Blue Chip investors get day in court

Whangarei couple Bruce and Judy Bartle are seeking to have mortgages discharged. Photo / Martin Sykes

A retired Whangarei couple who owe $629,000 following the collapse of
property business Blue Chip have become the first victims to get their day in court.

Bruce and Judy Bartle, whose only income is national super, say as a result of forged mortgage documents they have been left with financial obligations they cannot meet.

Their claim began in the High Court at Auckland yesterday. It is being seen as a test case for hundreds of other stricken Blue Chip investors.

The Bartles' action targets GE Finance subsidiary GE Custodians, which lent them the funds to invest in Blue Chip, mortgage broker Tasman Mortgages which arranged the loans, and a lawyer, Jonathan Mathias.

Their Blue Chip adviser told them to go to Mathias, who had acted for dozens of other investors, because their own lawyer wouldn't understand the product.

They are seeking to have mortgages worth $263,000 over their Whangarei home discharged, to be similarly freed from any responsibility for $366,000 owed on a Symonds St, Auckland apartment, and damages.

Barrister Paul Dale told the court that when the couple entered a "joint venture" with Blue Chip in November 2006 they thought they were taking out a mortgage of just $137,000.

Then when unit 701 at 135-145 Symonds St was completed a year later they discovered they were committed to borrowing a further $126,000. Bruce Bartle had believed Blue Chip was taking out the rest of the loans

In the meantime a $366,000 mortgage was taken out over the apartment supported by the Bartles' personal guarantee.

The Bartle case says that GE approved the loans to them because Tasman Mortgages changed their employment status on the application form from retired to "self-employed", and removed their income details. "In order to get it past GE, out comes the bottle of Twink," Dale said.

He said while GE might argue it was also a victim of fraud, a March 2006 letter from the financier to Tasman revealed it was aware of the problem.

The letter warned that "evidence of whiteout" on a number of loan applications was unacceptable, and also pulled Tasman up on a proposed home loan to a 97-year-old pensioner.

The case sheds light on the unlikely way many of the Blue Chip property investment products were structured. The cost of servicing the mortgages taken out as part of the Bartles' joint venture was $5000 a month, when the Symonds St apartment was only bringing in $480 a week in rent.

The deal also saw the Bartles pay an extra $82,000 made up of fees and a $55,000 "working capital" payment.

Blue Chip priced the apartment at $552,000, including a carpark and furniture package.

The couple have attempted to sell it and the best offer so far has been $235,000.

'WE'VE BEEN DECEIVED AND CHEATED'

Bruce Bartle has owned rental properties and ran his own cleaning business during his working life.

The 70-year-old didn't see how Blue Chip could work and was reluctant to invest until a 2-hour lunch meeting with lawyer Jonathan Mathias.

After that, he was convinced - so much so that he wrote to his brother enthusing about the opportunity.

Now he and his wife Judy, 68, find themselves in the unfamiliar setting of a court room.

"We've honestly been deceived and cheated," Bruce said. "We're totally relying on the justice system that [the] truth will be revealed."

Their only assets are their now heavily mortgaged Whangarei home and $65,000 in savings.

Judy said they were attracted by the $451 a fortnight payment the Blue Chip joint venture offered and saw it as a means of visiting their four children who live overseas. But as a result of the situation they are now in they have never seen two of their 10 grandchildren.

Judy is not looking forward to standing up in court but is buoyed by the thought of the other Blue Chip victims she is representing. "I have got to remember it's not only for us."