AI, new High Court Rules and rising costs reshape NZ business disputes in 2026
Pasting a draft letter of advice or board report into a public, general-purpose AI tool to sharpen the wording before it goes out might feel like a proofreading exercise for a general counsel. But legally, it may be nothing of the sort.
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.
According to Andrew Horne and Ana Simkiss, litigators at MinterEllisonRuddWatts, that privilege risk is just one of several issues raised by the increasing use of AI in litigation, among other forces reshaping how New Zealand businesses weigh whether to fight, settle or walk away from a commercial dispute in 2026. These include factoring in front-loaded costs under new High Court rules and mounting economic pressure.
Horne and Simkiss’ frontline experience helps to shape the Business Disputes content in LexisNexis' Practical Guidance Business, one of the most widely used areas of the platform in New Zealand. With more disputes moving through a changed procedural regime this year, the insights of contributors such as Horne and Simkiss are invaluable for practitioners building a strategy on unfamiliar ground. Business Disputes gives practitioners a starting point built on precedent and hands-on judgement rather than theory, which Horne and Simkiss both say is what keeps a good strategy from becoming a costly one.
New Zealand’s High Court began the year under a new set of procedural rules. The changes took effect on 1 January 2026 for new proceedings, after a rush of filings the previous year from litigants keen to lodge their claims before the change. Horne said the changes go well beyond procedural housekeeping.
“The changes to the rules are not mere technicalities,” said Horne. “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 puts 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 will have a new ability to impose early costs and pressures upon their counterparties, which may help drive earlier settlements,” said Horne.
Artificial intelligence is not yet generating disputes of its own in New Zealand, but Horne said it was creating risks that businesses were only beginning to reckon with, particularly around reputation and legal privilege.
Courts here and overseas have already dealt with cases involving fabricated legal citations produced by AI tools.
“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 Horne.
Simkiss pointed to a less visible risk sitting inside ordinary business use of general AI tools, one that touches directly on legal privilege. Businesses that feed sensitive material into a publicly available AI tool may be giving up more than they realise.
“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 Simkiss.
That waiver risk is compounded by a second issue: 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,” said Simkiss.
New Zealand’s tighter economic conditions over the past year have translated directly into more litigation, according to Simkiss, though not every viable claim gets pursued.
“In the past 12 months we have seen a significant increase in the number of commercial disputes being litigated,” said Simkiss.
Many of these disputes trace back to projects or transactions that stopped making commercial sense, often when asset values fell or expected funding failed to materialise. Businesses under pressure also tend to behave differently towards past grievances than those that are doing well.
“When times are good, businesses are more likely to cut their losses from a failure and spend their time and resources generating profits from the next deal, but when those options are not available, they are more ready to pursue past injustices,” said Simkiss.
Insolvencies have climbed over the same period, concentrated in hospitality and construction rather than among the larger, more visible failures. 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%. Construction remains the largest single contributor to liquidations overall, though its annual volumes have levelled off slightly from 2025.
Simkiss attributed 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.
Litigation still sits outside the everyday thinking of many New Zealand boards, according to Horne, which he said left some organisations exposed when a dispute did land.
“Most New Zealand businesses are not particularly litigious, and both private litigation and regulatory action are not as central to our business culture as it is in some jurisdictions,” said Horne.
That inexperience matters more as regulatory penalties climb. Horne pointed to the insurance sector as a recent example of how quickly the numbers involved can escalate.
“The number and magnitude of civil penalties are increasing across the board, with the increasingly substantial penalties recently imposed upon insurance companies being a good example,” said Horne. “The Fair Trading Amendment Bill, which will significantly increase penalties for breaches of fair trading standards, is another example.”
He said boards should be revisiting their insurance cover rather than assuming existing policies were adequate, particularly where multiple parties within the same organisation might need separate legal representation. Horne suggested businesses work through a short set of questions with their brokers and lawyers:
A legally strong claim is not necessarily one that should be actioned.
“Legally strong claims are often not worth pursuing, either because they are uneconomic in terms of both legal cost and the time and other resources required, or because pursuing them may have other unlooked-for consequences,” said Simkiss.
Executives who end up giving evidence can find their conduct and credibility scrutinised in public in ways they had not anticipated, and a dispute can attract attention that lingers well after it concludes.
“Some disputes can result in businesses being pursued for years by obsessive litigants and complainants who are very difficult to dissuade,” said Simkiss.
Horne said the lawyer’s job in these situations was to help a client look past the immediate dispute to what comes after it.
“Lawyers can help clients see down the road and consider whether their time and resources may be better spent on something else, and whether the risks a dispute presents are worth running,” said Horne. “They can also help strategise ways to manage a dispute cost-effectively or exert pressure on the other side to achieve an early outcome.”
Simkiss said most business owners had a reasonable sense of when a situation was becoming urgent, but delay remained the biggest risk once that point was reached.
“Rights can be lost through delay, and it is almost always better to act sooner rather than later,” said Simkiss.
Bringing litigators in before a problem escalates gives a business more options than waiting until a dispute has already hardened into a formal claim.
“This is one of those times when it usually is best to call the litigators in at an early stage. We have a lot of tools that can make a difference,” said Simkiss.
With more disputes coming through the system under a changed procedural regime, Horne said the value of well-organised, authoritative reference material had grown rather than shrunk. Practitioners working through an unfamiliar process need a reliable starting point before they can build a strategy.
“Authoritative practical guidance is essential to help build a roadmap of an unfamiliar issue or process,” said Horne.
Simkiss said the risk of getting that starting point wrong was not limited to a poor outcome for the client.
“An incomplete understanding of the legal issues and risks can easily result in a poorly thought out strategy or a badly executed plan, which can lead to complex and costly problems, or even liability for a practitioner,” said Simkiss.
That is the gap the Business Disputes content within Practical Guidance Business Law is designed to close, with practitioners able to work through the material directly or use LexisNexis Protégé to surface the relevant commentary and precedents quickly when a dispute-related question comes up.
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This article was produced in partnership with LexisNexis New Zealand.
