Legal Research
Cases
Houghton v Saunders

Houghton v Saunders

Case [2020] NZHC 1088 22 May 2020

Civil Litigation & Procedure

Class Actions

No judgment structure available for this case.

Type to search within this case.

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2008-409-348

[2020] NZHC 1088

BETWEEN
ERIC MESERVE HOUGHTON

Plaintiff

AND

TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG

EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS and JOAN WITHERS
First Defendants

CREDIT SUISSE PRIVATE EQUITY INCORPORATED

Second Defendant

CREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP

Third Defendant

Hearing: 11 May 2020

Counsel:

C R Carruthers QC and P A B Mills for plaintiff (via VMR)

A R Galbraith QC, D J Cooper, S T Coupe and M C Harris for first defendants (except for separate representation noted below) (via VMR)

T C Weston QC for Mr Magill (via telephone) C L Broad for Mr Horrocks (via telephone)

B D Gray QC and A E Ferguson for Ms Withers (via VMR)
J B M Smith QC, A S Olney and C J Curran for second and third defendants

Judgment:

22 May 2020

RESERVED JUDGMENT OF DOBSON J

[Application for strike out]

HOUGHTON v SAUNDERS [2020] NZHC 1088 [22 May 2020]

Contents

Background to the strike out application  [1]
Grounds for strike out/dismissal  [17]
Claimants’ opposition to strike out  [25]
The crowd funding offer  [38]
Concerns about the crowd funding offer  [53]
Reasonable duration for the crowd funding offer  [59]
Analysis on strike out  [65]
Outcome  [80]
Summary  [91]

Background to the strike out application

[1] This litigation relates to the prospectus issued for shares in Feltex Carpets Limited (Feltex) in May 2004. The proceeding was commenced in 2008. It was brought as a funded class action on behalf of some 3,600 subscribers for Feltex shares. High Court and Court of Appeal decisions rejected claims that a large number of elements of the prospectus were untrue in terms of the then Securities Act 1978, or misleading in terms of the Fair Trading Act 1986.1

[2] In August 2018, the Supreme Court held that the prospectus contained an untrue statement.2 The Supreme Court also found that the untrue statement constituted misleading conduct, for which liability arose under s 9 of the Fair Trading Act. The Supreme Court referred the matter back to the High Court for determination of whether the untrue statement caused loss (the stage two claims).

[3] The untrue statement arose because directors and promoters elected to maintain a forecast for Feltex’s revenue for its 2004 financial year (FY04) when, by the time subscribers were to make their commitments to purchase shares, the directors were on notice that there was no longer a reasonable basis for assuming that forecast would be achieved.

[4] The Supreme Court judgment contemplated two possible modes of quantifying loss arising from an untrue statement in a prospectus. The parties have taken different views on the application of those modes of quantifying loss in this case. Those were

1 Houghton v Saunders [2014] NZHC 2229, [2015] 2 NZLR 74; Houghton v Saunders [2016] NZCA 493, [2017] 2 NZLR 189.
2 Houghton v…

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 [2020] NZHC 1088
Case: [2020] NZHC 1088
Decision Date: 22 May 2020

CaseChat Overview and Summary

- Parties: The case involves Eric Meserve Houghton as the plaintiff, and Timothy Ernest Corbett Saunders, Samuel John Magill, John Michael Feeney, Craig Edgeworth Horrocks, Peter David Hunter, Peter Thomas, Joan Withers, Credit Suisse Private Equity Incorporated, and Credit Suisse First Boston Asian Merchant Partners LP as defendants.

- Nature of the dispute: The case revolves around a class action lawsuit filed by Eric Houghton on behalf of approximately 3,600 subscribers for Feltex Carpets Limited (Feltex) shares, alleging that the prospectus issued for Feltex shares in May 2004 contained an untrue statement. The case has been ongoing since 2008, with multiple hearings in various courts.

- Court: The case was heard in the High Court of New Zealand Wellington Registry.

- Legal issues: The court was required to decide whether the proceeding should be struck out or dismissed for the plaintiffs' failure to provide security for costs and arrange funding for the stage two hearing. The court also needed to assess the reasonableness of the crowd funding offer proposed by the claimants' funder, Joint Action Funding Limited (JAFL), and whether it warranted further time for the claimants to arrange security for costs and funding.

- Court's reasoning and outcome: The court found that the plaintiffs' failure to comply with the order for security for costs was inexcusable and intentional, and the proceeding was struck out under rules 7.48 and 15.2 of the High Court Rules 2016. The court considered the interests of the claimants, defendants, and the wider public interest in access to justice. It also examined the terms of the crowd funding offer and directed JAFL to provide a copy of the judgment to all claimants to whom the offer document had been sent. The court set a deadline of 13 July 2020 for the claimants to provide security for costs and confirm their readiness to proceed with the stage two hearing, after which the proceeding would be struck out unless the requirements were met.

Orders