Govt insurer wants to cut litigation funder

Govt insurer wants to cut litigation funder out of potential settlement

By Jenny Ruth

Sept. 26 (BusinessDesk) - Southern Response appears to want to avoid its claimants having to pay a portion of any settlement to litigation funder, Claims Funding Australia, flying in the face of a landmark Court of Appeal decision.

The government-owned insurer, which took over claims on policies written by AMI before it failed in 2012, is still making up its mind about whether to appeal that judgment published earlier this month.

Southern Response says in a statement that it would like to "proactively respond," once its appeal of another High Court decision - this one relating to a single couple, Karl and Alison Dodds - has been decided.

The facts of the Dodds' case are essentially the same as those in the class action being backed by Australia-based Maurice Blackburn.

Both sets of claimants settled with Southern Response before October 2014.

The Dodds decision Southern Response is appealing was that by withholding key information from the Dodds and inducing them to settle, the insurer had "engaged in misleading and deceptive conduct."

Southern Response says it wants the courts to decide "whether there is a legal obligation to go back in time and reopen claims that have been settled on a full and final basis according to the law at the time."

When settling claims after October 2014, when yet another judgment ruled that costs such as those withheld from the Dodds should be included in settlements, Southern Response has included such additional costs. It has not revisited claims settled before October 2014.

Once the Dodds appeal has been decided, "we would proactively respond to other people in a similar situation to the Dodds," Southern Response says in a statement.

"The intention of this would be to avoid the need for further costly litigation for customers and, ideally, to avoid a customer having to pay a portion of their entitlements to an offshore litigation funder."

This directly cuts across a Court of Appeal decision in the class action fronted by claimants Brendan and Colleen Ross.

That decision was ground-breaking because the Court of Appeal allowed the Ross case to proceed on an "opt-out" basis on behalf of about 3,000 other Southern Response customers whose homes were damaged or destroyed by the Christchurch earthquakes and who settled claims with Southern Response before October 2014.

This is only the second time a New Zealand court has allowed an opt-out process.

The first time, in the case brought by Feltex investors who alleged the prospectus contained untrue and misleading information, a decision made by an associate judge to allow an opt-out process was overturned in the High Court in favour of an "opt-in" approach.

With an opt-out approach, all potential claimants are party to the representative action, unless they specifically opt-out.

With an opt-in approach, the only parties covered by the eventual judgment are those potential claimants who proactively opt-in. Significantly fewer people are included in those cases than in opt-out ones.

"As part of considering the judgment in Ross and whether Southern Response will pursue an application for leave to appeal, we will be trying to better understand the position of GCA Lawyers – the class action lawyers representing the Ross case – and the litigation funder," the government-owned insurer says.

"If such a pro-active approach from the government is supported once the outcomes from Dodds are known, we wish to ensure the best outcome for our customers. It is therefore important for Southern Response, and for affected customers, to understand whether the lawyers and funders will support that outcome."

Grant Cameron of GCA Lawyers makes it clear he and Maurice Blackburn won't just step aside from the 3,000 claimants the Court of Appeal has ruled they now represent.

"At the moment, they're – Southern Response – thinking they might still deal with them individually," Cameron says.

"A compromise is certainly possible, but there needs to be some further talking that I should think would take us through until about February. Our position is they have no ability to go behind the opt-out order. These 3,000 people are part of the proceedings."

In Australia, where there is a statutory regime covering opt-out style class actions, all cases to date have been settled out of court.

(BusinessDesk)

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