Class action law on the horizon

22 December 2022
The Government has announced it agrees in principle with Law Commission recommendations to establish a statutory regime for class action lawsuits. The regime is to be underpinned by a Class Actions Act, which is intended to facilitate class actions and enhance access to justice.

At present, class action claims are governed by a High Court rule, together with principles developed by the Courts. The lack of a specific law governing class actions and litigation funding is widely regarded as an impediment to the efficient conduct of these claims. Litigants can spend significant time and cost on arguments as to how the claims should be conducted, before the merits of the claims are heard.

The objective of the proposed Class Actions Act is to create a more efficient and fair process for the conduct of class action claims and the associated litigation funding arrangements. Under the Act:

• A case will require approval or certification by the Court to proceed as a class action.

• Both opt-in and opt-out class actions will be permitted. An opt-in class actions requires individuals to sign up to the action to be a class member. In an opt-out class action, persons falling within the class definition are part of the action unless they opt out.

• The Courts will provide oversight to ensure the interests of class members are protected, for example by way of approval of settlement agreements.

• Litigation funding agreements will only be enforceable by a funder if they are approved by the Court.

• A public class action fund will be created to provide funding for public interest claims that are not sufficiently profitable for litigation funders to take on

• Consideration is to be given to specific class action rules for employment cases

The Government says it will undertake policy work to advance the class action law from early 2023. It cautions this will “take a period of time” and “will need to be balanced against other Government priorities”. This means the new law is unlikely to be formulated in the near future, but at least the legislative process is under way.

In the wake of the proliferation of class actions overseas, particularly in Australia, class action claims are becoming a more common feature in New Zealand. The proposed Class Action Act is an important reform which will provide clarity and structure to class actions and provide protections to the litigants involved. It is hoped progress on the new law moves quickly.

Grimshaw and Co