The complexities of administering class actions are coming to the fore in the Feltex litigation, as its lead plaintiff goes uninsured and security for costs remains unpaid.
Eric Houghton’s $185 million claim on behalf of more than 3,000 Feltex Carpets investors is now at the valuation or quantum stage after the Supreme Court ruled last year the carpet-maker’s 2004 prospectus had an untrue statement and that could lead to liability under the Securities Act.
Feltex collapsed less than two years after going public.
This month, former Fay Richwhite banker Tony Gavigan has been told personally to pay $1.65 million in security for costs to bring the case to stage two.
At this next stage, the courts will decide whether investors put money in reliance on the prospectus and whether that caused loss.
The case had been funded by British outfit Harbour Litigation Funding up until the end of 2015, after which Gavigan organised other investors to bankroll the case. Gavigan’s funding was provided by Joint Action Funding which former lawyer John Eichelbaum also has shares in but the pair fell out in a bitter dispute over funding arrangements.
Gavigan said he disputes the fact he should pay more for security for costs and says he needs more time to get insurance for the next stage.
He would not be drawn on who is now bankrolling the case but said Supreme Court funding came from “several sophisticated investor claimants,” and 100 smaller claimants.
Stage two funding has been sourced from a group of five Auckland businessmen, he told BusinessDesk.