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Blow for Mum’n’Dad investors in Blue Chip ruling

Blow for Mum’n’Dad investors in Blue Chip ruling

By Paul McBeth

Dec. 3 (BusinessDesk) – The Supreme Court has ruled finance company GE Custodians wasn’t to blame for a Whangarei couple’s decision to invest in the failed Blue Chip property investment group.

The judgement, given by Justice Peter Blanchard, found that a $630,000 loan to Bruce and Dorothy Bartle from GE, the local finance unit of multi-national General Electric, was not made on oppressive terms.

The Court of Appeal erred in determining the couple didn’t get independent advice, the bench ruled.

The Bartles lost heavily when a loan-backed investment in a $552,000 Auckland apartment went bad, and was later sold for $250,000.

They were trying to block a mortgagee sale of their $400,000 property by GE after Blue Chip collapsed.

Jonathan Mathias, who was recommended to them by a Blue Chip salesman, acted on their behalf, and though he was “found to be negligent” in the High Court ruling, “his independence was not the subject of challenge” and GE was entitled to believe his advice to the Bartles was sound.

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

Blanchard said it would be “quite wrong to hold GE culpable for has occurred” where the Bartles received independent advice, and GE wasn’t aware of any matters that could have put the loans in breach of reasonable commercial practice.

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“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,” he said. “That would be both inefficient in economic terms and productive of unfairness to lenders if they failed to discover something which was later found to make the loan oppressive.”

The Bartles took out several loans with Blue Chip affiliated-Tasman Mortgages Ltd. which then approached a GE subsidiary on their behalf. The money was then used to buy the Auckland apartment.

The case has been sent back to the High Court for further determination of issues, and the Bartles were ordered to pay GE $25,000 in costs.

(BusinessDesk)

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