CANADA Law and Practice Contributed by: Craig Ferris, Marko Vesely, Shannon Hayes and Catherine Whitehead, Lawson Lundell LLP
2. Litigation Funding 2.1 Third-Party Litigation Funding
Access to justice is a real concern in Canada. Com- mercial litigation may take anywhere from a few years to over a decade to resolve. 1.3 Court Filings and Proceedings The open court principle is a central feature of Cana- dian liberal democracy and is protected by the consti- tutionally entrenched right of freedom of expression. Generally, the public can attend hearings and review court files. The press is also free to inquire and com- ment on the workings of the courts. The Supreme Court of Canada has confirmed that this makes the justice system fair and accountable. Statutory protections exist for evidence or witnesses in certain criminal or family matters. The courts also have discretion to impose court access restrictions, including sealing documents, where openness pre- sents a serious risk to a competing interest of public importance. For commercial matters, the parties will most likely have to resort to common law and not statute. 1.4 Legal Representation in Court Individuals may be self-represented before every level of court. A corporation, however, cannot be self-rep- resented in court. The legal profession is regulated at the provincial lev- el. In the superior and appellate courts, only lawyers called within that provincial jurisdiction may appear before the courts. The law societies of numerous prov- inces have entered into mobility agreements that allow lawyers called in one province to appear on a limited basis in another, if they comply with the rules of that jurisdiction and the terms of their practice restrictions. For lawyers wanting to practice in any of the territo- ries, they must apply for membership with the law society of that territory. All lawyers called in any provincial or territorial juris- diction may appear in the federal courts and before the Supreme Court of Canada. Foreign-called lawyers cannot appear in any Canadian court as counsel of record.
Outside of class actions and insolvency, litigation funding is largely unregulated and a matter of contract between the party and the third-party funder. To avoid common law concerns with champerty and maintenance, the funder cannot “instigate” the liti- gation or through contractual terms become overly involved in the litigation. The class action legislation in some provinces requires court approval of third-party funding agreements with representative plaintiffs. The court will consider a variety of factors, such as whether the agreement is necessary to provide access to justice; whether the agreement is fair and reasonable; whether the agree- ment will diminish the rights of the representative plaintiff to instruct counsel or control the litigation; whether the funder is able to satisfy an adverse cost award to the extent that indemnity is provided; and the funder’s compensation and risk. The court may cap the amounts realised by the funder so that any combined compensation received by the funder and class counsel under a contingency agree- ment does not exceed the caps imposed by law for contingency fee arrangements. In the insolvency context, court approval of third- party funding that provides interim financing may be required. The factors that a court will consider are similar to those factors in the class action context. The terms of indemnification for adverse costs awards have been an important feature in court decisions. Obligations of confidentiality may also be imposed on the funders in these two circumstances. 2.2 Third-Party Funding: Lawsuits Third-party funding is available for all types of com- mercial litigation and arbitration. 2.3 Third-Party Funding for Plaintiff and Defendant Third-party funding is largely a matter of contract law in Canada. Currently, there is no legal rule preventing a defendant from obtaining third-party funding. How-
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