Litigation Loans And Adverse Cost Insurance - An Update - The Doctrines Of Champerty And Maintenance

• Published date: 08 April 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: McCague Borlack LLP
• Author: Mr Van Krkachovski and Ryan R. Taylor

Following the publication of the article Litigation Loans and Adverse Cost Insurance in March 2021, the writers received a question regarding the interplay between the doctrines of champerty and maintenance and its effect on litigation loans.

The Black's Law Dictionary definition of 'maintenance' is as follows:

An officious intermeddling in a lawsuit by a non-party by maintaining, supporting or assisting either party, with money or otherwise, to prosecute or defend the litigation.

'Champerty' is defined by Black's Law Dictionary as follows:

A bargain between a stranger and a party to a lawsuit by which the stranger pursues the party's claim in consideration of receiving part of any judgment proceeds; it is one type of 'maintenance', the more general term which refers to maintaining, supporting or promoting another person's litigation.

Both of these concepts are based on English common law, but they have not been applied the same in Canada. In the context of litigation loans, the oft-cited case is the British Columbia Supreme Court decision, Wiegand v Huberman, (1979), 18 B.C.L.R. 102, which states:

The old English cases indicate that the courts used to seek to discourage litigation. In Canada, while the courts do not seek to encourage litigation, they do not want to place any obstacles in the way of an aggrieved citizen bringing a lawsuit which on legal advice he wishes to bring. Given the costs of litigation, it may be necessary to obtain such assistance; in fact, it is commonplace in this province for lawyers to undertake litigation on behalf of clients with limited or no means on the understanding that if the suit is successful the lawyer will receive an agreed share of the proceeds. Are such agreements unlawful and unenforceable? I cannot imagine that they are.

As such, Canadian jurisdictions have leaned heavily on the access to justice arguments, in that, in order to pursue litigation, a loan to fund it must sometimes be taken. As such, the 'classic' definition of champerty and maintenance in Canada has been watered down.

...the courts will still enforce champerty where the interests of justice require doing so.

However, the courts will still...