How Class Actions Have Shaped Litigation Financing Law in Canada

AuthorRachel Meland
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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CCAR 14-2.indb 468 1/8/2019 10:57:47 AM
Rachel Meland*
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].
CCAR 14-2.indb 469 1/8/2019 10:57:47 AM

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