Too pricey to sue Blue Chip directors, say liquidators
Out-of-pocket investors in the failed Blue Chip property investment scheme have lost their last hope of gaining compensation.
Blue Chip's liquidators announced yesterday that they had not been able to get funding to sue Blue Chip's directors, and were winding up the liquidation.
Former Cabinet ministers Wyatt Creech and John Luxton and Blue Chip founder Mark Bryers were among the directors targeted in legal action alleging reckless trading during their time at the helm.
Meltzer Mason Heath (MMH), the liquidators of 50 Blue Chip companies for the past five years, said it had proved impossible to secure the necessary funding to prosecute a large and complex claim. The proceedings against the directors and auditors had ended "by consent of all parties involved".
Blue Chip collapsed in February 2008. About 1200 mostly older investors are still owed up to $120 million.
The liquidators' action was running in parallel with a similar case brought by Auckland barristers Paul Dale and Daniel Grove.
Dale and Grove 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. However, the barristers were also unable to raise funding for the action against directors.
MMH said investors were not asked to contribute funds because even if the action were successful, there may have been little left in the pot once liquidation costs and secured and preferential creditors - including the Inland Revenue Department - were paid.
MMH principal Jeff Meltzer said the case would need a judgment in favour of investors of at least $15m to cover these costs. "That's far greater than any court has ever awarded and that was a major factor in us having to bring a halt to it.
"We think we had very good claims but there was no entity or organisation prepared to put up the funding."
MMH had been approached by other liquidators interested in taking over the file but in the end this did not proceed, he said.
Palmerston North Blue Chip investor Garry Abbiss said it showed company directors were not held accountable for their actions in New Zealand.
The Blue Chip collapse had had a huge effect on his life. "I will be bitter on my dying day. I don't trust anyone." Fairfax NZ