New Zealand Law Society - Class action litigation

Class action litigation

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The traditional conception of litigation is a process by which private individual rights and remedies are determined by a passive judge on a one-off basis.

The lawyer in this picture is an independent professional providing dispassionate advice and advocacy as an agent for clients. Class action litigation raises some hard questions about the appropriate boundaries of civil litigation and the roles that should be played by judge, lawyer, plaintiff and defendant. Resistance to this class action litigation may be explained, at least in part, by its incompatibility with our traditional notion of these roles.

New Zealand does not have the large plaintiff law firms that are such an established presence in Australia and the United States. But there is no reason to think that firms that are capable of mobilising injured individuals into classes and have the skill and capability to conduct large litigation will not emerge.

Some smaller players in this field already exist and lawyers have proved themselves as adaptable to changing trends in New Zealand as elsewhere. A conservative New Zealand legal culture may frown on “entrepreneurial” lawyers, equating them with “ambulance chasers”. The lawyer’s role in this context and the dilution of control by the immediate parties is seen as in tension with the traditional conception of a lawyer and civil litigation.

The values underlying the traditional approach have to be reconciled with the values which class action litigation promotes, in particular access to justice. Class action litigation can have social utility on a scale that is absent in most other litigation. Attitudes which stand in its way merit close scrutiny.

Important mechanism for achieving public interest goals

The class action procedure empowers individuals to take proceedings in circumstances where the conduct which caused them harm would otherwise be left unchecked and the harm left without redress.

It makes it possible for the courts to grapple with conduct which can only properly be comprehended and responded to by examining its consequences for a group of people. It enables private enforcement of consumer protection laws and investor protections, and redress to be obtained for harm caused to large numbers of individuals by product failures and other torts. It also has the potential to achieve significant collective good by enforcing environmental laws.

A number of the most significant class action cases have sought redress for human rights abuses.

High profile cases include Konneh v State of New South Wales, the class action commenced in Australia in 2011 on behalf of children and young adults who had been wrongly arrested and jailed because of out of date or incorrect bail information in the New South Wales police computer system1 and Hilao v Estate of Marcos 103 F.3d 767 (9th Cir 1996) where a class of 10,000 Filipino victims who were tortured, summarily executed or “disappeared” by the Marcos regime took proceedings against Marcos (and his estate when he died) in the United States under the Alien Tort Claims Act and the Torture Victim Prevention Act.

Class action claims were filed against various Swiss banks on behalf of a class of Holocaust victims whose assets were wrongfully retained by private Swiss banks during and after World War II. They were settled for US$1.25 billion. Native Alaskans whose lives were affected by the 1989 Exxon Valdez oil spill ultimately obtained a US$507 million settlement from Exxon after filing a class action proceeding.

Class action litigation is a powerful tool for achieving social change because it provides collective interests, often disadvantaged and vulnerable, with publicity and access to the power of the judiciary, which can be a catalyst for legislative reform.

Class action litigation in other jurisdictions has played an important role in raising awareness about health issues, such as faulty medical devices, dangerous impacts of medication and systemic failures in health monitoring. Improved standards in public health in Australia have been attributed to class action litigation regarding increases in exposure to Legionnaire’s disease.2 Class action litigation has been an important tool in advancing tobacco control in the United States.

Should we be concerned?

Its opponents insist that if it is to be permitted, various safeguards should be put in place to guard against the “excesses” of United States-style class actions.

But problems observed with the US system – where all the action takes place at the certification stage and the cases that are certified are often settled – are simply never going to be a feature of the New Zealand system with its modest punitive damages awards, absence of large jury awards, limitations on contingency fees and potential for adverse costs awards.

The essential concerns appear to be that class actions, especially with the involvement of a litigation funder, pressure defendants into settling meritless claims and are unduly burdensome for defendants and the Court.

In general our legal system assumes that there is no requirement of symmetry or “equality of arms” between litigants. However the reality is that vast inequality of resources between parties in the adversarial context can work great injustice, and imbalances of power that are perpetuated in the courtroom can limit access to justice.

Government and corporations are systematically better represented than the individuals who take them on. Class actions represent one means by which this imbalance can be addressed. As commentators have pointed out, it is therefore ironic that the concerns expressed about asymmetry created by powerful class plaintiffs putting inappropriate pressure on defendants have gained so much traction.3

The argument that class actions are unduly burdensome is also, at a minimum, unduly simplistic. If the alternative is the filing of thousands of individual claims then the class action is an important tool to ensure the efficient and effective use of court time and to avoid overburdening the courts and defendants.

Class actions offer efficiencies by enabling economies of scale to operate in litigation. In New Zealand the courts have come under pressure from the large number of claims arising from the leaky building crisis and from the Christchurch earthquakes. Grouping claims together through a class action procedure is one obvious solution, especially if the determination of a preliminary issue will lead to the resolution of the claims.

Tools exist to address abuses

It is hard to believe that there is any real prospect that New Zealand defendants will settle meritless claims for large sums. Strike out and summary judgment are the obvious tools for preventing such an outcome. They are used to good effect by New Zealand defendants and place responsibility squarely on the judges to prevent meritless claims proceeding.

An aspect of the concern about the burden on defendants is the concern about plaintiffs’ ability to pay costs. However this concern is not limited to class action litigation.

It can be addressed within the existing rules by an application for security for costs, which the courts are well-placed to determine by reference to established principles which directly address the values at stake. In exercising its discretion the court balances the importance of the plaintiffs’ access to justice against the need to protect the defendant from unjustified litigation. In this context the court will consider the merits of the case. It is likely that security for costs will be sought in many class actions, giving the court an early opportunity to consider these questions.

Like any litigation, and any complaints procedure, there is the potential for abuse. There are mechanisms available to the parties and the courts for ensuring that class action litigation is conducted appropriately.

In applying these measures, and determining whether additional safeguards are required, it is important that the potential for abuse be addressed proportionately and with sensitivity to the deterrent effects that relatively minor limitations can have.

In this context access to justice is a core value, and it is important that it not be denied to some of the most deserving plaintiffs by regulating the procedure so that it becomes too difficult to use.

Liesle Theron is a barrister at Thorndon Chambers. She has a wide-ranging civil and commercial litigation practice and advises clients on all aspects of commercial and public law.

  1. For most recent developments, see Konneh v State of New South Wales (No 3) [2013] NSWSC 1424.
  2. Australian Lawyers Alliance Submission to Australian productivity commission Inquiry into Access to Justice 8 November 2013.
  3. AD Lahav Symmetry and Class Action Litigation 60 UCLA L. Rev. 1494 (2013).
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