The long-running Feltex class action should be reinstated because of fresh evidence and new circumstances, lawyers representing the claimants argued at the High Court in Wellington today.
However, another lawyer Chris Curran, said the matter was “stale” and the claim to reinstate it was “weak”.
He also said the judicial system had given the case a “thorough assessment”. He added jurisdiction had been “exhausted”.
The class action started in 2008 and involved about 3600 investors, led by investor Eric Houghton. He brought proceedings against the directors of Feltex, Credit Suisse, First New Zealand Capital, and Forsyth Barr.
It was alleged the 2004 Feltex prospectus was misleading, and the group eventually won an element of that claim in the Supreme Court.
But when the case was returned to the lower courts for determining damages, the claimants did not provide the $1.65 million security for costs required by the court. Then, in May 2020, the High Court ordered the claim struck out unless security was provided by July 13, 2020.
This ‘unless’ order was appealed, although the Court of Appeal found no reason to excuse a failure to comply. The investors then sought leave to appeal that ruling to the Supreme Court, which rejected the bid in May 2021 and effectively ended the Feltex investors’ court battle.
But the case was returned to the High Court before Justice Francis Cooke to make a final costs award and bring the proceeding to a close.
The Feltex director defendants and two Credit Suisse entities involved in selling Feltex to the public had sought more than $2m in costs but the judge, who labelled parts of the costs claimed “excessive”, effectively reduced that to $438,000.
That reduction also included what was effectively a credit for $930,000 that was held by the defendants as security. However, the judge also ruled that Tony Gavigan and the funding entity, Joint Action Funding, were liable to share the costs with Houghton.
Tony Gavigan.
Back in court
At the High Court today, Associate Judge Andrew Skelton heard submissions to reinstate the case and bring justice to the 3600 claimants involved in the original class action.
Lawyer Nick Williams said the High Court had to weigh up the interests of justice and consider whether the matter should be heard again.
He said the case was not an appeal of the previous strike out order but was a test for reinstatement.
“It would be a significant step”, he said, based on fresh evidence and new proceedings under the Fair Trading Act.
He said the interests of the roughly 3600 investors also needed to be “factored in” to the High Court’s considerations on the case.
Williams acknowledged the class action had lingered for years but also said there were outside factors throughout that time, including the global financial crisis, Canterbury earthquakes, and Covid-19 pandemic.
Meanwhile, lawyer Chris Curran argued that the proceeding was “stale” and related to events from about 20 years ago.
He went through the previous court fixtures regarding the case and the previous trials that had collapsed.
Curran added the judicial system had given the matter a “thorough assessment” before it came to an end by the Supreme Court.
Stretched resources
The Supreme Court’s May 2021 decision declining leave to appeal had noted the Court of Appeal’s view that permitting the case to continue would be against the public interest.
“This is because it would absorb the resources of the courts to the detriment of other litigants for a further (potentially lengthy) period. It would also cause prejudice to the respondents if the proceeding were revived with a result that it would continue into a thirteenth year.”
The claimant shareholders, who had collectively bought 73 million shares in the company, had been fighting Feltex’s directors (Joan Withers, Craig Horrocks, Peter Hunter, John Feeney, Tim Saunders, Sam Magill, and Peter Thomas) in court for losses since 2008.
The carpetmaker listed on the stock exchange in 2004 at an issue price of $1.70. Eighteen months later it headed into liquidation, leaving its shares virtually worthless.
