Łútsël K’é lawsuit against KPMG can proceed in NWT, judge rules

An NWT Supreme Court Justice has ruled the Łútsël K’é Dene First Nation’s lawsuit against an accounting firm can proceed in open court in the territory.

The First Nation launched its suit against KPMG in 2024, alleging the accounting firm knowingly assisted the former chief executive officer of Denesoline Corporation – the First Nation’s business arm – in misappropriating millions of dollars from 2016 to 2023.

KPMG has denied the claims.

During a court hearing in March 2025, KPMG argued the NWT Supreme Court should stay the First Nation’s lawsuit and the allegations should instead be dealt with through private arbitration in British Columbia. The accounting firm pointed to arbitration clauses in agreements it had with the First Nation’s companies.

In a lengthy judgement released on Wednesday, Justice Nicholas Devlin set aside those agreements and ruled the case could proceed in NWT Supreme Court.

Devlin found that dealing with the First Nation’s allegations through both private and public litigation would be costly and complicated, could cause conflicting outcomes, and would “impair the remedial process underway.” He added there is public interest in having the case held in open court in the NWT.

“On the one hand, this case presents as a contractual relationship between a professionally managed million-dollar commercial enterprise and the high-end advisors it retained,” he wrote.

“On the other, it is a situation in which standard bearers of colonial capitalistic power – big law and big accountancy – walked into a remote Indigenous community, appeared to vouch (innocently or otherwise) for the fraudster who was robbing this small band of people blind and, when called to account for their actions, rely on a contract the First Nation never knew existed, signed by their oppressor as part of his scheme to defraud them, forcing them to spend much more of their limited resources to litigate for compensation in secret, in a foreign jurisdiction, far from their home.”

“It does not seem too much to ask,” he continued, “that Canada’s business community accept the risk of having to render account for their conduct in open court when acting as fiduciaries for First Nations.”

Devlin noted that while he has ruled the case can proceed, the allegations against KPMG are “far from proven.”

KPMG reviewing, First Nation and receiver pleased

In a statement to Cabin Radio, a spokesperson for KPMG said the company had “sought to resolve differences through the cost-effective and efficient arbitration process.” The spokesperson said KPMG is reviewing the court’s recent decision and “considering its response.”

“We will be vigorously defending ourselves throughout any legal proceedings,” the company stated.

Larry Innes, one of the lawyers representing the Łútsël K’é Dene First Nation, said he was “very pleased” with Wednesday’s decision.

Toby Kruger – the lawyer representing Riley Farber Inc, the court-appointed receiver in control of the First Nation’s companies – said the court’s decision is a “big, big victory” for the First Nation and its companies.

“This is one step in seeking justice for the wrongs that were done to them and there’s still a long road ahead,” he said, “but this sends a clear message that the court is going to see through efforts to kind-of derail the First Nation seeking justice.”

A ‘pretty extraordinary’ case

Innes and Kruger said Devlin’s decision has wider implications for how arbitration agreements with First Nations could be dealt with by courts in the future.

They both highlighted that the decision references the Truth and Reconciliation Commission’s calls to action and the United Nations Declaration on the Rights of Indigenous Peoples.

Kruger said it’s “pretty extraordinary” that Devlin set aside an arbitration clause.

“I think the judge made some law here on the circumstances under which an arbitration clause can be set aside,” he said.

“I think this is one of the first times that a court has done that in the context of an oppression remedy,” he added.

“It was important for the judge to really indicate why this is such a unique case to justify such an extraordinary remedy.”

Innes said the decision is “going to be very useful for other Indigenous communities that find themselves in similar circumstances, where they’re at the sharp end of a contract put in front of them by sophisticated parties who then use that contract or weaponize that contract against them.”

“This case opens up to exception that general rule that parties will be bound to their contracts, and really sends a message to those who deal with First Nations communities that they need to be mindful not just to the law but to the equity in these situations,” he said, adding courts will “provide remedies in situations where those equities are not observed.”

Latest procedural chapter

As described by Devlin in his ruling, this was “the latest procedural chapter in the quest of the Łútsël K’é Dene First Nation to recover” funds misappropriated by Ron Barlas, the former chief executive officer of its companies.

The First Nation began legal action against Barlas in April 2023.

In July 2024, the NWT Supreme Court ruled in favour of the First Nation, finding Barlas had “engaged in egregious conduct and abused his position” as head of the First Nation’s companies, siphoning millions of dollars into his family’s companies, among other wrongdoing.

Following an appeal by Barlas, the NWT Court of Appeal upheld the ruling against him last year.

A trial is pending to determine exactly how much money the First Nation is owed.

Also outstanding are hearings on the First Nation’s lawsuits against KPMG and law firm Reynolds Mirth Richards & Farmer, which has also denied the claims against it. Those cases could be heard together.

Now the court has given the green light for the case involving KPMG to proceed, Innes said, the First Nation hopes the outstanding legal matters will be dealt with as soon as possible.

“It’s our hope that we will be able to move this very, very quickly and to get Łútsël K’é back into the position that they should have been in,” he said.