Hubbard statutory managers lose bid to exclude Aorangi investor owed $5.8m
The statutory managers for the late Allan Hubbard's Aorangi Securities have lost a bid to exclude an American widow who had some $5.8 million invested with the Timaru businessman.
In the High Court at Christchurch, Justice Robert Dobson today struck down a bid by Grant Thornton's Richard Simpson, Trevor Thornton and Graeme McGlinn to have Susan Jenks and her deceased husband declared not investors in Aorangi Securities, one of the Hubbard investment vehicles under their statutory management.
The statutory managers claimed the Jenks' investment was with Southbury Group, and were resisting their claim to be recognised as a creditor of Aorangi, as it would cut the proportionate entitlement of other creditors.
They claimed the exclusion was confirmed by Allan Hubbard's juggling of the Jenks' investment between the entities leading up to their appointment.
While the judge was satisfied the investment was in the Southbury unit at the time the managers were appointed, he said they erred in dismissing a letter from Hubbard to Susan Jenks in October 2010 affirming a personal guarantee to Aorangi and implying a constraint on moving her funds without obtaining her instructions.
That meant Hubbard's shuffling of Jenks' assets amounted to breach of his fiduciary duties, though the statutory managers did not argue he had been deliberately untruthful, the judgment said.
"However well meaning, and irrespective of any misguided subjective justification Mr Hubbard had for taking Mrs Jenks' money out of ASL, his conduct in doing so breached the fiduciary obligations he owed her, to deal with her money only in her best interests," Justice Dobson said.
Given Hubbard's close identity with and authority to bind Aorangi, the fund wasn't able to deny that it continued to hold Jenks' funds, meaning the statutory managers are obliged to treat her as a depositor, the judge said.
Justice Dobson awarded costs to Jenks, turning down the managers' bid to have each party bear their own costs.
Earlier this month, the judge sought feedback from counsel as to whether other Aorangi depositors would be unjustly enriched if he found against Jenks. He ultimately decided it would be unconscionable for the statutory managers to use assets that had been pledged by Hubbard as a guarantee to Jenks after other depositors.
In May, the statutory managers reached a deal with Jean Hubbard, Allan's widow, over $60 million of disputed assets which will return most, if not all, of the $96 million of investors' capital.
At the time of the last update on the statutory management in August, some $3.3 million had been spent on legal fees for the Aorangi administration alone, out of $17 million spent on the statutory management of all the entities since it was imposed in 2010.