Hanover investor takes legal action

A contractor at the Hotchin mansion yesterday. Photo / Dean Purcell

One of Hanover's investors is pursuing legal action against the company because he felt its founders "hoodwinked" elderly investors and contradicted the advice of experts.

Tom Brosnahan, who had a "substantial sum" invested in United Finance, says the Security Commission's court action against former Hanover boss Mark Hotchin, which froze his assets, was the biggest boost investors had received in two years.

Mr Brosnahan said the court order breathed new life into his hopes for compensation. He is part of a group of 3000 investors who were aiming to collectively sue Hanover early next year.

The retired investor said he was taking legal action because he felt Hanover "deluded" investors into accepting two deals - a moratorium and a deal with Allied Farmers - which experts had warned against.

"I felt personally hoodwinked into keeping with the company when they knew full well they were going to crash.

"They knew they had a naive, vulnerable group of people, retired people, desperate to get their money back. So people accepted - they were deluded by these people."

After Hanover's promise to pay investors back over five years failed, investors voted to swap their deposits for Allied Farmers shares in December last year. The shares were issued at 20.7 cents but are now worth 2 cents.

Auckland lawyer Tim Rainey, who is representing the group of investors, said the collective case was not a witch hunt.

He did not want to hound people, but instead secure compensation.

"If we launch the action it will sweep more broadly than focusing on one person. There are many parties who have a role here, and certainly our action does not focus on one man, but a much broader failure."

He was bracing himself for a "long and difficult struggle against some fairly well-resourced defendants who will fight tooth and nail".

Mr Rainey said the group gave their full backing to the Securities Commission, and hoped to use the resources of the state in its civil proceedings.

He expected the case to be ready in February.

Hanover collapsed in July 2008, freezing $550 million owed to 16,500 investors.

Those investors have been critical of Hotchin's and co-founders' flamboyant lifestyle since the collapse. Much of their anger has focused on Hotchin's incomplete mansion on Paritai Drive, which is valued at $30 million.

Construction work continued at that address yesterday, with at least 10 contractors' vehicles on site.

A site manager would not answer questions about the future of the property. Hotchin's representatives have said it is not for sale.

This story has been corrected from an earlier version that referred to Brosnahan as a Hanover shareholder.