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24-01-2012

Blue Chip directors, auditors hit with $40m claim

Landlords.co.nz

 

Blue Chip liquidators have gone to court claiming more than $40 million from former directors and auditors of the failed property investment scheme.
 
Meltzer Mason Heath, the insolvency firm liquidating a number of Blue Chip Group companies, has filed a statement of claim in the High Court at Auckland alleging Blue Chip had a flawed business model that led to its collapse.
 
The claim relates to about 800 investors and focuses on the period to 2006 and beyond, when Blue Chip sold apartments off plans for developments in a number of locations in Auckland's CBD.
 
And the liquidators have said there could be further legal action as the process of unravelling the web of Blue Chip dealings continues.
 
Jeff Meltzer of Meltzer Mason Heath said, "It's taken some time to effectively analyse the considerable data underpinning a series of complex Blue Chip investor agreements and sub-agreements written during the relevant period.  Blue Chip had many variations of the agreements."
 
The liquidators allege there were a number of inherent flaws in the Blue Chip business model which caused the collapse of the Blue Chip group and losses to investors and creditors.
 
"These inherent flaws were compounded by the way the business model was operated," Meltzer said.
 
"Rather than purchasers' deposits being held in a solicitor's trust account they were instead paid to Blue Chip New Zealand Ltd and used by it for working capital.
 
"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.
 
"A Blue Chip undertaking to pay investors 9.3% interest on deposits, or a licence rental, cut into Blue Chip's cash resources which should have been available to pay construction and related costs on these developments."
 
The liquidators have been working on recovering money for investors through civil action, but Meltzer cautioned that filing the statement of claim was the first step in what could be a lengthy process.

Tags: blue chip

Source: Landlords.co.nz

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