Law Commission calls for further submissions on draft procedure for class actions

Law Commission calls for further submissions on draft procedure for class actions

On Thursday 30 September 2021 the Aotearoa New Zealand Law Commission handed down its supplementary issues paper in its ongoing review of class actions and litigation funding in New Zealand.

The Commission has confirmed its view that a statutory class action regime is desirable, observing that even those submitters who were sceptical of the benefits of class actions preferred the certainty of such reform. Many of the proposals align with Omni Bridgeway’s submission to the Commission.

Although further submissions are sought by 12 November 2021*  the issues paper provides valuable insight into what we can expect from a future class actions regime in Aotearoa New Zealand. Unlike their earlier issues paper released in December 2020, this paper includes draft legislation, which gives stakeholders greater clarity on the framework for the ongoing consultation. 

The features of the Commission’s proposed regime include:

  • The existing High Court Rule 4.24 (the representative proceeding rule) is to be retained for cases which are unsuitable to be brought as a class action. Some amendment may be required in order to avoid confusion about which procedure should be adopted.
  • A new commencement process for class actions, including a certification stage. The Commission favours a straight forward numerosity requirement (a representative plaintiff and 2 or more other persons) and a low threshold for commonality (the claims all raise a common issue). The certification process is similar to that used in Canada and requires the Court to consider if the statement of claim discloses a reasonably arguable cause of action, as well as making an assessment of the suitability of the representative plaintiff; whether the opt-in or opt-out mechanism proposed is an appropriate means of determining class membership; and whether a class action proceeding is an appropriate procedure for the efficient resolution of the claims of class members.
  • Provision for both opt-in and opt-out class actions.
  • Powers for the court to manage “competing” class actions. The Commission is in favour of a wide definition of “competing class action”, such as: “Two or more class actions with respect to the same or substantially similar issues filed against the same defendant by different representative plaintiffs.” Time limits have also been proposed so that once a class action is filed, any other class action against the same defendant on similar issues would need to be filed within 90 days. The court would then consider the competing actions at the certification stage.
  • Detailed requirements for notices that need to be sent to class members, such as when a class action has been certified, when the court issues judgment determining the common issues and when settlement is proposed or approved.
  • A requirement for court approval to be given before the discontinuance and/or settlement of a class action. Before approving a settlement, the court must be satisfied that it is fair, reasonable and in the interests of the class as a whole. The proposed procedure is similar to the settlement approval process used to date in Australia.
  • Once the settlement has been implemented, a provision that a settlement outcome report be given to the court and these to be available to the wider public. These reports could include information about the total settlement fund, the number of class members who received a payment from the settlement, the size of payments received by class members, amounts paid to litigation funders and amounts paid to lawyers.    

Interestingly, the Law Commission has not formed a preliminary view on whether common fund orders or funding equalisation orders should be allowed in Aotearoa New Zealand. Their final recommendation will be informed by further submissions and the Law Commissions conclusions on litigation funding.

The Law Commission’s final report is due in May 2022. 

Omni Bridgeway looks forward to continuing to participate in the consultation process.