Former Hanover Finance director Mark Hotchin has changed tack in his defence of Financial Markets Authority allegations, saying the finance company's trustees, Guardian and Perpetual, are also to blame for investors' losses.
It emerged in the High Court in Auckland this morning that Hotchin and fellow defendants to an FMA civil suit have filed an amended pleading which implicates the trustees.
The FMA proceedings claim Hotchin and the other directors and promoters of Hanover Finance misled investors who put $35 million into the company in the first half of 2008.
Defendants also include former directors Tipene O'Regan, Greg Muir and Bruce Gordon, and promoters Eric Watson and Dennis Broit.
Lawyers for Guardian Trust have been arguing against being implicated, saying that it was not the trustee's responsibility to vet Hanover's prospectus, which the FMA says included misleading and untrue statements.
The trustees are seeking to have Hotchin's amended statement of defence "struck out" before the matter goes to trial.
Guardian Trust's lawyer Ralph Simpson told Chief High Court Judge Justice Helen Winkelmann that his client did not have responsibility to vet the prospectus, only to ensure that the company was not breaching its trust deed.
Simpson said the trustee had a duty of care to investors but argued that it did not extend to oversight of the issue of investment documents.
It did require the directors to issue a representation that the prospectus included no misleading statements but any duty to do due diligence on the documents was "wholly unrealistic", he said.
Simpson noted that litigation in the case "will go on for years" and will be "horrendously expensive for any party to the proceedings".
He said unnecessary additions to the litigation would only eat into the money eventually available to pay out investors.
The hearing is continuing.
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