Litigation Funding in New Zealand is far from a developed industry. I say this when comparing it to the growing litigation funding industry that exists in Australia. IMF is a publically listed company on the ASX (www.imf.com.au). IMF describes itself as “… providing funding of legal claims and other related services, in Australia and in other jurisdictions, where the claim size is over AUD $2million.” The Australian High Court has in recent years cast aside many of the reservations that stemmed from the tort of champerty and maintenance. England abolished the tort many decades ago. Our Court of Appeal has questioned whether the tort is still law. However, for reasons that I certainly do not agree with, the New Zealand Law Commission have expressed, albeit 10 years ago, a view that it should be retained. I recently had reason to review the High Court of Australia’s decisions in the Fostif and Jeffery & Katauskas cases. The High Court in both cases approved, in general terms, the use of commercial funding by non-parties to the proceedings. So what are the policy arguments for supporting commercial funding? Access to justice has to be the number one benefit of commercial funding. It has become somewhat trendy to assert that civil litigation in New Zealand is in crisis due to cost. It is hard to reconcile the policy considerations which underpin the introduction of the new District Court Rules i.e. to lower costs for litigants by recognising that the large majority of disputes are resolved by way of a settlement. The war of paper and associated delays that the new Rules have created seem somewhat inconsistent with such an objective. Getting back to access to justice, it is hard to argue against allowing a plaintiff to pursue a genuine claim albeit with the assistance of third party funding. Why should a liable defendant avoid their responsibilities simply because a plaintiff does not have their own resources to achieve a just outcome? In many cases the impecuniosity of the plaintiff may have been caused by the defendant’s actions. The main advocated concern of litigation funding is that the funder is immune from the risks of any adverse costs awarded. There are two simple answers to this. The first is that an order for security for costs goes a long way towards removing the concern. Secondly, a defendant can always seek costs against a non-party litigation funder. However, such an order can only be obtained from the High Court pursuant to its inherent jurisdiction. There are a number of, in my opinion, minor concerns regarding litigation funding. I see no real prejudice for a defendant if the funding has some say in the way in which the litigation is run by a plaintiff. Commercial insurers direct and control defendants’ cases without creating any abuse of process issues. The High Court has always been able to regulate and deal with any abuse of process issues that may arise out of any specific cases, with an award of costs being the main tool used.
By Chris Patterson