Hotchin and Watson sue over comments made by former Shareholders' Association chairman.

High-profile businessmen Mark Hotchin and Eric Watson are fighting a High Court decision allowing allegations that their reputations are generally bad in relevant respects to be raised in mitigation of damages in a defamation case.

The pair, who were involved with the failed firm Hanover Finance, are suing the Shareholders' Association and its former chairman Bruce Sheppard for comments he made about them.

Sheppard made numerous statements on television, radio, emails and on blogs which were critical of Hotchin and Watson.

These include comments, with which Hotchin and Watson take issue, that they had dishonestly misled investors, that they were "crooks", that there was good reason to believe the pair had participated in GST fraud and that the duo had misappropriated cash belonging to a Hanover company.


The main part of the defamation hearing is not due to happen until next year, but last month lawyers for both sides went to court arguing whether pleaded instances of Hotchin and Watson's alleged past "misconduct" could form part of the defence's case.

These alleged instances include Watson being censured in 1998 by the Securities Commission for buying shares in McCollam Print while negotiating its takeover by an entity related to him.

They also include claims Hotchin breached Securities Commission guidelines in 1999 on insider trading in relation to the sale and purchase of shares of a company called Pacific Retail Group.

In citing these alleged "misconducts" Sheppard is seeking to show Hotchin and Watson were not persons of "particularly good reputation" in relevant respects and that this should be taken into account if any damages are awarded to them.

Hotchin and Watson last month attempted to have the "particulars of misconduct" struck out by the High Court, asserting they were not "proper particulars". The duo's counsel said the defence's allegations of "bad reputation" did not relate to the aspect of Hotchin and Watson's repute associated with the defamation case.

It was also argued the defence's pleadings were "frivolous, vexatious or otherwise an abuse of process" and that they were likely to cause "prejudice and delay".

However, Associate Judge Jeremy Doogue dismissed Hotchin and Watson's strike out application.

"I am of the view that the insider trading allegations and the negative effect that they must have had upon the reputations of the plaintiffs [Hotchin and Watson] would not inevitably be disregarded as irrelevant by the Court when assessing the proposition that publication of the defamatory statements caused substantial diminishment of reputation," the judge said in his decision last week.


The pair are now seeking to have Judge Doogue's decision reviewed in an effort to reverse it.

No date has been set for the review.

- staff reporter