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Motions to Approve Third Party Funding Agreements Are Not to be Heard Ex Parte or In Camera

2 minute read

In Fehr v. Sun Life Assurance Company of Canada, 2012 ONSC 2715, the plaintiffs sought orders that a motion for approval of a third party funding agreement be heard: (a) without notice, (b) in a hearing closed to the public, and (c) that the third party funding agreement be sealed. The plaintiffs argued that the third party funding agreement was privileged and that there would be no prejudice to the defendants. Further, they argued that any public interest was outweighed by the potential deleterious effects. Justice Perell dismissed the plaintiffs' motion.

A central issue was whether the defendants were affected by the motion for approval of third party funding. The defendants argued, and Justice Perell agreed, that they were. The defendants had an interest in ensuring that: the third party funder could honour its financial commitments; any adverse costs award would be enforceable directly by them; their confidentiality was protected under the implied undertaking rule; and, the integrity of the litigation process and administration of justice was maintained. In addition, Justice Perell's view was that the defendant's participation would be useful as the defendant might raise issues that should be addressed by the court.

With respect to the plaintiffs' argument that the third party funding agreement was privileged, Justice Perell acknowledged that some international case law supported the view that a third party funding agreement is privileged. However, Justice Perell held that privilege does not apply to third party funding agreements in Ontario either because: (a) it does not exist, and where a third party funding agreement included legal opinion about the merits or strategy then it was “both unnecessary and wrong”; or (b) because fairness demanded that any privilege had been waived as the questions of who was controlling the litigation, and whether the agreement complied with statute and conflicts of interest law were put in issue.

As privilege did not exist or had been waived, Justice Perell also ruled that the plaintiffs had not met the test for an order restricting the open court principle. In addition, Justice Perell found that there was no serious risk to access to justice. In any event, as the defendant was affected, potentially adversely, and because their presence could be useful, no reason existed to prevent the participation of the defendants or to exclude the public.

The plaintiffs' motion to proceed without notice to the defendants and for a private hearing was denied.

The content contained in these blogs is intended to provide information about the subject matter and is not intended as legal advice. If you would like further information or advice on any of the subjects discussed in a blog post, please contact the author.

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