The Death of Champerty: Is Third Party Litigation Funding the New Normal in Class Actions?

AuthorJacqueline M Palef
The Death of Champerty: Is Third Party Litigation
Funding the New Normal in Class Actions?
Jacqueline M Palef
ABSTRACT: Are third party litigation funding agreements in class actions
becoming the new normal? Historically, champerty was a crime in Can-
ada, and these types of agreements were illegal. It was considered champ-
ertous for a third party to f‌inance a lawsuit that it had no interest in, and
in return receive a portion of the party’s winnings. The law has, however,
been gradually clearing certain obstacles — beginning in 1953 with the
change in the Criminal Code; followed by the implementation of class
actions legislation; and later followed by legislative and judicial endorse-
ment of business models for class proceedings. The high risks involved in
modern class proceedings, such as counsel’s growing work-in-progress
(WIP) accounts and costs awards, have led both parties and the courts to
consider third party funding agreements in class actions.
This paper will consider the historical development of third party
litigation funding in class actions in Ontario. Third party funders make
important contributions to access to justice by investing in class actions
that may not otherwise have the funding to proceed. Notably, the Law
Commission of Ontario in its Class Actions: Objectives, Experiences and
Reforms: Final Report, included recommendations to amend the Class Pro-
ceeding Act, 1992, the statute governing class actions in Ontario, to per-
mit third party funding of class actions and to codify the trends that are
readily apparent in the case law. Recently, the Supreme Court of Canada
addressed third party litigation funding in 9354-9186 Quebec Inc v Callidus
Capital Corp. While not a class action, this insolvency dispute demon-
strates the f‌irst time the Supreme Court of Canada has pronounced on
third party litigation funding. The moral and legal derision of champerty
appears to be behind us, and third party funding in class actions may be
the new normal.

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