Public Financiers as Overseers of Class Proceedings

In this paper, I will discuss Canadian class litigation funding by way of comparison to the American system and to various proposals for reform. I will argue that Quebec’s provincial government assistance fund is most effective as a funding mechanism and as an oversight body, and could serve as a model for reform of other legal systems.

In the past decades, the volume of class action litigation has steadily risen in Canada, such that significant amounts of capital are required to prosecute these actions, provide access to justice, and coincidently, reduce the funding gap between plaintiffs and defendants. The funding issue is thus fundamental; it also threatens, however, some of the core values of our system such as client confidentiality and the preservation of solicitor-client privilege, and the duty of counsel to avoid conflicts of interest and to remain independent. Accordingly, despite its increasing popularity, third party litigation funding by private entities remains a secretive and controversial phenomenon. There is a legitimate concern that without regulation, such funding may subvert the public policy purposes of the class action.

Quebec has the longest history of class action funding in Canada. The Quebec system managed by the Fonds d’aide aux recours collectifs has made 776 decisions on applications for funding over the past ten years, and granted funding in more than one third of these cases. The Fonds can assist with both legal fees and disbursements and is well capitalized with yearly provincial subsidies and warranties from the provincial government which guarantee payment of capital and interest of any loan or other financial commitment made. Importantly, it also retains a percentage of any recovery made in every class action, a right that applies to every action, not simply those in which funding was provided. Given this feature, as well as the potential ongoing legal fee support supporting class counsel’s cash flow, there is a real incentive to apply for funding.

The mandate of the Fonds is to help finance class action litigation in first instance or on appeal, and to publish information on the filing of class action suits. Its mandate, however, could be easily redefined such as to include a specific oversight mechanism of the class action litigation which would avoid the potential pitfalls and ethical risks of such funding, while ensuring that the class action objectives are furthered.

This content has been updated on September 17, 2015 at 3:09 pm.