Canada: Court Approves Third-Party Financing For Putative Class Action

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Class Actions, June 2009

For the first time, a Canadian court in Don Hobsbawn v. ATCO Gas and Pipelines Ltd. (ATCO) has approved a private third-party financing arrangement to fund a putative class action. The plaintiff and BridgePoint Financial Services Inc. (BridgePoint), a non-party financial institution, applied, on an ex-parte basis (without notice and hearing from the other side), and were granted an Order by the Honourable Mr. Justice S. A. Lovecchio in the Alberta Court of Queen's Bench approving not only the retainer agreement between the representative plaintiff and his counsel but an indemnity agreement between the plaintiff and BridgePoint to fund the lawsuit. The financing arrangement has been sealed, so the details of it are not currently public.

The nature of the ATCO action is the same or similar to that in Garland v. Consumers' Gas Co. (1998), 3 S.C.R. 112, decided by the Supreme Court of Canada. The facts in Garland were that Consumers' Gas, a gas utility, billed its customers a late payment penalty for payments received after the due date specified in its invoices, calculated at 5% of the unpaid charges for that month. The penalty was implemented by Consumers' Gas in 1975 following a series of rate hearings conducted by the Ontario Energy Board. The representative plaintiff in that class action commenced an action on behalf of a large number of Consumers' Gas customers alleging that the penalty violated section 347 of the Criminal Code because, for a significant number of customers each month, it constituted an allocation of interest at a rate exceeding 60% per year.

The allegations in the Statement of Claim in ATCO are similar. It alleges that ATCO has, since January 1, 1982, charged late payment penalties in violation of section 347 of the Criminal Code. In addition, it alleges that ATCO did not comply with certain sections of the Canada Interest Act requiring an express statement setting out the yearly rate of interest to which the late penalty is equated.

While the substantive nature of the claim is not novel, the fact that the representative plaintiff was able to obtain approval by the court of third-party financing will no doubt send a chill to defendants in proposed class action proceedings.

Under class action and other proceedings in Alberta, unsuccessful plaintiffs must generally pay the taxable costs and disbursements of a defendant in circumstances where a claim is struck out or otherwise dismissed. This differs from the "no-costs" regime implemented by class proceedings legislation in most other provinces. While the taxable costs regime was not developed to fully indemnify a defendant for its costs, the stated intent of that regime in Alberta has been to provide a 40-50% form of costs indemnification. That partial indemnification has been said to reflect an attempt to balance two conflicting interests. One argument is that if a party is successful in defending a claim, it is unfair to require the successful party to bear the costs incurred in defending the action. The competing argument is that if the unsuccessful party is required to bear the costs of a successful defendant, litigants may be unduly hesitant to commence a claim and assert their rights (even if valid). The partial indemnification practice as it exists in Alberta is a compromise of those positions and is intended to give some consideration for each of the conflicting policy considerations. Historically, the ability to collect costs from an unsuccessful plaintiff has acted as a factor in reducing the number of unmeritorious cases being commenced or otherwise prosecuted. Procedurally, the ability of defendants, in some cases, to require plaintiffs to post security for costs or be exposed to increased cost sanctions following formal offers have also been very useful tools in managing actions for defendants.

The absence of cost consequences creates, in effect, a "free-option" to plaintiffs in commencing an action. It is undeniable that without facing cost sanctions, plaintiffs are more readily able to commence and maintain actions against defendants. The ability of a plaintiff to obtain indemnification for costs by a third party who was otherwise a stranger to the dispute defeats the important policy considerations of providing a costs sanction to unsuccessful litigants, and seems to be at odds with the intentions of the Alberta legislature which chose to retain the costs regime in the Class Proceedings Act.

Historically, the ability of a third party to fund a lawsuit has been prevented by virtue of the imposition of a public policy against a stranger funding or otherwise "stirring up" litigation. The tort of "maintenance" prevented an officious intermeddler – a stranger to the cause of action without any previous commercial connection – from inciting litigation. "Champerty" is a form of maintenance in which the stranger maintains an action in return for a payment conditional upon success in the lawsuit or based upon a percentage of recovery in the lawsuit.

The question of whether an arrangement to fund a lawsuit is champertous turns upon the specific circumstances of the case, and it is for the court to determine whether the stranger to the action is stirring up or inciting litigation. While the details of the agreement between BridgePoint and the plaintiff in this matter remain undisclosed, it is noteworthy that this action appears to have lain dormant for nearly eight years following its original filing on February 28, 2001, until very recently.

This decision in ATCO raises the concern that the express decision of the Alberta legislature to maintain the normal cost consequences in a class proceeding, rather than follow the lead of other provinces by setting up a no-costs regime, has been further eroded. While funding by a third party does not prevent a successful defendant from receiving its partial payment of costs following disposition of the matter, it does fail to address the very valid policy reasons behind making unsuccessful plaintiffs liable to pay for such costs directly. If the representative plaintiff is not exposed to cost consequences directly, then more marginal claims may be commenced and prosecuted. The decision further raises questions about the torts of maintenance and champerty and how those issues will be dealt with in Alberta.

Given that the Order was obtained on an ex-parte basis, it arguably has less precedential value. It will be interesting to see what the result would be if such an application was made on notice and in circumstances where the defendant was vigorously objecting to the relief claimed. We can expect that such an application will arise soon.

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.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
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.