Litigation funding: a Canadian update | S2 EP2

Litigation funding – where a plaintiff’s litigation effort is financed by a third party in exchange for a portion of the proceeds of the case – is an established practice in jurisdictions such as the US and the UK, and is now becoming a regular feature of Canadian litigation, especially in the insolvency context. In this episode, hosts  Ailsa Bloomer and Andrew McCoomb welcome our first industry guest: Paul Rand is chief investment officer at Omni Bridgeway, a global litigation finance company that funds commercial disputes and enforcement proceedings around the world. Joining Paul is Arad Mojtahedi, associate in our Montréal office practising commercial litigation and insolvency proceedings under Canada's Companies’ Creditors Arrangement Act.

For more information: The reverse vesting order is here to stay: Continued innovative use of the Companies’ Creditors Arrangement Act to save distressed companies and Authority to bar a creditor from voting and litigation funding as interim financing: The Supreme Court of Canada’s ruling in Bluberi

CPD credits: This episode qualifies for 0.65 hours of Substantive credit in Ontario and 0.66 hours of Substantive credit in British Columbia

Transcript

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Transcript:

Andrew McCoomb  00:10
Hi, and welcome back to Disputed, a Norton Rose Fulbright podcast. We’re your hosts Andrew McCoomb from Toronto and Ailsa Bloomer from Calgary, and this episode is about litigation finance.

Ailsa Bloomer  00:22
Litigation financing, what do we mean by that? Well, it's when a third party funds a plaintiff's claim but, unlike a loan, that funder only gets paid if that plaintiff is successful. Litigation funding is an established practice in other jurisdictions, such as the US and the UK, but it's taken longer to gain ground in Canada, perhaps because of concerns about the old common law of champerty. However, Canadian courts attitudes are changing and we are increasingly seeing litigation funding utilized across the commercial litigation landscape, notably in class actions and insolvency proceedings.

Andrew McCoomb  00:59
For this episode, we start with some litigation funding basics before looking at how it's being used in insolvency proceedings specifically. Why focus on insolvency? Well, in 2020, the SCC handed down an important decision in the case of Bluberi, which gave the green light for litigation funding and insolvency proceedings. Also, both our guests were involved in the Bluberi case.

Ailsa Bloomer  01:21
And for our guests, we are excited to welcome our first industry guest speaker to the podcast. Paul Rand is the Chief Investment Officer at Omni Bridgeway, which is a global litigation finance company that funds commercial disputes and enforcement proceedings around the world. Before joining Omni Bridgeway, Paul began his career with a legacy Norton Rose firm, and he practiced as both a litigator and a transactional lawyer. Paul talks us through litigation financing basics, some common issues that arise with litigation funding agreements, or LFAs, and he gives us his industry perspective on the expanding Canadian funding market.

Andrew McCoomb  01:57
Joining Paul is Arad Mojtahedi. Arad is an associate in our Montréal office practicing commercial litigation and insolvency with a focus on corporate restructuring under Canada's Companies’ Creditors Arrangement Act, the CCAA. Arad also represented one of the interveners before the Supreme Court in the Bluberi case.

Ailsa Bloomer  02:16
And as always, if you want to understand more about these issues and the case law, links to some helpful articles are in this episode's description. 

Ailsa Bloomer  02:32
Paul, Arad, welcome to the podcast and thank you very much for joining us.

Arad Mojtahedi  02:36
Thank you for having us.

Paul Rand  02:37
Yeah, it's a real pleasure. Before jumping in, I do want to give a quick shout out for you guys for this podcast. Really terrific, great to be here, and great exercise that you're pursuing.

Ailsa Bloomer  02:49
Well thank you Paul and you are our first external guest speaker from industry on the podcast, so we are also grateful to have you here, too. So Paul, you're the Chief Investment Officer of Omni Bridgeway, Omni is a global litigation finance firm, it's been operating since 1986 and it has been in Canada for just over five years now. High-level, can you outline for us what litigation financing is and what you do at Omni Bridgeway?

Paul Rand  03:18
Yeah, thanks very much. So I'm the Chief Investment Officer for the Canadian business, as you point out, we're a global operation and so I'll find counterparts in Europe and APAC and the US. To your question, the--the idea of litigation funding is really premised on this notion that a piece of commercial litigation is a corporate asset. So starting from that premise, we as litigation funders invest capital, on a non-recourse basis, in order to support the legal costs as well as the adverse cost risks associated with pursuing that litigation asset. The non-recourse capital that we provide is not a loan. And so our return comes from the eventual success of the claim in which we invest. The corollary to that is that if a claim fails, we don't receive a return. And so, in that sense, litigation finance might be perceived of both as financing as well as a risk transfer mechanism.

Andrew McCoomb  04:24
So picking up there Paul, talking about it as a risk transfer mechanism. I mean, thinking about Ontario's Rules of Procedure and the Rules of Procedure that I've dealt with across the country and an expectation that litigants have a skin in the game and you know, historical notions of champerty and maintenance being a problem. Take us through the evolution of how we get to a place where this kind of risk transfer as a business model can make sense in the Canadian marketplace.

Paul Rand  04:48
So there, of course, is risk, huge risk in litigation and I think it's trite to point out that over the years, the cost of pursuing a claim has just continued to grow and grow. Innovative firms, like Norton Rose, work with clients to identify different pricing structures and different ways to meet that challenge of paying to advance a claim. And litigation finance is really another avenue into addressing that. Really, the idea is that we want a client who's advancing a meritorious claim to be equally invested in the outcome, and aligned with us in terms of working towards the best possible result. And frankly, the same holds true for counsel who are--who are engaged in a matter that we're funding. We'd like to see all parties to the litigation involved in some of that risk, because the outcome, of course, involves sharing in the upside of the litigation.

Andrew McCoomb  05:55
So I know Omni Bridgeway is in the commercial litigation space, among others. I mean, can you tell us a bit about who's out there in the litigation funding market on the funding side? And what kind of market segments they're looking at?

Paul Rand  06:08
Yeah, absolutely. So there are a couple of global funders that really are active in all major jurisdictions around the world and Omni Bridgeway is one of them. A narrow, an even narrower subset of these global funders are publicly listed companies like Omni Bridgeway. It is interesting, I think, and important when working with significant corporate clients to know that they're partnering with a funder that has transparency as well as financial wherewithal and resources to deliver on their agreements, as well as a degree of sophistication. Other funders, other--other participants in the ecosystem include some smaller, maybe local players. And if you're following the market of litigation funding, there is this impression that over the last year or two, there's been this sort of surge of new entrants, smaller participants looking to provide litigation finance folks who are doing it in a sort of ad hoc way, or thinking that it's an easy road to hoe. And while we haven't seen this-- this develop in Canada, to the same extent as it would be seen in the US or in the European context, there are some bodies on the side of the road of those who thought that litigation funding would be an interesting, uncorrelated space to play and--and it--it can be challenging. Beyond that, there's the segment of folks that really I consider to be lenders rather than litigation funders that occupy the segment involving personal injury largely. There is this, sometimes for me, frustrating conflation between those who provide litigation funding in the highly sophisticated commercial context, as contrasted with those who provide financing to firms and individuals operating in the personal injury environment, which we sometimes think of as being a little bit more of a retail product, if you will. But critically, it's often a lending arrangement as opposed to this non-recourse financing investment style funding that we provide.

Ailsa Bloomer  08:23
I think that does touch on an interesting point that you--you say that the market is becoming increasingly populated by smaller funders and you refer to bodies being left by the roadside. I think that touches on potential risks for the plaintiffs who are perhaps looking for litigation financing. What are the red flags that a client should be aware of in engaging a funder? For example, are there any signs of champertous behavior that would lead to an inappropriate litigation funding arrangement?

Paul Rand  08:53
It's really important to have folks who have experience. These are people like Omni Bridgeway, who have worked in the litigation space, they look carefully and think carefully about the cases that we fund, and we end up, where we can, looking to contribute value, a strategic input and thoughts along the way, to help strengthen the--the claimant’s position. What we don't do is look to control the--the litigation. A litigation funder ought not to look to take control of a piece of litigation they’re funding. So, a provision in an agreement that allowed the litigation funder to have direction, authority, and control over the ultimate strategy of a piece of litigation would be an issue.

Ailsa Bloomer  09:38
And as you say, the established litigation funders such as--such as Omni, for example, they are staffed with experienced lawyers, these are legally trained people that assess the merits of a claim before deciding to invest. So on that point, let's talk practically about how the litigation funding process works. So take us through the steps of obtaining litigation funding and what--what a client of yours would do when working with an investor?

Paul Rand  10:03
Yeah, terrific. Our goal really is to make the process one that's as painless and easy as possible. But at the same time, it's important to think to acknowledge that we're looking to invest often millions and millions of dollars into a piece of litigation over which we won't really have any control or direction and which itself often an investment of three or sometimes four years duration or more. So we're--we're careful and thoughtful in terms of the investments that we choose to back. This is helpful in terms of helping position and strengthen a claim. If a party decides to disclose to their opponent that a third party is of Omni Bridgeway’s caliber is participating as a funder, sends a--an interesting and pretty powerful message about the likely strength of the claim. But onto process itself, we will usually kick off with a telephone call, Zoom meeting or sit down with a client or their lawyers, talk very high-level about what the case in question involves and what the needs are. The next step is to sign up a non-binding term sheet. The non-binding term sheet allows us a period of exclusivity to take the deep dive analysis of the case. We really look to understand the case in a--in a meaningful way, and how it's going to evolve, and ultimately, what the--what the outcome is expected to be in our assessment. Around that same time, we're looking at entering into a litigation funding agreement. And so, as soon as the investment is approved, we can get the litigation funding agreement signed up, and the funding begins, and everyone's off to the races.

Ailsa Bloomer  11:46
Based on what you've been saying so far, there's obviously a huge strategic element here of having an established funder essentially betting millions on a plaintiff being successful. And, as you say, with established funders, this is an extremely carefully thought through decision and it involves the funder doing extensive due diligence on the claim. And I guess if you're the plaintiff it’s like having a second informal opinion on the merits of your action with the funder looking through all your documents and saying, yes, we’ll back you. But on that point, what are the privilege issues here? When you have a third-party that's going through all of these documents, working with the plaintiffs’ lawyers, I mean, how does a client ensure that privilege isn't waived in this engagement process?

Paul Rand  12:34
Yeah, so this is an issue that I can address in the Canadian context and I just make that distinction to the extent that there are listeners who are considering this point in other parts of the world and other jurisdictions. But in Canada, we have very good advice that supports the position that communications between a funder and a prospective client or funded client are in anticipation or in furtherance of litigation and therefore benefit from litigation privilege. Other measures can be put in place, some clients may wish to enter into common interest arrangements, other clients may choose to be very selective and highly protective of the type of information that they're comfortable sharing. Obviously, it impacts our ability to assess a case and ultimately the ability of a funder to arrive at a positive decision. But big picture takeaway, litigation privileges is the umbrella that covers the relationship.

Andrew McCoomb  13:34
So Paul, you mentioned once you've got the green light to proceed with the funding arrangement from your investment committee, you're looking at a litigation funding agreement. For someone who hasn't seen one of those, can you just take us through at a high-level what a claimant would be looking at in terms of the structure of that deal that they'd be making with you guys?

Paul Rand  13:52
Yeah, sure Andrew. The litigation funding agreement is a document that consists of some boilerplate, some standard provision sort of terms that are offered up on a non-negotiated basis. And then there are other elements of it that will, frankly, largely, have already been negotiated in the context of the term sheet and that's of chief interest to people is the economics of the funding arrangement. The LFA governs the relationship for the parties and so, it does include provisions around confidentiality. Those terms that would already exist in the context of an NDA having been signed up by the parties, but as is often the case, that would be reiterated and supplanted by the LFA. You'll find a lot of other provisions that would live in most standard commercial financing agreements. Beyond that, there’re always terms that require a bit of discussion, including those provisions around settlement negotiation or settlement opportunities, as well as around termination of the agreement and the termination rights that operate and extend to Omni Bridgeway or the funder.

Ailsa Bloomer  15:02
In your experience, what tend to be the most controversial provisions that are negotiated in an LFA?

Paul Rand  15:08
Right, so I pointed to the termination mechanic and the settlement considerations. And inevitably, those require some discussion and a degree of, I suppose, education or explanation, as is the case with any difficult or perceived difficult term in a contract. The termination provision is drafted in such a way that allows Omni Bridgeway or a funder, broadly, to terminate funding in a case that really has gone off the rails. And, I think, when that sort of assessment takes place, it's very much with the benefit of the advice of counsel who are engaged for the plaintiff as well, of course, as the funders’ assessment. But, in situations where we're looking to walk away from a funding arrangement because we are unhappy about the--the direction of things, it's a serious step for us to take because we're, of course, in--in most instances, walking away from the opportunity to see recovery. Would the administration of justice benefit from funders simply charging along or party simply charging along to see a matter through to its bloody conclusion even if the writing was al--already on the wall? Well, we don't think so. The settlement issue is a, I think, probably the--the potentially the trickiest one. And inevitably, in meritorious claim, there's going to be points where settlement discussions occur. We as a sophisticated funder expect to be made aware of these settlement discussions. We don't have a say in the settlement discussions, but the agreement will provide that we are to be apprised of--of what's being considered and discussed. And we expect in a funded--in a funded relationship, to be working with a client and working with lawyers who are commercially rational. And that's part of what we need to establish in our early due diligence, that there isn't some ulterior consideration, that there isn't some non-monetary motive that may ultimately overtake what should be an appropriate resolution of a case in the context of settlement. And so in order to help bridge that or address that challenge, what we have incorporated into our LFA is a short-fuse arbitration mechanism, something we haven't had to ever employ. But the idea is that we want to have a pre-agreed approach in order to resolve that potential log jam where we're saying, and the lawyers are saying, yeah, that's a very reasonable settlement. And the client is saying, well, justice to me has a couple more zeros after the end of it.

Ailsa Bloomer  18:11
I think it's really interesting just how you assess the risk and--and deal with the risks that you're taking on as an investor and obviously, that's covered all in the LFA. But, combined with the fact that you know as much as the plaintiff knows, at the beginning when you make the decision to invest, and you're also taking a backseat, I mean, this isn't an--a subrogated insurance claim where the insurer is driving the bus, you know? You're--you're to some extent at the mercy of what the plaintiff wants to do. And so I just think that's a really--really interesting business model in terms of how you--how you manage that risk and how you plan for it. 

Paul Rand  18:47
Yeah, well, what you said was--was really very interesting. And I think--I think it bears--it bears noting that we put a lot of effort upfront into understanding the case. And often we speak with counsel who will say to us, I've never understood my case this well, this early on, in previous engagements. And whenever the key actor’s in a piece of litigation, the client and the lawyers, are required to really focus their thinking on strategy and on different steps at an early stage, it's only going to be to the benefit of the claimant. Ultimately, I think to the benefit of the administration of justice in seeing claims prosecuted in a way that's really effective.

Ailsa Bloomer  19:33
Okay, so we've talked about what litigation funding is, the process of how a plaintiff engages a litigation funder, and the basic terms of a litigation funding agreement. I want to move on now to consider litigation funding in an insolvency context and, Arad, this is where I want to get your views, can you explain how litigation funding is utilized in insolvency proceedings, and why we are seeing more and more LFAs crop up in these cases.

Arad Mojtahedi  20:02
Sure, just to give a high-level background for our listeners, the main focus is on the Companies’ Creditors Arrangement Act, one of the two main insolvency statutes in Canada, or as we call it, the CCAA, which governs restructurings for bigger companies and where we're going to see sort of the--the use of LFAs in bigger litigations. Under the CCAA, companies in financial difficulty can apply to court for temporary protection from creditors to give the debtor company time to restructure and also seek interim financing to keep the company operating during this period. In the context of this CCAA protection, litigation funding can essentially give a debtor company a chance to realize an otherwise irrecoverable asset. What I mean by that is, an insolvent company under CCAA protection might have an asset in the form of a litigation claim, but because it is insolvent, it does not have the funds to take that claim to court and ultimately realize the value of that potential asset. So litigation funding, in the insolvency context, can enable the insolvent company to pursue this claim. And if they're successful, obtain damages so as to maximize credit recovery.

Paul Rand  21:22
Yeah, I would just agree with those comments and just amplify this idea that insolvency--the insolvency context in litigation funding have been matched up in other jurisdictions for years and years. And so, it's a tool that has really been embraced in other parts of the world for a good long time and so it's a natural fit, and--and I think that's part of the reason we're seeing a lot of opportunity in the same context in Canada. We talk about the debtor seeking funding and the debtor believing in their case and so on, and that's all absolutely true. But it's also often the case that creditors will be big supporters of a litigation funder being involved, because they don't put their money at risk. But they see someone willing to advance what the Supreme Court described as the access to the pot of gold at the end of the potentially successful litigation.

Ailsa Bloomer  22:21
Okay, and Arad, you mentioned interim financing. Can you explain what interim financing is and what's the link to litigation funding?

Arad Mojtahedi  22:30
An insolvent company that seeks protection under the CCAA can apply to court for approval of an interim financing arrangement, which is financing that enables the debtor company to keep operating during the restructuring process. In terms of how this relates to litigation funding, in May 2020, the Supreme Court of Canada found in the Bluberi decision that litigation financing agreements are forms of interim financing under the CCAA. And what that also means, in an insolvency context, litigation financing agreements require court approval. Outside of the insolvency context, LFAs are private commercial agreements that do not require court approval. But, in proceedings where court supervision is involved, such as the CCAA proceedings or in class action proceedings, a court does have to prove litigation funding agreement.

Ailsa Bloomer  23:23
Okay just to summarize briefly, that--so interim financing is short term funding that a debtor company uses which helps the debtor kind of keep the lights on during a restructuring process and the court has to approve interim financing arrangements. The Supreme Court found in the Bluberi case that litigation financing constitutes interim financing so the short of it is, LFAs, in an insolvency context, need court approval. Now this Bluberi case, Arad and Paul, you were both involved in that case. Omni--Omni Bridgeway’s predecessor IMF was Bluberi’s litigation funder and, Arad, you were part of the Norton Rose team that was acting for two of the interveners in the case. The facts of Bluberi are quite long and complicated, so can you highlight, Arad, the key points that are most relevant for the litigation funding issue?

Arad Mojtahedi  24:18
Sure, in a very, very short format, Bluberi manufactured casino gaming machines and took a $24 million loan from Callidus. In--within three years, the debt had ballooned to $86 million which forced Bluberi to seek protection under the CCAA. Bluberi accused Callidus of predatory lending tactics, most of Bluberi’s assets had been sold to Callidus through a credit bid as the secured lender under this massive loan. Bluberi, however, retained its nearly $200 million predatory lending claim against Callidus. The only way it could do this was with a litigation funding agreement, so Bluberi asked the Superior Court of Quebec to approve the litigation funding agreement so that it could bring its claim forward. The issue that ultimately went all the way to the Supreme Court was whether the first instance judge could approve the LFA as a form of interim financing, or whether the LFA needed creditor approval first, like a Plan of Arrangement does, before being put before the judge. The Court of Appeal agreed with Callidus, finding that the LFA had to be approved by all creditors. But the Supreme Court of Canada reversed the Court of Appeal’s decision and reinstated the first instance judge's approval of the LFA and said that the LFA did not need creditor approval. Now important for our discussion, the Supreme Courts said that litigation funding is a new field in insolvency proceedings and that the law is still evolving, but there is no principle basis upon which we need to restrict the supervising judge’s discretion from approving these agreements as interim financing.

Ailsa Bloomer  26:02
And as someone who was on the ground, sort of in the trenches in this case, what are your thoughts on the significance of the Supreme Court's decision as it relates to litigation funding?

Arad Mojtahedi  26:14
The decision was in line with the arguments we're making on behalf of the IIC and CAIRP, which were that if we put a blanket statement that litigation funding agreements need creditor approval, then every time there is any decision by a supervising judge that could affect creditor recovery, then that would have to be submitted to creditor’s approval, which is just not feasible. Now, in a CCAA restructuring, how we get to the end of the restructuring process involves the supervising judge exercising a lot of discretion over approvals for interim financing, asset sales, and so on. The judge needs to have all the latitude they require, and that--and the requisite tools to get to the finish line. Creditors should only have the right to vote on final plans that will permanently compromise their rights. In Bluberi, the Supreme Court essentially agreed with this and basically reinstated the litigation funding agreement, as was approved by the first instance supervisory judge.

Ailsa Bloomer  27:14
Okay, and so with the Bluberi decision in mind, what tests are courts going to apply in deciding whether to approve a litigation funding agreement in an insolvency context?

Arad Mojtahedi  27:27
Generally, there are five principles that almost all courts in Canada look at in approving modern litigation financing agreements. These were elaborated on in Bluberi and also in subsequent decisions, such as an Ontario Superior Court Case from July 2021 called JMX Contracting. First, the funding agreement must be necessary to provide the plaintiff access to justice that would not otherwise be available to them. This is the most important concentration for approval of the LFA. In JMX Contracting, the Ontario Superior Court broke this down into two points. First, whether the LFA is necessary to allow the plaintiff to pursue the litigation, or can the plaintiff get funding from elsewhere. And second, do the LFA terms balance the plaintiff’s access to justice with protecting the defendant’s legitimate interests? For example, would it affect the defendant’s ability to enforce an adverse costs award if the plaintiff’s claim is unsuccessful. The next point the court looks at in approving an LFA is that the plaintiff’s right to instruct counsel and control the litigation has not been diminished by the agreement. The third principle is that the funding agreements must not compromise or impair the lawyer-client relationship, or the lawyer’s duties of confidentiality. The funder must also undertake to keep confidential any privileged or confidential information. And fourthly, the compensation from the funder, if the claim is successful, must be fair and reasonable and this depends, obviously, on the circumstances but in a commercial litigation context, returns of 30 to 50% have been found to be commercially reasonable.

Ailsa Bloomer  29:14
Thank you, I think Bluberi is a really interesting case because you have a debtor using an LFA, litigation funding to enable it to pursue the very creditor that had put it in that situation in the first place. So, it was almost an innovative defense to predatory lending. And I think it touches on an interesting area, which you and I have had a previous conversation about before when we were prepping this topic, and--and that is the use of what's called Reverse Vesting Orders. And this idea that you can take all the liabilities of a debtor company, put them in a residual company, and use litigation funding to pursue a lawsuit on behalf of that company. So, can you talk a little bit about that trend? So what a Reverse Vesting Order is and how it fits with the evolution of litigation financing.

Arad Mojtahedi  30:06
Yeah, sure. Great question. So as you mentioned, I think one of the most important recent developments in insolvency practice is the increased use of the RVO or the Reverse Vesting Order. Now if you go a few steps back, major restructurings are conducted under the CCAA and ever since the Act was enacted during the Great Depression, the Act has become more and more flexible. So the Reverse Vesting Orders are a type of an asset vesting order to effect an asset sale. But as the name indicates, it is then in reverse, and instead of the purchaser buying the assets of the insolvent debtor free and clear of all charges, in essence, the purchaser is buying the shares of the company and then taking out the assets and liabilities that they don't want from the debtor company and putting them into a newly created company called the residual co. Oftentimes, that purchaser is not interested in acquiring the litigation asset of the debtor and so they will shift those assets into the residual co. Now, as you can imagine, residual co is filled with a bunch of liabilities and is not, you know, a very attractive company for--for further restructuring or asset sales. And it would not be able to finance the--the excluded litigation by itself, oftentimes. And this sort of puts us in a circumstance where a knight in shining armour such as Omni Bridgeway, can come along and say, hey, we're ready to finance your litigation and continue the restructuring process. So that is where it becomes very interesting to use LFAs in the sense that, but for the litigation funding agreement, the creditor of the creditor’s residual co would have no hope of recovering any sum for themselves from that contingent claim.

Andrew McCoomb  32:00
You were going to say something Paul?

Paul Rand  32:01
Well, I just wanted to chime in to say that it's interesting, but it's also not just theoretically interesting. Last year, while not an RVO structure, we concluded an investment that is in many ways analogous to the RVO format that Arad was describing in that--in that investment, and this is public record so I'm not--I'm not being careless in sharing details, but in that investment, a Calgary-based oil company was in the process of going through a go-private transaction. They had a significant piece of litigation that was ongoing in that it had been resolved in their favour, but was subject to appeal. In order to streamline their go-private transaction, because the acquiring company wasn't interested in that litigation asset, we acquired the interest in the litigation trust that that held the dispute and funded the matter through to resolution. So we were able to inject significant capital into the seller’s pockets and--and then pay for the remaining steps of the litigation, which resulted favourably. So in—in, I think, in obvious ways that has similarities to the RVO strategy, and maybe it speaks to the bigger--the bigger issue that where there is a valuable litigation asset, clever lawyers will find structures that will allow the value of the asset to be unlocked. And you'll find thoughtful funders that are prepared to partner and interested in--in partnering where they can assess the value of the litigation asset in question.

Andrew McCoomb  33:45
And that's the takeaway I'm getting from this conversation is that where what we're talking about is an asset to realize on a receivable that just happens to be the sort of receivable that's going to require you to go through the courts to action it, there are innovative products that are going to make that possible or at least break down some of the barriers for making that possible for a company that's otherwise in dire straits.

Ailsa Bloomer  34:09
Yeah, it's interesting. Another point that I want to ask about and I don't think we've explored it yet, is adverse costs and what approach the courts are taking to funding arrangements that exclude payment of adverse costs awards. Because when Arad was outlining the factors a few minutes ago, you know, on what the court looks at in approving a litigation funding agreement, it seemed to me that the most significant of those was enabling access to justice, and--and in particular, how you balance or how the court balances the interests between the plaintiff being able to pursue its claim while also ensuring that the defendants interests are protected. So, I guess I'm thinking, what happens if the defendant is ultimately successful, but they can't recover their costs because the litigation funder has carved this out of its agreement with the plaintiff, and it's obviously not possible to seek recovery from the plaintiff themselves. I mean, I'm not--I'm not suggesting that Omni does that at all, but can we address this point about how the defendant’s interests are affected by litigation funding agreements, and whether a defendant has any standing to challenge an LFA. 

Arad Mojtahedi  35:25
This is something that was addressed recently by the Quebec Superior Court and the restructuring proceedings of Fortress Global, where there was a question as to whether the LFA limited the funder’s obligation to pay an eventual adverse costs award. Now the court found that where a funding agreement does not provide a full or proper protection for the payment of adverse costs, the defendants in that litigation has a standing to challenge the LFA. Broadly speaking, I think the case law shows that Canadian courts are going to be very picky on this issue. This question of balancing the defendant’s interests with the plaintiff’s access to justice is an uncertain area with room for debate. So I think it is very important for entities that do have recourse to LFAs to make sure that they are mindful of defendant’s rights to get their adverse costs, and potentially challenge LFA’s approval in an insolvency context.

Paul Rand  36:19
Yeah, I would go further and say that I don't think they're being picky, I think their approach is appropriate in--in suggesting that, where there's a litigation funder involved, there should be an expectation that adverse costs of the defendant could be met in the eventuality that--that they come to pass. Importantly, on the issue of standing, I think what we're seeing is that defendants ought to think very carefully about whether to make an issue of litigation funding agreement. More and more in class actions, at least recently, we've seen a number where the defendants simply have not taken a position on the litigation funding approval motion. Defendants need to think very carefully about how they want to be perceived by the court going into a hearing on the merits of the matter at issue. So increasingly, my--my guess would be that defendants will be thoughtful as to whether in the face of professional litigation funding agreements, and clear expectations from the courts, whether--whether defendants will seek to oppose these types of arrangements.

Ailsa Bloomer  37:30
Thank you, Paul. We'll wrap this conversation up with you. From your industry perspective, and based on everything that we've talked about, what are your top three trends and predictions for litigation funding as we move into 2022?

Paul Rand  37:44
Yeah, okay, thank you very much. I think we're going to see in the next two years major law firms looking at litigation funding as a strategy for their firm to get ahead. Second prediction would be that board CEOs, CFOs, will be asking their general counsel, are they educated on litigation funding? Is this something that their company needs to know about and be thinking about? And then finally, and I think it's demonstrated in the context of this discussion, I think increasingly, young partners and up and coming senior associates are going to be looking to litigation funding as a strategy that can help springboard their careers and give them a bigger voice in their firms.

Ailsa Bloomer  38:24
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