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If a party causes harm to your business and multiple other parties, you may seek to collectively take action against the wrongdoer. When watching American legal dramas or reading international news, you may have come across the phrase ‘class action lawsuits’. However, New Zealand does not have class action lawsuits, nor a class action regime. Instead, what would be known internationally as class action lawsuits is termed ‘representative actions’ in New Zealand. This article will outline:

  • what representative actions are;
  • how representative actions work in New Zealand; and
  • the purpose of representative actions.

What are Representative Actions?

A representative action is when one party sues on behalf, or for the benefit, of a group of individuals. These individuals and their representative share the same interest in the subject matter of that specific court case.

For example, say a group of 20 fruit growers seek a company to sell a quantity of their produce. That company will also store the fruit whilst awaiting sale. However, due to an issue with the storage temperature, half of the fruit rots. Instead of each fruit grower entering into litigation with the company for the financial damage they have each suffered, the group could engage in a representative action. This would mean that the group of 20 would be represented in a court case by one of the fruit growers. 

How Do Representative Actions Work?

There are no clear guidelines in New Zealand as to how representative actions should operate. The High Court Rules only briefly outline this process. This lack of guidance means that, in each case, the court will have to determine how to best approach and decide the issues at hand.

However, you need to satisfy two key matters before starting a representative action, including whether:

  • there is a shared, common interest; and
  • any individuals opted out of the representative action.

Shared Interest

To make a representative claim, you must first demonstrate that the individuals of the action have the same interest. This means that members of the representative action must share a significant, common interest in resolving the particular question of law or fact in the court proceedings. 

For example, following the example above, all 20 of the fruit growers share a common interest in determining whether the company is liable to pay for their financial loss due to the fruit rotting. 

It is unnecessary for these collective interests or collective actions to be the entire basis of the case. The representative may bring other related matters. However, the representative must enter into the court proceedings for the other group members’ benefit.

Opt-Out Approach

In New Zealand, a representative can also bring proceedings on behalf of a group without first obtaining their consent. This is known as the ‘opt-out’ approach. Individuals who share the same interest as the representative will only be excluded from the proceedings if they expressly opt-out of being included. Additionally, representative actions will also exclude individuals if engaging in the proceedings would result in a real disadvantage. 

The opt-out approach ensures that it is easy as possible for affected individuals to participate in court proceedings that would be both relevant and potentially advantageous to them. 

What is the Purpose of Representative Actions?

The representative action procedure intends to fulfil three key objectives. These are to:

  • improve access to justice; 
  • incentivise compliance with the law; and
  • avoid conflicting outcomes.

Improve Access to Justice

Engaging in a court case is often extremely expensive and time-consuming. This can make it incredibly inaccessible to get justice in the court system for the harms or issues that you and others experience.

Under a representative action, however, the costs for a court case are either: 

This distribution of costs provides access to justice to groups of individuals that otherwise would have been barred by extremely expensive and drawn-out court proceedings.

Incentivise Compliance With the Law

Due to the issues accessing litigation, individuals and businesses may assume that actions that result in minor but widespread harm will go unpunished. However, representative action provides individuals affected by such actions with the ability to seek compensation for harm suffered. 

Therefore, this aspect of representative action deters potential wrongdoers from operating on this assumption and instead incentivises compliance with the law to avoid litigation. 

Avoid Conflicting Outcomes

If representative actions were not available, each individual would have to enter into their own civil proceedings to resolve their issues. This means there would be multiple claims brought to the courts with nearly identical facts and circumstances. 

As different judges would hear each of these cases, there is a potential that each claim would lead to different outcomes. This could create inconsistencies throughout the New Zealand court system.

Alternatively, through representative actions, these cases can culminate into one so that the court can provide the group affected with a clear and definitive decision. 

Key Takeaways

Unlike other countries overseas, New Zealand does not have a class action lawsuit regime. Instead, individuals with a shared, common interest can elect a representative to engage in a representative action on their behalf. Alternatively, a representative can engage in proceedings on behalf of individuals with a collective interest in the subject matter of the case, on the basis that they have not opted out of the action. If you would like help bringing a representative action, contact LegalVision’s New Zealand disputes lawyers on 0800 005 570 or complete the form on this page.

FAQs

What is a class action lawsuit?

A class-action lawsuit is when one party sues or is sued, on behalf of or for the benefit of, a group of individuals. All of these individuals will share a collective interest in the subject matter of the case. In New Zealand, this is known as a representative action.

What is a class action representative?

The representative is the individual who represents the wider group of individuals and shares the same, common interest in the outcome of the case.

Who benefits from a class-action lawsuit?

A class-action lawsuit, or a representative action, is intended to benefit the wider group of individuals who share a common interest in the outcome of the proceedings. 

How many plaintiffs are needed for a class-action lawsuit?

There is no required amount of individuals for a representative action. There merely needs to be more than one individual and all parties involved must share the same, common interest.

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