Liquidators lodge $40m claim against Blue Chip directors and auditors

Liquidators of the collapsed Blue Chip Group of companies have filed a statement of claim seeking $40 million from former directors and auditors.

Jeff Meltzer of Meltzer Mason Heath says the claim, lodged in the Auckland High Court, focuses on 2006 and beyond and relates to approximately 800 investors and more than $40 million.

During that time Blue Chip sold apartments off plan for developments in Emily Place, Turner and Waverley Streets and St Martins Lane in central Auckland.

Blue Chip collapsed in February 2008 owing 3000 investors at least $80 million. Co-founder and managing director Mark Bryers was bankrupted in October 2009 with debts of $230 million.

In the statement of claim the liquidators allege there were a number of inherent flaws in the Blue Chip business model.

“Rather than purchasers’ deposits being held in a solicitor’s trust account they were instead paid to Blue Chip New Zealand and used by it for working capital,” Mr Meltzer said.

“In addition, a 12.6% royalty fee on sales of apartments exceeded usual selling costs incurred by developers and was a possible contributing factor to the developments not being built.”

Blue Chip’s undertaking to pay investors 9.3% interest on deposits cut into cash reserves, which could have been available to pay construction and other costs on the developments, he said.

Mr Meltzer said the liquidators are working on recoveries for investors through civil action and the statement of claim was the first step in what could be a lengthy process.

It had taken a long time to analyse a series of complex Blue Chip investor agreements and sub-arrangements written during the relevant period, he said.

“Blue Chip had many variations of the agreements.”

Mr Bryers currently resides in Australia. It is understood he still hasn’t paid a $37,000 fine he received in May 2010 after pleading guilty to book-keeping charges relating to Blue Chip's collapse.

Last year the Serious Fraud Office ended an investigation of the Blue Chip group and decided not lay charges based on insufficient available evidence.