Watson, Hotchin want judge only trial

RICHARD MEADOWS
Last updated 11:57 25/03/2013

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Hanover owners Eric Watson and Mark Hotchin are attempting to have their defamation suit against former Shareholders' Association chairman Bruce Sheppard heard by a judge alone, rather than a jury.

The pair settled with the NZSA earlier this month for an undisclosed sum, but are forging ahead with a multi-million dollar parallel action against Sheppard.

The legal action relates to media comments made by Sheppard in 2009, alleging Hotchin and Watson acted improperly in relation to the debt restructuring of Hanover Finance, which collapsed in 2008 owing $554 million to 16,500 investors.

At the High Court in Auckland this morning, Watson and Hotchin's lawyer Julian Miles (QC), said there would be a series of periods in Hanover's history which would have to go under the microscope.

"Under the guise of a defamation action, effectively, this a a major commercial litigation," he said.

The wisdom of establishing a moratorium for repaying investors would come under scrutiny, as would the sale of Hanover's remaining assets to Allied Farmers.

Miles said Sheppard had suggested both events were allegedly set up as smokescreens to sidestep liquidation or receivership, and avoid the obligations Hotchin and Watson had agreed to as part of the debt repayment proposal.

Sheppard's defences include honest opinion, which protects people saying what they genuinely believe, and qualified privilege, which can grant immunity from defamation for malice-free statements made in the course of duty.

Miles said that he had appeared in a number of defamation cases, and even the simple ones were not easy.

"When you get into the defences of honest opinion and qualified privilege...there are layers of awkwardness behind all of these."

A further, more unusual, argument that the plaintiffs had no reputation left to damage would add another whole layer to the case, said Miles.

"That's going to be tricky."

Miles questioned how convenient it would be for a judge to explain the implications of tomes of legal documents, which would be dredged up throughout the case, to a jury of laypersons.

The "constant difficulties and niggles" could extend the duration of the trial by at least a week, he claimed.

"They will come out with a judgment of course, but the extent to which it would be influenced by the evidence is something I have absolutely no confidence about."

Miles suggested that the fact that the Serious Fraud Office had still not reached an outcome after years of investigating Hanover "speaks volumes for the complexity of what they're investigating".

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The Financial Markets Authority has also filed a $35m civil lawsuit against the Hanover directors, including Hotchin and Watson.

Sheppard's lawyers are expected to give their submissions in support of a jury trial this afternoon.

- BusinessDay.co.nz

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