Court documents obtained by CBC News allege that the Catholic Church is withholding millions from former students of Indian residential schools.
The church was part of the Indian residential school settlement reached in 2006. While the government paid the lion’s share of the billion-dollar settlement, the churches were also required to make reparations.
The Anglican, Presbyterian and United churches have met their obligations, but according to the federal government, the Catholic Church is shirking its responsibility.
The Aboriginal Healing Foundation is one organization that was slated to receive funds from the Catholic Church.
"We're trying to get blood from a stone," says Mike DeGagne, former head of the organization.
'We're trying to get blood from a stone.' — Mike DeGagne
He says the foundation was supposed to receive $29 million from the church.
"But then, the Catholics were allowed to subtract a number of expenses they'd already incurred, so it got down to about $18 million and about $1.6 million is still outstanding."
Ottawa claims those expenses should have gone directly to the foundation, and is critical of the church for claiming legal expenses as administrative costs.
"The net effect of this accounting approach is to reduce the overall amounts that are paid to the Aboriginal Healing Foundation, and to give preference to the Corporation's administrative costs, including their lawyers' fees, at the expense of former students of Indian Residential Schools."
Ottawa also points out the Catholic groups committed to fundraise $25 million as a part of the settlement, but so far have only raised a fraction of that.
With funding from Ottawa, the Catholic Church ran more than 70 per cent of the residential schools, which operated from the late 1800s to the 1990s.
Denise Guimond attended one of those schools for five years.
Pierre Baribeau, a lawyer in Montreal and director of the Catholic Entities corporation, says the Catholic Church will fight these allegations in court.
"The federal government has always adopted an aggressive attitude towards the Catholic Entities and we have offered reconciliation process to them and they firmly answered negatively, they don’t want to apply the agreement as negotiated in 2006, so we are going to present our arguments to the courts."
But DeGagne says the legal dispute sends a bad message to survivors.
"This is not about the person in the pews. Most Catholics have no idea their church isn't honouring their obligations and choosing to pay lawyers versus their obligations to survivors. If most Catholics knew this, they would be appalled."
Today, Aboriginal Affairs Minister Bernard Valcourt said, "Canada is committed to implementation of settlement agreement, as this matter is before the court, this will be the extent of my comment on it."
The case is scheduled to be heard in a Saskatoon court in June.