Blue Chip victims fall at last hurdle

About 3000 investors lost over $80 million when the Blue Chip group of companies collapsed. Bryers has been bankrupted owing $230 million, banned as a director for five years and sentenced to 75 hours' community service on record-keeping charges.

The New Zealand Herald
December 4, 2010

Blue Chip victims fall at last hurdle
Anne Gibson


Bruce and Judy Bartle reacted angrily to the court's decision. Photo / Martin Sykes

Blue Chip victims had their final hopes dashed yesterday after a financier won a Supreme Court case.

GE Custodians beat Bruce and Judy Bartle, retired Whangarei investors who used equity in their home to buy an Auckland apartment through Blue Chip.

The Bartles reacted angrily to the decision, Mr Bartle describing the situation as unbelievable.

"Where is the justice?" he asked, saying other Blue Chip victims were depending on the court case and would also be upset.

Mrs Bartle described the decision as cruel and devastating and also asked where it left other victims. Mr Bartle called for a commission of inquiry.

Their barrister, Paul Dale, said other litigation against valuers and lawyers was proceeding but he was frustrated about the lack of action from Blue Chip's liquidators.

The latest decision overturned a Court of Appeal ruling backing the Bartles, who initially lost in the High Court.

The Appeal Court said GE was responsible because a loan agreement signed by the Bartle was "oppressive" under consumer finance law.

The case centred on fastdoc lending where it was not known whether borrowers had the ability to repay.

The Supreme Court said GE could not be held responsible for what happened because lenders could not be forced to investigate everything.

Financiers would be unable to loan, based on what borrowers chose to reveal to them, and would be forced to conduct their own extensive investigations just in case they uncovered something which might render the deal able to be overturned or re-opened, the court found.

Investors in Blue Chip, once headed by now-banned director Mark Bryers, bought apartments or properties, getting loans from financiers such as GE to allow them to fund the investments.

But they lost millions of dollars when they could not afford repayments, properties did not rise in value and they were forced to sell their family homes.

About 3000 investors lost over $80 million when the Blue Chip group of companies collapsed. Bryers has been bankrupted owing $230 million, banned as a director for five years and sentenced to 75 hours' community service on record-keeping charges.

GE challenged a Court of Appeal decision that loan contracts like those with the Bartles were oppressive. GE, whose legal team was headed by Jim Farmer, QC, said it had no knowledge of any matter which would make those loan contracts oppressive and the Supreme Court agreed.

GE was not responsible for the Bartles' predicament, the ruling said, and while the couple deserved sympathy, they decided to put their faith in Blue Chip and lawyer Jonathan Mathias, the court said.

"It would make bad law if they could now hold GE responsible for what has occurred," the Supreme Court concluded.

Julian Miles, QC, acted for the Bartles with Paul Dale and Daniel Grove. The Supreme Court said the Bartles' problems were not the lender's fault. "This result is hard for the Bartles, whose rights against those responsible for their predicament, Blue Chip and Mr Mathias, may be of limited value. But it would be quite wrong to hold GE culpable for what has occurred.

"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. They would be unable to proceed on the basis of what borrowers chose to reveal to them, and would have to conduct an investigation into the affairs of the borrowers lest there be something which might render the transaction liable to reopening. They would have to decline to lend at all or to incur additional expense which would certainly be passed on to the borrowers, regardless of the fact that the borrowers were being advised by a lawyer," the court decided.

Adam Feeley, Serious Fraud Office chief executive, has dismissed taking action on Blue Chip.

"Everyone else is convinced Blue Chip was a crime. At most, if it was a crime then we simply can't find sufficient evidence to prosecute," Mr Feeley said.

Blue Chip case

  • High Court, September 2009: went against investors.
  • Court of Appeal, May 2010: favoured the investors.
  • Supreme Court, yesterday: backed financier, not investors.

Anne Gibson | Email Anne

Risks: Appraiser and lender has cozy, repeat-business relationship, Bankruptcy, Caveat emptor canard, Contracts seen as unenforceable or void, Costs of scandals, Courts misunderstand relationship, Follow the money: franchising re-distributes (not creates) wealth, Franchising practiced the same, worldwide, Franchisor corporation created to fail, Fraud, Justice, Law grinds the poor, and rich men rule the law, Lending duty, Lending duty never enforced via regulation or litigation, Lending is subject to expert fraud because it is a credence good service, Life savings gone, Loan pushing, Lost homes, Misrepresentations, Money swears, Ponzi (pyramid) scheme, Predatory franchise lending, Sue the appraiser, Sue the bank, Related company transactions, Undue influence, New Zealand, 20101204 Blue chip

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