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ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: The Trustees of the Labourers’ Pension Fund of Central and Eastern Canada, the Trustees of the International Union of Operating Engineers Local 793 Pension Plan for Operating Engineers in Ontario, Sjuunde Ap-Fonden, David Grant and Robert Wong Plaintiffs - and Sino-Forest Corporation, Ernst & Young LLP, BDO Limited (formerly known as BDO McCabe Lo Limited), Allen T.Y. Chan, W. Judson Martin, Kai Kit Poon, David J. Horsley, William E. Ardell, James P Bowland, James M.E. Hyde, Edmund Mak, Simon Murray, Peter Wang, Garry J. West, Pöyry (Beijing) Consulting Company Limited, Credit Suisse Securities (Canada), Inc., TD Securities Inc., Dundee Securities Corporation, RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada, Inc., Canaccord Financial Ltd., Maison Placements Canada Inc., Credit Suisse Securities (USA) LLC and Banc of America Securities LLC Defendants Proceeding under the Class Proceedings Act, 1992 COUNSEL: •

Charles Wright, Kirk Baert, Serge Kalloghlian for the Plaintiffs

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John Fabello for the underwriter defendants

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Shara Roy for Ernst & Young LLP

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Kenneth Dekker for BDO Limited

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John Pirie and David Gadsden for Pöyry (Beijing) Consulting Company Limited

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Christopher Scotchmer for David Horsley

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Megan MacKey for Allen Chan

HEARING DATE: May 17, 2012 PERELL, J.

2012 ONSC 2937 (CanLII)

CITATION: The Trustees of the Labourers’ Pension Fund of Central and Eastern Canada v. Sino-Forest Corporation, 2012 ONSC 2937 COURT FILE NO.: 11-CV-431153CP DATE: May 17, 2012

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[1] The Trustees of the Labourers’ Pension Fund of Central and Eastern Canada, the Trustees of the International Union of Operating Engineers Local 793 Pension Plan for Operating Engineers in Ontario, David C. Grant, Robert Wong, and Sjuunde APFonden are the Plaintiffs in a proposed securities misrepresentation class action. Some of the claims may not be brought without leave granted under Ontario’s Securities Act, R.S.O. 1990, c. S.5. The Plaintiffs claim that the proposed class members suffered losses in the billions of dollars. [2] The action concerns the affairs of the Defendant Sino-Forest Corporation. There are 23 defendants, including certain directors and officers of Sino-Forest, underwriters, auditors, and consultants. The Plaintiffs seek damages in an amount equal to the losses that they and the other class members suffered as a result of purchasing or acquiring Sino-Forest securities at prices artificially inflated by an alleged misrepresentation respecting, among other things, Sino-Forest’s compliance with generally accepted accounting principles. [3] In this motion, the Plaintiffs seek court approval of a third-party funding agreement, which they submit they require to protect themselves from the adverse costs consequences of the proposed class action should any of the numerous Defendants successfully resist certification or successfully mount a defence to the Plaintiffs’ claims. [4] There is no question that if they are unsuccessful, the Plaintiffs would be exposed to a gigantic costs liability. [5] Koskie Minsky LLP and Siskinds LLP, the lawyers of record and proposed Class Counsel have agreed to fund the disbursem*nts required to prosecute the Plaintiffs’ claims. [6] Claims Funding International, PLC (“CFI”) has entered into a proposed litigation funding agreement with the Plaintiffs. The terms of this agreement provide that CFI will pay $50,000 toward disbursem*nts, and it will pay any adverse costs orders issued against the Plaintiffs in return for a scaled and capped commission on any settlement or judgment obtained by the Plaintiffs on behalf of the class. [7] In the case at bar, the Defendants were served with notice of the motion for approval as were some members of the proposed class for the action. By letter dated February 21, 2012, notice was given to Sino-Forest’s 20 largest independently-run institutional investors as measured by the number of Sino-Forest’s securities held during the proposed class period. [8] There is no opposition to the court granting approval to the third party funding agreement. [9] An agreement nearly identical to the one proposed in this case was approved by Justice Strathy in Dugal v Manulife Financial Corp, 2011 ONSC 1785 (“Dugal”). [10] In Dugal, Justice Strathy also concluded that the court had jurisdiction to make the approval order binding on putative class members before the certification of the action. I recently came to the same conclusion as an aspect of a decision about the

2012 ONSC 2937 (CanLII)

REASONS FOR DECISION

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[11] In Fehr, I discuss the current law about litigation funding, and I reviewed the key judgements; namely: the key judgments are: McIntrye Estate v. Ontario (Attorney General) (2002), 61 O.R. (3d) 257 (C.A.), Metzler Investment GMBH v. Gildan Activewear Inc. [2009] O.J. No. 3315 (S.C.J.), and Dugal v. Manulife Financial Corp., 2011 ONSC 1785, additional reasons 2011 ONSC 3147. I rely on but will not repeat that analysis here. [12] In Fehr, I concluded that third party funding agreements are not categorically illegal on the grounds of champerty or maintenance, but a particular third party funding agreement might be illegal as champertous or on some other basis. I also concluded that Plaintiffs must obtain court approval in order to enter into a third party funding agreement. [13]

In the case at bar, the principle terms of the third party funding agreement are:

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CFI agrees to pay the Plaintiffs’ adverse costs orders in exchange for a commission on any settlement or judgment made in relation to the claims asserted by the Plaintiffs on behalf of the class

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in the event a settlement or judgment is reached at any time before the filing of the Plaintiffs’ pre-trial conference brief, a commission representing 5% of the amount of such settlement or judgment, after deduction of lawyers fees and disbursem*nts, including applicable tax, and any administration expenses associated with such settlement or judgment, will be paid to CFI, capped at a maximum of $5 million

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in the event a settlement or judgment is reached at any time on or after the filing of the Plaintiffs’ pre-trial conference brief, the commission shall be 7% of the amount of such settlement or judgment, after deduction of lawyers fees and disbursem*nts, including applicable tax, and any administration expenses associated with such settlement or judgment, capped at a maximum of $10 million

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if the judgment or settlement concerns other actions in addition to the within proceeding, then the same stage-dependent commission percentages and caps apply unless the commission can otherwise be determined in a manner satisfactory to all parties to the resolution

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although there is an obligation on Class Counsel to inform CFI about any significant issue in the action including prospects, strategy, quantum, proof and material changes, CFI acknowledges that the Plaintiffs provide the instruction to their lawyers and that the lawyers’ professional duties are owed to the Plaintiffs and not CFI

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CFI must pay, into court, security for the Defendants’ costs on an escalating scale reflecting the progress of the litigation

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CFI is bound by the deemed undertaking rule (Rule 30.1.01).

2012 ONSC 2937 (CanLII)

procedure to follow on a third party funding approval motion. See Fehr v. Sun Life Assurance Company of Canada 2012 ONSC 2715

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[15] It is a fair and reasonable agreement that facilitates access to justice while protecting the interests of the Defendants. The Defendants have the comfort that money for their legal costs has been paid into court. [16] In the circ*mstances of this case, the third party funding agreement is preferable to the alternative of funding from the Class Proceedings Fund. The commission is less than the 10% uncapped levy that would be extracted by the Fund. [17]

For the above Reasons, I grant approval of the third party funding agreement.

_____________________ Perell, J. Released: May 17, 2012

2012 ONSC 2937 (CanLII)

[14] Much for the same reasons that commended themselves to Justice Strathy in the Dugal case, I conclude that the third party funding agreement in the case at bar should be approved.

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: The Trustees of the Labourers’ Pension Fund of Central and Eastern Canada, et al. Plaintiffs - and Sino-Forest Corporation et al. Defendants ________________________________________ REASONS FOR DECISION ________________________________________ Perell, J. Released: May 17, 2012.

2012 ONSC 2937 (CanLII)

CITATION: The Trustees of the Labourers’ Pension Fund of Central and Eastern Canada v. Sino-Forest Corporation, 2012 ONSC 2937 COURT FILE NO. 11-CV-431153CP DATE: May 17, 2012