Feltex saga makes it to the Supreme Court

Former Feltex Carpets shareholder Eric Houghton has been granted leave to appeal to the Supreme Court, after his case was dismissed by the Court of Appeal.

Chief Justice Sian Elias and Justices Terence Arnold and Mark O'Regan decided to grant the appeal, in a judgment released today.

The court has requested the case be heard in the last week of July.

In last month’s hearing to request an appeal, Mr Houghton’s lawyer, Patricia Mills, argued the failed company's 2004 prospectus wasn't valid because it contained untrue statements about its sales prospects, and therefore wasn't entitled to offer securities to the public. 

Mr Houghton originally sued the former Feltex directors, owners and sale managers in a representative High Court action, which sought $185 million including interest for shareholders he said had been misled by the 2004 prospectus

Justice Robert Dobson found in favour of the defendants, although noted some criticism of the offer documents.

Justices Ellen France, Tony Randerson and Helen Winkelmann dismissed Mr Houghton’s subsequent appeal to the Court of Appeal last October and ruled the only conduct that could be deemed misleading or deceptive wasn't material enough to cause loss.

However, the judges did say the forecast revenue in the prospectus for the 2004 financial year was an untrue statement. This differed from the earlier High Court decision.

This forms the grounds for the Supreme Court appeal, to try to obtain compensation from the former directors, vendor Credit Suisse First Boston Asian Merchant Partners LP and joint lead managers of the float, First NZ Capital and Forsyth Barr.

Five former directors, including chairman Tim Saunders and former chief executive Peter Thomas, successfully defended criminal charges brought by the Companies Office in the Auckland District Court and then defended the class action brought by Mr Houghton in the High Court.

The respondents have hired 11 lawyers, including four QCs.

The Supreme Court case will be the final effort of a long-running action taken on behalf of almost 3700 former shareholders who lost money when Feltex failed soon after its 2004 float.

Feltex collapsed into receivership in September 2006, 21 months after raising $254 million mostly from retail investors to list on the stockmarket.