I MARKET OVERVIEW
Funded litigation in New Zealand is not as common as in comparable common law jurisdictions such as the United Kingdom and Australia, but it is undoubtedly on the rise.2 There are several local and overseas litigation funders operating. The local funders include LPF Group Ltd, Litigation Funding Ltd, Tempest Litigation Funders, and Earthquake Services Ltd. The overseas funders include Harbour Litigation Funding (United Kingdom) and Litigation Lending (Australia).
In recent years, a variety of proceedings funded by third parties have been brought involving allegations in relation to losses on share investments caused by misleading statements in a share prospectus,3 building products,4 losses resulting from kiwi fruit being affected by the entry of disease into the country,5 illegitimate fees charged to consumers by banks,6 insurance claims arising out of earthquakes7 and breaches of directors' duties owed to companies.8
The existing legal and regulatory framework is antiquated and, while permitting funded litigation, is not attuned to its dynamics. Reform is very likely within the next few years, with the Law Commission (an independent law reform agency established by statute) having in May 2108 announced plans to review and recommend reform on both litigation funding and class action procedure generally.
II LEGAL AND REGULATORY FRAMEWORK
There is no specific legislation in New Zealand governing litigation funding,9 or even class actions. Instead, the applicable principles have been developed by the courts in the context of the existing rules of civil procedure that do not specifically govern litigation funding or class actions.10 These existing rules have necessarily been applied in a flexible and liberal way to cater for the modern style of group litigation.
i Attitude and role of the courts
The recent attitude of the New Zealand courts to litigation funding can be described as cautiously permissive, and perhaps increasingly receptive. Although the common law torts of maintenance (support of litigation by a stranger without just cause) and champerty (an aggravated form of maintenance involving such support in return for a share of the proceeds) have technically not been abolished in New Zealand and their role is not necessarily abrogated,11 the general approach taken to these torts is a relaxed one. This minimises their potential application to funding arrangements.
The Supreme Court of New Zealand has made it clear that it is not the role of the courts to act as general regulators of litigation funding arrangements or to give prior approval to such arrangements, outside their supervisory role in 'representative' proceedings under Rule 4.24 of the High Court Rules.12 Instead, the role of the courts is to adjudicate on any applications brought before them to which the existence and terms of a litigation funding arrangement may be relevant.13
The Supreme Court has accepted that some measure of control by a third party funder is 'inevitable' to enable a litigation funder to protect its investment.14 The main grounds for intervention (for example, by imposing a stay of proceedings) are:
- Where there is a manifestation of an abuse of process on traditional grounds, such as where proceedings deceive the court, are fictitious or a mere sham, use the process of the court in an unfair or dishonest way or for some ulterior or improper purpose or in an improper way, are manifestly groundless, without foundation or serve no useful purpose, and are vexatious or oppressive.15
- Where a funding arrangement amounts to an assignment of a bare cause of action to a third party funder in circumstances where this is not permissible (i.e., the exceptions to maintenance and champerty do not apply). In assessing whether litigation funding arrangements amount to an assignment that is not permitted, the court will have regard to the level of legal (rather than de facto) control able to be exercised by the funder, the profit share of the funder and the role of the lawyers acting.16
- Where a representative action has been promoted to prospective litigants using misleading statements, the court may also intervene, either by refusing a direction under Rule 4.24(b), or to correct the harm done by the distribution of the material.17
Even where concerns such as these arise, the provision of appropriate undertakings by a funder may be effective to allay them. In one notable case,18 a funding agreement was in place between the plaintiff company (in liquidation) and the litigation funder (SPF No. 10 Ltd), in conjunction with an assignment under a security agreement to the funder of the plaintiff's right of action against the defendant (this being its only valuable asset). The defendant argued that this arrangement was an impermissible assignment of a bare cause of action to the funder, which amounted to an abuse of process. The majority of the Supreme Court held that the belated provision of undertakings given by the funder to the Court (1) not to rely on clauses in the security agreement giving it greater control than it had under the funding agreement, and (2) to pay a proportion of proceeds of a successful claim for the benefit of unsecured creditors (where the funder was otherwise entitled to all these under the security agreement) satisfied concerns as to the permissibility of the assignment.
ii Regulation of litigation funders
As providers of financial services and products in trade, litigation funders are subject to the provisions of the Fair Trading Act 1986.19 This contains consumer protections against misleading and deceptive conduct, unsubstantiated representations and false or misleading representations. The legislation provides redress against such conduct by funders in, for example, marketing funding, negotiating with prospective plaintiffs, or in relation to acts or omissions while a funding arrangement is in place. The Consumer Guarantees Act 1993, which imposes statutory guarantees in relation to services, may also have application.
Funders with a place of business in New Zealand, and who provide a 'financial service' (typically, this is because they act as a creditor under a credit contract),20 must register as a financial service provider (FSP). Those providing services to 'retail clients'21 must also belong to a dispute resolution scheme. All FSPs are subject to the fair-dealing provisions in the Financial Markets Conduct Act 2013, which prohibit misleading conduct, false or misleading representations and unsubstantiated representations in relation to financial products and services. The regulatory authority, the Financial Markets Authority, can take civil action against FSPs whose conduct breaches these provisions. Possible civil orders include declarations of contravention, pecuniary penalties22 and compensatory orders.
III STRUCTURING THE AGREEMENT
Funded litigation typically involves a relationship between three parties: the litigation funder, the lawyers, and the funded plaintiff or plaintiffs. There will be at least two contracts involving these parties. First, there will be a retainer agreement between the lawyer and the funded plaintiff or plaintiffs defining the scope and terms of the legal services. Second, there will be a funding agreement between the litigation funder and the funded plaintiff or plaintiffs defining the terms on which funding is to be provided. In addition to incorporating terms standard in commercial agreements (such as confidentiality), these terms will comprehensively regulate matters such as the level of recoveries to be enjoyed by the funder, the extent to which the funder has control over the litigation (including veto rights over settlements), the application of recoveries and termination.
In addition to these agreements, there may be a separate agreement entered into between the lawyers and the litigation funder, governing matters such as the level of legal fees and expenses, the process for invoicing and payment of these, and reporting obligations. Quite separately, the litigation funder may also appoint a project manager to monitor the progress of the funded litigation against the applicable budget.
i No requirement for court approval
In a significant decision at the end of 2017, the Court of Appeal confirmed that the representative action procedure does not require the court to give prior approval of a funding arrangement.23 Instead, the court will be concerned to ensure that in granting leave it is not facilitating an abuse of process. If a representative action is based on clearly misleading funding arrangements or amounts to a bare assignment of claims, then the court will not grant leave knowing that its processes are being used to facilitate unlawful conduct. In this regard, the courts will exercise a greater supervisory role over the setting up of representative actions (i.e., the funding arrangements and communications with prospective class members) than where a party brings an ordinary non-representative proceeding that is funded.
Subject to this and to the law relating to illegality, parties are free to include whatever terms they wish in funding agreements and the courts are reluctant to interfere with this freedom.
ii Level of funder recovery
There are no limits prescribed by either legislation or the common law. In the context of a non-representative funded action, the Supreme Court has said that it is not the role of the courts to assess the fairness of any bargain between a funder and a plaintiff, presumably including the matter of funder remuneration.24 In the context of a representative funded action, the High Court was not persuaded that the terms of the funding agreement (including an entitlement to terminate the funding agreement without cause on five days' notice and a power to veto in relation to settlement) were inappropriate for a representative action.25
This said, in assessing whether litigation funding arrangements amount to an impermissible assignment, the courts will have regard to the profit share to be taken by the funder (see above).
While there is no regulation of the nature and extent of recovery by litigation funders, lawyers in New Zealand may utilise only a certain type of contingency fee. The fee must:26
- amount to the normal fee that would have been charged for the services provided; or
- amount to the normal fee accompanied by a premium that:
- compensates counsel for the risk of not being paid at all;
- compensates counsel for waiting to be paid until proceedings have been concluded; or
- is not calculated as a proportion of the amount recovered by the proceedings.
However, conditional fee agreements are prohibited for criminal proceedings, immigration proceedings and family law proceedings.
Conditional or contingency fee agreements that fall outside this statutory permission may be illegal or unenforceable, especially where the payable fee is calculated as a proportion of the amount recovered (and is therefore champertous).
iii Validity of settlement veto rights
The courts take a generally liberal and non-interventionist approach to the inclusion of veto rights in a funding agreement. In the leading case considering this issue,27 the High Court was not persuaded that the existence of a power of veto in relation to settlement was inappropriate for a representative action. This was for the following reasons:
- in most scenarios, the claimants and the funder should continue to have aligned interests in relation to what would constitute an acceptable settlement;
- to the extent the action requires positive input from all the claimants, the funder will need to maintain their goodwill to carry on with the action; and
- where the funding agreement contemplates the involvement of independent third parties with appropriate expertise to resolve disputes, this will provide a fetter on the funder's ability to act unreasonably.
iv Validity of termination rights (with or without cause)
The courts take a similarly liberal and non-interventionist approach to the inclusion of express termination rights (with or without cause) in a funding agreement.
In the unusual event that the funding agreement does not make express provision for termination, Part 2 of Subpart 3 of the Contract and Commercial Law Act 2017 will apply by default. A funder would be able to cancel (prospectively) a funding agreement in the following circumstances:
- for misrepresentation by the plaintiffs prior to the agreement that has induced the funder to enter the agreement;
- if a term of the funding agreement is broken by the plaintiffs; or
- if it is clear that a term in the funding agreement will be broken by the plaintiffs.
In all these situations, the funder may exercise the right to cancel if, and only if:
- the parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the term is essential to the funder; or
- the effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be:
- substantially to reduce the benefit of the contract to the funder;
- substantially to increase the burden of the funder under the contract; or
- in relation to the funder, to make the benefit or burden of the contract substantially different from that represented or contracted for.
On the issue of any funded proceedings, a litigant must disclose the following matters to the other party or parties:28
- the fact there is a litigation funder and the funder's identity;
- the amenability of the funder to the jurisdiction of the New Zealand courts; and
- the terms of withdrawal of funding, if those terms in some way give legal control over the proceedings to the funder (for example, the ability to withdraw finding if the funded party refuses to obey instructions given).
The litigation funding agreement itself must be disclosed to the opposing party and the court where an application is made to which the terms of the agreement could be relevant, such as applications for a stay on the basis of abuse of process, applications for third party costs orders and applications for security for costs.29 In relation to the latter type of application, the Supreme Court has said that it is 'strongly arguable' that the courts have power to order disclosure of at least the existence of a litigation funder and the relevant terms of the funding agreement.30
Disclosure to the opposing party is subject to appropriate redactions being made to preserve confidentiality and protect ligitigation-sensitive matters and privilege.
In this regard, confidentiality is protected by a combination of the common law and the Evidence Act 2006.31 Legal privilege in proceedings is protected by the Evidence Act 2006.32 This extends to communications, information and any opinions formed based on the communication or information. There is privilege for communications with legal advisers,33 privilege for preparatory materials for proceedings34 and privilege for settlement negotiations or mediations.35 The legislation does not specifically address communications exchanged between legal advisers and litigation funders, or materials prepared for or by litigation funders for prospective legal proceedings. Such communications or materials would ordinarily be encompassed within the privilege over preparatory materials for proceedings.36
In domestic arbitrations, an arbitral tribunal may order the discovery and production of documents or materials within the possession or power of a party.37 This is broad enough to extend to a litigation funding agreement, although an arbitral tribunal would be cognisant of the need to protect confidentiality and privilege.
In any civil proceeding, a court may order the unsuccessful party to pay the costs (and certain disbursements) of the successful party in the litigation. All matters of costs are at the discretion of the High Court,38 but one of the default principles is that the party that fails with respect to a proceeding or an interlocutory application should pay (scale) costs to the party who succeeds.39
i Level of costs
Generally, costs are assessed by applying a notional daily recovery rate (normally, two-thirds of the daily rate considered reasonable for each step of the proceeding) to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application.40 A court may award increased costs,41 or even indemnity costs,42 in specified circumstances (generally involving fault by one party).
Litigation funding costs, or the costs of securing third party funding, do not constitute either costs or disbursements within the meaning of the costs regime. The only basis on which the High Court might order the unsuccessful party to pay such costs or disbursements would be on the basis of its inherent jurisdiction; this would be exceptional and we are not aware of any precedent for this.
ii Liability of funders for adverse costs
In exceptional circumstances, funders may be liable for adverse costs as non-parties, even in the absence of any abuse of process43 or impropriety.44 Further, the level of such costs is not limited to the amount of funding provided.45
According to the leading case on costs against non-parties:46
Where . . . the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes.
In this case, a non-party had funded unsuccessful litigation by an insolvent company. The Privy Council did not have litigation funding specifically in contemplation. Given that a litigation funder always stands to benefit financially from the proceedings and will ordinarily exercise at least some control over the proceedings, the above proposition must be read down. It seems likely, therefore, that for a funder to be liable for adverse costs, something more is required. One situation might be where the funder exercises control over the proceedings to the effective exclusion of the plaintiffs. Another might be where the funder withdraws funding part way through the litigation, leaving the defendants to face a plaintiff who is impecunious or insolvent. A third might be where it was clear at the time of filing that the funded claim is simply not tenable and litigation should have been avoided.47
Indemnity or increased costs will not be awarded merely because a litigation funder with a profit motive stands behind the losing party.48
iii Security for adverse costs
On application by a defendant, a court may order the giving of security for costs if:49
- a plaintiff is resident out of New Zealand;
- a plaintiff is a corporation incorporated outside New Zealand;
- a plaintiff is a subsidiary of a corporation incorporated outside New Zealand; or
- there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding.
Funders may be ordered to provide security, and have been so ordered. The evolving practice is for funders of funded representative actions to provide security for costs that tend to be quantified on a relatively generous basis in favour of defendants.50 Calculation of the sum is a matter for the court to assess in all the circumstances. Those include the:
- amount or nature of the relief claimed;
- nature of the proceeding, including the complexity and novelty of the issues, and therefore the likely extent of interlocutory procedures;
- estimated duration of trial; and
- the probable costs payable if the plaintiff is unsuccessful, and perhaps also the defendant's estimated actual (i.e., solicitor and client) costs.
Insofar as past awards of security are a legitimate guide, they generally represent some discount on the likely award of default scale costs.
The sum ordered must either be paid into court, or security for that sum must be given to the satisfaction of the judge or registrar. Where the litigation funder is overseas, an appropriate form of security will be a bank bond or guarantee unconditionally enforceable by the defendant on demand, or additional commitments made by the funder and an after-the-event insurer.51
The involvement of a funder does influence the court's decision to award security and may justify increased security for costs. In the leading case,52 the Court of Appeal stated:
[The fact a party is supported by a litigation funder] may justify increased security on the ground that courts should be readier to order security where a non-party who stands to benefit from the litigation is not interested in having rights vindicated but rather is acting in pursuit of profit. Security allows the court to hold the funder more directly accountable for costs. It is consistent with the Court's jurisdiction to award costs against a non-party which is sufficiently interested in the litigation. Security is all the more appropriate where the funder can avoid liability for future costs by terminating the funding agreement by notice before the litigation concludes.
In that case, the Court of Appeal ordered security (for the appeal) in the sum of NZ$100,000 (increased from NZ$86,000) because the overseas litigation funder retained the right to terminate its indemnity to the representative plaintiff for costs on notice and the scale costs of the proceeding were unusually high.
vi THE YEAR IN REVIEW
In light of the recent increase in funded litigation, a number of practitioners, judges and commentators have expressed concern that the absence of a regulatory regime for litigation funding (and class actions) is creating inefficiencies in the court system and uncertainty for litigants. On 10 May 2018, the Law Commission (an independent law reform agency established by statute)53 announced that it is to review the law relating to class actions and litigation funding, with a view to making reform recommendations to the Minister of Justice.54
The task of the Law Commission is 'to assess whether the potential benefits of class actions and litigation funding can be realised in a manner that outweighs any costs and disadvantages they might give rise to'.55
As at September 2019, the Law Commission is working towards finalising terms of reference. After this has been done, the Law Commission will engage with interested parties in both the public and private sector during the review and will carry out a public consultation process. An expert advisory group to provide technical expertise and advice representing a range of perspectives will also be established.
The draft terms of reference for the review include the following issues in relation to litigation funding:56
- the extent to which the courts should have a role in supervising, managing or approving class actions and third party funding arrangements;
- whether any regulatory requirements should be imposed on third party funders;
- issues relating to costs and settlement in class actions and other third party funded proceedings; and
- assessment and payment of claims at the conclusion of a class action.
Ultimately, the Law Commission makes recommendations in a final report to the Minister of Justice. As at the time of writing, no final completion date for the review has been set.
This report is tabled in Parliament and the government responds by deciding whether to accept or reject some or all the recommendations. If some or all are accepted and legislation is required, then a bill is prepared and introduced to Parliament in the ordinary way. Unless urgency is required, this can take several Parliamentary sessions over one or more years.
It should be noted that a previous attempt to achieve reform in New Zealand did not come to fruition. In 2008, the Rules Committee (a statutory body with responsibility for procedural rules in the courts) released a draft Class Actions Bill or High Court Amendment (Class Actions) Rules for consultation. This contained a new procedure to enable true class action proceedings in New Zealand.
A final draft was sent to the Secretary for Justice in 2009. In October 2011, following an inquiry into major finance company failures in New Zealand, the Commerce Committee recommended57 'that priority be given to progressing legislation on class actions during the term of the 50th Parliament' and 'that such legislation include guidelines for the operation of commercial third-party funders of litigation'. In March 2012, the government issued a response to the report.58 In relation to the recommendations quoted, this stated that further policy work was required before the Bill could be introduced to the House and that this was expected to occur in 2012. The Bill subsequently received no further political consideration and has now almost certainly been overtaken by the pending Law Commission review.
In relation to the existing procedural rules, a significant development in 2019 was the judgment of the Court of Appeal in Ross v. Southern Earthquake Services Ltd59 recognising the ability of the Court to make an 'opt-out order' as part of a direction under Rule 4.24 of the High Court Rules, and that this should be the default position. Such an order means all members of the relevant class are automatically included in the action, unless they expressly opt out. Where actions are tried in two stages (a trial on liability followed by a trial on quantum), class members will still have to opt in at the quantum stage, to have an opportunity to prove their loss and enjoy a share of recovery.
This marks a significant change to the New Zealand law relating to representative actions, enabling funded actions to be brought more easily. It remains to be seen whether and to what extent the New Zealand courts will grant 'common fund' orders or 'equalisation' orders for the benefit of funders, as occurs in Australia.
vii CONCLUSIONS AND OUTLOOK
Litigation funding is undoubtedly on the rise in New Zealand, not least because group-style litigation is also on the rise. The recent recognition of opt-out representative actions will only add to this and is also likely to create greater competition among funders. In this sense, it is a growth market. In the absence of any legislation specifically governing these matters, the courts have been content to adopt a permissive approach, generally interfering with a funding arrangement only where it raises an issue of abuse of process or amounts to an impermissible assignment. The scope for such interference is greater in the case of representative actions, which are governed by the High Court Rules and that do involve supervision by the High Court.
Funders are generally at liberty to include any terms they wish in funding agreements, which are ordinarily structured as financing of the claim. Agreements tend to be comprehensive in regulating all relevant matters, including as to recovery levels, veto rights over settlements and termination provisions.
On the issue of any funded proceedings, a litigant must disclose certain matters to the other party or parties (the fact that there is a litigation funder and the funder's identity, the amenability of the funder to the jurisdiction of the New Zealand courts, and the terms of withdrawal of funding). The litigation funding agreement itself must be disclosed where an application is made to which the terms of the agreement could be relevant.
Costs in civil proceedings are at the discretion of the court. The default rule is that the unsuccessful party pays at least the scale costs of the successful party. Funders may be liable to pay adverse costs and also to provide security for costs, which tend to be quantified generously.
The Law Commission has announced a review into litigation funding and class actions, after which it may recommend reform to the government. The time frame for this process has not been finalised. It is also not yet known how any reform will affect the business of litigation funding in New Zealand.
1 Adina Thorn is a principal and Rohan Havelock a consultant at Adina Thorn Lawyers.
2 Statistics on the number of funded civil proceedings are not available. In 2016, 2,602 new civil proceedings were filed and 2,352 proceedings disposed. In 2017, 2,653 civil proceedings were filed and 2,306 proceedings disposed. In 2018, 2,346 new civil proceedings were filed and 2,266 proceedings disposed. This data was taken from Annual Statistics for the High Court to 31 December 2018: see https://www.courtsofnz.govt.nz/the-courts/high-court/31-december-2018/annual-statistics-for-the-high-court-31-
3 Saunders v. Houghton  NZHC 2229.
4 White v. James Hardie New Zealand  NZHC 2112.
5 Strathboss Kiwifruit Ltd v. Attorney-General  NZHC 1559.
6 Cooper v. ANZ  NZHC 2827.
7 Southern Response Earthquake Services Ltd v. Southern Response Unresolved Claims Group  NZCA 489,  2 NZLR 312.
8 Walker v. Forbes  NZHC 1212.
9 Similarly, there are also no industry associations or codes of conduct.
10 High Court Rules 2016 (part of the Senior Courts Act 2016).
11 See PricewaterhouseCoopers v. Walker  NZSC 151 at  per Elias CJ.
12 This procedure, inherited from England as developed in the 17th and 18th centuries, allows one or more persons to sue on behalf of or for the benefit of all persons with the same interest in the subject matter. This requires either (1) consent of the other persons who have the 'same interest' (meaning a common issue of fact or law of significance for each member of the class represented), or (2) a court direction on an application made by a party or intending party to the proceeding.
13 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at –.
14 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at .
15 PricewaterhouseCoopers v. Walker  NZCA 338 at [14(e)].
16 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91; PricewaterhouseCoopers v. Walker  NZCA 338.
17 Southern Response Earthquake Services Ltd v. Southern Response Unresolved Claims Group  NZCA 489 at  and .
18 PricewaterhouseCoopers v. Walker  NZSC 151 at –.
19 And also the Consumer Guarantees Act 1993, which imposes certain statutory guarantees in relation to goods and services, with a more limited set of remedies available.
20 As defined in Section 5 of the Financial Service Providers (Registration and Dispute Resolution) Act.
21 As defined in Section 49 of the Financial Service Providers (Registration and Dispute Resolution) Act.
22 In the case of a specified civil liability provision, the maximum penalty is the greatest of the consideration for the relevant transaction, or three times the amount of the gain made or loss avoided, or NZ$1 million (in the case of an individual) or (NZ$600,000) in any other case: Section 490(1), Financial Markets Conduct Act 2013.
23 Southern Response Earthquake Services Ltd v. Southern Response Unresolved Claims Group  NZCA 489 at . Funding arrangements have been approved in earlier cases: Re Nautilus Developments Ltd  2 NZLR 505 (HC) and Re Gellert Developments Ltd (in liq) (2001) 9 NZCLC 262,714.
24 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at .
25 Strathboss Kiwifruit Ltd v. Attorney-General  NZHC 1596, (2015) 23 PRNZ 69 at .
26 Sections 333–335 of the Lawyers and Conveyancers Act 2006.
27 Strathboss Kiwifruit Ltd v. Attorney-General  NZHC 1596, (2015) 23 PRNZ 69 at –.
28 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at – and .
29 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at –.
30 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at .
31 Sections 68–70.
32 Sections 53–67.
33 Section 54.
34 Section 56.
35 Section 57.
36 Section 56. In particular, Section 56(2)(b) ('a communication between the party's legal adviser and any other person') and (d) ('information compiled or prepared at the request of the party, or the party's legal adviser, by any other person').
37 Arbitration Act 1996, Schedule 2 Rule 3(1)(f).
38 Rule 14.1.
39 Rule 14.2(a).
40 Rule 14.2(c) and (d).
41 Rule 14.6(3).
42 Rule 14.6(4).
43 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at . See generally Erwood v. Maxted  NZCA 93, (2010) 20 PRNZ 466 at .
44 Dymocks Franchise Systems (NSW) Pty Ltd v. Todd (No. 2)  UKPC 39,  1 NZLR 145 at .
45 Waterhouse v. Contractors Bonding Ltd  NZSC 89,  1 NZLR 91 at .
46 Dymocks Franchise Systems (NSW) Pty Ltd v. Todd (No. 2)  UKPC 39,  1 NZLR 145 at  (approved in Mana Property Trustee Ltd v. James Developments Ltd  NZSC 124,  2 NZLR 25). Conversely, this discretion would not be exercised against a 'pure funder' (meaning a party without any personal interest in the litigation, who does not stand to benefit from it, was not funding it as a matter of business, and who did not seek to control its course: Hamilton v. Al-Fayed  EWCA Civ 665,  QB 1174 at ).
47 See Poh v. Cousins & Associates (HC Christchurch, CIV 2010-409-2654, 4 February 2011) at ; compare Capital + Merchant Finance Ltd (in rec and in liq) v. Vision Securities Ltd (in rec)  NZCA 657 at –. This will be very rare in the context of funded litigation, since the funder will ordinarily have conducted thorough due diligence on the merits of the claim and its prospects of success.
48 Prattley Enterprises Ltd v. Vero Insurance New Zealand Ltd  NZCA 67 at .
49 Rule 5.45.
50 Saunders v. Houghton (No. 1)  NZCA 610,  3 NZLR 331 at  and Walker v. Forbes  NZHC 1212 at –.
51 Houghton v. Saunders  NZHC 1824 at –.
52 Houghton v. Saunders  NZCA 141 at . The High Court had previously held that the fact the plaintiff is funded is a ground for the order of security: Highgate on Broadway Ltd v. Devine  NZHC 2288,  NZAR 1017 at [22(d)].
53 Law Commission Act 1985 Sections 4 and 5(3). Two principal functions of the Law Commission are (1) to take and keep under review in a systematic way the law of New Zealand, and (2) to make recommendations for the reform and development of the law in New Zealand.
55 ibid. at .
56 ibid. at page 14.
57 Inquiry into Finance Company Failures, Report of the Commerce Committee, Forty-Ninth Parliament (Lianne Dalziel, Chairperson) page 33 available at: www.parliament.nz/resource/en-nz/49DBSCH_SCR5335_1/0d9cfef1280ab5ba97f9569c8f965bfd7374305f.
58 Government Response to Report of the Commerce Committee on its Inquiry into Finance Company Failures [2011–2014] 15 Appendix to the Journals of the House of Representatives 1 at 11.
59  NZCA 431.