Canada: The Latest Chapter In Litigation Finance – Back From The Brink?

Last Updated: January 3 2012
Article by Adam Howden-Duke and Alexander D.C. Kask

The costs judgment in Guiliani v. Region of Halton (2011 ONSC 5119), handed down August 31st, followed a trial in February 2010 concerning injuries incurred in a motor vehicle accident. The damages awarded were $375,000, however the costs and disbursements incurred by the Plaintiff's counsel totaled approximately $788,000. Murray J. was critical of the amount of costs, however of particular note are the judge's consideration of a loan which the Plaintiff had obtained from Lexfund Inc. to finance disbursements.

The loan was taken out on November 15, 2009, for $150,000. Repayment was contingent on success at trial. The interest rate was 3.5% compounded monthly (an effective annual rate in the region of 50%). There was an additional underwriting fee of 7.5% on the amount advanced that was added to the principal debt. Also, (despite the proximity to trial) the agreement provided for a penalty if the loan was repaid within 24 months from drawdown. According to the Plaintiff's counsel, the agreement required repayment of $379,625.71. If this was as of the date of the costs Judgment, the effective annual interest rate would have approached 85% (and if any earlier date, be higher still). Perhaps unsurprisingly, the amount claimed on taxation was significantly less ($92,734.26 – stated to be owing as of November 2010). Given the effective annual rate on this amount is 59.53% (by the authors' calculations), it may have been chosen specifically to fall below the Criminal Code rate (60%). Regarding the rate, the Judge commented that "[the loan was] in effect a contingency arrangement which allows the lender to make huge profits from the proceeds of litigation rather than from a commercially normative interest rate on a risky loan".

Murray J declined to rule on whether the loan agreement was champertous. It is not clear from the judgment whether that had been argued by the Defendant, but the Judge did note, obiter, that Courts have taken into account excessive fees as one of the factors to be considered in determining whether third party funding of litigation is champertous, and if so, it may be that the loan at issue amounted to champerty and would be unenforceable for that reason alone.

In addition, while the defendants argued the effective rate exceeded the Criminal Code rate, the Judge declined to decide that issue, holding "[the financier was] not on trial before me for violating the Criminal Code".

The issue of recovery of the interest payment turned on the less esoteric argument of whether the disbursement was reasonable in assessing costs payable by the Defendant under the Ontario equivalent of British Columbia Rule 14-1(2). Approaching it under this analysis, Murray J. held:

"I am in complete agreement with the submissions of Defendants' counsel that: "this Court should not reward, sanction or encourage the use of such usurious litigation loans, which in this case has interest provisions that are arguably illegal, otherwise such loans will be seen to be judicially encouraged and could become a common-place tactic." I agree that an award of interest in this case would likely have an adverse impact on other Defendants' decisions to proceed to trial or to Appeal. I think the Defendants' counsel is correct in stating that access to justice is a two-way street. As I have indicated above, to award interest as requested by the [Plaintiff's counsel] would not facilitate access to justice and would undoubtedly bring the administration of justice and to disrepute."

Murray J. thus disallowed the interest claim in its entirety (as opposed to substituting a lesser amount). Curiously, the judge did allow pre-judgment interest on the allowed disbursements – a controversial interpretation of the Ontario statue, and the opposite finding to current BC case law on the Court Order Interest Act (see Moore v Dhillon 1992 CarswellBC 1453 at para 437).

An argument raised in other cases in which interest was awarded (e.g., Bourgoin v. Oullette (2009) 343 NBR (2d)) has been the need for finance in order to facilitate access to justice. The Plaintiff had not provided any Affidavit evidence to support such assertion, although did make that argument. On the topic, the judge had held that the financing terms imposed were counter to the notion that the loan agreement facilitated access to justice:

"The interest rate on the loan obtained by the Plaintiff for disbursements is unconscionable. It is turning the world on its head to assert, as does [the Plaintiff's counsel] that this is an access to justice issue and that ordering interest payments on the Lexfund [sic] is reasonable. ..."

This is a scathing criticism of the terms of the loan obtained, in circumstances where other such loans with high interest rates have been allowed (e.g. Bourgoin v. Oullette – 32.9% effective annual interest rate). Where the tipping point falls such that the rate renders the loan agreement champertous, remains to be seen. The fact that a lesser sum than owing was pursued is an intriguing development. It will be interesting to see what steps the litigation finance industry may take in response to this decision, given the obvious advantage to it of borrowers' ability to recover the interest charge from defendants (following success at trial), to be balanced against commercially enticing rates of return where the financing lacks traditional security of repayment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.