LITIGTION FUNDING IN NEW ZEALAND
Accountability and access to justice
Cost is a major barrier to accessing justice. Litigation funding exists to support the important principle of having a justice system that is accessible to everyone, not just the wealthy. For many people, litigation funding is the only way by which they can have a chance to recover some of their losses and hold those who have done wrong to account.
Often defendants have commercial liability insurance and are well funded, which enables them to fully test the financial resolve of plaintiffs, to avoid being held accountable for their actions. These tactics are utilised very effectively by well-resourced defendants to delay and distract legal proceedings and contribute to the prohibitively expensive cost of litigation for many investors seeking compensation and to hold those who have done wrong to account.
To date the company has investigated more than 150 prospective claims and made strategic decisions based on merit to fund just 24 of them. Of these, LPF has successfully obtained a return for people who have suffered losses in all 17 cases completed to date. It is important to note that these deserving investors/shareholders would not have received any compensation for their losses without litigation funding to support their claim.
LPF only funds cases with a strong legal basis on a ‘no success, no fee’ basis. Given the inherent risks associated with litigation, this provides an absolute incentive to be responsible when making decisions over which cases to fund.
Securities cases in New Zealand
LPF Group is very supportive of the leadership role the Financial Markets Authority plays to ensure New Zealand’s financial markets are fair, efficient and transparent.
Those goals are shared by LPF and are fundamental to ensuring investors can have confidence that they have full and accurate information when investing their own, or someone else’s money.
Underpinning those goals, and the work of both LPF as a ligation funder, and the FMA as regulator, is holding those who serve in both governance and advisory roles, to the highest standards of professional expertise and conduct. Both organisations, by the very nature of their roles, must operate independently from outside influence.
Securities related funded cases are rare in New Zealand. The cases LPF Group has funded, and is currently funding, involve significant financial losses by investors, and allegations of serious wrongdoing by advisors/auditors and company directors.
To date, there have only been two class actions proposed in New Zealand post the Feltex case: CBL Corporation and Intueri. The situations where application of the few applicable legal standards that may result in legal action with serious compensatory outcomes are relatively limited. The predominant actions are misleading statements in a prospectus; breaches of continuous disclosure; trading whilst insolvent and other related insolvency actions.
Actions of this nature are a high bar at law, and in order to attract litigation funding, the tests need to have been met, and losses need to have arisen from the alleged breach substantial enough to sustain both funding, and the cost of funding, with a realistic prospect of meaningful compensation for victims.
LPF Group supports the regulation of litigation funding in the same way the ASIC regulates the industry in Australia. It would also support potential regulation around capital requirements and a local commitment to further align interests to the FMA and the New Zealand public.