Audit of Litigation Management - 2025

3.1.1 Documentation and Performance of Litigation Management Roles, Responsibilities

Clearly defining and documenting roles and responsibilities is essential to promoting clarity, accountability, and collaboration, while supporting effective and efficient litigation management.

Within CIRNAC and ISC, these roles and responsibilities are outlined in several high-level agreements and guidance documents. These include MOUs between CIRNAC and ISC, individual MOUs between CIRNAC's Policy and Strategic Direction Sector, Treaties and Aboriginal Government Sector, and Resolution and Partnerships Sectors, as well as separate MOUs between CIRNAC, ISC, and JUS.

To further support clarity and consistency, LMOD developed the Litigation Management Toolkit, which outlines roles and responsibilities and provides recommended practices for conducting litigation activities.

Some LMUs, such as the Settlement Agreement and Childhood Claims Branch's Litigation and Resolution Directorate and the First Nations and Inuit Health Branch Jordan's Principle and Inuit Child First Initiative team, have developed additional guidance to reflect their specific operational contexts. In most cases, these documents remain consistent with the Toolkit, with a few noted exceptions:

• Settlement Agreement and Childhood Claims Branch's toolkit addresses the unique nature of childhood claims and Indian Residential Schools Settlement Agreement litigation.
• First Nations and Inuit Health Branch Jordan's Principle and Inuit Child First Initiative have "Litigation 101" and "Back to Basics Approach" guidance documents available for staff.

Collectively, these MOUs and guidance documents form a framework for managing key litigation activities, including SCI, ongoing case management, out-of-court settlements, senior management and ministerial briefings, support for governance committees, and contingent liability reporting. However, despite the existence of these reference documents, the audit found that certain roles and responsibilities could be further defined.

Although "management oversight" is part of LMOD's title, the review of documented roles and responsibilities indicated that its oversight role is limited to support functions such as approving certain settlement mandates, developing and providing high-level guidance documents, delivering ad hoc training to LMUs, and coordinating SCI exercises and ministerial briefings. Current documentation does not define the type of operational oversight that LMOD should provide across the full spectrum of departmental litigation activities. These responsibilities could include providing direction, analysis, decision-making, and broader oversight. LMOD's limited resources, its position within CIRNAC, and its limited insight or authority over ISC officials and activities prevent it from providing a more complete and effective level of operational oversight, especially over ISC LMUs.

The role of the departmental LSU in supporting litigation activities could also be further defined. While the audit did not include an examination of JUS activities, interviews indicated that CIRNAC and ISC employees have observed that the departmental LSU plays a key role in monitoring and reporting to senior management on litigation activities and interacting with JUS litigators on steps to be taken in resolving cases. The LMOD Toolkit references the LSU's limited involvement in SCI and ministerial briefings but does not establish responsibilities in other areas, such as reporting directly to senior management. Interviewees suggested that the current Toolkit should more clearly define the LSU's role in litigation-related matters to avoid confusion and overlapping responsibilities with LMUs.

Walkthroughs with selected LMUs (Settlement Agreement and Childhood Claims Branch, Education and Social Development Programs and Partnerships, First Nations Child and Family Services, First Nations and Inuit Health Branch–Assistant Deputy Minister's Office, as well as Jordan's Principle and Inuit Child First Initiative) found that roles related to SCI and out-of-court settlements are generally carried out as defined. However, the Settlement Agreement and Childhood Claims Branch's Litigation and Resolution Directorate, which operates in a unique context due to the sensitive nature of the litigation it manages, uses paper-based communication during the SCI process to protect sensitive information, or receives cases directly from JUS through a paper-based process.

While LMUs are structured within sectors to support integration with policy and program teams, there are no specific expectations on how strategic analysis and prevention of future litigation are to be performed. This prevented the audit from validating whether these activities were being carried out. It is also unclear whether LMUs have the capacity and ability to perform activities related to strategic analysis and prevention on top of managing the daily workload of litigation cases. Previously, these analysis and prevention activities were reportedly performed by the Litigation Management and Resolution Branch under the centralized model. With decentralization, responsibility for strategic analysis and litigation prevention has been transferred to the LMUs, but the demands of other litigation activities have left limited capacity for such efforts.

Inconsistencies in how litigation management roles and responsibilities are defined and carried out were observed across LMUs. A lack of clear expectations and guidance on specific activities such as strategic analysis and prevention contributes to these inconsistencies and may lead to ineffective or inefficient litigation management, limited oversight, and a lack of a coherent departmental approach.

3.1.2 Litigation Management Guidance and Training

The audit noted that guidance to support effective management of litigation activities is defined and documented through overarching documents such as LMOD's Toolkit and various guides developed by LMOD and individual LMUs.

The LMOD Toolkit is available to all LMUs and serves as a high-level reference for conducting litigation activities, including SCI and out-of-court settlements. It has been reported as a useful resource. In addition, LMOD has developed several guidance documents describing authorities, roles, responsibilities, and step-by-step processes to obtain and execute settlement mandates. LMOD also chairs weekly and monthly calls with LMUs to discuss guidance and answer questions.

As described previously, certain LMUs, such as the Settlement Agreement and Childhood Claims Branch, Education and Social Development Programs and Partnerships, and First Nations and Inuit Health Branch Jordan's Principle and Inuit Child First Initiative, have created supplementary guidance to expand on the information contained in LMOD's Toolkit. However, some LMUs reported that they do not have sufficient resources or time to develop tailored guidance reflecting the specific nature of their work. As a result, important aspects of LMU operations, such as managing class action lawsuits, are not described in any LMOD or LMU-level guidance. In the absence of specific guidance, LMU officials often rely on more experienced colleagues, other LMUs, or JUS for information and assistance. The audit also found that there is no formal process in place to regularly assess the adequacy and completeness of existing litigation management guidance across CIRNAC and ISC.

The audit found that existing guidance does not describe expectations for conducting strategic analysis, integrating litigation management with policy and program activities, or preventing future litigation. Interviews indicated that expectations for these activities were unclear, and there was no consistent understanding of how to approach strategic analysis, integration, or prevention efforts. This is important because the decentralized model was intended to enable LMOD, as an oversight body, to support strategic analysis and facilitate prevention measures in collaboration with LMUs and program and policy units. However, this is difficult to achieve without clearly defined expectations and activities to guide efforts.

While LMOD and LMU guidance materials also serve as training resources for new LMU employees, there is no formal litigation management training program in place. Interviews indicated that case managers possess valuable corporate knowledge about litigation management, which is often lost when employees leave. Orientation sessions provided by LMOD are not mandatory, and training is typically offered on an ad hoc basis in response to new requirements or specific LMU requests.

The audit noted that, in the current decentralized environment, LMUs demonstrate different levels of knowledge, experience, and capacity related to their litigation management responsibilities. Some lack resources to create and maintain training materials, relying on LMOD for overarching guidance and training. Unique mandates have also led some LMUs to develop their own tailored guidance and practices, resulting in inconsistencies within each department and potentially different approaches to managing litigation risks. Without comprehensive guidance and mandatory training, litigation management activities may not be performed effectively or efficiently, preventing the intended objectives of the decentralized model from being fully achieved. Additionally, a lack of focus on defining and implementing litigation prevention activities may negatively impact the litigation landscape over time.

3.1.3 Governance and Oversight Structures

LMOD supports and serves as the Secretariat for a series of Director General–level and Senior Management–level governance committees on litigation management. These include:

• Directors General Litigation Committee (DGLC): Comprised of Director General (DG) level members and representative(s) from the LSU, provides direction on key litigation matters such as issues requiring corporate-level input, including mandates for settlement negotiations, litigation strategies, new litigation policies, and contingent liability matters. The DGLC may also refer matters to the Senior Management Litigation Committee where appropriate.
• Joint Fiscal and Business Issues Committee: Comprised of representatives from CIRNAC, ISC, and JUS, this committee oversees the partnership concerning legal services. It typically meets every six (6) weeks to provide advice and recommendations on the business and financial aspects of legal services and to coordinate and monitor departmental MOUs to ensure resource use aligns with each organization's strategic priorities and financial capacity.
• Directors General Railway Committee: Serves as an interdepartmental forum to discuss issues or claims related to railway lands, with membership including DGs from ISC, CIRNAC, Transport Canada, and JUS.
• Senior Management Litigation Committee (SMLC): Comprised of sector heads and Deputy Ministers (DMs) and representative(s) from the LSU, provides a forum for discussion and direction on Indigenous litigation issues with substantial operational and policy implications for CIRNAC, ISC, and OGDs.
• Deputy Minister Working Group on Indigenous Litigation: Established by the CIRNAC DM in June 2024, this group serves as a forum for discussion and whole-of-government direction on managing Indigenous litigation. Membership includes DMs of CIRNAC, ISC, JUS, Department of Finance, Privy Council Office, and Treasury Board Secretariat. The DM Working Group is supported by a DG-level Working Group on Litigation Management coordinated by LMOD.

Although each governance structure has a dedicated Terms of Reference, most DG-level committees and working groups meet on a demand-driven basis. The audit noted inconsistencies across LMUs in their use of the DGLC. Some LMUs regularly engage the DGLC in line with its mandate, while others work directly with their policy and program units and JUS without involving the DGLC on their litigation files.

Additionally, the SMLC paused meetings from 2022 to 2024, resuming quarterly in June 2024 in response to increased attention on Indigenous litigation and associated contingent liabilities.

The current demand-driven approach to using certain governance structures may stem from unclear communication of their mandate, purpose, and value to sector leadership. Without fully leveraging governance structures for operational and strategic oversight, there is a risk that a coherent departmental approach to Indigenous litigation management may not be achieved. This could contribute to inefficiencies in resource allocation, misalignment of priorities, and challenges in supporting the Government of Canada's reconciliation objectives.

3.2.1 Forecasting and Management of Legal Services Costs

LMOD and the sectors/LMUs are reliant on JUS to provide accurate, reliable, and timely forecasts in accordance with the timelines established in the CIRNAC-JUS and ISC-JUS MOUs 2021–24. According to the MOUs:

• Joint strategic planning sessions are held between CIRNAC/ISC and JUS to inform the forecasting and monitoring process for the demand and provision of legal services.
• The results of the planning and forecasting sessions are documented in Annex B.2 (Advisory) and Annex E (Litigation) of the MOU. Advisory services forecasts are shared by LMOD with the programs for review and feedback, and litigation service forecasts are shared by LMOD with the LMUs for review and feedback.
• JUS requires receipt of all MOU renewals by April 1 of each year and aims for signed annual Annex B updates as early as possible in each fiscal year; however, there may be delays .
• An Advanced Billing schedule is also established for the payments made by CIRNAC and ISC to JUS, typically broken down as follows:
  • 1st installment (50% of the approved forecast) scheduled for July to September;
  • 2nd installment (40% of the approved forecast) scheduled for November; and
  • 3rd installment (10% of the approved forecast) scheduled for February (i.e., one more pre-payment before fiscal year end).
• Legal services reports are to be provided by JUS to CIRNAC and ISC, at minimum, on a quarterly basis to demonstrate actual costs incurred compared to forecasts. Supporting information by business line (advisory and litigation) is also to be provided by JUS in line with the department's revenue forecast exercises (October, December, and February) as well as at year-end in early April.
• Any changes made to the forecasted amount payable should be reflected in an In-Year Adjustment to Forecast worksheet.

However, interviews and documentation review indicate that challenges have occurred in consistently meeting all tasks, duties, and commitments under the MOUs related to forecasting and billing. In particular, the timing and level of detail of information exchanged between parties have at times made it difficult to maintain a fully aligned and timely forecasting and billing cycle. While forecasts and reports are shared regularly, the timing of their delivery and the need for clarification have occasionally delayed the finalization of related MOU annexes. In addition, variations in the format and level of detail of reports have limited the ability of departments to fully validate and reconcile information as part of the forecasting process.

These challenges and the inherently challenging nature of the litigation cycle contribute to difficulty in effectively estimating and managing legal services costs throughout the litigation management process. At the time of the audit, LMOD was negotiating revised MOUs between CIRNAC-JUS and ISC-JUS to better align JUS's financial reporting practices with MOU expectations and support cost management. LMOD also established a Tiger Team, which includes representatives from JUS and CFRDO CIRNAC (but not ISC)^{Footnote 9}, to address reporting issues. The Joint Fiscal and Business Issues Committee can also serve as a forum through which CIRNAC, ISC, and JUS engage in collaborative discussions on the MOUs. LMOD and JUS have taken steps to improve coordination and reporting clarity, including enhanced segmentation of reports by sector and region. Continued efforts in this area are expected to support more consistent and timely forecasting and cost-management practices going forward.

3.2.2 Accountability Over Legal Services Costs

Given the decentralized nature of litigation management in the departments, accountability for it resides with the Sector ADMs. However, there is a lack of consistent understanding among stakeholders (i.e., the LMUs and LMOD) regarding accountability for the associated legal services costs. LMOD manages the relationship with JUS through the MOU but does not control the extent of legal services accessed by sectors and LMUs. Within CIRNAC, CFRDO CIRNAC allocates legal advisory services budgets to sectors at the beginning of the fiscal year, with sectors responsible for managing their legal advisory services budgets. LMOD manages the litigation services budget for LMUs. In case of cost overruns for both advisory and litigation services, CFRDO CIRNAC may use departmental reserves or reallocate budgets. As a result, reallocations resulting from higher advisory or litigation costs may not always be clear to sector ADMs as they are part of broader departmental reallocation exercises. Within ISC, CFRDO ISC pays JUS for both litigation and advisory services through a custodial account, resulting in a disconnect between those who pay for the legal services and those who request them.

Regardless of the approach taken to litigation management, without consistent understanding and clear accountabilities over legal services costs, cost overruns may be incurred. It is also important to ensure continued collaboration with JUS and improved clarity on roles expectations as it relates to costing details and justifications.

3.2.3 Requesting Legal Advisory Services

The audit examined how CIRNAC and ISC used JUS services and if it was aligned with established departmental responsibilities, and whether measures were in place to help manage legal expenditures related to requests. Interviews and documentation review did not identify instances where LMUs requested JUS support for matters that could have been handled internally. However, the assessment was limited by several factors that affected the ability to fully analyze the nature and extent of legal advisory services.

The audit found that the volume of advisory services requested by LMUs is relatively low compared to those initiated by policy and program sectors. In some cases, organizational structures combine litigation management with policy or program functions, making it difficult to distinguish requests related to litigation from those related to broader legal or policy advice. Further clarity on the delineation between litigation-related legal advice and other advisory services would support a more consistent understanding of when to seek LSU input.

Processes for requesting and tracking legal advisory services vary across LMUs and are not applied systematically. Approaches range from designated points of contact for requests to more informal or ongoing arrangements, with limited documentation of related costs. This variability limits the ability to consistently monitor and assess the nature and extent of advisory services.

In 2023 JUS and LMOD began a pilot project to estimate hours for the 35 largest files, which account for about 62% of anticipated billings to CIRNAC. If successful, this project may later extend to ISC. LMOD indicated its use remains limited, covering only about $30,000 in advisory costs to date. As policy and program areas are the main users of advisory services, most LMUs do not need to use the Legal Services Request form separately from the advice received through JUS litigation files. Efforts are ongoing to expand use of the form within CIRNAC, including discussions with LSU to clarify responsibilities for completing estimates. Broader rollout to ISC is planned only once the model has been proven effective in CIRNAC.

However, there is an opportunity for LMOD to continue assessing results of the current pilot project and implement further steps to increase it within CIRNAC. Additional clarity around expectations and approval channels may also be needed.