Litigation funders LPF Group’s official complaint to the Judicial Conduct Commissioner regarding Chief Justice Dame Sian Elias’s alleged conflicts and bias and reveals the depth of opposition by insurers and others to litigation funding in New Zealand.
The 10 page complaint explains the dramatic effect of Dame Sian’s alleged opposition to litigation funding and to “call to arms” for insurers to oppose changes to the law, lead by “losing” law firm Fee Langstone in the recent PwC case.
The lawsuit from the liquidators of David Henderson’s failed property development firm Property Ventures (PVL), a claim that was financed by LPF in return for 42.5 percent of any settlement, was settled with PwC in August, though the Supreme Court said it had still chosen to issue its judgment “because the appeal involves important issues” and the underlying proceeding is continuing against other defendants.
LPF is the largest domestic litigation funding group, recently involved in the long-running PSA claim against the government. LPF chairman is former Supreme Court justice Bill Wilson.
The nine page letter signed by LPF director Phil Newland relates to the claim against Christchurch developer Dave Henderson’s failed PVL case in a claim brought by the PVL Group liquidator and funded by LPF Group.
The letter specifically refers to and complains about an article in law firm and insurance specialists Fee Langstone’s article “Supreme Court Introduces Uncertainty into Litigation Funding”. The article was introduced by Dame Sian in a separate proceeding, PricewaterhouseCooper v. Walker & Scutter issued in October 2017.
In part, the article quotes Dame Sian’s comments regarding litigation funding, reporting –
She expressed the view that it was “well arguable” that the litigation funding agreement itself was contrary to law and public policy, given the wide extent of control over the litigation it afforded SPF. Her provisional conclusion was that there is scope to take the view that “the litigation funding arrangement amounts to the transfer of a bare cause of action for profit and is champertous”. Nor was she convinced that SPF’s undertakings would have been sufficient, as they were irrelevant to the central question of whether a bare cause of action had been assigned to the litigation funder. Finally, the Chief Justice questioned whether the law should be further developed by legislation.
This case was in fact settled in a confidential settlement made before the decision was issued.
But LPF maintain that Dame Sian’s comments were seriously prejudicial to LPF (or its entity funding the PVL cases), which lead to the complaint to the JCC.
Conflict of Interest
Among the most serious claims made in the complaint are those relating to Dame Sian’s husband Hugh Fletcher, who is chairman of IAG NZ which, the letter notes, is likely to be the insurer of one of the parties in the action and allegedly the largest professional indemnity insurer in New Zealand.
He is also a substantial IAG shareholder, while the IAG reports disclose that his earnings from the company over the past decade has been $AUD3.2 million
The letter also claims Dame Sian failed to disclose her “interactions” with Bruce Gray QC (below) in respect of
discussions at a Rules Committee meeting over litigation funding in New Zealand. Bruce Gray and Dame Sian, according to the letter, both attended a Rules Committee meeting in February 2017. And the Chief Justice had noted her concerns about the funding of class actions as early as 2009.
The appeal that is the subject of the substantive complaint involved Bruce Gray QC acting on instructions from Fee Langstone. Arguments of champerty were raised regarding the litigation funding arrangements.
The chief Justice claimed that the court should not have delivered judgment following the
confidential settlement with PwC due in part to the manner in which the appeal had been argued.
She stated that PwC’s “apparent concession” that the litigation funding agreement was unobjectionable “should not be treated as determinative. I think it is well arguable that the litigation funding agreement in issue here is contrary to law, even though PwC did not invite the High Court or Court of Appeal to treat it as objectionable in itself. I am influenced in this view by the extent of control over the ligitation permitted to SPF under the funding agreement and the extent to which it remains in control of the funding to be provided.”
The LPF complaint claims that the Chief Justice’s statement had ‘dramatic impact’ on the business
and litigation funding generally because it was creating uncertainty around the financial viability of
litigation funding and “purporting to introduce new standards which simply cannot be met.”
“The fact that the Chief Justice describes her comments as provisional does not diminish the
prejudicial impact of the most senior judge in New Zealand declaring the funding agreement to
be unlawful on a preliminary reading,” the Phil Newland’s letter says.
The Chief Justice’s view will serve as a ‘blueprint’ for defendants in funded cases to challenge
the terms of any similar funding agreementes, the complaint says.
Leading public lawyer Mai Chen also noted in NBR that the issuing of a separate judgment such as that written by the Chief Justice was unusual.
“Unlike the decision of the majority it is not binding on other courts so while future litigants might refer to the dissenting judgment in argument it will not prevail over the decision of the majority if the case involves the same issue. However, the parts of her judgment which address the decision to issue judgment after settlement will be highly relevant the next time that situation arises. IF and when that happens again, and assuming there is a dispute bout whether judgment should be issued at all, I would expect the chief justice’s dissenting judgment to receive very careful consideration.”
The Fee Langstone article, says the LPF complaint, published by the “losing side”, “goes on to record with some delight that the Chief Justice’s “separate reasons” are significant and “it will probably mean that there will be more challenges to litigation funding arrangement in future”.
Call To Arms
The Fee Langstone article then serves to make a “call to arms” for the insurance industry in
relation to the Law Commission’s upcoming work on litigation funding.
“We are concerned that an unfavourable predisposition to litigation funding has led the Chief Justice
to undertake a critique of the funding agreement without notice to or input from the affected
parties,” Phil Newland wrote.
Given the involvement of Hugh Fletcher in IAG NZ, Phil Newland says they would have taken the opportunity, if presented, to have Dame Sian recuse herself “whether or not IAG NZ were an insurer actually involved in the proceeding. No industry has a greater interest in impeding the progress towards certainty and simplification of class actions and litigation funding than they do,” he wrote.