Saskatchewan appeal court rules on legal fees dispute over residential schools

The Saskatchewan Court of Appeal is allowing an appeal of a lower-court ruling in a dispute between the Canadian government and the Merchant Law Group.

The government has argued that the firm, which represented thousands of residential school survivors, should have to pay back legal fees because of allegations its billings were inflated.

Lawyers for Canada's attorney general argued the government would not have entered into an agreement a decade ago to pay the firm $25 million if it had known there were concerns about how much time the company spent working on residential school claims.

Counsel for the law firm has argued the government knew there were concerns about billing and went into negotiations with its eyes wide open, adding that dragging the case into court again was an abuse of process.

In a decision released Wednesday, Madam Justice Jacelyn Ryan-Froslie provided a written decision — with the other two appeal court justices concurring — that concluded the federal government's position has merit.

Ryan-Froslie allowed the appeal and set aside the decision by the lower-court judge, adding that Merchant Law Group "shall pay to Canada the costs of the within appeal assessed in the usual way."

The case goes back about a decade, when courts in each province approved the Indian Residential Schools Settlement Agreement.

In the Saskatchewan settlement approval hearing, Canada argued that the agreement did not require that it pay Merchant Law Group a minimum of $25 million.

But Justice Dennis Ball disagreed and found the amount reasonable, noting that substantial time had been spent on the case and the complexity of the litigation.

Canada's appeal was dismissed by the Saskatchewan Court of Appeal in March 2007.

Canada went back to court in December 2007, arguing it shouldn't have to pay Merchant until a verification process to review the firm's billing records was complete.

Justice Neil Gabrielson, who was overseeing implementation of the settlement agreement in Saskatchewan, ruled in 2008 that the verification process was not complete but that Canada must pay.

The federal government filed a new lawsuit against Merchant Law Group in January 2015 to try to get the money back, arguing there had been fraud, deceit and fraudulent misrepresentation.

In response, Merchant Law Group asked for the government's statement of claim to be struck because it "disclosed no reasonable cause of action, was scandalous, vexatious and was an abuse of process."