Class action and litigation funding regime welcomed, if the right balance is struck

18 March 2021

Our submission to the Law Commission welcomes the chance to remedy current issues with New Zealand’s representative actions regime. A dedicated regime provides the opportunity to create a fair and balanced system that achieves access to justice goals, reduces cost, and improves certainty for all parties involved in large scale litigation. Further work, and consultation, is needed to get the details right.

From our experience, the growing number of funded representative actions have raised new challenges for litigation in this country. Complex, and potentially overlapping, class actions require careful case management to avoid inefficient and expensive delays.

In Chapman Tripp’s view, any statutory class actions regime will need to:

  • ensure court supervision of the establishment of the class and the early identification of the common issues
  • manage class actions arising from the same or similar events together and with regard to the burden imposed on the witnesses and experts for the defendants
  • complement, rather than replace, existing regulatory enforcement mechanisms, which can often achieve more holistic solutions than the courts alone
  • recognise that cost awards represent only a small proportion of actual costs incurred by successful parties, especially in complex representative actions, and
  • require court approval for settled opt-out class actions.

It is important that all aspects of the regime, and their impact on both plaintiffs and defendants, are considered in the round.

We also consider that minimum baselines for litigation funding agreements (building on those included in the UK’s Association of Litigation Funders code of conduct) should be included in legislation. These safeguards include:

  • restrictions on funder control over key strategic decisions, and in particular the decision to settle or discontinue a proceeding
  • prohibitions on the funder from having a discretionary right to terminate funding, and limiting circumstances in which termination is permissible
  • wide-ranging procedures for resolution of disputes between funders and plaintiffs
  • terms requiring lawyers to prioritise their professional and fiduciary duties to the plaintiff(s) above any duties owed to the funder
  • prohibitions on solicitors and law firms having financial and other interests in a funder funding litigation on which that law firm or solicitor is acting
  • minimum capital adequacy requirements for funders, and
  • requirements that:
    1. a litigation funder must provide security for costs in court proceedings, together with a presumption that full security is to be provided, and
    2. any security provided should be in a form enforceable in Aotearoa New Zealand, and enforceable without the need for any ancillary litigation (whether in Aotearoa New Zealand or overseas).

There should be clear consequences for non-compliance with those minimum baselines.

We look forward to engaging with the Commission further as this new regime is developed.

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