Hamish Fletcher

Business reporter for the NZ Herald

Hotchin aims to recoup money put into mansion

Former Hanover director Mark Hotchin leaves the High Court in Auckland yesterday. Photo / Brett Phibbs
Former Hanover director Mark Hotchin leaves the High Court in Auckland yesterday. Photo / Brett Phibbs

Former Hanover director Mark Hotchin has gone to court seeking some reimbursement for the millions of dollars he paid towards the construction of a yet-to-be-sold Auckland mansion where he and his family once planned to live.

Mr Hotchin, who appeared in the High Court yesterday, said he put about $12 million towards the cost of a seven-bedroom, 12-car-garage mansion on Paritai Drive.

The title of this property is held by one of Mr Hotchin's family trusts, called KA No 4.

After the collapse of Hanover in 2008, Mr Hotchin couldn't afford to put any more money into the house and KA No 4 took over the responsibility of building the mansion.

KA No 4 used some of its own funds and also borrowed money from another Hotchin family trust.

Mr Hotchin had planned to lease the Paritai Drive house from KA No 4 and live in it for up to 30 years with his family, the court heard yesterday.

But Mr Hotchin said he ended up in a financial position where he couldn't commit to the lease, especially given the expenses including tens of thousands of dollars in rates and the hiring of a full-time gardener at an annual cost of $60,000.

"We cannot afford to take the lease and we do not want to live in New Zealand."

The house is almost ready for sale and Mr Hotchin, who is bringing a claim against KA No 4's trustee, said he wants some reimbursement for the construction costs.

"I believe KA4 Trust has been enriched as a result of the improvements [on the house] which I paid for," he said. "I never expected to gift these to KA4 Trust ... the trust has ended up with the benefit of the improvements I paid for."

KA No 4 trustee's Queens' Counsel, Jim Farmer, said his client would have been content to settle with Mr Hotchin on how funds from the sale of Paritai Drive would be split up.

"Why we can't settle with them is because of the FMA," he said.

The Financial Markets Authority, which put a freezing order on the Paritai Drive property in late 2010, was represented in court yesterday by Queens' Counsel Colin Carruthers.

The FMA is seeking compensation for investors from Mr Hotchin and other former Hanover directors or promoters and because of its claim, Mr Carruthers said the authority had an interest in Mr Hotchin's asset position. "The concern that arises is the risk that the plaintiff [Hotchin] is incentivised to seek orders that identifies his interests in the construction costs as the lowest possible level," he said.

SFO Hanover probe ends

Eric Watson says the Serious Fraud Office's decision not to lay criminal charges against anyone associated with Hanover Finance "finally sets the record straight" and he has questioned the price to taxpayers of the 32-month investigation.

The SFO has spent longer mulling over whether to lay charges in the wake of the Hanover collapse than in the case of any other finance company it has probed.

Mr Watson, former Hanover promoter, said: "I have been confident from the outset that the Hanover companies were responsibly governed and managed.

"... I have to ask, what this investigation has financially cost the New Zealand public?"

Acting SFO chief executive Simon McArley yesterday said the Hanover probe was "by far the most extensive and challenging of the finance company investigations undertaken by SFO".

"While many may view the conduct that occurred at Hanover Finance as egregious, that alone is not sufficient for me to commence a prosecution."

McArley said the "significant public interest" of the case justified "the vast time and resources that SFO has dedicated to it".

Despite not laying charges, the SFO believes that serious questions arose during its investigation.

Former Hanover director Mark Hotchin told One News the decision should come as a "comfort".

"I would have thought that you would take some comfort from knowing there was no criminality, there was no theft or any wrongdoing," he said.

"It takes a long time to go through a long process, they did an extraordinary job, it was very in-depth."

In April last year, a Court of Appeal judgment said Hanover failed in mid-2008, causing substantial losses to depositors.

About 16,000 people with investments totalling more than $500 million lost most of their money through the failure of Hanover and related companies, and the sale of assets to Allied Farmers. After receiving complaints the SFO launched an investigation in September 2010.

- Staff reporter

- NZ Herald

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