Matthew Smith, barrister, Thorndon Chambers, and author of The NZ Judicial Review Handbook will join Francis Cooke QC to present an overview of the Judicial Review process in a Seminar co-hosted by the NZ Bar Association and Thomson Reuters, and introduced by Honorable Justice Wild.
Find out more - Judicial Review Seminar.

In the post below Matthew Smith discusses the indisputable fact that ...

Civil litigation is expensive (these days)

Civil litigation is expensive these days. This is as true for the judicial review area in which I do a reasonable amount of work as it is for other civil proceedings – even though judicial review as a process was evolved by the Courts to uphold important Rule of Law values like compliance by the Executive Government with law, and equality before and under the law.

An example: 2B scale costs in judicial review

The significant costs of judicial review today can be illustrated with reference to the scale costs that would be awarded by the Court to a defendant where a plaintiff’s judicial review claim is not successful. Leaving aside disbursements like photocopying and Court (filing) fees, the costs an unsuccessful applicant for judicial review is exposed to for a relatively uncomplicated one day judicial review hearing exceed $20,000 – as the table below shows:

(The table above assumes informal disclosure by the defendant, one case management conference at which timetabling orders are made, no interlocutory applications, a one day hearing, and a costs allowance for only one counsel at the hearing).

Need to provide litigation funding advice

Costs exposures like this have created increasing interest in and client-based demand for practical advice on litigation funding options. Where a client is not eligible for legal aid, what litigation funding options are available to them, and what might a client do to try and minimise their costs exposure if their civil proceeding is not successful?

Options for spreading litigation risk/uncertainty

One way to make civil litigation more financially feasible for a client is to try and spread the risk and uncertainty of litigation over more people.  There are at least three options here.

First, a client might seek litigation insurance.  AIG, for instance, offers litigation buyout insurance to enable companies “to manage the negative financial impact of a wide range of events, including litigation involving large uninsured and underinsured liabilities and complex operational issues”. “Such events” it says “may impede successful closure of merger and acquisition transactions, hinder value creation, or stand in the way of needed financing”.

Where litigation insurance is not available to a client, or it is too expensive, third party funding might be available to support the bringing of a claim (or defence). As Finn Brooke explained in “Litigation funding: Two perspectives – the funder and the lawyer” (NZ Lawyer, issue 180, 23 March 2012), there are a number of ancillary benefits to approaching a third party funder, who will do a due diligence analysis before deciding whether to assist.  Those benefits can include a clearer idea through due diligence of strengths/weaknesses of a claim.

A third strategy for spreading the risk and uncertainty of litigation over a greater number of people, and by doing so making civil litigation financially more feasible for a client, is to (create and) use an entity, such as an incorporated society, to advance the proceeding.  While this will not always be available as a strategy (depending on what the claim is), it is a not uncommon way to spread risk and fundraise for public law proceedings in particular – as borne out in incorporated ratepayers groups, for instance, brining judicial review claims.

The creation and use of an entity such as an incorporated society to advance a civil proceeding has two main litigation costs-related benefits.  The first is that it spreads the funding ‘burden’ from one to many.  This can help to reduce the costs exposure of any given individual to the litigation, and may help in turn to make civil proceedings financially more feasible than they otherwise would be.  Second, the use of an entity to advance a proceeding can signal to the Court that the claim has a broader public interest dimension to it.  Amongst other things, this might later justify a reduction in costs ordered by the Court to be paid by the entity if its case does not succeed, on the ground that the Courts should not discourage by costs awards responsible interest groups from testing public law decisions through the Courts.

Possibility of seeking a protective costs order

Finally, consideration might be given to whether a client could successfully apply for a protective costs order (PCO) to help with the potential risk/liability that they would face if their proceeding is unsuccessful.  PCOs are available where an applicant can, as a minimum, show (i) that the case mounted is clearly arguable; (ii) that there is a substantial public interest in obtaining a decision of the Court on the point or points at issue, irrespective of the result; and (iii) that it would be unduly onerous for the applicant to be expected to fund the litigation even in the interim (see Berkett v Cave [2001] 1 NZLR 667 (CA), at [13]).

The decision of the High Court in Morrison v Treaty of Waitangi Fisheries Commission (2003) 17 PRNZ 37 provides an example of a New Zealand case where a PCO was made.

As things currently stand PCOs are in their infancy in New Zealand.  In this, we can be contrasted with the United Kingdom, for instance, where such orders are much more commonly sought and granted by the Courts in public law proceedings in particular.

Our relative lack of experience in this country with PCOs, and the lack of case-law on them, makes it quite likely that the making of a PCO would be contested by a respondent – which will in practical terms add to the time taken to bring a proceeding to a final hearing, and the costs involved in doing that.  That said, PCOs have the potential to play an important role in ensuring access to justice, and should not be overlooked by litigators asked to identify options practically open to a client wanting to pursue costs protections up-front.

Find out more

• For more about the Judicial Review Seminar
• For more about the Judicial Review Handbook