Blue Chip verdict could open door

It is believed that the $250,000 judgment could set a benchmark for other claims related to Blue Chip's failure. Photo / Kenny Rodger

A High Court decision in Napier ordering a financial adviser to pay an elderly widow $250,000 could become a "benchmark" for other claims related to the $80 million failure of the Blue Chip property investment company last year.

Myles Wealth Management director Craig Myles suggested yesterday that the 3000 investors who lost money through Blue Chip could compare the detail of their case with that of the Napier case.

"If the facts of your case mirror the case that has just received judgment; the closer your circumstances are ... the more likely your claim would be successful. When you establish liability through case law like this, it will now create a benchmark for others to be assessed against."

The widow, 75-year-old Beryl Joyce Breeze, was awarded $204,465 damages plus $54,361 costs and disbursements after Justice Simon France found VPFS Financial Planner Ltd "failed to meet the standards of a reasonable financial adviser" in placing the money.

VPFS had recommended Mrs Breeze invest in a Blue Chip-related scheme and Justice France said it had been negligent or alternatively had not used reasonable care and skill in advising Mrs Breeze.

VPFS did not defend the action.

He said other parties, including legal advisers, were originally also involved, but they had settled.

Shareholders Association chairman Bruce Sheppard said last night that he expected the Napier case would be a one-off.

"There may be other old people that have been advised by planners but it would be very unusual for a respectable planner to have ever embarked on recommending such a plan to elderly people."

Most Blue Chip investments were "hard sold" by company agents.

Mr Sheppard said there was still the issue of whether Mrs Breeze could recover the money from the planner.

"The issue will be whether or not the financial planner was insured. If he was insured, she will recover."

An experienced financial adviser, Andrew Guest, who gave evidence for Mrs Breeze, said that the investment was unwise for anyone "but one wholly unsuited to an investor in Mrs Breeze's position".

Justice France Mrs Breeze was at the time a 75-year-old widow who had previously invested on the advice of VPFS.

"Her investment profile was conservative, and primarily aimed at modest income returns."

The judge said Mr Guest gave affidavit evidence as to the complexity of the transaction.

"In his opinion understanding the documentation is beyond any who are not experienced in these matters.

"It is his opinion that the risks were significant, and particularly so to one in Mrs Breeze's position."

He said there should have been written advice which clearly set out the risks.

The scheme depended entirely on the continuing viability of the companies involved and as they were all closely related, the risks were "manifest" and should have been carefully explained in written form, Justice France said.

"It is apparent that the advice Mrs Breeze received was wholly deficient for the circumstances.

"The defendant had been Mrs Breeze's adviser for some years, and knew her position and her investment profile.

"It was an unsuitable investment for her, and obviously so. Even if everything went well, the maximisation of gains was some years down the track," the judge said.

Bearing in mind Mrs Breeze's age and immediate needs, it was not an appropriate investment, putting her most significant asset, her home, at risk.

"I have no doubt that the defendant failed to meet the standards of a reasonable financial adviser and that the claim in negligence, and alternatively in contract are made good," the judge said.

Mrs Breeze was represented by Auckland lawyers Charles Cato and Neil Thinn.

The $80 million failure of the Blue Chip property investment company left more than 3000 New Zealand investors out of pocket.