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FMA mulls the prospect of revisiting Blue Chip

BUSINESSDESK: The Financial Markets Authority is considering what action it could take against Blue Chip now the Supreme Court has ruled it was in breach of the Securities Act with a scheme to sell apartments in Auckland.

A group of investors in Blue Chip have won their Supreme Court appeal against being forced to buy apartments in Auckland that were originally to be funded with assistance from the failed finance group.

“Now that the Supreme Court has ruled in favour of Blue Chip investors, FMA will be looking at the judgment very carefully and considering whether there are any steps it can take to assist investors,” an FMA spokesman said.

The investors had been knocked back by the High Court and Court of Appeal in seeking to be excused from completing the purchase of apartments in the Barclay, Bianco and Icon apartment blocks in central Auckland.

They had argued that when Blue Chip marketed its investment schemes it was offering securities to the public in terms of the Securities Act 1978 and was required to provide a prospectus.

In the Supreme Court, Justices Sian Elias, Andrew Tipping, John McGrath, William Young and Noel Anderson agreed that the appellants’ Securities Act arguments “are correct”.

“When Blue Chip was marketing its investment schemes, it acted in breach of the Securities Act and thus brought into play s37 of that Act which renders unenforceable the allotment of improperly marketed securities and the associated subscription of such securities,” the judgment says.

The Supreme Court also held the developers of the apartments to be issuers in terms of the Securities Act, “giving rise to entitlements to relief” under the Act.

“We see the Blue Chip products as providing mechanisms by which Blue Chip sought and obtained financing from the public,” the judgment says.

“It is true that they were also buying apartments but under the investment schemes the apartments had a very limited function. Provided all went according to plan, the investors were never to occupy the apartments."

When the Blue Chip Group collapsed in 2008 the developments, by separate companies, went ahead and the investors faced difficulties in raising the necessary funds.

They had signed two sets of agreements – the agreement to buy the properties and a separate arrangement with Blue Chip under which “they were entitled to certain financial returns and other assistance”.

The court ordered the respondents, development companies Turner and Waverley, Greenstone Barclay Trustees and Grafton Projects, to pay costs to the appellants of $75,000, plus disbursements.

The case is now to be returned to the High Court “to make such further orders as may be consistent with this judgment.”

Comments and questions

Where was the FMA? Oh right, now that the hard work has been done they've offered to assist the investors. Maybe.

It's the Securities Commission all over again!

Le's be fair about this. The Securities Commission under Plane Jane Diplock was a total waste of time but a wonderful time for white collar corporate crooks - an Australian has-been imported by Helen Clark as part of the female brigade to social engineer NZ.

The FMA has been more successful in 1 year in the whole 10 years that Plane Jane was in office. Let them take Blue Chip on now that the court process has defined breaches of the law.

I remind you that the finance company cases now succeeding in the courts were all Securities Commission cases, albeit that the current FMA administration likes to take the credit for them.

Plane Jane presided over the destruction of billions of dollars by white collar crooks - many of the victims have been left devastated - while she flew around the world, enjoying herself at taxpayer's expense.

Who appointed her? And reappointed her for a further 5 years in 2006? On what basis?

I'm a little concerned too.... Adam Feeley now in Queenstown as CEO for their council, but we have a Belinda Moffatt ex Westpac now joined forces on the FMA payroll.... lets see what the FMA do? after all the hard work has been done! Why Why Why is Blue Chip water proof? it's take 5 years for todays decision

"Mulls" is the catchword of the FMA, indeed.

Your "Anonymous" commentators miss the obvious and logical point that FMA was unable to take action on this matter because we were complying with the judgments of both the High Court and then the Court of Appeal that the investors' interests were not "securities'. Until today's Supreme Court judgment, FMA had no legal basis on which it could act. Now the Supreme Court has over-turned those earlier decisions and held the Securities Act does apply, I have asked my team to look at what steps can be taken. If your 'Anonymous' commentators would like to contact me directly, they should feel free to do so, but their criticism is flawed.
Sean Hughes

Hey Shaun, I contacted you directly, in writing, 11 months ago to highlight a criminal breach of trust and security law breaches, and to lay a complaint about a prior investigation. I am still waiting for a reply. Oh that's right you don't confirm or deny if you are investigating. I guess that applies to complaints as well.

No reply? That is not right, Mr Hughes.

The least that you can do is to acknowledge a complaint and to advice if your office is taking action.

You know the old adage about "Justice must not only be done but be seen to be done."

By "my team" I assume you mean Meredith Connell, Sean? You know very well that you wouldn't trust our own unhappy and inexperienced staff to make a decision like that!

good decision by supreme court, it generate liability for sell an apartment. also help the people with to figure out the right things to do.

The time that has elapsed for this decision to come out is ridiculous. FOUR YEARS!!

Our justice system is riven by lethargy and apathy that borders on pondering indifference.

That is totally unfair. The purchasers' claims were rejected by the High Court and Court of Appeal. Cases this complex take their time to reach the second appelate court.

The reality is that the investments in this case were not understood to be covered by the Securities Act until yesterday. The Supreme Court had to go through some extremely tortured reasoning to come to the decision that they are - in key areas the Court relied on a "non-technical approach".

Contrary to showing indifference, the Court (in turns) stretched and read down parts of the Securities Act to reach its desired outcome.

No one believes for one moment -- and especially those judges from the High Court and Court of Appeal -- that the Supreme Court judges possess an acuity of judicial intellect, superior to those judges whose decisions they overturned.

Your comment, "some extremely tortured reasoning", invites conjecture that the decision was not predicated upon the application of legal precedents and objective reasoning. Rarther, it was distilled from the judges' own subjective and, hence, emotive responses as to what they deemed to be 'correct'. That is, their decision was "interpretative"; and that invokes the spectre of "discretionary". And with that, comes "they cut the cloth to fit the suit".

I'm very pleased for the Blue Chip investors. But I don't believe the appelate court judges erred in their findings, which had ruled against them.

If you ever sat in on a Blue Chip presentation (which I have), you will know that the Supreme Court judges have made an excellent judgement - they saw through all the muck put up by Blue Chip and its lawyers and the judges call the Blue Chip scheme for what it was - convoluted engineered financial schemes around which Blue Chip was raising funds from investors without using registered prospectuses. Very much like a ponzi scheme using apartments.

Quite obviously and leaving aside the self-serving comments of those affected,the action,or lack of,those responsible were inadequate.
With Feeley we seemed to be getting some action at long last.
regretfully he has now moved on and the reasons for this are yet to be disclosed; political interference has been inferred.

High Court, Court of Appeal, Supreme court - 3 bites of the cherry.
Lawyers - another big bite of the cherry.
FMA - thinking of taking a bite from the cherry.
Investors - anything left of the cherry?


Here's hoping that the FMA will also investigate those who assisted Blue Chip and Mark Bryers to deceive so many investors out of their life savings.

Start with the ex-National Party ministers who lent their name to Blue Chip - Wyatt Creech and John Luxton. As directors, they knew what was going on but chose to collect their fees and perks before fleeing the scene when the truth started emerging to the public.

Then, investigate the role of Macquarie Bank in the whole smelly affair - Macquarie not only invested in Blue Chip, it allowed Blue Chip to use its name in their marketing and promotion. Macquarie also sponsored the listing of Blue Chip into Australia and raised funds for Blue Chip there.

I received a Blue Chip 'pitch' in my home and was impressed by the participation of a senior Russell McVeagh lawyer in the business.

Fortunately for me I listened carefully and calculated that what they presented as 'guaranteed returns' only guaranteed returns to Blue Chip, not to me. The language was insidiously clever, and it would have been easy to be misled.

Ever since, I have wondered if that upstanding lawyer knew that his name was being used, and if so what recourse one would have if one lost out.

This decision by the Supreme Court is welcomed by all victims effected by the Blue Chip Scam. What really bothers me is that the SFO could not find that fraud had been committed. Feeley took the word of the lying, cheating spokesperson of the finance company involved, who said that the altered documents would NOT have influenced their decision in relation to approving these loans, when in fact it was the unauthorised altering of the loan documents that the finance company relied upon to approve the loans.

Banks and brash next for their performance at hujlich?

I'm grateful we now have a Supreme Court decision on this matter. And it helps that we have a Supreme Court to make such decisions.

Whilst the protracted proceedings in the Courts were regrettable, let us not lose sight of the fact that there is now a decision that should lead to serious charges being laid against Bryers and his co-Directors. The so called "products" were a fundamental part of the Blue chip business and none of the Directors including Bryers can deny knowledge. The previous charges relating to breaches of the Companies Act were minor by comparison. I hope that the FMA will now seize this opportunity to investigate him and the people who assisted him particularly Bob Bangerter Michael Reeves, and John Muru Walters a lawyer who fronted much of Bryers' business and acted as his power of attorney.

Blue Chip was also a set up used by the Banks to be able to create fraudulent no doc and low doc loan documents for ARIP citizens. A set up that would inevitably cause people to lose their homes Huge revelations and providing of evidence happening in Aussie at present. The FMA needs to get serious on opening up the Blue Chip situation