Update: Hotchin settles with Perpetual before appeal to draw into FMA case
Mark Hotchin, principal of failed finance company Hanover, has reached a confidential settlement with one of Hanover's trustees, Perpetual Trust, leaving only Guardian Trust Co as a party to his Supreme Court bid to have the trustees included in the Financial Markets Authority's civil case against the former lender's directors and promoters.
In mid-2013, the High Court in Auckland's Justice Helen Winkelmann agreed with New Zealand Guardian Trust Co and Perpetual Trust to strike out a claim by Hotchin that would have drawn the trustees into the FMA's civil case, which seeks compensation for investors who lost money in the 2008 Hanover collapse. Appearing in the Supreme Court before Chief Justice Sian Elias, Justice William Young, Justice Terence Arnold, Justice Susan Glazebrook and Justice Mark O'Regan, Hotchin's lawyer Nathan Gedye QC said the case against Perpetual had been abandoned as Hotchin and Perpetual have reached a settlement agreement.
David Cooper is appearing for the NZ Guardian Trust.
The appeal will cover "whether the Court of Appeal was correct to uphold the striking out of Mr Hotchin's third party claims against the respondents."
Gedye argued the facts concerning the Hanover directors and the trustees are "intertwined" and should appear together at the trial because of the information flows between the two, which he said had been accepted by the FMA. The trustees and directors are linked by the harm caused to Hanover investors, regardless of the different actions on each side that may have led to the harm, he said.
"It offends justice that the trustees are not required to contribute," Gedye said, calling the previous decision a "repugnance of justice".
The FMA is pursuing the former Hanover directors and promoters in a civil suit over the period between December 2007 and July 2008 when $35 million was deposited with the failed lender. In April, the Serious Fraud Office closed its investigation into Hanover after deciding not to seek a prosecution, though it will provide information and evidence to assist the FMA's claim.
Hanover Finance froze $554 million of funds for its 17,000 investors in July 2008 after running into financial difficulties, before convincing them to accept a disastrous deal where their debt was swapped for equity in Allied Farmers the following year.
The appeal continues in the Supreme Court.