Ontario court adjourns motion to approve litigation funding agreement

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In Gebien v. Apotex Inc., the plaintiff asked the Ontario Superior Court of Justice to approve a third-party funding agreement in a putative class action seeking more than $1 billion against opioid manufacturers and distributors.

The defendants raised a number of objections to provisions of the agreement that were potentially prejudicial to the defendants’ legitimate interests. As the Court noted, the most important objection involved the funder’s use and distribution of the defendants’ confidential documents. The Court found this objection and others “justified and substantial”.


The proposed class action names 17 groups of pharmaceutical companies[1] that manufacture or distribute opioids in Canada. The plaintiff seeks to represent a class of all persons in Canada who were prescribed opioids and suffered from Opioid Use Disorder.

To address the significant expenses and exposure to potential adverse costs, the plaintiff and his counsel sought court approval of its third-party funding agreement (or Agreement).

In general, third-party funding of class proceedings has been recognized as lawful in Canada and been justified as a means to promote access to justice. The general test for approval of a third-party funding agreement is that the agreement should not be “champertous or illegal and it must be a fair and reasonable agreement that facilitates access to justice while protecting the interests of the defendants” (emphasis added). Defendants may raise objections based on their legitimate interests.

Defendants' objections

In this case, some defendants objected to clauses of the third-party funding agreement. The Court did not agree with all the objections; however, three objections that the Court agreed with are discussed below.

  1. The confidentiality objection was the most important

The defendants argued the Agreement did not adequately protect their rights to confidentiality, as it allowed disclosure beyond the funding entity to “Affiliates” and “Permitted Persons”. These included, among others, subsidiaries and representatives of the funding entity.

The Agreement also failed to impose limits on the use of the confidential information.

Considering this the most important and serious objection, the Court adjourned the motion to give the plaintiff an opportunity to justify the existing provisions or submit another proposal that would resolve the objection.

  1. The post-termination confidentiality objection had merit

The defendants objected to a clause which entitled the funding entity to keep copies of the defendants’ confidential information provided to it after the termination of the Agreement.

The Court opined that retention of documents could be justified in some cases but not others. Therefore, it wrote, (a) the Agreement should contain some provision to justify document retention post termination; and (b) the question of how the defendants’ documents should be treated as a consequence of termination should be addressed before approval of the Agreement.

  1. The attornment clause was insufficient

The funding entity undertook to obtain an undertaking from its ultimate parent company, Omni Bridgeway Ltd., that the parent company would attorn to the jurisdiction of the Ontario court. The Court agreed with the defendants that the parent company was required to attorn to the jurisdiction of the Ontario court for “all purposes”. As drafted, the attornment undertaking was insufficient because it only applied to payments of costs.

Key takeaway

This decision is a valuable indication of a defendant’s rights and roles in a motion to approve third-party funding. The Court confirmed that a defendant is entitled to make objections to the approval of the agreement that has been submitted — particularly where the agreement would affect the defendant’s legitimate interests.

A revised third-party funding agreement has since been submitted and approved by the Court.

[1] Osler is defending some of the pharmaceutical companies in this action.