Canada
Answer ... Class actions are a common feature in Canada. Litigation funding is permitted in Canada. In all provinces except Quebec, advance court approval of a litigation funding agreement is expected. In Ontario, the Class Proceedings Act has been amended to include provisions on what a litigation funding agreement should include. These are as follows:
- A third-party funding agreement is subject to court approval.
- The agreement must be provided to the defendant, subject to the permission to redact such information that may reasonably be considered to confer a tactical advantage on the defendant.
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In order to approve an agreement, the court must be satisfied that:
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- the agreement – including indemnity for costs and amounts payable to the funder under the agreement – is fair and reasonable;
- the agreement will not diminish the rights of the representative plaintiff to instruct the solicitor or control the litigation or otherwise impair the solicitor-client relationship;
- the funder can financially satisfy an adverse costs award in the proceeding, to the extent of the indemnity provided under the agreement; and
- any prescribed requirements and other relevant requirements are met.
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It is a term of the agreement that the funder will be subject to:
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- the same confidentiality requirements in respect of confidential or privileged information in the proceeding to which the representative plaintiff would be subject; and
- the deemed undertaking rules set out under the rules of court, as if the funder were a party to the proceeding.
- In determining whether a third-party funding agreement meets the above requirements, the court will consider whether the representative plaintiff received independent legal advice with respect to the agreement.
- If costs are ordered to be paid by the representative plaintiff, the defendant must have the right to recover the costs directly from the funder, to the extent of the indemnity provided under an approved third-party funding agreement.
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The defendant is entitled, on motion, to obtain from the funder security for costs to the extent of the indemnity provided under an approved third-party funding agreement if:
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- the funder is ordinarily resident outside Ontario;
- the defendant has an order against the funder for costs in the same or another proceeding that remain unpaid in whole or in part; or
- there is good reason to believe that the funder has insufficient assets in Ontario to pay the costs.
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The representative plaintiff must give notice to the court and to the defendant if:
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- an approved third-party funding agreement is terminated; or
- the funder becomes insolvent.
Canada
Answer ... Litigation funding is a common and important part of the class action landscape. Because of the requirement to seek court approval of litigation funding agreements, there is a wealth of judicial consideration of funding in this context. Class action counsel turn to funding in order to assist with fees, disbursements and adverse cost exposure borne by the representative plaintiff.
One interesting feature in Ontario and Quebec is the public funds made available to support class actions. In Ontario, the Class Proceedings Fund provides protection for cost exposure and a limited amount of disbursement funding where cases meet the requirements of the fund. A public fund in Quebec provides similar, though more limited support for class action counsel.
Due to the necessity of court approval for funding agreements in class actions (and insolvency-related litigation funding), but not for individual commercial litigation funding, some in the market have a misperception that litigation funding is primarily a tool used in the class action context. However, it is clear from reporting by funders and lawyers in the market that litigation funding is broadly used in private commercial disputes.