Law Commission class action review a 'step forward for people seeking justice'

Monday, 7 December 2020

The Southern Response court case now looks like paving the way for an overhaul of the justice system (video first published in September 2018).

Law firms are hopeful people will find it easier to get justice through the courts after the Law Commission announced a review of the rules surrounding “class action” lawsuits.

Angela Parlane, managing director of Shine Lawyers in Auckland, said the review was “undoubtedly” the result of a landmark ruling by the Supreme Court last month.

The Supreme Court ruled that a representative action brought by Canterbury policyholders against insurance company Southern Response could go ahead on an “opt-out” basis.

That means claimants would not necessarily need to agree in advance to be represented by the lawsuit in order to be covered by the judgment.

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The ruling should make it easier for law firms to bring legal action in situations where many people might stand to benefit from a judgment but might not get organised to sue.

That would bring New Zealand more into line with countries where class actions are more common such as the United States and Australia.

The Law Commission said its review would consider whether lawsuits could be commercially-funded by parties such as law firms that were not directly involved a dispute, and how that could be regulated.

The way litigation funding usually works overseas is that law firms or specialist litigators fund legal action on a “no win, no fee basis”, taking a commission from the compensation awarded to people covered by claim if they win their case.

Kiwifruit growers have been taking a class action against the Ministry of Primary Industries over the importation of the PSA disease to New Zealand.

“Our initial view is that litigation funding is desirable in principle and should be permitted in Aotearoa New Zealand, so long as certain concerns can be addressed” commission president Amokura Kawharu said.

“In our view, class actions and litigation funding can improve access to justice. But there are risks and costs with both and these need to be carefully managed.”

Aaron Sherriff, a partner at law firm Duncan Cotterill, said the Southern Response judgment provided “a really good road map” for class actions in the absence of a legislative framework from Parliament.

But, speaking before the announcement of the Law Commission’s review, he said the Supreme Court seemed to be crying out for the commission to provide more direction.

“The courts have been struggling for at least decade as we have seen more of these proceedings being started.”

Sherriff didn’t believe the Southern Response ruling alone would “open the flood gates”, bearing in mind more such cases were being launched, anyway.

In addition to the claim brought by homeowners against Southern Response in relation to earthquake claims, kiwifruit growers had brought a representative action against the Ministry of Primary Industries claiming it was negligent in allowing the kiwifruit disease Psa to enter the country in 2009, he noted.

A discussed class action on behalf of telecommunications subcontractors who have been building the ultrafast broadband network is on hold.

Cladding manufacturer James Hardie has also faced a class action in relation to a leaky homes dispute.

“There is a real range of cases with all sorts of claimants,” he said.

Parlane agreed there were are already numerous “funded” actions, but said the Southern Response ruling meant there would be more.

Now that the ‘opt-out’ way of proceeding had been agreed to by the Supreme Court, “you don’t have build of book of clients”, she said.

“I would have thought there would be a lot of cases that have been waiting in the wings.

“This will be the Law Commission responding to that and they need to get something formulated ‘asap’ I’d of thought.”

Shine Lawyers has in the past discussed taking a class action lawsuit against contracting firms involved in the roll-out of Chorus’ ultrafast broadband network.

It has argued that hundreds if not thousands of sub-contractors working in the telecommunications industry should have been treated as employees and entitled to holiday pay, sick pay and back pay.

But Parlane said that possible action was on hold, and not just because of the remaining uncertainties regarding class actions.

“There are some quite complex legal arguments we would need to overcome.

“One of the big things about representative actions is you have to be sure the facts are the same from person to person.”

Phil Newland, director of Auckland litigation firm LPF Group, said the Law Commission’s consultations were a step towards “ensuring ordinary New Zealanders” who had suffered significant financial loss as a result of wrongdoing could have their day in court.

“A key barrier for people in accessing justice to seek compensation for financial losses suffered is the time and cost involved,” he said.

“Litigation funding helps overcome these challenges, yet the current system makes it extremely difficult for people who use litigation funding, instead favouring the defendants.”

Businesses that funded class actions should be required to have a local presence “to demonstrate commitment to the New Zealand public”, he said.

“Regulation of this sort will address any valid concerns that litigation funding could be

used by unscrupulous parties to frustrate access to justice or speculation through the bringing of

unmeritorious claims by parties with nothing to lose.”

The Law Commission has set a deadline of March 11 for submissions on its discussion document.