insight

Chasing design perfection in class action regime

15 November 2021

Chapman Tripp commends the Law Commission for running a second round of consultation on the design of a class action regime for New Zealand.

While we generally agree with the Commission’s proposed approach, we have used the opportunity to argue for some further refinements which we think will be critical to the new regime’s success.

We summarise the main points of our submission below.

The Commission is now also developing recommendations for a regulatory framework to support litigation funding – a companion reform – having completed its consultations on this issue in March.

Key points

  • Multiple class actions about the same matter are plainly inefficient and have the potential to cause injustice to the defendant(s). We consider that a time limit should be instituted within which any competing class action must be filed.  We also consider that there should be a presumption that the court will select one class action to proceed and stay the other proceedings.
  • Good case management will be critical to the efficient conduct of class actions. Specific tools which might assist this outcome include:
    • providing for automatic dismissal of a class action if not progressed within a certain time frame
    • requiring prescribed issues to be addressed in case management conferences, including regular review of definition of the class and common issues, as well as decisions around the management of communications with class members, updates on the size of the class, and the expected steps and timing of the litigation, and
    • more frequent use of judicial settlement conferences for interlocutory applications.
  • We reiterate our view, from our submission in the first consultation round, that the costs regime merits review in relation to class actions.
  • Staged hearings, where the common issues are resolved separately from individual issues, should be the default position, but the Court ought to have flexibility. The Court should also have flexibility in how individual issues in a class action will be determined.  The process for determining individual issues should be considered at an early stage in the proceeding, preferably as part of certification, and then revisited as needed.  It remains important that individual issues are properly determined on appropriate evidence. 
  • Specific rules for discovery are needed to facilitate discovery by class members where appropriate, in relation to both the common issues and individual issues.
  • The defendant(s) should be entitled to information about class members’ claims, including lists of class members, or those who have opted out. This is important for the defendant(s) to better understand the claim against them and would enable more realistic consideration of settlement options.
  • On damages, in most cases individual class members should still be required to substantiate their claims, including establishing loss at an individual level. However, where there are no individual issues that need to be determined to assess loss, it may be appropriate to assess damages in aggregate.
  • We agree with most of the draft provisions on monetary relief, but consider that there should be a default position that unclaimed damages are returned to the defendant. A Court could have the power to adopt a different approach in exceptional circumstances.
  • Court approval should be required for settlements in both opt-in and opt-out proceedings. But the approval process needs to be appropriately streamlined and efficient to be consistent with the aims of the class action regime.  There is particular need for efficiency in situations where a settlement may be struck mid-way through trial, where any delay in concluding settlement will have an adverse effect on all parties in terms of ongoing costs, not to mention court resources.
  • Class members should not have the ability to opt out of a class action settlement once it has been approved. Opt-outs from settlement at a late stage may amount to free riding by those members opting out, and run the risk of jeopardising settlement to the detriment of all parties.  Instead, we consider that a class member should be able to appeal a settlement approval with the leave of the High Court, and on the basis that: (a) they are substituted into the role of representative plaintiff for that purpose, and (b) that the appeal is limited to a judicial review of the discretion exercised by the Court in approving the settlement rather than a full appeal of the merits.
  • If the Commission considers that an opt-out right at the settlement stage is appropriate, we consider that it should only be available in exceptional circumstances.

 

View our full submission

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