Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

NZ’s measured review of class actions and litigation funding, noting Australia’s ‘polarised’ debate

The New Zealand Law Commission has commenced a 2 year inquiry into litigation funding and class actions, right at the time that an Australian parliamentary joint committee (PJC) is due to report on that topic on 21 December 2020.

The NZLC’s issues paper refers to the ‘polarised’ views in Australia ranging from “poor justice outcomes for those who join class actions” to the government’s ‘protecting its “big business mates”’, suggesting this is because of what it sees as separate plaintiff and defendant legal groups in Australia, unlike NZ, and also suggesting that Australia’s legal community does not have NZ’s “collegial nature”.   

Australia’s PJC will no doubt have had regard to this well researched NZ issues paper in preparing its final report. 

The New Zealand Law Commission describes its inquiry as ‘a first principles review of class actions and litigation funding’. Its terms of reference ask it to consider whether and to what extent the law should allow class actions, and whether and to what extent the law should allow litigation funding having regard to the torts of maintenance and champerty.

Issues paper

On 4 December 2020, the Commission published an Issues Paper – NZLC IP45 Class Actions and Litigation Funding | Law Commission – and has established an independent expert advisory group comprising lawyers and academics.

It has also commissioned experts to provide high level analysis on the

‘economics of class actions and litigation funding within a theorised base case of civil litigation’.

The Commission says it is evident that there is no broad consensus on the desirability of a class actions regime or litigation funding, nor on the extent to which, or how, they should be regulated.

In noting that this lack of consensus is a common feature elsewhere, it refers to the PJC inquiry into Litigation Funding and Class Actions in Australia, prompted, as it says, ‘by concerns over issues such as the level of funders’ commissions’.  The NZLC  refers to many submissions made to that inquiry.

It also refers to the 2018 report of the Australian Law Reform Commission into class actions and third-party litigation funders (ALRC R134, 2018).

The NZLC is calling for submissions or comments by 11 March 2021, with further consultation proposed before a final report by May 2022.

Insolvency

Unlike the two Australian inquiries, the NZLC raises a number of issues about insolvency and the importance to it of litigation funding, which had its origins in the insolvency context. It notes that claims arising out of insolvent companies continue to be an important area of activity, indeed that many claims could otherwise not be brought.

The Australian PJC inquiry

In referring to the Australian PJC inquiry, due to report on 21 December 2020, the NZLC says that ‘the proliferation of litigation funding in Australia has not been without controversy’.

Citing an on-line blog, it refers to the Australian government saying there is

“growing concern that the lack of regulation governing the funding industry is leading to poor justice outcomes for those who join class actions”

while the opposition is said to refer to Australia’s inquiry as

“a shameless move towards denying justice and fair compensation for ordinary” people and to claim that the government is more interested in protecting its “big business mates”.

Australia’s polarised views

The NZLC speculates why there is such polarisation of views in Australia, its proffered reasons being both the development of ‘a separate plaintiff bar and defendant bar’ in Australia, in contrast to New Zealand; and what it sees as

“the collegial nature of the legal community in Aotearoa New Zealand”.

PJC

The PJC was to issue its report by 7 December but obtained a two week extension to 21 December 2020.  This extension will have enabled the PJC to have regard to the very measured approach of the NZLC paper in finalising its own report.

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