Fifty investors in one of the late Allan Hubbard's failed businesses must hand back more than $3 million they have already been paid out.
That is the result of a High Court decision determining how investors in the company, Hubbard Management Funds (HMF), should be repaid.
In the ruling, Justice Lester Chisholm accepted a method for distribution of HMF's assets put forward by Allan Hubbard's wife, Jean.
While the judge believed this provided "the greatest prospect of overall justice and fairness" for investors, HMF's statutory managers said yesterday it meant 50 people now needed to return more than $3 million they had already been paid out.
The managers, from accountancy firm Grant Thornton, refused to answer questions yesterday on what would happen if people had already spent the money or invested it elsewhere.
The managers said they were "now reconstructing each investor's position under the approved method".
However, they warned that the court's decision on the method of distribution could be the subject of an appeal, which would delay payouts.
If it stands, the model of distribution ordered by Justice Chisholm will see the cash HMF investors had in the fund paid back first.
After this, any remaining assets will be used to pay returns on investments.
The method will ignore statements showing returns and capital growth that Allan Hubbard provided to investors on March 31, 2010.
The judge said there were "fundamental problems" and discrepancies with these investor statements, which said the fund should be worth a total of $89 million.
In May this year, there was about $35.9 million left in the fund for distribution after a payment of $9 million was made to investors in March.
As well as HMF, Grant Thornton manages another frozen Hubbard business - Aorangi Securities.
The statutory managers said yesterday they might now be unable to return almost 100c in the dollar to Aorangi investors because the ownership of some of the failed company's assets was in dispute.
In papers submitted to the High Court, Jean Hubbard was disputing the beneficial ownership by Aorangi of $60 million in assets, the statutory managers said in their 11th report.
The court case to confirm that the assets belong to Aorangi and not the Hubbards has a provisional hearing date of October 29 in Timaru.
The High Court challenge meant the possibility of a significant loss to investors, the managers said. If the $60 million of assets were to be available to Aorangi investors, then returns would be close to 100c in the dollar.
"It is our view that the Hubbards did not dispute the fact that these assets belonged to Aorangi," the managers said.
"Our reason for seeking a court declaration is to confirm that the correct action was being taken."
The assets in question were transferred to Aorangi by the Hubbards. They then attempted to transfer those same assets to several trusts, the managers said.
"The unwinding of those subsequent transactions back to the Hubbards was a deliberate and considered act because on our analysisthe legal processes in the original transactions were ineffective and invalid."
The managers said sufficient funds were on hand to make a further 3c capital payment to investors on July 11. This would bring the total repayment to investors to 15c in the dollar, they said.
Separately, the managers said there had been progress in recovering other third party loans valued at about $39 million.
- Additional reporting APNZ