Introduction

In the recent decision of Simons & Ors v ANZ Bank New Zealand Limited & ASB Bank Limited,[1] the Court of Appeal approved the High Court judgment of Venning J, [2] in which it was held that the High Court has jurisdiction to issue a common fund order (CFO) – the first authority of its kind in New Zealand. CFOs “are a mechanism which provide a way of sharing the costs of bringing a class action between all class members, regardless of whether they have signed the funding agreement” with the litigation funder.[3]

Two issues were central to the Court of Appeal decision: first, whether a CFO ought to have been ordered. Second, at what stage in the proceedings should the order be made.

On 20 December 2024, the Supreme Court refused an application by ANZ and ASB for leave to appeal the Court of Appeal decision.[4] So the Court of Appeal decision is the last word on the matter, for the moment at least.

Facts

Certain ANZ and ASB customers who did not receive accurate loan variation information sought leave in the High Court to issue representative proceedings on behalf of themselves and other affected customers. Backed by litigation funders,[5] the plaintiffs are seeking relief under various provisions of the Credit Contracts and Consumers Finance Act 2003 (CCCFA).[6] The proceeding is off the back of an earlier settlement between the banks and the Commerce Commission, which included admissions of breaches of the CCCFA.

Court of Appeal decision

Opt-out representative proceeding

Relying on the Supreme Court[7] and Court of Appeal[8] decisions in Southern Response Earthquake Services Ltd v Ross, the Court confirmed that an ‘opt-out’ representative proceeding – which allows a claimant to represent all similarly interested individuals, save where they choose to opt out – was appropriate.[9] It cited similar principles of access to justice, with no disadvantages to class members. An ‘opt-in’ proceeding, by contrast, requires individuals to explicitly consent (opt in) to their inclusion in the representative class for the purpose of the proceeding.

CFOs

The plaintiffs sought CFOs from the Court to give effect to their contractual relationship with their litigation funder. The terms entitle the litigation funders to first priority on any monies received from the litigation. In the event of a settlement or judgment being given against the banks, the sum recovered would not be paid to the class until after the litigation funders have recovered their costs, as well as their service fee (which was not disclosed in the judgment).[10]

The Court of Appeal examined the position of CFOs in Australia, the UK and Canada:

Australia: In BMW Australia Ltd v Brewster,[11] it was held that the making of a CFO could not take place at an ‘early stage’ of the proceeding. The majority in Brewster held that the making of a CFO at an early stage is uncertain as it “involves speculation on the part of the parties and the court” as to the cost and value of the litigation.[12] In relation to the making of a CFO at the conclusion of a proceeding, the Court noted that the position is uncertain in Australia.[13]

United Kingdom: The Court noted that it is not clear whether the UK’s Civil Procedure Rules permit the making of a CFO at any stage of a proceeding, and that there has been no positive ruling on the making of a CFO in the UK.[14]

Canada: Litigation-funding agreements (which include the same or similar terms that would be in a CFO) can be approved by the Federal Court in Canada.[15] In Ontario, litigation-funding agreements can also be approved under the legislation.[16]

Contrary to the High Court of Australia's stance in BMW Australia Ltd v Brewster, the Court of Appeal considered that CFOs enhance access to justice by providing funding certainty.[17] It found that Rule 4.24 of the High Court Rules allows for CFOs to ensure the benefits of a successful representative proceeding are shared ‘fairly’,[18] and affirmed the High Court’s equitable jurisdiction to issue CFOs at the beginning of a class action.[19]

The Court noted that a crucial factor to its conclusion was that it will closely scrutinise the CFO and approve any settlement which may arise.[20] This dicta is aligned with the Law Commission’s recommendation that a new class actions statute should require settlements to be approved by the courts.[21] As noted by the Law Commission, court supervision of a class action settlement is necessary “to protect the interests of class members, who are unlikely to be involved in negotiating the settlement but will be bound by its terms and conditions, including terms that extinguish some or all of their claims.”[22] Australian federal legislation[23] and New South Wales legislation[24] provide that a representative proceeding cannot be settled without court approval.

In respect of the timing of the CFO, the Court of Appeal disagreed with the New Zealand High Court’s decision to refrain from issuing the CFO at the outset of the proceeding. The High Court believed that it had not been apprised of all relevant facts and that therefore it was premature to make the CFOs until after the ‘stage one hearing’, at which the common issues in dispute would be determined.[25] The High Court also had regard to the Court of Appeal decision in Ross v Southern Response Earthquake Services Ltd[26] where it was noted that the time and cost of litigating about a CFO would be pointless if the proceedings fail at stage one.[27] However, the Court of Appeal disagreed and held that failing to make a CFO at an early stage of the proceeding prolongs uncertainty about the funding of the litigation and thereby places access to justice at risk.[28] It ruled that the issuing of the CFOs as early as possible best serves the interests of justice and, accordingly, directed their immediate implementation.[29]

Supreme Court decision

In refusing ASB and ANZ’s application for leave to appeal, the Supreme Court held that the challenge against the High Court’s jurisdiction to make a CFO did not have a “sufficient prospect of success to justify the expense and delay of a further appeal”.[30] It was “hard to resist” the Court of Appeal’s reasoning in relation to the timing of the making of a CFO[31] – that is, it was in the interests of justice to issue the CFO as early as possible.

Comment by Morgan Fee

These landmark judgments establish a ‘first’ for New Zealand and represent a significant departure from international class action frameworks, enhancing our jurisdiction's appeal to litigation funders. By granting a CFO, the Court mitigates the uncertainty and commercial risks that funders typically encounter when participating in representative proceedings.

However, allowing funders to incur substantial costs and service fees before a claim's viability has been robustly tested poses a serious risk to class members' chances of securing a meaningful remedy. For many defendants, the plaintiffs’ costs can become the primary obstacle to resolving litigation. The Court's readiness to issue orders at such an early stage may create unique challenges for both claimants and defendants.

moRGan fee is a special counsel at fee langstone

[1] [2024] NZCA 330 [CA decision].

[2] [2022] NZHC 1836 [HC decision].

[3] CA decision, supra note 1 at [92].

[4] [2024] NZSC 186 [SC decision].

[5] LPF and CASL Management Pty Ltd (CASL) are involved in funding the claims - CA decision supra note 1 at [32].

[6] ANZ plaintiffs seek relief pursuant to sections 48, 90, 93 (a), 94 (1)(a), 99 (1A), 99 (1); ASB plaintiffs seek relief pursuant to sections 48, 99 (1) and 99 (1A) - see CA decision, supra note 1 at [21], [22].

[7] Southern Response Earthquake Services Limited v Ross [2020] NZSC 126. See our article on this case at: Continuing developments in Southern Response v Ross – Class Action “opt-out” approved - Insurance law in New Zealand (feelangstone.co.nz)

[8] Ross v Southern Response Earthquake Services Ltd [2019] NZCA 431; see our article on this case at: Class action to include all potential members - Insurance law in New Zealand (feelangstone.co.nz)

[9] CA decision, supra note 1 at [91].

[10] CA decision, supra note 1 at [99]–[100].

[11] [2019] HCA 45 [hereinafter Brewster].

[12] Ibid. at [68].

[13] CA decision, supra note 1 at [116].

[14] CA decision, supra note 1 at [123].

[15] CA decision, supra note 1 at [124].

[16] CA decision, supra note 1 at [125].

[17] CA decision, supra note 1 at [133].

[18] CA decision, supra note 1 at [135].