A stoush between Hanover and its insurance broker has been parked to enable the failed finance company's directors and promoters to enter into settlement talks with the Financial Markets Authority, says a lawyer in the case.
The FMA is taking civil action against Hanover's Mark Hotchin, Eric Watson, Greg Muir, Bruce Gordon, Sir Tipene O'Regan and Dennis Broit over allegedly misleading or untrue statements made in offer documents.
A fight involving the defendants in the FMA case and a group of Hanover companies against their insurance broker - Apex General - was due to begin in the High Court at Auckland this morning but was adjourned.
Appearing briefly before Justice John Fogarty this morning, Apex Queen's Counsel Les Taylor said the parties had reached an "interim settlement".
"The parties have reached what I refer to in my email as an interim settlement ...which will hopefully enable the parties to this proceeding and also the parties to the related FMA proceeding to reach a settlement, which is in the interest of all parties, including of course the investors in Hanover. So that's the purpose of the adjournment. It's not certain that that settlement will be reached but every endeavour will be made to achieve it if possible," he told the judge, who adjourned the case and gave the parties leave to come back to the court if necessary.
Outside court Taylor said all he could reveal was that the case was adjourned to enable settlement discussions to take place between the FMA and the defendants in that case and Apex and Hanover.
Hanover's lawyer, Nathan Gedye, QC, said he could not comment.
The FMA has issued a statement saying that as civil proceedings were currently before the Court, it was unable to comment.
According to documents filed with the court in October, a number of Hanover-related companies - together with the defendants in the FMA case - were claiming Apex breached its contract, causing the financiers to lose payments it would have obtained from insurance giant AIG and others to cover costs in the FMA case.
The policies at issue, for directors and officers insurance, were worth up to $50 million.
The plaintiffs were also claiming Apex had been negligent and breached the Fair Trading Act and were seeking an inquiry into losses and judgement for this sum.
According to Hanover's October 2013 statement of claim, Apex had been its exclusive insurance broker and risk adviser since 2004.
Hanover alleged it advised Apex that it required full prospectus cover for 2007 to 2008 policy period, which it says meant cover "for all past, current and future prospectuses pursuant to which claims could potentially be made against directors and officers during the policy period".
After allegedly being advised by Apex that AIG would provide the cover, Hanover requested the broker to renew its D&O policy with AIG.
However the policy, issued in December 2007, excluded D&O cover for losses from claims about prospectuses where the amount to be raised was over $400 million.
In 2011, AIG told Hanover it would not provide cover for two prospectuses which were caught by this endorsement and which are now subject to claims by the FMA. The insurance giant denied it had agreed to grant full prospectus cover.
Hanover took AIG to the High Court and to the Court of Appeal claiming it had full cover, but both these cases were dismissed.
The separate claim against Apex was due to begin today and take up to three weeks, but it never began.
The FMA in its case is seeking compensation for investors who put $35 million into Hanover Finance, Hanover Capital and United Finance between December 2007 and July 22, 2008.
It is also seeking penalty orders against the defendants, and if the claim is successful, the former directors and promoters could each face fines of up to $5 million.