Canadian Lawyer

June 2020

The most widely read magazine for Canadian lawyers

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Page 9 of 51

UPFRONT 8 OTTAWA UPDATE IN A WIN for third-party litigation funding, the Supreme Court of Canada has released its reasons in a decision from the bench on Jan. 23 that approved litigation funding allowing an insolvent company to sue one of its creditors. "This is validation from the Supreme Court," says Paul Rand, chief investment offi- cer, Canada at Omni Bridgeway. Bentham IMF, which merged with Omni Bridgeway last year, was the litigation funder and an intervenor in the case. "Litigation funding, when done properly, is an important and viable tool. So, in insol- vencies, it gives a big green light to litigation funding in Canada." The decision in 9354-9186 Québec inc. v. Callidus Capital Corp. marks the first time Canada's top court has dealt with third-party litigation funding. The dispute in the case concerned Quebec- SCC gives 'green light' to litigation funding now attempting to override that result. The Quebec Court of Appeal overturned that decision, finding the funding at issue was "a type of equity investment," an agree- ment requiring a vote, and that the funder was seeking to cut in front of creditors to take a slice of the company, says Jeremy Opolsky, a partner in Torys LLP's litigation and dis- pute resolution practice in Toronto. The Supreme Court found the Court of Appeal did not afford the appropriate defer- ence to supervising judge Michaud and that, in many cases, litigation funding qualifies as interim financing under the CCAA. The court found that litigation funding serves the twin purposes of the CCAA: to keep companies in business and to maximize creditor recovery. "[I]nsofar as third-party litigation fund- ing agreements are not per se illegal, there is no principled basis upon which to restrict supervising judges from approving such agreements as interim financing in appro- priate cases," wrote Chief Justice Richard Wagner and Justice Michael Moldaver for a unanimous court. Supreme Court of Canada rules judges may approve interim financing from third parties to fund lawsuits based gaming company Bluberi and the debt it owed creditors, including secured credi- tor Callidus Capital. Under the Companies' Creditors Arrangement Act regime, Callidus put forward a plan of arrangement in which Bluberi relinquished the right to sue Callidus. But Callidus's plan fell short of the CCAA requirement of approval of a majority of creditors representing two-thirds of the value owed. Callidus declined to vote. Bluberi then undertook a third-party litiga- tion funding agreement to sue Callidus and asked the supervising judge, Quebec Superior Court Justice Jean-François Michaud, to approve the agreement as interim financing. Callidus objected, saying the funding consti- tuted a plan of arrangement and required a vote from creditors. Callidus put forward a new plan, but Michaud found the company was acting with "improper purpose" as it had relin- quished its voting opportunity initially and was NEWS BRIEFS COVID-19 action committee on court operations created Chief Justice of Canada Richard Wagner and Minister of Justice David Lametti announced the creation of an Action Committee on Court Operations in Response to COVID-19 on May 8. The Action Committee, which held its first meeting that same day by teleconference, will provide national leadership to support the work of provincial and territorial governments, individual courts and court administrators in restoring the full operation of courts while ensuring the safety of court users and staff. Competition Bureau cracks down on COVID-19 claims In May, the Competition Bureau warned businesses against making false or misleading claims that their products and services could prevent, treat or cure COVID-19. It issued direct compliance warnings to businesses across Canada to stop potentially deceptive claims that could give Canadians a false impression that products or services can treat COVID-19 infections or protect against it, including claims that herbal or natural remedies or other food or drinks can prevent COVID-19. "Litigation funding is something more companies are looking at as being applicable to them." Paul Rand, Omni Bridgeway

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