Although much of the Law Foundation’s income is derived from interest on lawyers’ pooled trust accounts, the Law Foundation also receives money through cy-près settlements in class actions.

Cy-près funds arise when some or all of a class action damages settlement or award cannot be distributed to the class members. This can occur when class members cannot be identified or notified of their entitlement, when they do not claim their share of the litigation proceeds, or when it is uneconomical to determine and distribute each member’s entitlement. It is reported that approximately $100 million has been distributed as fixed cy-près disbursements, in addition to an unknown amount of residual funds that have been distributed as cy-près.

Rather than allowing the funds to revert to the defendant, some courts have adopted the doctrine of cy-près to allow for an alternative distribution. Cy-près means “as nearly as possible” and arose in administration of charitable trusts and bequests to prevent failure of gifts (often to religious organizations) due to the testator not accurately naming the beneficiary or due to subsequent events beyond the testator’s control. To help express the testator’s piety, courts would direct the gift to another organization chosen to be as near as possible to the intended beneficiary.

In class actions, the goal of the distribution of cy-près funds has been to provide indirect benefit to class members, to avoid unreasonably benefiting non-members of the class action and to avoid reversion to the defendant.

Canadian courts have used their discretion to award the cy-près funds to organizations whose work is aligned with the issues raised in the litigation. Courts have also determined that law foundations are suitable recipients of cy-près funds. The Ontario Superior Court in Markson v. MBNA Canada Bank (2012 ONSC 5891) confirmed that “[t]he recipient of the cy-près distribution should either be directly connected to the issues in the class action... or like the Law Foundation [of Ontario] able to use the money to further the goals of the Class Proceedings Act.”

The goal of providing access to justice, common to both class actions and the Law Foundation, led to amendments to the Class Proceedings Act, which mandate that at least 50% of all cy-près funds (other than those funds arising out of actions for damage or loss suffered primarily by Indigenous peoples of Canada) be directed to the Law Foundation. This provision is a first in Canada and applies to actions commenced after the amendment came into force on November 27, 2018. Judicial discretion remains to award the balance of the cy-près award to the Law Foundation or to any other appropriate recipient.

Given the Law Foundation’s mission is to “advance and promote a just society governed by the rule of law, through leadership, innovation and collaboration” and its vision is “a society where access to justice is protected and advanced,” the amendment is a welcome development.

The Law Foundation looks forward to continued receipt of cy-près funds to enhance access to justice for British Columbians or for Canadians across the country by way of a national distribution strategy.