Feltex collapsed in 2006 just two years after a $250m IPO
Feltex collapsed in 2006 just two years after a $250m IPO
Lawyers defending a $185 million claim brought by more than 3,000 Feltex investors say the case must now end since the claimants lack funding.
In 2018 the Supreme Court ruled the carpet-maker's 2004 prospectus had an untrue statement and that directors and promoters could be liable under the Securities Act.
Feltex had collapsed in 2006 and the representative claim by Eric Houghton was filed in 2008.
The second stage of the case, where the court works out the value of the loss for investors, was meant to start last year but has been delayed because the litigation funder, Joint Action Funding, has outstanding security for costs.
In video conferencing in the High Court at Wellington today, lawyers for the defendants - former Feltex directors Timothy Saunders, Sam Magill, John Feeney, Craig Horrocks, Peter Hunter, Peter Thomas and Joan Withers, as well as two Credit Suisse entities - said the case must now be thrown out and the court should not indulge further delays.
Former Feltex director Peter Thomas and chairman Tim Saunders back in 2010
"There has to be concerns that the pursuit of profit doesn't get in the way of the proceeding being conducted appropriately and even-handedly between the parties," Alan Galbraith QC told Justice Robert Dobson.
"This has got completely out of balance since July 2019," he said, adding that there had been an "unhappy history of funding defaults."
The court heard how various potential funders had been floated, including insurer Crombie Lockwood, ATE Insurance and class action firm Slater & Gordon.
Harbour Litigation Funding had helped fund the case at trial but now disputes its entitlements if the investors win money.
Crowd funding
Joint Action Funding – whose founder Tony Gavigan filed a last-minute affidavit yesterday - is presently raising capital through online crowd-funding. Its website, accessed today, showed $162,000 had been raised to date, with $5 million on offer initially.
David Cooper, who represents most of the defendant directors alongside Galbraith, said that the offer documents for the raising were misleading and the money that it was purporting to raise wasn't enough anyway.
Cooper noted that the offer documents included a scenario where the investors won $100 million – which was a higher figure than the investors' expert witnesses expected.
Galbraith said that while the Supreme Court had previously suggested judges be hands-off when it came to litigation funding, "the realities of this proceeding made it a naïve observation of the Supreme Court."
"Every time we have one of these proposals, and a hearing on this, and it doesn't proceed it is further costs we don't have."
Tom Weston QC, who represents Magill, told the judge he should now be considering more heavily the oppression on defendants as the case continued on.
Justin Smith QC, who represents the two Credit Suisse entities which promoted the float, said blaming the lack of funding on covid-19 does nothing to mitigate the previous delays.
The lawyer for the investors, Colin Carruthers QC is expected to give argument this afternoon.
The proceeding continues, in a somewhat stilted way, given the online environment. Arguments were delivered via video conferencing mostly from Bankside Chambers, where some of the defendant lawyers practice. At one point Justice Dobson appeared to apologise for his appearance, muttering "I will get to the haircutters soon."
One lawyer was advised to mute audio following repeated phone calls in the background.
Feltex timeline:
2004 - Feltex Carpet floats
2006 - Moved into receivership and liquidation
2008 - Eric Houghton files representative claim
2014 - Justice Robert Dobson finds against claimants in High Court
2016 - Court of Appeal upholds most of High Court decision
2018 - Supreme Court reverses Court of Appeal, First NZ Capital and Forsyth Barr removed from the case.
2019 - Stage two trial to evaluate quantum scheduled
2020 - Court hearing scheduled for February delayed as investors not ready.
