Hanover in legal fight over $5m payment

Photo / Brett Phibbs

Hanover Finance has launched legal proceedings against Allied Farmers over its refusal to pay the company $5 million.

Chapman Tripp, which acts for Hanover, has served papers against Allied Farmers over its decision not to make the payment, which was part of the ill-fated deal that saw Allied take on Hanover's loan book.

The deal issued billions of shares in the rural services company to the failed financier's depositors.

Allied, in an announcement to the NZX this afternoon, insists it was entitled to cancel the payment, claiming Hanover breached the terms of their agreement in some of the last transactions before the swap.

The news comes a day after the Securities Commission froze some of Hotchin's assets in a preventative move to preserve the interests of any Hanover investors who successfully make a claim against the lender.

Property financier Hanover froze $554 million owed to 16,500 investors in 2008.

Allied acquired the loan book of Hanover and United Finance last December when investors swapped their debenture stock for shares in Allied.

Both the commission and the Serious Fraud Office are investigating Hanover.

Shares in Allied rose 5 per cent to 2.1 cents in trading today.

A court date is set down for next February.

- NZ HERALD ONLINE / BusinessDesk