Victims at mercy of financier

Owen and Margaret Dawe may lose their house to pay back financier GE. Photo / Doug Sherring

Financier GE Money says it will not put any victims of the Blue Chip collapse out on the street, following a Supreme Court decision last week clearing the way for the lender to enforce its rights.

The court said that loans of $629,000 to Whangarei pensioners Bruce and Judy Bartle were not oppressive, even though the amount was significantly more than their home was worth.

The loans were organised through a broker as part of the Blue Chip scheme, allowing the Bartles to invest in an Auckland apartment.

The apartment was eventually sold by GE for just $250,000, and the lender is now seeking the balance of the loan.

The Bartles took the matter to the High Court, which ruled that their lawyer was negligent in his advice to them. However it threw out their claim that the loans were oppressive.

The couple appealed and won. But the Supreme Court has now said that GE did not know about Blue Chip's involvement in the loans, and was not aware of anything that would make the loans oppressive.

"Whilst the Bartles are deserving of much sympathy, it was they who chose to put their faith in Blue Chip and their chosen lawyer," the court said.

"It would make bad law if they could now hold GE responsible for what has occurred."

The Bartle matter was seen as a test case for dozens of Blue Chip victims. With all legal avenues now exhausted many face forfeiting their homes to repay lenders such as GE, which funded their investment in the failed property scheme.

Aaron Baxter, managing director of GE Money New Zealand, said it had about 100 Blue Chip-affected customers.

"Our intention is not to arbitrarily remove anyone from his or her owner-occupied residence.

"Rather, we'll work with each customer on a case-by-case basis to come to an appropriate solution where possible."

It would be writing to customers within the next week, asking that they contact GE before January 31. There would be no recovery action before that date.

It would also accept hardship applications up until then, and hoped to have those resolved by the end of February.

The options included reduced or deferred payments, capitalisation of arrears and reverse mortgages.

"We completely understand that some Blue Chip customers are extremely anxious about what lies ahead, so we encourage them to contact us as soon as possible," Baxter said.

However, he made the distinction between properties people lived in and investment or holiday properties.

"This concession [to keep people in their homes] does not, and has never, applied to non-owner occupied investment properties or secondary residences. Delaying the sale of these properties would have subjected our borrowers to larger losses as interest accrued and the market corrected."

It's a distinction of which Manurewa couple Owen and Margaret Dawe are well aware.

They have lost count of how much they owe GE - two years ago the loan had accrued to $1.5 million. Their only income is the pension. "It's just ridiculous to say the loan wasn't oppressive," Owen said.

The couple invested in two central Auckland apartments through Blue Chip, which GE has since sold.

They now stand to lose their home and a bach at Lake Tarawera, which has been in the family for several generations. As part of the dispute with GE they have been locked out of the property.

"We would never be able to pay [the loan]; they can skin us, they can sell the house, the bach and everything I've got and just leave me with a shirt and there's still going to be a shortfall of ... $1 million or so," Owen Dawe said.

When the Herald on Sunday spoke to her this week, Christchurch widow Helene Philpott said it was "the first day I haven't cried" following the Bartle decision.

Philpott has already taken out a form of reverse mortgage on her Russley home to cover her $170,000 loan from GE.

Like many other investors, the 72 year old had no idea she had been described as "self-employed" on the loan documents so she would qualify.

It emerged that her deposit on a yet-to-be-built Auckland apartment was not held in trust and Blue Chip had no right to sell the property.

"Why did so many of them get mortgages if [GE] were doing their job properly? We didn't know what we were going in for; it was glossed over."

Australian lender Challenger Financial Services also funded some Blue Chip loans.

"We will continue to work with defaulting borrowers on a case-by-case basis," a spokesman said.

GE MONEY has a specific Blue Chip number that investors can call: 0800 281 998.