UPDATED: FMA mulls prospect of revisiting Blue Chip after investors win at Supreme Court
Aug. 9 (BusinessDesk) - The Financial Markets Authority is mulling what action it could take against Blue Chip now that 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.”