Blue Chip victims lose court battle

Whangarei couple Bruce Bartle and Judy Bartle File photo

Hopes that Blue Chip victims would win litigation were dashed this morning by a final court ruling.

The Supreme Court has decided in favour of financier GE Custodians and against Blue Chip investors the Bartles of Whangarei.

That ruling overturned a Court of Appeal decision in favour of the Bartles.

The Court of Appeal had found earlier that loans the retired couple took out to buy an apartment in Auckland were oppressive.

GE challenged that decision, saying it had no knowledge of any matter which would make those loan contracts oppressive and the Supreme Court agreed.

It would be unfair to hold GE responsible for the Bartles' predicament, the ruling said.

The case has been sent back to the High Court for further determination of issues.

The Bartles have been ordered to pay GE $25,000 in costs.

Investors in Blue Chip bought apartments or properties, getting loans from financiers like GE to allow them to fund the investments.

"This result is hard for the Bartles," the Supreme Court decision said.

"But it would be quite wrong to hold GE culpable for what has occurred in circumstances in which the Bartles were throughout being given advice by a lawyer whose independence must be accepted and where GE was not aware of, nor put on inquiry about, any matter which rendered any of the loans in breach of reasonable standards of commercial practice.

"If the court were to do this it would require lenders to take responsibility for matters of which they neither knew nor should have known," the Supreme Court said.

"Whilst the Bartles are deserving or much sympathy, it was they who chose to put their faith in Blue Chip and their chosen lawyer. They expressly disavowed reliance on GE. It would make bad law if they could now hold GE responsible for what has occurred."

The Bartles had decided to go ahead with a proposal put to them by a Blue Chip salesman that they buy a residential apartment in a large building then being built in Auckland, borrowing against their Whangarei home and the apartment itself in order to do so.

Until the apartment was resold Blue Chip guaranteed to meet a shortfall on rental income, meaning it would subsidise mortgage outgoings, and would pay the Bartles $451 per fortnight.

The Bartles were to buy the apartment for $552,000, although borrowing an aggregate amount of $629,566.

The first loan advance was made in November 2006, with the second and third in September 2007.

Blue Chip had fulfilled all its obligations to the Bartles during the first year but it stopped making the fortnightly payments even before the second and third loans were drawn down, and in February 2008 stopped making monthly interest payments, the Supreme Court said.

GE had exercised its power of sale over the apartment but it realised only about $250,000. GE was now seeking from the Bartles the balance, which appeared likely to be more than the value of their Whangarei home.

Paul Dale, who is acting for hundreds of Blue Chip investors, said the Bartles were worried about losing their home and he could offer them no guarantees.

Dale said the Supreme Court recognised it was a difficult case.

"They had to apply the law as they saw it. They applied it in a way that doesn't work for us but as a matter of principle that's the way it is. It just leaves the Bartles and a lot of others over a barrel unfortunately."

More than 3000 Kiwi investors lost more than $80 million when the Blue Chip group of companies collapsed.

Blue Chip founder Bryers has been bankrupted owing $230 million, banned as a director for five years and sentenced to 75 hours' community service on minor record-keeping charges.

- with Susie Nordqvist / NZPA