1. Case Study – Claims for Loss of Income under the Indian Residential School Settlement Agreement

    When a claimant’s damages for loss of income under the Indian Residential School Settlement Agreement (the “Settlement Agreement”) exceed $250,000, should that claimant be allowed to proceed with a claim under the Independent Assessment Process (“IAP”)? Should that claimant be allowed to rely on the substantive rights provided to them under the Settlement Agreement?  Should the claimant be forced to start the claim over and opt out of the Settlement Agreement? Is the fact that the claimant suffered a greater income loss than other residential school survivors a reason to deny that claimant the substantive rights provided to other survivors? These were the questions that were examined by Justice Schulman on November 12, 2013, when an application was brought by a survivor asking the court for direction (the ““Direction”).

    At that time, Justice Schulman found that the Settlement Agreement allows a claimant with a loss of income exceeding $250,000 to access the courts for the evaluation of the loss of income claim and by doing so that claimant does not lose the substantive rights afforded to him or her under the Settlement Agreement. He further stated that the claimant would be required to comply with court procedures in the assessment of the lost income, but the balance of the proceedings would be done under the IAP.[1] It was a win for the residential school survivors, but it was long over due and given the time it took to have this issue determined one cannot help but wonder whether others would have made this claim if Canada had not made it so cumbersome and risky to do so. Moreover, Canada has made it clear that the battle is not over yet.


    The Government of Canada (“Canada”) conceded that the residential school system that it put in place was a misguided policy and formally apologized to Canada’s First Nations people for its implementation on June 11, 2008 (the “Apology”)[2].  As Justice Schulman stated on November 12, 2013:

    The Settlement Agreement was concluded in order to provide a fair and comprehensive resolution to the tens of thousands of Indian Residential School survivors alive today, the vast majority of whom did not – and would likely not have managed to- seek compensation on an individual basis.[3]

    On December 15, 2006, the courts in nine provinces and territories concurrently issued reasons approving a national settlement resolving various class actions that were started by residential school survivors throughout the country. On March 8, 2007, those same courts incorporated the terms of the Settlement Agreement.

    As of November 2013 there were more than 20,000 claims received and resolved through the IAP, in accordance with the Settlement Agreement.  The Settlement Agreement provides the particulars as to how a continuing residential school abuse claim proceeds and the substantive rights provided to the claimants. However, the Settlement Agreement does not provide “a complete code of all procedural rights”.[4] For instance, the IAP contains a clause allowing the claimant access to the courts for various reasons, including situations where the actual income loss may exceed $250,000,[5] however, it fails to provide the particulars of such a procedure. This, combined with Canada’s failure to provide a reasonable proposal as to how to proceed, has forced one claimant to take on Canada to seek a direction from the Court.

    Loss of Income Exceeding $250,000

    Notwithstanding the spirit of the Settlement Agreement and the Apology, Canada took the position before Justice Schulman that once a claimant elects to pursue a claim for actual income loss in excess of the $250,000 limit, that claimant is then opting out of the Settlement Agreement and thereby waiving the substantive rights provided to him by that agreement. If Canada were correct, it would have the consequence of punishing those who suffered greater damages for loss of income, which seems counter-intuitive. In addition, it would force a claimant who may have a loss of income exceeding the threshold provided by the Settlement Agreement to either opt out of the class action prior to starting the IAP or to proceed with the IAP, seek leave from an adjudicator to bring the claim outside of the IAP and then commence suit in the court. A process, which would not only be contrary to the spirit of the Settlement Agreement, but which would be entirely redundant and create an absurd result. Canada’s approach is not tenable.

    Justice Schulman agreed and advised that the Settlement Agreement allowed for a bifurcated proceeding. The claimant would proceed with an IAP, but the court would determine the loss of income. The judgement regarding the loss of income would then be incorporated into the decision of the adjudicator. It allows for the expertise of the judge to be used to calculate the loss of income and the expertise of the adjudicator to be used for the balance of the matter.  It provides a balanced approach that is consistent with the spirit and intent of the Settlement Agreement.

    Notwithstanding the decision, the battle regarding the procedure for loss of income exceeding $250,000, is far from over. Canada has advised that it is appealing the Direction, which will probably be heard by the Manitoba Court of Appeal in April. Canada also attempted to stay the Direction, pending the appeal; however, it was unable to show that without the stay it would suffer irreparable harm.

    If you want to learn more about this issue or other residential school matters, please feel free to contact Matt Mulholland.

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    [1] Fontaine et al. v. Canada (Attorney General) et al., 2013 MBQB 272

    [2] Statement of Apology, dated June 11, 2008 <http://www.aadnc-aandc.gc.ca/eng/1100100015644/1100100015649>

    [3] Fontaine et al. v. Canada (Attorney General) et al., 2013 MBQB 272, para 20

    [4] Fontaine et al v. Canada (Attorney General) et al., 2014 ONSC 283, para 202

    [5] Settlement Agreement Part III of Schedule D

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