LPF Group, is asking insurance companies to support a set of administrative initiatives that will deliver better access to justice by discouraging behaviour that that wastes court resources and prevents the timely resolution of cases. The New Zealand-based litigation funder says access to justice remains a serious issue in New Zealand because of the lack of Court capacity and delaying tactics that abuse the justice system.
LPF says the costs of litigation means that access to the Courts for justice is simply out of reach for most New Zealanders.
For justice to be effective it must be timely and cost-effective, argues LPF, with courts allowing meritorious claims to be heard promptly and succeed, or defendants to show that have done no wrong. In a bid to remedy the problem and achieve more timely litigation outcomes for plaintiffs and defendants alike, LPF is calling on the insurance industry to support its call to have the courts award 100% of the successful parties’ actual costs so that, when justice is delayed, it does not advantage the wrongdoer.
In the UK and Australia costs are usually awarded on an indemnity basis. In New Zealand costs are awarded on scale basis – – often as little as 30% of the actual costs incurred — effectively encouraging expensive time-wasting strategies. LPF suggests the best way to speed up the legal process, improve returns to plaintiffs and discourage non-meritorious time wasting defence tactics or claims is to award payment of actual costs, in full, to the successful party.
Phil Newland says “A huge amount of Court time is tied up needlessly because of the deliberate tactics in major civil litigation adopted to simply delay and escalate costs in the matter. This impacts everyone wanting to use the court system and the only winners are the lawyers.” Changing the way costs are awarded would represent a serious disincentive for plaintiffs to bring flimsy cases or defendants to run tactical time wasting defences or create delays in interlocutory steps, such as discovery.
Strategies that impede access to justice
LPF Group, New Zealand’s largest locally based litigation funder, has 10 years’ evidence to show that the payment of costs at scale significantly reduces the value of the outcome to the successful party and provides a perverse incentive to waste the Courts’ time.
LPF’s Phil Newland says: “The principle at stake is access to justice and how the unfettered use of deny, delay and defend strategies —encouraged by awarding scale costs — impedes access.
“The administration of justice and the allocation of responsibility and compensation are the province of the courts. However, courts are being clogged up by tactics designed to delay hearings and increase costs rather than address the substantive matters.
“The goal of the courts should be to deliver real and substantive compensation to victims of wrongful conduct or clear blameless defendants as quickly as possible. In our view plaintiffs and defendants should both be able to seek full recovery of costs. We invite the insurance industry, if they are serious about improving access to justice, to join us in requesting the Law Commission recommend the award of real and actual costs.”
Actual and punitive costs
LPF Group suggests that that funding by litigation funders and insurance companies be disclosed at the outset of a case and that, where either form of funding occurs, the courts award 100% of the actual legal, witness, trial, security and other costs incurred to the successful party.
Being exposed to pay full costs will require funders of both defendants and plaintiffs to carefully consider the merits of a case. This would see meritorious cases resolved more quickly and at lower cost. That would free up court time and resources. If plaintiffs lose, defendants receive full payment for any costs they have incurred, and vice versa.
To prevent abuse of process, Courts should have the power to award lesser costs if they consider that a party has unreasonably incurred these, as they can in the UK.
LPF Group further recommends that the courts be able to award punitive costs. These would apply in cases where the unsuccessful party has delayed discovery, failed to comply promptly with court orders or otherwise drawn out a case unnecessarily in a way that impedes the efficient working of justice. LPF suggests that Courts should also have the power to charge proper interest on judgement sums (including unpaid costs).
Promoting rational behaviour
The award of actual costs, punitive costs and interest will promote rational behaviour by all parties and lower the overall cost of litigation. It will give the insurance industry the protection it is calling for against what it considers to be frivolous lawsuits being undertaken with the assistance of litigation funders. It will improve outcomes for successful plaintiffs and increase transparency.
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