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A procession of residential school survivors during the Truth and Reconciliation Commission of Canada national event in Vancouver, Sept. 18, 2013.Rafal Gerszak/The Globe and Mail

It is illegal for form-filling agencies to exact fees from First Nations people for helping them to complete the paperwork required to claim compensation for abuses suffered at residential schools, a judge has ruled.

More than that, Justice Perry Schulman of the Manitoba Court of Queen's Bench wrote in a decision released this week, the "unequal bargaining power" of the form fillers means they acted in an "unconscionable" fashion when they coerced school survivors to sign payment agreements.

The case was brought by Dan Shapiro, the chief adjudicator of the Independent Assessment Process (IAP) – the non-adversarial method though which former students who suffered serious abuse can seek redress for the harm that was done to them. Mr. Shapiro had asked the judge to end the form-filling scheme that deprived as many as 1,000 abused former students of the full amount they were awarded under the Indian Residential Schools Settlement Agreement.

The decision "indicates that the courts will take steps to protect some of the most vulnerable members of our society from unscrupulous conduct," Mr. Shapiro said Friday. "There is a strong declaration from the court that form-filling agencies are not legally committed to charge contingency fees."

In his ruling, Justice Schulman asked court officials to investigate the extent of the problem and to find ways to recover money for former students who had already paid the fees. In the future, he wrote, all information related to the arrangements between the claimants, their lawyers and form fillers must be provided to the adjudicators that preside over the hearings that are being held under the IAP.

The maximum amount that lawyers can charge for handling the most complex cases of residential-school abuse is 30 per cent of the compensation awarded – the government will pay legal fees of up to 15 per cent of the award and the claimant must pay the rest. By charging extra through a form-filling agency, lawyers could take more than the maximum and avoid the scrutiny of adjudicators who are required to assess, in each case, whether the legal fees being charged are fair and reasonable.

Many lawyers are alleged to have taken part in the form-filling schemes. But the IAP asked the court to look at the "pilot case" of Winnipeg lawyer Ken Carroll and First Nations Residential School Solutions Inc. (FNRSSI), a now-defunct form-filling agency of which he was a part owner.

One of Mr. Carroll's clients was an elderly woman who said she did not realize one of the forms she was told to sign required her to pay 15 per cent of her claim to FNRSSI. Although the woman had cancer and was undergoing chemotherapy, she says Mr. Carroll insisted that she travel by bus from Thunder Bay to Winnipeg to pick up her compensation money. After she left Mr. Caroll's office with her cheque, FNRSSI employees followed her to her bank and forced her to pay them $8,100.

Justice Schulman said in his ruling that: "To protect other IAP claimants who have been represented by the Carroll firm from the actions of unscrupulous form fillers, I have ordered that their settlement proceeds be paid through the court monitor rather than the Carroll firm."

Mr. Carroll said Thursday he had no comment on the decision. He had previously argued that there were no rules governing form-fillers and their fees. He also said that, when he learned that FNRSSI was receiving improper fees, he terminated his relationship with the company and used his own money to reimburse funds improperly paid by two clients.

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