Nearly 14 years after their time on the board of failed carpet maker Feltex, former directors say they're still absorbing the surprising news that the Supreme Court has cleared the way for former shareholders to challenge them again in court over a 2004 prospectus forecast.
High profile public company director Joan Withers, one of seven former affected directors, said the Supreme Court decision was a surprise.
"It's certainly not what we'd hoped for and somewhat surprising given the track record of over 13 years of a 15-month Securities Commission inquiry, a High Court Case and then the Court of Appeal - all of which exonerated the director defendants."
Withers devoted a chapter of her book A Woman's Place, published last year, to the impact of the Feltex failure aftermath.
She said while it could be viewed as a learning experience, "I wouldn't wish it on my worst enemy".
Former Feltex director Craig Horrocks said given the length of the issue he was expecting the Supreme Court to look at things "with a fresh eye".
"Given the length of time it has taken for the Supreme Court to finalise the decision and given the complexity of the issue that have been argued through all the different stages, I was obviously expecting the court was looking at things with its own fresh eye, so to speak."
The former lawyer said he had yet to take legal advice. He believed the decision had big implications for future IPOs on the New Zealand sharemarket.
Former Feltex chairman Tim Saunders, one of the directors affected by the Supreme Court ruling, declined to comment.
The other affected former directors Samuel Magill, John Feeney, Peter Hunter and Peter Thomas did not respond to invitations to comment or could not be reached.
Chief Justice Sian Elias and Justices Susan Glazebrook, Mark O'Regan, Terrence Arnold and Stephen Kos have ruled the 2004 Feltex prospectus contained an untrue statement over forecasts for that year and was enough to warrant the second stage of a trial as to whether that caused loss to investors.
The decision veered from the Court of Appeal, which in 2016 deemed the misstatement to be immaterial information for investors.
The decision means the 3639 former Feltex shareholders seeking $185 million from the directors and IPO promoters will get another day in the High Court to prove they suffered a loss as a result of the offer documents.
Lead complainant Eric Houghton, who was effectively a test case in the first stage of the trial, will have to persuade a judge to let him be included in any further action.
"We conclude that the FY04 forecast was an untrue statement," Justices Glazebrook, O'Regan and Kos said in the written judgment.
"We stress that this stage of the inquiry is to determine if the prospectus contained an untrue statement. We have not considered the materiality of the shortfall. This is because materiality is, contrary to the approach of the High Court, not relevant when considering if a statement is untrue."
The judges set aside the Appeal Court findings that the untrue statement did not trigger liability under securities law and wasn't in breach of the Fair Trading Act, both of which were questions for the second stage of the trial.
The High Court will have to work out whether the untrue statement caused a loss for investors. The Supreme Court noted Justice Robert Dobson's observation that it will be necessary to determine a date for that assessment to be made.
"The respondents' arguments that the value of the Feltex shares, as reflected in its market price after the IPO, was at least equal to the IPO price will need to be assessed, as will their arguments that the reasons for the fall in the market price of the shares in Feltex in 2005–2006 were unrelated to the untrue statement in the prospectus," the judgment said.
"The argument made by Mr Houghton that the shares were worthless from inception will also need to be assessed."
The judges dismissed the appeal against First NZ Capital and Forsyth Barr as joint lead managers, saying the investment firms were not promoters under the act.
Their decision leaves the seven former directors and sale promoter Credit Suisse Private Equity and vendor Credit Suisse First Boston Asian Merchant Partners to face the second tranche of the trial.
Additional reporting BusinessDesk.