With the end of 2025 in sight, we are taking time to reflect on key developments in New Zealand's litigation landscape this year and look ahead to trends likely to shape 2026.
Litigation activity has not slowed over the past year, and the Russell McVeagh litigation team has been in the thick of it. If you have any questions about what the decisions or legislative changes discussed in this update may mean for you, get in touch with one of our experts listed below.
Class dismissed?
2025 saw the continued evolution of New Zealand class action procedure, including in response to novel applications in the well-known Smith v Fonterra proceedings, in which Mr Smith alleges that the defendant companies' greenhouse gas emissions have materially contributed to climate change. The case has provided two key takeaways for representative proceedings:
- Representative defendant orders should be sought to manage large numbers of defendants, not to expand the scope of litigation: In Smith v Fonterra Co-Operative Group Ltd [2025] NZHC 940, [2025] NZCCLR 393, some of the defendant companies unsuccessfully applied to be representatives of all New Zealand entities with similar emissions profiles. The application was made under the same rule that allows a plaintiff to bring a class action on behalf of others. The High Court found that a defendant class this broad would add unnecessary complexity and delay, the opposite of what representative orders are meant to achieve. Orders of this kind could be granted if that improved access to justice, but not in cases where the order forces the plaintiff to sue entities that they did not wish to sue.
- Courts need to know exactly who is covered by protective cost orders (PCOs): Funding is a key consideration in almost all representative proceedings. In another decision later this year, Smith v Fonterra Co-Operative Group Ltd [2025] NZHC 1605, [2025] 3 NZLR 22, Mr Smith asked the Court to protect an unknown third-party funder from having to pay costs if the case was unsuccessful, on the basis that a funder would not stand to control or benefit from the proceeding but would be a "pure funder", such as an environmental charity. As the order was sought to help Mr Smith obtain funding, it was only possible to identify the type of funder who might provide funding rather than the specific funder. While the Court had some sympathy for the application, the Court held it could not assess the application or determine if the proposed funder is truly a "pure funder" without the name or details of the third-party funder and that transparency was important for defendants so they could understand the scale and nature of the case they are likely to face.
In another recent development, ASB settled the claims against it in the Simons v ANZ Credit Contracts and Consumer Finance Act class action. The settlement was made with no admission of liability and is subject to approval by the High Court, a process that may take several months. Russell McVeagh has been pleased to act for ASB in this proceeding.
Looking ahead, we await with interest a decision in relation to representative orders in the ongoing Toyota class action proceeding.
Across the Tasman, we saw the High Court of Australia issue some important decisions this year relating to particular features of class action proceedings. In Lendlease Corporation Ltd v Pallas [2025] HCA 19, the High Court confirmed the availability of "soft class closure orders", which require class members to proactively register in a proceeding to share in settlement proceeds (unregistered members are able to participate in judgment proceeds). And in Kain v R&B Investments Pty Ltd [2025] HCA 28, the High Court confirmed that the Federal Court can make common fund orders ("CFOs"), requiring all group members (who have not opted out), to contribute equally to a litigation funder's commission. Importantly, a CFO is not available where the litigation funder is a law practice. These decisions offer helpful insights into the potential future of our own class action regime. For more information about these developments, read our recent publication here.
Directors under the spotlight
Accessory liability for former CFO
In Financial Markets Authority v CBL Corp Ltd (in liq), the High Court found the former CFO of CBL Corp Ltd (in liq) personally liable as an accessory to the company's breaches of the continuous disclosure provisions in the Financial Markets Conduct Act 2013. This was the first time the High Court had considered accessory liability in relation to these provisions, and the Court's judgment is consistent with the law on accessory liability as it has developed in other contexts. Helpfully, the Court confirmed that a director or senior must have actual knowledge of the contravention before they can become liable as an accessory. For more information, see our summary here.
Diversion of corporate opportunity
The decision in Drylandcarbon GP One Ltd v Leckie [2025] NZHC 2915 is just one recent example of a notable uptick in shareholder disputes. In it the High Court found two directors had diverted a corporate opportunity and misused company information to establish a separate and new forestry investment generating carbon credits for investors. That diversion and misuse was also found to amount to shareholder oppression. The plaintiff brought the claim on behalf of the company in a derivative proceeding as the company's 50% shareholder (and other director). In the derivative proceeding, the defendant directors (and related companies used to exploit the opportunity) were ordered to account to the company for profits obtained by them from the investment opportunity. In the shareholder oppression proceeding, the defendant directors were ordered to purchase the plaintiff's shareholding at fair value, coming out at just over $12 million. This case is a timely reminder of the strictness of directors' fiduciary duties and the strength of equitable relief.
From shareholder rights to AI risks: what’s next for legal privilege?
The law on legal privilege is on the move. In 2025, two developments were of particular importance. First, the judgment of the Privy Council in Jardine Strategic Limited (Appellant) v Oasis Investments II Master Fund Ltd and Ors [2025] UKPC 34 overturned the "Shareholder Rule", which had previously prevented companies from asserting legal advice privilege against their shareholders. The Board rejected the historical basis of the Shareholder Rule that shareholders have a proprietary interest in the advice. Although the rule has received little attention in New Zealand (where the Privy Council's judgment does not represent the law), the decision in Jardine may foreshadow renewed focus on these shores, especially given the context noted above of an increase in shareholder disputes. The removal of the rule would give company boards reassurance that communications made with the company's lawyers on behalf of the company are secure and protected. To learn more about this development take a look at our recent publication.
The second development concerns legal privilege and technology. The boundaries of privilege are being tested by generative AI, with calls sounding earlier this year for "AI privilege". However, under current New Zealand law, chat logs in generative AI tools are generally not subject to legal advice privilege. This means that chat logs may need to be disclosed to another party in litigation or to a regulator in response to a request. Outside of litigation, though AI-generated material created specifically for obtaining legal advice may in some circumstances attract legal privilege, even that is not clearcut, and the general position is that most chat logs and material will not be privileged. See our article here.
Judicial review: it's all about context
2025 has seen welcome clarification of the courts' approach to judicial review in commercial contexts and of the mistake of fact ground of review:
- The Court of Appeal's recent decision in New Zealand Independent Community Pharmacy Group Inc v Health New Zealand [2025] NZCA 443 (which Russell McVeagh acted on) recalibrates the courts' approach to the public law scrutiny of commercial decisions. It rejects the presumption that public bodies' commercial decisions cannot be reviewed except on the limited grounds of fraud, corruption or bad faith and confirms that the scope of judicial review depends on the factual and legal context. The appeal challenging a decision to enter into a community pharmacy agreement was dismissed. Leave to appeal to the Supreme Court has been sought by New Zealand Independent Community Pharmacy Group.
- In Air New Zealand Ltd v Qantas Airways Ltd [2025] NZHC 3230 (which Russell McVeagh also acted on), the High Court confirmed and brought welcome clarity to the emerging mistake of fact ground of review. The Court held that a decision will be reviewable if it is tainted by an "incontrovertible mistake of fact" that was material to the decision. In such cases, procedural fairness requires that mistake to be corrected. Separately, the court confirmed the more established rule that an error of law will arise if there is no basis in fact upon which a particular decision could have been reached. The Court of Appeal independently came to more or less the same conclusion in a decision not two weeks later in New Health Incorporated v Minister for COVID-19 Response [2025] NZCA 592. These are timely and helpful clarifications for decision-makers and interested parties alike.
- In addition, earlier this year the Court of Appeal dismissed a judicial review challenge by Lawyers for Climate Action New Zealand against the Climate Change Commission. The case centred on the Commission’s 2021 advice on emissions budgets and New Zealand’s Paris Agreement commitments and, while focused on decisions of the previous Government, the decision has ongoing significance for how emissions budgets are set and monitored. More generally, the decision was notable for expressing doubt about the courts applying "heightened scrutiny" to judicial review in climate change cases as a default rule, emphasising instead that whether a decision is reasonable has to be assessed in the factual and legal context. Read our full analysis here.
Construction disputes provide building blocks for compliance
Retention monies need to be handled with care
In Burt v Grant [2025] NZHC 2486, following the liquidation of the head contractor, the High Court held that statutory trusts arose in the subcontractors' favour over sums received from various sources following liquidation, including retentions released by principals under head contracts and settlement sums received from the directors for breach of obligations in relation to retentions. This meant that liquidators were not free to treat the trust money as part of the company's general pool of assets. For more information see our summary here. We understand this decision is being appealed so this is one to watch.
Contractors must be careful not to jump the gun when seeking payment on a default basis
In Construction Advantage Ltd v Eljayej Holdings Ltd [2025] NZHC 1749, a summary judgment application for payment on a default basis, the Court confirmed that it was reasonably arguable that referencing previous correspondence in a payment schedule satisfied the requirement to give reasons for deductions from a payment claim. In Chillex Services Ltd v Best Air Conditioning Ltd [2025] NZHC 1729, a contractor's statutory demand for payment of its payment claims was set aside as it was issued before the contractual payment dates and while a genuine dispute existed over the sums claimed.
Contractors stepping into a partially completed project must carefully define scope
In Hsieh (As Trustee of Hsieh Family Trust) v Dreamhome Construction Ltd [2025] NZHC 1643, a contractor, having agreed to replace another contractor in completing a residential build, was held responsible for remedying existing defects (which were not expressly excluded).
Employment law reforms signal major shifts
New Zealand's employment law framework is on the cusp of one of its most significant overhauls in recent years. The Employment Relations Amendment Bill was introduced in June and would, if passed, signal a significant shift in current employment law. It proposes a gateway test to clarify employee versus contractor status, removes the 30-day rule for new employees under collective agreements, and limits remedies where employee conduct contributed to dismissal. The Bill also introduces a salary threshold of $180,000 for unjustified dismissal claims and refines the justification test to prevent technical defects from determining outcomes. For further information, see our update here.
Alongside this, details have emerged on the long-awaited Holidays Act reform, which will be replaced by the Employment Leave Act. Key changes include hours-based accrual for annual and sick leave from day one (rather than waiting 12 or six months), immediate entitlement to bereavement and family violence leave, a new pay-as-you-go rate of 12.5%, simplified holiday pay calculations excluding bonuses and commissions, and the ability for employees to cash up 25% of annual leave.
On the litigation front, just last week the Supreme Court issued its decision in Rasier Operations BV v E Tū Incorporated [2025] NZSC 162 (which Russell McVeagh acted on), unanimously finding that four Uber drivers (one also being an Uber Eats delivery partner) were employees. The majority agreed with the lower courts that the real nature of the relationship between drivers and Uber was that of employment. Justices Glazebook and Ellen France came to the same conclusion as the majority but disagreed on the applicable legal test, finding that the Court of Appeal had erred in discounting the parties’ common intention as to the status of their relationship at the time of entering into the relationship. The decision is significant as it had been over 20 years since the Supreme Court last considered the test for employment status under s 6 of the Employment Relations Act – the last instance being in Bryson v Three Foot Six [2005] NZSC 34. The decision is expected to have wide-reaching implications for working relationships generally, but particularly those in the gig economy.
Restructuring and insolvency momentum shows no signs of slowing
As we anticipated, this year has been exceptionally busy for restructuring and insolvency. Whilst company insolvencies are increasing year by year as businesses grapple with challenging economic conditions, opportunities to implement operational and balance sheet restructurings remain where stakeholders take decisive action early. We expect this trend to persist into next year as a "tail" of restructuring and insolvency activity often follows periods of financial distress. Check back here in two weeks' time for our specialist Restructuring & Insolvency Year in Review.
Private client update
Applications under the provisions of Trusts Act 2019 have continued to increase over the past 12 months, as have trust disputes more generally. We have also seen an increase in trust restructuring work, as families seek to redesign the structures in which their assets are held to ensure they remain fit for purpose, and to reduce the risk of becoming embroiled in their own disputes in future. Our Private Client Year in Review provides more detail on the trends we have been seeing in trust law, important decisions from the Supreme Court over the past 12 months, and updates on key recent developments in tax and immigration.
Brace for change: 2026 is set to reshape the litigation landscape
Beyond the trends highlighted above, we expect litigation commencing in 2026 to look very different as a result of the major procedural changes coming into force next year. In particular, we see the following areas of reform as likely to dramatically change the litigation landscape in the next year:
- Major changes to the High Court Rules are coming. From 1 January 2026, significant amendments to the High Court Rules 2016 come into force. The changes represent a deliberate attempt to streamline proceedings, and to ensure that the time and cost involved in civil litigation is proportionate. The key changes include a new duty on parties to cooperate with each other, earlier filing of factual evidence, a move away from current discovery processes, a streamlined process for interlocutory applications, increased judicial involvement, and changes to requirements for initial disclosure and expert evidence.
- The new Auckland High Court Commercial List, established late this year, will see a different and more intensive case management for commercial cases qualifying for entry onto the list. Together with the rule changes above, the List will mean quite a different experience for parties familiar with commercial litigation in the High Court.
- The Government has announced a flurry of proposed updates to the Health and Safety at Work Act 2015. The reforms are focused on cutting red tape and reducing compliance costs. Many of the proposed reforms are intended to provide businesses with more certainty. The changes will reduce requirements for small businesses in low-risk industries. Overlap will also be removed between the HSAWA and other regulatory regimes. The changes will also clarify that landowners who permit people to undertake recreational activities on their land will not be responsible if someone is injured on their land while participating in those recreational activities. Responsibility will lie with the organisation running the activity. This is consistent with the decision reached by the High Court in Whakaari Management Limited v WorkSafe New Zealand. For more information read our 10 April 2025 update).
- The Government has also consulted on a proposed new statutory private adjudication process for civil disputes, and we will be watching to see whether the proposal is progressed.
- Parliament's willingness over the course of this year to consider legislating in response to active and high-profile litigation has caught the public's attention. Key examples include legislation affecting the CCCFA class action against ANZ and ASB, Marine and Coastal Area Act litigation, and pay equity claims, with potentially more to come. It remains to be seen if this will be a lasting trend, but it serves to remind litigants of the need to have a strategy beyond the courtroom as well.
This content is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter, please contact a Russell McVeagh partner/solicitor.