Litigation funder LPF Group has laid an official complaint about chief justice Sian Elias to the Judicial Complaints Commissioner, over what it says were "unfair and unjustified opinions" in a ruling on a case it funded.
LPF bankrolled the lawsuit, brought by the liquidators of David Henderson's failed property development firm Property Ventures (PVL) against company directors, PricewaterhouseCoopers as company auditor and PVL's liability insurer, in exchange for 42.5 per cent of any settlement.
That case is set down for February next year in the High Court but in the meantime, PwC challenged the validity of the funding arrangements.
Neither the High Court nor the Court of Appeal found any issue with the funding arrangement, which PwC then appealed to the Supreme Court.
But before the Supreme Court was able to issue a decision, the accounting company settled with the liquidator while denying allegations about its role as both auditor and adviser to the company.
As a result, the Supreme Court dismissed the appeal but decided it would still give its decision because the appeal involved important legal issues.
The majority indicated it would have accepted the funding arrangements but only on the basis that LPF gave certain undertakings on the share of proceeds that would flow to unsecured creditors and wouldn't exercise its power as a first-ranking security holder.
Within that Supreme Court decision, the chief justice gave a dissenting judgment, saying the "extent of control over the litigation permitted to SPF under the funding agreement and the extent to which it remains in control of the funding" made her believe the funding arrangement could be unlawful, but her assessment of the facts was provisional as that had not been argued.
Ahead of today's complaint, a spokesperson for the courts said the chief justice would not comment on the meaning of her dissenting judgment, as "the convention is that judges speak through their judgments and do not enter into public discussion outside this forum."
In a nine-page complaint, LPF director Phil Newland alleged the chief justice was attempting to rewrite the law on litigation funding and her comments "unfairly and unjustifiably create uncertainty over the validity of legal funding in New Zealand."
It also alleged that Elias failed to disclose a conflict of interest with the commercial liability insurance industry.
Elias' husband, Hugh Fletcher, is chair of IAG New Zealand, which the funders said is the largest insurer of professional liability in Australasia.
The funders said they weren't aware of Fletcher's role until after the case closed, but if they had known, they would have asked Elias to recuse herself.
Constitutional and administrative law expert Mai Chen said the chief justice "does not normally issue a separate judgment in Supreme Court decisions unless she has something additional to add to the majority decision, or she disagrees with that decision."
"Unlike the decision of the majority, it is not binding on other courts," Chen said.
"So while future litigants might refer to the dissenting judgment in argument, it will not prevail over the decision of the majority if the case involves the same issue. However, the parts of her judgment which address the decision to issue judgment after settlement will be highly relevant the next time that situation arises. If and when that happens again, and assuming there is a dispute about whether judgment should be issued at all, I would expect the chief justice's dissenting judgment to receive very careful consideration."
Chen says that's partly because the chief justice has gone to considerable lengths to discuss the question of when the court can and should issue judgment after settlement, "and partly because, as chief justice, her views will inevitably command the respect of other members of the judiciary, even if they do not always agree with her."
In her judgment, Elias said the litigation funder had significant authority over the appointment and dismissal of lawyers, meaning it was in effect treated as a client, giving it control of the claim. She also said that the ability of the funder to withdraw from the agreement and to approve or refuse settlement "arguably allows the claim to be treated as an investment... it is difficult to see that it would not operate as an assignment of the cause of action."
Elias said that there was scope for the courts to take the view that the litigation funding arrangement "amounts to the transfer of a bare cause of action for profit and is champertous. It would constitute trafficking in litigation, which I do not think this court should acquiesce in without further consideration and full argument."
LPF Group is an Auckland-based litigation funder whose chair is Bill Wilson QC, former Supreme Court judge. He resigned from that court in 2010.