Law Times

Law Times • OcTOber 1, 2012 the many blanks in the law sur- rounding the practice, according to a partner at Stockwoods LLP. Speaking at The Advocates' Society's second annual securi- ties symposium on Sept. 13, civil litigator Aaron Dantowitz told the audience that securities class ac- tions have become the favoured forum for third-party funders with three of the four reported decisions addressing agreements coming out of securities cases. "This is an emerging phenom- themselves in the field include Canadian funder Bridgepoint Financial Services Inc. and Ireland-based Claims Funding International PLC. Both offer services that include indemnifi- cation for adverse costs awards and financing for disbursements and legal fees in exchange for a cut of any final settlement. Despite operating in the same Funders that have established " said Dantowitz. realm as the Law Foundation of Ontario' there's plenty of room for private need funding of some kind and that funders seem to have settled on a commission of about seven s class proceedings fund, players in the class actions funding market, according to Dantowitz. He said most claimants will Jury still out on third-party class action funding A FOCUS BY MICHAEL McKIERNAN Law Times growing number of class actions involving third-party funders is helping lawyers fill in per cent, a number that's well be- s fund. In any low the 10-per-cent levy charged by law foundation' case, the law foundation doesn't grant funding to all claims and class counsel are sometimes un- willing to fill the gap. "The economics of class ac- tions, of course, are that the indi- vidual claim of the representative plaintiff or any class member is out of proportion typically to the costs of litigation and particularly to the exposure the representative plaintiff faces if the case is unsuc- cessful, enon in Ontario, but there are some lessons that can be distilled from the limited case law we have so far, around class members trying to help out the representative plain- tiff typically isn't a realistic op- tion, so third-party funders have entered the fray. "The idea of passing the hat " said Dantowitz. Inco, in which the court awarded $1.77 million to Inco Ltd. for the trial of the common issues, and Martin v. AstraZeneca Pharma- ceuticals PLC, in which the court ordered a plaintiff indemnified by her class counsel to pay $700,000 for a failed certification motion, have reinforced the potential jeop- ardy for failed claimants. "These are very real risks face Recent costs awards in Smith v. " that plaintiffs unsuccessful and typically the amount they stand to gain per- sonally doesn't compare to those amounts," said Dantowitz. Claims Funding Interna- tional's agreement with a group if they're of former investors suing Gildan Activewear over secondary-mar- ket share purchases was the first to come before the courts in 2009 when Superior Court Justice Lynne Leitch addressed the con- cern that such agreements could be champertous. Drawing on the Ontario Court of Appeal's decision in agreement will not amount to ' McIntyre Estate v. Ontario (Attor- ney General), which concerned contingency-fee agreements be- tween lawyers and clients, Leitch cleared the way for third-party funding agreements. "It was concluded by the court in McIntyre that contin- gency agreements are not, per se, champertous. Similarly, I think the same comment can be made respecting third-party funding agreements," Leitch wrote, adding that an assessment of the motives underlying each agreement would be necessary. Subsequent judgments have adopted the same reasoning by conducting case-by-case assess- ments of sonableness of the funder's fee to the fairness and rea- determine whether an improper motive exists. Excessive compensation would agreement, Leitch also gave guid- ance about the extent of the influ- ence funders can exercise over the litigation. Leitch shot down a termination clause that allowed the funder to walk away at any time with notice and without cause as well as another provision that required class counsel to im- mediately report settlement dis- cussions to Claims Funding In- ternational. Neither clauses have reappeared in subsequent cases, according to Dantowitz. "CFI has the right to be in- over compensation' to the extent that it is unreasonable and unfair to those who will bear its expense. In her decision rejecting the " formed but has no right to instruct class counsel or otherwise control the litigation," Leitch wrote. The most recent securities case to see a third-party fund- ing agreement arose in May of this year when Ontario Supe- rior Court Justice Paul Perell constitute an improper motive, ac- cording to Dantowitz, who noted it has "become clear that the third- party funding agreements are not categorically illegal on the basis that they are champertous." In the Metzler Investment v. Gildan Activewear case, Leitch actually declined to approve the agreement that provided for a sev- en-per-cent commission on any "resolution sum." Since the case was still in its early stages and there was no cap on the funder' tion, Leitch determined it was "impossible to conclude that this s compensa- YOUR SOURCE OF ESSENTIAL LEGISLATION NEW EDITION CONSOLIDATED ONTARIO SMALL CLAIMS COURT STATUTES, REGULATIONS AND RULES, 2012-2013 MR. JUSTICE MARVIN A. ZUKER Access a wealth of relevant, up-to-date statutes, regulations and rules for your small claims matters with this comprehensive, portable, and easy-to-use guide. NEW IN THIS EDITION • All the latest amendments to the Small Claims Court rules and forms, including the latest amendments in force July 1, 2012 and January 1, 2013 (O. Reg. 56/12) • All amendments to the key statutes contained in the consolidation ORDER # 985100-65203 $92 Softcover approx. 1440 pages August 2012 978-0-7798-5100-3 Annual volumes available on standing order subscription Multiple copy discounts available Shipping and handling are extra. Price subject to change without notice and subject to applicable taxes. AVAILABLE RISK-FREE FOR 30 DAYS Order online: www.carswell.com Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800 The appeals process demands detailed and discriminating analysis of the existing record. It rewards the insight to identify and articulate a strategy upon which a case will turn. It favours those with an intimate understanding of the procedures and perspectives that define our appeal courts and Supreme Court. It is an unforgiving environment for those who approach unprepared. Whether you won at trial and face an appeal or lost at trial and wish to launch an appeal, we can help you determine the final outcome for your client. Call us. PAGE 11 approved an agreement between Claims Funding International and the plaintiffs in The Trustees of the Labourers' Pension Fund of Central and Eastern Canada v. Sino-Forest Corp. This time, the commission percentage and cap were both on a sliding scale, depending on when the action settled, with the funder' Co. of Canada, the only non- securities class action agreement reported on, the plaintiffs failed in an attempt to keep the agree- ment behind closed doors. Despite the increased volume mum payday standing at $10 million. The judge also required the funder to pay security for costs based on its lack of assets in Canada. In Fehr v. Sun Life Assurance s maxi- of cases, Dantowitz said there are "a lot of things we still don't know both in terms of the sub- stantive law and the procedure that applies to approving these types of agreements." LT " He" He who Earl Cherniak, Q.C. wins last, wins Appellate Advocacy Group, Lerners LLP " Toronto: 416 867 3076 Toronto: 416 867 3076 London: 519 672 4510 London: 519 672 4510 Earl Cherniak, Q.C., Kirk Boggs, Mark Freiman, Kirk Stevens, Jasmine Akbarali, Brian Radnoff, Cynthia Kuehl Peter Kryworuk, Ian Leach, Andrew Murray, Carolyn Brandow Lerners LLP is 100-plus lawyers with a proud history of 80 years of successful litigation. www.lerners.ca/appeals proud on. Lerners LLP is 100-plus lawyers with a proud history of 80 years of successful litigation. www.lerners.ca/appeals www.lawtimesnews.com ntitled-1 1 12-09-24 3:08 PM Peter Kryworuk, Ian Leach, Andrew Murray, Carolyn Brandow Earl Cherniak, Q.C., Kirk Boggs, Mark Freiman, Kirk Stevens, Jasmine Akbarali, Brian Radnoff, Cynthia Kuehl

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