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

• Author: Jacqueline M Palef
• Pages: 77-103

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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.