28/06/2022·3 mins to read
Law Commission recommends new class action regime
A new class action regime for New Zealand is within sight, with Te Aka Matua o te Ture | The Law Commission releasing its long-awaited final report on class actions and litigation funding after a comprehensive two year review. The Commission has made 121 recommendations that, if accepted, would see new laws created to facilitate and manage class actions, and litigation funders subject to court oversight. The key drivers are to improve access to justice and manage multiple claims efficiently.
Certification: Class actions would need to be approved by the court before they can proceed, and the representative plaintiff would need to show they have at least one reasonably arguable cause of action.
Opt-in or opt-out: Class actions would proceed on either an opt-in or opt-out basis. Opt-in requires class members to actively sign up to the proceeding, whereas in an opt-out claim any person falling within the class definition will be a member unless they expressly exclude themselves.
Cost sharing orders: Courts would be able to make cost sharing orders to enable costs to be spread equitably among all class members. This is particularly important where, in an opt-out proceeding, some class members are unlikely to have entered into an agreement with the litigation funder.
Multiple class actions: Each time a class action is filed, public notice of the proceeding would need to be given. Any subsequent class action dealing with the same or substantially similar issues and with at least one common defendant would need to be filed within 90 days. The court would then decide at the certification stage which class action(s) can proceed.
Class member information: The court would be able to require a defendant to disclose the names and contact details of potential class members eg customers of a certain product, investors etc.
Litigation funding: Agreements for litigation funding would only be enforced if they have been approved by the court. Among other things, the court would need to be satisfied the agreement is fair and reasonable (including as to the circumstances in which the funder can terminate). There would also be a rebuttable presumption that security for costs should be awarded against a funded representative plaintiff.
Court oversight: The courts would play an important role in overseeing class actions, including at the certification stage. As well as the funding agreement, the court would also need to approve notices to class members, settlements, and the distribution of proceeds to class members if the claim is successful.
Public class action fund: In order to improve access to justice, the Government should consider creating a public class action fund that can indemnify a representative plaintiff for legal costs in public interest litigation (including where the relief sought is non-monetary eg a declaration).
In addition to creating a new Class Actions Act, the Commission also recommends the introduction of a new suite of High Court Rules to supplement the regime, as well as changes to the Lawyers and Conveyances Act (Lawyers: Conduct and Client Care Rules) 2008 to clarify the duties of a lawyer acting for the representative plaintiff and class members. The torts of maintenance and champerty would be abolished.
Impact of a new regime
There is general consensus that New Zealand needs a class action regime, and that litigation funders should be regulated to some degree. There have also been clear indications from the Commission over the last two years that it was likely to recommend a new regime, so the majority of its recommendations are not a surprise.
The proposed regime strikes a good balance, and would offer much greater certainty for litigants in class actions. The recommendations resolve some key issues that have been up in the air, such as the court’s jurisdiction to make shared costs orders (ie common fund orders) in an opt-out proceeding.
There is a strong access to justice theme that underpins the recommendations, but this applies to defendants as well as representative plaintiffs with safeguards in place to prevent unmeritorious claims from being allowed to proceed.
To date, class actions have required significant judicial resources and court time to resolve. The courts would still be required to actively supervise these proceedings, but could do so in a more efficient way given the framework that is now being proposed.
The recommendation of a public class action fund is a late addition, and was not previously flagged by the Commission during the consultation process. As a result, many of the details of how this might operate in practice (including how it would be funded) have not been canvassed and would need to be considered by the Government if the recommendation is accepted. It has the potential, however, to offer assistance to groups wishing to bring public interest litigation seeking non-monetary relief - such as declarations related to the impacts of climate change.
The Government will now consider whether to accept or reject the Commission’s recommendations. If some or all of the recommendations are accepted, then a new Bill will need to be prepared and introduced.
Simpson Grierson will be running a webinar in the near future on the key takeaways of the report and what to expect from a class action regime. Please get in touch if you are interested in attending this.
Special thanks to Rachael Machado for her assistance in writing this article.