Shareholders of failed carpet manufacturing company Feltex have lost their damages claim against the directors of the company.

Eric Houghton took the action on behalf of more than 3600 former shareholders seeking $185 million in damages.

Investors claimed false and misleading statements were made in prospectus documents for Feltex's $250 million float.

Justice Robert Dobson says although a number of the criticisms of the content of the prospectus had some justification, none of them had misleading content or omissions that would trigger liability.

He has also ruled that because relevant conduct is regulated by the Securities Act, the prospect of liability does not arise under the Fair Trading Act.