COURT FILE NO.: CV-20-00644200-00CP

DATE: 20200917

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ALEX KAN and STUART RATH, Plaintiffs

– and –

KEW MEDIA GROUP INC., STEVEN SILVER,

GEOFFREY WEBB, DAVID FLECK, MAURICE KAGAN,

PATRICE MERRIN, PETER SUSSMAN and ERICK KWAK, Defendants

BEFORE: E.M. Morgan J.

COUNSEL: Garth Myers, Jonathan Foreman, and Sarah Bowdon, for the Plaintiffs

David Conklin and Carly Fox, for the Defendants, Steven Silver, David Fleck, Maurice Kagan, Patrice Merrin, Peter Sussman and Erick Kwak

David Hausman and Jonathan Wansbrough, for the Defendant, Geoffrey Webb

HEARD: September 14, 2020

tHIRD PARTY FUNDING APPROVAL

[1] The Plaintiffs bring this motion for approval of a third-party Adverse Costs Indemnity and Funding Agreement with Camac Partners LLC (“Camac”) dated August 31, 2020 (the “Agreement”).

[2] The Agreement provides that Camac will indemnify the Plaintiffs for any adverse costs awards that might be made in this class action. It also provides for certain disbursement funding by Camac in exchange for a fixed percentage of the net recovery from any settlement or judgment. The Defendants raise no objection to the Plaintiffs’ request for approval of the Agreement.

[3] The action is brought on behalf of purchasers Kew Media Group Inc. (“Kew”) securities between March 28, 2017 and January 16, 2020. The Statement of Claim alleges that Kew and its senior officers and directors are liable for misrepresentations in the company’s public filings. It sets out claims at common law and under the Ontario Securities Act.

[4] On February 28, 2020, Koehnen J. granted an application for a receivership order over Kew commenced by a number of its lenders. The Order included a stay of all proceedings pending against Kew and precluded any new proceeding against Kew except with the written consent of the Receiver or leave of the Court. On July 14, 2020, Justice Koehnen lifted the stay of proceedings to permit, among other things: (a) the issuing, filing, and serving of the Statement of Claim in this matter; and (b) serving (as necessary), filing, and hearing any motions related to the court approval of a third-party adverse costs indemnity and disbursement funding agreement.

[5] While the Plaintiffs are committed to pursuing the action on behalf of other similarly situated investors, they require indemnification in the event of an adverse costs award. From the outset, therefore, their counsel undertook to secure such an indemnity. Camac was one of a number of third party funders that were approached in this regard. Among the offers received from various potential funders, Camac’s was the most advantageous to the putative class. After several weeks of negotiations, the Plaintiffs and Camac entered into the Agreement on August 31, 2020.

[6] The Agreement provides that Camac will indemnify the Plaintiffs in the event of an adverse cost awards in an amount up to $800,000.00. In addition, Camac will provide funding for disbursements up to $125,000.00. In return, Camac would be repaid any adverse costs and disbursements it paid and receive 10% of the net recovery to the class (net of class counsel fees, taxes, and disbursements and administration and notice costs), capped at $4 million.

[7] The Agreement requires periodic reporting by the Plaintiffs to Camac with respect to the progress of the action. However, it specifically provides that the Plaintiffs shall maintain sole control over the litigation. The Agreement, which was just concluded two weeks ago, was promptly disclosed to the Court.

[8] The Agreement also imposes a duty of confidentiality on Camac in respect of any information or material it receives in the action, and binds Camac to the deemed undertaking rule in respect of anything it learns during the course of the action. Camac is required to return any information or material it has received at the end of the action.

[9] Counsel for the Plaintiffs views the adverse costs indemnity agreement as a reasonable alternative to the Class Proceedings Fund and as an arrangement that is fair to both the Plaintiffs and the proposed class. As has been said before, no rational plaintiff in a class proceeding would risk an adverse cost award that would far exceed his or her potential recovery in the action: Dugal v. Manulife Financial Corporation, 2011 ONSC 1785, at para 28. As in many such cases, the Agreement was necessary to provide access to justice to the Plaintiffs and the proposed class.

[10] I agree that the terms of the Agreement appear to be fair and reasonable. It provides adequate protections for the Plaintiffs ($800,000.00 adverse costs indemnity) and provides a payment to Camac that is a reasonable percentage of net recovery (10%, capped at $4,000,000). These terms are comparable to the Class Proceedings Fund, and are along the lines of the funding agreement approved by this court in David v. Loblaw, 2018 ONSC 6469, at para 13:

In General Motors [2018 ONSC 2535], at para 9(xii), the court found a litigation funding agreement to be ‘fair and reasonable’ where ‘the commission in the Funding Agreement is less than the 10% premium applied by the CPF and is capped at a fixed amount, unlike the CPF.’ The same can be said here, where the Agreement hits the 10% target and places caps on a sliding scale depending on the stage where a settlement is reached.

[11] The Plaintiffs have deposed that they remain committed to pursuing this action and to instructing counsel on behalf of and in the best interests of the class.

[12] The terms of the Agreement are hereby approved. There shall be an Order to go in the form submitted by the Plaintiffs and agreed to by the Defendants.

Morgan J.

Date: September 17, 2020