Class Action

OCA settles issue around third-party funding

By Staff

A recent Ontario Court of Appeal (OCA) decision settled the issue of whether a judge’s order on a third-party funding agreement is final or interlocutory, says Toronto class-action lawyer Margaret Waddell.

“We now have clarity in an area where previously there was no jurisprudence on this particular point, and direction from the court on how to proceed with these things in the future,” she tells

Waddell, a partner with Waddell Phillips Professional Corporation, acted for the appellants in the case.

The appellants are the proposed representative plaintiffs in a putative class action. They, along with class counsel, reached an agreement for litigation funding from a third party, and a motion seeking approval of the agreement was brought to the Ontario Superior Court of Justice. The judge declined to approve the agreement unless certain changes were made within 60 days.

The changes were not acceptable to the parties and they appealed the conditional order to the OCA, arguing that because the order is final, the court has jurisdiction to hear the appeal. The respondents, however, submitted that the motion judge made an interlocutory order and any appeal must be made to the Divisional Court with leave.

“This motion represents yet another salvo in the seemingly never-ending battle over what orders are final and what orders are interlocutory,” the Court of Appeal said.

Waddell says she agrees with the court’s observation. “Different situations keep cropping up that haven’t been explored before, where there is some ambiguity as to whether the order should be characterized as final or interlocutory, and this case was one of those examples,” she says.

The decision also noted: “The problem that this motion once again raises is that there is no definition in the Courts of Justice Act as to what constitutes a final order. This problem is exacerbated by the fact that, notwithstanding the many decisions on the subject, they have not always followed a consistent approach for determining whether an order is final or interlocutory.”

The court ultimately ruled in favour of the respondents, finding that the order is interlocutory and can only be appealed to the Divisional Court if leave is granted.

“I think this case is particularly interesting and important because it clarifies that if you bring a motion for approval of a third-party funding agreement — even though it affects the interests of not just the plaintiff but also the funder, and in this case class counsel — the route of appeal is not directly to the Court of Appeal if the agreement is not approved, but rather the parties have to proceed to seek leave from the Divisional Court before an appeal will be heard at all,” Waddell says.

“It really is setting up some procedural hurdles that need to be overcome if the court doesn’t approve a funding agreement and the parties take issue with it,” she says, adding that leave to appeal to the Divisional Court in this matter has been sought.

The Court of Appeal referred to a number of cases, including what is believed to be the first decision by the court that tried to differentiate between final and interlocutory orders.

In that 1932 case, the Court of Appeal wrote: “The interlocutory order from which there is no appeal is an order which does not determine the real matter in dispute between the parties — the very subject matter of the litigation, but only some matter collateral. It may be final in the sense that it determines the very question raised by the applications, but it is interlocutory if the merits of the case remain to be determined.”

The court, in the current case, noted that two of the parties challenging the order “are not, strictly speaking, parties to the proceeding. Where ‘non-parties’ are involved, the question of whether an order is final or interlocutory is made more difficult.”

In reaching its conclusion, the court said, “While the responding parties say that the result is the end of the litigation because the proposed representative plaintiffs will not have funding to pursue their claim, that result is a consequence of the responding parties’ decision not to amend the funding agreement. It is not a necessary result of the order.”

Waddell says, “I think the practical upshot will be that in the long term, given what the Court of Appeal has said, if the funding agreement isn’t approved on the first go-around, it’s going to be exceedingly difficult for there to be an appeal from that decision. The parties are going to have to really try and get it right the first time."

“The Court of Appeal concluded that because this isn’t finally dispositive of the issues in the litigation, effectively it’s an interlocutory order," she adds.

Waddell notes that the Divisional Court granted leave to appeal in this matter on Feb. 26.

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