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" de
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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