Ottawa wants to claw back $25 million from Merchant law firm for residential school work

Ottawa wants back millions paid to Merchant law firm for residential school work

Tony Merchant defends legal fees in Canadian Lawyer magazine’s August issue. ORG XMIT: POS2013040520132177

/ Regina Leader~Post

While the federal government believes it should be allowed to pursue its lawsuit for $25 million paid to Merchant Law Group (MLG) for its work on Indian residential school files, the firm’s lawyer says it’s a done deal.

“It should go to trial,” Mitchell Taylor, the lawyer representing the Attorney General of Canada argued before the Saskatchewan Court of Appeal on Tuesday. Ottawa’s suit — rejected by a lower court earlier this year — claimed that the Regina law firm inflated its legal bill.

But Regina lawyer Gord Kuski, representing MLG, said the government has struck out twice in its efforts to avoid paying — and now wants a third try. He called it a “collateral attack,” attempting to re-litigate what the courts have already decided. “There has to be some end to litigation,” said Kuski.

The appeal court reserved decision. As is the court’s practice, Justices Ralph Ottenbreit, Peter Whitmore and Jacelyn Ryan-Froslie gave no date by which they’ll issue a written decision.

The appeal is one more volley in a decade-long battle over the payment of legal fees and expenses to the Regina-based law firm under terms in the historic Indian Residential Schools Settlement Agreement. That landmark deal provided compensation for former residential school students — which remains unaffected by the outcome of this dispute — and also paved the way for the Truth and Reconciliation Commission.

The federal government says a Court of Queen’s Bench judge erred in striking the lawsuit against MLG before it ever went to trial. “Canada is entitled to have its tort claim that it was defrauded and deceived by MLG over fees and its work in progress adjudicated on its merits,” Taylor argued. “We fully recognize that this is a very serious claim.”

In his January decision, Court of Queen’s Bench Justice Brian Barrington-Foote agreed with MLG that Ottawa was trying to reopen what was already signed, sealed and delivered.

“How can Canada now recover the very fee that the courts have found to be fair and reasonable?” he wrote.

Kuski characterized the government’s move in much the same way before the appeal court. “Canada’s attempt(ing) to take a third bite at the cherry,” he argued. Kuski said MLG has been on a “tortuous journey” since 2006 — and 10 years later it’s being “vexed” by the same issue.

But Taylor took issue with casting MLG as some sort of victim. He said only after the settlement was reached and the firm’s files reviewed by a government-appointed auditor did Ottawa realize there was a problem.

“It’s a different and new claim. It’s not an abuse of process,” he argued.

The agreement provided payment to a number of law firms, but MLG got the largest share given the volume of claims it handled. In a 2006 ruling, later upheld on appeal, a Regina judge found the agreement gave MLG a minimum of $25 million, with payment to a maximum of $40 million upon verification. A subsequent decision in 2008 also ordered Ottawa to pay $25 million regardless of verification. Now it wants the money back.

Taylor didn’t dispute those decisions, but believes they were premised on misinformation. He said as part of the 2006 verification agreement, MLG head Tony Merchant made certain representations regarding fees and effectively agreed to a check of the firm’s records.

Taylor contended the firm was “obstructionist” when it came time to actually allowing verification. Kuski disagreed, saying, “There’s absolutely no evidence before the court to justify that assertion.”

Taylor said the auditor’s analysis in 2014 revealed over-billing, wrong-billing, excessive hours, and back-dating of accounts — which would be the subject of the lawsuit.

However, Kuski said it was clear to the federal government in 2006 that MLG was doing a “reconstruction process” to calculate fees and expenses. The firm had done residential school claims since the 1990s, and a number were taken under contingency agreements — meaning there would be payment on the result — so there was no point in tracking billable hours. And that’s why in some instances it might appear the firm was working more than a 24-hour day, for example.

But government lawyer Kelly Keenan contended, “We wouldn’t have agreed to that amount if we’d know the truth,” she said.

Kuski accused the government of “ingenuity and recalcitrance,” despite repeatedly being told to pay up. 

“$25 million was approved; Canada didn’t like it,” he said.

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