Class Actions and Litigation Funding

Commissioner
Belinda Clark QSO
Status
Researching issues
Project contact
Nick Gillard
Phone
04 914 4832
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  • Project

Project Overview

A class action is a court proceeding in which a group with similar interests collectively sues one or more defendants. The court proceeding is typically brought by a representative plaintiff on behalf of the class. New Zealand does not currently have a detailed class action regime. High Court Rule 4.24 allows a claim to be brought on a representative basis “on behalf of, or for the benefit of, all persons with the same interest in the subject matter of the proceeding.” An increasing number of representative proceedings are being filed in the High Court and these are often referred to as “class actions”. However, the rule has changed little since the 19th century and does not provide guidance on the many issues that arise in modern representative actions. The lack of detailed rules for representative actions can make proceedings inefficient and expensive.

Litigation funding is where a third-party with no pre-existing interest in the litigation agrees to fund the claim, usually in exchange for a fee if the claim is successful and nothing if the action is lost. Litigation funding is not limited to class actions, but many class actions would be unable to proceed without litigation funding. There is currently no specific regulation of litigation funding in New Zealand.

The Commission is therefore conducting a review of the law relating to class actions and litigation funding in New Zealand. The scope of the Commission’s review is set out in the Terms of Reference below. In its final report the Commission will make recommendations as to what, if any, reform of the law is desirable.

We will update this website as we finalise our project timeline. At this stage, we expect to publish a detailed consultation document in 2020 and then invite the public to provide feedback . You can stay up to date with developments in this project by signing up to the Commission’s mailing list here.

Terms of Reference 

Class actions enable a group of people with similar claims against the same defendant to have their claims determined in one legal proceeding. Litigation funding is where a third-party with no pre-existing interest in the litigation agrees to fund it, sometimes in exchange for a fee if the action is successful and nothing if the action is lost. Litigation funding is not limited to class actions, but many class actions would be unable to proceed without litigation funding.

The law on class actions and litigation funding in New Zealand is uncertain. High Court Rule 4.24 allows one or more persons to sue or be sued on behalf of, or for the benefit of, all persons with the same interest in the subject matter of a proceeding (commonly referred to as a “representative proceeding”). However, unlike many other jurisdictions, New Zealand does not have a detailed class actions regime. Nor is there specific regulation of litigation funding in New Zealand. The courts have been cautious in permitting litigation funding, as the torts of maintenance and champerty have traditionally restricted its use.

A key benefit of establishing clearer regimes for class actions and litigation funding would be to enhance access to justice. The Law Commission will therefore conduct a first principles review of class actions and litigation funding in New Zealand to ensure the law in these areas supports an efficient economy and a just society; and is understandable, clear and practicable.[1]

The Commission’s review will include, but not be limited to, consideration of the following matters:

Class Actions

  • Whether and to what extent the law should allow class actions;
  • If class actions should be allowed, how they should be regulated, for example in relation to:
  • the scope of a class actions regime;
  • the criteria and process for commencing a class action, including how a “class” should be defined;
  • management of class action proceedings; and
  • damages, costs and settlement.

Litigation Funding

  • Whether and to what extent the law should allow litigation funding, having regard to the torts of maintenance and champerty;
  • The role of the courts, if any, in overseeing litigation funding arrangements;
  • Whether and to what extent litigation funders and/or funding arrangements should be regulated, for example in relation to:
  • the nature and extent of the litigation funder’s recovery;
  • the powers and responsibilities of litigation funders;
  • the potential for conflicts of interest; and
  • disclosure requirements.

For the purposes of this review, litigation funding does not include civil legal aid.

The Law Commission will consult with the public, experts, Māori and other stakeholders during the review.

The Law Commission intends to report to the Minister with its recommendations by the end of 2021.

 

[1]   Letter from Minister responsible for the Law Commission to President of the Law Commission regarding Annual Expectations for 2018/2019 (14 May 2018).