Calls to strengthen class action process

New Zealand should introduce Australian-style ‘‘opt out’’ class action lawsuits, says leading class action lawyer Adina Thorn.

These cases, involving groups of claimants clubbing together to sue well-heeled companies or government departments for compensation, can be brought in New Zealand.

But they can only be taken in the names of claimants who actively ‘‘opt in’’. By contrast, class actions in Australia can be ‘‘opt out’’ affairs where all potential claimants are included, unless they actively decide against it.

Thorn’s call comes amid rising calls for the booming class action industry, and the controversial litigation lending that bankrolls it, to be regulated by acts of Parliament.

Early next year the Law Commission will begin consulting on whether Parliament should create a ‘‘specific legislative regime dealing with class actions ... and, if so, what features such a regime should include,’’ said commission spokesman Stephen Day.

Opt-out class actions are easier for lawyers to launch, and can end up being bigger than cases built when lawyers such as Thorn have to advertise to build their books of claimants.

As a result Thorn expects strong opposition from state- owned enterprises and government ministries. Kiwifruit growers are currently suing the Ministry for Primary Industries over the 2010 PSA virus outbreak.

‘‘All the big commercial enterprises, the banks and the insurers, will be strongly opposed,’’ Thorn predicted.

The Law Commission consultation, ordered by former Justice Minister Amy Adams in August, will also probe litigation lending, a rapidly-growing industry in which private lenders fund civil lawsuits.

Countries such as the UK and Australia already have litigation lending laws supporting an industry many believe plays an important role in allowing consumers to hold deep-pocketed companies to account.

But some, including Chief Justice Sian Elias, question the legality of litigation funding agreements.

In a Supreme Court judgement in a case in which liquidator Robert Walker is suing PricewaterhouseCoopers over its role as auditor of failed finance company Property Ventures Ltd, Elias said litigation funder LPF had so much control it ‘‘arguably allows the claim to be treated as an investment to be maintained to the extent to which it provides a commercial return’’.

Her comments prompted LPF to complain to the Judicial Complaints Commissioner with LPF director Phil Newland calling her comments ‘‘unfair’’, ‘‘unjustified’’ and ‘‘incorrect’’.

Both Elias and Newland believe Parliament should look at regulating the industry.

Legislating litigation funding could also lead to protections for litigants, who can pay dearly for their loans, and cede a lot of control to lenders.

In the PWC case, for example, LPF was entitled to a fee of 42.5 per cent share of the net recovery costs, the Supreme Court heard.