Seedlings Life Science Ventures v. Pfizer Canada “Seedlings II”

In this case, Seedlings brought an action to enforce a patent against an Pfizer, international pharmaceutical company.  Seedlings entered into an Litigation Funding Agreement (LFA) with Bentham.  Under the LFA, Bentham agrees to pay a portion of Seedlings’ legal fees and disbursements on a non-recourse basis.  If the case is unsuccessful, Seedlings loses nothing, and Bentham will pay any court-ordered costs.  If the case is successful, Seedlings, its counsel and Bentham will each receive a return.  Seedlings and Bentham brought a motion, on notice to the defendant, for approval of their LFA by the Federal Court.
The Approval Motion was dismissed, without costs, on the basis that the Federal Court did not have jurisdiction to grant such a remedy or make such a determination [7].  Case Management Judge Tabib reasoned that, unlike in class actions where courts must help protect vulnerable class members, “the legal, procedural and policy imperatives … of submitting LFAs to prior court approval … do not exist in the context of private litigation. There is no legal or logical basis to extend the requirement of pre-approval outside of class proceedings” [16].
The Court noted that “the manner in which Seedlings chooses to fund a litigation it has every right to bring is of no concern to the Court or to the Defendant. … The Defendant has no legitimate interest in enquiring into the reasonability, legality or validity of Seedlings’ [funding] arrangements … because they do not affect or determine the validity of the rights asserted by Seedlings in this action” [22-23].  Indeed, by opposing the LFA as “aggressively” as it did, “Pfizer’s conduct was not at all helpful to the determination of the issues before the Court … [and its] conduct should not be recompensed with an award of costs” [35].
The Court further found that the LFA need not be approved in order for Bentham to be bound by the implied undertaking rule. That is, a third-party funder is entitled to receive information from the discovery of a defendant, as any related third party would be (e.g. “experts, potential witnesses, consultants or others whose advice is relevant to the carriage of the litigation”), without special approval from the court. Such disclosure by a plaintiff to the funder is “neither improper nor alien, collateral or ulterior to the litigation”—as long as the funder agrees to abide by the implied undertaking rule [32-33].