Houghton v Saunders - [2019] NZCA 404

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA290/2019
[2019] NZCA 404

BETWEEN	ERIC MESERVE HOUGHTON Appellant
AND	TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS AND JOAN WITHERS First Respondents CREDIT SUISSE PRIVATE EQUITY INCORPORATED Second Respondent CREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP Third Respondent

Hearing:	26 August 2019
Court:	French, Collins and Wild JJ
Counsel:	C R Carruthers QC and PAB Mills for Appellant A R Galbraith QC, D J Cooper and M C Harris for First Respondents other than S Magill and J Withers T C Weston QC for First Respondent S Magill B D Gray QC and A E Ferguson for First Respondent J Withers JBM Smith QC, A S Olney and C J Curran for Second and Third Respondents
Judgment:	2 September 2019 at 3 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
B The appellant is to pay each of the separately represented respondents costs for a standard appeal on a band A basis with usual disbursements.
CWe certify for second counsel for each of those separately represented respondents.

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REASONS OF THE COURT

(Given by Wild J)

Introduction

This is an interlocutory appeal in the “Feltex” litigation. It is against a judgment of Dobson J delivered on 15 May, dismissing Mr Houghton’s application that any defence relying on s 63 Securities Act 1978 be struck out.[1]

Background

[1]Houghton v Saunders [2019] NZHC 1061.

Feltex Carpets Limited was floated to the public in May 2004. By September 2006, the company had collapsed financially and was put into receivership and then liquidation.
Representing some 3,000 subscribers for shares in the public offer, Mr Houghton sues the directors of Feltex and the promoters of the issue claiming compensation. Mr Houghton’s fourth amended statement of claim, filed on 14 March 2014, pleads four causes of action. The second of these is directed against Mr Magill alone (he was Feltex’s only executive director). The others allege breach of s 9 Fair Trading Act 1986, breach of s 56 Securities Act (the Act), and negligence. This application focuses on the claim under the Act. In that cause, Mr Houghton alleges the respondents are liable for making, in the prospectus, an untrue statement in the Company’s forecast of its revenue in the 2004 financial year.
Over a decade has passed since Mr Houghton filed his statement of claim. In 2012 the High Court, with the parties’ agreement, directed that the case be split into two stages for hearing.[2]
[2]Houghton v Saunders [2012] NZHC 1828, [2012] NZCCLR 31.
Stage one of the litigation has travelled to the Supreme Court. In a judgment delivered on 15 August 2018, the Supreme Court held the defence in s 56(3)(c) of the Act was not available to the respondent directors.[3] Although the availability of relief under s 63 of the Act was not in issue at stage one of the litigation, the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Houghton v Saunders

Details

AGLC: Houghton v Saunders [2019] NZCA 404
Case: [2019] NZCA 404
Decision Date: 2 September 2019 at 3 pm

CaseChat Overview and Summary

The Court of Appeal of New Zealand considered an interlocutory appeal in the ongoing "Feltex" litigation, dismissing Eric Meserve Houghton's application to strike out any defence relying on section 63 of the Securities Act 1978. Houghton, a shareholder in the collapsed company Feltex Carpets Limited, sued the company's directors and promoters for compensation under various sections of the Securities Act and the Fair Trading Act 1986. The appeal focused on the claim under section 56 of the Securities Act, which alleges the respondents are liable for making an untrue statement in the company's forecast of its revenue in the 2004 financial year. The Court of Appeal found that the legal argument advanced by Houghton, which contended that the claim for compensation under section 56 was not a proceeding for negligence, default, breach of duty, or breach of trust, was incorrect. The Court found that the claim for compensation under section 56 was a claim arising out of a breach of duty, within the terms of section 63, and was also for default on the respondents' part. The Court further found that the factual argument, which contended that the Supreme Court's judgment precluded the respondents from relief under section 63, did not meet the strike out threshold. The appeal was dismissed, and Houghton was ordered to pay costs to each of the separately represented respondents.

Orders