Statement from Mark Hotchin
The former directors of Hanover Finance Limited today confirmed that their Statements of Defence were lodged at the High Court in Auckland on 31 July.
Each Statement of Defence is detailed and comprehensive, is supported by independent expert advice and opinion, and rejects strongly the allegations make in the FMA's proceedings. The directors believe that the FMA is relying on incorrect information in a forensic accountant's report that the FMA refuses to release to the directors. This is resulting in an ill-conceived and expensive piece of litigation.
While there may be some complex factual issues to resolve or understand, the directors' have fully cooperated with all regulatory investigations. The investigations include a 3 year investigation by the FMA, and its predecessor the Securities Commission, related investigation by the Commerce Commission which concluded in 2009, and some inquiries from the Registrar of Companies.
The directors have also provided the FMA with an independent expert report by forensic accountants on the issuer company's liquidity management and forecasting, alongside a comprehensive legal opinion as to compliance with the Securities Act. This was done to ensure the FMA is fully informed and has been reviewing the appropriate information.
Despite the matter now stretching past 4 years, the directors have continued to respond to every issue raised and every question asked, providing sound and detailed explanations to the FMA.
It should be clear to the FMA that the facts of this case are completely different from other finance companies that have come before the Courts, and the directors are confident they will not be found liable.
The Boards of Hanover issuer companies actively monitored liquidity levels at every board meeting and, until mid July 2008, were at all times satisfied with actual and forecast cash levels and liquidity buffers and that the Hanover companies were being managed and assessed in a prudent and satisfactory way.
Hanover group operated with a high level of corporate governance, and the Hanover companies had in place sound processes and internal controls which were audited by reputable and competent auditors who at all material times produced favourable and unqualified audit reports.
Hanover was subject to ongoing independent review and assessment by international rating agencies, legal and accounting professionals. The trustees for the issuer companies also monitored compliance and financial capability on behalf of investors and were provided with detailed and regular reports and information with no adverse comment or concern raised.
The Statements of Defence include defences that the FMA's claims for pecuniary penalties and 'declarations of civil liability' are time barred because the Securities Commission was aware, or ought to have discovered, the matters pleaded in its claim within the 2 years period then required by the Securities Act 1978.
Although FMA has not particularise its claim for compensation, the defence records that investor claimants would each need to show they invested on the faith of the relevant offer document and in reliance on particular statements FMA has alleged are untrue, and that any loss or damage was a result of the specific statements and not intervening events such as the GFC, deterioration in New Zealand property markets, the Hanover debt restructure or the Allied Farmers transaction.
The FMA's case is ill conceived and will be vigorously defended.
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