Auckland lawyer Jesse Nguy was ordered to pay $873,600 damages for negligence after failing to seek Overseas Investment Act clearance for a client’s $9.5 million Auckland purchase.
Owned by off-shore Chinese interests, BCH Investments Ltd committed in 2013 to the purchase of just on five hectares of subdividable land on Gills Road, Albany. Initial plans were for BCH to buy in conjunction with interests associated with Paul Bublitz and Chris Cooke. BCH contacted Mr Nguy. Its client engagement letter saw Mr Nguy accept responsibility for all ‘incidental matters in respect of the development at Gills Road.’
The High Court was told Mr Bublitz reminded Mr Nguy overseas investment consent would be required. Mr Nguy did suggest setting up a trust to disguise true ownership of the development, but nothing eventuated. It is a breach of overseas investment rules to hide true ownership through trust structures. The $9.5 million purchase eventually went through in the name of BCH Investments alone. Mr Nguy told the High Court that the owners of BCH had grown wary of both Mr Bublitz and Mr Cooke. Mr Nguy did not take any steps to get investment approval. There was no evidence that owners of BCH Investments were aware of a requirement to get investment consent.
Subsequently, BCH Investments paid over one hundred thousand dollars on legal fees having a succession of legal firms attempt to get retrospective overseas investment approval. All to no avail. BCH was prosecuted for its breach of the Overseas Investment Act. A $300,000 penalty was imposed and BCH Investments ordered to sell the land.
Justice Venning ruled Mr Nguy was negligent in failing to seek investment approval. $873,600 damages awarded included not only the $300,000 penalty imposed but also government prosecution costs BCH was ordered to pay plus all legal costs BCH incurred trying to get retrospective consent.
BCH Investments Ltd v. Nguy – High Court (1.11.21)
21.180