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Litigation funder supervision role may be tested

22 February 2018

The courts may well review their role in supervising litigation funders this year, according to a review of class actions in New Zealand by Bell Gully.

The review identifies five key trends to look for in 2018. It says historically the courts would only intervene if a funding arrangement amounted to an abuse of process.

"However, a recent judgment from the Chief Justice [PricewaterhouseCoopers v Walker [2017] NZSC 151] suggests a possible change of approach, indicating that the courts may subject funders to greater scrutiny in the future."

Bell Gully says legislative reform is another area to watch. The Law Commission announced in 2017 that it would be reviewing the law relating to class actions and litigation funding.

"It remains to be seen whether the new government will prioritise this review. If it does, will; the light-handed status quo prevail? Will new prescriptive legisation be proposed? Could we see a code of conduct or regulation for litigation funders?"

Product liability claims have dominated the Australian class action regime and, if the James Hardie claims are successful in New Zealand, they may open the door to further product liability claims here, the review says.

"The Court of Appeal ruled in September 2017 that one of the James Hardie claims, which raises novel issues as to whether a cladding manufacturer may be liable for pure economic loss resulting from alleged defects in its product, could proceed as a class action."

Bell Gully says that to date there has been "surprisingly little" in the way of securities class actions in New Zealand. It says there has been a significant increase in securities class actions in Australia, with shareholder claims now said to comprise 20% of all class actions.

"We expect New Zealand to follow suit, with a focus on companies' continuous disclosure obligations and on statements made in public offer documents."

Cyber security claims are also seen as an area to watch. Bell Gully says while businesses are not obliged to notify data breaches in New Zealand, widespread breaches gain considerable publicity. It says a high profile data breech could give rise to a class action if a number of customers or third parties are affected by a problem.

Last updated on the 16th September 2019