Proposal aligns with U.S. law; third-party funding rules codified
Ontario’s legislature is considering changes to the class action regime in the province, ushered in as one of the many proposals by Attorney General Doug Downey in bill 161.
One of the amendments, which tracks against recent case law, would add more rules for third-party financing, says Paul Rand, Chief Investment Officer at Bentham IMF in Toronto. Rand highlighted recent trends toward getting court approval for funding agreements for class actions; sharing funding agreements with the defendant and filing the agreement with the court; and giving notice to the court and to the defendant if the funding agreement is terminated or the funder becomes insolvent.
Rand wrote in an email to Law Times that investing in class proceedings will still be attractive in the right circumstances, although Bentham’s “core business” remains in financing commercial disputes between corporations.
“In our view, these amendments underscore the benefit of working with a professional funder located in Ontario,” he wrote. “Access to justice is a critical aspect of third-party funding and of the class action regime . . . . the proposed changes recognize that.”
Mark Spiteri, finance and commercial director at Woodsford Litigation Funding says the reforms, while not entirely surprising, are welcome “to the extent that they will more likely ensure that reputable, well-resourced funders provide funding solutions to the Canadian market.”
“It is positive to see that several principles cited in Metzler, Dugal, Loblaw and Fehr are adopted in the bill,” he said. “Woodsford also supports the requirement that representative class members should obtain independent legal advice when entering into a funding agreement which is best practice in our experience.”
But Spiteri questioned whether the requirement for non-local funders to put up security for costs addresses a key issue: that funders (or lawyers, where lawyers indemnify the class against adverse costs) should be able to demonstrate to the court that they have the financial capacity to meet an adverse costs order, whether they reside in Ontario or not.
“Woodsford would not like to see a situation where an under-capitalised Ontario-based funder or law firm is unable to meet such an order, even though they have acted within the requirements of the Act,” he said.
Lawyers at Torys LLP wrote in a memo that the overarching changes proposed for class actions “will be beneficial to defendants and potential defendants.”
“Other amendments, although not directly applicable to defendants, have the effect of restricting the options available to plaintiff counsel and thus of streamlining and potentially expediting the class proceedings process,” wrote W. Grant Worden, James Gotowiec and Patricia McMahon.
While many of bill 161’s changes follow reforms suggested this year by the Law Commission of Ontario, the Torys lawyers said that the government is also considering “changes to the certification test, were specifically considered and rejected by the LCO.”
One major change?
The rules suggest “a class proceeding is the preferable procedure ‘only if, at a minimum’ it is superior to all reasonably available means of determining the entitlement of the class to relief, and common questions of law or fact predominate over individual issues,” wrote Torys.
“This amendment runs contrary to the recommendations of the LCO, and substantially alters the preferable procedure test as most recently interpreted by the Supreme Court of Canada,” Torys’ lawyers added.
One of the other most significant changes, according to Torys, is the ability to bring a motion to dismiss a “dormant” class proceeding. In a press conference announcing the change, Downey mentioned a retail case that has been pending since the 1990s.
Some of the changes proposed by Downey — for example, that a party or class member may bring a motion prior to certification to determine whether an extra-provincial proceeding should be preferred to an Ontario one — run contrary to other provinces, said Torys. Other changes could align class action law in Ontario more closely with that of the United States.
“Whether this will be the result remains to be seen,” the Torys lawyers wrote.