The Maple Tree is Growing: Commercial Litigation Funding in Canada

Marla Decker

The litigation finance industry in the U.S. is relatively new compared to the more mature markets that exist in Australia, the U.K. and other parts of Europe.  Continuing the growth trend in North America is now Canada, which has begun to adopt litigation finance on its own terms.

Like its Commonwealth sister Australia, litigation finance in Canada found its initial toehold in class action funding, in response to the ever-increasing costs of litigation and the risks of a loser-pays system. Over the last few years, Canadian courts have approved litigation funding agreements in the class litigation context despite long-standing adherence in Canada to the champerty and maintenance doctrines.  In fact, the province of Quebec took the unique step of establishing a public fund that is used to finance class lawsuits as discussed by University of Montreal Professor Catherine Piché at last month’s symposium on litigation finance at NYU.  Ontario has a similar fund.

An open question has remained, however, as to whether courts would permit litigation funding in private commercial disputes, which raise different policy considerations.  A recent decision by Justice Thomas McEwen of the Ontario Superior Court suggests that the trend will continue in favor of allowing commercial litigants to access financing, perhaps with judicially-imposed limits.  While Justice McEwen denied without prejudice a motion to approve a litigation funding agreement between a UK based funder and the plaintiff – a Swiss resident of “modest means” seeking $10-$30 million in breach of contract damages from Valeant Pharmaceuticals – the Court suggested it would approve the agreement upon a revision that would cap the funder’s share of recovery at 50%, which has reportedly since been done to the court’s approval.  The decision was the first to positively endorse (albeit with conditions) a litigation funding agreement in the private commercial context.  More details on the significance of this development can be found here.

We expect there will be more developments in Canada as businesses seek to realize the opportunity created by litigation finance.  We’ll keep you posted.

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