Disclosure of Funding Arrangements: An Example from New Zealand

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When a court determines whether to require disclosure of a funding arrangement, there are four classes of information that it must consider: the participation of a funder (i.e., is there a funder involved or not?), the identity of the funder (i.e., who is the funder?), an outline of the terms of the agreement (i.e., what is the gist of the funding arrangement?), and the actual terms of the agreement (i.e., what is the actual language of specific provisions and/or the whole funding contract?). Jurisdictions that require disclosure typically require some combination of the above, but may not require all of the aforementioned information to be disclosed. In addition, the court must determine to whom the funded party is required to disclose the information – the court, the non-funded party, or both? As the authors’ indicate, this issue remains largely unsettled in New York and in the vast majority of other US states. Thus, we may need to look outside of the United States for possible solutions.

A recent case that addresses many of the disclosure parameters discussed above is Houghton v. Saunders (2011), which was one of the appeals in the Feltex shareholder class action cases in New Zealand. The High Court of New Zealand ruled in favor of the plaintiff with respect to not disclosing the full funding agreement and underlying litigation insurance policy to the defendant. In New Zealand, the plaintiff may be required to disclose the full terms to the court, but not necessarily to the defendant. In this case, the plaintiff had disclosed the full terms to the court and had given a generalized description of the agreement to the defendant. Another interesting feature of this case is that Harbour Litigation Funding was the funder on record acting on behalf of another undisclosed funder, “a London-based entity.” Coincidentally, the court did not require the funded party to reveal the actual identity of the undisclosed funder, although the participation of the undisclosed funder was disclosed. At best, this case illustrates that the parameters of the disclosure will likely depend on the facts of that particular case, the reason for the disclosure, what information is to be disclosed, and to whom. Thus, funders and funded parties would be wise to operate on the assumption that the entire funding arrangement may be required to be disclosed to the court/tribunal, but perhaps not to the opposing side.

It is important to the note that Houghton v Saunders addressed class actions (or representative actions, as they are called in New Zealand). In Contractors Bonding Ltd v Waterhouse (2012) , the New Zealand Court of Appeals articulated its position with respect to disclosure of litigation funding arrangements in individual (non-class) actions. The court stated that in an individual action the participation of a litigation funder must be disclosed to the court and to the non-funded party in addition to the following details:

(a) the identity and location of litigation funder;
(b) its financial standing/viability;
(c) its amenability to the jurisdiction of the New Zealand courts if that is relevant; and
(d) the terms on which funding can be withdrawn and the consequences of withdrawal.

The court went on to state that the funded party would not be required to disclose any “details that might give rise to a tactical advantage to the non-funded party such as information about any ‘war chest’ or other commercially sensitive details.”

In practical terms, this line of New Zealand decisions appears to require disclosure of the gist of those aspects of the litigation funding agreement that may affect the funder’s ability to afford to pay the costs for the litigation and any adverse costs orders, as well as the (foreign) funder’s willingness to be subject to the court’s jurisdiction. It does not require the funded party to disclose the entire agreement or to make partial disclosures that would seem to disadvantage the funded party or advantage the non-funded party. Thus, it appears that New Zealand’s disclosure requirements have more to do with making sure that the funder is sound and solvent than with creating advantages or disadvantages with respect to each party’s tactical position.


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