Law Commission seeks submissions on class actions and litigation funding

Monday 7 December 2020

Authors: Sam Hiebendaal, Sophie East, David Friar and Jenny Stevens

On Friday the Law Commission released an issues pa​per on its “first principles" review of class actions and litigation funding, seeking submissions by 11 March 2021. 

The Commission's review is highly likely to shape these important areas of the law, and already expresses some interesting preliminary views on key issues.

Class actions in New Zea​land

Class actions have increasing prominence in New Zealand, but it is widely acknowledged that the existing procedure for class actions to be brought (i.e. by way of a “representative action") is not completely fit for purpose. In particular, there is currently no legislation or other framework that prescribes the key features of the class action regime. Instead, important issues must be worked out by the courts on a case-by-case basis.

Similarly, litigation funding is often crucial to the commencement and progress of representative actions, but it is not regulated and there are few clear rules to define what funding is permitted, the parameters of that funding, and the extent to which the courts will assess the fairness and adequacy of funding arrangements.

The Law Commission is conducting a review of class actions and litigation funding that will answer these questions, and expects to deliver a final report to the Minister of Justice in the first half of May 2022.

Issues Pa​per

The Issues Paper seeks feedback to inform the recommendations that the Commission will make in its report to the Minister of Justice. It is a lengthy document, 376 pages, that sets out an overview of the issues that the Commission is considering in its review, and also some preliminary views on key issues.

The Commission's preliminary views include:

  • The current mechanisms to support group litigation are “inadequate".

  • Class actions improve access to justice and facilitate better efficiency in litigation. They also increase incentives to comply with the law.

  • It would therefore be desirable to have a statutory class actions regime in New Zealand, with the main objective of improving access to justice.

  • That main objective will need to be weighed against other principles, including balancing the rights of plaintiffs and defendants, protecting the interests of class members, proportionality, and recognising tikanga Māori.

  • It may be necessary or desirable to have different costs rules from normal commercial proceedings (where the “loser pays"), so as not to disincentivise the bringing of class actions.

  • The lack of specific regulation for litigation funding is “problematic".

  • Litigation funding has advantages (for example, increasing access to justice) and disadvantages (for example, encouraging meritless litigation), but in principle it is desirable and should be expressly permitted.

  • Litigation funding should be regulated due to the need to manage concerns with litigation funding, including the degree of control that funders may have over the litigation, conflicts of interest, excessive profits, and capital adequacy of litigation funders.

The Issues Paper also seeks feedback on 60 questions touching on these views and other issues.

Submis​sions

The Law Commission seeks submissions by 11 March 2021. Bell Gully will be making a submission, and welcomes feedback from clients and other interested parties on the issues covered.

If you have any questions about the issues paper or require assistance in preparing a submission, please get in touch with the contacts listed or your usual Bell Gully adviser.


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Sophie East

    Partner Auckland
  • David Friar

    Partner Auckland
  • Jenny Stevens

    Partner Wellington
  • Sam Hiebendaal

    Senior Associate Auckland
Related areas of expertise
  • Class actions
  • Litigation and dispute resolution
  • Commercial
  • Banking and finance
  • Banking and finance litigation
  • Consumer law
  • Insurance