Family staring at bankruptcy after Blue Chip failure

Glen and Kirstin Johnson, with children Mackenzie and Reid, have spent $50,000 in legal fees. Photo / Vision Media

A Tauranga family with a hearing-impaired child is facing bankruptcy after going it alone in legal action over their failed Blue Chip investment.

Glen and Kirstin Johnson must pay Auckland development company Turn and Wave damages of $116,000 plus costs and interest, after their attempts to exit an apartment deal they can't afford failed.

The pair, who have split up, have no more than $62,000 between them, including $10,000 put aside for the benefit of their children. Their 5-year-old son Reid has moderate to severe hearing loss and has worn a hearing aid since he was a baby.

"We've offered them everything," Glen Johnson said. "I'm pretty sure the reason they've declined it is to make us an example to threaten other investors with."

Turn and Wave - ultimately owned by Auckland developer Tim Manning - had given Johnson's lawyers notice of its intention to issue bankruptcy proceedings. He was now "sitting around waiting for somebody to turn up".

In 2007 the Johnsons entered into a joint venture agreement with property scheme Blue Chip over a $367,000 apartment in a development off Queen St.

They mortgaged their home to put down a $37,000 deposit and pay other Blue Chip fees, on the understanding that after four years Blue Chip would buy the apartment and they would split the capital gain made on the property.

However, the Blue Chip group collapsed in February 2008, leaving them holding a sale and purchase agreement for the unit.

Glen Johnson said their Blue Chip-recommended lawyers did not advise them of the pitfalls of the scheme.

Last year a group of Blue Chip investors in the same situation unsuccessfully took a case to the High Court against apartment developers including Turn and Wave.

That case is now being appealed and any action against the investors is on hold.

The case has been led by barrister Paul Dale who acts for more than 200 Blue Chip investors.

However, Glen Johnson said he had been advised to use other legal representation, and ended up going with Tauranga firm Sharp Tudhope.

"I should have gone with Paul Dale. I didn't know what to do. I didn't know whether to jump ship from Sharp Tudhope who I'd been with for three months who seemed to be doing all the right things. It was such a confusing time."

In her judgment on the Johnson case, Judge Hannah Sargisson said the same factors were in play as in the larger developer case.

In both cases the investors argued that they should be able to get out of the agreements because the developers were agents of Blue Chip and the investment had been misrepresented to them.

But both judges disagreed. "The net effect here is that Turn and Wave could not have made clearer that its agents' authority was limited and did not extend to representations about Blue Chip," Sargisson said.

The Johnsons say they have no money to appeal. Legal fees have cost them $50,000.

Although they maintain a good relationship, their marriage is over. Their house has been sold.

"I don't feel as if I've done anything wrong," Kirstin Johnson said.