Former Hanover director Mark Hotchin has labelled civil action against the company's former directors and promoters as "ill conceived".

The Financial Markets Authority is suing Hotchin, Eric Watson, Greg Muir, Bruce Gordon, Sir Tipene O'Regan and Dennis Broit over allegedly misleading or untrue statements made in Hanover offer documents.

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.

The market watchdog is also seeking penalty orders against the defendants, and if the claim is successful, the former directors and promoters could each face fines of up to $5 million.


The amount of the fine, if any, is determined by the court but the 10 causes of action filed against the six men each carry maximum pecuniary penalties of $500,000.

In a media statement this afternoon, Hotchin confirmed the defendants had now filed their statements of defence with the High Court at Auckland.

"It should be clear to the FMA that the facts of this case are completely different from other finance companies that have come before the Courts, and the directors are confident they will not be found liable," Hotchin's media statement said.

"Hanover group operated with a high level of corporate governance, and the Hanover companies had in place sound processes and internal controls which were audited by reputable and competent auditors who at all material times produced favourable and unqualified audit reports," it said.

Hotchin also said the defendants will argue the FMA's claims for penalties and declarations of civil liability "are time barred because the Securities Commission was aware, or ought to have discovered, the matters pleaded in its claim within the 2 years period then required by the Securities Act 1978".