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Litigation Funding vs Lawyer Privilege

The issue of litigation funding and lawyer privilege became a public news issue during the trial Hulk Hogan vs Gawker when it became known that Peter Thiel had secretly funded the litigation as revenge against Gawker for a personal exposé.

The litigation was very expensive and Hogan ultimately won such a large award that Gawker was put out of business.

Throughout various stages in the litigation  the defendant tried to expose who was ultimately paying for the litigation, but it was held to be privileged.

The same issue arose in Galloway v AB BCSC 320 where the defendants sought an order that the plaintiff answer questions about whether a third-party was financing the plaintiff’s litigation.

The plaintiff argued that retainer agreements are privileged, including whether or not those arrangements involve any third party.

The defendants in turn argued that there was jurisprudence that required a person to reveal whether a third-party was paying their legal fees and that it was not a breach of solicitor client privilege.

They relied upon Adams v Norcan Energy Resources 1999 ABQB 84. The court stated that solicitor client privilege applies to communications, facts that exist independent of a communication may be disclosed in certain circumstances. The source of payment of legal fees is such a fact.

But in Telus v . Telecommunications Workers Union 2008 BCCA 144 the court stated that it is rare for the court to direct inquiries to counsel as to who is funding the litigation, including costs. In most cases that will be confidential, if not privileged information of no concern to the court. There may be many reasons why a nonparty might pay or assist.

The court in the Galloway decision declined to order disclosure of who is paying for the litigation, as the jurisprudence cautions against diving too deeply into the balancing test; whether there is an apparent imbalance in economic power, or any other area. If the court does so, all sides, including the very public “Go Fund Me” campaigns that the plaintiff contends that some of the defendants have used to raise money, would need to be examined.

The court held that any concern over financial advantage or disadvantage arises when a large corporate entity, or perhaps a union, is pitted against a private citizen, but is not intended to create an avenue of inquiry where individual citizens are facing other individual citizens.

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