Second setback for victims of Blue Chip

…a representative group of people who invested in three central Auckland developments through Blue Chip cannot get out of their sale and purchase agreements on the apartments…the three developers were not liable for the representations made by Blue Chip companies, and had no knowledge of any illegality involved. He also said the Fair Trading Act did not apply for the same reason, and the investments fell outside the scope of the Securities Act.

The New Zealand Herald
November 28, 2009

Second setback for victims of Blue Chip
Maria Slade

BlueChipJudyBartle.jpg

Bruce and Judy Bartle lost their case against a finance company which lent them money to invest in Blue Chip. Photo / Martin Sykes

Blue Chip victims have had another setback in their efforts to gain relief through the courts, with the failure of a second High Court case.

Justice Geoffrey Venning has ruled that a representative group of people who invested in three central Auckland developments through Blue Chip cannot get out of their sale and purchase agreements on the apartments.

It is the second significant piece of court action over the collapsed Blue Chip investment scheme to go against investors.

In September Whangarei pensioners Bruce and Judy Bartle lost their case against GE Custodians, the finance company that lent them more than their home was worth to invest in Blue Chip.

They claimed the loans were an "unconscionable bargain" or "oppressive", and that the Blue Chip company that arranged them was an agent of GE.

But the High Court said that GE did not know anything about the terms of the Blue Chip investment or that the Bartles could not support the loans.

However it ruled that the lawyer who advised them failed in his duty of care to them.

The latest case was heard over six weeks in May and June. The group of about 30 investors argued that they should not have to settle on the downtown apartments because they had been misled about the investments.

The decision has implications for over 200 investors who put their money into unusual investment products promoted by Blue Chip.

As part of the products the investors effectively put down a deposit on the yet-to-be-built apartments and were paid for the use of their funds.

They were told that Blue Chip would purchase the apartments on completion and they would never have to own the properties.

Blue Chip collapsed in February 2008, the buildings have since been completed, and the developers are looking to settle on the apartments.

As part of the Blue Chip products the investors signed sale and purchase agreements, which Justice Venning said were valid.

"A common theme in the investors' evidence was that they did not read the agreements for sale and purchase. Some even said they had not appreciated they were entering agreements for sale and purchase at all."

But signing a document without reading it did not excuse a party from the consequences of signing, the judge said.

The investors argued that the Blue Chip companies which sold them the investments were acting as the agents of the developers, and that as the investments were misleading they now had the right to cancel the sale and purchase agreements with the developers.

The developers had underwriting agreements with Blue Chip entities and paid them 15 per cent for every apartment sold.

But the judge said the three developers were not liable for the representations made by Blue Chip companies, and had no knowledge of any illegality involved.

He also said the Fair Trading Act did not apply for the same reason, and the investments fell outside the scope of the Securities Act.

MORE MISERY

  • Blue Chip victims have been told they have to buy apartments in the Icon, Bianco and Barclay developments in central Auckland.
  • Most can't afford to settle on the properties, and say Blue Chip told them they would never have to do so.
  • But the High Court says the apartment developers are not liable for representations made by Blue Chip.

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