The freezing orders over a multi-million-dollar Paritai Drive mansion linked to former Hanover director Mark Hotchin should be expanded, says the Court of Appeal.

Hotchin's New Zealand-based assets and those of two trusts associated with him were put on ice in December 2010 to ensure if any out-of-pocket Hanover investors wished to take civil action against Hotchin, there would be money available should they win.

The freeze was put in place by the Securities Commission (now called the Financial Markets Authority).

Although some of the orders against the trusts were lifted last year, Chief High Court Judge Helen Winkelmann kept the freezing orders against Hotchin.


The former Hanover director then made a bid to lift the orders and replace them with less restrictive arrangements in the Court of Appeal last month.

However, this was rejected in a decision yesterday from Justices Anthony Randerson, Rhys Harrison and John Wild.

The three judges agreed with Justice Winkelmann's ruling that the freeze should stay in place and said the orders gave the court more effective powers of supervision.

The court also ordered Hotchin to pay the FMA court costs for the appeal.

FMA chief executive Sean Hughes welcomed the decision and said these orders "were important for enabling FMA to preserve assets for aggrieved investors pending the outcome of the civil proceedings filed by FMA last month".

The FMA has launched civil action against six former Hanover directors and promoters, including Hotchin and Warriors co-owner Eric Watson. It is seeking to have fines of up to $30 million imposed on the six defendants and to gain compensation for out-of-pocket Hanover investors.

The Court of Appeal said Hanover "failed in 2008 causing substantial losses to depositors".

The judges also said the freeze over Hotchin's unfinished Paritai Drive mansion should be "expanded".

About $43 million will have been spent on the house by the time it is completed, of which Hotchin has personally contributed $12.2 million. The mansion is not owned by Mr Hotchin outright but held in a family trust linked to him known as KA4.

"We record our concern that the preservation order as it applies to Paritai Drive should be expanded so as explicitly to prevent KA4 releasing any debt it owes to Mr Hotchin ... or otherwise entering into any arrangement with Mr Hotchin in respect of his interest in Paritai Drive," the judges said.

According to the Court of Appeal, the former director's stake in Paritai Drive appears "potentially to be Mr Hotchin's major remaining asset".

Although Hotchin argued the asset freeze was stopping him from earning a living because no one wanted to deal with him, the Court of Appeal said any "stigma arising from preservation orders" would come about from the FMA's civil action anyway.

Following yesterday's decision, the Weekend Herald can also reveal claims from Hotchin that he is more than $8 million in debt. However, almost all of this debt is owed to a trust which Hotchin and his children are discretionary beneficiaries of.

Hotchin said the money was borrowed "primarily to pay the construction costs at Paritai Drive".

This year the trust went to the High Court at Auckland to seek a judgment on the debt against Hotchin, which the former Hanover director admitted.

The Court of Appeal said yesterday this debt was not straightforward and should not necessarily be deducted from Hotchin's assets.