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Finance company not liable for oppressive Blue Chip scheme

By Tony Johnson - 5 Jan 2011

The Supreme Court has found GE Finance not liable for its role in financing Mr and Mrs Bartle's failed Blue Chip investment.

Who was involved?

Mr and Mrs Bartle were an elderly couple looking for an investment to fund their retirement. Blue Chip offered an investment based on the purchase of a central Auckland apartment.

The investment proved to be a poor one. During the scheme's operation, most of the Bartles' returns were funded by their own contributions.  After a mortgagee sale of the apartment, the Bartles lost the majority of their investment.

All the principal players in the scheme including the Blue Chip companies, Mark Bryers (the leading figure behind Blue Chip) and the Bartles' solicitor were unable to pay any sum the Court might award against them.

The Bartles therefore sued GE, who had given a loan over the Bartles' family home and the apartment so the Bartles could fund the investment. The Bartles claimed the finance agreement with GE was an oppressive contract under the Credit Contracts and Consumer Finance Act (the "Act").

Although GE initially won in the High Court, the Court of Appeal overturned that decision. So GE appealed to the Supreme Court.

The Supreme Court's decision

The test for whether a contract is oppressive is a legal test under the Act.  The lender must know the contract was oppressive, or know circumstances that suggest that the contract may be oppressive. In deciding what the lender knew, the Court may look at all the surrounding circumstances to decide whether a credit contract is oppressive.

In this case, one of the surrounding circumstances was the Blue Chip scheme that the credit contract was financing. However, the Court found that GE had no knowledge of the scheme and no knowledge of anything that might alert it to problems with the scheme.

A solicitor, Mr Mathias, helped the Bartles into the Blue Chip investment and helped them arrange the loan. Although he was supposed to act for the Bartles, he was in reality looking out for Blue Chip's interests.  He failed to carry out the duties he owed to the Bartles as their solicitor.

Although the solicitor was negligent, GE did not know that. Therefore, GE was entitled to rely on Mr Mathias to point out the uncommercial aspects of the scheme to the Bartles and to act competently. Accordingly, there were no circumstances that should have put GE on notice that the surrounding circumstances of the credit contract made it oppressive.

Although the Court sympathised with the Bartles, that was not enough to impose liability on GE. After all, the Bartles were the ones who entered the transaction.


Choose your professional advisers carefully.  It can be acceptable for a lawyer to act for both a lender and borrower, but this sometimes gives rise to a conflict.  If you are unsure about such an arrangement, raise your concerns with an independent third party, such as another lawyer.

If you require any further information, or have any questions about how the decision could affect you, please contact Tony Johnson or your usual contact at Martelli McKegg on 09 379 7333.


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