The Court of Appeal has turned down a bid by trusts related to Mark Hotchin's family to throw out claims there wasn't a direct link between the assets held in trust and the family beneficiaries.

Justices Mark O'Regan, Terence Arnold and Douglas White dismissed the appeal by KA No 4 Trustee and KA No 3 Trustee, whose assets include Hotchin's incomplete multi-million dollar mansion on Auckland's Paratai Drive, according to a judgment released today.

The trusts were seeking to strike out interim preservation orders made by Chief High Court Judge Helen Winkelmann earlier this year.

The trustees claimed the High Court ruling imposed a punitive element as it led to property being frozen "merely because the holder of the property had some association with the relevant person."


The Appeal Court rejected the claim, saying "it would be surprising if a protective regime such as the provisions in this case left outside of its net any issues held in discretionary trusts.

"Such vehicles are often established for the express purpose of placing assets beyond the reach of creditors, and can be vulnerable to successful challenges on the basis that the intention of the establishment was to defeat creditors," the judgment said.

The bench of judges decided it would be too early to strike out the Financial Markets Authority's pleading at this stage, and that it would be more appropriate for it to proceed to discovery and a substantive hearing.

The trustees also sought to strike out an FMA claim that there was an arguable case the KA4 trust was a "sham", saying the regulator hadn't supported its argument with enough detail.

The judges accepted the FMA's pleading was "simplistic and needs amplification and refinement" and needs amending, but didn't need to be struck out at this stage.

The FMA was awarded costs.