Litigation funding arrangements continue to receive attention from the courts, including in the recent Court of Appeal decision of Southern Response Earthquake Services Limited v Southern Response Unresolved Claims Group [2017] NZCA 489. 

This decision was an appeal from the High Court, granting leave to bring a proceeding as a representative action on behalf of an unincorporated body of homeowners (Group), and others who wished to join the proceeding.  Each member of the Group had unresolved insurance claims against Southern Response Earthquake Services Limited (Southern Response) arising from the Canterbury earthquakes. 

The Group alleged that Southern Response breached the respective insurance contracts in both procedural and substantive respects.  The Group also alleged that Southern Response had engaged in a deliberate strategy designed to deceive policy holders, and delay claims with a view to reducing its own financial liability.

In granting leave to bring a representative action, the High Court considered that the materials used by the Group to promote the representative action had been misleading.  The Court imposed terms requiring the Group to provide further information to its members about the action and the funding arrangements, and also to provide the members with a cooling off period to decide whether they wished to leave the Group.  Southern Response appealed the granting of leave and the Group cross-appealed the terms imposed.

The Court of Appeal held that the individual claims had sufficiently common issues that could be addressed through the representative process.  This would promote efficiency and economy in the conduct of the litigation.  The fact that significant issues would need to be worked through after the common issues were addressed by the Court, and on an individual basis, was no bar to the grant of leave.

In considering the terms imposed on the Group, the Court acknowledged that the Group's marketing materials were misleading and made the following general comments:

  • It is not the role of the Court to “approve” litigation funding arrangements.  The grant of leave to bring representative proceedings is not, and should not be seen as, an endorsement of the funding arrangements
  • Nevertheless, the Court will ensure that, in granting leave, it is not facilitating an abuse of its processes. If a representative proceeding is based on clearly misleading funding arrangements for example, then the Court will not grant leave knowing that its processes are being used to facilitate unlawful conduct.

The appeal by Southern Response was dismissed and the cross-appeal by the Group was allowed in part, with the previous imposed term for a cooling off period set aside but the other terms remaining in force.

See the Court's decision here.