Judge orders nearly $1m compensation in Feltex case

An Auckland District Court judge has ordered compensation of nearly $1 million for the legal costs of five former Feltex directors who were acquitted of charges brought under the Financial Reporting Act.

District Court Judge Jan Doogue’s order against the Ministry of Economic Development amounts to $952,000, of which $517,145 is for Bell Gully, $203,857 for Paul Davison QC, $127,400 for Allan Galbraith QC and disbursements of $104,000.

The directors, John Michael Feeney, John Hagen, David Hunter, Tim Saunders and Peter Thomas, had been claiming costs of $1.36 million in costs.

In her decision, Judge Doogue said the ministry “failed to have proper regard to or draw the obvious conclusions from the information” provided by the accused directors. The charges related to the failure to disclose the company had breached conditions of a loan from ANZ Bank.

“The prosecution failed to access and consider all relevant documents available to it from the Securities Commission, including documents disclosing serious errors by Ernst & Young in the conduct of its review," she said.

"I conclude that the prosecution chose to proceed to put the directors on trial without giving fair and adequate consideration to the steps the directors took to ensure that the standard would be complied with and were probably under a misapprehension that the directors were not entitled to rely on advice and assistance from management and professional advisers."

Mr Saunders, the former chairman, said in a statement on behalf of the directors that he believed it was one of the highest cost awards ever in a criminal case in New Zealand.

The court's earlier decision confirmed that the directors acted honestly and carefully at all times and were not guilty of the charges alleged by the ministry.

"This further judgment now confirms that those charges should never have been brought, and that we should never have had to face the ordeal of a criminal trial. This is a further vindication of our conduct and we are very pleased with the outcome."

Two civil claims against some of the Feltex directors are continuing.

"We are continuing to defend those claims, and are confident of successful outcomes in those cases also," Mr Saunders said.

Feltex's share float in 2004 raised $250 million from mostly retail New Zealand investors and two years later it was in receivership. The business was sold to a rival and several factories were closed with the loss of many jobs.