National Business Review 24/11/09

Eichelbaum to present amended claim against Feltex defendants

Duncan Bridgeman | Tuesday November 24 2009 - 07:39am

"Investors who lost money in the Feltex collapse have called in the heavy hitters with high profile civil law barrister John Eichelbaum to appear for them at a Court of Appeal hearing in Wellington today.

Mr Eichelbaum, the son of former chief justice Sir Thomas Eichelbaum, will represent Eric Houghton of Upper Moutere, who is bringing a case - on behalf of other investors - under the Fair Trading Act against seven former Feltex directors and other parties associated with the share issue in 2004.

Local brokerages Forsyth Barr and First NZ Capital, with Feltex's former directors and the private equity arm of Credit Suisse that floated the business, are appealing Justice French's October 2008 decision, which allowed the group action to proceed for IPO investors.

The judge dismissed their application for a halt to proceedings on the grounds of champerty, which is an illegal sharing in the proceeds of litigation by one who promotes it. The plaintiff case is supported by Tony Gavigan's Joint Action Funding.

Justice French also required the opt-out procedure to be replaced by an opt- in procedure. The first, second and third defendants are appealing against her decision to the Court of Appeal.

Mr Eichelbaum has prepared an amended statement of claim, which is confidential until tabled in court.

The plaintiff claims the share prospectus contained untrue and misleading statements.

CSFB Asian Merchant Partners sold Feltex in a sharemarket float for $254 million in 2004. Two year’s later the company was in receivership and sold to Australian carpetmaker Godfrey Hirst as a going concern, with the purchase price sufficient to repay Feltex's bank facilities.


Thousands of small shareholders lost an average of $29,400 each - when the shares became worthless.

The directors are listed in this case as Tim Saunders, Sam Magill, John Feeney, Craig Horrocks, Peter Hunter, Peter Thomas and Joan Withers.

The defendants will bring a swag of lawyers to the Court with Bell Gully representing the directors, Russell McVeagh acting for Credit Suisse and Andrea Challis of McElroys representing Forsyth Barr.

Mr Eichelbaum has returned from overseas to take on the case for the investors.

Legal sources say he will be a worthy combatant in the Feltex case.

He was a key figure in the Winebox Inquiry, assisting Sir Ronald Davidson in the long running tax inquiry in the late 1990’s.

He is also experienced in group litigation, having acted for 150 tax payers in a $226 million tax battle with the commissioner of Inland Revenue in the so-called Actonz computer software scheme and assisting investors in recovering funds from defunct finance companies.

He also acted for Peak Petroleum in its high-profile attempt to take over Fletcher Energy."


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