Blue Chip lawyer didn't cause loss - Supreme Court

Blue Chip founder Mark Bryers. Photo / NZPA

"Negligent" advice from a Tauranga law firm did not cause a Blue Chip investor's $90,000 loss, the Supreme Court has unanimously decided.

Justices Sian Elias, John McGrath, William Young, Susan Glazebrook and Terence Arnold this morning threw out a decision from the Court of Appeal that the law firm was liable for the $90,000 and ordered the out-of-pocket investor to pay costs of $25,000.

The investor, John Appleton, agreed to purchase an apartment in 2004 for just over $350,000 from a company called Rockfort, which was an affiliate of Blue Chip.

The Blue Chip group of companies failed in 2008 owing $84 million to investors and founder Mark Bryers was fined $38,000 and sentenced to 75 hours' community work for bad record-keeping.

Appleton's family trust was to be the purchaser of this apartment, planned to be built on Turner St in central Auckland.

Appleton signed the purchase agreement without taking legal advice but was later referred by Blue Chip to a firm called Tauranga Law.

Tauranga Law's principal Kevin Olivier then sent Appleton a letter which, among other things, detailed some risks involved in the transaction.

Appleton's trust raised a loan to fund a deposit of $90,000 for the apartment, which was paid into a Blue Chip bank account.

Several years went by and the apartment was never built and Appleton contacted Blue Chip to get his deposit back. This never happened, Blue Chip collapsed, Rockfort was liquidated and Appleton lost his deposit.

Appleton and his trust then took Tauranga Law to the High Court in 2011 alleging the legal advice he received was inadequate. Appleton claimed $112,000 from Olivier, together with interest and damages.

The High Court's Justice Christopher Allan found Olivier had been negligent, failed to provide proper advice and had therefore breached his duty of care. But the judge said Olivier's negligence had not caused Appleton's loss and so the claim failed.

Appleton and the family trust took the case to the Court Appeal and in September Justices Mark O'Regan, Christine French and Helen Winkelmann found in their favour.

The three judges said they saw Olivier's "failings as much more significant" than Justice Allan did.

"We must of necessity reassess the causation issue in light of our different conclusion on the nature of the breach of the duty," their decision said.

They awarded judgment to Appleton and for the deposit, together with interest.

Tauranga Law then went to the Supreme Court last year and Justices Elias, McGrath, Young, Glazebrook and Arnold this morning reversed the lower court's judgment on whether the advice caused loss.

"The Court of Appeal reassessed [Justice Allan's] finding of fact on the question of causation because it thought the terms of the transaction and the deficiencies in the advice were more serious than the Judge had treated them," the five judges said.

"We do not agree that the judge minimised the problems with the transaction...he was right however to treat the sufficiency of the advice about the security of the deposit as the only matter material to the actual loss which ensued, a view with which in substance the Court of Appeal did not disagree. The reason given by the Court of Appeal for undertaking its own reassessment of the findings on causation is not therefore we think convincing, although it was entitled to take a different view on the evidence from that taken by the judge, without further justification. Was it right to do so? We are of the view that it was not," they said.

The Supreme Court agreed with Justice Allan's assessment that the breach of duty did not cause the loss suffered by Appleton and his family trust.

"The appeal is accordingly allowed and the judgment of the Court of Appeal is set aside," the Supreme Court said.

Read Supreme Court-provided summary of the case here:

Read today's Supreme Court decision here: