The Supreme Court heard submissions this week in the Ross v Southern Response appeal on whether representative proceedings in New Zealand should be "opt-in" or "opt-out". The Court of Appeal had paved the way for representative proceedings (including this one) to proceed on an "opt out" basis: see our earlier update here.
On the facts of this case, if the proceeding is "opt-out", some 3,000 policyholders would automatically be part of the proceeding. If the proceeding is "opt-in", however, each policyholder who wishes to join would need to sign up to be part of the represented group. Currently, approximately 200 policyholders have signed up. While more could be expected to sign up in due course, these figures illustrate the potentially significant difference between an "opt-in" and an "opt-out" representative proceeding.
The plaintiffs' (ie respondents on appeal) primary argument was that an "opt-out" approach to representative proceedings is preferable because it improves access to justice for claimants, including those who might not know about the claim or might fail to opt-in. The plaintiffs also argued that "opt-out" has appropriate deterrence benefits by holding defendants accountable for the full amount of any loss they have caused as well as potential efficiency gains for the judicial system.
It was also argued that the Court should adopt an "opt-out" approach to bring New Zealand in line with a number of overseas jurisdictions, including Australia.
The Supreme Court sought the views of both the New Zealand Bar Association and the New Zealand Law Society. Both industry bodies, intervening in the appeal, supported the "opt-out" approach.
The defendant (appellant in the Supreme Court) argued that "opt-out" undermines the interests of the claimants who are "opted in" without choice and whose claim is then managed by someone else, potentially without their input. The defendant also submitted that "opt-out" was so significant a development that it should be left to the legislature (noting that the Law Commission is currently considering this issue).
A litigation funder, LPF Group Ltd, was granted leave to intervene on the appeal. It supported "opt-in" for much the same reasons as the defendant.
A further significant issue, as demonstrated by the intervening litigation funder, was how the decision on "opt-in"/"opt-out" would affect funding arrangements for representative proceedings. In particular, the Court heard submissions on how the courts might be required to approve settlement agreements in representative proceedings and how damages might be awarded on behalf of an entire group of represented claimants.
Where to from here?
The Court adjourned the hearing to seek further submissions from the parties, the Bar Association and Law Society. These submissions will respond to the plaintiffs' proposed "guidelines for an 'opt-out' proceeding", which were handed up in Court on the first day.
The Court faces an important decision with wide-ranging impacts on representative proceedings. That the Court is considering "guidelines" and seeking further submissions suggests it is alive to the appetite in the legal, commercial and funding sectors for further guidance in this area. The Court's judgment will be keenly awaited.
This article 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 of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.