The cost of failed Hanover Finance boss Mark Hotchin's Auckland mansion has blown out to $43 million, making it one of the country's most expensive homes.
Built over three sections in cliff-top Paritai Drive, often known as Auckland's richest street, the home is at the centre of attempts by Hotchin to make a living while protracted litigation relating to the Hanover Finance collapse plays out.
Hotchin put $12.5 million of his own money into the development, which is owned by a family trust known as KA4. Once completed, the mansion could free up funds for Hotchin, depending on its sale price.
However, his lawyer, Bruce Stewart QC, told the Court of Appeal Hotchin was willing "not to access that $12 million" except by agreement with the Financial Markets Authority or by court order.
The court heard also that a $4.5 million mortgage had recently been approved to complete the development.
That takes the seven bedroom home's total development cost to $43 million, from a previously disclosed $35 million, to take it past the $40 million price tag placed on Russian steel magnate Alexander Abramov's Northland mansion, which was today labelled the country's most expensive home.
The FMA and Serious Fraud Office are both investigating Hotchin, although the FMA is only pursuing civil action. The SFO has yet to complete its investigation into the Hanover collapse.
The cost of the Paritai Drive development was revealed as Stewart argued the High Court had been wrong not to replace "draconian" preservation orders freezing Hotchin's few remaining assets, and that they should be allowed to be replaced with formal undertakings.
Stewart said this was "a less drastic alternative", noted the Australian courts were willing to accept undertakings even in criminal cases, and that Hotchin had fully cooperated with the legal process to date.
It also emerged in the hearing that Hotchin is willing to allow the FMA a claim on future income and assets, if he could keep a specified portion that would allow him to "provide for his family."
"He would look to be able to earn X dollars a year and once he exceeds that amount, he would file an affidavit with the Financial Markets Authority," said Stewart, allowing the regulator to consider whether to freeze income or assets accumulated above that level.
Lead judge Tony Randerson described this as a "completely new proposition", although Stewart said this arrangement had been proposed to the FMA, which was difficult to deal with and "would not have a bar of it."
Under heavy questioning from the three-judge bench to be more clear about the grounds for appeal, Stewart said Hotchin had instructed him to offer the undertakings on both Paritai Drive and future income and assets as a "fallback position", which had not been set out in detail in the Court of Appeal application.
High Court Judge Helen Winkelmann ruled against replacing the preservation orders with undertakings last September, saying undertakings "provide a less satisfactory protection for aggrieved persons" without alleviating the difficulty Hotchin said he was having making an income to support his family.
The judges questioned Stewart closely on why undertakings would give Hanover creditors greater comfort than the existing orders, which are capable of taking into account any forgotten, concealed or other assets that might come to light in the course of time.