Related party smear as Hanover and Gapes battle it out
As the hearing on Mark Hotchin’s asset freezing order continued in the High Court at Auckland today, lawyers down the hall were arguing the finer points of murky lending practices of the Hanover empire, including allegations of "fictional" deals to hide related party transactions.
Allied Farmers, which bought the leftovers of Hanover Finance in 2009, is in court trying to get Auckland property developer Tony Gapes to pay a bill related to the joint purchase of land tied up with a failed bid for the Lion Breweries site in Newmarket.
The conflict centres on the status of a joint venture arrangement between Hanover Property – co-owned by Mr Hotchin – and Mr Gapes' Fenton Properties.
Mr Gapes’ lawyer Sandra Grant said Fenton Properties entered a joint venture with Hanover Properties to buy the Carlton Gore Rd property, in 2007, as a subsidiary acquisition to ensure access for developer to the adjacent Lion Breweries site.
Terms of the joint venture were that Hanover Properties, on behalf of Hanover Finance, would lend Fenton Projects $1.16 million, not repayable until the property was sold.
Fenton would hold the title as trustee for the joint venture, to ensure the loan was not seen as a related party loan between companies under the Hanover umbrella.
But Hanover was to be responsible for half the debt and half the profit on sale.
The joint venture bid for the Lion Breweries site did not succeed and Mr Gapes has been waiting to sell his interest and set off a claim for loss against the loan agreement.
Nathan Gedye, the lawyer for Allied Farmers Investments, which took over the assets of Hanover Finance in 2009, said Hanover Finance – a separate legal entity – was not party to the joint venture and the loan was a normal, stand alone agreement which was in no way part of the joint venture.
Ms Grant said Fenton’s struggle to claim for loss demonstrated the way Hanover would interchange companies within the group to suit the joint venture and demonstrated how Hanover did not treat its finance and property arms as separate entities.
Ms Grant argued that having the property held by Fenton Projects as trustee for the joint venture was a way to avoid the loan being seen as a related party loan.
Associate Judge Jeremy Doogue reserved his decision.
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Comments and questions22
Let's hope that the SFO get to the bottom of this murky mess of shams, backroom deals and related party rorts that was Hanover.
Then we will see how Mark Hotchin, Kerry Finnigan and David Henry stand up under proper scrutiny.
Yea bring it on , we will learn all sorts of tricks, these boys are masters at telling bull shit to every one.
It also seems that the terms of this loan including a guarantee from Mr Gapes were changed the day before the loan was sold to Allied Farmers !!!! This just proves that Hotchin ran Hanover solely for his own enrichment, which would be fine if he wasn't using other peoples money!
How does Kerry Finnigan sleep at night with two disasters to his name ( Strategic also ).
A normal person would hide in shame
Interesting reporting on Hanover, but it seems to be to the exclusion of all others. Where is some similar reporting on all the other related party shams and reckless trading, for example at C+M and MFS and Strategic. Come on NBR - get stuck into the mire - there must be plenty of leads to follow up. All this Hanover coverage is begining to smack of a vendetta.
I wonder if Gapes' wife gave evidence too? And if so, for which side? I understand tony Gapes is quite a reputable guy. I wouldn't be surprised if his version was the more believable.
Not sure what Finnigan and Henry have to do with this - i think you mean the rest of the Hanover Board need to suffer scrutiny
Hey Bud investors would have got their money back if borrowers like Gapes paid back the money they borrowed - who's the villain here?
Sorry, Bud Fox is right. If it turns out Hotchin was doing deals he had an interest in with third parties and not disclosing it, then that's out and out fraud by Hotchin on his own company. Hard to blame the third parties - they weren't the ones who had a duty to look after the Hanover investors. I also don't think it's fair to blame the Hanover board if they too were defrauded. Who knows - but it will be interesting to watch this unfold. A lot of smoke. Me thinks a fire.
Hanover were the biggest and did make the most noise and wer eproud of their massive profits - most of which got taken out as dividends. There has been plenty of reporting about others but Hanover was by far the most conspicuous and now, if these reports are something to go on, potentially the worst. Fraud, if proven, is way worse than reckless trading I would think.
I think you will find that both David Henry and Kerry Finnigan were at Hanover in 2009. I am sure the SFO will be looking very closely at this time and at the sale to Allied.
Why was the Gapes loan restrucured on December 17th ? :-
http://www.stuff.co.nz/business/money/4660429/Hanover-Finance-loan-papers-fiction
The Board, the "independent" directors, the Trustee and the auditors need to be examined and held to account. Lives have been shattered by this debacle.
Nice to see balance in the reporting and plenty of comment fro Allied's lawyer Gedye...
"Nathan Gedye, the lawyer for Allied Farmers Investments, which took over the assets of Hanover Finance in 2009, said Hanover Finance – a separate legal entity – was not party to the joint venture and the loan was a normal, stand alone agreement which was in no way part of the joint venture."
By anyone's reading the NBR is running a vendetta against Hotchin. Let the Securities Commission or the SFO undertake their investigations instead of beating up public opinion against various directors.
At anonymous 609pm
What profit????? It was in paper only. These guys had loans rolling 6 monthly so it looked they were being paid back. Reality is most were capitalized interest meaning not a dime back until full and final settlement. So that means paper profits so therefore moneyvpaid by way of dividends was in fact debenture holders money!!!! It was a ponzi scheme for goodness sake. Gapes is complicit in this. Also why not ask about his involvement in the queens town debacle.??? How did he get some of 5 mile so cheap????. What about kinlock????
The only way you are going to find truth on these matters is by torture.
Most of the parties involved are sharp operators, who will continue to hide behind lawyers spin doctoring.
I think we all know the truth, however proving it will be another thing. Dont be surprised if some backroom deal is done & an out of court settlement is delivered. Another ground hog day, just like Transrail, Richwhite & Co.
I commend Adam Feeley for his diligent work thus far. Keep up the good work, and lets expose some more of the consultants involved, so the general public know who they are dealing, or not, with in the future.
The only way you are going to find truth on these matters is by torture.
Most of the parties involved are sharp operators, who will continue to hide behind lawyers spin doctoring.
I think we all know the truth, however proving it will be another thing. Dont be surprised if some backroom deal is done & an out of court settlement is delivered. Another ground hog day, just like Transrail, Richwhite & Co.
I commend Adam Feeley for his diligent work thus far. Keep up the good work, and lets expose some more of the consultants involved, so the general public know who they are dealing, or not, with in the future.
I agree with Richard S
Adam Feeley appears to be doing a great job - but he has not dealt to the big guys at Hanover and Strategic yet - his decision on these companies will be the defining moment in his SFO career and determine how ballsy and focussed he is on bringing the worst crooks to task. His achievements to date are good but only chicken feed compared to what is really out there.
Talking about consultants Richard S - there is one prime Consultant at Strategic who seems to have kept under the public radar when anyone who knows Strategic know he was the driving force behind the company
My understanding is that Hanover forgave a number of personal guarantees just prior to the transfer to Allied.
Rob Alloway ia quite rightly spitting blood as it let a number off the hook and rendered the assets worthless with no back stop
PWC has some real explaining to do as it happened on their watch despite the mega bucks they were paid.
I think you mean Guardian Trust's watch?
It would be interesting to see how effective supervision was during that moratorium process. A lot seems to have gone on behind closed doors before the sale to Allied.
I think the release of guarantees and the public allegations now by Gapes and that US developer Cooper previously that Hotchin was in for a cut of the action starts giving a flavour for what makes this circumstance unique and why the trustee and indepenedent directors may have been hoodwinked too. This will be a good test of the smarts of our regulators.
Interesting comments over at Bob Day's Property Report - http://bit.ly/fe3MxI
"Mr Gedye rebutted the sham allegation:
“Evidence commensurate with the gravity of that allegation would need to be supplied - it’s tantamount to an allegation of fraud or deceit. Even if the sham argument were accepted as tenable, that’s a matter between the defendants & Hanover Property, there’s no evidence Hanover Finance was ever party to a sham. Mrs Grant relies on a confidentiality clause and demands not made as evidence for a sham. Neither is capable of supporting it, both are consistent with normal commercial dealings and there equal alternative reasons for those conditions & provisions.
“There’s no single mention of Hanover Finance as involved in the alleged joint venture and they (documents) were all unsigned and presented as a record of incomplete dealings on the joint venture where Mr Gapes & his company were the counter-parties. If there ever were a signed joint venture agreement, Mr Gapes would have produced it. Where is the final agreement? Mr Gapes has not produced it. The court can infer the joint venture did not proceed.”
What's confusing in all this is Nathan Geyde was the lawyer for Hanover and still acts for them and Hotchin. And here he seems to be acting for Allied. Allied are being sued by Hanover. Surely Allied would see value in uncovering any dodgy undisclosed dealings by Hanover in the assets Allied purchased? Geyde is hardly likely to opush that line is he given his loyalties to Hotchin? How can Geyde act for both Allied and Hanover?
Hotchie... get in touch with tv3 will ya ... you spineless... pri#ck
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