Hotchin mansion money claim challenged

Former Hanover director Mark Hotchin leaves the High Court in Auckland yesterday. Photo / Brett Phibbs

There was no obligation for Mark Hotchin to be reimbursed for the millions of dollars he paid towards the construction of a mansion on his family trust's land, a witness has told the High Court.

Hotchin put more than $12 million towards the construction of a seven-bedroom, 12-car-garage mansion on Paritai Drive, whose title is held by one of his family trusts, called KA No 4.

Hotchin initially put money towards the construction of the mansion and had once planned to lease the property from the trust and live there with his family.

But after the collapse of Hanover Finance, the former director couldn't put any more funds into the project and so the trust took over the responsibility for building of the mansion.

Hotchin is now not in a financial position to commit to the lease on the property and is seeking some reimbursement for the construction costs he paid for on the property, which is almost ready for sale.

The former director has brought a claim against KA No 4's trustee, which is being heard in the High Court Auckland this week before Justice Helen Winkelmann.

Appearing as a witness yesterday, Hotchin said the trust had ended up with the benefit of the house improvements:

"I believe KA4 Trust has been enriched as a result of the improvements I paid for".

"I never expected to gift these to KA4 Trust," he said.

But an accountant who did work for both Hotchin and the trusts, Dwyane McGorman, today said he believed there was no obligation for reimbursement to be made.

"I don't believe there was ever an obligation for him to be reimbursed," McGorman said.

When KA No 4 took over the completion of the mansion, McGorman said the ownership of the unfinished improvements Hotchin had paid for was a "grey area".

"A view I took was Mark potentially didn't own anything [from the house improvements] at that time because he hadn't fulfilled what he set out to do - which was complete the house - and left that with the trust," McGorman said.

Earlier today, Hotchin was questioned in the witness box by Financial Markets Authority Queens' Counsel, Colin Carruthers.

The FMA is known as "an intervener" in these proceedings and the court heard yesterday how Hotchin and KA4 would have settled the claim if not for the market regulator's involvement.

The FMA has freezing orders over the Paritai Drive property and is taking civil action against Hotchin and five other former Hanover directors or promoters in an attempt to get compensation for the finance group's investors.

Carruthers said during his opening statements this week that because of its claim against Hotchin, the authority has an interest in his asset position.

Carruthers said yesterday that Hotchin's $12 million payment for the construction was an advance from him to KA4.

Hotchin did not agree when this was put to him in the witness box this morning.

The proceedings continue today.