In Houle v St. Jude Medical Inc., 2018 ONCA 88, the Ontario Court of Appeal has ruled that a decision of the Superior Court of Justice to approve a third party litigation funding agreement (“LFA”) on the condition that certain revisions be made to it (which the parties declined to accept) was an interlocutory decision for the purposes of an appeal.
Conditional Approval of Funding Agreement
Justice Perell’s decision in the court below (reported at 2017 ONSC 5129) approved the use of a third party LFA in the context of a proposed class action, subject to certain revisions being made to it. The revisions related to concerns he had with certain terms of the LFA, including limits on the ability of the representative plaintiffs to control the litigation and the potential for the third party funder, Bentham IMF Capital Inc. (“Bentham”), to be overcompensated. Rather than revise the LFA, the representative plaintiff, proposed class counsel, and Bentham appealed Justice Perell’s order. In addition, they sought leave to appeal Justice Perell’s decision to the Divisional Court (though the leave application has yet to be determined).
The Court of Appeal
In the Court of Appeal, the defendants moved for an order quashing the appeal on the basis that the order was interlocutory and thus only appealable to the Divisional Court with leave. The responding parties argued that it was properly appealable to the Court of Appeal as a final order.
The Court recognized the inconsistency in the jurisprudence on interlocutory and final orders, but emphasized that a final order must deal with the substantive merits as opposed to mere procedural rights, despite how important those procedural rights may be.
The Court noted that Justice Perell in fact granted the motion to approve the LFA, albeit he did so conditionally. It was only because those parties decided not to revise the LFA that the motion was eventually dismissed. The Court noted that such an order is akin to other forms of conditional orders, such as an order for security for costs. Where security for costs are ordered but not posted, this may result in the proceedings coming to an end, but the order for security for costs itself remains interlocutory.
The Court determined that Justice Perell’s order did not finally dispose of the rights of proposed class counsel and Bentham as no substantive right was determined by the conditional approval of the LFA. Although the responding parties argued that such a result would effectively end the litigation due to a lack of funding, the Court determined that this was a consequence of the decision not to amend the LFA and not as a result of the order. The Court therefore concluded that the order was interlocutory and only appealable to the Divisional Court with leave, and accordingly quashed the appeal. Once the leave application is heard by the Divisional Court, a further update on this case will be provided.
About the authors
Christopher Wirth
Michael Tersigni
Keel Cottrelle LLP