Gowling liable in day-school lawyers’ fee dispute; Canada and Winogron claims dismissed

Gowling WLG (Canada) LLP is liable for breaching obligations to protect predecessor lawyers’ fee claims when it took over litigation concerning federal day schools, a Manitoba judge has ruled. The amount of damages will be determined at a later hearing.

Justice McCarthy of the Court of King’s Bench of Manitoba made the liability-only summary-judgment ruling in Jack et al. v. Gowling WLG (CANADA) LLP et al., 2026 MBKB 121, delivered August 31, 2026. The plaintiffs are Joan R. Jack, Louay Alghoul and Alghoul Law and Associates.

The court dismissed all claims against Canada and all personal claims against lawyer Robert Winogron. The successful claims are against Gowling, based on its contractual undertaking, fiduciary obligations and duty of care. This decision awards no quantified damages and does not reopen the day-school settlement or award additional compensation to survivors.

The transfer of the file created the dispute

Jack filed a proposed class action in Manitoba in 2009 concerning abuse and mistreatment in federally operated day schools. She later joined Alghoul’s firm and brought the litigation file with her. The original lawyers’ work included community outreach, identifying potential class members and gathering evidence.

Gowling took over as counsel in 2016 and later commenced a Federal Court action. By early 2017, it had received the predecessor lawyers’ physical files and a database containing information about approximately 12,500 potential class members.

The Federal Court certified the action in 2018 and approved a settlement in 2019. A separate legal-fee component totalled $55 million. That was the 2019 fee settlement negotiated by Gowling and Canada, not an amount awarded to Jack or Alghoul in this case.

The predecessor lawyers learned of the settlement after it had been negotiated but before approval. They unsuccessfully sought intervenor status, although the Federal Court permitted submissions on the fee-approval issue. They brought this Manitoba damages action in 2020 while the appeal was pending. The Federal Court of Appeal upheld the federal ruling in 2021.

Federal approval did not decide the inter-firm claim

Gowling argued that the earlier Federal Court proceedings had resolved any fee entitlement and that pursuing the matter in Manitoba was an abuse of process. It also relied on issue estoppel, which can prevent a decided issue from being litigated again.

McCarthy distinguished the two proceedings. The Federal Court had considered settlement and fee approval in the class action, not liability for damages arising from obligations between the firms. It had declined to determine the inter-firm dispute and identified Manitoba as the appropriate forum.

Jack and Alghoul had not been parties with standing in the federal action and had been denied intervenor status. The requirements for issue estoppel were not met, the judge found. The Manitoba proceeding therefore could determine whether Gowling breached obligations arising when the file was transferred.

An undertaking, not a guaranteed percentage

The central factual issue concerned discussions about protecting the predecessor lawyers’ unpaid fees in exchange for delivery of their work. A June 20, 2016 email included Gowling’s undertaking to present documentation about their fees and disbursements for court approval following a successful outcome.

Gowling argued that the arrangement was either too uncertain to enforce or conditional on prompt delivery of statements of account. Because the plaintiffs had not supplied those accounts, it maintained that it had no binding obligation to advance their fees.

The plaintiffs said a subsequent telephone discussion removed that immediate requirement: the file would be transferred, accounts could follow later, and Gowling would protect the fee claim. McCarthy accepted that account, relying in part on an employee’s contemporaneous notes and testimony. Gowling’s witnesses said they did not recall or have a record of the call.

The judge found two essential terms: the plaintiffs would provide their file and database, and Gowling would protect their fees by presenting their claim at a fee-approval hearing. The plaintiffs accepted the undertaking by transferring the file.

This was not an agreement fixing a fee amount, rate or percentage. The absence of those terms did not defeat the more limited promise to put the claim forward. Nor did it amount to an unconditional promise that Gowling itself would pay whatever fees were claimed.

Failure to notify and advance the claim breached the promise

Gowling acknowledged that it did not seek compensation for the plaintiffs’ fees in negotiations with Canada. It also opposed their application to intervene at the approval stage.

McCarthy found that, at a minimum, Gowling had to notify the plaintiffs when fee negotiations began and advise Canada and the court that an unpaid-fee claim was being asserted. The plaintiffs were no longer conducting the litigation and could not be expected to know when their accounts were needed. A public announcement did not satisfy Gowling’s notification obligation.

Gowling also argued that the earlier work had little value, that Jack had already been paid, and that the retainer arrangements did not support further fees. The judge rejected those positions as justification for failing to advance the claim. The record showed substantial work, and uncertainty over entitlement or amount did not permit Gowling to decide the issue unilaterally.

The undertaking also created a fiduciary relationship in these circumstances, McCarthy found. After receiving the file, Gowling controlled the litigation, settlement negotiations and fee-approval process on which the plaintiffs depended for payment. Failing to notify them and disclose their claim breached that obligation.

The same conduct breached the duty of care of a reasonably prudent firm that had undertaken to present another firm’s fees. McCarthy found resulting loss, while leaving its amount for the damages hearing.

Claims against Canada and Winogron dismissed

Winogron acted as Gowling’s agent, and the plaintiffs did not establish separate actionable conduct or personal enrichment supporting an individual claim against him.

Canada owed no contractual or other obligation to ensure payment of the former lawyers’ fees. The judge accepted evidence that its settlement representatives had not known of the fee claim until shortly before the approval hearings. Allegations of conspiracy, unlawful means and inducement did not establish the broader wrongdoing alleged.

McCarthy also concluded that, had there been no enforceable contract or undertaking, compensation for the value of services could have been available against Gowling through unjust enrichment. That alternative analysis was not a second damages award.

A subsequent hearing will determine damages against Gowling. Costs are adjourned; if the parties cannot agree, a further pre-trial conference is to address them or arrange a hearing.