Fehr v. Sun Life Assurance Company of Canada 2012 ONSC 2715 ...

CITATION: Fehr v. Sun Life Assurance Company of Canada 2012 ONSC 2715COURT FILE NO.: 10-CV-411183 CPDATE: May 7, 2012BETWEEN:ONTARIOSUPERIOR COURT OF JUSTICEEldon Fehr, Angela Watters, Gaetan Laurier, Leslie Michael Lucas and Joseph (YungYub) Kang- and -Plaintiffs2012 ONSC 2715 (CanLII)Sun Life Assurance Company of CanadaDefendantProceeding under the Class Proceedings Act, 1992COUNSEL:• Won J. Kim, Victoria Paris, and Megan B. McPhee for the Plaintiffs• F. Paul Morrison, Glynnis P. Burt, and Heather L. Meredith for the Defendant• Ward K. Branch for Bridgepoint Global Litigation Services Inc.HEARING DATE: April 20, 2012PERELL, J.A. INTRODUCTIONREASONS FOR DECISION[1] This motion explores the largely still unexplored legal territory of third partyfunding of Ontario class proceedings. If a premise of the moving party’s argument iscorrect, then the outcome of this motion for directions about the procedure for a fundingmotion will have profound chilling effects on the viability and availability of classactions in Ontario.[2] The Plaintiffs, Eldon Fehr, Angela Watters, Gaetan Laurier, Leslie MichaelLucas, and Joseph Kang are purchasers of life insurance policies. In a proposed Davidv. Goliath type class action, the Plaintiffs sue Sun Life Assurance Company of Canada(“Sun Life”) for $2.5 billion for negligent misrepresentation. Relying on rule 37.07(2)of the Rules of Civil Procedure, which provides that “where the nature of the motion orthe circumstances render service of the motion impracticable or unnecessary, the court

2may make an order without notice,” the Plaintiffs seek orders: (a) that a motion forapproval of a third party financing and indemnity agreement be heard without notice toSun Life; (b) that the hearing of the motion be closed to the public; and (c) that thedocuments for the motion be sealed.[3] The Plaintiffs submit that the third party funding agreement discloses elementsof the their litigation strategy and that the agreement was negotiated confidentially andis privileged. The Plaintiffs submit that the funding agreement is part of the retainerwith their lawyers, Kim Orr Barristers P.C. and that disclosure of the funding agreementwould reveal confidential and sensitive information regarding the legal advice andlitigation strategy. They say disclosure could reveal the resources available to prosecutethe action and the tolerance to risk of the Plaintiff and revealing this information to SunLife would provide it with a tactical advantage in the litigation.[4] Most potently, they submit open court disclosure of the agreement wouldimperil solicitor-client privilege and litigation privilege which, if not protected, wouldadversely affect access to justice for the class, risk a fair trial, and harm theadministration of justice. They submit that solicitor-client privilege is an interest of suchimportance to override the open court principle.[5] Further, the Plaintiffs submit that Sun Life will not be prejudiced by an incamera hearing and any public interest engaged in disclosure of the funding agreementis outweighed by the possible deleterious effects to the Plaintiffs’ and Class Members’privilege and access to justice. The Plaintiffs submit that it is in their best interests andof putative class members to have Sun Life excluded from the hearing of the motion andto keep the terms of the funding agreement secret and disclosed only to the court but notthe public and the Defendant.[6] Sun Life opposes the motion, and it asks that it be permitted to participate in thePlaintiffs’ funding motion. I will describe its arguments below.[7] I agree with Sun Life’s arguments, and for those reasons and for my ownreasons, set out below, I dismiss this motion - but with directions.[8] As I will explain, in the context of a class proceeding, the terms of ClassCounsel’s retainer agreement and any associated third party funding agreement are notprivileged in law and ought not to be regarded as privileged as a matter of public policy.Further, in my opinion, in any event, if the retainer agreement and any associated thirdparty agreement were privileged, then the privilege is waived when the plaintiff’slawyer applies, as he or she must apply, for approval of a fee agreement that involves acontingency fee or third party funding agreement. Thus, the importance of protecting2012 ONSC 2715 (CanLII)

3solicitor-client privilege does not justify an in camera ex parte-hearing and the sealingof the third party funding agreement.[9] Further, in my opinion, Sun Life is “affected” by the application for approval forthird-party funding and it has a right to disclosure of the third party funding agreementand a right to be heard on the motion for its approval.[10] In the context of an adversarial system of justice, the defendant’s opposition orsupport for the third party funding agreement will provide the Court with informationuseful to the determination of whether to approve the third party funding agreement andthe defendant’s participation may obviate the need to appoint an amicus to fill anadversarial void in the approval process.[11] That all said, in my opinion, special procedural rules for a motion for approvalof a third party agreement motion do need to be developed but not the in cameraprocedure suggested by the Plaintiffs. For instances, there should be no automatic rightto cross-examine and if leave is granted to cross-examine, then the scope of the crossexaminationshould be prescribed before the cross-examination begins.[12] Best practices also need to be developed. Third-party agreements ought not todisclose information about the plaintiff’s lawyer’s views about the strengths orweaknesses of his or her client’s proposed class action.2012 ONSC 2715 (CanLII)B. METHODOLOGY[13] In order to explain my reasons for dismissing the Plaintiffs’ motion, it isnecessary to discuss a diverse set of legal topics and also a little about the economictheory behind the access to justice provided by class actions.[14] I have organized these Reasons for Decision under the following headings:• Introduction• Methodology• Factual and Evidentiary Background• The Economic Theory behind the Access to Justice of Class Actions.• The Current Law about Litigation Funding• Analysiso Introductiono Notice

4o Third Party Funding Agreements and Solicitor- Client Privilegeo The Open Court Principle• Procedure for a Third Party Funding Motion• ConclusionC. FACTUAL AND EVIDENTIARY BACKGROUND[15] The proposed third party funder, Bridgepoint Global Litigation Services Inc.(“Bridgepoint”) appeared on the return of this motion. It did not file any material.[16] In support of their motion, the Plaintiffs relied on an affidavit from NormanMizobuchi, who is an associate with Kim Orr practicing in class actions and complexcommercial litigation.[17] In opposing the motion, Sun Life relied on an affidavit from Susan Kraker, whois an assistant at McCarthy Tétrault, LLP, which is Sun Life’s lawyer of record,; Ms.Kraker disclosed some correspondence that passed between the lawyers for the parties.[18] Although Sun Life objected, the evidence provided by the Plaintiffs through Mr.Mizobuchi’s affidavit was supplemented by some factual submissions made during Mr.Kim’s argument. I will accept these factual submissions as established. Since I will bedismissing the motion, I see no harm to Sun Life in allowing the Plaintiffs to fill a fewholes in the evidence for their motion.[19] I, therefore, accept that the Plaintiffs are of modest means and the value of theirindividual claims are small and that it would financially suicidal for any of the Plaintiffsto pursue their claims and expose their limited assets to any adverse costs award of anunsuccessful action against Sun Life.[20] I accept that the Plaintiffs were prepared to pursue their own claims and theclaims of the putative class of other policyholders only if they obtained twocommitments from Kim Orr; namely: (1) that the firm would take on the case on acontingent fee basis; and (2) the Plaintiffs would be indemnified, i.e. held harmless, ifthey were obliged to pay a costs award to Sun Life.[21] The Plaintiffs obtained both commitments from Kim Orr conditional upon theCourt approving the third party funding agreement provided by Bridgepoint, whichrevealed itself as the proposed third party funder at the hearing of the motion.[22] The details of the funding agreement have not been disclosed.[23] The Plaintiffs fear of an adverse costs award is no figment of their imagination.Plaintiffs in Ontario class actions are exposed to costs awards and class actions are2012 ONSC 2715 (CanLII)

5notoriously high stakes and high costs proceedings. Ontario is a “loser-pays”jurisdiction. Although it is early days in this action, there is no doubt that it will be hardfought and costly. There already has been a pleadings motion; the Plaintiffs were thelosers and costs of $73,645.02 were awarded against them on a partial indemnity scalein any event of the cause. (The decision is currently under appeal.) Sun Life hadclaimed $219,896.36 for the costs of the pleadings motion.[24] The Plaintiffs have a written retainer agreement with Kim Orr Barristers P.C.,and the Plaintiffs have entered into a conditional agreement with Bridgepoint, a thirdparty funder, for the purposes of financing the litigation or protecting the Plaintiffs fromthe risk of an adverse costs liability. The funding agreement is conditional upon courtapproval.[25] I accept that the proposed agreement, which I have yet to see, is an agreementbetween Bridgepoint and the Plaintiffs but a chief beneficiary of the agreement is KimOrr, because, practically speaking, the funding agreement protects the law firm in theevent it was called upon on to indemnify the Plaintiffs for an adverse costs awardpayable to Sun Life.[26] For the purposes of this motion, I accept that although the Plaintiffs did notpursue third party funding before they commenced this action, if third party funding isnot obtained, Kim Orr will not agree to indemnify the Plaintiffs, and the law firm andthe Plaintiffs may abandon their proposed class action against Sun Life.[27] I accept that Kim Orr exercised due diligence and “shopped around” for a thirdparty funder. The negotiations with Bridgepoint were arms-length and difficult.[28] The Plaintiffs argue that the commercial interests of the third party funder wouldbe adversely affected if the terms of the agreement are disclosed because its businessdepends upon its ability to negotiate confidential terms with each of its clients.[29] Although it is more argument than evidence, the Plaintiffs say that the thirdparty funding agreement was negotiated for the purposes of this litigation and that it isprotected by solicitor-client privilege, litigation privilege, and common interestprivilege.[30] The Plaintiffs argue that third party funding agreements “assist in leveling theplaying field between plaintiffs and defendants in class proceedings, thereby providingaccess to justice.” They say that as persons seeking access to justice, they are confrontedwith a far more financially resourced opponent. They argue that the third party fundingagreement will make it possible for lawyers to assume the risks and costs of high stakeslitigation.2012 ONSC 2715 (CanLII)

6[31] The Plaintiffs say that if they are obliged to disclose their retainer agreement andthe third party funding agreement, they will reassess whether to proceed with a motionfor court approval of the third party funding agreement. The inference is that if they losethis motion for an in camera hearing then they may not proceed with their motion forapproval of the third party funding and they may abandon the proposed class action thatwould provide access to justice for the thousands of class members.[32] The Class Proceedings Fund is an alternative source of funding but the Plaintiffsdid not apply for funding from the Class Proceedings Fund.[33] The Class Proceedings Fund was not given notice of this motion and did notparticipate in the motion.[34] The Defendant did not submit any evidence for this motion. Both partiesprovided helpful factums and helpful legal argument during the hearing of the motion.2012 ONSC 2715 (CanLII)D. THE ECONOMIC THEORY BEHIND THE ACCESS TO JUSTICE OF CLASSACTIONS[35] Doctorial thesis, law reform commission reports, and legal texts and articles ofconsiderable length have been written to explain the public policy and economic theorybehind class actions. For present purposes, it is sufficient to summarize some of thetheory as follows.[36] The theory of class actions begins with the notion of wrongdoing suffered by anidentifiable group of individuals where it would be improvident for the members of thegroup (the class members) to obtain access to justice. The case at bar provides anexample of an alleged wrongdoing affecting a group of purchasers of insurance policies,but the types of groups affected by wrongdoing are diverse, including stock purchasers,condominium unit purchasers, tenants, owners of environmentally contaminatedproperties, patients, passengers, vacationers, consumers, contractors, distributors,franchisees, employees, and ratepayers.[37] A defendant that harms many should not be able to get away with it, and thosewho suffer should have access to justice for the injuries they suffer. Thus, it is bothnecessary and just that the substantive law and procedural law should have a means torespond to wrongdoing harming many. From the perspective of the substantive law,with some exceptions and sometimes with the assistance of statutes and with theprospect of incremental growth, the common law and equity do have the means and areadequate to respond to wrongdoing affecting many persons.[38] From the perspective of procedural law, there is, however, a problem. From thisperspective, the normal rules of civil procedure do not provide an economically feasible

7means to litigate group claims because the normal rules of procedure do not respond tothe economics of litigation that make the prosecution of these claims uneconomic andprohibitively expensive for plaintiffs. The normal rules of procedure also havedifficulties administering the multiplicity of proceedings that is or could be theaftermath of a wrong inflicted on a group of individual similarly-affected claimants.[39] Class action legislation, like Ontario’s Class Proceedings Act, 1992, is designedto overcome the economic barriers to access to justice and to provide the proceduralmeans to litigate mass claims. In doing so, class actions are said to have three publicpolicy goals associated with litigating mass wrongdoings; namely: (1) access to justicefor numerous claimants; (2) judicial economy so that courts can adjudicate numerousclaims fairly and efficiently; and (3) behaviour modification, so that wrongdoers may bebrought to the seat of justice and other potential wrongdoers may be deterred fromsimilar wrongdoing.[40] To be more expansive about the public policy goals, class actions are designedto provide access to justice because they provide a procedural means for individuals tolitigate claims on behalf of a group. They provide judicial economy because by allowingan individual to represent the group’s claim through the mechanism of a class action, amultiplicity of proceedings is avoided as is the embarrassment of possible inconsistentresults in multiple proceedings about the same alleged wrongdoing. Class actionsprovide behaviour modification because defendants learn not to think they can commitwrongs harming many and get away with it simply because no individual claimantcould afford to pursue justice for himself or herself, let alone for a group of similarclaimants. Class actions also have a deterrent effect and their mere possibilitydiscourages wrongdoing.[41] It must, however, not be forgotten that the public policy goals of class actionsmust be achieved without sacrificing the due process rights of the defendant who maybe innocent of wrongdoing.[42] There are at least three economic barriers that confront a group or class that hasbeen harmed by a wrongdoer. First, the economics of litigation (economies of scale andefficiency) favour the defendant and not the claimant. Second, there is the cost ofobtaining legal services to prosecute the claim. Third, there is the claimant’s exposure toan adverse costs award payable to the defendant. Class action legislation is designed, inpart, to overcome these three economic barriers access to justice for members of agroup.[43] By aggregating the group members’ claims, a class action is designed to balancethe litigation efficiencies that normally favour the defendant. For example, where adefendant harms many, the harm caused by the defendants to each member of the group2012 ONSC 2715 (CanLII)

8may be small or even trifling, but in the aggregate, the extent of the harm caused may beenormous.[44] For example, if a class had a million members and each individual class membersuffered a loss of $100, then the aggregate loss or unjust enrichment inflicted by thedefendant would be $100 million. For individual plaintiffs, however, it makes noeconomic sense to invest any money to pursue a $100 claim. In contrast, the defendant’sinvestment in mounting a defence to one claimant's case has utility for resisting otherclaimants' cases.[45] Moreover, without a class proceeding, a plaintiff's investment in his or herlitigation has no additional economic utility because it cannot be shared by the nextclaimant. These phenomena are discussed by Craig Jones in Theory of Class Actions(Toronto: Irwin Law, 2003) at pp. 22-24, where he states:In the "traditional" or individualistic legal regime, a tort action may be viewed asconnecting the tortfeasor on one hand and its victim on the other. In a mass tort, bycomparison, the tortfeasor lies at the hub of the actions which might be seen to radiate fromthe decisions made at the centre. Viewed in this way, it is not difficult to see how theeconomy of scale in a dispute resolution process will naturally favour the defendant whocan reuse the work product involved in the defence of issues common to all claims. Not sothe numerous plaintiffs, who must begin anew with each new case, even on the commonissues. This dichotomy is at the heart of mass tort -- the defendant has mass-produced thewrong; the plaintiffs suffer the harm and bear the costs individually. This "structuralasymmetry" has been called a systemic bias in favour of defendants ...2012 ONSC 2715 (CanLII)It is not difficult to foresee the results of structural asymmetry in the individual litigation ofmass torts. Mass tort defendants will tend to overspend on litigation in individual suitsbecause their economy of scale permits them to invest in each initial claim an amount fargreater than the claim is worth; this strategy makes success more likely in the early suits,compounding the advantage in the aggregate. Faced with such unequal litigation power,suits are discouraged or settled for too little, and confidentiality agreements extracted bydefendants at the time of settlement may preclude "free riders" from taking full advantageof the work that has been done before, while the defendant is free to do so.[46] At page 25, Mr. Jones adds:For these reasons, mass tort theorists increasingly accept that a fundamental -- some wouldsay the only fundamental reason -- for aggregating litigation is to redress the imbalancebetween mass tort defendants and plaintiffs, to "level the playing field" so that plaintiffs canenjoy the economies of scale that defendants have always exploited, and thereby increasetheir recovery.[47] For present purposes, I need not say more about about the first economic barrier,because it is the second and third economic barriers to access to justice that are relevantto the outcome of this motion and to the funding motion that may follow.[48] The availability of contingency fee agreements and the court’s supervision oflawyers’ fees address the second economic barrier confronting a group pursuing access

9to justice. The relevant provisions of the Class Proceedings Act, 1992, about fees,disbursements, and retainer agreements are sections 32 and 33, which state:Fees and disbursements32. (1) An agreement respecting fees and disbursements between a solicitor and arepresentative party shall be in writing and shall,(a) state the terms under which fees and disbursements shall be paid;(b) give an estimate of the expected fee, whether contingent on success in the classproceeding or not; and(c) state the method by which payment is to be made, whether by lump sum, salaryor otherwise.Court to approve agreements2012 ONSC 2715 (CanLII)(2) An agreement respecting fees and disbursements between a solicitor and arepresentative party is not enforceable unless approved by the court, on the motion of thesolicitor.Priority of amounts owed under approved agreement(3) Amounts owing under an enforceable agreement are a first charge on any settlementfunds or monetary award.Determination of fees where agreement not approved(4) If an agreement is not approved by the court, the court may,(a) determine the amount owing to the solicitor in respect of fees and disbursements;(b) direct a reference under the rules of court to determine the amount owing; or(c) direct that the amount owing be determined in any other manner.Agreements for payment only in the event of success33. (1) Despite the Solicitors Act and An Act Respecting Champerty, being chapter 327 ofRevised Statutes of Ontario, 1897, a solicitor and a representative party may enter into awritten agreement providing for payment of fees and disbursements only in the event ofsuccess in a class proceeding.Interpretation: success in a proceeding(2) For the purpose of subsection (1), success in a class proceeding includes,Definitions(a) a judgment on common issues in favour of some or all class members; and(b) a settlement that benefits one or more class members.(3) For the purposes of subsections (4) to (7),

10“base fee” means the result of multiplying the total number of hours worked by an hourlyrate; (“honoraires de base”)“multiplier” means a multiple to be applied to a base fee. (“multiplicateur”)Agreements to increase fees by a multiplier(4) An agreement under subsection (1) may permit the solicitor to make a motion to thecourt to have his or her fees increased by a multiplier.Motion to increase fee by a multiplier(5) A motion under subsection (4) shall be heard by a judge who has,(a) given judgment on common issues in favour of some or all class members; or(b) approved a settlement that benefits any class member.2012 ONSC 2715 (CanLII)Idem(6) Where the judge referred to in subsection (5) is unavailable for any reason, the regionalsenior judge shall assign another judge of the court for the purpose.Idem(7) On the motion of a solicitor who has entered into an agreement under subsection (4), thecourt,Idem(a) shall determine the amount of the solicitor’s base fee;(b) may apply a multiplier to the base fee that results in fair and reasonablecompensation to the solicitor for the risk incurred in undertaking and continuing theproceeding under an agreement for payment only in the event of success; and(c) shall determine the amount of disbursements to which the solicitor is entitled,including interest calculated on the disbursements incurred, as totalled at the end ofeach six-month period following the date of the agreement.(8) In making a determination under clause (7) (a), the court shall allow only a reasonablefee.Idem(9) In making a determination under clause (7) (b), the court may consider the manner inwhich the solicitor conducted the proceeding.[49] In Ontario, the Class Proceedings Act, 1992, authorizes contingency feeagreements for class actions, and the Act requires court approval for fee agreements orthe judicial review of Class Counsel’s fees and disbursements. The policy idea ofencouraging access to justice by allowing contingency fees and of approving ordetermining lawyer’s fees is simple enough, but it has profound implications to theadministration of justice and to the nature of the relationship between a lawyer and his

11or her client, particularly the ethical and professional duties of the lawyer, including theduties of loyalty and (as this decision will reveal) the duties of keeping confidences andof not disclosing privileged information.[50] In exchange for not charging a fee and for assuming the expense of thedisbursements should the client’s claim fail, the class action lawyer obtains a share ofthe recovery should the client’s claim succeed. The risks and rewards for the lawyerbrave enough to take on the retainer are enormous. To use the above example of a $100million aggregate claim, even without accounting for a liability for an adverse costsaward, a failure in the class proceeding might bankrupt the law firm, while a successcould be worth $30 to $40 million in revenues and reimbursements for the law firm.[51] For present purposes, the point to note is that the Legislature has decided thataccess to justice can be promoted by means of entrepreneurial lawyers taking on therisks of group litigation in exchange for a share in the claimant’s recovery.[52] This brings the discussion to the third economic barrier to access to justice. Toreturn to the example, it would be insane for a claimant with a $100 claim to take on therisk of paying a successful defendant its costs of defending a $100 million aggregateclaim. Thus, a class action regime must address the barrier of the representativeplaintiff’s exposure to costs.[53] I am aware of five means to address the third economic barrier to access tojustice caused by the prospect that a representative plaintiff could be liable for anadverse costs award payable to the defendant: (1) self-help fund raising; (2) a no-costsregime; (3) funding from the Law Foundation of Ontario; (4) indemnity agreementsfrom Class Counsel; and (5) third party funding agreements.[54] Commenting briefly about the five alternatives, in the past, self-help fund raisingwas used by public interest litigants who would select a representative plaintiff and raisefunds to pay for his or her legal fees and exposure to costs awards. This method tocircumvent the second and the third economic barriers to class action litigation is stillavailable in Ontario.[55] A no-costs regime, the most direct means to address the economic barrier causedby an adverse costs award, is not available in Ontario. The Class Proceedings Act, 1992,addresses costs in section 31 of the Act, which states:Costs2012 ONSC 2715 (CanLII)31. (1) In exercising its discretion with respect to costs under subsection 131 (1) of theCourts of Justice Act, the court may consider whether the class proceeding was a test case,raised a novel point of law or involved a matter of public interest.

12Liability of class members for costs(2) Class members, other than the representative party, are not liable for costs except withrespect to the determination of their own individual claims.Small claims(3) Where an individual claim under section 24 or 25 is within the monetary jurisdiction ofthe Small Claims Court where the class proceeding was commenced, costs related to theclaim shall be assessed as if the claim had been determined by the Small Claims Court.[56] Against the recommendation of the Ontario Law Reform Commission, but withthe recommendation of the Attorney General’s Advisory Committee on Class ActionsReform (Report, February 1990), the Legislature rejected a no-costs regime forOntario. The normal “loser pays costs” regime applies. Under s. 31, the ClassProceedings Act, 1992, however, encourages the court to consider whether the classproceeding was a test case, raised a novel point of law or involved a matter of publicinterest, in which circumstances, the court has the discretion to order that there be nocosts awarded to a successful defendant.[57] Instead of employing a no-costs regime, the Ontario Legislature responded to theproblem of the third economic barrier by introducing funding from the ClassProceedings Fund of the Law Foundation of Ontario. (I note here that Sun Life arguesthat the creation of the Fund indicates a policy choice to preclude third party funding. Ialso note that there are arguments to the contrary.)[58] The Law Foundation is established under s. 53 of the Law Society Act, R.S.O.1990, c. L.8. Among its functions is the administration of the Class Proceedings Fund,which, in turn, was established by the Legislature as part of the class proceedingsregime introduced by the Class Proceedings Act, 1992.[59] A representative plaintiff may apply to the Law Foundation to ask that the Fundbe responsible for the disbursements of an action, and if the Class ProceedingsCommittee of the Law Foundation agrees to provide this funding, then the LawFoundation becomes liable for the defendant's costs in the proceeding should thedefendant be entitled to costs and should the defendant apply to the Foundation forpayment of them. A defendant who is entitled to make an application may not recoverany part of the costs award from the plaintiff: Law Society Act, s. 59.4(3); Garland v.Consumers Gas, [2004] 1 S.C.R. 629.[60] In determining whether to provide support and thus shield the representativeplaintiff from costs and expose itself to a corresponding liability, the Class ProceedingsCommittee is directed by the Law Society Act and the related regulations to have regardto: (a) the merits of the plaintiff's case; (b) whether the plaintiff has made reasonable2012 ONSC 2715 (CanLII)

13efforts to raise funds from other sources; (c) whether the plaintiff has a clear andreasonable proposal for the use of any funds awarded; (d) whether the plaintiff hasappropriate financial controls to ensure that any funds awarded are spent for thepurposes of the award; (e) any other matter that the Committee considers relevant; (f)the extent to which the issues in the proceeding affect the public interest; (g) thelikelihood that the proceeding will be certified; and (h) the available money in the fund.See: Law Society Act, ss. 59.2-59.3; Ont. Reg. 772/92. s. 5.[61] Pursuant to rule 12.04 of the Rules of Civil Procedure, the Law Foundation has aright to make submissions in class proceedings in which the plaintiff has receivedfinancial support from the Foundation's Class Proceedings Fund.[62] If the representative plaintiff’s class action succeeds, then pursuant to Ont. Reg.771/92, there is a levy payable to the Class Proceedings Fund equal to the sum of theamount of any financial support paid for disbursements and 10 per cent of the amount ofthe award or settlement funds to which one or more persons in the class is entitled.[63] I have little information about the success rate for applications for funding fromthe Class Proceedings Fund or about the percentage of class actions supported byfunding from the Fund. In his judgment in Dugal, Justice Strathy noted that from 1992until June 30, 2010, the Committee received 96 applications for funding. (Ninety-sixclass actions would be a small percentage of the class actions commenced in Ontario.)Of those applications, 52 had been approved for funding, 28 had been denied ordeferred and 16 had been withdrawn.[64] The conventional wisdom is that a request for funding from the Fund is madeonly in a minority of cases. In the majority of cases, where funding is not sought orwhere funding is refused by the Committee, Class Counsel provide indemnities to therepresentative plaintiffs.[65] An indemnity agreement from Class Counsel is the fourth means to address theeconomic barrier of an adverse costs award. That Class Counsel will agree to indemnifythe representative plaintiff is now openly known, and this circumstance is typicallydisclosed when Class Counsel applies for court approval of their fees. Anecdotalevidence suggests that indemnity agreements are more popular than resorting to theClass Proceedings Fund.[66] In the case at bar, no application has been made to the Class Proceedings Fund,and Kim Orr has conditionally agreed to indemnify the Plaintiffs for their potentialexposure to an adverse costs award. These circumstances segue to the fifth means toaddress an economic barrier to a class action, i.e. third party funding.2012 ONSC 2715 (CanLII)

14[67] The Plaintiffs and Class Counsel seek the support of third party funding. Themotion now before the court is a prelude to a request by the Plaintiffs to approve theirthird party funding agreement with Bridgepoint.[68] Third party funding agreements are a recent phenomenon in Ontario and acrossthe world. I will have more to say about third party funding in the next section of theseReasons.E. THE CURRENT LAW ABOUT LITIGATION FUNDING[69] The law about the funding of litigation has an ancient history going backcenturies, during which it was a crime and a civil wrong for a third party to officiouslyintermeddle with somebody else’s litigation. On the civil law side, the torts are knownas champerty and maintenance.[70] In Buday v. Locator of Missing Heirs Inc., (1993), 16 O.R. (3d) 257 at pp. 262-63 (C.A.), quoting Halsbury (9 Hals, 4th ed. (1974), para. 400, p. 272), the Court ofAppeal described the nature of the torts as follows:Maintenance may be defined as the giving of assistance or encouragement to one of theparties to litigation by a person who has neither an interest in the litigation nor any othermotive recognized by the law as justifying his interference. Champerty is a particular kindof maintenance, namely maintenance of an action in consideration of a promise to give themaintainer a share in the proceeds or subject matter of the action.2012 ONSC 2715 (CanLII)[71] In particular, the old law frowned on a bystander obtaining a share of somebodyelse’s litigation, which is the tort of champerty. Champerty is a subset of the larger tortof maintenance. Thus, contingent fee agreements, where a lawyer would agree not tocharge for his or her services in exchange for a share of a successful outcome, wereonce regarded as categorically illegal and unenforceable as champerty. In Ontario, thelaw of champerty and maintenance still apply under the An Act Respecting Champerty,R.S.O. 1897, c. 327, s. 1.[72] The elements of a claim of champerty are: (1) the defendant for an impropermotive (officious intermeddling) provides assistance to a litigant in a lawsuit against theplaintiff; (2) the defendant has no personal interest in the lawsuit; (3) the defendant’sassistance to one of the litigants is without justification or excuse; and, (4) the defendantshares in the spoils of the litigation: Smythers v. Armstrong (1989), 67 O.R. (2d) 753(H.C.J.); Trendex Trading v. Credit Suisse, [1982] A.C. 679 (H.L.); Oseco Inc. v.Jansen (1989), 71 O.R. (2d) 151 (H.C.J.); George Biro Real Estate Ltd. v. Sheldon,[1965] 1 O.R. 49 (H.C.J.).[73] It took centuries, but public policy changed, and in a progression that is stilltaking place around the common law world, the law developed so that supporting

15another’s litigation was not categorically illegal and, thus, contingency fees and thirdparty funding of litigation became a possibility. The saving grace of assisting another inlitigation is that the assistance might be the only means for the other to achieve access tojustice.[74] The law about third party funding differs from jurisdiction to jurisdictionbecause the underlying law about champerty and maintenance varies from jurisdictionto jurisdiction, and different jurisdictions take different approaches to the legality of athird party providing financial support for another’s litigation.[75] Before going on to describe the current state of the law in Ontario, it is worthemphasizing that the law is different from the current law in Australia, the UnitedStates, and England, which all are in various stages of law reform.[76] In particular, Ontario is unique in providing the assistance of the ClassProceedings Fund. It is also important to note that third party funding of another’slitigation can take a variety of forms. Variants of third party funding include, nonrecourseloans to the litigants with the principal and interest payable from a judgment orsettlement, recourse or non-recourse loans to the litigants or their lawyers with a shareof the judgment or the settlement as security for the loan; financial grants in return for ashare of the proceeds of a judgment or settlement; litigation insurance; legal aid-typearrangements; and agreements to indemnity or to insure the plaintiff’s cost exposure inexchange for a share of the proceeds of a judgment or settlement. Behind these forms ofthird party funding, there may be syndicates and investors.[77] In the case at bar, at this juncture, the nature of the third party agreement is notknown, but I foreshadow the discussion below to say that in determining whether toapprove a third party agreement, it will be necessary to consider the particularities of thefunding agreement. I also foreshadow to say that in my opinion, disclosure of the typeand details of the third party funding to the defendant is in the interests of theadministration of justice and disclosure to the defendant may help fill an adversarialvoid in the process of approving or refusing third party funding agreements.[78] As for the current state of the law in Ontario about third party fundingagreements, the key judgments are: McIntrye Estate v. Ontario (Attorney General)(2002), 61 O.R. (3d) 257 (C.A.), Metzler Investment GMBH v. Gildan Activewear Inc.[2009] O.J. No. 3315 (S.C.J.), and Dugal v. Manulife Financial Corp., 2011 ONSC1785, additional reasons 2011 ONSC 3147.[79] In McIntyre Estate v. Ontario (Attorney General), Mrs. McIntyre brought anaction against Imperial Tobacco and Venturi Inc. for the alleged wrongful death of herhusband. Mrs. McIntrye’s lawyers had agreed to take on the case with a contingency fee2012 ONSC 2715 (CanLII)

16agreement, and Mrs. McIntrye sought a declaration that the agreement was not illegal aschamperty.[80] O’Connor, A.C.J.O, writing for the Court of Appeal concluded that contingencyfee agreements are not categorically illegal because the law had developed to recognizethat a person supporting another’s litigation or taking an assignment of another litigationand pursuing it might have a justifying motive or excuse. In such circumstances therewould be no officious intermeddling or stirring up strife, which were necessaryelements of the tort of maintenance. See also: Fredrickson v. Insurance Corporation ofBritish Columbia (1986), 28 D.L.R. (4th) 414 (B.C.C.A.), aff'd [1988] 1 S.C.R. 1089;Trendex Trading v. Credit Suisse, supra.[81] In the McIntyre Estate case, the Associate Chief Justice concluded, however,that it was premature to determine whether the particular contingency fee agreementwas champertous. The prematurity problem arose because to determine whether anagreement was champertous, it would be necessary to examine the facts of the particularcase and also the motivation of the alleged maintainer. Whether a particular agreementwas champertous might not be ascertainable until the end of the litigation. In this regard,Associate Chief Justice O’Connor stated at para. 76:When considering the propriety of the motive of a lawyer who enters into a contingency feeagreement, a court will be concerned with the nature and the amount of the fees to be paidto the lawyer in the event of success. One of the originating policies in forming thecommon law of champerty was the protection of vulnerable litigants. A fee agreement thatso over-compensates a lawyer such that it is unreasonable or unfair to the client is anagreement with an improper purpose - i.e., taking advantage of the client.2012 ONSC 2715 (CanLII)[82] In Metzler Investment GMBH v. Gildan Activewear Inc., supra, Justice Leitch,dismissed a motion for approval of a third party funding agreement between theplaintiffs and Claims Funding International PLC (“CFI”), an Irish corporation. In thiscase, Metzler Investments sued Gildan Activewear because of an allegedmisrepresentation that affected the value of Gildan’s shares in the secondary market.Before certification, Metzler Investments voluntarily sought approval of the third partyfunding agreement with CFI.[83] In Metzler Investments, the terms of the proposed third party funding agreementwere that CFI agreed to pay any adverse costs award in exchange for an uncapped 7 percent share of any recovery in the litigation. CFI acknowledged that Class Counsel’sduties were to the plaintiffs and not to CFI, and the plaintiffs promised that they wouldconduct the proceeding in a manner that avoided costs and delay and they promised toprovide full and honest instructions to Class Counsel.[84] Justice Leitch ruled that before certification, the court did not have jurisdictionto make a declaratory order binding the putative class members to the terms of the third

17party funding agreement. Dealing only with the situation as between the plaintiffs andCFI, Justice Leitch ruled that a third party funding agreement was not categoricallychampertous and thus was capable of being approved. However, applying the rationaleof the McIntrye Estate case, she declined to approve the third party funding agreement,because until the outcome of the litigation was known, it could not be determinedwhether a 7 per cent share of the recovery was fair and reasonable.[85] Dugal v. Manulife Financial Corp. was the first case in Ontario in which a thirdparty funding agreement was approved. In this case, Mark Dugal and the other plaintiffssued Manulife because of an alleged misrepresentation that artificially inflated the valueof its securities. Before certification, Mr. Dugal applied for approval of a third partyfunding agreement with Claims Funding International PLC (“CFI”), the same funderthat had failed to obtain approval in Metzler Investments.[86] Under the proposed third party funding agreement in Dugal, CFI agreed to pay$50,000 for disbursements and to indemnify the plaintiffs if there was an adverse costsaward. In return, it was to receive a 7 per cent share of the proceeds of any recovery inthe litigation to a maximum of $5 million before certification and to a maximum of $10million after certification. CFI acknowledged that Class Counsel’s duties were to theplaintiffs and not CFI, and the plaintiffs promised that they would conduct theproceeding in a manner that avoided costs and delay and they promised to provide fulland honest instructions to Class Counsel. CFI was entitled to terminate only if theplaintiffs breached their obligations under the agreement. The agreement was subject tocourt approval.[87] In Dugal, Justice Strathy addressed the defendant Manulife’s argument that thethird party agreement was champertous. Following, the Court of Appeal’s decision inMcIntrye Estate v. Ontario (Attorney General), supra, Justice Strathy concluded thatthird party funding agreements were not categorically or necessarily champertous andthat there were reasons to approve the third party funding agreement between theplaintiffs and CFI, including the factors that the funding agreement would promoteaccess to justice and the agreement did not interfere with the plaintiffs’ control of thelitigation. Problems with securing the possible indemnity and on what informationcould be disclosed to the funder could be and were addressed, and, therefore, JusticeStrathy approved the third party funding agreement.[88] Not following Metlzer Investments, supra, and relying on s. 12 of the ClassProceedings Act, 1992, the court’s jurisdiction to make declaratory orders, the court’sinherent jurisdiction, and my decision in Fantl v. Transamerica Life Canada, [2008]O.J. No. 1536, aff’d [2008] O.J. No. 4928, aff’d 2009 ONCA 377, Justice Strathyconcluded that before certification, the court has the jurisdiction to make an order2012 ONSC 2715 (CanLII)

19extent of the levy of the third party funder, which may be greater than the levy of theClass Proceedings Fund, but, once again, it would be for the court to determine whetherthe third party funding agreement is fair to the persons who would be bound by it. Thus,I do not see any reason that would justify postponing making a binding decision untilafter certification.[94] In this last regard, I agree with Justice Strathy’s comments in Dugal, supra, atpara. 17, where he stated:To postpone the decision to post-certification, when the views of class members can besought, could very well spell the end of this proceeding, because the plaintiffs cannotwithstand an adverse costs award on certification. In my view, exercising the Court'ssupervisory jurisdiction over the proceeding, I am entitled to put myself in the shoes ofprospective class members and ask whether the proposed agreement is fair and reasonable.2012 ONSC 2715 (CanLII)[95] To conclude this part of the analysis, the current state of the law in Ontario isthat third party funding agreements are not categorically illegal but they may be. Inruling on the legality of third party agreements, Ontario courts have considered some ofthe issues that might be raised to challenge a third party funding agreement but there ismuch unexplored territory. I will mention some of the unexplored issues below.Whether and the extent to which third party funding is permissible should be regardedas an unsettled issue and a work in progress.F. ANALYSIS1. Introduction and Preliminary Points[96] With this background, it is now possible to address the Plaintiffs’ motion thatseeks orders: (a) that a motion for approval of a third party financing and indemnityagreement be heard without notice to Sun Life; (b) that the hearing of the motion beclosed to the public; and (c) that the documents for the motion be sealed.[97] I will begin the analysis by noting that the Plaintiffs rely on the juridical fact thatthe Alberta Court of the Queen’s Bench and the Nova Scotia Supreme Court have bothheard and approved third party litigation funding arrangements ex parte. See MacQueenv. Sydney Steel Corp., Hfx No. 218010 (Murphy, J., N.S.S.C.) October 19, 2010;Hobshawn v. ATCO Gas and Pipelines Ltd., Action No. 0101-04999 (Lovecchio, J.,Alta. Q.B.) May 14, 2009. These decisions, however, are not helpful because there areno published reasons for the decisions.[98] Next, the Plaintiffs rely on Garland v. Consumers’ Gas Company Limited,[1995] O.J. No. 997 at paras. 41-42 (Gen. Div.), aff’d [1996] O.J. No. 3162 (C.A.),where Justice Winkler, as he then was, held that on an application for approval of

20funding from the Class Proceedings Fund, it is for the plaintiff to determine whether thedefendant is given notice of the application.[99] Justice Winkler explained that the rationale for this approach is to prevent adefendant from gaining an advantage in the proceeding from knowledge that theplaintiff has been denied funding. Justice Winkler accepted, however, that with theplaintiff’s consent, the defendant could participate so that the Committee might obtainthe defendant’s analysis of the claim and its defence to it, so as to properly assess themerits of the case, which is a factor in its determination of whether to approve fundingfor the class action.[100] While, as appears from the discussion above and below, the existence and therole played by the Ontario Class Proceedings Fund is a relevant consideration to theissues of whether or not the Superior Court should approve third party funding. I do notfind the Garland decision helpful in determining the issues I must decide on thismotion.[101] In the case of an application to the Class Proceedings Committee, theparticipation of the defendant is possible and if the application is granted, the defendantwill be advised and become aware of the precise nature of the statutorily-prescribedsupport being offered by the Fund. The defendant will also be aware that the Fund hasno other role to play in the litigation.[102] In contrast, in the case at bar, if I hear the funding application in camera andapprove the arrangement, Sun Life may be able to intuit that the funding has beengranted, but Sun Life will have no idea about the nature of the support or the role playedby the unnamed third party funder. Further, there is no issue about the propriety of thesupport provided by the Fund but there well may be once the details of the third partyagreement are revealed. The Garland decision does not address the circumstances of thecase at bar.2012 ONSC 2715 (CanLII)2. Notice[103] The analysis may continue with the dispute between the parties about whetherSun Life is entitled to be given notice and to participate in the funding approval motion.The precise issue is whether Sun Life is “affected” by the motion for approval of thethird party funding agreement.[104] It is a principle of natural justice that a party be given notice and have anopportunity to be heard in proceedings that affect his or her interests, and it is afundamental principle in the administration of justice that court proceedings are publicproceedings.

21[105] Generally speaking, the circumstances in which a court will accept submissionsex parte are exceptional and limited to situations in which the delay associated withnotice would result in harm or where there is a fear that the other party will actimproperly or irrevocably if notice were given: Ruby v. Canada (Solicitor General),[2004] 4 S.C.R. 1 at para. 25.[106] As noted above, the Plaintiffs submit that Sun Life is not “affected” by whetheror not the Plaintiffs are supported in some way by third party funding. Sun Lifedisagrees and submits that it is affected by the prospect of third party funding beingapproved by the court. Sun Life states that it has an interest in ensuring that: (a) the thirdparty funder is financially capable of honouring its commitments; (b) that the funder’scommitment to pay an adverse costs awards is directly enforceable by Sun Life; (c) thatthe implied undertaking that protects Sun Life’s confidential information applies to thefunder; and (d) that the integrity of the litigation process and the administration ofjustice is maintained.[107] I agree that the Defendant is affected by the motion for third party funding.Although the point was not contested, Justice Strathy was of a similar view in Dugal v.Manulife Financial Corp., supra, at para. 16, as was Justice Leitch in MetzlerInvestment GMBH v. Gildan Activewear Inc. supra, at para. 3.[108] In addition to being affected by the motion for third party funding and, therefore,normally entitled to participate in the process, it is my view that as a policy matter adefendant’s participation would be useful and should be permitted. As demonstrated bythe immediate case, a defendant might raise issues that should be addressed by thecourt. In the case at bar, Sun Life submitted that a third party funding agreement mightraise the following questions, for which it would be both necessary and helpful to haveSun Life’s submissions:• Whether the third party funding agreement was champertous or otherwisecontrary to public policy.• Whether the third party agreement might be “legal expense insurance,” in whichcase it would be regulated under the Insurance Act, R.S.O. 1990, c 1.8, and thecourt would have to consider whether the agreement complied with the Act. Thecourt would also have to consider whether notice of the motion should be givento the regulator, the Financial Services Commission of Ontario.• Whether the third party funding agreement involved an investment scheme, inwhich case it might be a “security” subject to compliance with the OntarioSecurities Act, R.S.O. 1990, c. S.5.2012 ONSC 2715 (CanLII)

22• Whether the third party funding agreement might be illegal under s. 347 of theCriminal Code, R.S.C. 1985, c. C. 46 for imposing a criminal rate of interest.[109] There are other issues associated with third party funding agreements that mayneed to be addressed. There is the concern that the third party funder may compromisethe lawyer and client relationship and the lawyer’s duties of loyalty and confidentialityor impair the lawyer’s professional judgment and carriage of the litigation on behalf ofthe client. Thus, it may be necessary to review as Justice Strathy did in Dugal, supra,and as Justice Leitch did in Metzler Investment, supra, the precise role of the third partyfunder in the litigation.[110] If any of these issues actually were aspects of the third party funding agreementwith Bridgepoint, in my opinion, it would be useful to have full argument from bothparties. If Sun Life were not present, it might be necessary to appoint an amicus to fillan adversarial void and to assist the court in making a determination.[111] I observe that the above issues are largely antithetical to third party funding, butit is conceivable that a defendant might support third party funding, since it may be theultimate beneficiary of it. Thus, it would also be informative for the court to know whya defendant supports or does not oppose the third party funding.[112] Therefore, unless the Plaintiffs make out a case for protecting solicitor-clientprivilege or make out some other public policy argument, Sun Life should be givennotice of the third party funding motion, and it should also receive the motion materialto be relied on for the motion, and it should be permitted to participate at the hearing.[113] I conclude this part of the analysis by repeating that the defendants participatedin the funding motions in Dugal v. Manulife Financial Corp., supra, and MetzlerInvestment GMBH v. Gildan Activewear Inc. supra.2012 ONSC 2715 (CanLII)3. Third Party Funding Agreements and Solicitor- Client Privilege[114] Given the conclusion that Sun Life is affected by the motion for approval ofthird party funding, the next issue is whether there are countervailing reasons that wouldjustify the orders being sought, which orders would exclude Sun Life and the publicfrom the third party funding motion. This issue brings the analysis to the relationshipbetween third party funding agreements and solicitor-client privilege.[115] In Canada, solicitor-client privilege has become a constitutionally protectedsubstantive rule of law. See: Canada v. Solosky, [1980] 1 S.C.R. 821 (S.C.C.);Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860; R. v. McClure, [2001] 1 S.C.R. 445;Lavellee, Rackel & Heintz v. Canada, 2002 SCC 61.

23[116] The Plaintiffs argue that disclosure of their third party funding agreement withBridgepoint would compromise solicitor-client privilege, litigation privilege, orcommon interest privilege. There is some support in the international case law thatsupports the Plaintiffs’ argument.[117] In Australia, in Re Global Medical Imaging Management Limited (inliquidation), [2001] NSWSC 476 at paras. 7-8 (N.S.W.S.C.), the New South WalesSupreme Court concluded that funding agreements are privileged and should not bedisclosed to the opponent. The Court stated:To deny legal privilege to a funding agreement of this sort would fail to give proper weightto its inextricable connection with the very subject matter of the legal advice that might begiven and the nature of the professional legal services to be rendered. It has the potential toreveal the litigant’s likely legal strategy. The funding agreement in a literal and substantivesense, fulfils the purpose of providing legal services in terms not only of the overallcapacity to have them at all, but also their availability at critical junctures in the case.While it may not reveal the content of legal advice, it reveals the confidential circumstancesof its availability and throws oblique light on the confidential circumstances to which theadvice is directed. One could, for example, infer from a funding agreement the likelihood oftactical advice being given of a particular kind at different stages of the litigation or, for thatmatter, of the likelihood of an appeal being advised or not advised.2012 ONSC 2715 (CanLII)[118] There are, however, three better arguments that at least in the context of classactions, retainers and associated third party funding agreements, are not privileged.[119] The first argument is the simple argument that third party funding agreementsare not privileged.[120] In Roth v. Alberta (Minister of Human Resources and Employment), 2005ABQB 505, in the context of a motion to proceed in camera with respect to acontingency agreement, Justice Slatter commented that the privilege over the retaineragreement in a class proceeding is more illusory than real. In remarks that are apt forOntario, Justice Slatter stated at paras. 8 and 9:8. The presumptive rule is that Canadian court proceedings are held in public, and an orderfor an in camera hearing is extraordinary... It is true that the Supreme Court of Canada hasemphasized the importance of solicitor and client privilege, and the preservation ofprivilege might well be one reason to close a courtroom. However, in this situation onemust be practical about the efficacy of any privilege, and the effect that disclosure of theinformation would have on the interests of the plaintiff. Section 20 of the ClassProceedings Act, 1992, requires that notice of certification be given to all members of theclass. Section 20(6)(e) provides that the notice must include a summary of any agreementsrespecting fees and disbursements. In addition, any member of the class who asked to see acopy of the contingency agreement would likely be entitled to a copy. A solicitor cannotkeep privileged material away from the client himself. Since the form of notice under theAct would be set by the Court, after hearing submissions from both counsel, and since thenotice must be sufficiently detailed to allow class members to make an informed choice asto whether they will opt out, it is inevitable that the defendants in a class proceeding will

24discover the general contents of the contingency agreement. In this respect, the privilegeover the retainer agreement in a class proceeding is more illusory than real.9. Further, disclosure of the contents of the privileged contingency agreement will rarelyprejudice the interests of the plaintiff. The contingency agreement would not usuallydisclose any of the tactics of the plaintiff nor would it reveal any privileged informationabout counsel's assessments of the merits. As a practical matter, while the retaineragreement is confidential, disclosure of its contents is unlikely to substantively prejudicethe interests of the plaintiff. In all of the circumstances, there is little point in holding thehearings in camera, or of sealing the entire court record. However, it is appropriate to sealthe affidavits of the two Plaintiffs sworn May 15, 2005 deposing to the reasonableness ofthe contingency agreement, as they do contain some sensitive information.[121] In Fairview Donut Inc. v. The TDL Group Corp., 2012 ONSC 152, in thecontext of a certification motion, Justice Strathy held that disclosing details of who isfunding the class action and on what terms does not involve solicitor-clientcommunications. At paras. 360-363, Justice Strathy stated :360. The plaintiffs rely on Descoteaux v. Mierzwinski, ... which deals with theconfidentiality of solicitor and client communications and Stevens v. Canada (PrimeMinister)... which dealt with the question of whether a lawyer's billing records areprotected by solicitor-client privilege. The issue in this case is not about communicationsbetween the plaintiff and their counsel - it is about who is paying for the lawsuit andwhether a third party is providing an indemnity for fees. The answer to that question doesnot require the disclosure of solicitor-client communications.2012 ONSC 2715 (CanLII)361. In my view, a Court being asked to certify a class proceeding and to appoint arepresentative of the class is entitled to know whether some other party is funding thelitigation and, if so, who is doing so and on what terms. The answers go to theindependence and motivations of the representative plaintiff as well as the ability of therepresentative plaintiff to see the action through to completion. It will be relevant for theCourt to know whether the third party has an interest in the litigation that is or could bedivergent from the interests of the representative plaintiff or the class. In the context ofthird party funding arrangements, the Court has been particularly concerned to know thedetails of the arrangements with the third party to ensure that the representative plaintiff,and not the third party, is actually calling the shots: Dugal v. Manulife Financial Corp., ...Metzler Investment GMBH v. Gildan Activewear Inc. ....362. Answering the question "who has control of the litigation" or "who is instructingcounsel" may not elicit a full answer to the real question, which is whether some behindthe-scenesparty is financing or promoting the litigation, and if so, whether there are anystrings attached.363. If it was established that the third party was not a member of the class and wassupporting the litigation financially for collateral reasons, that alone might be reason toquestion the independence and suitability of the representative plaintiff.[122] I agree with and would adopt Justice Strathy’s comments for the case at bar.[123] The second argument that there is no privilege attached to the terms of a thirdparty funding agreement is the argument that any presumption that a third party fundingagreement contains protected communications has been rebutted.

25[124] In order to understand this second argument for the conclusion that the thirdparty funding agreement is not privileged, it is necessary to first understand a veryintricate principle of the law of privilege that emerged from the Supreme Court ofCanada’s decision in Maranda v. Richler, 2003 SCC 67 and the treatment of thatprinciple by the Ontario Court of Appeal in Ontario (Attorney General) v. Ontario(Assistant Information and Privacy Commissioner) [2005] O.J. No. 941 (C.A.), andrecently by the British Court of Appeal in Donell v. GJB Enterprises Inc., 2012 BCCA135.[125] In Maranda, which arose in the context of criminal law proceedings about asearch warrant served on a law firm, the Supreme Court held that the amount a clientpays to his or her lawyer for legal fees is presumptively covered by solicitor-clientprivilege.[126] From Maranda, given the connection between a third party funding agreement,particularly some variants of it, to legal fees and the lawyer’s retainer, it could also beargued that a third party funding agreement is presumptively covered by solicitor- clientprivilege. The Plaintiffs’ argument in the case at bar is to similar effect.[127] However, as pointed out by the Ontario Court of Appeal in Ontario (AttorneyGeneral) v. Ontario (Assistant Information and Privacy Commissioner), there is only apresumption of privilege and the presumption can be rebutted. The facts of the casewere that as a result of the requests of two journalists, the Information and PrivacyCommissioner ordered the Attorney General to disclose how much had been paid to twolawyers who had acted for intervenors in a certain criminal proceedings and to fourlawyers who had acted on Paul Bernardo’s appeal from his murder convictions. Relyingon Maranda, the Attorney General argued that the information about the legal fees wasprivileged, and he sought judicial review of the Commissioner’s order requiring thedisclosure of the information about the amount of the billings.[128] Affirming a decision of the Divisional Court, the Court of Appeal held that thepresumption of privilege associated with the information the journalists were seekingwas rebuttable and the presumption had been rebutted. For present purposes, what issignificant is the Court of Appeal’s ruling at para. 9 of its judgment that “Thepresumption will be rebutted if it is determined that disclosure of the amount paid willnot violate the confidentiality of the solicitor-client relationship by revealing directly orindirectly any communication protected by the privilege.” At paras. 12 and 13 of thejudgment, the Court stated:12. The presumption will be rebutted if there is no reasonable possibility that disclosure ofthe amount of the fees paid will directly or indirectly reveal any communication protectedby the privilege. …. If there is a reasonable possibility that the assiduous inquirer, aware ofbackground information available to the public, could use the information requestedconcerning the amount of fees paid to deduce or otherwise acquire communicationsprotected by the privilege, then the information is protected by the client/solicitor privilegeand cannot be disclosed. ….2012 ONSC 2715 (CanLII)

2613. We see no reasonable possibility that any client/solicitor communication could berevealed to anyone by the information that the IPC ordered disclosed pursuant to the tworequests in issue on this appeal. The only thing that the assiduous reader could glean fromthe information would be a rough estimate of the total number of hours spent by thesolicitors on behalf of their clients. In some circumstances, this information mightsomehow reveal client/solicitor communications. We see no realistic possibility that it cando so in this case. For example, having regard to the information ordered disclosed in PO-1952, we see no possibility that an educated guess as to the amount of hours spent by thelawyers on the appeal could somehow reveal anything about the communications betweenBernardo and his lawyers concerning the appeal.[129] In the case at bar, I cannot be an assiduous inquirer with respect to the thirdparty funding agreement, because I have not yet seen the agreement, but I can say that Isee no reasonable possibility that any genuinely solicitor-client communication need berevealed as a part of any third party funding agreement. Thus, there is no privilegedinformation.[130] Put differently, if a third party funding agreement contained information thatdisclosed counsel’s legal opinion about the merits of the litigation or disclosed howcounsel proposed to carry out the litigation beyond what might be disclosed in thelitigation plan that would be disclosed for a certification motion, then it was bothunnecessary and wrong to include that information. Including the information isunnecessary because it does not have to be included in order to obtain court approval, asis evidenced by the Dugal case. Including the information is wrong or improper becauseit would mean that the third party had assumed control of the client’s litigation, which isimproper and would cause the court to reject the third party funding agreement.[131] In Donell v. GJB Enterprises Inc., supra, Mr. Donell was a California courtappointedreceiver of GJB Enterprises, which had been operated by its principal GeraldBerke as a Ponzi scheme. Mr. Berke and his wife, who denied knowledge of the Ponzischeme, moved to British Columbia. Mr. Donell, who was attempting to trace Mr.Berke’s ill-gotten gains, brought an application in the British Columbia Supreme Courtfor a declaration that certain files and documents in the possession of the Berke’s BritishColumbia lawyers were not privileged and should be disclosed. The application wasdismissed, and Mr. Donell appealed, but he limited his appeal to the law firm’s trustledgers. The Court of Appeal allowed the appeal in part.[132] Justice Chiasson (Justice Neilson concurring, Justice K.J. Smith dissenting)reviewed the law firm’s trust ledgers and scrutinized them for privileged material. Themajority concluded that the trust ledger entries relating to a real estate transaction, ofwhich all parties were aware, were not privileged and four particular entries relating tomoney management did not arise from the solicitor-client relationship and wereproducible. The rest of the entries were irrelevant.[133] At para. 59 of his judgment, after a detailed analysis of Maranda and the caselaw in Ontario, including Ontario (Attorney General) v. Ontario (Assistant Informationand Privacy Commissioner), supra, Justice Chiasson summarized the applicable law asfollows:2012 ONSC 2715 (CanLII)

2759. In summary, in my view:1. at a minimum, Maranda establishes that lawyers' bills, in the criminal lawcontext, are presumptively subject to solicitor-client privilege;2. this presumption flows from the connection between lawyers' bills and the natureof the relationship between lawyers and clients; the account reflects work done onbehalf of the client which involves communications that are privileged;3. the presumption may be rebutted if it is established that there is no reasonablepossibility that disclosure will directly or indirectly reveal any communicationsprotected by privilege;4. Maranda did not do away with the distinction between communications, whichare privileged, and facts, which are not;5. other financial records of lawyers are not presumptively subject to solicitor-clientprivilege insofar as they merely represent records of actions or facts, but they shouldnot be produced automatically solely for that reason;2012 ONSC 2715 (CanLII)6. Maranda mandates that it is necessary to consider such records in order todetermine whether they arise out of the solicitor-client relationship and whattranspires within it, that is, communications to obtain legal advice;7. if it is concluded that the records do arise out of that relationship and whattranspires within it, they are presumed to be privileged, but the privilege can be rebuttedand the document produced if it is established that production will not permitthe deduction or acquisition of communications protected by solicitor-clientprivilege.[134] Thus, the majority of the British Columbia Court of Appeal adopted theapproach of the Ontario Court of Appeal in Ontario (Attorney General) v. Ontario(Assistant Information and Privacy Commissioner). Lawyers bills are presumptivelysubject to solicitor-client privilege, because they may reflect communications that areprivileged, but the presumption may be rebutted. Other financial records are notpresumptively subject to solicitor-client privilege, and these records would not beprivileged if they represented records of actions or facts because there is a distinctionbetween client communications with a lawyer, which are privileged, and facts aboutclient conduct or client activities, which are not privileged.[135] In effect, the majority of the British Columbia Court of Appeal would divide theclient’s documents and related material in the possession of a lawyer into two classes:(1) documents presumptively privileged; and (2) documents independent of thecommunication of legal advice and not presumptively privileged.[136] Applying the approach of Donell v. GJB Enterprises Inc., supra, to the case atbar, yields the conclusion that either the third party funding agreement is a documentindependent of the communication of legal advice and not privileged or the presumptionof privilege has been rebutted.[137] The third argument for the conclusion that there is no privilege attached to theterms of a third party funding agreement is that the privilege is waived.

28[138] In S. & K. Processors Ltd v. Campbell Ave. Herring Producers Ltd., (1983), 35C.P.C. 146 (B.C.S.C.) at paras. 6, 10, Justice McLachlin, as she then was, describedwhen privilege is waived as follows:6. Waiver of privilege is ordinarily established were it is shown that the possessor of theprivilege: (1) knows of the existence of the privilege; and (2) voluntarily evinces anintention to waive that privilege. However, waiver may also occur in the absence of anintention to waive, where fairness and consistency so require. Thus, waiver of privilege asto part of a communication will be held to be waiver as to the entire communication.Similarly, where a litigant relies on legal advice as an element of his claim or defence, theprivilege which would otherwise attach to that advice is lost: Hunter v. Rogers, [1982] 2W.W.R. 189.”10. … In Rogers v. Hunter, the intention to partially waive was inferred from theDefendant’s act of pleading reliance on legal advice. In Harrich v. Stamp (1979), 27 O.R.(2d) 395 (C.A.), it was inferred from the accused’s reliance on alleged inadequate legaladvice in seeking to explain why he had pleaded guilty to a charge of dangerous driving. Inboth cases, the plaintiff chose to raise the issue. Having raised it, he could not in fairness bepermitted to use privilege to prevent his opponent exploring its validity.”2012 ONSC 2715 (CanLII)[139] It is arguable that when a plaintiff applies for third party funding, among otherthings, he or she puts in issue who is actually controlling the litigation and whether thethird party funding agreement is champertous or in compliance with any regulatoryregime that might apply. The terms of the agreement may have implications to whetherthe representative plaintiff and Class Counsel have conflicts of interest. In thesecircumstances, fairness requires that any privilege associated with the terms of the thirdparty funding agreement be treated as waived.[140] In my opinion, a defendant is affected by a third party funding agreement andfairness demands that any privilege associated with the agreement is waived. Thisconclusion is also consistent with the practice of disclosing the support of the ClassProceedings Fund to the defendant.[141] Thus, on grounds of precedent, policy, and fairness, I prefer the Canadianarguments to the Australian position, which leads to the conclusion that that a thirdparty funding agreement is not privileged or if it is privileged, then the privilege iswaived.[142] But I add the observation that because there is no privilege in the third partyfunding agreement, then as a matter of best practices, an applicant for third partyfunding should not include extraneous and otherwise privileged information in a thirdparty funding agreement.[143] In the next section, I will explain why the conclusion that there is no privilege inthe third party funding agreement is dispositive of this motion, yielding the ultimateconclusion that the motion should be dismissed.

294. The Open Court Principle[144] The analysis finally comes to the heart of the Plaintiffs’ motion, which iswhether the procedure for a motion for third party funding should depart from the opencourt principle.[145] With certain exceptions, the Rules and the Courts of Justice Act provide that allcourt hearings shall be open to the public. See rule 37.11 and Courts of Justice Act,R.S.O. 1990, c. C.43, s. 135. The Courts of Justice Act provides that the court mayexclude the public where the possibility of serious harm or injustice to any personjustifies a departure from the general principle that court hearings should be open to thepublic.[146] The Supreme Court of Canada and other courts, including the Ontario Court ofAppeal have developed a test for determining when a court may order a publication ban,seal documents, or proceed in camera. See: R. Mentuck, 2001 SCC 76; Sierra Club ofCanada v. Canada, [2002] 2 S.C.R. 522; and M.E.H. v. Williams, 2012 ONCA 35.[147] Recently, in Williams at para. 22, the Court of Appeal described the two-part testas follows:A publication ban should only be ordered when:2012 ONSC 2715 (CanLII)(a) such an order is necessary in order to prevent a serious risk to the properadministration of justice because reasonably alternative measures will not prevent therisk; and(b) the salutary effects of the publication ban outweigh the deleterious effects on therights and interests of the parties and the public, including the effects on the right tofree expression, the right of the accused to a fair and public trial, and theefficacy of the administration of justice.[148] The two-part test for a publication ban etc. may itself be broken down into threeelements; (1) there is a serious risk to the proper administration of justice or anothermatter of public interest; (2) there are no reasonable means to prevent the serious riskother than a court order negating or restricting the open court principle; (3) and thesalutary effects of the court’s order would outweigh its deleterious effects on the rightsand interests of the parties and the public.[149] In the case at bar, Sun Life concedes that denying access to justice would be aserious risk to the proper administration of justice, but it submits that there is noevidence that this action will not proceed in the absence of third party funding and thusthere is no evidence that access to justice is at risk. Sun Life submits that the Plaintiffshave not adduced any evidence that they will be or have been unable to obtain funding

30from the Class Proceedings Fund or that the third party funder will not provide fundingif the Plaintiffs' motion to approve the third party funding agreement is heard in opencourt. Sun Life, therefore, submits that the motion should be dismissed because, on theevidence adduced, the Plaintiffs have not satisfied the “necessity” elements of the twopart.[150] There is considerable merit in Sun Life’s evidentiary argument, but I will notdecide this motion on an evidentiary basis, because, as noted above, I am prepared toassume that the gaps in the evidence have been filled based on the submissions madeduring oral argument. Further, since, I would have allowed the Plaintiffs to reapplybased on better evidence, I am prepared to accept that the Plaintiffs cannot obtainfunding from the Class Proceedings Fund and that Bridgepoint will not provide fundingif the Plaintiffs' motion to approve the third party funding agreement is heard in opencourt.[151] With those assumptions, I conclude, nevertheless, that the Plaintiffs have failedto establish each of the three elements of the test for an order restricting the open courtprinciple.[152] With respect to the “serious risk” or necessity element of the test for apublication ban, etc., for the reasons described above, I conclude that there is no risk tothe important values of solicitor-client privilege or litigation privilege or commoninterest privilege because the information provided by disclosing the third party fundingagreement is not privileged or, if it is privileged, then the privilege is waived byapplying for third party funding.[153] I also conclude that there is no serious risk to access to justice. Given that thereis no risk to solicitor-client privilege, there is an audacious quality to the plaintiffs’argument that access to justice is at risk. If access to justice were at risk, then it is a selfinflictedrisk. It is the Plaintiffs and Bridgepoint that would impose the condition thatthe third party funding application will be withdrawn if the agreement is disclosed to theDefendant and to the public. From Dugal v. Manulife Financial Corp., supra, andMetzler Investment GMBH v. Gildan Activewear Inc., it is known that there are otherthird party funders who would not impose this pre-condition.[154] In any event, the Plaintiffs do not have an unfettered right to access justiceunencumbered by exposure to costs. All litigants must abide by the rules that administeraccess to justice, and no litigant is entitled as of right to have any economic barriers toaccess to justice removed. By itself, the desirability or the necessity of a class actiondoes not entitle a plaintiff to immunity from the costs consequences of litigation. If thatwere the case, Ontario would have adopted a no-costs regime. However, litigation inOntario including class actions comes with exposure to an adverse costs award. To2012 ONSC 2715 (CanLII)

31obtain access to justice, the Plaintiffs must play by the rules of the administration ofjustice, and the rules to access to justice normally require that a Plaintiff disclose his orher case for relief to the defendant in open court.[155] As for Bridgepoint, if it does not wish to disclose its pecuniary interest in thelitigation, then Bridgepoint should do its business in another less transparent or moredisinterested forum.[156] Further, if I am incorrect in concluding that there is no serious risk to the publicinterest or to the administration of justice, I conclude that it is not the case that there areno reasonable means to prevent the serious risk. In the next section of these reasons, Iwill describe those reasonable means.[157] Further still, if I am incorrect in concluding that the first two elements of thethree-part test for a publication ban, etc. have not been satisfied, the third element is notsatisfied.[158] In my opinion, an order restricting or qualifying the open court principle wouldnot outweigh its deleterious effects on the rights and interests of the parties and thepublic. In my opinion, for the reasons expressed earlier, Sun Life is affected by themotion, possibly adversely affected. And, in any event, the participation of Sun Lifewould be helpful in determining whether to approve or refuse the third party fundingapplication.[159] For the above reasons, I conclude that the two-part test for restricting the opinecourt principle has not been satisfied and, therefore, the Plaintiffs’ motion should bedismissed.2012 ONSC 2715 (CanLII)G. PROCEDURE FOR A THIRD PARTY FUNDING MOTION[160] The above analysis shows that the disclosure of the third party fundingagreement to the defendant in open court and the participation of the defendant in thefunding motion is all of necessary, fair, and helpful to the administration of justice.[161] It does not follow, however, that a funding motion should be treated in the sameway as other motions. The defendant is affected, and although the defendant should beallowed to protect its own proper interests, there are aspects of a funding applicationthat should be none of the defendant’s business. For instance, while the defendant mayhave an interest in ensuring that an adverse costs award will actually be paid to it, it isno business of the defendant to inquire into how the Plaintiffs would propose to use thefunding for the purposes of the litigation. In this regard, it may be noted that a defendantmay apply to the Class Proceedings Committee for the payment of the costs award but

32the Defendant does not have a right to appear before the Committee and oppose theconferral of funding.[162] It will take some experience before the parameters of opposition to a motion forapproval can be articulated, but because the defendant’s interest is not open-ended, thenormal rules about motions may need to be adjusted. In class proceedings, the court hasthe authority to make these adjustments pursuant to s. 12 of the Class Proceedings Act,1992, which, as noted above, grants the court a discretion to make orders respecting theconduct of a class proceeding to ensure its fair and expeditious determination.[163] It is early days for third party funding motions, and at present time, there is littleexperience to guide how the procedure should be shaped. For the case at bar, I direct thefollowing procedure:• The Plaintiffs must obtain court approval for the third party funding agreement.• Approval may be obtained by motion on notice to Sun Life.• If the Plaintiffs wish to proceed with their motion for approval, they must servea copy of the third party funding agreement covered by an affidavit from one ormore of the Plaintiffs setting out the reasons why third party funding should beapproved.• Sun Life may deliver an affidavit(s) in support of or in opposition to theapproval of the third party funding agreement.• There shall be no examinations or cross examinations without leave of the courtobtained at a case management conference.• On the motion for third party funding, the parties shall deliver factums.2012 ONSC 2715 (CanLII)H. CONCLUSION[164] For the above reasons, I dismiss the Plaintiffs’ motion.[165] Given the novelty and the importance of the issues, there will be no order as tocosts.Released: May 7, 2012_____________________Perell, J.

CITATION: Fehr v. Sun Life Assurance Company of Canada 2012 ONSC 2715COURT FILE NO.: 10-CV-411183 CPDATE: May 7, 2012ONTARIOSUPERIOR COURT OF JUSTICEBETWEEN:Eldon Fehr, Angela Watters, GaetanLaurier, Leslie Michael Lucas and Joseph(Yung Yub) KangPlaintiffs- and -Sun Life Assurance Company of CanadaDefendant2012 ONSC 2715 (CanLII)__________________________________REASONS FOR DECISION__________________________________Perell, J.Released: May 7, 2012.