David v. Loblaw

In this proposed class action, the plaintiffs allege that the defendant manufacturers and retailers of packaged bread engaged in unlawful price-fixing over a 15 year period.   Class counsel are acting on a contingency fee basis, but the disbursements for litigating the complex claim are expected to be in the millions of dollars.  In addition, there is a significant adverse costs exposure if the action, or any motions within it, are unsuccessful.  Following a competitive process, the plaintiffs entered into a Litigation Funding Agreement (LFA) with Bentham.

The key features of the LFA are that Bentham will (a) pay disbursements incurred by class counsel up to a prescribed maximum, after which class counsel will fund the disbursements; (b) pay any court ordered costs on behalf of the Plaintiffs up to a prescribed maximum, after which class counsel will be responsible for court ordered costs; (c) provide security for costs of one or more Defendant if required by the court to do so, which security will take the form of an Undertaking.  In return, Bentham will be reimbursed for all payments advanced and will receive a return of 10% out of the litigation proceeds after deduction of disbursements, lawyers’ fees and taxes, and administrative expenses. Bentham’s 10% return is capped under the Agreement.

Following a motion on notice to the defendants, Justice Morgan approved the LFA.  In doing so, he noted that:

1. Bentham is a substantial financial entity whose financial statement are a matter of record.  It is “amply capitalized, and also has insurance as a backstop to its obligations under the Agreement” (para. 15).  Moreover, as a reporting issuer, any changes to its financial position are a matter of public record (para. 8).
2. Bentham’s return would be on par with the Class Proceedings Fund (“CPF”), but is also capped at a fixed amount, unlike the CPF (para. 13).
3. The LFA contains features “which add layers of fairness to the class: the claimants have sole right to direct proceedings and instruct counsel, termination of the Agreement is only with leave of the court (and if before certification the consent of class counsel is also required), Bentham will pay the costs up to the termination date (including costs of a motion to approve termination), and any assignment must be on notice to all parties and requires approval of court” (para. 14).  In addition, the representative plaintiffs received independent legal advice from a class actions lawyer prior to entering into the Agreement.
4. Bentham agrees to satisfy any security for costs in the form of an Undertaking made to the Defendants.  The question of whether to accept an Undertaking as security is a discretionary one, and in accepting it here, Justice Morgan noted:

a.  Although the Undertaking is given by IMF Bentham Ltd (the parent company to the Canadian entity), a parent Undertaking was acceptable:  “Bentham Australia has attorned to this court’s jurisdiction and has waived any jurisdictional defences. In any case, Australia is a jurisdiction with a legal system as similar as any to that of Ontario, and there should be no problem seeking enforcement of an Ontario court order in the Australian courts” (para. 18).

b.  Although the monetary cap on Bentham’s funding, including the total adverse costs commitment, was redacted, it was not necessary for the defendants to have access to that figure.  An unredacted copy was provided to the Court, and Justice Morgan was “satisfied that Bentham’s obligation to fund the litigation is sufficient to cover any likely costs award” (para. 19). 

c.  While there was no motion for security for costs presently before the Court, there was “no reason to withhold approval of the Agreement on the basis that it proposes a form of security that is in any case within the scope of discretion of a judge hearing such a motion” (para. 22).

The Agreement was therefore approved.