2018 Litigation Forecast - Third party funding Summary
Like group litigation (often called ‘class’ actions), litigation funding is also becoming a more established feature of the New Zealand litigation landscape. A typical model is that a litigation funder will pay for all legal and other costs relating to a proceeding in exchange for repayment of funding costs and a profit margin or share of the damages if the claim is successful. Litigation funding is attractive to claimants who may not have sufficient funds to pursue a claim and who pay nothing if the claim does not succeed. As there are no significant common law or statutory barriers to litigation funding in New Zealand, we predict increasing involvement from funders.
The hot topics for litigation funding in 2018 are likely to be:
- Further debate on the proper role of the courts where litigation is funded: The New Zealand courts have, in recent years, followed overseas courts in taking a more permissive approach towards litigation funding with some safeguards. These safeguards and the role of the courts in relation to litigation funding have been considered recently by the Supreme Court and the Court of Appeal. Our view is that the courts will continue to test where the boundaries of its protective function lie as litigation funding continues to grow and evolve in New Zealand.
- Advertising of ‘class actions’ which are funded by third parties. A recent decision by the Court of Appeal demonstrates that the courts will scrutinise statements made regarding the likely outcomes of funded litigation: Funders and claimants may face delays in obtaining leave to bring a group claim if inaccurate or misleading statements are made.
- Return on investment for funders: Despite the growth in litigation funding, a key issue for funders in New Zealand is that there has not yet been a track record of substantial pay outs for litigation funders, while in one case a substantial liability for costs was incurred.
- Litigation funding and the Law Commission’s review of class actions: Litigation funding is likely to be a hot topic in the review of the class action regime by the Law Commission which is due to commence in early 2018. The Law Commission is likely to look closely at whether the courts should take a more active role in supervising third party funding as the Australian courts do.
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