Blue Chip mortgages go to appeal

Judy and Bruce Bartle. Photo / Martin Sykes

The case of two Whangarei pensioners who are trying to have their Blue Chip-related mortgages set aside goes before the Court of Appeal this week.

The court will hear the urgent appeal from Bruce and Judy Bartle on Wednesday and Thursday.

Six weeks ago the Bartles lost their High Court case against finance company GE Custodians over $639,000 in loans made to them so that they could invest in Blue Chip. The amount was more than their home was worth.

They believed that they were borrowing $137,000 and that Blue Chip would put up the rest under the joint venture agreement they signed.

With the failure of the property investment scheme they have been left liable for the total.

The Bartles argued that the loans were "unconscionable" and "oppressive", and that the company that arranged them - Tasman Mortgages, at the time owned by Blue Chip - altered the loan documents to describe them as "self-employed investors" so they would qualify.

But Justice Tony Randerson said that GE did not know anything about the terms of the Blue Chip investment or that the Bartles could not support the loans. He said Tasman was not the agent of GE.

The Bartles' barrister, Paul Dale, said the agency issue was central to the appeal and the couple would argue that there was an agency relationship between Tasman and GE, and therefore GE was fixed with the knowledge of the transaction.

"What's at the heart of it is a lending practice where GE no longer require proof of income from people to whom they lend ... and it's a dangerous process.

"That means reliance upon Blue Chip became a central issue, and Blue Chip was not an organisation upon which you could rely."

Dale will put an Australian case before the court. The judgment relates to a property investment scheme similar to Blue Chip called Streetwise.

The case concerned three couples who took out large mortgages on their homes to enter into joint ventures with Streetwise.

The idea was that the couples would make capital gain on investment properties and Streetwise would contribute to the servicing of the loans. The loans came from a financier arranged through Streetwise, and investors were urged to use Streetwise's lawyers.

The court ruled that the mortgages be set aside.