The Manitoba Court of Queen’s Bench dismissed an application by the plaintiffs, on behalf of the Lake St. Martin First Nation, for an order of interim costs to fund a claim against Manitoba and Canada relating to the historic flooding of lands. The Court held that the evidence filed by the plaintiffs fell far short of satisfying the requisite test to obtain such an extraordinary remedy. In particular, the plaintiffs failed to satisfy the first criterion of the Okanagan First Nation test of demonstrating that they were impecunious. There was no reliable evidence of the financial status of the plaintiffs, and no litigation budget was put before the court. The plaintiffs failed to make full and transparent disclosure.

This claim was filed in 1999, and related to the flooding of reserve lands in the 1960s and 1970s. The plaintiffs allege that a release signed in 1975 concerning the flooding was unconscionable. There were sporadic negotiations between 2007 and 2011. In January 2011, the plaintiffs advised that they would proceed with this litigation and sought funding from Manitoba. The funding request was denied. The court noted the tragic events of 2011 when further flooding led to an evacuation order. In February 2012, the plaintiffs advised that their motion for interim costs would not be pursued, in order to pursue negotiations with Canada and Manitoba. A framework agreement was signed in April 2012. However, in September 2012, the First Nation abruptly took the position that it wanted the Crown’s “position and commitment” to the issues of relocation and compensation within eight days. The plaintiffs then retained new counsel and issued a media release indicating that it would proceed with the interim costs motion.

The Court applied the test for interim costs set out in Okanagan First Nation v. British Columbia, 2003 SCC 71 and Little Sisters Book and Art Emporium v. Canada, 2007 SCC 2. The three requirements are impecuniosity, a meritorious case, and issues of public importance. These are “absolute requirements”. The first prong of impecuniosity requires strong evidence that the party genuinely cannot afford to pay for the litigation, and there must be no other realistic option for bringing the issues to trial. The Court noted that there is no right to interim costs, and such an order remains at the discretion of the court.

The threshold of proof of impecuniosity is high. The applicant must make full and transparent disclosure of its assets, expenses, ability to raise or borrow monies, the ability to retain counsel (including the availability of a contingency fee agreement), and an estimate of the litigation costs. Mainella J. commented that the Court cannot be “myopic” about the consequences of such an order, and its “democratic implications”. He stated:

… in this motion, public monies are being requested without debate, advice or consent of the legislature(s). While an order for interim costs promotes access to justice for the general public interest, the monies ordered come from the treasury in the form of increasing the public debt or cutting funding to others. Accordingly, a party seeking interim costs must come before the court with complete financial transparency so that the court’s decision provides accountability for the use of public monies.

The Court held that the applicants failed to meet this test. The plaintiffs relied on the affidavit of Mr. Marsden, who had been the elected Chief between 2007 and 2009. He was now retired. Mr. Marsden had little personal knowledge of the First Nation’s current finances. He had no knowledge of the plaintiffs’ attempts to locate alternative funding. Mainella J. referred to Mr. Marsden as “nothing more than a straw man”. He cannot make full disclosure because he lacks the requisite knowledge to do so. Most of his affidavit was vague or non-sourced hearsay.

The evidence filed by the plaintiffs failed to demonstrate that they were diligent and thorough in seeking out alternative sources of litigation funding. An interim costs order cannot be made unless the party fully explored both public and private alternative funding options in good faith. In this case, there was no evidence about the ability of the individuals members of the First Nation to assist. The Court “cannot be left to guess in a vacuum”. A blanket statement that none of the First Nation members (over 1,000) were unable to contribute anything is not credible.

The Court noted that the plaintiffs had hired and discharged multiple lawyers since 1999, which indicates that the First Nation does pay its legal bills. There was also no evidence of whether a contingency fee agreement had been explored. The Court agreed with Manitoba’s submission that this claim seems ideal for such an arrangement.

The Court also criticized the plaintiffs for not having a litigation budget, or any estimate of the potential costs other than the statement that the claim can “easily run into the millions of dollars”. A properly drafted litigation budget is necessary to obtain such an extraordinary remedy as interim costs.

The plaintiffs’ motion was therefore dismissed. The parties could make submissions on the costs of this application.

Scott Kerwin, Partner
Aboriginal Law
BLG, Vancouver


Scott Kerwin


Aboriginal Law