The asset preservation orders were put in place to ensure if any investors wished to take civil action against Hotchin in the future, there would be money available should they win.
During Hotchin's appeal against the freezing orders in February, the FMA argued the trusts held property as bare nominees, or that they were shams, and the properties in reality were owned by the former Hanover director.
After the appeal, Chief High Court Judge Helen Winkelmann kept the freezing orders against Hotchin in place but revoked some of those against KA3 and KA4. However, her decision said she could not follow the FMA's argument that the trusts were a sham, or emerging sham, and asked it to file an amended statement of claim setting out its case more clearly.
In the High Court at Auckland yesterday, the FMA put the sham argument forward again and said there had been no intention to create legitimate trusts when KA3 and KA4 were set up in 1999 and 2003.
FMA counsel Kristy McDonald argued that Hotchin maintained powers of appointment in these trusts and could transfer property from them to himself through power of attorney.
Hotchin's relationship to KA3 and KA4 was shown in his ability to arrange the sale of the $13.8 million property at Matapana Rd on Waiheke Island from one trust to the other, McDonald alleged.
On the other hand, the lawyer representing the trusts, Julian Long, said the allegation of sham was akin to fraud. He claimed the trusts' structure was "utterly standard" and there was nothing special about the trust deeds.
He went on to label parts of the FMA's argument illogical and said its claim was lacking particulars that addressed the legal issues involved.
Justice Winkelmann reserved her decision on the status of the trusts and banned reporting of certain statements made about the Paritai Drive property. Both parties will now make further submissions over the next 10 days.
Hotchin made a fresh bid in September to overturn the asset freeze but a judgment has not yet been released.
