IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20140528

Docket: S111075

Registry:
Vancouver

Between:

Dianna Louise
Stanway

Plaintiff

And

Wyeth Canada Inc.,
Wyeth Pharmaceuticals, Inc., Wyeth
Holdings Canada Inc., Wyeth Canada, Wyeth-Ayerst International Inc.,
and Wyeth

Defendants

Before:
The Honourable Madam Justice Gropper

Reasons for Judgment
Re: Approval of Litigation Financing Agreement

Introduction

[1]            
In my directions regarding litigation funding agreements (LFA) indexed
at 2013 BCSC 1585, I determined that a LFA may be approved in British Columbia.
I invited the defendants’ submissions in respect of the particular aspects of
the LFA. I determined that the LFA is subject to privilege on matters relating
to litigation strategy, litigation budget and other “highly sensitive” aspects.

[2]            
This decision concerns the plaintiffs’ application to approve the LFA between
Ms. Stanway and Catherine Willis (the representative plaintiffs) and
BridgePoint Global Litigation Services Limited Partnership V (BridgePoint). The
representative plaintiffs, through their counsel, have negotiated an LFA with
BridgePoint. They have signed the LFA as has the principal of BridgePoint.

[3]            
At para. 4 of my directions I outlined the terms upon which the
representative plaintiffs would enter a LFA:

(a)        Court approval: the LFA must be subject to court
approval;

(b)        Notice: the LFA must be described in the notice of
certification so that class members can choose whether or not to accept it by
opting in/out of the class;

(c)        Contingency: the LFA must be payable only in the
event of success;

(d)        Disbursements: the purpose of the LFA is to cover
disbursements only

(e)        Independence: the private lender shall have no say
in the conduct of the lawsuit. All decisions remain the preserve of the
representative plaintiffs;

(f)         Qualifications: the only private lenders to be
considered are those which have already been approved by Canadian courts in
other cases involving LFAs;

(g)        Confidentiality of Canadian Documents: the representative
plaintiffs will not provide to the private lender any documents produced by the
Canadian Defendants in this lawsuit which are subject to the implied
undertaking rule. …Canadian documents which are publicly available may be
shared with the private lender. This would include documents which have already
been filed as exhibits on motions in this proceeding.

(h)        Confidentiality of
American documents: the representative plaintiffs will not provide the private
lender any documents originating from the American Defendants which are subject
to the Access Order of May 24, 2006. For greater clarity … American documents
which are publicly available may be shared with the private lender. This would
include documents which have been filed as trial exhibits in American
proceedings, or which have been posted on the internet by the University of
Southern California Drug Industry Document Archive.

[4]            
Ms. Stanway has provided an affidavit that demonstrates that these
terms have been met. The only difference is that the notice of the class action
has been issued. It refers to an LFA but does not include the incremental cost
of it.

Position of the Parties

The Representative Plaintiffs

[5]            
The representative plaintiffs say that they investigated all the
Canadian companies in the business of litigation financing. The only Canadian
company that would agree to finance a class action for personal injury is
BridgePoint. BridgePoint has obtained court approval in four class actions in
Alberta, Nova Scotia, Ontario and British Columbia.

[6]            
The plaintiff describes the LFA as superior to other LFAs negotiated by
plaintiffs in other cases. The LFA negotiated by the representative plaintiffs
provides that BridgePoint may advance funds in three separate instalments; the
funds available under the LFA are substantial; and the funding mechanism under
the LFA is structured to ensure that each instalment bear some relationship to
the remaining stages of the lawsuit yet to be completed. Each instalment has an
increased base charge: the amount advanced and the rate depends on how the
litigation proceeds.

The Defendants

[7]            
The defendants do not take a formal position on the application but
provided comments as contemplated in my directions. The defendants refer to:

1.     the
requirements of an LFA to be fair and reasonable and not champertous or
contrary to public policy;

2.     whether
the representative plaintiffs maintain sufficient control; and

3.     does the
LFA meet the requirements of the access agreement entered into between the
parties on May 24, 2006?

[8]            
Specifically, the defendants point out that the LFA guarantees
BridgePoint a minimum of 150% return on its investment. There is no cap on BridgePoint’s
potential recovery, which the defendants say provides greater benefit to
BridgePoint under this LFA than has been acceptable for funders in other
Canadian cases. They suggest that the representative plaintiffs have a better
arrangement with their counsel, who are currently charging interest on
disbursements at 10% per annum, not compounded. The high return on
BridgePoint’s loan may be unjustified given that British Columbia’s no cost
regime means that BridgePoint faces less risk than funders in other
jurisdictions: BridgePoint does not have to indemnify the representative
plaintiffs for an adverse costs award.

[9]            
The defendants say that the LFA imposes certain restrictions on the
ability of the plaintiff to control the litigation: BridgePoint has a right to
terminate the LFA if the representative plaintiffs change counsel or to
terminate, dismiss, or otherwise continue legal claims that materially change
the prospects of success in prosecuting the Action (section 10); BridgePoint is
entitled to full payment of the Contingent Value Right as well as immediate
repayment of all disbursements previously loaned (section 10); BridgePoint has
an obligation to release disbursements contingent on continuing compliance with
the litigation plan (section 2); and BridgePoint will provide advice in the
litigation (section 9) which may interfere with the representative plaintiffs
ability to maintain independence over the litigation.

[10]        
The defendants raise concerns that the confidentiality and privacy
protections which are agreed to in the Access Order may be compromised. They
also suggest that the LFA should include a term regarding the plaintiffs’
ability to seek independent legal advice.

Legal Framework

[11]        
British Columbia courts have not considered LFAs in the context of class
proceedings. The authorities in respect of LFAs emanate primarily from Ontario.
I addressed the differences between the class action regimes in Ontario and British
Columbia in my direction at paras. 11 and 12:

[11] British Columbia is a “no costs” jurisdiction pursuant
to s. 37 of the CPA, as are Alberta and Nova Scotia. Ontario and Quebec
are costs regimes and have public agencies that provide litigation funding to
class action plaintiffs. In Ontario, a class proceeding fund was established
under s. 59.1 of the Law Society Act, R.S.O. 1990, c. L.8, which is
administered by the Law Foundation of Ontario. It assists Ontario plaintiffs
with disbursement expenses and indemnifies plaintiffs against adverse costs
awards. In Quebec, the Fonds d’aide aux recours collectifs was established by An
Act Respecting the Class Action, R.S.Q. c. R-2.1. It is an independent
agency with board members appointed by the Quebec Ministry of Justice after
consultation with the Barreau du Quebec (s. 8). It may assist a Quebec
plaintiff with legal fees and disbursements in exchange for a percentage of the
recovery in accordance with the regulations.

[12] There is no public agency to
assist class action plaintiffs with disbursements in British Columbia.

[12]        
Mr. Justice Strathy (as he then was), considered the “practical concerns”
in class actions that may be addressed by a LFA in Dugal v. Manulife
Financial Corp., 2011 ONSC 1785. While he was clearly addressing the impact
of an adverse cost awards on a representative plaintiff, some of his comments
are apposite in a no-costs regime, most importantly to provide access to
justice to large groups of people who have claims that cannot be economically
pursued individually” (at para 27).

[13]        
While British Columbia class action plaintiffs do not face that risk,
they still face the obligation for the payment of disbursements even if they
are successful. In a claim such as this one where there will be an intense
battle of experts, the disbursements can be several thousands of dollars. As
Strathy, J. points out: “The grim reality is that no person in their right mind
would accept the role of representative plaintiff if he or she were at risk of
losing everything they own. No one, no matter how altruistic, would risk such a
loss over a modest claim” (at para 28). One of the “responses to this reality”
is the availability of LFAs:

…indemnities given by class
counsel are commonplace – they have been recognized as "part of the
landscape in class proceedings": Holmes v. London Life Insurance Co.
(2007), 40 CPC (6th) 167, [2007] O.J. No. 158 at para. 2 (S.C.J.); Bellaire v.
Daya (2007), 49 C.P.C. (6th) 110, [2007] O.J. No. 4819 at para. 81 (S.C.J.).
Such agreements impose onerous financial burdens on counsel and risk
compromising the independence of counsel, which is such a valued part of our legal
tradition.

[14]        
In his reasons for approving the LFA, Strathy, J. comments at para. 33:

33 In this case, subject to the concerns expressed
below, I have decided to approve the funding agreement for the following
reasons:

(a) The funding agreement helps to promote one of the important
goals of the CPA– providing access to justice. … Just as contingency fee
agreements have been recognized as providing access to justice, so too third
party indemnity agreements can avoid the unfortunate result that individuals
with potentially meritorious claims cannot bring them because they are unable
to withstand the risk of loss: see McIntyre Estate at para. 55.

(b) There is no evidence that [the litigation funder] stirred up,
incited or provoked this litigation, within the meaning of the term
"moved" in s. 1 of the Champerty Act: see McIntyre Estate
at para. 41. On the contrary, the plaintiffs demonstrated a clear intention to
proceed with this litigation before [the litigation funder] came on the scene.

(c) The indemnification agreement leaves control of the litigation
in the hands of the representative plaintiff – it does not permit officious
intermeddling in the conduct of the litigation by the funder, but allows it to
receive appropriate information about the progress of the litigation,
consistent with its need to manage its own financial affairs, such as posting
reserves.

(d) The commission payable (7%) is, in general, reasonable and
consistent with the commission (10%) that would be payable to the only other
available source, the Fund.

(e) The commission cap ($5 million prior to pre-trial and $10
million thereafter) is also reasonable and is a fair reflection of the
potential downside risk facing the funder ($10 million in costs)…

(f) The commission is acceptable to the representative plaintiffs…

(g) While it is true that one may not be able to say, with
absolute certainty, that there is no possibility that the funding agreement
might result in a "windfall" recovery to [the litigation funder], the
possibility of such a recovery, when balanced against the probability of
protracted litigation and a somewhat speculative result, is a factor that a
commercial risk-taker must take into account in determining the amount of its
compensation…

(h) In the existing state of affairs, in which the defendants
profess every intention of mounting an aggressive and expensive defence, it is
my assessment that the financial terms of the indemnification agreement are a
fair reflection of risk and reward.

(i) The plaintiffs are represented by experienced and highly
reputable counsel who can be expected to discharge their duties to the
plaintiffs, the class and the court without being influenced by the funder.

(j)
There will be court supervision of the parties to the agreement.

[15]        
In Bayens v. Kinross Gold Corporation, 2013 ONSC 4974,
Mr. Justice Perell outlined the principles to consider in to approving a
LFA at para. 41. I refer particularly to the following:

·       
…the third party agreement must not compromise or impair the
lawyer and client relationship and the lawyer’s duties of loyalty and
confidentiality or impair the lawyer’s professional judgment and carriage of
the litigation on behalf of the representative plaintiff or the class members.

·       
…the third party funding agreement must not diminish the
representative plaintiff’s rights to instruct and control the litigation.

·       
…the court must be satisfied that the representative plaintiff
will not become indifferent in giving instructions to class counsel in the best
interests of the class members

·       
…the court must be satisfied that the agreement is necessary in
order to provide the plaintiff and the class members’ access to justice.

·       
.. the court must be satisfied that the agreement is fair and
reasonable to the class. The court must be satisfied that the access to justice
facilitated by the third party funding agreement remains substantively
meaningful and that the representative plaintiff has not agreed to overcompensate
the third party funder for assuming the risks

·       
…the third party funding agreement must contain a term that the
third party funder is bound by the deemed undertaking and is also bound to keep
confidential any confidential or privileged information.

Analysis

[16]        
The defendants suggest that the court may wish to consider amendments to
the LFA, rather than approving it. A significant consideration in this context
is that the representative plaintiffs have access to only three companies
engaged in litigation financing which have been approved by a Canadian court. Only
BridgePoint provides litigation funding in a personal injury claim. It is not a
broad marketplace where the plaintiff can chose from an array of lenders or
attempt to strongly negotiate where there are no other alternatives.

[17]        
As the Ontario jurisprudence points out, the LFA must be fair and
reasonable and provide the representative plaintiffs with access to judgment,
without compromising the principles of independence of counsel, confidentiality
agreements between the parties be observed and, not to the disadvantage of the
representative plaintiffs.

[18]        
First, in respect of fees and the lack of a commission cap, I find the
LFA to be reasonable and fair. The commission outlined in the LFA appears to be
consistent with commissions that have been approved in other cases. The lack of
a cap does not undermine my conclusion in this regard. I accept that plaintiffs’
counsel are discharging their duties to the plaintiffs’ class and the court;
the market for litigation financing is limited; and it is acceptable to the
representative plaintiffs. Even though the funding agreement may result in a
“windfall” recovery, there is every probability of a protracted litigation and the
result is speculative. BridgePoint will be providing disbursement funding even
if the plaintiff is successful in this litigation. Those are factors that
BridgePoint must take into account when it determines its risk and its
compensation.

[19]        
I do not find that the independence of plaintiff’s counsel is
compromised by the termination clause set out in section 10 of the LFA relating
to BridgePoint’s ability to terminate the agreement following a decision to
change counsel or otherwise alter the strategic course of litigation (section
10); to make release of disbursements contingent on continuing compliance with
the agreed upon litigation plan (section 2); or BridgePoint providing advice in
the litigation (section 11(f)). I agree that the termination clause is
triggered in circumstances such as where the representative plaintiffs abandon
the case, which counsel for the representative plaintiffs describes as “dire
circumstances”. The litigation plan has been approved by the court and must be
followed unless the court determines a different litigation plan. While
BridgePoint has the ability to provide advice, plaintiff’s counsel is not
obliged to follow the advice.

[20]        
In relation to the defendants’ suggestions concerning the Access Order,
I am satisfied that the plaintiffs and their counsel understand their obligations
thereunder and will abide by them in their dealings with BridgePoint. BridgePoint
is obliged to sign the confidentiality undertaking before it has access to any
documents covered by the Access Order.

[21]        
Finally, in respect of independent legal advice, the defendants’
suggestion has some attraction. Contingency agreements in this province are
required to include such a term. However, the representative plaintiffs in this
class action cannot enter into the LFA without court approval which is not the case
in contingency agreements generally. Having had the input of counsel for both
the representative plaintiffs and the defendants, I consider independent legal
advice, particularly at this stage of the litigation, to be of little benefit.

Conclusion

[22]        
I approve the LFA between the representative plaintiffs and BridgePoint.

“Gropper J.”