Artificial intelligence applications are altering the manner in which New Zealand firms handle commercial disputes, creating hazards that, according to legal specialists, most companies are only starting to grasp. Inserting a draft advisory letter or board report into a publicly accessible, generic AI system to refine its phrasing before distribution might appear to be a standard proofreading task for a general counsel. Yet, from a legal perspective, it may not be so.
AI and the Risk to Legal Privilege
If the AI tool sits outside the business’s own systems, such an exchange can waive legal privilege in the draft, including any comments, and a record of the conversation can become something an opposing counsel may be entitled to see. “If they put legally privileged documents into a [public AI tool] or other AI system that is not ring-fenced within their business, they may waive legal privilege in them, because they have disclosed them to a third party,” said Ana Simkiss, a litigator at MinterEllisonRuddWatts.
Simkiss pointed to a less visible risk sitting inside ordinary business use of general AI tools, one that touches directly on legal privilege. Conversations with public AI tools are not shielded the way conversations with a lawyer are, even when the questions being asked are legal in nature. “Records of their interactions with general AI tools may be discoverable in a dispute, and they will usually not be privileged, even if the business is asking legal questions, because these AI tools are not qualified lawyers with practising certificates,” she explained.
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The danger is compounded by cases overseas where AI tools fabricated legal citations that courts have had to address. “The use of AI in court, often by unrepresented litigants, provides cautionary tales involving hallucinated case authorities that do not exist being relied on,” said Andrew Horne, also of MinterEllisonRuddWatts.
New High Court Rules Front-Load Litigation Costs
New Zealand’s High Court began the year under a new set of procedural rules that took effect on 1 January 2026. The changes, which came after a rush of filings the previous year from litigants keen to lodge their claims before the change, go well beyond procedural housekeeping, according to Horne.
“The changes to the rules are not mere technicalities,” Horne said. “Under the new regime, the work and cost required in litigation are significantly more front-loaded than they were before.” That front-loading removes an option many businesses have relied on in the past, using an initial round of pleadings to signal intent and open the door to negotiation before serious cost is incurred.
Parties must now hand over most of their documents early in a case, rather than waiting for a discovery process later on, which may put pressure on how well an organisation’s records are kept in the first place. Those who are prepared to commit the necessary resources when they bring claims may have a new ability to impose early costs and pressures upon their counterparties, which could help drive earlier settlements.
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Simkiss noted that economic pressure over the past year has translated directly into more litigation. “In the past 12 months we have seen a significant increase in the number of commercial disputes being litigated,” she said. Many of these disputes trace back to projects or transactions that stopped making commercial sense when asset values fell or expected funding failed to materialise. Data from credit bureau Centrix shows hospitality company liquidations rose 42% over the past year to 422, while more than 2,900 hospitality businesses ceased trading altogether, an increase of 38%.
Insurance and Director Liability Considerations
Rising regulatory penalties have intensified scrutiny on corporate indemnity arrangements. The Fair Trading Amendment Bill, set to take effect in mid-2026, will triple maximum penalties for misleading or deceptive conduct, directly impacting coverage assessments. Boards should consider reviewing policy limits against potential exposure, particularly where multiple parties within an organisation may require separate legal representation.
Strategic Shifts in Litigation and Early Intervention
Simkiss attributes part of this trend to Inland Revenue’s changed approach over the last few years to older debt built up during the pandemic. “Many have been tipped into liquidation by the IRD, whose patience with mostly COVID-era debt finally ran out,” said Simkiss. She notes that rights can be lost through delay, and it is almost always better to act sooner rather than later. Horne adds that lawyers can help clients evaluate whether pursuing a dispute aligns with their long-term interests, offering strategies to manage costs or pressure opposing parties toward resolution.
