Judge says Lutsel K'e Dene First Nation claim against law firm can move ahead

An Edmonton law firm that's accused of helping Ron Barlas defraud a First Nation in the N.W.T. of millions of dollars has mostly failed in its bid to have the claim against it thrown out of court.

Barlas is the former CEO of the Lutsel K'e Dene First Nation's (LKDFN) business arm. The court has already found that he abused his authority to bilk the companies out of millions of dollars during his time as CEO. Barlas is appealing that decision.

Lutsel K'e is also seeking damages from Reynolds Mirth Richards and Farmer, the law firm that was acting on behalf of the LKDFN companies at the time Barlas was CEO. It's claiming the firm acted more in Barlas's interests and knew, or should have known, that the work it was doing was harmful to Lutsel K'e's businesses.

In court documents supporting its application to dismiss Lutsel K'e's statement of claim, Reynolds Mirth Richards and Farmer (RMRF) argues that the 72-page claim violated the rules of court requiring that claims be concise and to the point.

The firm argued the claim contains "unnecessary, scandalous, frivolous or vexatious allegations … and is an abuse of process."

RMRF said the claim was crafted so badly it was unable to respond to the lawsuit. But Lutsel K'e's lawyers pointed out that the firm did in fact respond to the lawsuit with a statement of defence.

N.W.T. Supreme Court Justice N.E. Devlin partly agreed with the Edmonton law firm. He ordered that parts of the statement of claim must be removed. But Devlin said the rest of it can proceed.

"The statement of claim is somewhat too long and could have used a more pointed final edit," said Devlin in a written decision released this week. "Overall, however, it provides a conceptually concise pathway and particularized allegations that will functionally guide this litigation as well or better than most 'conventional' pleadings."

In an email to CBC News, a partner with RMRF, Julie Gagnon, wrote that the firm "continues to deny all allegations that it or any of its lawyers participated in fraud or other inappropriate conduct."

"Given that the issue is before the courts and deals with some matters subject to solicitor/client privilege, we are precluded from commenting further at this time," she wrote.

Law firm notifies directors it may sue them

Lutsel K'e's lawyers said that not only was their claim clear enough for RMRF to file a statement of defence, but it was also clear enough for the firm to identify third parties to sue if it's ordered to pay any damages.

In January, RMRF served notice on Barlas, his wife and the directors of the Lutsel K'e companies during Barlas's time as CEO that if the law firm is ordered to pay any damages, it will be suing them for a share of those damages.

The directors RMRF served notice to are Stephanie Poole, Tom Lockhart, Darryl Marlowe, Maryrose Casaway, Archie Catholique, Adrian Nataway and Sunrise Lockhart.

In their written arguments, Lutsel K'e's lawyers suggested it was a mistake for RMRF to hold the directors responsible, because the judge in the case against Barlas found that the former CEO had manipulated and misled them "through omission and with outright falsehoods" and created "an atmosphere of fear" that discouraged the directors from asking relevant questions.

In the notice, RMRF says the directors knew or should have known "that Barlas was engaging in self-dealing, fraud, oppression and commercially unreasonable behaviour."

The Lutsel K'e lawyers and RMRF are still gathering evidence from each other in an effort to find some resolution or, if that doesn't happen, prepare for a trial.

Though the courts have decided that Barlas defrauded the Lutsel K'e companies, the sides are still working out how much money he took.