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Orange ribbons, a memorial symbol for the 215 Indigenous children found at a former Kamloops Indian Residential School, are tied to the gates surrounding St. Michael's Cathedral Basilica in Toronto on Aug. 5.Tijana Martin/The Globe and Mail

The Catholic Church aggressively pursued a release from the millions of dollars it owed to residential school survivors, while claiming that government efforts to collect the money would be fruitless because there was none left.

The details of the church’s campaign are revealed in newly released court records, which The Globe and Mail fought to obtain. The records were filed in 2014 and 2015, but not previously made available to the public. They have long been sought by academics and experts studying the Indian Residential Schools Settlement Agreement, a significant 2006 legal deal that provided restitution to residential school survivors.

Included in the files are e-mail exchanges between lawyers for the Catholic Church and the federal government in which they discuss the status of the church’s unpaid obligations to survivors under the settlement. At the time, those included more than $21-million that the church was required to make “best efforts” to obtain through fundraising, and a separate $1.6-million in cash commitments.

Eventually, the two parties agreed on a $1.2-million payment from the church. But a dispute emerged over the terms of the deal.

In the documents, church lawyers argue that the government had agreed, in exchange for the $1.2-million, to completely release the church from all of its remaining settlement obligations.

Government lawyers, meanwhile, maintained that this was not what they had agreed to. In their e-mails, they say that they had negotiated a narrower release, which would only have covered the outstanding $1.6-million.

In 2015, Judge Neil Gabrielson of the Saskatchewan Court of Queen’s Bench in Regina ruled that the government had indeed agreed to a full release from the church’s obligations, in effect liberating the Catholic Church from its remaining financial commitments.

Late last month, the Saskatchewan court released the records as a result of a court application by The Globe and Mail and the CBC. Justice Gabrielson told the media outlets in August that a formal request would be required to access the documents, and that both the Catholic Church and the federal government would first have to be consulted. Both parties participated in preparing the files for release.

Court records are supposed to be accessible to the public by default unless they are sealed. The documents in this case were not under seal or a publication ban.

Mary Ellen Turpel-Lafond, a former Saskatchewan judge who is now a law professor and academic director of the Indian Residential School History and Dialogue Centre at the University of British Columbia, said she had been trying for years to access the court files, because the judge’s ruling modified an important legal settlement between Indigenous groups and the Catholic Church.

The fact that The Globe and Mail had to file a court application to obtain the files is “a deep embarrassment for the courts of Saskatchewan,” Prof. Turpel-Lafond said. “This should have been open. It should have been public.”

The details should prompt the federal government to re-examine its case against the Catholic Church, she argued. In Nov. 2015, Ottawa dropped a plan to appeal. Its filing did not provide a reason for that decision.

“The Attorney General of Canada, whoever that might be shortly, needs to revisit this case,” Prof. Turpel-Lafond said. “Bad decisions get made all the time, where Indigenous people are not heard or seen. Just because someone makes a bad decision doesn’t mean we have to live with it.”

The Catholic Church ran most of Canada’s residential schools, which were federally funded institutions meant to strip Indigenous children of their traditions, language and culture. Thousands of children died from malnutrition, abuse, disease or neglect. The Truth and Reconciliation Commission has said Canada’s residential school policy was cultural genocide.

Under one aspect of the Indian Residential Schools Settlement Agreement, a group of 48 Catholic Church entities, including dioceses and religious orders, agreed to make three forms of financial restitution to survivors and Indigenous organizations. They would pay $29-million in cash, provide $25-million in church and religious in-kind services and make “best efforts” to raise $25-million in a national fundraising campaign. To handle these payments, the church set up a special organization, the Corporation of Catholic Entities Party to the Indian Residential Schools Settlement (CCEPIRSS).

But by 2014 the church had yet to collect more than $21-million of its fundraising commitment, and still owed $1.6-million on its cash commitment. (By then, the church was saying it had already fulfilled the in-kind promise.)

When the government became aware of the $1.6-million cash shortfall, it took the church’s corporation to court. In filings previously obtained by The Globe, federal lawyers alleged the Catholic Church had improperly redirected funds meant for survivors towards fees for lawyers, auditors and accountants. A Globe story in late August revealed that the church’s corporation spent $6.46-million – roughly 27 per cent of its total funds – on expenses.

Lawyers for the government further alleged that the church’s lawyers were in a conflict of interest because they sat on the board of CCEPIRSS. The government also argued that the $25-million of in-kind services had not been audited, meaning the services’ value could not be verified. In late September, experts questioned whether the in-kind commitment had been met after The Globe acquired a list describing the services performed.

During the case, Gordon Kuski, a lawyer for the Catholic corporation, and Alexander Gay, a government lawyer, eventually agreed the church would pay out $1.2-million.

But the newly released court records suggest a misunderstanding soon emerged over the terms of the settlement, culminating in a pitched battle based on each side’s interpretation of various emails, letters and phone calls.

According to Mr. Kuski’s emails, he was negotiating for an all-encompassing deal: In exchange for the $1.2-million, the church would be released from its cash commitment, its fundraising commitment, and any outstanding in-kind service obligations. Mr. Gay, meanwhile, expected a much narrower settlement that only addressed the outstanding $1.6-million.

As negotiations wore on, the church became increasingly convinced a deal had been struck. On Sept. 17, 2014, Mr. Kuski sent an optimistic message to two board members of the Catholic corporation. “We are on the verge!!,” he wrote.

The government, meanwhile, believed the deal’s terms were still being negotiated.

In October, Mr. Kuski sent Mr. Gay a letter warning him that the $1.2-million was intended to cover all of the church’s financial requirements. “That was the deal,” he wrote. The outstanding money for the national fundraising campaign was a moot point, he said, because the church had already made its “best efforts” to raise the funds, as required under the residential schools settlement. “I think we agree that it appears pursuing any such complaint or concern would be fruitless,” he wrote.

The church did not want to become embroiled in an expensive legal dispute, Mr. Kuski continued. And, even if that were to happen, “the Catholic Entities and CCEPIRSS have no funds to pay for the cost of representation,” he wrote.

After that, exchanges between the church and government became more acrimonious.

“The delay in finalizing the settlement is completely unacceptable,” Mr. Kuski wrote nearly a month later. He threatened to ask the judge to order the deal be finalized.

Mr. Gay fired back later that day.

“We have not been able to reach agreement on the terms of the release. I have explained this to you numerous times and have advised you that the matter is still under consideration,” he wrote. “Your suggestion that there is an agreement is disturbing on many fronts and an unfortunate move on your part.”

With that, the government and the church were at an impasse. For the next six months, the court case – which began as a government complaint over a missing $1.6-million – became wholly consumed with the legal question of whether a deal had been struck. And then, in 2015, the church emerged victorious.

The now-public court files show that the church “out-maneuvered everyone,” Prof. Turpel-Lafond said. “They were discharged of their obligations through the sheer aggressiveness of their tactics. This was largely legal trickery and not a substantive consideration of the obligations and whether they were met.”

Prof. Turpel-Lafond also noted that she disagrees with Justice Gabrielson’s decision. “I think he was wrong, and that it was a disgrace,” she said.

James Ehmann, a lawyer who represented the Catholic entities in 2015, said that Canada reneged on a settlement its lawyers negotiated, which was why the judge found in the church’s favour.

Mr. Ehmann said that all parties – including the government and Indigenous groups – knew that the church hadn’t come close to the $25-million fundraising target, in part because of the cash the church had to raise for its $29-million commitment.

In a statement, Crown-Indigenous Relations and Northern Affairs spokesperson Megan MacLean said that Canada’s understanding and position had been that the negotiated deal only covered “the narrow scope” of accounting issues related to the $1.6-million shortfall. She did not respond to a question about whether the government would attempt to re-examine the 2014 case.

Following the discoveries of more than 1,200 unmarked graves at former residential school sites this summer, protesters and Indigenous leaders across the country began calling for an apology from the Pope, as well as financial reparations. In 2016, a lawyer for the church said that a new round of fundraising would not happen, and that many churches were already near bankruptcy.

The church’s assets in Canada, however, are substantial. In August, a Globe and Mail investigation used tax records to examine its holdings. The analysis revealed that the combined Catholic Church in Canada had net assets of $4.1-billion in 2019, and that it had received $886-million in donations, making it the largest charitable organization in the country.

In late September, the Catholic Bishops of Canada apologized for the “grave abuses” committed by the church at residential schools, and vowed to raise $30-million over five years in a new campaign to support healing and reconciliation for survivors and their communities.

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