Merchant Law Group LLP Applicant/Appellant (Plaintiff) v. Bruce J., 2022 SKCA 75

Court of Appeal for Saskatchewan Docket: CACV2434 Citation: Merchant Law Group LLP v Slusar , 2022 SKCA 75 Date: 2022-06-29 Between: Merchant Law Group LLP Applicant/Appellant (Plaintiff) And Bruce J. Slusar and Bruce J. Slusar Law Office, P.C. Inc. Respondents/Respondents (Respondents) Before: Caldwell, Schwann and Tholl JJ.A. Disposition: Application dismissed; appeal allowed Written reasons by: The Honourable Mr. Justice Tholl In concurrence: The Honourable Mr. Justice Caldwell The Honourable Madam Justice Schwann On appeal from: 2013 SKQB 204 , Saskatoon Appeal heard: May 11, 2022 Counsel: E.F.

Anthony Merchant, Q.C., for the Appellant Bruce J. Slusar for the Respondents Tholl J.A. I. INTRODUCTION [ 1 ] Merchant Law Group LLP [Merchant Law] commenced an action against Bruce J. Slusar and Bruce J. Slusar Law Office, P.C. Inc. [Slusar Law] and against a former Client of Merchant Law for the collection of legal fees. The Client had changed counsel from Merchant Law to Slusar Law.

Merchant Law asserts that it holds a solicitor’s charging lien for the value of its prior legal work and disbursements that should be enforced against the settlement funds that Slusar Law obtained for the Client in relation to the same claim upon which it had acted. [ 2 ] Slusar Law successfully applied to have Merchant Law’s statement of claim struck on the grounds that it disclosed no reasonable cause of action and that it was an abuse of process: Merchant Law Group LLP v Slusar , 2013 SKQB 204 , 421 Sask R 291.

Merchant Law appeals from that decision and contends that the Chambers judge erred by overlooking the amendments to its statement of claim, not recognizing that a solicitor’s charging lien had been created, failing to consider the plain and obvious test for striking a claim, and by providing insufficient reasons. Merchant Law has applied to adduce fresh evidence on the appeal. [ 3 ] For the reasons that follow, the appeal is allowed and the portion of the order that struck the statement of claim is set aside. The fresh evidence application is dismissed. II.

BACKGROUND [ 4 ] No affidavit material was filed in the Court of Queen’s Bench by Merchant Law or the respondents. As such, and given that this appeal arises from a strike application, much of the following background is distilled from Merchant Law’s pleadings and consists only of allegations. Evidence has not yet been provided in relation to the factual allegations in this matter. [ 5 ] Merchant Law and Slusar Law are both law firms with offices in Saskatoon, Saskatchewan.

In 1999, Merchant Law entered into a written contingency fee agreement with the Client, who was seeking damages arising out of his attendance at an Indian residential school. Between August 4, 1999, and December 1, 2003, Merchant Law prepared and filed a statement of claim, gathered documents for the claim, and organized and scheduled an examination for discovery on behalf of the Client. In doing so, it performed legal services and paid disbursements, which totalled $5,178.45. [ 6 ] On November 21, 2003, Slusar Law notified Merchant Law that it was now representing the Client in his residential school claim.

As per the terms of the contingency agreement, the Client had not yet paid anything to Merchant Law. On December 1, 2003, Merchant Law notified Slusar Law that it claimed a solicitor’s lien on the file and sent a statement of its account in relation to the Client. On January 14, 2008, Merchant Law demanded that Slusar Law disclose any settlement agreement it had obtained for the Client and demanded payment of the outstanding account. Slusar Law did not respond.

A formal demand letter was later sent from Merchant Law to Slusar Law, but this did not result in any payment. [ 7 ] On January 5, 2010, Merchant Law caused a summons to be issued in the Provincial Court of Saskatchewan (Civil Division) and brought a claim against the Client and Mr. Slusar personally. It sought judgment in the amount of $5,178.45 for unpaid legal fees and disbursements. On April 27, 2011, the matter was transferred to the Court of Queen’s Bench. In July of 2011, Merchant Law discontinued its claim as against the Client. [ 8 ] On July 27, 2012, Mr.

Slusar filed his statement of defence, raising several defences and denying liability. On that same day,

Mr. Slusar issued a third party claim against the Attorney General of Canada, claiming indemnity and contribution in the event that Merchant Law’s claim against him was successful. In his statement of defence, Mr. Slusar admitted that the Client had received compensation in relation to his attendance at a residential school.

However, he also alleged that the Client was an eligible common experience payment recipient whose claim was adjudicated under the independent assessment process [IAP], where Slusar Law had represented him for the entirety of that process. [ 9 ] On November 29, 2012, Merchant Law filed an amended statement of claim, as permitted by the November 21, 2012, order of Mills J.: Merchant Law Group LLP v Slusar (21 November 2012) Saskatoon, QBG 1504 of 2012 (Sask). The amendments contained some minor changes and, more significantly, added Slusar Law as a defendant. Mr.

Slusar and Slusar Law filed an amended statement of defence. [ 10 ] On February 18, 2013, the Attorney General of Canada filed a motion seeking to strike the third party notice that had been issued against it. Attached to that motion was a brief affidavit appending the Indian Residential Schools Settlement Agreement [IRSSA], which had been concluded on May 8, 2006. On March 22, 2013, Mr.

Slusar and Slusar Law applied to strike Merchant Law’s statement of claim on the basis of former Rule 173 (now Rule 7-9 of The Queen’s Bench Rules ), asserting that the claim was an abuse of process and, alternatively, that it disclosed no reasonable cause of action. On March 28, 2013, Merchant Law filed a motion seeking to further amend its amended statement of claim. All three motions were heard by the Chambers judge on the same day. III. CHAMBERS DECISION [ 11 ] The Chambers judge began his fiat by noting that there were three motions before him, and very briefly described each of them.

Other than this initial introduction, the Chambers judge did not again mention Merchant Law’s motion to further amend its amended statement of claim, conducted no analysis of that application and made no order in relation to it. [ 12 ] After a brief review of the facts, the Chambers judge granted the Attorney General’s request to strike the third party claim. That determination has not been appealed. [ 13 ] The Chambers judge then moved on to consider the application to strike the statement of claim and struck it on the basis of former Rule 173(

a) and Rule 173(e). His reasons for doing so were as follows: [10] In the matter of the application by the defendants to strike the statement of claim, the plaintiff may have had a claim against [the Client] which it discontinued but providing the defendants notice of a claim does not make it a liability of the defendants. [11] The plaintiff’s amended statement of claim does not plead a cause of action against a defendant. The statement of claim pleads a notice of an outstanding account and the assertion that notice of a solicitor’s lien is a binding charge upon any person.

This pleading has no foundation in law. [12] As stated by Justice B. Brown in Fontaine v. Canada (Attorney General) , 2010 BCSC 1208 , [2010] B.C.J. No. 1755 (QL), at paras. 17 and 18 : 17 The IAP adjudicators are provided with the jurisdiction to assess the fairness and reasonableness of “all” legal fees charged by counsel to a claimant pursuing a claim under the IAP. Counsel are required to provide their retainer agreement and “any other information pertinent to their legal fees”.

In conducting the assessment, the adjudicator is required to assess, inter alia , the “time expended by legal counsel” as well as “the results achieved and the contribution of legal counsel to the result”. The language of paragraphs 17 and 18 is not limited to work performed after November 20, 2005 and, indeed, it would be difficult, if not impossible, to assess the fees without the full picture, including work performed and fees paid prior to November 20, 2005. 18 It may well be that the work done for which legal counsel was compensated prior to November 20, 2005 is not relevant to an IAP claim.

However, it is also possible that some of the work done by counsel, and for which they were compensated is applicable to the IAP claim. In the first situation, the review would have no impact on the fees awarded by the adjudicator, while in the second scenario, a proper fee review would take into account the fact that counsel are not to be compensated twice for the same work. The adjudicator conducting a fee review is best able to determine this issue.

There is no principled basis to exclude work prior to November 20, 2005 from the review. [13] Also, Ball J. who was charged with the responsibility of approving the settlement agreement in Saskatchewan observed that residential school counsel remain entitled to receive compensation in relation to an IAP award in addition to any amount for settling the class action. Consequently solicitor–client agreements are not extinguished or exhausted by Crown payment under

Article 13. See Sparvier v. Canada (Attorney General) , 2006 SKQB 533 , 290 Sask. R. 111, at para. 76 , affirmed by the Saskatchewan Court of Appeal 2007 SKCA 37 , 293 Sask.

R. 54. [ 14 ] The plaintiff’s claim would be against [the Client] not the current defendants who were merely [the Client’s] subsequent legal counsel respecting the separate IAP claim and for which no file or other materials were obtained from the plaintiff in the advancing of this claim. … [17] If the plaintiff believes that it has done work in progress for [the Client] there are avenues in which to pursue this of which the plaintiff is most familiar.

However an action against the current defendants is not the appropriate procedure to follow. [18] The plaintiff’s amended statement of claim is struck under Rule 173(

a) and (

e) with costs to the defendants as stated in Rule 173(e). IV. ISSUES

[14] In my view, the issues can be distilled to the following: (

a) Should the fresh evidence be admitted? (

b) Did the Chambers judge err in striking the statement of claim for disclosing no reasonable cause of action? (

c) Did the Chambers judge err in striking the statement of claim on the grounds of an abuse of process? V. ANALYSIS A. Fresh evidence application [15] Merchant Law seeks to file fresh evidence in the form of a short affidavit from a staff member employed in its Regina office.The affidavit appends four letters, which can be broadly summarized as follows: (

a) A November 21, 2003, letter from Slusar Law to Merchant Law, indicating that it now acted for the Client “in his claimarising from his experiences at Residential School” and requesting that Merchant Law transfer the file and documentation to it. (

b) A December 1, 2003, letter from Merchant Law to Slusar Law, asserting a solicitor’s lien on the file and enclosing a copy ofthe Client’s retainer agreement. Merchant Law stated that it was prepared to transfer the file upon payment of the disbursements and thatthe transfer was conditional on Slusar Law agreeing to pay its fees, which were specified, when the case was concluded. (

c) A January 14, 2008, letter from Merchant Law to Slusar Law, inquiring as to the amount for which the Client’s matter hadbeen settled and warning that legal proceedings would be initiated if Slusar Law was not prepared to settle Merchant Law’s account. (

d) A December 1, 2009, letter from Merchant Law to Slusar Law, demanding that the account be settled and setting out itsposition in detail. It indicated that Merchant Law would commence an action if the matter were not resolved by December 15, 2009. [16] The test from R v Palmer, (SCC), [1980] 1 SCR 759 at 775, which is utilized when determining if freshevidence should be admitted on appeal under Rule 59(1) of The Court of Appeal Rules, is well known. This approach applies whether aparty is seeking to admit fresh evidence or new evidence: Barendregt v Grebliunas, 2022 SCC 22 at paras 2–3 and 34. The four criteriathat the Court must examine consist of the following: (

a) the evidence could not, by the exercise of due diligence, have been obtained for the original hearing; (

b) the evidence is relevant in that it bears upon a decisive or potentially decisive issue; (

c) the evidence is credible in the sense that it is reasonably capable of belief; and (

d) the evidence is such that, if believed, it could have affected the result at the hearing. [17] The proposed evidence here is credible, given that it only seeks to establish the uncontroversial fact that four specific pieces ofcorrespondence were exchanged. However, it fails to satisfy the other three criteria. [18] With regard to the diligence criterion, I note that the letters consist of routine correspondence that would have been contained inMerchant Law’s own files. The earliest letter predates the motion by almost ten years and the most recent one was sent over three yearsprior to the motion.

This evidence was all available through the exercise of due diligence. [19] Turning to the next part of the test, I find that the letters are not relevant to the Rule 173(

a) portion of the motion because, asnoted below, affidavit evidence is not admissible on such an application. Affidavit evidence is generally admissible on a Rule 173(e)motion, but the letters sought to be tendered do not bear on a decisive or potentially decisive issue under that subrule. [20] Lastly, the evidence could not have affected the result at the hearing. Admitting the evidence would make no difference in theoutcome of this appeal. [21] The application to adduce fresh evidence is dismissed. B.

Striking for disclosing no reasonable cause of action [22] Merchant Law submits that the Chambers judge failed to consider its second amended statement of claim at all. It furtherargues that he did not conduct any analysis of whether the claim should be struck under former Rule 173(a). Merchant Law contends thatthe statement of claim disclosed a reasonable cause of action and the Chambers judge erred in finding that it did not.

The respondentsargue that a reasonable cause of action is not revealed by the pleadings because a solicitor’s charging lien cannot apply under thecircumstances in question. [23] Former Rule 173(a), which is the equivalent of current Rule 7-9(2)(a), was as follows: Pleadings disclosing no cause of action or defence, or unnecessary, scandalous or embarrassing may be struck out 173 The Court may at any stage of an action order any pleading or any part thereof to be struck out, with or without leave to amend, on theground that: (

a) it discloses no reasonable cause of action or defence, as the case may be;

… Action stayed, dismissed or judgment entered; Costs and may order the action be stayed or dismissed or judgment be entered accordingly or may grant such order as may be just. Unlessotherwise directed, the offending party shall pay double the costs to which the other party would otherwise be entitled. [24] The standard of review to be applied when considering a decision striking a pleading for failing to disclose a reasonable causeof action is that of correctness: Harpold v Saskatchewan (Corrections and Policing), 2020 SKCA 98 at para 21.

While Harpold wasdecided pursuant to the current Queen’s Bench Rules, the principles set out by Schwann J.A. were developed under the former rule andare applicable to the matter at hand: [25] A useful

summary of the governing principles with respect to an application to strike a pleading for failing to disclose a reasonablecause of action is found in Swift Current (City) v Saskatchewan Power Corporation, 2007 SKCA 27, [2007] 5 WWR 387 [Swift Current]: [18] These general principles were summarized by Gunn J. in the case of Collins v. McMahon, 2002 SKQB 201, [2002] S.J. No. 318(QL): [11] The principles which apply to an application to strike a plaintiff’s claim under Rule 173(

a) are the following: (

i) The claim should be struck where, assuming the plaintiff proves everything alleged in the claim there is no reasonable chance ofsuccess. (Sagon v. Royal Bank of Canada et al. (1992, (SK CA), 105 Sask. R. 133 at 140 (C.A.)); (ii) The jurisdiction to strike a claim should only be exercised in plain and obvious cases where the matter is beyond doubt. (Sagon, at140; Milgaard v. Kujawa et al. (1994), (SK CA), 123 Sask. R. 164 (Sask.

C.A.)); (iii) The court may consider only the claim, particulars furnished pursuant to a demand and any document referred to in the claim uponwhich the plaintiff must rely to establish its case (Sagon, at p. 140); (iv) The court can strike all, or a portion of the claim (Rule 173); (

v) The plaintiff must state sufficient facts to establish the requisite legal elements for a cause of action. (Sandy Ridge Sawing Ltd. v.Norrish and Carson (1996), (SK KB), 140 Sask. R. 146 (Q.B.)). As noted, see Sagon v Royal Bank (1992), (SK CA), 105 Sask R 133 (CA) at para 16 [Sagon]. [26] When called upon to review a claim in response to an application under Rule 7-9(2)(a), the reviewing judge is required to determinewhether sufficient facts have been pleaded to establish the legal elements of a cause of action by considering the whole of the statement ofclaim.

It is for the reviewing judge “to determine whether the combined effect of any technical pleading, together with other facts,properly plead the essential elements of the cause of action” (Reisinger v J.C. Architect Ltd., 2017 SKCA 11 at para 20, 411 DLR (4th)687 [Reisinger]). [25] As a starting point, I find that the Chambers judge failed to consider the proposed second amended statement of claim when hedismissed the action.

While he mentioned it in the introductory paragraph – referring to a motion by Merchant Law to “further amend theamended statement of claim” (at para 1) – the Chambers judge did not otherwise address the motion to amend, despite the fact that therespondents had written to the Court indicating that they did not oppose the proposed amendments. In the course of his reasons, theChambers judge referred to the amended statement of claim several times (at paras 1, 11 and 18), but never referred to the most recentamendments specifically or generally. He also did not rule on whether the amendments would be allowed.

The Chambers judge shouldhave allowed the amendments and then examined the newest version of the pleadings in his analysis. It was an error for the Chambersjudge not to consider the second amended statement of claim when determining whether the claim should be struck. [26] Turning to the application of the Rule 173(

a) test, I note that, in addition to setting out the alleged factual background –including a description of the Client, the contingency agreement, the details of the work performed by Merchant Law and the associatedcharges, the Client’s change of counsel to Slusar Law, and the notices and demands provided by Merchant Law to Slusar Law – the secondamended statement of claim contained the following paragraphs, which are directly relevant to whether a reasonable cause of action hadbeen pleaded: 7. An inchoate Solicitor’s Lien existed against the recovery by Bruce J. Slusar or alternatively Bruce J.

Slusar Law Office PC Inc. whichcould only be perfected after a judgment or settlement was achieved by the Defendants or either of them, which settlement was achieved inpart as a result of the initial efforts of the Plaintiff, and the Defendants are jointly and severally liable to the Plaintiff for the value of theSolicitor’s Lien. The Plaintiff is not of possession of the property obtained through the settlement. … 15. THE PLAINTIFF, THEREFORE, CLAIMS AS AGAINST BOTH DEFENDANTS JOINTLY AND SEVERALLY:

a) an order pursuant to The Legal Professions Act, 1990, SS 1990-91, c. L-10.1, granting the Plaintiff a lien or charge in the amount of$5,178.45 against the award that was recovered in part as a result of the Plaintiff’s services for the fees and expenses of the Plaintiff inrelation to the recovery of that property;

b) judgment in the sum of $5,178.45, being the amount of the outstanding account for legal services rendered, disbursements and tax forservices performed between August 4, 1999 and December 1, 2008 and the solicitor’s lien that flows therefrom … . The underlined portions represent proposed amendments to the second amended statement of claim.

[27] I find the pleadings disclose a reasonable cause of action. The necessary factual background is set out and a cause of action ispleaded. The claim is based on the assertion that a lien arose in favour of Merchant Law, in relation to the settlement proceeds recoveredby the Client for a claim arising out of his attendance at a residential school. It is not, as characterized by the Chambers judge, a situationwhere Merchant Law sought to collect a debt from an unrelated party simply by providing a notice.

According to the facts alleged,Merchant Law represented the Client for a claim and Slusar Law represented him on the same claim. Merchant Law pleads that its legalwork was in part responsible for the settlement being obtained.

Given the judicial pronouncements regarding the existence andapplicability of solicitor’s charging liens and statutory liens under s. 66 of The Legal Profession Act, 1990, SS 1990-91, c L-10.1, it cannotbe said that it is plain and obvious, and beyond doubt, that a reasonable cause of action is not disclosed by the second amended statementof claim: see, for example, Phillips Legal Professional Corporation v Schenher, 2020 SKCA 87 at paras 66–89, [2021] 4 WWR 275;FitzGibbon v Piters, 2012 BCCA 269, 33 BCLR (5th) 241; Merchant Law Group v McLeod & Co., 2005 ABQB 875, 55 Alta LR (4th)301; Hosseini v Oreck Chernoff, 1999 BCCA 386 at paras 18–31, 174 DLR (4th) 685; and West and Siwak v Caros Investments (1992), (SK KB), 101 Sask R 45 (QB).

The Chambers judge, without conducting any analysis of the issue, concluded that sucha lien could not exist because it had no foundation in law. That was an error of law. [28] The second amended statement of claim does not refer to the IAP, which the respondents assert was an unrelated process to theclaim on which Merchant Law represented the Client. It also does not reference any other agreements under which Merchant Law mayhave received payment for the legal fees, as argued by the respondents. While these arguments may be relevant at another stage, they haveno place in the examination of a Rule 173(

a) strike application, which must rely only on the plaintiff’s pleadings. [29] The second amended statement of claim discloses a reasonable cause of action. The Chambers judge erred by striking itpursuant to Rule 173(a). C. Striking for being an abuse of process [30] The Chambers judge appears to have struck the claim as an abuse of process on the following bases: (

a) Merchant Law’s assertion that it had a lien that could be enforced as against the respondents had no foundation in law; (

b) Merchant Law’s fees in relation to the Client were covered by the IAP process and the IRSSA; and (

c) the only potential remaining claim was against the Client. [31] Former Rule 173(e), which is the equivalent of current Rule 7-9(2)(e), was as follows: Pleadings disclosing no cause of action or defence, or unnecessary, scandalous or embarrassing may be struck out 173 The Court may at any stage of an action order any pleading or any part thereof to be struck out, with or without leave to amend, on theground that: … (

e) it is otherwise an abuse of process of the Court; Action stayed, dismissed or judgment entered; Costs and may order the action be stayed or dismissed or judgment be entered accordingly or may grant such order as may be just.

Unlessotherwise directed, the offending party shall pay double the costs to which the other party would otherwise be entitled. [32] The standard of review with regard to a decision that has struck a claim as being an abuse of process is set out in Walker vMitchell, 2020 SKCA 127, [2021] 4 WWR 555 [Walker]: [16] While the decision of the Chambers judge striking the appellant’s statement of claim is a discretionary decision, the question ofwhether the Chambers judge erred in interpreting Rule 7-9(2)(

e) in a way that allowed him to strike the appellant’s statement of claim asan abuse of process is a question of law and attracts a correctness standard of review: Housen v Nikolaisen, 2002 SCC 33, [2002] 2 SCR235. [33] Unlike a motion under former Rule 173(a), affidavit evidence is admissible on a motion to strike for abuse of process underformer Rule 173(e). In their factum, the respondents provide a long recitation of the facts; however, neither Merchant Law nor therespondents filed any evidence.

The Attorney General of Canada filed the IRSSA on its application, along with a related schedule, but thatwas the only evidence in front of the Chambers judge. [34] As set out in the “Striking for disclosing no reasonable cause of action” section, the Chambers judge erred by determining thatthere is no foundation in law for a claim to a common law or statutory lien. He also erred by finding that the only potential claim is againstthe Client. Merchant Law seeks a solicitor’s charging lien against the “fruits of the litigation”, not the direct collection of a debt from theClient or an unrelated party.

It is claiming a portion of the fee that was allegedly received by the respondents. This leaves an examinationof the striking of the claim as a result of the IAP and the IRSSA. [35] Merchant Law submits that the Chambers judge erred by focussing on the IAP and the IRSSA, which it asserts were irrelevantto the application.

It points to the negligible evidentiary basis regarding the complex operation of the IAP and the competing judicialinterpretations with regard to the IRSSA and argues that the claim could not have properly been struck as an abuse of process on this basis.It contends that it was not plain and obvious that its claim could not succeed. [36] The respondents argue that the IRSSA presents a complete answer to this matter. Merchant Law is a party to the IRSSA. Intheir view, this agreement provides for the payment of all of Merchant Law’s legal work on behalf of residential school claimants up to

November 20, 2005, and, therefore, payment of the Client’s account. They present their

interpretation of several portions of the IRSSA asa fait accompli, despite the complex nature of the agreement and the competing

interpretations offered in argument by Merchant Law. [37] The respondents also submit that the Client was a new claimant in a subsequent and separate process, namely the IAP. Theyassert that the two processes are completely unrelated. However, there was no evidence of this. [38] Bringing a claim that has already been settled by agreement, judgment or otherwise can amount to an abuse of process. InWalker, Whitmore J.A. noted that this “doctrine employs the inherent power of the court to prevent misuse of its procedure in a way thatwould bring the administration of justice into disrepute” (at para 18).

Permitting an action to proceed that has already been unambiguouslyand fully resolved would bring the administration of justice into disrepute. [39] In Nelson v Teva Canada Limited, 2021 SKCA 171 [Nelson], Caldwell J.A discussed the difficulty in having a claim struck asan abuse of process when such a determination depends on the

interpretation of a settlement document: [4] Rule 7-9(2)(e) [formerly Rule 173(e)] permits a judge to strike out all or any part of a pleading where the pleading “is otherwise anabuse of process of the Court”. It reflects the Court’s inherent jurisdiction to guard against its process being used by litigants to harass orvex others (which is catalogued under Rule 7-9(2)(b)) or in a way that would bring the administration of justice into disrepute (Walker vMitchell, 2020 SKCA 127 at para 18, [2021] 4 WWR 555 [Walker], citing Toronto v C.U.P.E., Local 79, 2003 SCC 63 at para 51, [2003]3 SCR 77).

The Rule is, however, only to be used where it is “plain and obvious” that allowing an action to proceed would amount to anabuse of process (Hunt v Carey Canada Inc., (SCC), [1990] 2 SCR 959).

Relevant to this appeal, the Supreme Court inHunt stated that “neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant topresent a strong defence should prevent the plaintiff from proceeding with his or her case” (at 980; emphasis added). [5] In this case, the Chambers judge erred in principle when he struck the Nelson Action because the Respondents had only raised apotential defence to the Appellants’ claims against them. … [16] More fundamentally, nowhere in the QB Decision [2020 SKQB 159] did the Chambers judge directly address the first-order questionnecessary to determine whether it was “plain and obvious” that the Nelson Action was an abuse of process: Does the Settlement Order infact and at law dispose of the Appellants’ rights of action against the Respondents?

This question should have been at the root of hisinquiry under Rule 7-9(2)(e). Moreover, given that it is a question that calls for an assessment of the factual matrix relevant to theinterpretation of the Settlement Order, I would hazard to suggest that it may have been preferrable to address it under a Rule 7-1 or Rule7-2 application. I say that because I recognise that the evidence before the Court as to the factual matrix relevant to the

interpretation of theSettlement Order is incomplete and, if it were complete, it could result in an

interpretation that provides a defence for the Respondents. [17] However, for the purposes of a Rule 7-9(2)(

e) application, “it is enough that the plaintiff has some chance of success” (Hunt at 989).In CPC Networks Corp. v McDougall Gauley LLP, 2021 SKCA 127 at para 92, Barrington-Foote J.A. found that it was an error inprinciple to strike a claim as an abuse of process where there is an arguable issue as to whether the claim is barred.

That is the ratio of thisappeal as well: Since the Respondents’ proffered defence—i.e., that the Settlement Order bars continuation of the Nelson Action—remained an arguable issue, the Appellants had some chance of success in their action and, therefore, the Chambers judge should not havestruck the statement of claim as an abuse of process. [18] To summarize, it is an arguable issue whether the Settlement Order disposes of or bars the Appellants’ claims against theRespondents; and, therefore, it is not plain and obvious that the Nelson Action is an abuse of process.

As such, the statement of claim wasstruck as the result of an error in principle. [40] Merchant Law argues that the IRSSA did not extinguish its claim to fees and disbursements from the Client. At the very least,as in Nelson, Merchant Law argues that it cannot be said that it is plain and obvious that the settlement document, the IRSSA, achievedthat result. It points to the following quotations from related cases which, it submits, demonstrate that this issue is still in question: (

a) Sparvier v Canada (Attorney General), 2006 SKQB 533, 35 CPC (6th) 110 (emphasis in original): [76] For these reasons I cannot begin to place a monetary value on the IAP benefits with any degree of reliability. Even if I could, I wouldnot take them into account in determining the amount of legal fees to be approved now. The reason is that lawyers remain entitled toreceive payment of fees for any amounts that may be recovered by their clients under the IAP in addition to any amounts to be awardednow for settling the class action. (

b) Baxter v Canada (Attorney General) (2006), (ON SC), 83 OR (3d) 481 (Sup Ct): [70] … It is apparent from the record that the class counsel fees might only represent a portion of the total fees that will be payable onbehalf of those class members who make claims under the IAP. … [L]awyers representing individual IAP claimants will be chargingcontingent fees in excess of 15 per cent payable by Canada. The settlement does not prevent this practice nor does it restrict the amount ofsuch contingent fees payable by the claimant.

Indeed, the absence of any control mechanism on individual fee arrangements appears tohave been a conscious choice in the drafting of the settlement. This is evident from Mr. Merkur’s affidavit. He deposes, at para. 18: The Settlement Agreement also recognizes that some counsel will be performing future work on behalf of individual clients who pursuefurther compensation through the [IAP] established by the Settlement Agreement. With respect to such future work, the SettlementAgreement takes a hand’s off approach to whatever retainer agreements might exist between counsel and client.

However, it does providethat Canada shall pay a further 15% of any IAP award to help defray lawyer’s fees. This is a continuation of the approach taken by Canadaunder the IAP’s predecessor, the Dispute Resolution process established in November, 2003. (Emphasis added) (

c) Fontaine v Canada (Attorney General), 2006 YKSC 63, 35 CPC (6th) 134:

[60] The other aspect of the legal fees issue is that under the Independent Assessment Process, Canada only pays an additional 15% of the award for legal fees which will typically be 30%. Several survivors raised this issue in Court. The balance of the lawyers’ fees will inevitably come off the award. [ 41 ] The respondents offer competing quotes from some of the same cases and other related ones, which they submit supports an

interpretation of the IRSSA that is contrary to the

interpretation contended by Merchant Law. The fact that some support for each position can be found in the jurisprudence lends credence to the notion that the outcome in this matter is not plain and obvious. [ 42 ] In my view, the overall conclusion to be drawn from the pleadings, the IRSSA and the submissions is that this claim ought not to have been struck as an abuse of process. As in Nelson , there is an arguable issue as to whether the IRSSA bars Merchant Law’s claim. The determination of this dispute will involve an

interpretation of the agreement and a weighing of the evidence. Additionally, without attempting to be exhaustive, there also remain open questions as to whether the Client engaged in a separate and subsequent process that was sufficiently unrelated to the original retainer so as to not constitute the same litigation and whether Merchant Law’s work preserved or advanced the Client’s claim. Given the convoluted and disputed nature of the issues at stake, it is impossible to conclude that it is plain and obvious that Merchant Law’s claim will fail.

It should not have been dismissed as an abuse of process under former Rule 173(e). The Chambers judge erred in doing so. VI. CONCLUSION [ 43 ] The fresh evidence application is dismissed. [ 44 ] The appeal is allowed. Paragraph 1 of the formal order – the portion that dismissed the third party claim against the Attorney General of Canada – remains in force. Paragraph 2 of the formal order – the portion that struck the claim by Merchant Law and awarded costs – is set aside.

Merchant Law is granted leave to serve and file its second amended statement of claim in the form that was filed on its motion. [ 45 ] Merchant Law shall have its costs as against Mr. Slusar and Slusar Law for the applications in the Court of Queen’s Bench, calculated in the usual manner. The other extensive relief sought by Merchant Law is beyond the scope of this appeal. [ 46 ] Merchant Law has been successful in this appeal, although its fresh evidence application has been dismissed.

However, this matter languished after the notice of appeal was filed nine years ago and only proceeded as a result of the actions of the Registrar. In the totality of the circumstances, I find that it is appropriate to make no order for costs on this appeal, the fresh evidence application, or for any of the appearances in Court of Appeal Chambers, except for those where costs were explicitly awarded. “Tholl J.A.” Tholl J.A. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Schwann J.A.” Schwann J.A.