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Law Commission releases final report on class actions and litigation funding

Home Insights Law Commission releases final report on class actions and litigation funding

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Contributed by: Kirsten Massey, Chris Curran, Michelle Mau and Madeline Alison

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Published on: June 29, 2022


The Law Commission released its final report on class actions and litigation funding on Monday 27 June. The report is the culmination of the Law Commission's review, which began in December 2020 and included consultation rounds with those in the sector.

A new statutory class actions regime

As previously signalled, the Law Commission has recommended a new Class Actions Act that it has concluded will be clearer and more accessible than the existing common law regime that has developed around representative proceedings under rule 4.24 of the High Court Rules. Key features proposed in the new statutory regime include:

  • Class actions will generally be commenced in the High Court. The Commission has recommended that the Government should also consider developing class action rules for the employment jurisdiction, however, it is not recommended that class actions be available in the District Court, Environment Court, or Māori Land Court.

  • A requirement that a proceeding be certified before it can proceed as a class action. The test proposed for certification closely mirrors the courts' current approach in determining whether a proceeding may continue as a representative proceeding.

  • A mechanism to deal with concurrent or competing class actions. While the proposed regime would not preclude concurrent class actions if the court is satisfied that more than one action should be certified, a 90-day deadline to bring a concurrent class action is proposed.

  • Preserving both opt-in and opt-out class actions in New Zealand, with no presumption in favour of either approach. The court would assess which is appropriate in the circumstances, according to recommended statutory factors. This reflects something of a change from what the Supreme Court had suggested in Ross v Southern Response, which was that there should be a presumption in favour of the plaintiff's choice of approach.

  • Court supervision and approval of both settlement and discontinuance of class actions. This is unsurprising given the approach in comparable overseas jurisdictions and the perceived need to safeguard the interests of members of the class not before the court, particularly in the context of opt out class actions.

  • One of the more novel recommendations: to allow the court to make an assessment of the aggregate monetary relief that a class is entitled to, rather than requiring each class member to prove their individual loss. If implemented, this would represent a significant change to the status quo (where each class member must prove all individual issues, including loss).

The role of the representative plaintiff

The report also focusses on the role of the representative plaintiff in a class action and recommends that the new Act should include specific provisions in that regard, including that the representative plaintiff should:
  • be responsible for making decisions about the conduct of the class action and giving instructions to the lawyer acting for them and the class;
  • owe an overarching duty to act in what they believe to be the best interests of the class; and
  • have a statutory immunity from claims by a class member with respect to their duty, unless they have acted recklessly or in wilful default or bad faith.

Interestingly, the Law Commission also recommends there be a difference between the role of the representative plaintiff and governance arrangements for the class (such as a claimant committee). This reflects the Law Commission's view that, while a claimant committee may be a useful way of supporting the representative plaintiff in its role, the decision-making responsibility for the conduct of the class action should remain solely with the representative plaintiff.

Lawyers involved in class actions

The Law Commission considers that, after certification, the representative plaintiff's lawyer should be regarded as the lawyer for all the members of the class, rather than the representative plaintiff alone. It recommends that the Lawyers and Conveyancers Act 2006 be amended to mandate this relationship and that New Zealand Law Society consider amending the Lawyers and Conveyancers (Lawyers: Conduct and Client Care) Rules 2008 to clarify the obligations of lawyers acting for the class in this type of action.

What about litigation funding?

In addition to considering the class actions regime itself, the Law Commission had also been considering how best to further regulate and oversee litigation funding in New Zealand. While it considered more formal models, including licensing and an appropriate regulator, the Law Commission ultimately came down in favour of recommendations that are largely consistent with current practice. Specific recommendations in this area include:

  • Consistent with recent moves in Australia, the Law Commission has recommended that the court have oversight of funding agreements – with the court only approving a funding agreement if the court considers it is fair and reasonable and the representative plaintiff has received independent legal advice on the agreement.

  • It has recommended that the court be empowered to make "costs sharing orders" (ie orders requiring class members to contribute a proportion of their proceeds from a settlement or judgment to the legal and funding costs of a class action). This could include what are commonly referred to as "common fund orders" and "funding equalisation orders". The recommendation for an express power is likely informed in part by the Australian experience, where there have been a number of disputes regarding the court's jurisdiction to make such orders.

  • Importantly, the Law Commission suggests the establishment of a public action fund to increase access to justice for claimants and ease pressure on the legal aid system. It was suggested this could be funded initially by the Government and then potentially by levies on future class action settlements.

A copy of the full report can be accessed here.
Please get in touch if you would like to talk to one of our experts about the report in more detail and what it may mean for you.

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.

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