In Houghton v Saunders [2018] NZSC 74 the Supreme Court held that a revenue forecast in a prospectus was an untrue statement for the purposes of the Securities Act 1978 (Act) and breached the Fair Trading Act 1986 (FTA).

In May 2004, Feltex Carpet Ltd (Feltex) issued a combined investment statement and prospectus (the IPO).  By December 2006, Feltex had been put into liquidation.  Mr Houghton brought a representative claim in 2008 on behalf of himself and other disgruntled investors.  The Supreme Court has determined the final appeal, but in doing so, sent the matter back to the High Court for a stage 2 trial.

The Supreme Court held that Feltex's revenue forecast in the prospectus was an untrue statement for the purposes of section 56(1) of the Act and breached section 9 of the FTA, because at the time of the allotment of shares, the Feltex directors knew that the forecast would not be achieved. 

At the stage 2 hearing, the High Court will determine:

  • Whether investors invested on the faith of the prospectus
  • Whether the untrue statement caused any loss to the investors
  • Whether the investors are entitled to any remedy under the FTA.

The decision can be found here.