Houghton v Saunders - [2012] NZHC 1828

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2008-409-000348 [2012] NZHC 1828

BETWEEN ERIC MESERVE HOUGHTON Plaintiff

ANDTIMOTHY ERNEST CORBETT SAUNDERS
SAMUEL JOHN MAGILL JOHN MICHAEL FEENEY
CRAIG EDGEWORTH HORROCKS PETER DAVID HUNTER
PETER THOMAS JOAN WITHERS First Defendants

ANDCREDIT SUISSE PRIVATE EQUITY INC (FORMERLY CREDIT SUISSE FIRST BOSTON PRIVATE EQUITY INC)
Second Defendant

ANDCREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP Third Defendant

ANDFIRST NZ CAPITAL SECURITIES LIMITED
Fourth Defendant

ANDFORSYTH BARR LIMITED Fifth Defendant

Hearing: 7-8 December 2011, 21 March 2012 and 30 May 2012

Appearances: A Forbes QC and Ms Mills for the Plaintiffs
D Cooper for the First Defendant
A Olney and C Curran for the Second and Third Defendants
D McLellan for the Fourth Defendant
A Challis for the Fifth Defendant

Judgment: 1 August 2012

RESERVED JUDGMENT OF HON. JUSTICE FRENCH On Plaintiff ’s Application for Split Trial/Determination of Preliminary Questions

HOUGHTON V SAUNDERS & Ors HC CHCH CIV-2008-409-000348 [1 August 2012]

Introduction

[1] The plaintiff, Mr Houghton, is a former shareholder of the failed company Feltex Carpets Limited. He has issued representative proceedings on behalf of himself and approximately 3000 shareholders against the former Feltex directors and others associated with a public float share issue that took place in May/June 2004.

[2] The claim centres primarily on the prospectus which Mr Houghton alleges contained untrue and misleading statements. The statement of claim pleads causes of action under s 9 Fair Trading Act 1986, s 56 Securities Act 1978 and negligence.

[3] It is common ground that the only effective and manageable way to process litigation of this sort is to hear the claims in two stages.

[4] What is in dispute is whether the first stage should include consideration of issues that may relate to the claims of other members of the represented class but not to Mr Houghton’s own case.

Background

[5] In order to understand the competing arguments, it is necessary to set out some of the background history.

[6] In November 2011, Mr Houghton’s counsel filed an application seeking an order under r 10.15 of the High Court rules, that all issues regarding liability be determined separately before any issues as to loss and individual reliance by any claimant.

[7] The application was opposed and a hearing held in December 2011.

[8] At the hearing, a consensus developed that, rather than stages 1 and 2 being a liability/loss split as proposed by the plaintiff, the more appropriate course of action was to have Mr Houghton’s own claim heard in its entirety (ie, both liability and loss) at stage 1. That, of necessity, would involve resolution of all issues that were common to Mr Houghton and all the other claimants, as well as issues that were unique to Mr Houghton. In the second stage, the individual aspects of the claims of all the other qualifying shareholders would be considered.

[9] It was further agreed that a list of common issues (meaning issues common to Mr Houghton and all other claimants) to…

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 [2012] NZHC 1828
Case: [2012] NZHC 1828
Decision Date: 1 August 2012

CaseChat Overview and Summary

Mr Houghton, a former shareholder of the failed company Feltex Carpets Limited, has issued representative proceedings on behalf of himself and approximately 3000 other shareholders against the former Feltex directors and others associated with a public float share issue that took place in May/June 2004. The claim centres primarily on the prospectus which Mr Houghton alleges contained untrue and misleading statements. The statement of claim pleads causes of action under s 9 Fair Trading Act 1986, s 56 Securities Act 1978 and negligence. The court was required to decide whether the first stage should include consideration of issues that may relate to the claims of other members of the represented class but not to Mr Houghton’s own case. The court found that there will be a stage 1 hearing at which Mr Houghton’s claim is to be heard in its entirety. Rulings at the stage 1 hearing on the common issues, identified by Mr Cooper in his list of 20 January 2012, will be binding as between all other members of the represented class and the defendants. The plaintiff’s application to include additional questions as formulated in Mr Forbes’s memorandum of 24 January 2012 is declined. Leave is reserved to the plaintiff to apply for directions establishing a sub- group or sub-groups within the class. Leave is reserved to any party to apply to vary the scope of the stage 1 hearing. The absence of class action rules is creating difficulties for the parties in this case and, in particular, for the plaintiff, who bears the carriage of the litigation. However, while taking that into account, I consider that the defendants are nevertheless entitled to costs on a 2B basis and I so award.

Orders