Fight over legal advice in Blue Chip deal returns to court

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

A fight over whether "negligent" advice from a Tauranga law firm caused a Blue Chip investor's $90,000 loss is heading for the Supreme Court.

Out-of-pocket 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 sent Appleton a letter which 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 money 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 of 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.

The judges awarded funds to Appleton and the trust but did not specify the exact amount.

However, Tauranga Law applied to take the case to the Supreme Court and leave for this appeal was granted this week. No date has yet been set for this hearing.