Feltex investors given July deadline for claim
Feltex investors have until July 13 to raise the money to take their case for compensation against the failed carpetmaker’s directors.
If they didn’t raise the money by then, the ‘‘guillotine’’ would fall on July 14, France’s Bastille Day, and the case would be struck out.
Feltex listed on the New Zealand NZX sharemarket in 2004, with thousands of ordinary investors buying shares at $1.70.
But by September 2006, receivers had been called in leaving investors angry, and in 2018 a ruling by the Supreme Court held Feltex’s 2004 prospectus contained a revenue forecast directors could not reasonably assume would be achieved.
The former directors targeted by investors had sought to have the case struck out, but Justice Robert Dobson at the High Court in Wellington ruled the investors should have ‘‘one last opportunity’’ to raise the money they needed to take their class action claim for damages.
That money was now being raised through a crowd-sourcing service, and members of the public were being invited to fund the lawsuit through a share offer.
JAFL Litigation Funding Partners, the company raising the money, said it would seek a pre-tax return of $2 for every $1 share issued.
The minimum needed to be raised is $500,000 for the case to go ahead, said Tony Gavigan, one of JAFL’s directors.
Collinson Crowdfunding was showing just under $200,000 raised.
Gavigan said the money raised so far had been from Feltex investors, but he hoped to see members of the public support the offer too.
Some Feltex investors could not now personally benefit from the case going forward as they were dead, Gavigan said, but their estates, including that of former Fonterra chief executive Craig Norgate were backing the case.
The oldest investor actively involved in the case was now 98.
Gavigan hoped the case would be completed within three years.
The directors of Feltex named as defendants in the class action – including Timothy Saunders, Peter Thomas and Joan Withers – had sought to have the case struck out.
So too had international investment bank Credit Suisse.
‘‘I accept that a case has been made out for striking out this proceeding,’’ ruled Justice Dobson.
‘‘Given the length of its history and the number of interests affected by its determination, that is a regrettable outcome.
‘‘However, in balancing the competing interests of justice as reflected for claimants and defendants, it is an outcome I am satisfied is warranted, subject to affording the claimants and their funder one last opportunity to perform.’’
The case would be struck out on July 14, if the funding for security of costs was not achieved.
‘‘He’s given Bastille Day as the dropdead day when the guillotine will fall,’’ Gavigan said.
In his judgment dated May 22, Justice Dobson said the defendants had indicated they would challenge claims by individual shareholders that they would not have invested if the untrue statement had been revealed to them at the time they committed to the purchase.
‘‘The defendants will argue that the untrue statement did not reduce the fair value of the shares, or not to the extent claimed,’’ Justice Dobson ruled.
And if they are found to have no reasonable basis for leaving the revenue forecast unaltered in the prospectus they will argue they were not liable for losses as they had conducted themselves with reasonable diligence.
The Feltex carpet brand is now owned by Australian company Godfrey Hirst.