Clarity for 'opt out' class actions relating to Canterbury earthquakes

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Litigation relating to the Canterbury earthquakes goes on, some ten years after the first quake struck. This includes numerous class actions, one of which (Ross v Southern Response1) is the first action in New Zealand to be advanced on an ‘opt out’ basis.

Unlike other jurisdictions, the New Zealand courts do not have detailed rules to draw upon in relation to class actions (known as representative actions in New Zealand). The New Zealand Rule Committee recommended, back in 2009, that a class action regime should be introduced and a draft Bill was produced. That proposal was not implemented, nor have proposed changes to the High Court Rules been introduced yet. This has left something of a procedural void that the New Zealand courts are having to fill, case by case.

The High Court has provided some useful ground rules in relation to ‘opt out’ class actions in the Ross v Southern Response case.

The Ross v Southern Response case so far

The plaintiffs in Ross v Southern Response, Mr and Mrs Ross (the Rosses), sued their insurer, Southern Response (SRES), alleging that SRES undervalued their settlement agreement by misrepresenting the cost of remedying earthquake damage to their home.

Over the course of two years, the plaintiffs applied to pursue a representative action and were appointed the representative of a class of potential plaintiffs who had settled claims with SRES. In a previous decision, the Court of Appeal directed that the representative action would be on an opt-out basis, meaning that all individuals who qualify to be part of the class of potential plaintiffs will be members of it unless they expressly opt out.

The Rosses then applied for directions as to how to notify the class members about the representative action, including its effect on their rights to pursue SRES and how and when they could opt out. Contemporaneously, SRES applied for leave from the court to contact the individual class members and offer them a settlement package if they opted out of the litigation. The Rosses opposed this on the basis that the effect of the Court of Appeal’s decision to order an ‘opt out’ representative action was to render the Rosses’ solicitors as solicitors for the entire class, and so SRES was required to funnel all communications through the Rosses’ solicitors.

The High Court’s decision

In a series of four simultaneous decisions, the High Court addressed the questions of how the class members should be notified of the representative action, and how and whether SRES could offer them the settlement package.

The Court reaffirmed that it held a supervisory jurisdiction over in respect of representative actions and that it would ensure fairness and efficiency in the proceedings. This jurisdiction extended to control over the form and content of information provided to the class members, and whether a defendant’s lawyer could contact them directly.

The Court considered that so long as the class members had not formally engaged the Rosses’ solicitor, SRES was not required to communicate with the members through the Rosses’ solicitor. However, the Court reserved its right to intervene where the defendant’s conduct was misleading, coercive or similarly unacceptable.

The Court considered that the guiding principle in giving notice to class members was that such communications were designed to ensure the members could make an informed decision concerning their rights, and not to recruit them to one course of action or another. On that basis, the Court held that SRES could inform the class members of its settlement package, provided that the notice was not provided in a way that was confusing or likely to mislead the members. The notice would also have to be provided at the same time that the class members were notified of the representative action.

The Law Commission's view

The Law Commission has recently confirmed its view that New Zealand needs a statutory class action regime, although its final report is not due until May 2020, so the commencement of any regime (if it is forthcoming) is some way off. In any event, the nature of class actions means that they will continue to be complex and procedurally challenging to manage.

  1. [2021] NZHC 2451, [2021] NZHC 2452, [2021] NZHC 2453, [2021] NZHC 2454.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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