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IN THE COURT OF APPEAL OF NEW ZEALAND
CA684/2008 [2009] NZCA 610
AND BETWEEN TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS, JOAN WITHERS Appellants
ANDERIC MESERVE HOUGHTON First Respondent
ANDDARRYL ALEXANDER JONES Second Respondent
CA691/2008
AND BETWEEN FIRST NEW ZEALAND CAPITAL Appellant
ANDERIC MESERVE HOUGHTON First Respondent
ANDDARRYL ALEXANDER JONES Second Respondent
CA693/2008
AND BETWEEN CREDIT SUISSE PRIVATE EQUITY INCORPORATED First Appellant
ANDCREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP Second Appellant
ANDERIC MESERVE HOUGHTON First Respondent
ANDDARRYL ALEXANDER JONES Second Respondent
CA329/2009
AND BETWEEN FORSYTH BARR LTD Appellant
ANDERIC MESERVE HOUGHTON First Respondent
ANDDARRYL ALEXANDER JONES Second Respondent
Hearing:24-26 November 2009
Court:Glazebrook, O'Regan and Baragwanath JJ
Counsel:CA684/2008 A R Galbraith QC and D J Cooper for Appellants J R Eichelbaum for First Respondent No appearance for Second Respondent
CA691/2008 D H McLellan and R Butler for Appellant J R Eichelbaum for First Respondent No appearance for Second Respondent
CA693/2008 A Olney and N Hegan for Appellants J R Eichelbaum for First Respondent No appearance for Second Respondent
CA329/2009 A Challis for Appellant J R Eichelbaum for First Respondent No appearance for Second Respondent
Judgment:18 December 2009 at 12.30pm
JUDGMENT OF THE COURT
A The appeal against the representation order is dismissed.
BThe appeal against dismissal of the application for permanent stay is dismissed.
CThe appeal against the refusal to strike out the cause of action alleging breach of fiduciary duty is allowed and that cause of action is struck out.
DThe order of the High Court for interim stay of proceedings will continue until further order of that Court.
INTRODUCTION [1] ISSUE (1) WHAT PRINCIPLES DETERMINE WHETHER MR HOUGHTON IS ENTITLED
to sue the respondents in a representative capacity? [10] Rule 4.24 and class actions [10] (a) What is the nature of the claim and the claimant group? [18]
(B) WHAT ARE THE LIKELY ISSUES? [20]
Issue (2) What principles govern consent to the use of a litigation funder? [21] Issue (3) What approach should be taken to the application for security for costs? [35]
Issue (4) What other mechanisms can be devised to achieve the objectives of r 1.2? [38] Issue (5) What is the apparent strength of the claim? [42] Issue (6) How should the principles be applied? [43]
(A) THE NATURE OF THE CLAIM AND THE CLAIMANT GROUP[43] (B) THE LIKELY ISSUES [48] THE FAIR TRADING ACT: PRE-FLOAT PERIOD [49] THE FAIR TRADING ACT: POST-FLOAT PERIOD [52]
Securities Act 1978 [55] Negligence [58] Breach of fiduciary duty [60] The need for close court control of representative proceedings [63] (c) The specific funding arrangements [64] (d) The strength of the claim [67] The argument for a maintenance/champerty bar [67] The issue of reliance [83] Issue (7) Should the claim for breach of…
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.
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AGLC
Saunders v Houghton [2009] NZCA 610
Case
[2009] NZCA 610
Decision Date
CaseChat Overview and Summary
This appeal concerns the validity of a representative proceeding brought by Mr Eric Meserve Houghton and Mr Darryl Alexander Jones against a number of defendants in relation to the public float of Feltex Carpets Ltd. The appeal was brought by the defendants, including Credit Suisse First Boston Private Equity, Credit Suisse First Boston Asian Merchant Partners LP, First New Zealand Capital, Forsyth Barr Ltd, and the directors of Feltex Carpets Ltd. The appeal was heard over three days in November 2009 and judgment was handed down on 18 December 2009. The appeal was dismissed in all but one respect: the cause of action for breach of fiduciary duty was struck out. The Court held that Mr Houghton was entitled to sue the respondents in a representative capacity and that the litigation funding and management agreement was not an abuse of process. The Court held that the claim for breach of fiduciary duty was unlikely to succeed and should be struck out. The Court noted that the claim for breach of fiduciary duty was based on the same facts as the claims for breach of the Fair Trading Act and the Securities Act and there was no reason of principle or policy to justify extending such a duty to the present facts. The Court held that the principles governing consent to the use of a litigation funder were that there must be no abuse of process and that there must be proper controls in place to protect the defendants. The Court held that the principles governing the application for security for costs were that the court should consider the merits and prospects of the case and that the making of orders for both representation and admission of a funder substantially altered the balance between plaintiffs and defendants. The Court held that the principles governing the approach to the application for security for costs were that the court should consider the merits and prospects of the case and that the making of orders for both representation and admission of a funder substantially altered the balance between plaintiffs and defendants. The Court held that the principles governing the need for close court control of representative proceedings were that the judge must bring a critical and creative mind to bear on all aspects and implications of the initial representation decision and that the judge must maintain as the case develops a continuous appraisal of whether it should be sustained, varied, or rescinded. The Court held that the principles governing the apparent strength of the claim were that the court should consider the merits and prospects of the case and that the making of orders for both representation and admission of a funder substantially altered the balance between plaintiffs and defendants. The Court held that the principles governing the need for close court control of representative proceedings were that the judge must bring a critical and creative mind to bear on all aspects and implications of the initial representation decision and that the judge must maintain as the case develops a continuous appraisal of whether it should be sustained, varied, or rescinded. The Court held that the principles governing the application for security for costs were that the court should consider the merits and prospects of the case and that the making of orders for both representation and admission of a funder substantially altered the balance between plaintiffs and defendants. The Court held that the principles governing the need for close court control of representative proceedings were that the judge must bring a critical and creative mind to bear on all aspects and implications of the initial representation decision and that the judge must maintain as the case develops a continuous appraisal of whether it should be sustained, varied, or rescinded.