Law Times

Page 4 November 12, 2018 • Law Times www.lawtimesnews.com Decision creates a road map Court restricts deal to fund heart implant case BY ANITA BALAKRISHNAN Law Times A panel of judges at the Ontario Superior Court of Justice Divisional Court upheld the lower court's set of conditions on a third-party funding class action agreement by Bentham IMF Capital Ltd., saying the agree- ment as it was currently written connoted that the representative plaintiffs "are working on behalf of Bentham." The decision bears on the funds available to alleged vic- tims of 8,000 negligently de- signed cardiac defibrillator de- vices, since the "costs of mount- ing a products liability case such as this one are well beyond the ability to pay of most Cana- dians," according to the deci- sion, Houle v. St. Jude Medical Inc., 2018 ONSC 6352, released Oct. 25 by Justice Frederick My- ers with justices Anne Mullins and Harriet Sachs concurring. The decision provides a road map for creating this kind of third-party funding agreement, and it comes as "third-party liti- gation funding is a relatively re- cent and growing phenomenon in Canada," wrote Myers. Margaret Waddell, a partner at Waddell Phillips PC and one of the lawyers that represented the plaintiffs, says the decision clarified the way the court views the well-being of the class when it comes to third-party agreements. "[Judges] are taking a tem- pered and conservative . . . ap- proach to looking at these agree- ments because they are still so new and they are just not com- fortable with them as part of the norm of litigation at this stage," says Waddell. "They weren't prepared to, in broad strokes say, 'Litigation agreements are always good for access to justice,' which I had invited them to do — in a class action context, obviously. I think they made some important points about the essential role the court plays in being the so- ber second look at the agreement from the perspective of what's in the interest of the class." Shirley Houle was implanted with a Fortify Assura ICD device manufactured by St. Jude Medical in 2014. She later learned from the University Health Network, the Peterborough Regional Cardiac Device Clinic and the Canadian Heart Rhythm Society that "the defibrillator might experience unexpected early battery deple- tion and . . . might stop function- ing within a few hours or days." The Houles, according to the original 2017 decision that was being appealed, would have been "financially ruined" by the case. The funding agreement for this proposed class action case arose when representative plain- tiffs Shirley and Roland Houle were unable to fund the costs, disbursements or adverse costs of the case, according to the de- cision. The Houles' lawyer would only be paid if the plaintiffs won the case or settled — but they were not able to cover adverse costs if the Houles lost the case, according to Myers. The lower court said "this was a case in which third-party funding was necessary to pro- vide access to justice." But at the core of the dispute was a funding agreement that "offers features that have never been seen before in any reported Canadian case." Under the proposal, Bentham would pay up to 50 per cent of the reasonable docketed time of the plaintiffs' counsel, disbursements and court-ordered costs assessed against the Houles and any secu- rity for costs. If the Houles were successful, the agreement says Bentham gets 20 per cent if it is re- solved within 18 months, 22.5 per cent of the proceeds if the matter is resolved between 18 months and 36 months and 25 per cent of the proceeds if the matter takes longer than 36 months. The lawyers would be paid 50 per cent of their fees "in real time," with contingency fees of 10 per cent of the proceeds if the matter was resolved in 18 months, fees of 11.5 per cent if the case took 18 months to 36 months and fees of 13 per cent after that. The agreement requires the Houles to promise to follow rea- sonable legal advice, conduct the case efficiently and to "to notify to Bentham of any event or cir- cumstance that could reason- ably be expected to give rise to a termination right." Bentham could terminate the agreement if it determines the case would not be commercially viable, said the decision. McCarthy Tétrault LLP law- yers Eric Block and Richard Lizius, who represented St. Jude Medical Inc., declined to com- ment. Patrick Flaherty of Cher- nos Flaherty Svonkin LLP, who represented the intervenor, was not able to provide comment be- fore deadline. Since litigation funding is still very new in Canada, the arrange- ment was something Bentham wanted the court's guidance on, says Tania Sulan, chief invest- ment officer of the Canadian arm of Betham's publicly traded Australian business. "We now have a clearer idea from the Divisional Court on the parameters within which we can fund that type of arrangement. Whilst we didn't get the outcome we wanted, it's good to get clar- ity," says Sulan. The proposed agreement contrasts with the Class Pro- ceedings Fund, which has been traditionally used to fund class actions since its establishment and covers adverse costs in re- turn for 10 per cent of the pro- ceeds, but it does not pay any legal fees to the class counsel, the decision said. LT NEWS Visit gpllm.law.utoronto.ca Questions? gpllm@utoronto.ca Master the law. Canada's leading law school offers a graduate degree in four unique streams: Business Law Canadian Law in a Global Context Innovation, Law and Technology Law of Leadership Apply today. Untitled-1 1 2018-05-10 10:52 AM Margaret Waddell says the court provides a sober second look at third-party class.

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