Hotchin freeze order appeal fails

02:47, Aug 17 2012
FACING $35 MILLION LAWSUIT: Action by the FMA under the Securities Act is being taken against Mark Hotchin, pictured, Eric Watson, Greg Muir, Sir Tipene O'Regan, Bruce Gordon and Dennis Broit.
APPEAL DISMISSED: Mark Hotchin has lost an appeal against a freezing order over a trust allegedly linked to him.

Lawyers acting for a trust allegedly linked to former Hanover boss Mark Hotchin have failed in an attempt to have court orders freezing its assets thrown out.

The Financial Markets Authority has freezing orders over the KA No 4 Trust, the owner of the half-built mansion on Auckland's upmarket Paritai Drive that was to be Hotchin's home.

Lawyers for the trust argued the FMA had not particularised its claim and had failed to explain allegations that the trust was a sham.

The appeal was dismissed in a Court of Appeal decision released this morning, with lawyers acting for the trust ordered to pay costs.

The judges said if they accepted arguments Hotchin was not connected to the trust because he was not a trustee it would have wide-ranging effects in other cases.

"Such vehicles are often established for the express purpose of placing assets beyond the reach of creditors, and can be vulnerable to successful challenges on the basis that the intention of their establishment was to defeat creditors."

The FMA is arguing the trust was a sham, constructed to disguise Hotchin's ownership of substantial assets, and dismissed arguments that this allegation had no grounds for success.

"This is not a case where the allegation of sham has been lightly made," the ruling said.

The FMA welcomed the court ruling. "These [freezing] orders are important for enabling FMA to preserve assets for aggrieved investors pending the outcome of the civil proceedings filed by FMA in March," chief executive Sean Hughes said.

The orders against Hotchin, and the trust, were first put in place in December 2010.

The FMA proceedings claim Hotchin, along with four other directors and promoters of Hanover Finance, misled investors who put $35 million into the company in the first half of 2008.

Hotchin and his co-defendants are defending the FMA claim.

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