Property law firm case revived

Albany Heights sales signage on Gills Road, Albany. File photo / Neville Marriner

Three overseas investors' claim against a law firm associated with an ill-fated Auckland housing development can now be revived.

The trio have successfully appealed their case against Wellington's Harkness Law and its principal John Harkness, which was struck out by the High Court.

Their claim alleged the law firm, which has since merged with another in the capital, engaged in misleading and deceptive conduct under the Fair Trading Act.

Adrian Ng, his wife Alicia Go, and Matthew Lim live in Singapore and paid money to obtain interests in residential lots in the Albany Heights housing project. It later emerged the development was linked to bankrupt developers Roderick Nielsen and Peter Chevin, failed finance company director Paul Bublitz. Chevin was at the time on his third bankruptcy, though has since been discharged.

The project did not go ahead and the development companies went into liquidation with scores of Asian investors claiming millions of dollars. The trio themselves lost hundreds of thousands of dollars and took action against Harkness Law, which received their funds in its trust account, and Harkness himself, who acted for the developers.

The law practice, after receiving the funds, paid it out to the developers in accordance with their instructions.

The investors allege they were misled into thinking their funds were safe in the firm's trust account.

They claimed that Harkness Law lent its name for use by the developers, allowed the development companies to use the firm's trust account when they did not then own the land to be developed, and paid deposit money out of the trust account without authority.

The say this conduct was misleading and deceptive under the Fair Trading Act.

But the High Court threw out the claim and Associate Judge Roger Bell declared that it could not succeed.

The investors then challenged this at the Court of Appeal, which sided with them last week.

While the appellate court accepted the claim could face difficulties, it said it was normally premature to strike out pleadings where it was possible they could be amended.

"On the evidence before the Associate Judge, we consider that the pleading was capable of amendment," said Justice Jill Mallon, who also noted that further evidence has become available.

The appeal court concluded Associate Judge Bell was wrong to strike out the claims and set that decision aside.