Supreme Court of Canada approves Omni Bridgeway’s litigation funding agreement

May 14, 2020
SCC image APPROVED

Earlier this year, we discussed the impact of a landmark decision from the Supreme Court of Canada about litigation funding. This week, the SCC issued its written opinion discussing its rationale for the approval of Omni Bridgeway’s litigation funding arrangement.

In 9354-9186 Québec Inc. v. Callidus Capital Corp.2020 SCC 10 (Bluberi), the Supreme Court of Canada (SCC) recognizes how litigation funding helps companies realize value from a litigation “pot of gold.” Bluberi is the first decision from the SCC on litigation funding. While it arises in an insolvency context, this case underscores how dispute financing can benefit any party as a tool to transfer the risk and cost of litigation or arbitration to a third party.

This decision concerns two companies (formerly called Bluberi) whose litigation funding from Omni Bridgeway (formerly called Bentham IMF) was the subject of an approval motion before an insolvency court in March 2018. Bluberi wanted Omni Bridgeway’s financial support in the form of “interim financing” that Bluberi could use to bring litigation against its former lender, who Bluberi alleges caused its demise.

The insolvency court approved Bluberi’s litigation funding arrangement (LFA), in part because it was the “only avenue that can potentially allow for any meaningful recovery for the creditors.” The Quebec Court of Appeal disagreed, overturning the insolvency court’s decision in February 2019.

The matter came before the SCC on January 23, 2020. At the end of oral argument, the SCC unanimously agreed with the insolvency court, immediately restoring the approval of Omni Bridgeway’s LFA with Bluberi.

On May 8, 2020, the SCC released its written reasons for judgment. Chief Justice Wagner and Justice Moldaver held that the judge at first instance properly exercised his discretion to approve Omni Bridgeway’s LFA after finding it “fair and reasonable”. The LFA was not a plan of arrangement, and did not need to be presented to Bluberi’s creditors for a vote.

The SCC made specific reference to the findings of the judge at first instance, and led the Court to the following conclusions (at paras. 106-107, citations omitted):

  • that approval of the LFA would assist [Bluberi] in finalizing a plan ‘with a view towards achieving maximum realization’ of its assets; …
  • that the creditors would not be materially prejudiced by the Litigation Financing Charge … [and] ‘given the particular circumstances of this matter, the only potential recovery lies with the lawsuit that the Debtors will launch’; and
  • that the [court-appointed] Monitor supported approving the LFA as interim financing.

“In our view, it is apparent that the supervising judge was focussed on the fairness at stake to all parties, the specific objectives of the CCAA [Canada’s insolvency legislation], and the particular circumstances of this case when he approved the LFA as interim financing. We cannot say that he erred in the exercise of his discretion.”

Bluberi represents a milestone for commercial litigation funding in Canada. It will be particularly helpful to insolvency and restructuring professionals as they look at litigation as an asset class from which to maximize recovery for a company’s creditors. As the SCC acknowledges, litigation can be akin to a “pot of gold” (at para. 111):

“When the ‘pot of gold’ is secure — that is, in the event of any litigation or settlement — the net funds will be distributed to the creditors. Here, if the [claims] generate funds in excess of Bluberi’s total liabilities, the creditors will be paid in full; if there is a shortfall, a plan of arrangement or compromise will determine how the funds are distributed.”

This matter further demonstrates Omni Bridgeway’s global leadership in advancing the law relating to litigation funding. It also represents an opportunity for Omni Bridgeway to continue supporting Bluberi in pursuing its claims and seeking access to justice.

What this decision means for you

  • Insolvency and restructuring professionals: Consider whether litigation pursued with third-party financing could help satisfy outstanding creditor claims
  • Companies needing liquidity events: Explore how the ability to transfer the risk and cost of litigation should inform your affirmative litigation strategy
  • Lawyers representing cost-sensitive, claim-rich clients: Understand the fee flexibility options made possible by litigation funding

The Omni Bridgeway team would be pleased to speak with you anytime about this case or about accessing litigation funding for you, your company or your clients.