Hamish Fletcher

Hamish Fletcher is a business reporter for the NZ Herald

Trustees helped draft Hanover prospectus, court told

Former Hanover Finance directors say the company's trustees were 'intimately engaged' in drafting a prospectus that the FMA claims was misleading. Photo / NZPA
Former Hanover Finance directors say the company's trustees were 'intimately engaged' in drafting a prospectus that the FMA claims was misleading. Photo / NZPA

Hanover Finance's trustee was "intimately engaged" in the drafting of an allegedly misleading prospectus that forms part of Financial Markets Authority civil action, a court has heard.

Six former Hanover directors and promoters - Mark Hotchin, Eric Watson, Greg Muir, Bruce Gordon, Sir Tipene O'Regan and Dennis Broit - are being sued by the FMA over what it alleges are misleading or untrue statements made in offer documents.

The FMA is seeking compensation for investors who put $35 million into Hanover Finance, Hanover Capital and United Finance between December 2007 and July 22, 2008.

Now two trustees, NZ Guardian Trust and Perpetual Trust, are caught up in the proceedings as third parties after Hotchin issued a claim against them.

Guardian was the trustee of Hanover Finance, while Perpetual was the trustee of Hanover Capital and United Finance.

Hotchin claims the two trustees held a duty of care to investors and that they should contribute to any damages payable if the FMA's case succeeds, his lawyer Nathan Gedye said.

However, Guardian and Perpetual have applied to the High Court at Auckland to have Hotchin's claims against them struck out.

While the trustee did have duties to investors, Guardian's lawyer Ralph Simpson these were not responsibilities that make it liable in this case.

Its duties did not extend to ensuring the truth of Hanover's prospectus, other than confirming that the terms of the offer to investors complied with the trust deed, Simpson said during submissions in court yesterday.

But Gedye argues the claims should not be struck out and said this morning the trustee was "intimately engaged in the drafting" of the Hanover Finance's December 2007 prospectus.

The trustee's solicitor had made a number of handwritten comments about disclosures on reinvestment rates and matters of liquidity in a draft of the prospectus that was sent back to Hanover, he said.

"While the trustee is disclaiming any real responsibility, he has endorsed an entry in the prospectus publicly stating he represents the interest of all current and future deposit holders," Gedye said.

"At a strike out stage, it cannot be safe to summarily find that the trustee's duties and responsibilities for this prospectus are so limited as to prevent any action," he said.

If Chief High Court Judge Helen Winkelmann, who is hearing the application, agrees to strike out the claims the trustees would no longer be third parties in the FMA's proceedings.

While the claims are being brought against Guardian and Perpetual by Hotchin alone, he was acting as a representative of the other directors associated with the case, Gedye said yesterday.

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