Feltex investors can join court case
The Supreme Court has dismissed an appeal which could have resulted in thousands of investors claiming $185 million in damages from the failure of carpet-maker Feltex time-barred from the proceedings.
A representative action began in the High Court in Wellington last month, nearly 10 years after thousands of investors put more than $250m into Feltex's mid-2004 public listing.
Feltex had offered shares to the public for $1.70 each, but the company collapsed just two years later and went into receivership.
Former shareholder Eric Houghton has led the action on behalf of 3639 shareholders, who said they were misled into buying shares by the "very rosy picture" painted in the failed carpet-maker's prospectus.
The claim, which was being heard six years after it was filed, was against the directors of Feltex, the sellers of the Feltex shares and the promoters of the issue of Feltex shares to the public in mid-2004.
The Court of Appeal dismissed five appeals in November 2012 by the directors, sellers and promoters of Feltex, which could have derailed the representative action.
But in April last year, the Supreme Court granted the former seller of shares in the company leave to appeal a decision on whether the claims of some or all of the shareholders represented by Houghton were time-barred.
The High Court trial had proceeded before Justice Robert Dobson on the basis this appeal would not delay it.
It is into its fourth week and is expected to take about two months.
In the appeal, Credit Suisse Private Equity and Credit Suisse First Boston Asian Merchant Partners LP had questioned whether some of the shareholders represented were too late in filing their claims.
If the appeal had been successful it could have meant most of the 3639 shareholders could be too late to join the action.
However, the Supreme Court today dismissed the appeal by a majority.
Houghton is the only plaintiff in the High Court hearing, representing the thousands of others who lost money.
Credit Suisse had submitted the claims were time-barred by limitation provisions in the Limitation Act or Fair Trading Act.
Its lawyer, Adrian Olney, had said a decision in favour of Houghton's High Court claim would establish the legal platform for individuals to pursue claims for relief.
But they would each need to bring and prove individual claims, which would now be time-barred.
Furthermore, each shareholder would need to establish their own evidence of reliance and loss.
Austin Forbes, QC, who was representing the plaintiff, said last year that even if Credit Suisse had succeeded in its appeal there was authority in Australia and England which suggested the parties could apply to be joined as plaintiffs.
He also said it would be unlikely a judgment would eliminate all claimants in respect of all claims.
In the High Court hearing the defendants include former Feltex directors Tim Saunders, Sam Magill, John Feeney, Craig Horrocks, Peter Hunter, Peter Thomas and Joan Withers.
Credit Suisse Private Equity, Credit Suisse First Boston Asian Merchant Partners LP, First NZ Capital and Forsyth Barr are also defendants.
Houghton has alleged false and misleading statements were made in prospectus documents for the float.
The company's collapse was "striking", particularly in the context of the "very rosy picture" Feltex's prospectus had painted, he says.
The directors have claimed they exercised "all reasonable care" in statements made in the company's prospectus.
- Fairfax Media