The Court steps in in the absence of a statutory regime

Justice Osborne in the High Court at Christchurch has recently issued two judgments demonstrating the Court’s willingness to exercise its supervisory jurisdiction over class actions when called on to do so.

The decisions arise out of the Ross v Southern Response litigation that we have reported on previously.  The Court of Appeal has granted leave for the Rosses to pursue a representative action on an “opt-out” basis under which all potential members of the class are included unless and until they choose to opt out of the litigation.

The judgments deal with how and when a defendant can communicate with individual potential members of a representative class (Communication Application), and the Court’s response to the proactive approach taken by litigation funders to the Court’s management of representative proceedings (LPF Application).1

In relation to the Communication Application, Southern Response sought directions that:

  1. the defendant, including its employees, officers and directors, be at liberty to communicate, engage, negotiate, and/or settle claims directly with potential class members in this proceeding; and
  2. the defendant’s legal advisers be at liberty to communicate directly with individual potential class members in this proceeding, except those potential class members that have retained GCA Lawyers.

Counsel for the Rosses opposed the Communication Application stating that the Court should not sanction direct communication by Southern Response with class members as this would circumvent the obligation to obtain the Court’s approval for any settlement and effectively result in a settlement of the claim, rather than settlement with a few individual class members or a sub-group of such members.

Justice Osborne agreed.  In reaching his decision, he held:

  1. The Court’s supervisory powers in relation to representative proceedings attached to communications between the defendant (and its legal representatives) and members of the class as they do to a plaintiff (and their legal representatives) and members of the class.
  2. In relation to both situations, the Court’s powers extend to all aspects of any communication, including form, conduct and timing.
  3. In appropriate cases the Court may require a party to seek from the Court prior approval in relation to its proposed communications.

The directions sought by Southern Response were refused, but it was left open for it to bring before the Court draft communications and details in relation to their form and timing for its consideration.  Thus leaving open the prospect of future communications with members of the representative class, albeit subject to Court approval.

The LPF Application is an application by litigation funder LPF to be heard in relation to the Communication Application, to access Court documents and for a direction that a Case Management Conference be allocated for the purpose of making timetable directions in relation to other representative plaintiffs.

LPF does not currently have a funding agreement with any potential representative class members in the Ross v Southern Response litigation.

Justice Osborne dismissed LPF’s application.  Due to the urgency of the application, reasons for the decision are not given.  However, it demonstrates that attempts by litigation funders to have a say in litigation in which they are not actively involved may not be accommodated by the Court.

The New Zealand Law Society has recently provided feedback on the Law Commission’s first principles review of class actions and litigation funding.  It supports the implementation of a statutory regime for both class actions and litigation funding in order to provide greater certainty, predictability and transparency of the law.  It has stated that it considers the existing statutory framework in the High Court Rules to be inadequate to deal with the “modern evolution of class actions” and that a detailed statutory framework is best suited to balance the perceived advantages and disadvantages that arise out of this type of litigation.

While this may well be the case, these recent decisions illustrate that the Court is not shying away from exercising its supervisory jurisdiction when called upon to deal with issues not currently provided for in the High Court Rules.

We understand that the Law Commission will consider the submissions that it has received in response to the issues paper and develop recommendations as a result.  We will continue to report on this area of law as it develops.

  1. Ross v Southern Response Earthquake Services Ltd CIV-2018-409-361 [2021 NZHC 142]; [2021 NZHC 153].

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