An estimated $6.4 million from the sale of a luxury Auckland mansion is due to go to former Hanover Finance director Mark Hotchin - if he wins a stoush with the financial markets watchdog.
Mr Hotchin paid $12.2 million towards the construction of the seven-bedroom Paritai Drive house, which has been bought by businessman Deyi Shi for $39 million, the Herald revealed on Friday.
The luxury mansion, which has an indoor swimming pool and parking space for 12 cars, was built on land belonging to one of Mr Hotchin's family trusts.
The trust - called KA No 4 - spent $17.4 million on buying the land the mansion is built on.
As at April, $26.9 million had been spent on the house and other improvements to the property.
KA No 4 had paid $14.7 million of this amount. It used $1.5 million of its own funds and borrowed the rest from a third party, ASAP Finance, and another Hotchin family trust, called KA No 3.
This year Mr Hotchin went to the High Court at Auckland seeking a declaration from Justice Helen Winkelmann on his entitlement to the $12.2 million he spent on construction.
Mr Hotchin and KA 4 disagreed on how money from the sale of the mansion should be divided once creditors were paid and the trust got its funds back for the land.
KA 4 said Mr Hotchin's claim was unsecured and would come behind all others in the proceeds of the sale. If there was a shortfall it should be borne by Mr Hotchin, KA 4 said.
Mr Hotchin disagreed and said the burden of any shortfall should be shared between him and the trust.
In her decision in July, Justice Winkelmann declared Mr Hotchin had a $12.2 million unsecured interest in the property but that his interest fell behind other claims on the proceeds of the property's sale.
When ranking the claims in order of priority, the judge said the debt owed by KA No 4 to ASAP Finance should be paid first.
Justice Winkelmann did not specify how much this debt was but documents held by property website QV say KA No 4 had a mortgage with ASAP worth $6.41 million plus interests and costs at the end of August.
After ASAP, the judge said the $7.3 million owed by KA No 4 to KA No 3 should be next in order of priority for funds.
The $17.4 million spent by KA No 4 on the land was next, followed by the amount this trust spent on improvements to the property, which was $1.5 million.
The total amount to be paid from the sale of the property before Mr Hotchin is entitled to what he spent on the house is therefore $32.6 million.
This means there is about $6.4 million - around half of what the Mr Hotchin spent on the construction - from the $39 million sale price left to go to to the former Hanover director.
However, Mr Hotchin's interest in the property has been frozen by the Financial Markets Authority pending its civil claim against him.
Mr Hotchin and five other former Hanover directors or promoters are being sued by the FMA for allegedly misleading or untrue statements in finance company prospectuses.
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.
Mr Hotchin's lawyer did not respond to requests for comment before deadline.