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REGULATION OF PROFESSION - Champerty and maintenance

Thursday, December 13, 2018 @ 8:15 AM  


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Appeal by the representative plaintiffs, the Houles, from the approval of a litigation funding agreement subject to conditions. The Houles were representative plaintiffs in a proposed class action that was not yet certified. They were suing the respondents for damages for alleged negligent design and manufacture of thousands of cardiac defibrillator devices that had been implanted surgically in the Houles and the proposed class members. The Houles were not in a financial position to fund the costs or disbursements of litigating the class proceeding. They also were not able to bear the burden and risk of paying any adverse costs awards in favour of the respondents. They therefore entered into a litigation funding agreement with their lawyers and their proposed third party funder, Bentham IMF Capital Limited. The proposed agreement included features that had never been seen before in any reported Canadian case. Those features included providing funding for 50 per cent of the plaintiffs’ counsels’ fees on a real-time basis throughout the case and the funding of 100 per cent of disbursements with few, if any, restrictions. This new form of funding agreement came with an added element of risk to the sacrosanct independence and fidelity of the relationship between the plaintiffs and their counsel. The Houles and Bentham took the position that the case management judge erred by imposing conditions on the court’s approval of the funding agreement. They sought to have the conditions set aside and to have the funding agreement approved in full.

HELD: Appeal dismissed. The case management judge was not bound to approve the rate of recovery at the outset. It was not an error in principle for the case management judge to have found that, on the facts of the case, assessing the fairness and reasonableness of the full compensation to be paid to Bentham could only take place once the outcome was known. The case management judge removed two clauses that allowed Bentham to withdraw funding on its own re-assessment of risk and added a court approval process. In doing so, the case management judge was satisfied that the funder would be protected from the risks it needed to be protected against and the administration of justice would be protected from the champertous fear of officious intermeddling. The case management judge applied the proper principles and provided a roadmap to the parties if they wished to proceed under the proposed type of arrangement. He did not commit any error in principle and he was not plainly wrong.

Houle v. St. Jude Medical Inc., [2018] O.J. No. 5540, Ontario Superior Court of Justice - Divisional Court, H.E. Sachs, A. Mullins and F.L. Myers JJ., October 25, 2018. Digest No. TLD-December102018007