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SCC denies leave to Merchant Law Group LLP

$25 million fraud action will proceed
|Written By Alex Robinson
SCC denies leave to Merchant Law Group LLP
REUTERS/Chris Wattie

The Supreme Court of Canada has denied leave to Merchant Law Group LLP to appeal a decision concerning a fraud action the government brought against the firm.

The Supreme Court dismissed the Saskatchewan-based firm’s request for leave Thursday in the latest instalment in a long legal battle over $25 million the government was ordered to pay Merchant Law Group in 2008.

The federal government launched the civil action against Merchant Law Group in 2015 to try to reclaim the sum, which was paid to the firm for work it had done on behalf of Indian residential schools survivors. The government brought its claim after a review conducted by accounting firm Deloitte indicated Merchant Law Group had illegitimate time entries and excessive disbursements in its billing records.

The federal government claimed damages for fraud, deceit and fraudulent misrepresentation. The lawsuit alleged the firm falsely and intentionally represented it had incurred more unbilled time than it did, modified illegitimate time entries and submitted false claims for legal fees and disbursements it was not entitled to. These allegations have not been proven in court.

Merchant Law Group moved to have the government’s statement of claim struck, and a judge of the Court of Queen’s Bench granted the motion in 2016, finding the action was frivolous and vexatious. The Court of Appeal for Saskatchewan, however, allowed a government appeal and set aside the judge’s order to strike the claim.

In that decision, the Court of Appeal found that the action raises serious allegations of fraud that could not be properly addressed in previous proceedings and that require a full hearing.

Lawyer Holli Kuski Bassett, who represented Merchant Law Group in its leave application, says the positions being advanced by the government were previously rejected by Saskatchewan courts in 2006, 2007 and 2008.

“However, in this particular matter, the Court of Appeal determined it was premature to strike the government’s claim, and the Supreme Court of Canada did not grant leave to appeal from this decision,” she says.

Merchant Law Group is also pursuing its own claim against the government for an additional payment of $15 million plus disbursements, to which the firm claims it is entitled in accordance with the Indian Residential Schools Settlement Agreement — a $2-billion agreement that came into effect in 2007.   

Moira Dillon, a lawyer with Supreme Law Group who acted as Merchant Law Group’s Ottawa agent in its leave application, says the Supreme Court does not provide reasons on such applications, but the outcome is no doubt a disappointment for the firm.

“Every successful litigant hopes for finality, and this matter was previously litigated and clearly decided in their favour by the appeal court in prior proceedings,” says Dillon.


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