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Hubbard's estate and investors trapped in legal gridlock

Grant Thornton's ninth report into Aorangi Securities and Hubbard Management Funds flags years of legal gridlock for investors and Mr Hubbard's widow.

Matt Nippert
Tue, 06 Dec 2011

Statutory managers handling the late Allan Hubbard’s investment vehicles have flagged years of legal gridlock and suspended payouts to investors owed $150 million.

The ninth report into Aorangi Securities and Hubbard Management Funds prepared by Grant Thornton says the recent death of Mr Hubbard has “added another layer of complexity to what has always been a complicated financial situation.”

Mr Hubbard’s widow Jean has been released from statutory management but, as executor of her late husband’s estate, she is now the subject of numerous legal claims from banks, receivers acting for South Canterbury Finance and statutory managers.

NBR print last week reported receivers for South Canterbury had filed a claim against Mrs Hubbard, and former directors, for $16 million over alleged breaches of fiduciary duty.

“While Mrs Hubbard was in statutory management she had the protection of a statutory moratorium, which meant that none of her creditors could take action against her to determine or satisfy their claims without our consent of that of the court. This is no longer the case. She and her advisers were well aware of this consequence in the discussion that were had with them up to her release,” the report says.

The reports says multiple legal claims are expected to be brought to determine the validity of a number of competing guarantees made by Mr Hubbard.

Statutory managers have flagged a claim against Mrs Hubbard to determine the validity of a transfer of assets to Aorangi Investors.

The report notes Mr Hubbard, shortly before his death, had filed a High Court claim to a $70 million stake in South Island Farm Holdings. This claim has been picked up by Mrs Hubbard and is contested by both SIFH and South Canterbury who have charges registered over the assets.

Pending the resolution of these legal wrangles, statutory managers say no capital distributions will be made to Aorangi investors until at least mid-2012.

Share investment vehicle Hubbard Management Funds is also entangled in legal action with statutory managers expected to soon file High Court proceedings to determine whether the fund should be treated as a pool or as individual accounts.

The report says HMF significantly over-reported the value of its assets to investors for years before statutory managers were appointed. Independent assessors says the fund operated on a high-risk high-return philosophy using a strategy generously described as “ad hoc”.

Distributions to HMF investors have also been put on hold until the High Court provides guidance to statutory managers on how to proceed.

Matt Nippert
Tue, 06 Dec 2011
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Hubbard's estate and investors trapped in legal gridlock