Woodsford’s Ekin Cinar, based in Toronto, looks at what the Smarter and Stronger Justice Act means for class actions and how they can be financed in Ontario.
On July 2, 2020, the Smarter and Stronger Justice Act (“Bill 161”) amending the Class Proceedings Act, 1992 (“CPA”) received Royal Assent. Bill 161 will come into force on a date to be determined by Lieutenant Governor of Ontario’s proclamation.
The Ministry of the Attorney General explained that the purpose of Bill 161 was to make class actions more fair, transparent and efficient for people and businesses in Ontario. In fact, Ontario’s class action legislation has not been significantly updated in over 25 years and Bill 161 adds a new section to the CPA adopting the existing case law  around litigation funding. The contents of this addition to the CPA are not surprising, as the courts have been developing a number of practices in the context of third-party funded class actions, especially on the conditions a litigation funding agreement needs to satisfy in order to be approved.
Bill 161, codifies that a plaintiff who has entered into a litigation funding agreement must receive court approval. The court will approve the litigation funding agreement if (1) the agreement is fair and reasonable, (2) the agreement does not diminish the rights of the representative plaintiff to instruct counsel and control the litigation, (3) the funder is able to satisfy the adverse costs awards, and (4) the funder meets any other prescribed requirements. The Court will also consider whether the representative plaintiff received independent legal advice with respect to the agreement.
Bill 161 also codifies that defendants can recover any costs awarded against the representative plaintiff directly from the funder, to the extent of the indemnity provided by the funder under an approved litigation funding agreement. The defendant is also entitled to obtain security for costs from the funder, again subject to the terms of the litigation funding agreement, if, (1) the funder is ordinarily resident outside of Ontario, (2) the defendant has an order against the funder that remains unpaid in whole or in part, and (3) there is good reason to believe that the funder has insufficient assets in Ontario to pay the costs.
Woodsford welcomes the addition of a new section related to third-party funding to the CPA, which ensures that reputable, well-resourced funders such as Woodsford are able to provide funding solutions to the Canadian market. We are confident that our litigation funding agreements will be approved by the Canadian courts, as they have been approved in many different jurisdictions over the last decade. However, it does strike us as slightly anachronistic that the security for costs provisions only relate to funders based outside of Ontario.
Mark Spiteri, Woodsford’s Finance and Commercial Director, welcomed the changes:
“As Woodsford becomes ever more active in the Ontario market and litigation funding becomes a mainstream source of finance for meritorious class actions, we welcome the clarity that this legislation brings as well as the advantages to well-resourced and experienced international funders such as Woodsford.”
 See, e.g., Fehr v. SunLife Assurance Co. of Canada, 2012 ONSC 2715, Dugal v. Manulife Financial Corporation, 2011 ONSC 1785, David v Loblaw, 2018 ONSC 198