The Canadian government says a law firm that represented thousands of residential school survivors should have to pay back legal fees because it inflated its billings.

But the government's argument that accuses the Merchant Law Group of fraud, deceit and misrepresentation won't go any further unless Saskatchewan's highest court agrees to reinstate the case.

Lawyers for Canada's attorney general told the Saskatchewan Court of Appeal on Tuesday that the government would not have entered into an agreement a decade ago to pay the firm $25 million if it had known there were concerns about how much time the company spent working on residential school claims.

"What we're saying is we wouldn't have agreed to that amount if we had known the truth, so we want some damages for that," lawyer Kelly Keenan told the three Appeal Court judges.

The Appeal Court reserved its decision, which will not affect payments for survivors.

The case goes back about a decade, when courts in each province approved the Indian Residential Schools Settlement Agreement.

In the Saskatchewan settlement approval hearing, Canada argued that the agreement did not require that it pay Merchant Law Group a minimum of $25 million. But Justice Dennis Ball disagreed and found the amount reasonable, noting that substantial time had been spent on the case and the complexity of the litigation.

Canada's appeal was dismissed by the Saskatchewan Court of Appeal in March 2007.

Canada went back to court in December 2007, arguing it shouldn't have to pay Merchant until a verification process to review the firm's billing records was complete.

Justice Neil Gabrielson, who was overseeing implementation of the settlement agreement in Saskatchewan, ruled in 2008 that the verification process was not complete but that Canada must pay.

The federal government filed a new lawsuit against Merchant Law Group in January 2015 to try to get the money back.

Justice Brian Barrington-Foote tossed out the claim, saying Canada did not have the information it now claims to have about Merchant's billing records, but that it was well aware of the possibility there had been misrepresentations and agreed to pay $25 million regardless.

Keenan said no one knew there was fraud in 2006 or 2008.

"Canada's claim is about what arrangement it would have entered into, not whether the arrangement it entered into was fair and reasonable," she said.

The review process was done after the agreement was signed, Keenan said, and it found Merchant's billing records were "replete with the illegitimate time entries and excessive disbursement records."

Merchant's lawyer, Gordon Kuski, said the government knew there were concerns about billing and went into negotiations with its eyes wide open.

"Each of the courts were fully informed and hip about the concerns but, pursuant to the contract, found out that the $25 million was fair and responsible," Kuski told the Appeal Court on Tuesday.

He also said dragging the case into court again is an abuse of process.

"The torturous journey that MLG has been on since 2006, relative to this matter, and here 10 years later — they're being vexed by the same issue."

Kuski said the government can't have its money back. "The court ordered that we were entitled to it," he said.

"I mean there has to be some end to litigation."

National Observer exists thanks to reader subscriptions and donations. Please subscribe today.

Keep reading