Waterhouse v Contractors Bonding Ltd

JurisdictionNew Zealand
CourtSupreme Court
JudgeGlazebrook J
Judgment Date20 September 2013
Neutral Citation[2013] NZSC 89
Docket NumberSC 66/2012
Date20 September 2013

[2013] NZSC 89

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, McGrath, William Young, Chambers* and Glazebrook JJ

SC 66/2012

Between
Godfrey Waterhouse and Robert John Waterhouse
Appellants
and
Contractors Bonding Limited
Respondent
Counsel:

S J Mills QC and S A Grant for Appellants

R E Harrison QC and J E Riddle for Respondent

Appeal against Court of Appeal's refusal to stay proceedings and ruling that appellant did not need to disclose to the respondent its litigation funding agreement — proceedings related to a failed insurance business in the United States of America — whether the appellant should be ordered to disclose the funding agreement to the respondent and, if so, on what terms — whether the torts of maintenance and champerty should be abolished — whether the courts should exercise a general supervisory role over litigation funding arrangements — whether the courts had the ability to intervene where conduct amounted to the tort of abuse of process.

The issues on appeal were: (1) whether the torts of maintenance and champerty be abolished; (2) whether the court should exercise a general supervisory role over litigation funding arrangements; (3) whether the court could intervene in the case of conduct amounting to the tort of abuse of process; (4) whether there were other matters that could give rise to an abuse of process in litigation funding cases; (5) in what circumstances should disclosure of litigation funding arrangements be made; and (6) what were the limits on disclosure.

Held: (1) Abolishment of torts: The appeal concerned an application for a stay and the underlying proceeding was not an action in maintenance or champerty. The extent of the torts of maintenance and champerty and what was needed to sustain an action under those torts was not before the Court and there was no factual foundation on which to base any discussion. It was inappropriate to make any comments on the torts and, to the extent it was relevant to the judgment, their continued existence was assumed.

(2) Supervisory role: It was not the role of the courts to act, on application by the non-funded party, as general regulators of litigation funding arrangements. If that was considered desirable, it was a matter for legislation or regulation. It was not the courts' role to give prior approval to such arrangements, at least in cases not involving a representative action. The role of the courts was to adjudicate on any applications brought before them in a proceeding. Litigation funding agreements might become relevant during the proceeding if there was application for a stay on the ground of abuse of process or an application for security for costs or third party costs orders again the funder.

(3) Court intervention: The power, under the High Court Rules or the inherent powers of a court, to stay a proceeding for abuse of process was not limited to the narrow tort of abuse of process. Concerns of control of litigation by a third party could be dealt with through conventional court procedures. Although the categories of abuse of process were not closed, this did not mean any conduct was an abuse if it could be characterized as unfair ( Jeffery&!Katauskas Pty Ltd v SST Consulting Pty Ltd).

(4) Other matters giving rise to an abuse of process: Although litigation funding could be important for access to justice reasons, this justification for it could be exaggerated. Commercial litigation funders would only fund claims where the projected return was sufficient to offset the costs of litigation and the risks of failure. Litigation funding was not a general panacea to offset rising costs of litigation and resulting access to justice concerns.

Further, litigation funding, apart from through insurance, would not be available to defendants. This raised the prospect of a disparity in resources in the litigation and therefore defendants being forced into premature settlements.

Conventional court procedures could deal with attempts by an allegedly champertous maintainer to inflame the damages, suppress evidence, or suborn witnesses or otherwise to undermine the ends of justice ( Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd). Some measure of control by a litigation funder was inevitable to enable the funder to protect its investment. Not to allow sufficient control for this purpose might reduce unmeritorious claims but that would be at the expense of denying access to the courts for many with legitimate claims.

It was not the role of the courts to assess the fairness of any bargain between a funder and a plaintiff (Fostif). To ask whether a bargain was fair assumed the existence of an ascertainable objective standard and a power to relieve persons of full age and capacity from bargains otherwise untainted by infirmity.

It was not an abuse of process in NZ for a funder not to provide an indemnity for costs to the funded party. Costs orders could be made against funders, without needing to make out an abuse of process. And funders thus subject to the discipline of the costs regime. Further it could not be definitively decided but there did not appear to be authority to suggest that third party costs orders against funders were limited to the funding provided.

The terms on which funding could be withdrawn were not relevant to deciding if there was an abuse of process. The possibility that a plaintiff may run out of funds and have to carry on proceedings without representation was one that all defendants face, whether the plaintiff was funded by a third party funder or not.

It was not appropriate in the New Zealand context to accept the Fostif position that litigation funding arrangements could only be challenged on traditional abuse of process grounds. Assignments of bare causes of action in tort and other personal actions were, with certain exceptions, not permitted in New Zealand. A funding agreement might be an abuse of process where it effectively amounted to an assignment of a cause of action where such an assignment was not permissible. In assessing whether an arrangement effectively amounted to an assignment, the court should have regard to the funding arrangements as a whole, including the level of control able to be exercised by the funder and the profit share of the funder. The role of the lawyers acting might also be relevant.

(5) Disclosure of arrangement: As per above at (2), disclosure of funding arrangements might be relevant applications for a stay on abuse of process grounds, applications for security for costs and applications for costs. If an application for a stay was made on abuse of process grounds and the application failed, then the losing party would normally face an adverse costs order.

In this case, security for costs has been voluntarily provided and W had stated that it could be increased as necessary. If an application for security for costs had been required, whether or not there was litigation funding would have had obvious relevance. It seemed strongly arguable, therefore, that the courts would have had the power to order disclosure, at least of the existence of a litigation funder and the relevant terms of the funding agreement.

In New Zealand, costs awards could be made against non-parties. Third party litigation funders would only be liable for a costs order to be made against them if the litigation would not have been undertaken without their involvement, and where they not only fund the proceedings but substantially control or benefit from them ( Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2)). The terms of a litigation funding arrangement were likely to be relevant to assessing if the Dymocks test was met.

The fact that there was a litigation funder and the funder's identity should be disclosed to the other party or parties when the litigation was commenced. The assistance of a litigation funder was relevant to applications for security for costs and costs. The non-funded party would also have to know of the existence of a litigation funder before it could decide whether to make an application for a stay on abuse of process grounds.

In addition, as a matter of principle, the courts (and the other party or parties) were entitled to know the identity of the “real parties” to the litigation.

Further, as it would be relevant for applications for security for costs, whether or not the funder was subject to the jurisdiction of the New Zealand courts was also a matter that should be disclosed.

The financial means of the funder should not be disclosed. The legitimate interest of the other party in this issue could be met by way of an application for security for costs. It was not the function or within the competence of the courts to provide any general regulation of litigation funders, including of their financial standing.

There should be no obligation to disclose the terms on which funding could be withdrawn. Such information could give a tactical advantage to the non-funded party as it could put the non-funded party in a position to precipitate the withdrawal of funding. Questions concerning the possibility that disclosure of the terms of withdrawal might be appropriate if the terms in some way gave legal control over the proceedings to the funder were left open as was the question of whether the terms of possible withdrawal might be relevant to an application for security for costs.

It could not be sensibly argued that all litigation funding agreements as a whole were confidential in all circumstances. Any arguments as to confidentiality would have to be put before the HC.

(6) Limits on Disclosure: under an adversarial process the non-funded party was entitled by the principles of natural justice to make submissions and it could not be accepted that disclosure should be made only to the Court in the first instance.

In summary;

  • on the issuing of proceedings that were to be funded by a third party unrelated litigation funder with no...

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    ...countries, specifically in consonance with the decision of the Supreme Court of New Zealand in Waterhouse v. Contractors Bonding Limited [2013] NZSC 89, opined that disclosure of the funding agreement might be ordered subject to redactions relating to confidentiality, litigation-sensitive a......
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    ...cause of action or its fruits”. 59 55 But let us assume the hire agreement did assign Mr Blumberg's cause of action to R2D. In Waterhouse v Contractors Bonding Ltd the Supreme Court stated “[a]ssignments of bare causes of action in tort and other personal actions are, with certain exception......
  • Re A
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3 firm's commentaries
  • Litigation funding agreements – in from the cold?
    • New Zealand
    • Mondaq New Zealand
    • 25 Septiembre 2013
    ...and a wholesale transfer of rights with the plaintiff remaining only a figurehead. Footnotes 1Waterhouse v Contractors Bonding Ltd [2013] NZSC 89. 2The case against the continued relevance of the torts is articulately expressed in Lord Neuberger's speech "From Barratry, Maintenance and Cham......
  • Supreme Court clarifies when litigation funding amounts to an abuse of process
    • New Zealand
    • Mondaq New Zealand
    • 18 Octubre 2017
    ...Walker [2017] NZSC 151 [PwC v Walker]. 2 At [1] and [14]. 3 At [2]. 4 At [4]. 5 At [6]. 6 At [6]. 7 Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1 NZLR 8 At [31]. 9 At [57]. 10 PwC v Walker at [78]. 11 At [78]. 12 At [80]. 13 At [80]. 14 At [81]. 15 At [81]. 16 At [82]. 17 At......
  • 'Stand By Your Man': A Reminder Of The Need To Choose Your Funder Wisely
    • United Kingdom
    • Mondaq UK
    • 31 Octubre 2017
    ...there are no significant common law or statutory obstacles to litigation funding in New Zealand (see Waterhouse v Contractors Bonding Ltd [2013] NZSC 89). This has been reflected in a tangible increase in both the awareness of the availability of litigation funding and the market appetite t......
1 books & journal articles
  • The Trendtex Principle in Australian Law: Context and Recent Developments
    • Australia
    • University of Western Australia Law Review Nbr. 40-2, September 2016
    • 1 Septiembre 2016
    ...For litigation funding in New Zealand, especially the importance of funding agreement disclosure, see Waterhouse v Contractors Bonding [2013] NZSC 89; See generally, Lee Atkin “Litigation Lending” After Fostif: An Advance in Consumer Protection, or a License to “Bottomfeeders”?” (2006) 28, ......

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