Case information

Civil procedure — Estoppel — Issue estoppel — Abuse of process — Canada had concerns about law firm’s estimated fees and disbursements prior related to claims made by survivors of Indian Residential schools prior to signing of Indian Residential Schools Settlement Agreement — IRSSA contained fee agreement as a result — Canada participated in proceedings in which fee agreement was found to be fair and reasonable and to require a minimum payment without verification — Evidence leading Canada to claim fraud subsequently discovered — Whether party who suspected fraud prior to entering into agreement can seek damages in a tort if new evidence shows fraud — Whether prior proceedings raised issue estoppel — When discovery of new evidence of fraud justifies relitigation of issue foreclosed by issue estoppel or abuse of process.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Prior to the signing of the Indian Residential Schools Settlement Agreement (“IRSSA”), Merchant Law Group (“MLG”) initiated actions against Canada on behalf of Indian Residential School survivors on both an individual and a class basis. While the settlement of those actions was being negotiated, Canada’s representative developed serious concerns about the outstanding fees and disbursements and the number of retainers MLG claimed. As a result, he required that a process for verifying the claimed fees and disbursements be included in the IRSSA, which was signed in May 2006 included an agreement that Canada would pay MLG no less than $25 million, and no more than $40 million in legal fees and disbursements for legal work done in advancing Indian Residential School claims from 1997-2005: Art. 13.08(2). The IRSSA was approved in Sparvier v. Canada (Attorney General), 2006 SKQB 533. When Canada appealed a portion of that decision, MLG’s fees were found to be “reasonable”: Canada (Attorney General) v. Sparvier, 2007 SKCA 37. In Fontaine v. Canada (Attorney General), 2008 SKQB 271, it was determined that MLG was entitled to $25 million in fees without verification, and Canada was ordered to pay that amount to MLG and to complete the verification process.

Once MLG had provided the last of its billing records and retainer agreements, a review indicated that the records contained illegitimate time entries and excessive disbursements. In 2015, Canada launched a fraud action against MLG claiming damages for fraud, deceit and fraudulent misrepresentation. MLG applied to strike the statement of claim for disclosing no reasonable cause of action, and for being scandalous, vexatious and an abuse of process. The chambers judge struck the statement of claim in its entirety; the Court of Appeal allowed an appeal and set the chambers judge’s order aside.