Berg v. Canadian Hockey League
A proposed representative plaintiff brought motion without notice for approval of a litigation funding agreement between the class, proposed class counsel and third-party litigation funder. The moving parties also sought an order sealing the court
Justice Perell first confirmed that third-party funding agreements are no longer prohibited. However, if they are unfair to the client, interfere with a lawyer’s professional responsibilities to the client or the court, or potentially could interfere with the administration of justice, then such an agreement would be illegal (para. 5).
Justice Perell noted that the funding agreement in this case was "extraordinarily complicated", and he was concerned that the representative plaintiff needed independent legal advice about agreement, and also about the interrelationship of the contingency fee agreement with counsel and the third party funding agreement with the funder. Neither the Court nor class counsel could be relied upon to provide that advice (para. 15-18).
The defendants' view on the agreement would also not be sufficient, as "defendants cannot and should not be relied on to ferret out the problems with a third party funding agreement, because once their own interests are protected, such as ensuring that they have access to the funds for a costs awards favourable to them, they might be content with the knowledge that the plaintiff was not judgment proof for costs, and thus defendants might rather like the existence of a third party funding agreement" (para. 19).
Justice Perell therefore determined that the circumstances required a sequential approach. The representative plaintiff must first retain, at the expense of class counsel, a lawyer to provide independent legal advice about the legality of the proposed third party funding agreement, as well as a recommendation as to whether or not the representative plaintiff should agree to the funding agreement. The written opinion must then be provided to the Court.
The motion for approval of the agreement was adjourned until that opinion was obtained, and provided to the Court. Justice Perell confirmed that there was no basis to involve the defendants at the outset, and but they may be involved depending on how the request for court approval progressed. That is, if it was determined that the third party funding agreement should not be approved because it was illegal or unfair and not in the interests of the putative Class Members, then there would no need to have the agreements and the other sensitive material disclosed to the Defendants.
To date, there has been no reported decision on the adjourned motion.