Friday, April 5, 2013

Date: 20130404 Docket: T-463-07 Citation: 2013 FC 341 DENNIS MANUGE V. HER MAJESTY THE QUEEN The Federal Court is Canada

Date: 20130404

Citation: 2013 FC 341

Ottawa, Ontario, April 4, 2013

PRESENT: The Honourable Mr. Justice Barnes








[1] This proceeding was initiated by Statement of Claim filed on March 15, 2007. In mid-

February 2008 a motion to certify the proceeding as a class action was argued before me at Halifax,

Nova Scotia and by a decision rendered on May 20, 2008 I certified the proceeding as a class action:


Manuge v Canada, 2008 FC 624, [2008] FCJ no 787. That decision was appealed by the

Defendant and on February 3, 2009 the Federal Court of Appeal set aside my certification Order:


Canada v Manuge, 2009 FCA 29, [2009] FCJ no 73. That decision was further appealed by the

Plaintiff, Dennis Manuge, to the Supreme Court of Canada and on December 23, 2010 that Court,

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by unanimous decision, restored my Order thereby allowing the action to proceed as a class action:


Manuge v Canada, 2010 SCC 67, [2010] 3 SCR 672.

[2] To their credit the parties then jointly proposed to bring an issue of law before the Court for

summary determination. That matter was argued before me at Halifax and by decision rendered on

May 1, 2012, I determined that the Defendant’s interpretation of the applicable Service Income

Security Insurance Plan Long Term Disability (SISIP LTD) policy and that, in particular, the

practice of deducting monthly

Pension Act, RSC, 1985, c P-6, disability benefits from the LTD

income payable to disabled class members was unlawful: see

Manuge v Canada, 2012 FC 499,

[2012] FCJ no 512. That determination was not appealed and the parties undertook extensive

negotiations with a view to working out the financial implications of my judgment.

[3] These Reasons are issued in connection with a motion by the parties under rule 334.29 of


Federal Courts Rules, SOR/98-106 (Rules) seeking Court approval for their negotiated

settlement of this class action. Counsel for the class also seek Court approval for their claim to legal

fees under Federal Courts Rule 334.4 payable from the proceeds of the proposed settlement. That

claim is opposed by counsel for the Defendant on the ground that the proposed amount of legal fees

is excessive.

General Principles Applicable to Class Action Settlements

[4] Court approval of a class action settlement is appropriate where, in the overall

circumstances, it is deemed to be fair and reasonable and in the best interests of the class as a whole:


Bodnar v The Cash Store Inc., 2010 BCSC 145 at para 17, [2010] BCJ no 192. In Chateauneuf

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v Canada

, 2006 FC 286 at para 7, [2006] FCJ no 363, Justice Danièle Tremblay-Lamer, described

the general approach to the approval of a class settlement in this Court:

7 The Court with a class action settlement before it does not expect

perfection, but rather that the settlement be reasonable, a good

compromise between the two parties. The purpose of a settlement is

to avoid the risks of a trial. Even if it is not perfect, the settlement

may be in the best interests of those affected by it, particularly when

the risks and the costs of a trial are considered. It is always necessary

to consider that a proposed settlement represents the parties' desire to

settle the matter out of court without any admission by either party

regarding the facts or regarding the law.

[5] It is not open to the reviewing Court to rewrite the substantive terms of a proposed

settlement nor should the interests of individual class members be assessed in isolation from the

interests of the entire class: see

Dabbs v Sun Life Assurance Co. of Canada, [1998] OJ no 1598 at

paras 10-11, (available on QL).

[6] It will always be a particular concern of the Court that an arms-length settlement negotiated

in good faith not be too readily rejected. The parties are, after all, best placed to assess the risks and

costs (financial and human) associated with taking complex class litigation to its conclusion. The

rejection of a multi-faceted settlement like the one negotiated here also carries the risk that the

process of negotiation will unravel and the spirit of compromise will be lost.

The Terms of the Proposed Settlement

[7] The settlement proposed by the parties includes a number of advantageous financial and

administrative terms. The value of the financial settlement has been estimated at more than

$887 million which includes the net present value of monies payable in the future to disabled class

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members. The financial effect of the settlement has also been extended voluntarily by the

Defendant by the removal of similar offsets of

Pension Act benefits from a number of other federal

financial support programs.

[8] The central component of the proposed settlement is the full recovery by approximately

7,500 class members or their families of all amounts unlawfully deducted or which would otherwise

have been deducted in the future from their SISIP LTD income. The agreed retroactive recovery of

benefits dates back to June 1, 1976, that being the date the

Pension Act offset began. This part of

the settlement resulted from a concession by the Defendant to abandon its limitations defences and

to expand the class to include disabled Canadian Forces (CF) members who would otherwise have

been left out. The agreement also provides for the recovery of offsets by the spouses and minor

children of deceased members in lieu of the cumbersome and complex process of recognizing estate


[9] In addition, the parties have negotiated reasonable rates for pre and post-judgment interest

dating back to 1992 totalling more than $80 million as of February 14, 2013. Interest continues to

accrue at $1.3 million per month.

[10] It is acknowledged by the parties that the payment of LTD benefits to members of the class

will attract income tax. Because SISIP LTD benefits constitute taxable income, the payment of

income tax is essentially unavoidable. In order to mitigate the impact of tax on lump sum

recoveries, disabled recipients will be permitted to spread their retroactive refunds over the years it

would have been payable if that option reduces their tax exposure. Further tax mitigation measures

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include a cash top up of 3.27% on retroactive LTD benefits payable to members and the right to

deduct legal fees as an expense incurred in the recovery of taxable income.

[11] In recognition of the hardships experienced by some members of the class, the parties have

agreed to establish a $10 million bursary fund to be administered over a period of 15 years by the

Association of Universities and Colleges of Canada. This fund can be accessed by class members

and their families for part-time or full-time study and is expected to generate bursaries of up to

$1,300.00 for each eligible applicant.

[12] The parties have also negotiated a streamlined process for administrating the payment of

refunds and for resolving future claim disagreements. Specifically, a number of members of the

class were subjected to

Pension Act offsets that exceeded the value of their SISIP LTD benefits.

These members came to be identified as “zero sum” members. Because the SISIP administrator had

not maintained medical and financial information for zero sum members, it was not possible to

readily determine their ongoing eligibility for LTD benefits. This barrier to recovery was resolved,

in part, by allowing the SISIP administrator to access medical data from other government sources

and by establishing proxy indicators for determining a person’s ongoing level of disability. A proxy

would include the recognition of “total disability” under other disability programs such as the

Canada Pension Plan. For members released after November 30, 1989, the Defendant has agreed

unconditionally to treat all zero sum members as disabled during the initial 24 month ownoccupation

disability period.

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[13] For class members who disagree with the Defendant’s assessment of disability or with the

amount payable a simple and binding appeal process has been established. Class counsel have

undertaken to represent those members on any appeal brought before an agreed and experienced

arbitrator who will be paid by the Defendant.

[14] The proposed settlement also provides for the appointment of a Monitor who will be

responsible for assessing the Defendant’s compliance with its terms. The Monitor will report

quarterly and will be paid by the Defendant.

[15] Finally, save for a remaining issue between the parties concerning the calculation of

Consumer Price Index (CPI) benefits payable under the SISIP policy (to be resolved later by the

Court), the settlement provides for a release of the Defendant from further liability in connection

with claims arising, or which could have been raised, in this litigation.

The Views of Class Members

[16] The Preliminary Notice of Settlement invited class members to write to counsel either

supporting or opposing the terms of settlement. Two hundred and sixty-nine responses were

received by counsel and submitted by affidavit to the Court. A small number of class members

wrote directly to the Court. At the hearing of the motion to approve the proposed settlement, a

number of class members appeared and, of those, several addressed the Court. The vast majority of

those submissions expressed strong approval of the terms of settlement including the claim to legal

costs. Only 15 of the written submissions expressed general disagreement with the settlement and

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another 18 opposed only the claim to legal fees. A further 30 class members advocated for the

Defendant to satisfy the claim to legal fees advanced by class counsel.

[17] The overwhelming tone of the submissions to the Court was complimentary to Mr. Manuge

and to his legal team and strongly supportive of the settlement. A few examples will be sufficient to

illustrate this general view. George Hrynewich wrote the following:

As for the settlement, I will get back what was clawed back by

SISIP. The interest amounts are fine as far as I am concerned,

because honestly, I probably would have spent the money and not

made any interest on it. Lawyer fees—of course everyone would like

to see things like this lower, but I was expecting them to be higher,

so I feel that they are fair. They did a lot of work for us and put up

with a lot. It would be nice to see them give Mr. Manuge a little bit

more for his work in starting the suit and carrying on with it. We

cannot escape income tax, and I would rather see them hold back too

much now and have the Canada Revenue Agency (CRA) give me a

refund later, than have to scramble to pay money back to CRA next

year. In summary, I have to say that I am satisfied that we

accomplished the main goals that I wanted to see accomplished when

I joined this lawsuit. I did not join this expecting to get rich and I

think the settlement is reasonable and fair.

Perhaps most of all I would like to see this end, and end while we are

ahead. If someone could promise me that I would definitely get more

money, but that it would take several more years and might cause us

to lose some of the other things we have gained, I would say no

thanks. You would have to be able to guarantee that I would get

hundreds of thousands of dollars, if not a million, before I would say

that I would even think about it. But this is just my opinion and I will

respect the opinion of the majority of the suit members, as well as the

judgment and decisions of the court.

Marcel Pellerin wrote:

Hello my name is Marcel Pellerin and I vote YES to accept this

settlement proposal.

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I would have liked more tax relief, however I am very pleased that

this whole thing is almost over.

The stress anxiety and physical illness that this has caused me over

the last 10 years is more than I could continue to bare.

Thank you so very much to our legal team and Mr. Manuge. You

have achieved a wonderful thing for the class [i]ncluding me and my

teenage daughter.

Dana Morris wrote:

I would like to thank you and your staff for the work you have done

on our behalf with this Class Action. This was a monumental task

that clearly was not for the weak. Your diligence and professionalism

should set a standard for all to emulate.

I still find it difficult, no, impossible to guess-estimate the amount

that would come our way however at this point it is a mute point!

Had it not been for the courage of Dennis Manuge and

Peter Driscoll, as well as their determination to see it through, we

(the class members) would have absolutely nothing to look forward

or dream about.

I, as a class member and disabled Veteran, with my family, support

the Agreement and the proposed legal fee percentage as outlined by

McInnes Cooper in the email dated 9 January 2013 sent to all Class


I can’t say this enough, “THANK YOU so very much” for giving us

hope and “a little piece of ourselves back”.

[18] Given the strong support for the settlement expressed by the vast majority of class members

who made submissions and the general notoriety of this case and its outcome within the community

of disabled veterans, I am satisfied that the settlement is viewed very favourably by almost all class

beneficiaries. Certainly, if there was general dissatisfaction with the settlement, I would have

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expected that more than a few members of the class would have expressed their concerns to the


[19] It is apparent from the submissions received from class members that some of the opponents

to the proposed settlement mistakenly believe that the Court has the authority to unilaterally amend

its terms. With the exception of the approval of legal fees under Federal Courts Rule 334.4, the

Court has no authority to alter a settlement reached by the parties or to impose its own terms upon

them. The Court is limited to either approving or rejecting a settlement in its entirety.

[20] Three recurring issues of concern to some class members had to do with the payment of

income tax on retroactive payments of LTD income, the unwillingness of the government to

contribute to the legal costs incurred by the class and the absence of an award for general or punitive

damages. A few individuals had specific concerns including the mother of a deceased veteran who

objected to the exclusion of extended family from the class.

[21] The concern expressed by a few members of the class about the failure to incorporate a

recovery for general damages is not persuasive. This was a breach of contract claim where such

recoveries are infrequently recognized and certainly not in substantial amounts. Counsel also point

out with some justification that the agreed $10 million bursary fund represents a form of surrogate

recovery for the personal hardships experienced by some members of the class over the years.

Protecting claims to general damages would also have required class members to produce individual

medical evidence and presumably to testify about the hardships they had experienced. In my view

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such an approach would have been more time-consuming, expensive and complex than warranted

by the benefits that would likely have been generated.

[22] The criticism that the settlement ought to have imposed upon the government an indemnity

obligation for legal costs fails to recognize that in this Court legal costs are not, except in

exceptional circumstances, payable by either party to a class proceeding regardless of the outcome:

see Federal Courts Rule 334.39. This provision was adopted to eliminate a practical barrier to the

commencement of a class proceeding by a representative plaintiff who might otherwise be exposed

to a substantial costs award if the case was ultimately unsuccessful. In the absence of any provision

in our Rules for the separate payment of costs, it was not unreasonable for the parties to negotiate a

settlement that provided for legal costs to be borne out of the settlement proceeds.

[23] A few members of the class complain that income tax will be payable on their retroactive

LTD payments. Taxes are, however, the inevitable consequence of the application of the


Tax Act

, RSC, 1985, c 1 (5th Supp.), and the manner in which SISIP LTD premiums were paid over

the years. Under the proposed settlement, class members are entitled to a 3.27% gross up for taxes

and will be able to elect to receive benefits over time if that creates a more favourable tax outcome.

These measures will mitigate the impact of income tax on taxable recoveries. It must also be kept in

mind that had class members received their full LTD benefits in accordance with the SISIP policy

that income would have been taxable at the time of receipt.

[24] No class action settlement will ever be perfect. Recovery is always limited to those who

meet the definition of a class member under the terms of certification. In cases like this involving

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thousands of unique individual claims, it is impossible and undesirable to treat every beneficiary

equally in either financial or administrative terms. It is inevitable that a settlement like this one will

leave a few people behind or benefit some ahead of others. In this case those distinctions are of

insufficient weight to reject the proposed settlement.

[25] Notwithstanding the concerns expressed by a few members of the class, I have no hesitation

in approving the proposed settlement of this action. It is a generous, complete and thoughtful

resolution of the issues that were raised in the litigation and it will provide substantial financial

assistance to thousands of disabled CF veterans and their families. The terms of settlement are also

the product of extensive negotiations between the parties. It would not serve the interests of the vast

majority of class members – many of who are suffering financially – to send the parties back into

further discussions to address the concerns of a handful of those who oppose the arrangement. It is

also a settlement that is supported by the vast majority of class members who took the opportunity

to make their views known to the Court. In short, it represents a fair and reasonable compromise

that is in the best interests of the class as a whole and it is, accordingly, approved.

[26] I would be remiss if I failed to recognize legal counsel, Mr. Manuge and the Government of

Canada for the generosity of spirit and compromise that so obviously motivated their negotiations

and which led to the resolution of the long-standing grievance that was at the heart of this case.

Without the tenacity of Mr. Manuge, the essential goodwill of the parties and the hard work of all

legal counsel involved, this settlement would not have been possible.

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[27] The claim by class counsel to legal costs is a different matter. The parties do not agree on

that issue and, in any event, it is left to the Court under Rule 334.4 to determine the appropriate

amount for those costs.

[28] At the heart of the application of Rule 334.4 is the requirement that legal fees payable to

class counsel be fair and reasonable: see

Parsons et al v Canadian Red Cross Society et al, 49 OR

(3d) 281, [2000] OJ no 2374 [

Parsons et al]. In determining what is fair and reasonable the Court

must look at a number of factors including the results achieved, the extent of the risk assumed by

class counsel, the amount of professional time actually incurred, the causal link between the legal

effort and the results obtained, the quality of the representation, the complexity of the issues raised

by the litigation, the character and importance of the litigation, the likelihood that individual claims

would have been litigated in any event, the views expressed by the class, the existence of a fee

agreement and the fees approved in comparable cases. Some authorities have also recognized a

broader public interest in controlling the fees payable to the legal profession: see

Endean v

Canadian Red Cross Society

, 2000 BCSC 971, at para 73, 2000 BCJ no 1254 [Endean].

The Quality of Legal Representation and the Results Achieved

[29] The certification and liability determinations that provided the impetus for this settlement

resulted from the skillful and tenacious advocacy of class counsel in the context of an adversarial

contest involving equally skilled and tenacious opposing counsel. The issues were thoroughly

briefed and persuasively argued and there is no question that the high quality of the legal work

performed by class counsel led to the favourable liability outcome.

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[30] The terms of settlement are equally impressive. Every dollar deducted will be returned to

class members or their families with appropriate interest. Notwithstanding the impact of legal fees,

the amounts recovered by class members will provide meaningful and, in many cases, badly needed

compensation. The Defendant’s withdrawal of its limitation defences will add many more

claimants to the class and will allow for recoveries dating back to 1976. A $10 million bursary

program will be put in place as a surrogate for potential claims to general damages. As discussed

above, general damages are notoriously difficult to prove in breach of contract cases. That is

particularly true for cases where claimants are medically disabled and the psychological impacts

arising from financial deprivation are often hard to isolate from other underlying conditions. The

solution adopted by the parties to resolve this issue was novel and creative. The same can be said

for the inclusion of surviving spouses and dependant children in lieu of the immense difficulties that

would arise from involving the estates of deceased members. Simple and cost effective measures

have been put in place to resolve any ongoing disputes about entitlements and it is anticipated that

the take-up rate for beneficiaries will approach 100%. These are results that would not have been

reasonably contemplated by anyone at the outset of this litigation. Indeed, if settlement negotiations

had been undertaken before my judgment was rendered, a reasonable outcome would have been

substantially less favourable to the class than this one. The excellence of the legal representation

provided by class counsel and the success that was achieved in the settlement negotiations are

factors that favour a significant premium in the assessment of costs.

Litigation Risk

[31] There can be no doubt that legal counsel for the class exposed themselves to a significant

level of risk in taking on this case. Once the case was finally certified as a class action, counsel

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were committed to bringing it to a final conclusion on behalf of all of the members of the class: see

Slater Vecchio LLP v Cashman

, 2013 BCSC 134, [2013] BCJ no 151.

[32] In the ordinary course of this type of litigation, counsel could expect to be engaged for many

years. In this case tens of thousands of pages of documents were expected to be discoverable and

extensive witness examinations and other pre-trial work was contemplated. When class counsel

accepted the retainer there was no expectation that the determinative legal issue would be resolved

in a summary way and that no appeal would be taken from that decision. Given the Defendant’s

adversarial approach to the motion to certify, counsel would have assumed that they were exposing

themselves to a financial risk measured in the potential loss of professional time and disbursements

of probably tens of millions of dollars. This was also not a case where the Defendant’s liability

approached a level of certainty. The claim to Charter relief was doubtful at best and the point of

contractual interpretation that ultimately drove the settlement was neither a sure thing nor

invulnerable to appeal. While there was likely a political dimension to the ultimate settlement, it is

doubtful that much, if anything, would have been recovered if my liability ruling had been

unfavourable to the class and had then withstood an appeal.

[33] Even the motion to certify this action exposed counsel to considerable risk. Although my

decision to certify was reinstated by the Supreme Court of Canada, the likelihood of obtaining leave

to that Court was only about one in ten. Furthermore, that decision turned on a contentious issue of

jurisdictional law that had long been unresolved in the national jurisprudence. Counsel for

Mr. Manuge undertook a three-year process to achieve certification. They also assumed tens of

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thousands of dollars of out-of-pocket expenses and agreed to indemnify Mr. Manuge for his

potential exposure to legal costs before the Supreme Court of Canada.

[34] The litigation risk that class counsel assumed is also illustrated by the fact that the grievance

that was at the centre of the case had been well-known for more than 30 years and had attracted no

litigation either individually or as a class proceeding until Mr. Manuge’s claim was taken up by

Mr. Peter Driscoll in 2007.

[35] Counsel for the Defendant point out that the litigation risk decreased significantly once a

decision was taken not to appeal my judgment. In the result, it is argued that the value of

professional time incurred by class counsel after that point ought to be discounted.

[36] Counsel for the class argues that the Defendant’s initial opposition to the proceeding was the

cause of much of the legal work that was incurred. According to this view, the Defendant’s initial

conduct in the defence of the claim diminishes the weight of its current argument that the claim to

legal fees is excessive.

[37] At this stage, I am not particularly concerned about the positions taken by the parties before

the settlement was achieved. It is sufficient to observe that the litigation risk assumed by class

counsel is primarily measured by the risk they assumed at the outset of the case. This point was

made by Justice Warren Winkler in

Parsons et al, above, in the following passages:

[29] Moreover, class action litigation introduces additional

complications. Complex class actions subsume the productive time

of counsel. The risk undertaken by counsel is not merely a function

of the probability of winning or losing. Some consideration must also

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be given to the commitment of resources made by the class counsel

and the impact that this will have in the event the litigation is

unsuccessful. Winning one of two class actions may be a reasonable

hallmark of success. However, for the lawyer who's first action turns

out to be a loser, the complete exhaustion of resources may leave him

or her unable to conduct another action. Thus the real risk undertaken

by class counsel is not merely a simple reciprocal of the "judgmental

probability of success" in the action, even if that calculation could be

made with any degree of certitude. There is a point in complex class

action litigation where, degree of risk notwithstanding, class counsel

may truly be, as Mr. Strosberg put it in his submissions, "betting his

or her law firm". This must be considered in assessing the "risk"

factor in regard of the appropriate fee for counsel.

[36] It is apparent from the record that even though this litigation

was conducted from the middle of 1998 forward as a negotiation

toward a settlement, the risks assumed by class counsel were no less

real at any point than if that time had been devoted to a disposition

through a trial process.

[37] In addition, the legislation enabling class proceedings

introduces several features that distinguish these actions from

ordinary litigation. One aspect that bears on the risk inherent in class

actions is the requirement of court approval of any settlement

reached. Protracted negotiations involve a commitment of the time

and resources of counsel and the litigants. However, in a class

proceeding, a court will not approve a settlement that it does not

regard as being in the best interests of the class, regardless of whether

class counsel take a different view. Thus, class counsel may find

themselves in the position of having committed time and resources to

the negotiation of a settlement, that they believe is in the best

interests of the class, only to find that the court will not approve the

settlement achieved. While this creates a risk simpliciter, it also

creates an advantage for a defendant who can successfully extend the

negotiations to the point that class counsel's resources are exhausted

before making a "final settlement offer" that may not ultimately

receive court approval. In those cases, class counsel may have

exhausted their resources attempting to obtain a reasonable

settlement only to find themselves, as a consequence, unable to

pursue the litigation. Accordingly, the risk in a class proceeding is

not merely a function of whether or not litigation is anticipated and

whether or not that litigation will be successful. Rather, there are

risks inherent in the adoption of, and commitment to, any particular

strategy for achieving a resolution.

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[38] In view of the foregoing, I am unable to accept the contention

that there was less risk in this proceeding merely because the parties

chose to proceed down a negotiation route. Moreover, contrary to the

submissions made by certain of the intervenors, it is apparent that the

time and resources committed to the negotiations by the class

counsel meant that the risk was increasing rather than decreasing as

the negotiations continued. As the parties moved toward a settlement,

the negotiations became more difficult as the issues narrowed with

the result that the risk of an insurmountable impasse increased rather

than diminished. This made the negotiations more perilous as they


[42] … The expenditures of class counsel in terms of time and

money were at risk of loss if any politician in authority decided as a

matter of expediency or policy not to settle the class proceedings or

decided to unilaterally institute a no-fault compensation program and

thereby bypass class counsel and the litigation. There was always the

inherent danger that the pan-Canadian settlement would be

impossible to achieve, either because of a reluctance on the part of a

particular government or a class in a particular action to approve an


[38] In my view the litigation risk assumed by class counsel was substantial and almost certainly

exceeded the tolerance level of others. This is a factor favouring a premium costs recovery, in part,

to motivate counsel to take on difficult class litigation involving potentially deserving claims that

might not otherwise be pursued.

Time and Effort Expended

[39] The affidavit of lead counsel, Mr. Driscoll, discloses that the two firms retained on behalf of

the class worked for more than 6 years (involving 20 legal professionals) and amassed more than

8500 hours of unbilled time. Considerable further work remains including the direct supervision of

the refund process and monitoring and assisting with individual appeals. The efforts undertaken to

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date to respond to enquiries from hundreds of highly engaged class members have been

considerable and will undoubtedly continue. Out-of-pocket expenses are now approaching

$200,000.00 and are estimated to exceed $260,000.00 before the case is concluded. All of the file

expenses have been borne by counsel and were, in considerable measure, at risk. Class counsel

value their current unbilled time at more than $3.2 million. This seems to me to be a reasonably fair

valuation. However, it is important to recognize that much of the billable time expended and all of

the file disbursements have been carried by these law firms for several years and that considerable

work remains to monitor and manage the individual claims of class members.

The Importance of the Litigation to the Class

[40] This was important litigation dealing with a long-standing, contractual grievance involving

thousands of disabled CF veterans. Since 1976 the practice of deducting

Pension Act disability

payments from SISIP LTD benefits had been the source of hardship drawing considerable thirdparty

criticism. Until my liability judgment was delivered, the Government of Canada forcefully

defended its position. The settlement of this class action will provide meaningful compensation for

several thousand deserving CF veterans and will likely represent the fourth highest financial payout

in Canadian class action history. These are factors that favour the award of a costs premium to class


The Public Interest

[41] If there is a public interest that pertains to matters such as this, it is more properly situate

around the interests of the class than the supposed interest of the general public in controlling

compensation for lawyers engaged in class litigation. In my view it is relevant in assessing the

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reasonableness and fairness of class action legal fees to consider the impact of those fees on the

individual recoveries of class members. This, I think, is what was of concern in

Killough v

Canadian Red Cross Society

, 2007 BCSC 941, [2007] BCJ no 1486 [Killough], where at para 8 the

Court referred to the impact of the agreed fee on the fund that would otherwise be available to the


[42] For someone like Mr. Manuge whose claim to retroactive LTD benefits is estimated at less

than $10,000.00, the deduction of legal fees of about $1,500.00 could not be considered to be unfair

or unreasonable. However, for a CF veteran suffering from a major, work-limiting disability, the

deduction of more than $37,000.00 from an award of $250,000.00 will result in a meaningful

financial deprivation. In short, those who are arguably the most in need of their retroactive

recoveries are the ones carrying most of the burden of legal costs. This is a factor that supports a

reduction in the award of costs to class counsel.

The Contingency Fee Agreement, the Claim to a Percentage Recovery and the Use of a


[43] I accept that a contingency fee agreement entered into between legal counsel and a

representative plaintiff in a proposed class proceeding may be a relevant and, sometimes, a

compelling consideration in the final assessment of legal fees. It strikes me, nonetheless, that such a

fee agreement will not necessarily be a primary consideration because it is most often executed at an

early point in time when very little is known about how the litigation will unfold. I made essentially

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the same point in my decision to certify this proceeding in

Manuge v Canada, 2008 FC 624 at para

34, [2008] FCJ no 787:

[34] One other concern raised by the Crown involves the

magnitude of the contingency fee that would be payable under the

terms of the Retainer Agreement entered into between Mr. Manuge

and his legal counsel. That Agreement provides for a fee of 30% of

any favourable financial judgment plus disbursements. The

Agreement also duly notes that the fee payable “shall be subject to

approval by the Court”. There is certainly nothing inappropriate

about a contingency fee arrangement in a case like this one where the

outcome is unpredictable and where the amounts individually in

issue appear insufficient to support litigation. The amount of fee

payable at the end of a class proceeding is, of course, subject to

assessment by the trial court and must bear some reasonable

relationship to the effort actually expended and to the degree of risk

assumed by counsel. I have no reservations about the ability of the

Court to deal with this issue, if necessary, in the exercise of its

supervisory jurisdiction.


[44] When Mr. Manuge entered into the fee agreement with his legal counsel, no one knew that

the issue of certification would ultimately reach the Supreme Court of Canada or that the

determinative liability issue would be finally resolved after a short hearing on agreed evidence and

without extensive discovery or a trial. Similarly, no one could have accurately predicted the

outcome of the negotiations that led to the settlement now before the Court including the

willingness of the Respondent to abandon what was likely a viable, if partial, limitations defence.

[45] The contingency fee agreement that was executed by Mr. Manuge and which purported to

award legal fees of 30% of amounts recovered on behalf of members of the class is of no particular

Also see Parsons et al v Canadian Red Cross Society et al, 49 OR (3d) 281 at para 58, [2000] OJ no 2374.

Page: 21

significance to this assessment. That is so because Mr. Manuge and class counsel have essentially

walked away from the agreement. What they are now seeking is the approval of legal fees

representing approximately 7.5% of the gross value of the settlement inclusive of past and future

benefits. It is also proposed that the fees be payable wholly from the past amounts due to class

members which would represent about 15.7% of the total value of the retroactive entitlements of

class members.

[46] Apart from the obvious fact that the fees now claimed represent about one-quarter of the

amount provided for in the initial contingency fee agreement, I was not provided with a clear

explanation for how the figure of $65 million was reached beyond the observation that the figure

was set at less than the amount of accrued interest included within the settlement. The figure

claimed for legal fees is thus not much more than a number and a very large number at that.

[47] The use of percentages and multipliers to assess class action legal fees is appropriate, but

mainly to test their reasonableness and not to determine absolute entitlement. Each approach has its

place. The multiplier appears to be a tool better suited to cases where the social benefits achieved

may be greater than the amounts recovered and where a percentage approach would likely undercompensate

counsel. In the so-called common-fund cases the use of a percentage appears to be

preferred because it tends to reward success and to promote early settlement.

[48] In my view there is a danger in placing undue emphasis on either a multiplier or a

percentage recovery in a case like this. My concern is the same as that expressed by Justice Ian

Pitfield in

Killough, above, in the following passages:

Page: 22

45 With respect, other factors do not elevate the contribution of

counsel in this action to the level of contribution of counsel in

relation to the earlier settlement. While time accumulated on the

matter and comparative multipliers are relevant and useful, caution

must be exercised when using them as benchmarks for the

assessment of the reasonableness of any fee. The principal concern is

that there is no means of assessing whether the accumulated time

was necessary and represented a reasonable and productive use of

counsel's time. Class actions must not represent an open-ended

invitation to accumulate time without regard to productivity.

46 The accumulation of substantial time charges in relation to a

legal matter does not always justify compensation at base rates or

multiples thereof. Conversely, low time endeavours may justify fees

that are many multiples of the book value of accumulated time.

47 Multipliers and percentage of recovery comparisons are

completely arbitrary. The efficacy of multipliers is affected by the

reasonableness, which cannot be assessed with any confidence, of

the base of accumulated time and hourly rates from which the

multiplier is derived. The percentage of recovery comparison is

reduced and therefore made to appear more favourable by comparing

the total fee to a global settlement amount that included the benefit

pool, the administration fund, goods and services tax and provincial

sales tax where applicable, and the aggregate of legal fees. Legal fees

were included notwithstanding the repeated assertion in affidavits

and submissions that legal fees were independent of any other

settlement consideration.

48 In sum, while counsel must be fairly and reasonably

compensated for the risk assumed by and the work done on behalf of

any class, the assessment of fairness and reasonableness is ultimately

more subjective than it is objective.

[49] The Defendant places considerable emphasis on the relatively low value of professional

time expended by class counsel and then argues for the use of typical multiplier of 1.5 to 3.5. This

seems to me to be overly simplistic and largely insensitive to the factors favouring a premium

recovery. The efficiency of counsel in getting to an excellent result is something to be rewarded and

not discouraged by the rigid application of a multiplier to the time expended. Here I agree with the

Page: 23

views expressed by Justice George Strathy in

Helm v Toronto Hydro-Electric System Ltd., 2012

ONSC 2602 at paras 25-27, [2012] OJ no 2081:

25 The proposed fee represents a significant premium over what

the fee would be based on time multiplied by standard hourly rates.

Is that a reason to disallow it? If the settlement had only been

achieved four years later, on the eve of trial, when over a million

dollars in time had been expended, would the fee be any more or less

appropriate? Should counsel not be rewarded for bringing this

litigation to a timely and meritorious conclusion? Should counsel not

be commended for taking an aggressive and innovative approach to

summary judgment, ultimately causing the plaintiff to enter into

serious and ultimately productive settlement discussions?

26 Plaintiff's counsel are serious, responsible, committed and

effective class action counsel. They are entrepreneurial. They will

likely take on some cases that they will lose, with significant

financial consequences. They will take on other cases where they

will not be paid for years. To my mind, they should be generously

compensated when they produce excellent and timely results, as they

have done here.

27 For those reasons, I approve the counsel fee.

Also see

Vitapharm Canada Ltd. v F. Hoffmann-La Roche Ltd., [2005] OJ no 1117 at para 107,

[2005] OTC 208.

[50] It can be equally unhelpful to look for guidance from authorities where legal fees have been

approved as a percentage of the amounts recovered. A reasonable fee should bear an appropriate

relationship to the amount recovered: see

Endean, above, at para 80. Cases that generate a recovery

of a few million dollars may well justify a 25% to 30% costs award. It is more difficult to support

such an approach where the award is in the hundreds of millions of dollars. Presumably that is the

reason why class counsel are not relying on the initial contingency fee allowance of 30%. That is

also the reason that the three authorities that represent the strongest comparators to this case in terms

Page: 24

of amounts recovered fall at the bottom of the scale of costs awarded in percentage terms: see

Baxter v Canada (Attorney General)

, [2006] OJ no 4968, 83 OR (3d) 481; Endean, above, and


, above.2 These comparable decisions do not support an award of costs in this case of

approximately 7.5% or, in financial terms, $65 million.


[51] Having regard to all of the considerations outlined above, I will approve legal fees in an

amount equal to 8% of the retroactive refunds payable to class beneficiaries (including the

cancellation of debts owing by class members to Manulife Financial). This figure is approximately

4% of the total value of the settlement. In addition I will approve the deduction of an amount equal

to 0.079% of refunds payable to class beneficiaries (including the cancellation of debts by class

members to Manulife Financial) as an indemnity for out-of-pocket expenses. Class counsel are also

authorized to deduct required goods and services tax, harmonized sales tax and/or provincial sales

tax from refunds payable to class beneficiaries and to remit those amounts to the Canada Revenue

Agency or to the appropriate provincial agency.

[52] I am satisfied that the above recovery of legal costs is in keeping with the fees approved in

the comparable cases. More importantly it represents a sufficient incentive to counsel to take on

In Baxter, above, a costs award representing 4.87% of a projected payout of almost $2 billion was approved. This

resulted in legal fees of between $85 and $100 million. In

Endean, above, legal fees of $52,500,000 were approved

representing 4.26% of the total amount recovered. In

Killough, above, legal fees of $37,290,000 were agreed between

the parties and were not to be deducted from the settlement proceeds. This figure was approved by the Court – albeit

with reservations - and it represented 3.64% of the total award.

Page: 25

high-risk class litigation without, at the same time, unduly impacting on the much-needed recoveries

of disabled CF veterans. I am grateful to counsel for their thorough briefing of the relevant

jurisprudence and, in particular, to counsel for the Minister who brought the required adversarial

balance to the process.

Discretionary Payments

[53] Class counsel have undertaken to create a fund for veterans in need of legal assistance with

the allocation of $1,003,420.00 from their costs award. In addition they propose to pay to

Mr. Manuge an honorarium of $50,000.00 in recognition of his significant contribution to the

prosecution of this action. Several members of the class argued that Mr. Manuge ought to receive

more than $50,000.00. However, to the extent that the Court has any control over the use of costs

awarded to counsel, I do not think it appropriate that Mr. Manuge receive more than the amount

described in the Preliminary Notice of Settlement sent to class members. That was the basis on

which the proposal would have been considered by class members and it is not desirable that a

unilateral and

ex post facto alteration be made at this stage. The proposal to establish a legal

assistance fund for veterans is laudable and, if Court approval is required, it, too, is given.

[54] No award of costs is made in connection with this motion.

[55] I will leave it to counsel to make the required changes to the proposed settlement Order to

be submitted to the Court for execution and issuance.

Page: 26



the settlement of this action is approved on the terms

proposed by the parties.


the legal costs payable to class counsel are

approved on the following terms:

(a) for legal fees, by the deduction of an amount equal to 8% of the refund and the cancellation

of debts, if any, owing to Manulife Financial payable to each eligible class beneficiary;

(b) for disbursements, by the deduction of an amount equal to 0.079% of the refund and the

cancellation of debts, if any, owing to Manulife Financial payable to each eligible class

beneficiary; and

(c) by the deduction from refunds payable to class beneficiaries and the remission of all

required goods and services tax, harmonized sales tax and/or provincial sales tax.

"R.L. Barnes"











February 14, 2013




April 4, 2013


Peter J. Driscoll

Dan Wallace and

Ward K. Branch


Paul B. Vickery

Lori Rasmussen and

Travis Henderson



McInnes Cooper

Barristers and Solicitors

Halifax, NS

Branch MacMaster

Barristers and Solicitors

Vancouver, BC


William F. Pentney

Deputy Attorney General of Canada

Ottawa, ON