A Crown claim that a trust linked to Mark Hotchin is a "sham" has been rejected and struck out by the Chief High Court Judge.
But Justice Helen Winkelmann says a claim against a different trust associated with the former Hanover director has "sufficient particulars to support an arguable case of sham".
The trusts involved in Justice Winkelmann's decision, KA3 and KA4, were frozen by the Securities Commission (now the Financial Markets Authority) along with Hotchin's New Zealand-based assets 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, money would be available should they win.
About 16,000 investors lost more than $500 million following the collapse of Hanover and the sale of assets to Allied Farmers.
During Hotchin's appeal against the freezing orders last February, the FMA argued the trusts held property as bare nominees, or that they were shams, and the properties in reality were owned by the former Hanover director.
After the appeal, Justice Winkelmann kept the freezing orders against Hotchin in place but revoked some of those over KA3 and KA4.
However, her decision on the appeal said she could not follow the FMA's argument that the trusts were a sham, or emerging sham, and asked it to file an amended statement of claim setting out its case more clearly.
In the High Court at Auckland in November, the FMA put the sham argument forward again and said there had been no intention to create legitimate trusts when KA3 and KA4 were set up in 1999 and 2003.
FMA lawyer Kristy McDonald, QC, alleged the trusts were set up to conceal Hotchin's "continued enjoyment" of normal ownership of trust property.
The assets in KA4 include a multimillion dollar mansion in Paritai Drive, and in KA3 a Waiheke holiday home with its own private beach.
At the same hearing in November, lawyers representing the trusts, Julian Long and Isaac Hikaka, applied to have the proceedings against them struck out and argued some amounted to an abuse of process.
Long and Hikaka suggested the claims were no more than a "fishing expedition" by the FMA.
In a decision on the hearing released last week, Justice Winkelmann struck out the FMA's claim that KA3 was a sham.
But in the case against KA4 the judge said there were "sufficient particulars to support an arguable case of sham".
"Aspects of how it was operated, particularly in relation to the Paritai Drive property, suggest that assets of the trust have been allowed to be treated as Mr Hotchin's," Justice Winkelmann said.
The judge requested the FMA to file another amended claim on how it would formulate its case against KA4, but mentioned she was not pleased with parts of the Crown's case.
The pleading and particulars of the FMA were inadequate, Justice Winkelmann said.
"The fact that KA3 and KA4 and I had to wait to hear oral submissions [from the FMA] before being provided with any meaningful detail in relation to the allegation of sham is deplorable."