A bid to modify the Crown's asset freeze of an unfinished Paritai Drive mansion linked to former Hanover director Mark Hotchin has been rejected by the chief High Court judge.
The seven-bedroom, 12-car garage property was part of a decision released by Justice Helen Winkelmann this week following a legal stoush involving the Financial Markets Authority, (FMA), Mr Hotchin and two family trusts associated with him.
The Securities Commission, which became the FMA, froze Mr Hotchin's New Zealand-based assets and those of the two trusts in December 2010.
The asset preservation orders were put in place to ensure if any investors wished to take civil action against the former Hanover director, there would be money available should they win.
About 16,000 investors lost more than $500 million following the collapse of the companies and the sale of Hanover's assets to Allied Farmers.
Although some of the assets were unfrozen last year, the multimillion-dollar Paritai Drive property - held in the KA4 Trust - is still on ice.
Justice Winkelmann ruled last May the KA4 Trustee was prohibited from dealing with the Paritai Drive property in any way. This included selling, transferring or leasing it.
Following this, the trustee applied in September to vary the asset preservation orders so the property could be used as security for a loan.
The money borrowed was to be used to complete the mansion and increase the value that would be recoverable if it was sold.
The Weekend Herald understands the trustee and the FMA reached an agreement allowing the property to be used as security against the loan.
As of May last year, KA4 had put $25 million into the property and Mr Hotchin has invested around $12 million towards construction of the mansion.
According to court documents, Mr Hotchin may also have the ability to claim up to a 30-year lease on the Paritai Drive site.
But in November last year counsel for the KA4 trustee questioned whether any potential rights Mr Hotchin had to this lease could justify the blanket freeze on dealings with the property.
They applied to have the asset preservation orders altered and submitted the potential leasehold could be properly protected by entering a caveat against the property.
This caveat (a hold which can be registered against the property title) would note Mr Hotchin may be able to claim a leasehold interest.
This "would be sufficient to alert potential purchasers to the claimed interest", it was argued.
However, Justice Winkelmann said this week it was not appropriate to replace the existing freezing orders with a caveat.
"From the evidence filed to date, it seems that the property is to have substantial work done before it is ready for sale. When it is ready for sale, there are simple mechanisms ... to allow the lifting of the order to enable a sale to proceed ..."