SCC Addresses Third Party Litigation Funding

On January 23, 2020, the Supreme Court of Canada unanimously granted the appeal in 9354-9186 Quebec Inc v Callidus Capital Corp., one of the first cases raising the issue of third party litigation funding at the Supreme Court of Canada. The unanimous Court allowed the appeal from the Quebec Court of Appeal’s decision, issuing its judgment from the bench with reasons to follow, another new trend coming out of Canada’s highest court. For a long time champerty was a crime in Canada, and these types of third party funding agreements were illegal. It was considered champterous for a third party to finance a lawsuit that it had no interest in, and in return receive a portion of the party’s winnings. In 1953, champerty was not included as a crime in the Criminal Code and thus began the rise of third party funding agreements in Canada. In the case of 9354-9186 Quebec Inc v Callidus Capital Corp., this was an insolvency dispute in a Companies’ Creditors Arrangement Act proceeding. At issue was whether the debtor was required to obtain creditor approval for the litigation funding agreement. By granting the appeal, the Supreme Court of Canada restored the decision of the Quebec Superior Court Judge, Justice Jean-Francois Michaud, which approved the litigation funding agreement that the debtor had entered into with Bentham IMF.

While we have seen the beginning of the more wide spread use of third party litigation funding in the class actions context, this is an important case on the use of litigation funding in insolvency proceedings. Notably, this will be the first time the Supreme Court of Canada comments on third party litigation funding. The highly anticipated written reasons to follow in the coming months will be an important guide for lawyers considering third party funding agreements in all types of proceedings.