There
is no liability for negligent advice where the advice is ignored; negligence
did not cause the loss. One investor was
not entitled to recover from a Tauranga law firm his $90,400 deposit lost when
Blue Chip went under because he was determined to push on with the investment
regardless of the advice he was given.
The Supreme Court was told
John Appleton, together with his family trust, invested in a Blue Chip project
after attending one of the company’s seminars.
In 2004, he signed up for an apartment to be built in Turner Street,
Auckland, at a price of $356,896 with a deposit of $101,910 payable up front. The project collapsed.
Legal paperwork signed by Mr
Appleton went to Tauranga Law who were to act as his solicitors. Mr Appleton approached Bank of New Zealand
for a loan to pay the deposit. Wary of
inflated apartment prices then apparent in Auckland, the Bank was unwilling to
lend the full $101,000 requested. The
Blue Chip group then agreed to take a lesser amount of $90,468 as the deposit.
Tauranga Law, who had been
acting for a number of Blue Chip investors, sent out a standard form three page
letter to Mr Appleton setting out details of his transaction and some of the
risks inherent in the proposed project.
The contents of this letter were subject to close scrutiny in the
courts. The letter stated Tauranga Law
was not commenting on the transaction’s commercial merits but did indicate that
the project might not be completed satisfactorily and that he might lose his
deposit. Mr Appleton was critical: he
argued the letter did not emphasise that on paying a deposit he would become an
unsecured creditor of the Blue Chip group and that the shell company he was
buying the apartment from had no right to the land on which the apartments were
to be built, had no funds to complete the construction and had no right to
force Blue Chip to either undertake the project or to sell the building to it. He said he would have cancelled the contract
if this had been made specific.
The Supreme Court said even if
Tauranga Law’s advice was negligent, Mr Appleton would have gone ahead
regardless. There was evidence that Mr
Appleton did not take much notice of the three page letter when it
arrived. In his words: “He felt
confident with the deal he had.” Mr
Appleton’s and his family trust’s loss of the $94,400 deposit was not caused by
any Tauranga Law negligence.
Tauranga
Law v. Appleton – Supreme Court (19.02.15)
15.009