NZ Law Commission recommends Class Action Act

By Melissa Gladstone-Joyce, Brock Gunthorpe and Michael Greatrex

New Zealand is one step closer to a legislated class action procedure after the recent publication of the New Zealand Law Commission’s (NZLC) final report on Class Actions and Litigation Funding. The report says class actions and litigation funding can make important contributions to improving access to justice. In particular, the NZLC recognised that:

"The increasing number of large representative proceedings… demonstrates a clear need for a group litigation mechanism that can resolve claims justly and efficiently. It has also exposed the inadequacies of the current procedure".

Access to justice and efficiency were key drivers in establishing Australia’s own class action framework – principles that continue to be tested today by various stakeholders, including the Court, members of the legal profession, third party funders and federal and state law reform commissions.

Common ground

The NZLC’s recommendations include some features already familiar to the Australian system including:

• court approval of class action settlements if the court is satisfied that the settlement is “fair, reasonable and in the interests of the class”; and
• a judgment on common issues that binds all class members who have not taken a step to opt out of the proceeding.

A number of the NZLC’s recommendations draw on recommendations identified by an Australian Parliamentary Joint committee in their December 2020 report (which is referenced by the NZLC) including:

• in respect of the multiplicity issue, setting a 90-day ‘standstill period’ so that any other competing or multiple class actions can be appropriately considered and filed; and
• in respect of third party funding, subjecting litigation funding to specific regulation and enhanced court oversight – with a litigation funding agreement only enforceable if approved by the Court.

Public Fund for class actions?

One other notable recommendation by the NZLC was the call to establish a

“public class action fund” (Public Fund) that can indemnify the representative plaintiff in a class action for adverse costs and provide funding towards legal fees. The main objective of the Public Fund is to “improve access to justice” by addressing “the lack of funding available for public interest class actions and class actions seeking non-monetary relief”.

These reforms are likely to stimulate debate on both sides of the Tasman and we will closely follow the legislative debate to see what, if any, reforms are ultimately adopted by the NZ government.