Court rules on Hubbard payout

Allan Hubbard. Photo / Listener

Judge’s ruling means entitlements of others caught up in collapse of business will be significantly less.

The biggest investor in one of Allan Hubbard's shambolic businesses has come out on top after a High Court hearing over how much money he is entitled to.

His success significantly reduces the amount that would otherwise be available to around 300 smaller investors in Hubbard Management Funds, although suppression orders mean the Herald cannot be any more specific.

HMF - one of Hubbard's investment vehicles - was unincorporated, had no separate corporate identity, and traded assets freely with other entities controlled by the late Timaru financier.

Investors in HMF received unreliable statements, with Hubbard seemingly reporting positions based on his intentions instead of the actual situation. However, investors were paid out according to these statements and Hubbard would take the shortfall or benefit if they did not match up with reality.

HMF's statutory managers, who were appointed to a string of Hubbard entities in 2010, have not done the same.

Although investors believed their holdings in HMF were worth $89 million, in 2012 its assets were valued at only $43 million.

The following year, however, the statutory managers revealed investors would be getting all their capital back and they have since repaid $20 million, or 50c in the dollar. Further payouts were on hold awaiting the High Court's ruling in a dispute with HMF's biggest investor, Graham Carr.

Carr, a client of Hubbard for more than 20 years, has deer farming interests and began investing with the Timaru identity in 1991.

The investment in HMF is held by one of Carr's companies that also owned a small stake in Southbury Group, another part of Hubbard's crumbled financial empire.

Although Carr believed he was due significant funds from HMF, the statutory managers came across transactions which they claimed meant he was entitled to nothing.

When the parties could not agree, the statutory managers sought directions from the High Court at Christchurch, and the case was argued in front of Justice Rachel Dunningham last September.

The statutory managers argued that four transactions where money went from Carr's HMF account to one of Hubbard's should be treated as withdrawals and deducted from his net position. If not, Carr's company would be unjustly enriched, at the expense of other HMF investors.

The amount of these transactions is suppressed.

But Justice Dunningham did not agree that the transactions should be treated as withdrawals and directed the statutory managers to ignore them when calculating the Carr position.

"Simply because other investors' entitlements will be less than the statutory managers had previously calculated does not mean that the outcome is inequitable or amounts to unjust enrichment," the judge said last month.

Statutory manager Graeme McGlinn did not wish to comment about the ruling. The statutory management, according to its report, has cost $8.3 million so far.