapse of Blue Chip unless a funder can be found to back action against them.
The four are among a group of directors targeted in two separate lawsuits alleging reckless trading during their time at the helm of the failed property investment scheme.
Blue Chip's liquidators say around 1200 people are still owed up to $120 million over the 2008 collapse.
Their last hope of getting any compensation for their losses is action against the directors, but that door is likely to close next month when a court extension expires.
Liquidators Meltzer Mason Heath (MMH) is bringing one of the lawsuits, and early this year told the court that it had not been able to find litigation funding. There was no money in the Blue Chip pot from day one, they said.
"The position hasn't changed," principal Arron Heath said last week. "We've been trying for three to four years, and we have approached most of the major players."
The other action is being driven by Auckland barristers Paul Dale and Daniel Grove, who successfully took a case to the Supreme Court on behalf of 235 Blue Chip victims which resulted in settlements with the developers of apartment buildings they had invested in.
The High Court is managing the two director actions together because of their similarity, and has given the Dale/Grove camp a 60-day extension until mid-April.
The barristers have not quite thrown in the towel. They have written to Blue Chip investors to canvass support, and plan to seek another extension. But they admit their prospects are not good.
"There will be quite a few investors who won't have any further desire to press ahead," Dale said.
In addition, new liquidators would have to be appointed. Given MMH have been liquidating a group of around 50 Blue Chip companies for the past five years, and the parent company, Northern Crest, is in the hands of separate liquidators, it would be a gargantuan effort.
Both camps lament the lack of any government assistance or responsibility taken over the Blue Chip saga.
"You need a statutory body that really does this," Dale said. "It is a massive task, apparently there are rooms of documents."
MMH is equally frustrated that government agencies such as the Financial Markets Authority have never seen fit to step up over Blue Chip.
"If directors run a company absolutely into the ground and commit all sorts of breaches of duty . . . it is unlikely that a liquidator could ever get in a position to take action unless they could attract external funding," Heath said.
MMH estimates legal action would cost between $2.5m to $3m and involve a four to six-week trial.
They planned to seek between $15m and $40m in reparation, but say they did not go to investors for funding because they could not guarantee a return. Even if the action were successful there may be little left in the pot for them once liquidation costs and secured and preferential creditors - including the Inland Revenue Department - were paid.
Nevertheless, they had done a lot of work to prepare the case, and would not have done so if they did not believe in its merits, principal Jeff Meltzer said.
"Sitting here today, we still feel that we have a sound case and that there are some issues for the directors to respond to."
Both teams point to the $40m worth of Blue Chip investors' deposits which disappeared. The deposits were put down on apartments which were not built, and the money was not held in trust. The developments were then onsold.
MMH believes the $40m was used as working capital, to pay generous wages, bonuses and commissions.
"The group lived a pretty luxurious life," Heath said.
The Financial Markets Authority said last week that it was still considering whether any further action over Blue Chip was in the public interest.
- Sunday Star Times
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