The Supreme Court has put the final nail in the coffin of the Feltex class action, more than 13 years after it was first filed in the High Court.

In a decision released yesterday, the Supreme Court dismissed an application by the representative investors for leave to appeal against an "unless order" made in the High Court which resulted in the proceeding being struck out.

The representative proceeding had been filed on behalf of more than 3,600 investors who had bought shares in Feltex Carpets Limited pursuant to a prospectus issued in an initial public offering in 2004. The company subsequently went into receivership and then liquidation in 2006. The plaintiffs claimed they had relied on statements in the prospectus that were misleading, and had suffered loss as a result.

At a stage one hearing to determine common liability issues, the Supreme Court ultimately found that the prospectus did contain an untrue statement for the purposes of the Securities Act 1978, and that the statement also amounted to misleading conduct under the Fair Trading Act 1986. The next step was then to consider issues of causation and loss at a stage two hearing, but the investors were ultimately unable to pull together the $1.65 million in security for costs required by the High Court for that hearing in time. As a result, their claim was struck out.

This long-running case underscores the need for a specific regime in New Zealand to manage and regulate class action proceedings and litigation funding in order to protect the interests of all concerned. The Law Commission is continuing with its work in this area and is due to make its final recommendations to the Minister of Justice in May 2022.