Third Party Litigation Funding: Identifying Opportunities and Challenges

Dr. Rupak SarmaGuest Author: Dr. Rupak Sarma, Third Party Litigation Funding Researcher

Canada has long faced systemic barriers in realizing access to justice. One such significant barrier is the cost of litigation, in terms of both a party’s own legal fees and disbursements, as well as exposure to adverse costs awards, which can put the pursuit of justice out of reach of most potential litigants. The advent of third party litigation funding, however, has brought hope that meritorious cases can be evaluated and pursued with outside financial assistance. Litigation funders can help to address the issues of both litigation and adverse costs. This is the case not just for individual litigants, but also for sophisticated corporate/commercial entities who view litigation funding as a risk allocation tool. However, the application of third party litigation funding presents its own legal, regulatory, and ethical issues, including protecting confidentiality and privilege, whether litigation funding ought to be disclosed to the court and to the defendant, and issues that arise from ancient common law doctrines that are concerned with improper interference in lawsuits.

Based on learnings from the UK, the US and Australia – where litigation funding is more developed – these issues are not fundamental roadblocks, but rather can be addressed by the application of common law, and regulation where appropriate.

For instance, case law has developed around the contexts in which litigation funding agreements must be disclosed. This arises particularly in insolvency and class proceedings, where courts have a unique supervisory function, and where specific common law and statutory rules now govern the application of third party funding.

In addition, in many jurisdictions, old common law doctrines have been relaxed to allow third parties to fund lawsuits so long as they are not acting for an improper purpose or exerting inappropriate control over the litigation, recognizing the commercial reality that many meritorious lawsuits may not be pursued without the availability of external funding.

As a result of these developments, third party funding is potentially available for use in many areas of civil litigation where a strong claim is coupled with the likelihood of a damages award. Indeed, specialized third party funders are already active in Canada in areas including class proceedings, intellectual property, commercial litigation, personal injury, and construction litigation.

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Dr. Rupak Sarma will be presenting at LESA’s upcoming Third Party Litigation Funding: Identifying Opportunities and Challenges – Webinar on January 21, 2022. Co-chaired by Glen M. Hickerson QC, Wilson Laycraft and M. Jenny McMordie QC, West End Legal Centre, this program will consider cutting-edge research on the viability of third-party litigation funding and examine the challenges associated with it. Registration is now open.

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