Law Times

www.lawtimesnews.com Law Times / march 17/24, 2008 Page 13 Fontaine catches attention of class action bar A ssignments of the pro- ceeds of litigation are not uncommon. For the most part, however, they fly under the radar, dealt with by simple documentation between the assignee, the assignor, and the paying defendants. But class action litigation is another matter. "Assignments of the pro- ceeds of class action certainly have the potential to compli- cate the already complicated administration of class settle- ments," says Paul Morrison of McCarthy Tétrault LLP's Toronto office. "Administrators may have to start wondering whether assignments are bind- ing, and that can be difficult in class actions where you have all kinds of claimants who don't have individual legal represen- tation." Which is why Fontaine v. AG Canada has caught the atten- tion of the class action bar. The case followed on settle- ment of the Indian residential schools class action in September 2007. Following implementa- tion, class members eligible to share in the proceeds, known as "common experience payments" or CEPs, submitted applications for payment. Subsequently, Service Canada, the entity that administered the CEPs, received various docu- ments related to the proceeds. These were called "direction to pay," or "assignment of proceeds of claim," or "irrevocable assign- ment of proceeds." The documents directed pay- ment in connection with com- mercial transactions, or payments to law firms in trusts, or assign- ments to law firms to fund legal fees, and disbursements with no further details. Service Canada responded with an application for direc- tions to the British Columbia Supreme Court. Chief Justice Donald Brenner heard the appli- cation. He framed the issue as follows: "The [respondents do] not dispute that the 'federal Crown is immune to charging order, orders for payment into court, assignments, executions on judg- ments, seizures and for the most part garnishments,'" he wrote. "So the real question is wheth- er the assignments are barred by the Financial Administration Act or the settlement agreement?" Section 67 of the act provides Crown debts are not assignable and no transaction purporting to be an assignment of such debt confers rights or remedies on any person. The act defines Crown debt as "any existing or future debt due or becoming due by the Crown, and any other chose in action in respect of which there is a right of recovery enforceable by action against the Crown." As well, the settlement agree- ment prohibited assignment of the proceeds in the following terms: "No amount payable under this agreement can be assigned and such assignment is null and void except as expressly provided for in this agreement." As Brenner saw it, the com- bined effect of the act and the settlement agreement precluded assignment of the CEPs. "In my view the settlement agreement is clear and unam- biguous; it bans the assign- ment of any amount payable under the agreement," he con- cluded. "CEPs are clearly included within that category. They are also Crown debts. They are payable from the consolidated revenue fund. As such, any assignment of CEPs in whole or part is also prohibited by [the act]." The respondents, howev- er, sought to distinguish the "directions to pay" from the "assignments." "They argue that the direc- tion to pay particularly to solicitors in trust are standard payment directions," Brenner wrote. "Since they are 'in trust' in favour of the CEP 'recipi- ent' they cannot be said to be assignments. They argue that the funds remain the property of the CEP claimant and can only be disbursed in accordance with the CEP claimant's instructions to the solicitor." The respondents also main- tained the trust funds were no longer Crown debts since the Crown's obligation to the claim- ant was fully discharged with the payment into trust. Brenner disagreed. In this case, he noted, the respondents first served Service Canada with a direction to pay the monies in trust to a law firm. They followed by serving an irre- vocable assignment of proceeds on the solicitor directing her to forward payment straight to the respondents. On these facts, Brenner observed, "it is clear that any funds transmitted to a CEP claim- ant pursuant to this arrangement would be fettered and subject to the assignment to [the respon- dents]." And if Service Canada was to forward these funds accord- ingly, it would be "in clear contravention" of the Financial Administration Act and the set- tlement agreement. "The CEP payment must be paid by Canada to the CEP recipients," Brenner observed. "Once received, the CEP recipi- ents are of course free to use or dispose of the funds in any manner they consider appropri- ate. But until 100% of the CEP monies are placed in their hands, the Crown debt will not have been discharged." Kirk Baert, of Toronto's Koskie Minsky LLP and a prominent member of the plaintiff 's class action bar, says he would like to see anti-assignment clauses in all class action settlements "It would help ensure that third parties can't take advantage of class members, some of whom — like the residential schools victims — may be particularly vulnerable," he said. FOCUS VANCOUVER 1-800-465-7878 EDMONTON 780-420-0897 GUELPH 1-800-265-8381 HALIFAX 1-800-565-0695 USA 1-800-265-2789 www.mckellar.com PRICELESS SERVICE IS A TRADITION. The McKellar Structured Settlement ™ We didn't get to be Canada's largest provider of structured settlements by putting a price tag on our services. Have us attend mediations, undertake file reviews, conduct seminars and prepare future care valuations – all with no price tag. Ever. Why settle for less? Untitled-2 1 3/12/08 10:16:52 AM 'Assignments of the proceeds of class action certainly have the potential to complicate the already complicated administration of class settlements,' says Paul Morrison. BY JULIUS MELNITZER For Law Times LT

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