The Court of Appeal has dismissed former Feltex Carpets shareholder Eric Houghton's long-running suit against the promoters and directors of the failed carpet-maker, saying the only conduct that could be deemed misleading or deceptive wasn't material enough to cause loss.

Justices Ellen France, Tony Randerson and Helen Winkelmann dismissed Houghton's appeal in the long-running representative action on behalf of 3,639 former shareholders over claimed failings in Feltex's 2004 prospectus.

Most of Houghton's grounds were knocked back by the bench, and while the forecast for earnings in the 2004 financial year gave Houghton grounds to pursue a claim that the document contained misleading statements, "given the court's finding that the forecast for FY04 was immaterial, the majority considers the contention that the forecast caused loss is untenable," the judgment said.

Feltex investor Houghton had sued the former Feltex directors, owners and sale managers in a representative action seeking $185 million including interest for shareholders his suit said had been misled by the 2004 prospectus. Justice Robert Dobson found in favour of the defendants, while noting some criticisms of the offer documents.


Houghton was successful in convincing Justices Randerson and Winkelmann, being the majority, that the High Court erred in its definition of promoter, finding the joint lead managers First NZ Capital and Forsyth Barr should have been captured, though that's since changed under the new securities law regime which excludes the concept of promoter as those liable for misleading statements.

"The critical commercial role they played in the offer meant they were able to shape aspects of the offer, even if they did not have decision-making power," the judgment said.

Justice France disagreed, saying joint lead managers simply assisted with offers.

The judges asked for submissions on costs, with a preliminary view that there wasn't a justification for an uplift.

Houghton's litigation funders - Harbour Litigation Investment Fund and Joint Action Funding Limited - were ordered to pay costs of $3.1m plus disbursements in the High Court case, who had indemnified the plaintiff against losing.