Monday 13th February 2017
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Debt factoring firm and financier Commercial Factors is chasing Blue Chip liquidator Meltzer Mason over an unpaid bill from the aborted litigation against the failed property investment group’s former directors and auditors.
In the High Court in Auckland, Associate Judge Roger Bell dismissed an application by the Blue Chip liquidators to strike out the claim, saying they failed to satisfy him that the action was bound to fail. The Jan. 27 judgment was recently published on the justice ministry website.
In 2009 Commercial Factors, owned by Cashflow Funding co-founder Terry Haydon, put up $67,750 for the liquidators to get a legal opinion about pursuing proceedings against Blue Chip's directors, covering the costs of obtaining the opinion and preparing the argument. The lawyer's opinion indicated there were "available claims against a number of directors of Blue Chip and related companies and against auditors", however Commercial Factors indicated it wasn't interested in funding the proceeding.
The liquidators filed a $40 million civil suit without financial backing to avoid a time-bar and show the defendants "they were serious about the claim". However when some creditors lobbied to change liquidator and a potential funder lost interest the proceeding was discontinued in February 2013.
Of the $525,350.44 of funds realised, none has gone toward repaying Commercial Factors, with the bulk going to the liquidators' remuneration, expenses and legal fees, and Associate Judge Bell found it was arguable that the liquidators either had or received funds that could have been used to repay Commercial Factors.
The judgment shows if proceedings had gone ahead, Commercial Factors would have been in line for 2.5 percent of net proceeds, irrespective of who funded the litigation.
The Blue Chip group of companies failed in 2008 owing $84 million to more than 2,000 investors and became a pin-up for regulatory failures of the time when the Securities Commission said property investment schemes fell outside the law requiring an offer document.
The Supreme Court later rejected that view in ruling the investment scheme marketing between 2005 and 2007 required a prospectus, however, the Financial Markets Authority didn't go further than reviewing the case, instead deciding it wasn't in the public interest because Blue Chip-funded developers reached a settlement with investors.
Separately, Blue Chip was investigated by the Serious Fraud Office, which decided there was insufficient evidence to pursue a prosecution while saying the firm operated in a "moral vacuum".
In 2015, former Blue Chip boss Mark Bryers was discharged from his five-and-a-half year bankruptcy, although he was banned from acting as a manager or director in New Zealand for another seven years because of the risk he posed to the public.
Bryers escaped a prison sentence in 2010 when he pleaded guilty to 34 charges relating to the company's mismanagement and improper accounting. He received a $33,750 fine and 75 hours' community work.
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