Class Action

Class members cash in on strength of creative counsel

By Staff

A $100-million class-action settlement shows the value of creative counsel, Toronto class-action lawyer Margaret Waddell tells

The Federal Court recently approved the settlement in the case which involved around 13,000 disabled veterans who lost out due to pension reductions —which the plaintiff argued were discriminatory.

“The settlement of this veteran’s disability pension case demonstrates the importance of thinking outside of the box when counsel are seeking to fashion remedies for their clients,” says Waddell, partner with Waddell Phillips Professional Corporation. “This was a neat case that was formulated in a very clever way.”

She explains that the class members were victims of a comprehensive statutory amendment that deprived them of benefits that they would otherwise have been entitled to receive.

But the plaintiff eschewed traditional common law causes of action, such as breach of fiduciary duty, unjust enrichment, or unlawful assignment under the Pension Act, instead amending the claim to allege a breach of members’ Charter equality rights.

“Particularly, the plaintiff argued that due to Canada’s policy of deducting payments intended to compensate veterans for their disability, class members suffered discrimination based on disability, in violation of s. 15 of the Charter,” says Waddell, who was not involved in the case and comments generally.

That approach essentially turned the action into a claim for Charter damages, as opposed to reimbursement of deducted benefits.

“By framing the claim as a Charter breach, and not as a claim for unpaid pension benefits, the settlement funds will be exempt from income tax deductions, as they are damages for harm, including pain, suffering, humiliation, and loss of dignity arising from the government’s discrimination on the basis of disability,” Waddell says. “This is a substantial benefit to the veterans who might otherwise have seen a significant portion of any recovery clawed back through income taxes.”

According to the decision, 70 per cent of the settlement is earmarked for members of the Armed Forces who received a disability pension between 2006 and 2012 and were eligible for both the Earnings Loss Benefit and the Canadian Forces Income Support Benefit. The remaining $30 million will be split between disabled veterans who were entitled to a War Veterans Allowance.

“We believe the settlement is fair and we are happy to have this matter resolved,” read a statement from the federal government following the decision granting the court’s approval.

The court also awarded the lead plaintiff an honorarium of $50,000, acknowledging his hundreds of hours of work with plaintiffs’ counsel over the course of the litigation.

“I find that [he] was engaged extensively in pursuing this issue since 2012 and in pursuing this litigation since 2014 and, but for his involvement, this litigation and the proposed settlement would not have occurred,” the judge wrote.

“This is at the very high end of honorariums awarded by the courts,” Waddell says, noting that the Federal Court took an unusual approach in permitting the payment to come from class counsel’s fees, rather than from the net settlement fund.

In a previous Ontario Court of Appeal case, a panel of judges ruled the representative plaintiff’s $3,000 honorarium should not be paid from the settlement fund rather than class counsel’s fees, in order to avoid the appearance of “fee splitting.”

Waddell says that wasn’t an issue here due to the lawyers’ hefty $16.9-million remuneration.

“Given the enormous quantum of the fees payable to class counsel, it is hard to imagine that the spectre of fee splitting would arise in this case,” she says. “Permitting the payment to come out of the counsel fees also ensures that the maximum recovery goes to the class, and eliminates the possible argument that seeking the honorarium puts the representative plaintiff in a conflict with the class.

“By receiving the payment from funds otherwise to be paid to class counsel, there is no detriment to the class, the representative’s contribution to the action is fairly acknowledged, and there is no meaningful change to the overall compensation to class counsel. In my view, this is preferable to deducting the honorarium from the funds payable to the class,” Waddell adds.

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