Sheppard faces trial by judge alone in Hanover defamation

Friday 3rd May 2013

Former New Zealand Shareholders Association chairman Bruce Sheppard will face trial by judge alone after former Hanover Finance shareholders Mark Hotchin and Eric Watson succeeded in arguing their defamation case was too complex for a jury.

Judge Mark Cooper ordered a trial by judge alone based on "the complexity of the issues that are likely to arise and the nature of the factual and legal inquiry that will be necessary."

He declined Hotchin and Watson's request for a review of Associate Judge Jeremy Doogue's decision to reject their application to strike out parts of Sheppard's statement of defence.

They had wanted references to past misdeeds related to McCollam Print, Watson's Blue Star Group and Pacific Retail Group struck out arguing they were old, irrelevant matters. Sheppard had argued, as a mitigating factor against damages, that Hotchin and Watson's reputations as businessmen were generally bad in relation to the matters to which the proceeding relates."

The Shareholders' Association, which awarded its derogatory 2010 Golden Glob award to Hotchin and Watson, has already settled with the two businessmen.

Hanover Finance froze $554 million of funds for its 17,000 investors in 2008 after running into financial difficulties before convincing them to accept a disastrous deal where their debt was swapped for equity in Allied Farmers.

The following year, Sheppard made a number of statements to the media and others about the deferred repayment plan and Hotchin and Watson's role in it, which the pair says defamed their reputations. He has pleaded defences of honest opinion and qualified privilege.

Among the instances is an interview between Sheppard and TVNZ's Close Up presenter Mark Sainsbury in November 2009 where he agreed he was characterising Hotchin and Watson as "crooks" albeit ones who "pervert moral justice" rather than break the law.

A group email he sent that month to property developer Mark Cooper, then NZX chief executive Mark Weldon, investor Bryan Gaynor, Securities Commission member Mark Verbiest, and insolvency practitioner Michael Stiassny refers to a "scam" to skim fees of GST payments.

Another to then Commerce Minister Simon Power also referred to a scam and other "malfeasances" in Hanover. In August 2010 he emailed then Securities Commission chair Jane Diplock referring to "orchestrated malfeasance", saying the activities at Hanover were "worse than Bridgecorp, worse than 5 Star" because of the degree of "cunning and long-term planning."

The Serious Fraud Office this week said that after a 32-month probe into Hanover Finance, its directors and shareholders including Hotchin and Watson, it had exhausted all avenues of investigation and found nothing to meet its threshold to pursue a prosecution.

Acting chief executive Simon McArley said there were serious questions over Hanover's behaviour, including how it disclosed its financial position to investors from late 2007, its solvency at times when dividends were paid up to the 2008 moratorium, the propriety of transactions in the lead-up to the freezing of payments to investors and the accuracy of how the company's assets were valued.

Still, those questions didn't meet the bar for the white collar crime investigator to proceed with a case that could prove beyond reasonable doubt that an offence had been committed, he said.

BusinessDesk.co.nz

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