How Class Actions Have Shaped Litigation Financing Law in Canada

• Author: Rachel Meland
• Pages: 467-515

467

How Class Actions Have Shaped Litigation Financing

Law in Canada

Rachel Meland

:Third party litigation f‌inancing has become more widely

accepted as a justif‌iable exception to the law against champerty for its

potential to improve access to justice for plaintif‌fs with meritorious

claims but who lack the funds to pursue their actions. In Canada, liti-

gation funding was introduced as an accessory to class actions in part

because of the statutorily mandated court supervision, and in part

because funding agreements are often critical to advancing these actions

when faced with large costs exposure. The disproportionate presence

of class actions in Canadian jurisprudence on litigation f‌inancing has

resulted in a unique system in which much of the analysis developed to

evaluate the legality of litigation f‌inancing agreements in class actions

has been applied beyond this context.

The intent of this paper is to provide an overview of the current law

of litigation f‌inancing and to canvass ethical issues that have received

the most attention; namely, ensuring that funders are not overcompen-

sated and do not interfere with the lawyer-client relationship. Although

the law of litigation f‌inancing is still in its infancy, trends have emerged

that allow the extrapolation of the future trajectory of the industry. This

paper also considers some dichotomies that appear to be emerging, such

as those between vulnerable and more sophisticated plaintif‌fs, between

litigation f‌inancing and insurance, and between indemnif‌ication agree-

ments and those that invest signif‌icantly more in the litigation.

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469

HOW CLASS ACTIONS HAVE SHAPED

LITIGATION FINANCING LAW IN

CANADA

Rachel Meland*

A. INTRODUCTION

In 1787, Jeremy Bentham criticized the legal system for its denial of the

commodif‌ication of legal disputes. He accused the system of being one

where “[w]ealth has indeed the monopoly of justice against poverty.”1 He

went on to say that the f‌irst step in rectifying that problem is to abolish

the “barbarous precautions” of the doctrines of champerty and mainten-

ance.2 The laws, originating in the Middle Ages, prohibited uninterested

third parties from involving themselves or prof‌iting from the disputes

of others. In the twenty-three decades since Bentham wrote In Defence

of Usury, his views on the merits of commodifying disputes have f‌inally

been commonly accepted and a litigation f‌inancing industry has started

to develop.

* Third-year law student in the BCL/LLB program at McGill University. She received

a BSc in honours chemistry with a minor in mathematics from McGill University

prior to her legal studies. She will be articling at Smart and Biggar, Toronto, in 2019.

I would like to thank Professor Geneviève Saumier for her guidance throughout the

development of this essay and her detailed and insightful comments.

1 Jeremy Bentham, Defence of Usury; Shewing the Impolicy of the Present Legal Restraints

on the Terms of Pecuniary Bargains; in Letters to a Friend. To which is added A Letter to

Adam Smith, Esq. LL.D. on the Discouragements opposed by the above Restraints to the

Progress of Inventive Industry; and to which is also added, A Protest against Law-Taxes,

4th ed (London: Payne and Foss, 1818) at 123.

2 Bentham, above note 1 at 121; McIntyre Estate v Ontario (Attorney General)(2002), 61

OR (3d) 257 (CA) [McIntyre Estate].

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