SCC ruling could force ‘seismic shift’ in legal landscape for litigation lenders

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 By Kirsten McMahon

A recent unanimous Supreme Court of Canada (SCC) decision that approved a litigation funding agreement outside of a formal plan of arrangement is “huge news” for the industry and “a significant step” for access to justice, says Larry Herscu, president of Easy Legal Finance Inc.

The oral decision in 9354-9186 Québec Inc. v. Callidus Capital Corporation, issued from the bench in late January, unanimously allowed the appeal with written reasons to follow.

“It will be interesting to read the written decision,” says Herscu, “but just the fact that the SCC reinstated the ruling of the Quebec Superior Court opens the door for more creative solutions for Canadians seeking financial support throughout the litigation process.”

The country’s highest court heard arguments for the first time relating to the important role of modern litigation funding in providing access to justice for parties, including those who are insolvent or bankrupt, reads a statement from Bentham IMF Capital Limited, the litigation funder at the heart of the matter.

The SCC restored the decision of Justice Jean-François Michaud, who approved a litigation funding agreement that the debtor had entered into with Bentham, enabling it to pursue a claim against a creditor.

The court-appointed monitor supported the funding arrangement, and the Insolvency Institute of Canada and the Canadian Association of Insolvency and Restructuring Professionals intervened in support of the appeal, states the press release.

Herscu says that what he finds most interesting is whether the SCC will provide more clarity and guidance around the rules and regulations surrounding litigation funding.

“This could set a huge precedent for access to justice — and it comes from the top court in the land,” he says, noting that third-party funding is well established in jurisdictions like the United Kingdom and Australia.

Herscu says a big part of Easy Legal’s business is offering financial support to those who have been hurt in an accident to help them pay bills while their lawyer fights for a fair settlement.

“I look forward to the written decision, but I’m curious to see if the court will get into how the cost of litigation to defend yourself is growing exponentially, to the point where it is virtually impossible to have access to justice without support,” he says.

Herscu predicts this decision will create a buzz in the litigation funding community because this is the first time Canada’s top court has heard a case concerning legal funding in any context.

“I think this should be of interest to all litigation funders — no matter whether they assist individual plaintiffs or corporate clients,” he says. “This could force a seismic shift in Canada’s legal landscape.”

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