Archive | Hanover

Appeal Court rejects Hotchin trusts’ bid to overturn ruling freezing assets

Published 20 August 2012

The Court of Appeal agreed with Chief High Court Judge Helen Winkelmann, in a ruling on Friday, that the courts should not strike out the Financial Markets Authority’s allegation that a trust set up by Hanover Group director Mark Hotchin was a sham.

The trustees of KA No 3 Trustee Ltd & KA No 4 Trustee Ltd appealed in June against Justice Winkelmann’s decision last December making orders preserving the assets of trusts which might be liable to investors for breaches of the Securities Act.

Justice Winkelmann struck out the sham pleading in respect of the KA3 Trust but found there were sufficient particulars to support an arguable case of sham in the case of the KA4 Trust. The Court of Appeal dismissed Mr Hotchin’s appeal against Justice Winkelmann’s orders in April.

The Financial Markets Authority filed a $35 million civil claim against Mr Hotchin & 5 other Hanover Group directors & promoters in March over money invested & reinvested in the group in 2007-08. No hearing date has been allocated for this proceeding yet. In anticipation of these civil claims, the authority sought an order under section 60H(1)(f) of the Securities Act requiring the trustees to transfer the assets of each of the trusts to a specified person, to be held on trust pending determination of the civil proceedings against Mr Hotchin.

The basis of this application was the authority’s pleading that Mr Hotchin’s children, who are “associated persons” of Mr Hotchin under the Securities Act, are discretionary beneficiaries of the 2 trusts. The authority pleaded that the trust was a sham from inception, and the consequence of that was that property held by the KA4 trustee was in reality property of, or property held for the benefit of, Mr Hotchin.

The Court of Appeal said the argument on behalf of the trustees, that the categories of section 60H should be construed as capturing only assets against which judgment against the relevant person could be enforced, was unsustainable. “Rather, the scheme of the legislation seems to create a broad jurisdiction to grant preservation orders, leaving for the discretionary phase the issue of whether the assets are likely to be available to meet any judgment obtained by aggrieved persons against the relevant person.”

The Court of Appeal also saw no substance in the Bill of Rights argument run by counsel for the trusts, Dr Jim Farmer: “The essence of this argument was that an asset preservation order is an unreasonable search & seizure under section 21 of the Bill of Rights. That is predicated on the false assumption that the preservation order is ‘unreasonable’. It is also predicated on an assumption that section 21 is a measure for the protection of property rights, which appears to run counter to the views expressed by both the chief justice and Justice Peter Blanchard J in Hamed versus the Queen that section 21 is essentially a measure for the protection of privacy rights.”

The president of the Court of Appeal, Justice Mark O’Regan, delivering the court’s decision, said: “It would be surprising if a protective regime such as the provisions in issue in this case left outside of its net any assets held in discretionary trusts. Such vehicles are often established for the express purpose of placing assets beyond the reach of creditors, and can be vulnerable to successful challenges on the basis that the intention of their establishment was to defeat creditors.

“In our view, it would be premature to strike out the Financial Markets Authority’s pleading at this stage. Rather, the matter should proceed to discovery and to a substantive hearing, so the High Court can make a fully informed assessment of the interests of the beneficiaries, the need to protect the position of aggrieved persons and the likelihood or otherwise that such protection will yield any ultimate benefit to aggrieved persons, before deciding whether the order under section 60H(1)(f) should be made.”

The Financial Markets Authority argued in the High Court that the trusts were set up to conceal Mr Hotchin’s continued enjoyment of the trust property. The arguments were:

The structure of the trust deeds gave significant control to the settlerAt the time the KA4 Trust was established, Mr Hotchin was the settlor & sole trusteeSince May 2009 for KA4 trustee, and April 2010 for KA3 trustee, the sole shareholder & director has been accountant Tony Thomas. Mr Thomas is used by Mr Hotchin as a director & shareholder in many companies associated with Mr HotchinThere is an absence of evidence of “push back” by trustees. The Financial Markets Authority had found only one incident where the trustees declined to do what Mr Hotchin had wanted with the assets of the trust.There are instances where the trustees have acted purely in Mr Hotchin’s interests, seemingly at his discretion. In particular, the Financial Markets Authority pointed to the “Matapana Rd transaction”. The Matapana Rd property is a consolidation of 4 properties on Waiheke Island, purchased by interests associated with Mr Hotchin for development as a beach house. The Matapana Rd transaction involved the transfer by the KA4 Trust of one of the 4 Matapana Rd properties to KA3 Trust in exchange for a forgiveness of debt owed by KA4 Trust to KA3 Trust. KA3 Trust then provided an indemnity to support certain of Mr Hotchin’s obligations in relation to one of the restructurings of the Hanover Group. The Matapana Rd property was used in support of that indemnityThe authority also pointed to dealings in respect of a property at Paritai Drive, Auckland. This is a consolidation of 3 residential properties, on which a large & very expensive residence is partially constructed. Although the property is owned by the KA4 Trust, Mr Hotchin personally spent $12 million on the construction of the house on the property. There was no formal documentation as to the basis upon which this was occurring, or even initially any informal understanding with the trust. Then, when Mr Hotchin ran out of money to fund construction, KA3 Trust advanced KA4 Trust $2.5 million, on the basis of an understanding reached with KA4 Trust that: (i) the KA4 Trust would grant Mr Hotchin & his family a long-term lease of the Paritai Drive property, and (ii) if, when the property was sold, the value of the house was less than the total cost of its construction, the amount of the loan by KA3 Trust to KA4 Trust would be reduced by the difference between valuation & cost.

“Dr Farmer argued that any question of sham was effectively removed by the introduction of independent trustees, but that does not seem to us to necessarily follow. If the KA4 Trust was, when established, a sham, it is not clear to us that subsequent actions taken pursuant to the sham trust deed could convert a sham into a valid trust.

“We accept that the pleading is simplistic and needs amplification & refinement, but we do not see this as a reason to strike out the sham pleading in its entirety. It may be that, if the pleading remains as is, any order made under s 60H(1)(a) in respect of assets held by the KA4 trustee will be limited to assets in respect of which the court is satisfied a resulting trust in favour of Mr Hotchin should be imposed.”

Earlier story:

1 April 2012: FMA names 6 directors in $35 million Hanover claim

 

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Attribution: Judgment, story written by Bob Dey for the Bob Dey Property Report.

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FMA names 6 directors in $35 million Hanover claim

Published 1 April 2012

Financial Markets Authority chief executive Sean Hughes disclosed in a TV1 interview today that the authority filed a civil claim against 6 Hanover Group directors & promoters on Friday over $35 million invested & reinvested in 2007-08.

Mr Hughes said in his interview with reporter Greg Boyed the authority had filed its claim against Hanover Finance Ltd directors Mark Hotchin, Greg Muir, Sir Tipene O’Regan & Bruce Gordon and Hanover Group Ltd directors Eric Watson & Dennis Broit.

Mr Hotchin & Mr Watson held control of the group but Mr Muir was chairman during the relevant period. Mr Muir left The Warehouse Ltd as its chief executive in 2003. He quit as Hanover chairman in April 2009, and quit as Pumpkin Patch Ltd’s chairman in late 2010 amid rising criticism of him over his Hanover role.

Sir Tipene O’Regan, 73, chairs the Ngai Tahu Maori Trust Board.

Mr Gordon was Hanover Group chief operating officer and a director of Hanover Finance.

Mr Broit, of Sydney, was finance director of Australian hotel & apartment developer & investor Mirvac Group for 23 years and has been a director of New Zealand property company McConnell Ltd since 2007. He & Mr Watson signed off Hanover Finance’s December 2007 prospectus as promoters because they were on the group board, not Hanover Finance’s.

Mr Hughes said in his television interview the Financial Markets Authority alleged certain statements made in various fundraising documents & advertisements over 2007-08 were misleading & untrue.

The proceedings relate to statements made in the December 2007 prospectuses, subsequent advertising and the March 2008 prospectus extension certificate. The authority is seeking declarations, pecuniary penalty orders & compensation for investors who made new investments & reinvestments totalling $35 million during the period 7 December 2007-22 July 2008.

Mr Hughes said investors should regard the possibility of getting back 100c:$1 as remote. He didn’t rule out further claims being made, either against the 6 named today or others, but he remained comfortable with the advice he’d got in December that this case didn’t merit a criminal prosecution.

Hanover suspended acceptance of new investments & repayment of existing deposits in July 2008, affecting $554 million of deposits held by 16,500 investors in 3 Hanover companies. The company proposed a debt restructure and won overwhelming support for it in December 2008.

In December 2009, Allied Farmers Ltd won approval from its own shareholders and investors in 4 categories of Hanover debt securities to acquire the net $396 million portfolio of Hanover Group finance assets. The value of those assets got down to $124 million by May 2010, and to $94.3 million 3 months later.

Earlier story:

16 December 2011: Regulator to take civil case against Hanover directors & promoters

 

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Attribution: TV1 release, Hanover company documents, story written by Bob Dey for the Bob Dey Property Report.

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Judge rejects Gapes’ claim of Hanover sham to hide related-party deal

Published 8 March 2011

Associate Judge Jeremy Doogue has rejected property developer Tony Gapes’ accusation that Hanover Finance Ltd engaged in a sham loan agreement with him to hide a related-party transaction.

In a decision out yesterday, Associate Judge Doogue granted Allied Farmers Investments Ltd’s application for summary judgment for $755,520 ($600,000 principal plus interest at 20%, compounded monthly) against Mr Gapes and his company, Fenton Projects Ltd. The Allied Farmers “bad bank” company took over Hanover Finance Ltd’s interest in December 2009.

The $1 million loan from Hanover Finance in 2007 (plus $160,000 capitalised interest) sat behind a $1.4 million Westpac NZ Ltd mortgage and was for the leasehold interest in a property at 77 Carlton Gore Rd, Newmarket, bought for extra access to the Lion Brewery site on Khyber Pass Rd, which counsel Sandra Grant said at the 15 February hearing Fenton had tendered to buy in a joint venture with Hanover, then owned by Mark Hotchin & Eric Watson.

Fenton didn’t buy the brewery site, an AMP Capital Investors NZ Ltd-managed fund did, only to renege last September. Lion Nathan Pty Ltd’s attempt to sell the 5ha since it resumed control has so far fallen flat, with offers falling well short of expectations.

Counsel for Allied, Nathan Gedye, said at the hearing the loan had expired in August 2009 and was varied in December 2009, without mention of a joint venture agreement.

However, Mrs Grant said there was evidence to indicate the joint venture agreement existed, or there was a pattern of payments by Hanover outside the norm for a lender. She claimed a set-off for payments made on behalf of the joint venture. An unusual feature was that Mr Gapes’ loan guarantee was capped at $600,000 on a loan starting at $1 million, with $160,000 of interest capitalised and subsequent costs shared 50:50.

Mr Gedye contended it was a normal standalone loan agreement, in no way a joint venture: “Had this been part of a joint venture, at the very least that would have been recorded. It was simply to assist with purchase of the leasehold at 77 Carlton Gore Rd.”

Mrs Grant said Hanover wanted the documents recorded in a way that would avoid them being referred to as related-party loans: “If it was documented as a loan to the joint venture, that would have been a related-party loan. Instead, it was documented as a loan to Fenton Projects guaranteed by Mr Gapes, and Mr Gapes said it was agreed between the parties that Fenton would hold 77 Carlton Gore Rd on behalf of the joint venture and be the borrower. The agreement was that Fenton Projects Trust would take title to the property.”

In December 2009, the loan had reached $1.55 million but was varied so the sum owing was reduced to $600,000, and Mr Gapes’ deed of guarantee & indemnity was capped at $600,000.

Looking at the defence’s claim of a partnership involving several Hanover companies and consequent set-off claim, Associate Judge Doogue said Mrs Grant hadn’t asserted that the corporate veil should be lifted: “That being so, it would be impermissible to gloss over the separate legal identity of each of the companies in the Hanover group….

“In the case of a sham, it is necessary, in order to establish the existence of such an arrangement, to demonstrate that the parties had a common intention that the document is not to create the legal rights & obligations which it gives the appearance of creating.

“Not surprisingly, the plaintiff did not accept that it had such an intention. It therefore becomes a matter of examining what inferences can be drawn from the evidence to see whether there is any substance to the suggestion of a ‘sham’. It is necessary to make some reference to the evidential bases upon which the defendants founded their submission that set-off was available.”

The judge said the related-party factor “does not have any significance concerning which parties in the Hanover Group were to be parties to the joint venture. If it demonstrates anything, it is that if a Hanover company was lending, it would not lend to another Hanover company, whether on its own or associated with a third party. It does not throw any light on the question of whether the company which does the lending is thereby to be drawn into the joint venture and assume obligations under those arrangements to other members of the joint venture, which is the key issue.

“I have difficulty following how the suggested motive for allegedly dressing up the transaction as something different from what it was would accomplish the objective in view, namely the wish to disguise related-party transactions. It is inherently unlikely that the plaintiffs would have agreed to an arrangement which does not appear to be rational.”

Associate Judge Doogue said there was no other evidence of an agreement of the kind the defendants were advancing: “Mr Gapes did not provide any details about the circumstances in which the parties arrived at a common intention to disguise the transaction. There are no particulars of the person with whom this arrangement was agreed or when it was agreed to. I consider that the suggestion that this arrangement was a sham has an air of unreality about it and cannot be viewed as providing the basis for an arguable defence.”

The judge said the best the defendants had been able to do to tie Hanover Finance into a joint venture with other Hanover entities was that a member of Hanover Property’s staff had suggested “a loan of $1 million would be available from Hanover Finance…. In my view, it is impossible to argue from such grounds that Hanover Finance was a party to the arrangements between the defendants and Hanover Property. The statement was not made on behalf of Hanover Finance and did not commit that company to provide the loan. The statement simply set out where the funds were available from. It was an equivocal act. What it may amount to (although I accept there is no evidence on this point) is one Hanover company understandably viewing another company in the same group as a preferred financier. But this does not make the latter a party to any joint venture if it takes up the opportunity to provide funds.”

The judge accepted it was reasonably arguable that Hanover Finance’s contractual rights were linked in to those between the defendants and Hanover Property, enabling a set-off claim, but said this on its own didn’t determine the defendants’ liability. He accepted that the loan write-off arrangements had the effect of reconfiguring the contract, but not to the extent of abrogating the no-set-off clause.

Earlier story:

15 February 2011: Gapes’ counsel alleges Hanover sham in Carlton Gore deal

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Attribution: Judgment, story written by Bob Dey for the Bob Dey Property Report.

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Gapes’ counsel alleges Hanover sham in Carlton Gore deal

Published 15 February 2011

A regular little loan not repaid on due date or a joint venture camouflaged to avoid related-party lending restrictions?

Allied Farmers Investments Ltd counsel Nathan Gedye argued the former before Associate Judge Jeremy Doogue in the Auckland High Court today, Sandra Grant argued the latter for Fenton Projects Ltd & director Tony Gapes. The judge reserved his decision.

The $1 million loan from Hanover Finance Ltd in 2007 sat behind a $1.4 million Westpac NZ Ltd mortgage and was for the leasehold interest in a property at 77 Carlton Gore Rd, Newmarket, bought for extra access to the Lion Brewery site on Khyber Pass Rd, which Mrs Grant said Fenton had tendered to buy in a joint venture with Hanover, then owned by Mark Hotchin & Eric Watson.

Fenton didn’t buy the brewery site, an AMP Capital Investors NZ Ltd-managed fund did, only to renege last September. Lion Nathan Pty Ltd’s attempt to sell the 5ha since it resumed control has so far fallen flat, with offers falling well short of expectations.

Mr Gedye said in submissions in court today the Hanover loan was assigned to Allied Farmers Investments when Allied Farmers bought the Hanover & United Finance Ltd loan books in December 2009. The loan had expired in August 2009 and was varied in December 2009, without mention of a joint venture agreement.

However, Mrs Grant said there was evidence to indicate the joint venture agreement existed, or a pattern of payments by Hanover outside the norm for a lender. She claimed a set-off for payments made on behalf of the joint venture. An unusual feature was that Mr Gapes’ loan guarantee was capped at $600,000 on a loan starting at $1 million, with $160,000 of interest capitalised and subsequent costs shared 50:50.

Mr Gedye contended it was a normal standalone loan agreement, in no way a joint venture: “Had this been part of a joint venture, at the very least that would have been recorded. It was simply to assist with purchase of the leasehold at 77 Carlton Gore Rd.”

Mr Gedye said a set-off was contractually excluded and there was no interdependence between obligations – the Hanover Finance loan on the one hand and Fenton dealings with the group’s separately managed property arm on the other: “You’d have to lift the corporate veil for the set-off defence to succeed….. On the defendant’s case this is a joint venture, if it is one, only with Hanover Property.”

Mr Gapes’ dealings with Hanover companies in the same period included his purchase of the 7.7ha first stage of the Five Mile project beside Queenstown Airport in November 2009 from Hanover Finance. Mr Gapes’ assertion in today’s court case was that he was providing Hanover with substantial business benefits by buying the property at Five Mile, where Progressive Enterprises Ltd would build a supermarket. He believed he also had Progressive committed to the brewery site transaction.

But Mr Gedye said Associate Judge Hannah Sargisson made it clear in her 2007 decision in Hanover Finance’s summary judgment case against another Auckland developer, Andrew Krukziener, that dealing with various subsidiaries – or a parent company – didn’t make a set-off possible: for a set-off to succeed, it had to be with the same entity.

In Mr Krukziener’s case, he had a loan from Hanover Finance but other dealings with Hanover Group Holdings Ltd (it’s been called Axis Property Group Holdings Ltd before & since, Omara Property Group Holdings Ltd and, since last September, OPGH Ltd). But his case faltered when he couldn’t demonstrate that Hanover Finance was a party to a joint venture agreement with Hanover group companies, or had any liability under that agreement.

In Mr Gapes’ case, Mr Gedye said: “He has asserted this loan was reduced (by $954,000) to take into account Hanover Finance’s interest in the property. He says the reason so much of the loan was written off was to compensate or take into account joint-venture obligations. He said Fenton & Hanover Property agreed to the write-off, though Hanover Property wasn’t a party to the loan agreement. It was reduced to $600,000.”

Mrs Grant said Hanover wanted the documents recorded in a way that would avoid them being referred to as related-party loans: “If it was documented as a loan to the joint venture, that would have been a related-party loan. Instead, it was documented as a loan to Fenton Projects guaranteed by Mr Gapes, and Mr Gapes said it was agreed between the parties that Fenton would hold 77 Carlton Gore Rd on behalf of the joint venture and be the borrower. The agreement was that Fenton Projects Trust would take title to the property.

“Significantly, at 2 points in the chronology, Hanover Property – or whichever Hanover party is the joint venturer – purports to act on behalf of Hanover Finance, that Hanover Finance would provide $1 million of the funding. What it shows was that Hanover Property was in a position to commit its sister company Hanover Finance to a significant loan as part of the joint venture. The second significant fact of the chronology is it agreed to the $600,000 set-off, Mr Gapes said to reflect Hanover’s share of the unpaid cost of the variation agreement.”

Mrs Grant cited accounts where Hanover Equity Partners Ltd had paid half of a number of costs totalling $33,000 – the valuation, legal expenses, setting up the Westpac loan, Burton & Co’s costs as solicitor for the joint venture, Buddle Findlay’s account (guarantee & loan indemnity), Green Group’s account for drafting a resource consent application: “We have a history of Hanover picking up half the costs, not only of the development but of interest costs. We have a history of Hanover accepting it should pay these costs.

“Hanover Property had not been meeting those costs for a considerable period of time and Fenton had had to meet those costs on the way through. Reduction in the loan shows very clearly the close relationship between Hanover Property & Hanover Finance, it (Hanover Property) was effectively acting on behalf of Hanover Finance and Hanover Finance was effectively part of these joint-venture arrangements.

“The primary argument of the defendant is the documents were a fiction to avoid related-party transaction status.”

Associate Judge Doogue: “They were a sham?”

Mrs Grant: “Well, that would be one way of looking at them. Significantly there is no contradiction to that evidence.”

As for the corporate veil, Mrs Grant said Hanover itself proposed various companies as joint-venture partners and to provide loans: “Email correspondence shows the draft for the joint-venture document emanated from Hanover, so it was selecting the Hanover party that would be the joint venturer. Secondly, it shows Hanover was exchanging various companies in its group with whom Fenton was to contract.

“In the cases where it’s been held the corporate veil not be lifted in New Zealand, it’s because identity separation ought to be preserved by the courts. Here we have various companies being put up by the Hanover group. Hanover Group Ltd was proposed as the joint venture in the variation. In the next correspondence, Miss Dwyer (Hanover) refers to a loan from Hanover Property to be repaid. Then the company referred to in the last draft is Hanover Group Holdings Ltd. In the next correspondence, Mr Gapes’ affidavit said at Hanover’s request amounts were to be paid to Hanover Equity Partners.”

Mrs Grant said there was no logic in Fenton or Mr Gapes walking away from the costs: “Fenton continued to pay the Westpac interest, which was substantial.”

Mr Gedye rebutted the sham allegation: “Evidence commensurate with the gravity of that allegation would need to be supplied – it’s tantamount to an allegation of fraud or deceit. Even if the sham argument were accepted as tenable, that’s a matter between the defendants & Hanover Property, there’s no evidence Hanover Finance was ever party to a sham. Mrs Grant relies on a confidentiality clause and demands not made as evidence for a sham. Neither is capable of supporting it, both are consistent with normal commercial dealings and there equal alternative reasons for those conditions & provisions.

“There’s no single mention of Hanover Finance as involved in the alleged joint venture and they (documents) were all unsigned and presented as a record of incomplete dealings on the joint venture where Mr Gapes & his company were the counter-parties. If there ever were a signed joint venture agreement, Mr Gapes would have produced it. Where is the final agreement? Mr Gapes has not produced it. The court can infer the joint venture did not proceed.”

Earlier stories:

1 October 2010: Lion Nathan resumes brewery site control as AMP & Haumi write off $162 million

23 November 2009: Gapes buys quarter of Five Mile site

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Attribution: Court hearing, story written by Bob Dey for the Bob Dey Property Report.

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Hotchin sticks with $1000/week, judge says Porsche & Mercedes have to stay in NZ

Published 21 December 2010

Expatriate Hanover Finance group director Mark Hotchin ended up with no more to live on after a 3-hour hearing on his position before Chief High Court Judge Helen Winkelmann today. Media, too, were declined access to more than the day’s court proceedings & the judge’s order.

Mr Hotchin said in an affidavit the $1000/week living allowance he was granted under a 10 December court order wasn’t enough – he needed 7 times that – but withdrew an application to have an increase in living expenses he could take from assets frozen under that court order. He also wanted to ship 2 family cars to his current home on the Gold Coast – a $200,000 Mercedes and his wife’s $90,000 2004 Porsche Cayenne SUV.

Justice Winkelmann declined the request for the cars, decided to defer until 14 February her decision on whether the Hotchins could transfer art & jewellery to Australia, but said they could have other household items. Withdrawal, until the February hearing, of the application for a larger allowance meant the judge wasn’t required to decide on whether the Hotchins should have money for private school fees, or what to do about his request for access to funds to pay legal fees and a tax bill due in March.

The judge found there was no reason for the Hotchins not to use money they had in Australia to pay some specified bills rather than have an increase in the allowance or access to company funds in New Zealand. Counsel Bruce Stewart QC said Mr Hotchin was pursuing business opportunities in Australia. Among his expenses were a $1600/week payment to his ex-wife and a weekly payment to his parents-in-law.

Neither Mr Hotchin nor his lawyers have had access to a report which Christchurch insolvency practitioner David Crichton prepared for the Securities Commission, on which the commission based its successful December application to freeze Mr Hotchin’s New Zealand assets.

Justice Winkelmann decided today to keep them & the media in the dark on the contents of the Crichton report, and also ruled against giving media access to affidavits already filed in the case.

She set timetable orders for the commission and lawyers for Mr Hotchin & family trusts to meet before the 2-day hearing of Mr Hotchin’s application to rescind or vary the freeze order, set down for Monday-Tuesday 14-15 February.

Mr Stewart told Justice Winkelmann the Porsche was registered in Mr Hotchin’s name but was actually his wife’s car, which she used to ferry round their 3 young children. Mr Stewart said Mr Hotchin was going to ship the cars to Australia last Friday, at a cost of $1700, but took them out of the container to play safe by the freeze order. The family had to use rental cars, and the cost of that would match the shipping bill within a few months.

While Justice Winkelmann said it wasn’t appropriate for the court to tell Mr Hotchin he had to reduce his lifestyle, she also noted that the couple had $A240,000 with them in Australia. Securities Commission counsel Pauline Courtney said an undertaking from Mr Hotchin on removing more money or expensive personal effects from New Zealand wasn’t satisfactory because there was no easy way to enforce it. The judge, rather than ruling immediately on that, remarked again that the Hotchins had a large amount of cash available to them in Australia.

Earlier stories:

16 December 2010: Court freezes Hotchin’s assets

30 November 2010: SFO at interview stage of Hanover investigation

19 November 2010: Alloway questions Hanover value assumptions as receivers called into Matarangi Beach company

10 September 2010: Allied Farmers’ loss $77.6 million

12 August 2010: Allied gets Hanover book down to double figures

1 July 2010: Allied alleges Hanover breaches in transactions “lacking commercial rationale”

31 May 2010: $396 million of Hanover assets now down to $124 million, with count not yet complete

10 May 2010: Hanover portfolio value slides again

23 April 2010: Allied Farmers starts Hanover sales programme

3 March 2010: Allied share price drops to 8.5c after $220 million Hanover writedown

24 December 2009: Existing Allied stakes cut to fractions

23 December 2009: Allied price hovers above 10c

20 December 2009: Allied says all Hanover agreement conditions satisfied

17 December 2009: Allied share price plunges again after Hanover deal, but Alloway has eye on strong future

9 December 2009: Allied Farmers shareholders support Hanover purchase

18 November 2009: Hanover turns in $102 million loss

11 November 2009: New boy in Hanover hot seat trots out woeful page of excuses

20 March 2009: Hanover makes scheduled restructure payments, gets new chairman

10 December 2008: Hanover restructure wins overwhelming support

21 November 2008: Hanover calls debt restructure meeting

19 September 2008: Hotchin & Watson to inject up to $96 million into Hanover

24 July 2008: Commission opens Hanover investigation

24 July 2008: $554 million affected as Hanover Finance suspends investments & repayments

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Attribution: Court hearing, story written by Bob Dey for the Bob Dey Property Report.

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Court freezes Hotchin’s assets

Published 16 December 2010

The High Court froze the assets of Hanover Finance Ltd director Mark Hotchin last Friday, had a session on the decision in closed court yesterday and will have another court session next week before a substantive hearing expected to be set down for February.

The court froze the assets of Mr Hotchin & 2 trusts on the application of the Securities Commission, without notice. Mr Hotchin has applied to revoke the order and the February hearing will be about that. Among his assets is a huge mansion still uhder construction on Paritai Drive, Orakei.

Next week’s court call is to determine matters arising from the freeze decision.

Securities Commission chairman Jane Diplock said yesterday it took its action under sections 60G & 60H of the Securities Act “with a view to ultimately freezing sufficient property & assets of Mark Hotchin to meet any civil claims that may be brought by investors. Any such claims would relate to those who invested in Hanover Finance, Hanover Capital & United Finance on the basis of any disclosure documents that are proved to have included untrue statements.

"The Commission decided to take this action against Mr Hotchin after deciding it was in the public interest to do so, enabling us to preserve assets from being sold or transferred.

“This is a purely preventive measure that is in no way indicative of civil or criminal liability or of the commission’s views in that regard. The commission’s investigation has not concluded.”

Hanover partners Mr Hotchin & Eric Watson sold their troubled business’ portfolio of finance assets & properties to Allied Farmers Ltd in December 2009 when Allied Farmers Ltd shareholders voted to approve the purchase by Allied Farmers Investments Ltd of the finance assets of Hanover Finance & United Finance Ltd on the terms of an exchange agreement, and to issue new Allied Farmers shares as consideration for the acquisition.

 

Earlier stories:

19 November 2010: Alloway questions Hanover value assumptions as receivers called into Matarangi Beach company

10 September 2010: Allied Farmers’ loss $77.6 million

6 September 2010: Alloway to quit at Christmas, Allied Farmers gets waiver to delay accounts

23 August 2010: Trustee calls receivers into Allied Nationwide

12 August 2010: Allied gets Hanover book down to double figures

10 August 2010: Allied pulls capital-raising, Loughlin sees solutions to trustee concerns

4 August 2010: Allied Farmers seeks $19.3 million in new capital

20 July 2010: Allied gets banking extension

1 July 2010: Allied alleges Hanover breaches in transactions “lacking commercial rationale”

9 June 2010: S&P cuts Allied Nationwide rating, pressure still on

2 June 2010: Allied Nationwide gets capital support from parent as it makes writedown provision

31 May 2010: $396 million of Hanover assets now down to $124 million, with count not yet complete

10 May 2010: Hanover portfolio value slides again

23 April 2010: Allied Farmers starts Hanover sales programme

3 March 2010: Allied share price drops to 8.5c after $220 million Hanover writedown

24 December 2009: Existing Allied stakes cut to fractions

23 December 2009: Allied price hovers above 10c

20 December 2009: Allied says all Hanover agreement conditions satisfied

17 December 2009: Allied share price plunges again after Hanover deal, but Alloway has eye on strong future

9 December 2009: Allied Farmers shareholders support Hanover purchase

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Attribution: Securities Commission release, counsel, story written by Bob Dey for the Bob Dey Property Report.

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