Discussing Litigation Funding Can Help Lawyers to Meet their Duty of Care to Clients

May 15, 2018

Lawyers across Canada have taken note of Aird & Berlis v. Oravital Inc., a case in which Ontario’s highest court has provided guidance on lawyers’ duty to advise clients about litigation prospects and risks.

In its decision, the unanimous Court of Appeal affirmed "the solicitors’ duty of care to advise the clients about the legal basis for [their claim for] damages and the risks of litigation". This duty is owed to all clients, even "sophisticated business people".

Raising litigation funding as part of a broader conversation about the inherent risks of litigation can help lawyers discharge both aspects of this duty owed to their clients.

1. Duty to advise on the legal basis for the clients’ claims:

If lawyers and their client apply for litigation funding, they will work together with Bentham on an in-depth due diligence process. This independent analysis is meant to explore whether the case meets Bentham’s funding criteria (see: "What Factors Will a Litigation Funder Consider?"). It also allows the parties, through fresh eyes, to explore the strengths and weaknesses of the case as well as strategies on how to succeed.

If the case meets Bentham’s funding criteria, Bentham can act as a strategic sounding board for the duration of the case, through a ‘bird’s eye’ view of the litigation that is often a valuable perspective. However, even if the case does not meet Bentham’s funding criteria, the lawyer and client will still have the benefit of the Bentham’s analysis as well as any expert opinion Bentham paid for during due diligence.

2. Duty to advise on how the client can mitigate litigation risks:

Litigation funding can completely or partially de-risk litigation, no matter its current stage of progress—even for cases that are well underway (see: "Litigation Wary or Litigation Weary?"). This makes it an important risk-mitigation tool in every lawyer’s toolkit.

In funded cases, Bentham assumes all or most of the client’s legal fees and third-party disbursements, as well as the risk of any adverse costs order against the client, if the case is unsuccessful. Given that Bentham’s funding is non-recourse, the client will not have to pay Bentham anything for this funding unless the litigation succeeds—Bentham’s return is limited only to a portion of the litigation proceeds, if there are any.

In some jurisdictions, professional rules of conduct require lawyers to discuss third party funding with clients (see e.g. the U.K. Solicitors’ Code of Conduct, Rules O1.13, IB1.16). While this is not yet the case in Canada, having a discussion about litigation funding may nonetheless help lawyers discharge their duty of care to advise clients, as articulated by the Ontario Court of Appeal in Oravital.


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