A miscommunication by a federal lawyer allowed the Catholic Church to renege on its obligation to try to raise $25-million to pay for healing programs for the survivors of Indian residential schools.

Of that amount, the Church raised only $3.7-million, and a financial statement suggests less than $2.2-million of that was actually donated to help former students cope with the trauma inflicted by the residential schools.

The legal misstep occurred when Ottawa was pressing the Church to pay the entirety of a related cash settlement stemming from the Indian Residential Schools Settlement Agreement, the largest class-action deal in Canadian history.

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The failing fundraising effort by the Church, which represented almost a third of its obligation under the settlement, was playing out as the Truth and Reconciliation Commission was travelling the country hearing gut-wrenching stories about what occurred behind the walls of the institutions that operated in Canada for more than 100 years.

The landmark settlement agreement required 50 Catholic groups that ran the schools, known in court documents as the Catholic entities, to pay a combined $79-million for their role in the abuse.

Of that, $29-million was to be paid in cash, most of which was to flow to a now-closed Aboriginal Healing Foundation. Another $25-million was to be donated in unspecified "in kind" services. And an additional $25-million was to be raised for healing programs through the "best efforts" that the entities could make at fundraising.

In an attempt to make the Catholic Church pay the full amount of the $29-million cash settlement, the government inadvertently released it from any obligation it might have had to continue with a dismal fundraising campaign.

"When you have a deal, it needs to be implemented," said Bill Erasmus, the National Chief of the Dene Nation who handles the residential schools file for the Assembly of First Nations. "So the Church should be paying up. The church agreed there were harms. That's why people were to be compensated."

But, as of last summer, the Catholic entities were legally off the hook.

In a March 19 letter to Ron Kidd, a concerned citizen from British Columbia who has been following this case, Andrew Saranchuk, an assistant deputy minister within the Indigenous Affairs department, explained that a court settlement reached on July 16, 2015 "released the Catholic entities from all three of their financial obligations under the settlement agreement, including the 'best efforts' fundraising campaign, in exchange for a repayment of $1.2-million in administrative fees."

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This result, Mr. Saranchuk went on to explain, "was due to miscommunications between counsel regarding the nature and extent of the settlement being discussed."

The problem arose when the government took the Catholic entities to court in late 2013 for coming up $1.6-million short on the millions they were required to pay to the Aboriginal Healing Foundation. Negotiations ensued between Gordon Kuski, the lawyer for the Catholic entities, and Alexander Gay, the lawyer for the government.

According to court documents, Mr. Kuski wrote to Mr. Gay in June, 2014 and proposed that the Catholic entities pay $1.2-million in return for being released from "all matters between the parties" – meaning all of the financial obligations in the residential schools settlement agreement that had yet to be met, including fundraising. The groups realized their fundraising was falling far short of the $25-million goal and they wanted to be freed from that responsibility.

The court documents suggest there was some dispute over how that offer was received, but it appears that Mr. Gay's responses led Mr. Kuski to believe they had a deal, even though the government had no intention of allowing the Church to walk away from the fundraising obligations.

In reviewing the matter, Neil Gabrielson, a judge with the Court of Queen's Bench for Saskatchewan, determined that Mr. Kuski had reason to believe that the proposal had been accepted and that it therefore was binding.

A spokesman for the Indigenous Affairs department said in an e-mail that the government pressed the matter when it was clear that a mistake had occurred but ultimately it respects the court's decision.

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Pierre Baribeau, a lawyer for the Catholic entities, says his clients did all they could to meet their fundraising commitments under the residential schools settlement agreement.

But, in the end, said Mr. Baribeau, it was "a fiasco." Although much money was spent on the campaign, he said, corporations could not be persuaded to donate because it was a religious matter and many parishes were not in a financial position to hand over large sums.

"So we were not successful," said Mr. Baribeau. "We did our best efforts, that's for sure."

But Charlie Angus, the indigenous affairs critic for the New Democrats, said the residential schools settlement agreement was supposed to provide justice for the survivors.

"Instead, we see time and time again that it has been a travesty of injustice by the defendants for the benefit of the defendants," said Mr. Angus. "I am looking at communities where we have people dying because of a lack of mental-health services and we have the Catholic Church trying to sneak out of its obligations."