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Legal action gives hope to Hubbard investors

Investors in statutory-managed Aorangi Securities have a sniff of getting most of their money back if court action goes Grant Thornton's way.

NBR Online staff
Mon, 04 Feb 2013

A successful court ruling on about $60 million of "introduced assets" to Aorangi Securities will secure investors almost all their money.

Grant Thornton, the statutory managers of the former Allan Hubbard-managed fund, says a five-day Timaru High Court hearing in May will determine if assets involving about 34 entities belong to Aorangi and can be distributed to out-of-pocket investors.

"If the issue is resolved in favour of Aorangi, investors may well see most of their capital returned," statutory managers Richard Simpson and Trevor Thornton say in their 13th report.

"If the court decision is in Mrs Hubbard's favour, the return to Aorangi investors is likely to be around 35 cents in the dollar inclusive of the 15 cents that has already been distributed."

That 15 cent in the dollar distribution represents $14.5 million of the $96 million owed.

Mr Hubbard died in a car crash in November 2011 and his widow, Jean Hubbard, claims those assets belong to her and her husband's estate.

The assets include shares and loans in farm-owning companies, partnerships and businesses.

By the court's direction, Mrs Hubbard's legal costs are being at least partly funded by Aorangi itself and the latest managers' report says that has amounted to $85,000.

The money must be repaid if the managers win, they say.

Transfer to trusts

Mr Hubbard attempted to transfer the introduced assets into charitable trusts in March 2010.

Grant Thornton has annulled the transfers after their legal advisers said they were invalid.

The report says its legal advisers believe it has a strong case.

"We have provided the High Court with affidavits which outline Aorangi's history and our conclusions, based on the evidence we have found, as to why assets were introduced in 2009 and 2010.

“To further protect Aorangi investors we have also asked the court to rule that Mr and Mrs Hubbard are only paid for the assets they introduced after the claims of investors have been met.”

The latest report says one farm involved in a "substantial" mid-Canterbury operation will be marketed for sale early this year, which might garner $15 million.

Two Christchurch cool store properties have been sold to NZX-listed Property for Industry, with $2 million available to investors pending the outcome of the High Court case.

Mortgagee sale

Recoveries from Aorangi's third-party loans will be about $40 million, including the proceeds from the mortgagee sale of two South Otago dairy farms, which might sell for up to $12 million.

Aorangi invested about $23 million in Te Tua Charitable Trust, but "substantial losses" were expected on the trust's loan book, the report says.

Late last year, a group of Hubbard investors accused Grant Thornton of putting their money at risk by delaying the court action over the introduced assets.

However, Grant Thornton said the group did not understand the situation.

The cost of statutory management were $7.1 million to December 21, including $3.6 million to Grant Thornton, while professional costs for Te Tua have reached $1.15 million, including $680,000 to Grant Thornton.

The company also manages Hubbard Management Funds.

- with BusinessDesk

NBR Online staff
Mon, 04 Feb 2013
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Legal action gives hope to Hubbard investors