Hotchin house can secure loan

Mark Hotchin. Photo / NZPA

A family trust linked to former Hanover boss Mark Hotchin has permission to use a multimillion-dollar Paritai Drive mansion as security for a loan so the property can be completed and sold if necessary.

But the seven-bedroom mansion, with Hotchin's New Zealand-based assets and others owned by two family trusts, will remain frozen after a High Court ruling released yesterday.

The assets were put on ice in December last year when the Securities Commission - now the Financial Markets Authority - launched an investigation into whether the registered prospectuses of Hanover Finance, Hanover Capital and United Finance breached the Securities Act when Hotchin was a director.

The FMA has yet to lay any charges, but has indicated it would decide whether to do so by the end of this year. 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.

The asset preservation orders were put in place to ensure that if any investors wished to take civil action against Hotchin in the future, there would be money available should they win.

This week the former Hanover boss failed in his second bid to overturn the orders.

When the application was made in September, the lawyer representing two family trusts linked to Hotchin applied to vary the orders to allow the Paritai Drive mansion to be used as security for a loan.

The money borrowed would be used to complete the property and increase the value that would be recoverable once it was sold. In her ruling released yesterday, Justice Helen Winkelmann said following the hearing the application was dealt with on a "consent basis".

Justice Winkelmann suppressed the amount of security that was applied for.

The Weekend Herald understands the trusts and the FMA reached an agreement allowing the property to be used as security against the loan.

In September, Hotchin argued the orders were preventing him from earning an income because no one wanted to deal with him while they remained in place.

Because of this, Hotchin claimed he was forced to rely on his family to top up his $1000-a-week living allowance. He also sought permission to sell his assets so he could pay money owed to creditors. Once this had been completed, Hotchin argued there would be no need for the preservation orders because his assets - including most of the $12 million he invested in the Paritai Drive property - would be used up paying debt.

Despite this, Justice Winkelmann ruled the orders should remain and also apply to any future assets Hotchin earns or is gifted from "family-controlled entities". While the Chief High Court Judge gave Hotchin leave to sell assets to pay his tax bill and some other debt, he would need to pay other creditors from his living allowance, she said. She acknowledged $1000 a week was too little and said Hotchin could apply for more. Hotchin will appeal against the decision, a spokesperson told the Weekend Herald.