The Law Commission is proceeding with its review of litigation funding, after a period with some high profile cases that have created a higher-than-ever interest in what litigation funding means for litigants.
Recent high profile class action-type cases in New Zealand include the recent case taken against the directors of Mainzeal, the PSA kiwifruit action, the action against the former Feltex directors and the action taken by Fair Play on Fees against banks on behalf of over 21,000 bank customers over alleged excessive fees. It was deemed the biggest class action in New Zealand legal history at the time.
Law Commission senior legal policy advisor Jenny Ryan says the review was suspended in May last year due to resource constraints, but Justice Minister Andrew Little has requested that the Commission recommence its work on class actions and litigation funding.
“The Commission is now in the early stages of reactivating the project. We intend to revisit the Terms of Reference to see whether they are still appropriate for the review.”
The commission says that while class actions have been common internationally for some time, litigation funding is a more recent phenomenon, particularly with cases over the past decade. There are at least seven litigation funding firms now operating in New Zealand.
Justice Minister Andrew Little (right) says he’s aware that class actions and litigation funding is an issue that is on the work programme of the Law Commission. He supports the review which he says is an important part of the wider access to justice conversation.
Law firm Bell Gully said this week that although the Australian Federal Court accepted in 2016 that it has the power to make common fund orders, there are two pending challenges to this ruling currently before the Australian courts.
“The Australian Law Reform Commission (ALRC) has proposed to codify the current law allowing common fund orders to be made, which would mean that the current challenges to common fund orders would be rendered moot.
“We are aware of a recent application for a common fund order in a class action in New Zealand. However, that application has not yet been considered by the Court. Given the differences between the New Zealand and Australian class action regimes, it is hard to see that there is a basis for a common fund order under our current class action laws.”
The firm says that the New Zealand Law Commission’s review of class actions will therefore be critical and outlined the key points the Commission had indicated it would be looking at in March 2018 including –
- To what extent should the law permit class actions and litigation funding, and are the current rules adequate?
- Should the courts have a role in supervising, managing or approving class actions and litigation funding arrangements?
- When should class actions be permitted, who should be able to bring a class action, and how should the class be defined?
- What is the appropriate procedure for determining class actions, and how should issues that are not common to all parties be resolved?
- What, if any, regulatory framework should apply to commercial litigation funders, conditional fee arrangements and crowdfunding of class actions?
- How should costs, settlement and the payment of claims be dealt with?
“If it adopts the ALRC’s approach and recommends the courts be given the power to make common fund orders, we could see a radical change from the current basis on which litigation funders operate in New Zealand.”
Sir Douglas White Views
Retired Law Commission president Sir Douglas White QC (left) said last year “Litigation funding plays an important role in facilitating class actions, which would often be unable to proceed without third party funding. The previous Minister agreed that the Commission should consider both class actions and litigation. The new Minister, Hon Andrew Little has now confirmed that reference.
“. . . (litigation funding) may, however, be particularly important in such cases. In the absence of a funder, there may not be a lead plaintiff who is willing or able to take on the burden of funding the litigation,” White said.
He said class actions are important in cases where the amount recovered by each claimant will not be great, but the total sum recovered by the group is likely to be significant. In such cases often the cost of bringing an individual claim wouldn’t be justified by the amount received in the settlement.
“Consumer protection and investor claims often fall into this category,” White said.