Maintenance and Champerty: Dead but not buried?

In our conversations introducing commercial litigation funding to the Canadian legal market, we are frequently asked about maintenance and champerty.  Under current Canadian jurisprudence, third-party funding does not offend the doctrines of maintenance and champerty.

Canadian courts have approved litigation funding in single-party commercial cases and in class actions. In reaching those decisions, the courts have specified that the rules against maintenance and champerty do not prohibit third-party funding, but do impose the following restrictions:

  1. The funder must not instigate or stir up the litigation;
  2. The funder must not control the litigation; and
  3. The client must receive a fair return in light of the litigation risk.

As a result, third-party funding is a viable means of advancing litigation in Canada, as long as the agreement complies with these guidelines.  Litigation funding is useful where a plaintiff may not have the means to properly resource a matter through trial, but is also very attractive for well-capitalized corporations who can use funding to mitigate risk or as a corporate finance tool. 

Bentham’s website has detailed analysis of maintenance and champerty and its evolution over time, as well as information on the decision across Canada that specifically address third-party funding.