Feltex shareholders' case to go ahead
A $180 million damages case taken by 3600 former shareholders in failed carpet-maker Feltex is on track for a trial beginning on March 17, six years after the action was first filed.
The international company funding the litigation for a fee has filed the $1 million security required by the High Court. That is Harbour Litigation Funding.
Senior counsel for the investor representative action, Austin Forbes, QC, said the $1m had been paid at the time of the hearing. Last week a High Court decision related to the case in which Justice Robert Dobson said the $1m had to be paid to a trust account of law firm Wilson McKay by 5pm last Friday.
"There is no question of will it be paid? It has been paid," Forbes said on Friday.
The representative action is being taken by Eric Houghton, a former Feltex shareholder, on behalf of the 3600. He filed his action in February 2008 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. Feltex collapsed in late 2006.
The investors are claiming the prospectus for the issuing of the Feltex shares was misleading and untrue.
The defendants include former Feltex directors Tim Saunders, Sam Magill, John Feeney, Craig Horrocks, Peter Hunter, Peter Thomas and Joan Withers, as well as broking firms Credit Suisse First Boston, First NZ Capital and Forsyth Barr.
The trial will be in Wellington starting on March 17 with nine weeks allowed and the possibility of a tenth. Stage one of the trail is to prove Mr Houghton's case and his loss and also to determine the issues in common to all the claimants.
The issues seen as individual, the main one being the claimed losses, are being held over. "I do not anticipate that 3600 claimants will have to give evidence to prove their loss," Forbes said.
There were other issues that some parties were having to prove individually but that was disputed. He saw quantifying individual loss as quite simple and it could be done by a chartered accountant.
A court ruling on a case about how directors' liability insurance can be used has been a boost to the investor action against Feltex.
The Supreme Court ruled the three former directors of failed financier Bridgecorp could not use the group's insurance to defend themselves against a damages claim and the court also found that Feltex's Chartis Insurance (now called AIG Insurance) policy could not be used to pay the directors' defence bills in the shareholders' $180m damages case against them. The court said the policy limit for the AIG policy was understood to be $50m.
The Supreme Court said the Law Reform Act of 1936 imposed a statutory charge over insurance money indemnifying the insured for damages or compensation payable to third-party claimants.
That meant all the money from the policy was reserved for paying the third-party claim, so defence costs would be met only if there was any money left over. In the Feltex case the amount being claimed by third parties vastly exceeds the policy limits.