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Following the recent decision of the Queen’s Bench for Saskatchewan in Schneider v Royal Crown Gold Reserve Inc, six provinces have now set out the guiding principles for approving third-party litigation funding agreements.  Although most decisions are in the class action context, they are instructive for general commercial litigation, the core of Bentham IMF’s business in Canada.

In all six provinces, courts have approved third party litigation funding agreements. Procedurally, however, the approaches differ. 

In Schneider, Chief Justice Popescul permitted the motion to proceed on an ex parte basis.  He reasoned that "the existence of the LFA has no bearing, substantively or procedurally, on the defendants or the third parties. From whose pocket an adverse cost award is paid is of no consequence to the defendants and the third parties."  Justice Popescul further held that the funding agreement should be subject to a confidentiality order, because otherwise it “would result in the disclosure of confidential and sensitive information that relate to the legal services and advice given by counsel and form a part of the plaintiff’s litigation strategy.”   This approach is in line with Alberta and Nova Scotia, where LFAs have been approved on an ex parte basis. 

In contrast, Ontario (e.g. Fehr v. Sun Life Assurance Company) and British Columbia (e.g. Stanway v. Wyeth Canada Inc) require motions for approval to be brought on notice, and for the LFAs, appropriately redacted, to be provided to the defendants.  Although British Columbia is a “no costs” class action regime and Ontario is a “costs” regime, both provinces have found that the adversarial process can assist the Court in exercising its supervisory role over class actions, including whether to approve an LFA.

New Brunswick follows a third path.  In the Hayes v. Saint John matter earlier this year, the representative plaintiff attempted to bring the motion ex parte, but Justice Grant ordered that the defendants be given notice.  The defendants were not, however, given a copy of the LFA; it was sealed by the Court.  The defendants could therefore address the guiding principles without application to the specific agreement.   To the best of our knowledge, New Brunswick is the first province to adopt this procedure.    

Plaintiffs are increasingly turning to third-party funding as a means of accessing the courts and mitigating risk.  While it remains to be seen what approach the courts will take outside the class action context, plaintiffs, their counsel and litigation funders need to be mindful of these differing approaches when negotiating the terms of their litigation funding agreements.

Further details about the case law regarding third-party litigation funding, including links to the cases discussed above, can be found on the Legal Landscape Page of our website.