Hotchin's Fiji project Pacific Point back in court

The case is against Skyking Investments and HF Residual Obligations.

A court fight over a Hanover Finance-linked resort in Suva will begin this month as a Fijian lender has moved to get its mortgage over the site registered ahead of a company owned by Mark Hotchin.

The former principal of Hanover, Hotchin obtained the mortgage when his interests bought it back from Allied Farmers for $1, which was reported in 2014.

The case is being watched by Kiwis who lost their deposits in the Pacific Point resort complex, marketed back in the early 2000s as a "hidden jewel" in Fiji.

However, only the earthworks had been completed when Hanover Finance sold its assets to Allied Farmers in 2009.

A contest over the mortgage will be heard over a four-day trial in Fiji that starts on Feb. 27.

Court documents in the case before the High Court of Fiji, obtained by BusinessDesk, allege Dominion Finance hasn't been repaid what it lent. Suva-registered Dominion Finance should not be confused with the New Zealand company of the same name which collapsed in 2008.

In the documents, Dominion Finance said it lent FJ$1.5 million and provided a facility for a further FJ$9 million. It claimed the development was abandoned and funds that Hanover said were spent on the project had not been.

The case is against Skyking Investments, and Hotchin's HF Residual Obligations. Hotchin could not be reached for comment.

Fijian-registered Skyking is owned by New Zealand company Ocean Pacific Resort Holdings.

Ocean Pacific, which is owned and directed by developers Kevin Storey and Brent Gibson, was put into receivership at the request of Hanover back in 2010 but was removed from statutory management in 2013 at the request of Allied Farmers Investments.

Dominion's statement of claim said FJ$3.49 million was owing at March 2013, and that while it was given security in the form of a mortgage over the title, it now can't register its mortgage because of the Hanover loan.

It said the Hanover mortgage was not properly executed because it didn't have the Fijian central bank's approval.

The finance company said Hanover should prove that it actually advanced the money and that those funds were applied to the project. It wants FJ$3.49 million plus 19 percent interest.

It said Storey and Gibson abandoned the subdivision project, leaving behind substantial creditors in Fiji.

Storey said in an email that Hanover failed to fund the development, "so the argument is really one between Hanover and Dominion as competing creditors of the project."

Former Hanover co-owner Mark Hotchin

Meanwhile, Kiwis who paid deposits for properties in the resort hope the Fiji case might help them get their money back, because they still hold caveats over the land.

Brett Donaldson, along with two other investors, settled a case against Skyking Investments and Ocean Pacific Resorts on Feb. 14 last year. They had filed their claim in 2017.

Donaldson paid $50,000 for his lot, valued at $200,000, while the others each paid deposits for two plots that were valued at $543,000 for Jonathan Chiswell and $377,000 for two lots for Stephen Wilton.

While other investors in the development were given back their deposits, Donaldson said the trio were in a different position because their contracts were different.

The Auckland High Court documents in the trio's case alleged Skyking breached their agreements when the head title on the development was given to Hanover. The trio wanted the return of their head lots or other compensation.

The statements of defence in that claim denied the allegations and said that while Donaldson bought the property mortgage-free, he knew that Skyking would mortgage the land. The defendants also said Hanover ceased funding the project.

The case never went to a full hearing. It was defended by Skyking and associate judge Hannah Sargisson said in 2018 the investors faced "significant hurdles."

The proceeding never involved Hanover directly as a defendant, although a minute in the case said "there is a possible discussion as to the joinder of Hanover Finance."

"Mr Hotchin, who is behind Hanover Finance, may be a key element in producing any resolution of this proceeding. There may be a sensitivity, however, over joining Hanover precipitately," the court note said.

According to court documents, the agreement allowed the purchaser to initially take title to a head lot, free of mortgages or encumbrances, pending the issue of new titles for the sale lots. They would later be transferred back to the developer.

That meant that if the development failed to go ahead the purchasers would at least have a freehold title to "a big piece of dirt in Fiji right on the coast," Donaldson said in an affidavit.

In November 2005, Skyking signed a deal to receive $3 million payable in two stages, and in return, on Dec. 21, Hanover registered a mortgage over all the head lots in the development.

"The way things ultimately transpired is that in 2009 Hanover experienced well-published financial issues. Since then the development has stalled. Hanover refused to release its security over head titles and as a result the vendors have been unable to refinance the project," a preliminary judgment in the case said.

Donaldson and Chiswell have already had a tough time in the courts, having been convicted in 2013 of fraud due to their association with Motor Trade Finance dealer Mark Whelan.

In 2014 their convictions were quashed in a Court of Appeal ruling that was critical of the way the Crown handled the case. In 2015 a District Court judge said they could not be prosecuted again by the Serious Fraud Office.

However, the pair were both bankrupted along the way, although later discharged.

"If Dominion is successful and has priority to the mortgage then Hotchin's interests will be bumped to unsecured creditor and that will put us in the front of the queue in terms of getting our deposits back," Donaldson told BusinessDesk.

Donaldson acknowledged the deposits weren't large sums of money in today's terms but noted the waterfront titles he laid claim to would be quite valuable today.

"We thought the developers were our mates and our friends, we trusted them ... I never panicked because I thought the longer it takes, the more money it is going to be worth," he said.

Storey added: "We did everything in our powers to ensure the purchasers received their deposits back and they did.

"Donaldson and Co were on a different contract with far greater returns once completed (risk and reward). Unfortunately as a result of Hanover and the GFC they suffered along with myself and my family."