Lexpert Magazine

46 LEXPERT MAGAZINE | OCTOBER 2017 | LITIGATION FINANCE | front, cost that can run north of $1 million. "Oen the hardest pill for a company to swallow is finding the funding to move for- ward," Holub says. "In litigation, you can spread out that cost over a longer period of time and it's easier to fund because you're really only carrying your legal-team fees, and that can be paid on a monthly basis ... But in an ICC arbitration, if you don't pay in advance, the claim doesn't go anywhere." One of his colleagues knew someone socially who worked at the Toronto office of Bentham, an Australian funder with offices in several financial centres includ- ing Toronto, and suggested Holub arrange for introductions. e oil and gas company and Benthem came to an arrangement and the litigation was out of the gate. Given that third-party litigation fund- ing is still "a relatively new experience in Calgary," Holub admits to some early trepidation. Was he concerned that the funder would try to influence the client on their prosecution strategy? "at would have been a thought." But early on he real- ized that his worries were unfounded. "It's been made very clear to us that the funding entity does not get involved in that. ey leave that up to counsel." Moreover, he realized that there were clear advantages to having outside litiga- tion counsel. "I was pleased to discover how much diligence was performed by the they may have to make a choice between engaging in their court business or pursu- ing the business objective." Mining and oil and gas are both also sec- tors where there is a significant disparity between the juniors and the seniors. Many transactions involve a large brand-name company doing a deal with a junior to take a project to the next stage. If a dispute arises, there is a built-in disparity of finan- cial resources that may require the smaller company to get creative when it comes to funding any litigation, he says. Siller, who also clerked at the Ontario Court of Appeal, is seeing larger corpora- tions in all kinds of areas also turn to liti- gation financing. "It's not only the smaller guy using it. Increasingly, when they're dealing with their legal spend, businesses have to decide whether they want to deploy their capital into growing their business or using it to pursue the litigation. e extrac- tive industries is just a subset of businesses where it's more and more rational to get some of those legal expenses off the balance sheet and not have to engage in that false dichotomy. Because there's now a way to both pursue the claim and continue explo- ration efforts." As litigation financing starts to grow and mature, Nomos, one of the most recent Ca- nadian funders on the market, is not par- ticularly drawn by class actions, and while it would not rule out funding one it's more attracted to straight commercial claims. "I think that's an area that's been qui- etly growing," says Siller. "ere's not a lot of visibility because these are typically private arrangements between the claim- ant and the funder, so there's no need for court approval, which makes it difficult to get a clear view on how expensive this kind of litigation is from the court decision. But anecdotally, people are very interested, and law firms in particular are starting to see the value for this kind of service for their clients who are uncomfortable with legal expenses when they're bringing claims." IF CORPORATE law firms are starting to become interested in using third-party funders, it's about time, says Myriam Seers, a senior associate in the litigation group at Torys LLP. Seers has had clients use litigation funding for at least five cases, and acted on many more as the funder's litigation-funding entity. Obviously this is a big investment for them and they really do undertake a comprehensive diligence program on the merits of the case. at sur- prised me a little bit." e exercise in early due diligence, he says, helps the litigator re- ally understand their case comprehensively. In regular litigation where the client pays monthly from the get-go, he says, some- times you discover the merits of the case as it unfolds. But you can't do that in a case where the client is seeking funding, he says, because the funding is typically dependent on the diligence of the litigation funder. "So you really need to be organized, you need to understand your case — the dam- ages implications, the case-law implication — at an early point, because someone's ask- ing you. at's a positive factor." Holub expects the use of third-party funders to grow, especially in extractive in- dustries like oil and gas and mining that are extremely capital intensive. "ink of com- panies here that hold leases in the oil sands for instance. ose are not yet developed, and development of those types of assets are long-term and extraordinarily capital- intensive. If they get into a dispute where they need to pursue a claim, they may not have the cash flow. ey have assets they may be able to borrow against, but if you're going to be using your borrowing room to pursue litigation, it's probably the least ef- fective use of your capital." COMPANIES LIKE the one Holub is representing, which operate in extractive industries — miners, oil and gas companies — are prime candidates for third-party liti- gation financing, says Ezra Siller, managing director of Nomos Capital, a Toronto- based litigation funder and former litigator at Torys LLP. "A lot of companies may use cash on hand to develop a new asset or proj- ect, so if a claim arises during this process, "We've all seen cases that we think have merit but where the client just didn't want to take the risk, no matter how small. … I think litigation funding is a great new thing that provides access to justice not just for the little guy, but also for sophisticated commercial parties." MAUREEN WARD BENNETT JONES LLP

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