Te Aka Matua o te Ture | Law Commission is currently undertaking a first principles review of class actions and litigation funding. The review is part of wider, ongoing efforts to improve the affordability and efficiency of civil litigation and raises issues of significant interest to the legal profession and New Zealanders.

The New Zealand Law Society | Te Kāhui Ture o Aotearoa recently provided feedback on the Commission’s Issues Paper, saying that a statutory regime for both class actions and litigation funding is appropriate and necessary, and would provide greater certainty, predictability and transparency of the law.

The Law Society has advocated for a first principles review of class actions and litigation funding, regarding it as a high priority for law reform. Class actions allow claimants with factual or legal issues in common to group their claims together in a single proceeding so they can be resolved together, and litigation funding by a commercial funder may facilitate access to justice by covering claimants' legal costs in exchange for an agreed percentage of compensation awards. 

The Law Society considers the existing framework to address group-based litigation under rule 4.24 of the High Court Rules is inadequate to deal with the modern evolution of class actions. A full statutory framework is preferable and is best suited to balance the advantages of class actions (including access to justice) against the potential disadvantages that may arise.

In the Law Society’s view, access to justice is the clearest advantage of class actions and should be the main – but not the overriding – objective of a statutory regime. The regime must also consider appropriate protections for defendants and the need for proportionate access to justice for all parties in class action proceedings, in line with the fundamental objective of the High Court Rules to “secure the just, speedy, and inexpensive determination” of proceedings.

The Law Society also agrees that litigation funding is an established fact of modern litigation in New Zealand and elsewhere, and desirable in principle. The regulatory response should recognise that litigation funding is essentially a financial product and that many regulatory concerns can be addressed by good practice market mechanisms for financial products.  

It noted that the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 will also require amendment, because the Rules are not currently equipped to deal with the range and complexity of professional issues that can arise in multi-party relationships involving lawyers, class members and litigation funders.

Where to next?

The Law Commission will consider the submissions it receives in response to the Issues Paper and develop appropriate recommendations. If the submissions, and the Commission’s further analysis, supports proceeding with class actions and/or litigation funding, the Commission will look to publish a further paper with detailed proposals for regulation. The Law Society looks forward to providing more detailed feedback on specific reform proposals in the next phase of consultation.

The Law Society thanks members of its Civil Litigation & Tribunals Committee for their extensive work contributing to the Law Society’s submission.