Class Actions Carter Pearce*
Carter Pearce from Bankside Chambers explains where we are at with class actions and how we got to this position. In any civilised society, some sort of procedure allowing groups of people to sue or be sued is essential. All societies are made up of individuals, but all societies also contain groups: people linked together by common social roles, legal rights or interests, cultural connection, or even just descent. Some societies are more “groupy” than others of course, and from the viewpoint of today’s individualistic society, medieval England was pretty groupy indeed. Membership of groups such as the parish, manor, guild, or religious order defined social identity to an extent unfamiliar to modern eyes. These groups were not legal persons who could be sued by corporate name, and thus representative litigation - where one or more group members sued (or were sued) on behalf of the whole - was common in medieval England.1 The class represented was usually a cohesive social group that existed independently of the litigation, and the named party’s standing to represent the group often went unquestioned.2 By the turn of the 18th century, individualism was on the march and representative litigation had become the exclusive province of Chancery. The common law courts dispensed “justice between man and man”,3 were unfriendly to joinder,4 and did not permit representative suits.5 But the equity courts sought to do “complete justice, and not by halves”,6 and thus demanded that all persons materially interested in a case be joined.7 Where those interested were too numerous to be made parties, the court permitted one or more members of the class to represent the rest. Over time, Chancery extended the use of representative suits to groups whose membership was arguably less “natural” and cohesive than the older medieval groups, such as shareholders (and creditors) of companies, mutual assurance societies, and trade unions. With the 19th century “merger” of the law and equity courts, the Chancery practice of permitting representative suits was carried over into the merged system and extended to cases that previously could only have been brought in the law courts. At the same time, the Chancery practice with its various quirks and inconsistencies was distilled to a one sentence rule included in the new codes of civil procedure. This
DECEMBER 2021
happened first in New York, where a rule formulated in 1849 became the model for rules in other American states. Then in England, the rule as formulated in the schedule to the Judicature Act of 1873 became the model for rules in other Commonwealth jurisdictions, including New Zealand. Class actions emerged as a major feature of American litigation after 1938, when the law-equity “merger” occurred in the Federal courts. In England, however, the law “took a wrong turning”.8 While the appellate courts in the merged system initially exhibited a liberal approach to representative suits,9 the 1910 Court of Appeal decision in Markt & Co v Knight Steamship was read as confining representative suits to a relatively narrow field of cases, with a resultant “stultifying” of the law.10 In particular, suits for damages were thought to be out of bounds. In New Zealand too, the “straitjacket of Markt”11 hampered the use of representative suits for most of the 20th century. This divergence between England and America may partly explain the false but widespread notion that “class actions” and “representative actions” are fundamentally different beasts. Both names refer to the same thing: a proceeding in which one of the parties represents a class of other persons.12 Prior to the early 20th century the two names were used interchangeably on both sides of the Atlantic.13 The split in naming seems to date to 1938, when the US rule appeared under the heading “Class Actions” in the Federal Rules of Civil Procedure, and that name has stuck in the US ever since. That this has led some to imagine a difference in kind is testament to the power of labels to direct (and misdirect) thought. Having said that, the “class action” regimes in Australia and North America do have important features that were until recently either absent or uncertain in New Zealand. In those jurisdictions, the rulebook for class actions is contained in statute or detailed rules of court, whereas in New Zealand (and England), the “rules” are scattered across the case law. So, a good way to approach the question “Where are we at with class actions?” is to look at how far New Zealand courts have come in addressing those important features. Although a definitive list is hard to compile, some of the key features of a “modern-day” class action regime include (a) the ability to combine individual damages claims in one proceeding; (b) the use of an opt-out procedure to refine the class membership; (c)
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