By Gareth Vaughan
McDonald Vague, Feltex's liquidator, "fully expects" claims it has made against five former directors of the failed carpet maker to be aired in the High Court next May.
Feltex was tipped into receivership by the ANZ Banking Group, which was owed A$119.5 million, in September 2006 with McGrathNicol appointed receiver. McGrathNicol's most recent report notes the ANZ has been reimbursed to the tune of A$116.6 million leaving just A$2.9 million plus accrued interest outstanding.
Meanwhile, McDonald Vague's claims and allegations against the former Feltex directors - ex-chairman Tim Saunders, former CEO Peter Thomas, Peter Hunter, Michael Feeney and John Hagen the former chairman of both Deloitte and the Accounting Standards Review Board - accuse the five of:
- failure to act in good faith and in the best interests of Feltex,
- reckless trading,
- and failure to comply with the continuous disclosure requirements of the Securities Markets Act.
The five deny any wrong doing and say they followed legal advice from Bell Gully and Alan Galbraith QC, auditor Ernst & Young's advice on sharemarket disclosure rules, and took Deloitte's counsel on Feltex's solvency.
McDonald Vague's eighth and latest report notes attempts to settle their claim, after talks with the ex-directors, proved unsuccessful.
"The liquidators fully expect that a trial will be required."
A trial date is scheduled for May 2011.
McDonald Vague director Iain McLennan told interest.co.nz in September the liquidator's representatives had watched this year's ultimately unsuccessful Registrar of Companies District Court trial against the same five former Feltex directors closely.
“We were happy with some of the admissions that were made,” McLennan said in September, although he declined to elaborate on just which admissions had caught his eye.
Feltex's receivership came just 27 months after the group's NZ$1.70-a-share, NZ$254 million initial public offering on the sharemarket in June 2004 when private equity group Credit Suisse First Boston Asian Merchant Partners sold out lock, stock and barrel. Shareholders lost everything although the liquidtor's claim against the former directors includes a claim for about NZ$9 million for alleged breaches of the Securities Markets Act continuous disclosure provisions.
Citing a 2007 Securities Commission report, the liquidator says Feltex was in breach of NZX continuous disclosure rules from August 23, 2005 till June 30, 2006 for failing to reveal banking covenant breaches, new ANZ loan terms, a forecast earnings deterioration and planned restructuring costs.
McDonald Vague filed a High Court statement of claim seeking about NZ$41 million from the former directors on April 1 last year. The statement of claim goes as far as suggesting Feltex's board had failed, since 2001, to annually forecast, project or budget "with any reliability" Feltex's financial performance.
* This article was first published in our email for paid subscribers earlier today. See here for more details and to subscribe.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.