Docket: T-463-07
Citation:
2014 FC 640
Ottawa, Ontario, July 2, 2014
PRESENT: The Honourable Mr. Justice Barnes
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BETWEEN:
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DENNIS MANUGE
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Plaintiff
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and
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HER MAJESTY THE QUEEN
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Defendant
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ORDER AND REASONS
[1]
This is a motion brought before the Court by the
parties on consent under Federal Courts Rules 334.29 and 334.4. The
parties also seek relief under Rule 334.19 to amend the Certification Order in
this proceeding expanding the Class membership.
[2]
The parties are seeking the Court’s approval for
a proposed settlement of an outstanding issue that was not resolved at the time
of the Court’s earlier settlement approval Order in Manuge v Canada,
2013 FC 341.
[3]
Under the terms of the earlier Order the
principal settlement terms were approved along with the fixing of legal fees
and disbursements payable to Class counsel. Up to that point the parties had
been unable to resolve a disagreement concerning the calculation of a cost of
living provision (COLA) in the SSIP long term disability policy. They prudently
put that matter aside for later discussion or adjudication and moved forward
with the settlement of the other matters in issue.
[4]
After considerable further negotiation the
parties have provisionally resolved the COLA issue. They also propose three
other administrative adjustments that will, if approved, benefit members of the
Class. The proposed settlement of these matters will result in an estimated
refund to Class members of $38.6 million dollars including interest calculated
to the date of payment.
[5]
Another aspect of the proposed settlement
involves an expansion of the Class to include approximately six thousand new
members who had not been adversely affected by the LTD Pension Act offset
that was the initial subject of this Class action. Because the COLA calculation
affected many other Canadian Forces members who were not subject to the Pension
Act offset, the parties propose to include them as Class beneficiaries to
the COLA refund.
[6]
The settlement proposal represents a payout to
the expanded class of 74% of a best case maximum entitlement. The parties
attribute the 26% reduction to the elimination of litigation risks. Unlike the
earlier settlement, which had been motivated by my judgment favouring the
Class, the COLA issue was not judicially determined. Having had the benefit of
the parties written submissions on the COLA issue, I can attest to the fact
that its resolution was not free of legal difficulties. There was risk to both
parties had they required the Court to resolve the issue. In addition, the
Defendant had what appeared to be a viable limitations defence that, if accepted,
would have barred any recovery prior to March 2001. Under the terms of the
proposed settlement the limitations defence has been dropped and benefits will
be payable without temporal restriction.
[7]
The parties have also proposed a simplified
process for distributing refunds to Class members that includes a direct
payment by the Defendant to Class counsel of $19 for each refund transaction.
This transfers some of the ongoing administrative expense to the Defendant.
[8]
As with the earlier settlement, COLA refunds can
be paid to spouses and children of deceased Canadian Forces veterans.
[9]
In return for these benefits the Defendant seeks
a comprehensive and final release of all potential claims in the following
terms:
IN CONSIDERATION
of the Defendant’s agreement to the terms of this Order, each Class Member DOES
HEREBY RELEASE and forever discharge the Defendant and her officers, directors,
employees, agents, parent, subsidiaries, affiliates, predecessors, successors,
and assigns, jointly and severally, from any and all losses, damages, debts,
liabilities, costs, claims, suits, actions, causes of action, and demands
whatsoever which the Class Member ever had, now has, or which the Class Member
or his or her heirs, executors, successors or assigns may at any time in the
future have against the Defendant by reason of or resulting from the Offset of Pension
Act benefits, the calculation of Cost of Living Allowance increases, the
calculation of the offset for employment income earned as part of a
rehabilitation program, or the determination of minimum salary, including all
claims raised or capable of being raised in this action.
[10]
The Affidavit of Daniel Wallace confirms that a
Preliminary Notice of the proposed settlement was sent to Class members in
early May 2014, and posted on the internet. Members of the Class were invited
to make their views known and, in particular, they were given instructions on
the process for objecting to the settlement terms or to the proposed legal fees
payable to Class counsel. As of June 10, 2014, sixty-three Class members had
responded. Of those, sixty supported the proposed settlement and one was
opposed. Eighteen of the sixty-three respondents wrote in support of the
proposed legal fees and two were opposed. At the time of the settlement
approval hearing in Halifax on June 20, 2014 only Mr. Manuge made a submission
and he did so in support of the proposed settlement and legal fees. The Defendant
took no position concerning the amount sought by Class counsel for legal fees.
[11]
It is apparent from the evidence that the
proposed settlement has the support of virtually all of the members of the
Class. That is not surprising because the settlement terms provide a generous
recovery on behalf of 14,000 disabled Canadian Forces veterans or to their
families arising from the recalculation of their COLA entitlement under the LTD
policy.
[12]
The objections raised by only one member of the
Class to the terms of the settlement have no merit and should not, in any
event, block the recovery of needed benefits that thousands of other
beneficiaries are seeking. The proposed settlement is accordingly approved.
[13]
Class counsel propose to deduct from refund
cheques legal fees of 8%. An additional allowance of 0.038% is requested to be
applied to out of pocket expenses incurred. With an average recovery of about
$2,500 this is a modest amount that is unlikely to cause disproportionate
hardship to anyone. The amount sought is also consistent with the legal fees
that were approved by the Court at the time of the initial settlement. Had the
COLA issue been resolved at that time the additional benefits would have been
subject to the 8% allowance for legal fees. Counsel will continue to administer
these claims over the next 18 months and they have worked hard to achieve a
very favourable outcome on behalf of Class members. The COLA issue was itself
identified by counsel in the course of their review of the other matters in issue
in this case. Without their efforts this additional recovery would not have
occurred. Counsel should be rewarded for their initiative and diligence and an
8% recovery is, in the circumstances, very reasonable. It is accordingly
approved.
[14]
Finally, like Mr. Manuge, I would commend
counsel for the Minister for their hard work in reasonably resolving this issue
in favour of disabled veterans and their families. It is also to the credit of
the Minister that a highly litigious approach to this matter was avoided and,
in the result, a reasonable compromise was obtained.
[15]
There are no costs of this motion.
ORDER
THIS COURT ORDERS that:
[1]
The Defendant’s agreement to the following terms
of this Order is made without admission of liability in regard to any claim made
by the Plaintiff Class.
[2]
For the purposes of the further remedies
provided in this Order only, the definition of the Class shall be amended to
the following:
All former members
of the Canadian Forces who were in receipt of long-term disability benefits under
S.I.S.I.P. Policy No. 901102 on or before the date of this Order and whose
benefits were subject to a Cost of Living Allowance increase from January 1, 1971 to the date of this Order.
[3]
The opt out date for any new Class Members added
by virtue of this amendment shall be 60 days from the date that the Defendant,
through Manulife Financial, distributes the appropriate Notice to the last
known address on file for the Class Members (“Opt Out Period”). An Opt Out may
be withdrawn before the end of the Opt Out Period.
[4]
The following common issues shall be added:
Did the Defendant properly calculate the
Cost of Living Allowance increases under S.I.S.I.P Policy 901102 from January 1, 1971 to the date of this Order?
Did the Defendant properly calculate the
offset for employment income earned as part of a rehabilitation program?
Did the Defendant
properly set the Class Members’ minimum salary for the purposes of calculating LTD benefits?
[5]
The Statement of Claim shall be amended as set
out in Annex A to this Order.
[6]
The Defendant shall calculate for each member of
the Class an amount known as the “Principal Refund” to be calculated according
to the following formula:
74%
multiplied by (y + z)
Where:
y = the difference for the Class Member
from December 1, 1999 to the date of this Order between:
(i) the
application of the Cost of Living Allowance from the date the benefit commenced
on the gross long term disability benefit; and
(ii) the
application of the Cost of Living Allowance from the date the benefit commenced
on the net long term disability benefit.
y
only pertains to Class Members released on or after December 1, 1999;
z = the difference for the Class Member
from January 1, 1971 to the date of this Order between:
(i) applying the
cumulative increase in the Cost of Living Allowance (capped at a maximum
increase in benefits of 2% per year) from the date the benefit commenced on the
gross or net
long term disability benefit; and
(ii) applying the
increase in the Cost of Living Allowance only in the most recent year (capped
at a maximum increase of 2% per year) on the gross or net1 long term
disability benefit and taking into account any ad hoc indexing declared between
1980 and 1992 on the net long term disability benefit.
If, for any
individual Class Member, (i) less (ii) is less than 0, the value shall be
deemed to be equal to 0.
[7]
From the date of this Order forward:
a.
the Cost of Living Allowance provisions shall
continue to be calculated on the net long term disability benefit and only
applied to the most recent year (capped at a maximum increase of 2% per year);
b.
the minimum salary, for the purpose of setting
the initial benefit, will continue to be calculated based on the minimum salary
as at the date of the class member’s release; and
c.
the rehabilitation offset will continue to be
calculated for regular members on the monthly salary at release without
application of COLA increases.
[8]
The Defendant, through The Manufacturers Life
Insurance Company (“Manulife Financial”), will pay McInnes Cooper in trust the
sum of the following for each Class Member (collectively referred to as the
“Administrative Correction”):
a.
the amount that would have been paid to each
Class Member had the Cost of Living Allowance increases been rounded up to the
nearest .25% in 2002, 2004 and 2007, less the amount actually paid to the date
of this Order;
b.
the amount that would have been paid to each
class member had the Cost of Living Allowance been calculated on a 12 month
average period ending on September 30, less the amount actually paid to the
date of this Order;
c.
the amount that would have been paid to each
Class Member had there not been Cost of Living Allowance overpayments and
subsequent underpayments, less the amount actually paid to the date of this
Order.
For
Class Members who continue to be in receipt of LTD benefits, their benefits
shall be adjusted on a go forward basis to reflect the corrected amount related
to the Administrative Correction.
[9]
Interest paid on the Principal Refund and
Administrative Correction shall be simple interest calculated as follows:
a.
6% annually from February 1, 1992 to December 31, 1995;
b.
5% annually from January 1, 1996 to December 31, 2008;
c.
3% annually from January 1, 2009 to the date the amount is paid to McInnes Cooper in Trust;
(collectively,
the “Interest Amount.”)
[10]
If a Class Member had a Pension Act Offset debt
cancelled by the Court’s May 1, 2012 Order and that debt cancellation was not factored into the calculation of the Class Member’s first refund in this
action, the Principal Refund shall be reduced by the Pension Act debt
cancelled. Collectively, the Principal Refund, Administrative Correction, and
the Interest Amount shall be referred to as the “COLA Refund.” If the
Administrative Correction is negative, it can be used to reduce the COLA Refund
otherwise payable, but in no event shall an amount be left owing from the Class
Member to the Defendant arising from the Administrative Correction.
[11]
The COLA Refund payable to any Class Member
shall be reduced by any amount owing by the Class Member to Manulife Financial
not arising from the Pension Act Offset (the “Non-Pension Act Overpayment
Recovery.”)
[12]
The Defendant, through Manulife Financial, shall
remit to McInnes Cooper in Trust the COLA Refund payable to each Class Member,
less any statutorily required withholding tax (the “Withholding”) and less any
Non-Pension Act Overpayment Recovery.
[13]
The Defendant, through Manulife Financial, shall
accrue the COLA Refunds payable and deliver those to Class Counsel on a monthly
basis, on the seventh day of each month, commencing in January 2015 and to be
completed within 12 months of this Order. The COLA Refunds are only payable if
the Order has not been vacated pursuant to paragraph 30.
[14]
Class Members may claim the tax withheld as a
credit for tax paid as provided under the Income Tax Act.
[15]
The Defendant, through Manulife Financial, will
issue all required tax forms to Class Members and the Canada Revenue Agency (“CRA.”)
[16]
The Defendant, through Manulife Financial, shall
provide to Class Counsel the following information for each Class Member: the
Principal Refund, the Administrative Correction, the Interest Amount, the
Withholding Amount, and any required CRA forms which will be generated at the
time the COLA Refund is processed.
[17]
The Defendant, through Manulife Financial, shall
provide McInnes Cooper with the Defendant’s information about the Class
Members’ last known address, date of birth, e-mail address and telephone
number. The Defendant shall not provide this information on Class Members who
have opted out.
[18]
The Defendant shall retain her usual rights
under SISIP Policy 901102 in relation to the provision of or requests for
medical or financial evidence for future payments other than the COLA Refund.
[19]
Payments in respect of Class Members who are
deceased at June 20, 2014 shall be payable to the date of death, which payments
shall be paid only and directly to living persons who were eligible
“Dependants” at the time of the Class Member’s death as defined in Part I of
SISIP Policy 901102. Payments are to be made in the following priority:
a.
All of the payments shall be paid to the
surviving “Spouse” of the deceased member, with “Spouse” being defined as set
out in Part I of SISIP Policy 901102 with reference to the member’s date of
death.
b.
If there is no surviving spouse of the deceased
member, all payments shall be divided equally and paid to the “Dependent
Children” as defined in part I of the SISIP Policy with reference to the
member’s date of death.
c.
If there is no surviving “Spouse” or surviving
“Dependent Children” as defined under Part I of SISIP Policy 901102 with
reference to the member’s date of death, no payments shall be payable by the
Defendant.
[20]
Claimants in respect of deceased Class Members
under paragraph 19 shall be required to execute a declaration in the form of
Annex B to this Order for Spouses/Common Law Partners or Annex C to this Order
for Children.
[21]
If a Class Member dies after June 20, 2014, but before receiving his or her COLA Refund, the COLA Refund will be paid
to that Class Member’s estate.
[22]
In the event that a Class Member inadvertently
receives a COLA Refund that is greater than the COLA Refund that the Class
Member is entitled to under this Order (an “Overpayment”), Manulife Financial
shall, upon discovery of the Overpayment, immediately request that the amount
of the Overpayment be returned. Manulife Financial shall retain its usual
rights under SISIP Policy 901102 in relation to the recovery of Overpayments
should the Overpayment not be returned upon request.
[23]
Her Majesty the Queen in Right of Canada, her
heirs, successors, and assigns, Manulife Financial, the Department of National
Defence, Veterans Affairs Canada, the Treasury Board of Canada and Class
Counsel, including but not limited to McInnes Cooper and Branch MacMaster shall
be held harmless from any and all claims, suits, actions, causes of action, or
demands whatsoever by reason of or resulting from a payment to a spouse, common
law partner, dependent child or estate pursuant to this Order.
[24]
Deloitte (the “Monitor”) shall be appointed to
review, monitor and report quarterly on the process of the Defendant's
compliance with this Order until such time as the Court directs. The Monitor’s
accounts shall be paid by the Defendant and any dispute on these accounts or
the scope of their work shall be resolved by the Court.
[25]
Class members are deemed to provide a release in
favour of the Defendant in the following form:
IN CONSIDERATION of the Defendant’s
agreement to the terms of this Order, each Class Member DOES HEREBY RELEASE and
forever discharge the Defendant and her officers, directors, employees, agents,
parent, subsidiaries, affiliates, predecessors, successors, and assigns,
jointly and severally, from any and all losses, damages, debts, liabilities,
costs, claims, suits, actions, causes of action, and demands whatsoever which
the Class Member ever had, now has, or which the Class Member or his or her
heirs, executors, successors or assigns may at any time in the future have
against the Defendant by reason of or resulting from the Offset of Pension Act
benefits, the calculation of Cost of Living Allowance increases, the
calculation of the offset for employment income earned as part of a
rehabilitation program, or the determination of minimum salary, including all
claims raised or capable of being raised in this action.
[26]
Class Members will be provided notice in the
form attached as Annex D (the “Notice”) and in the manner set out below:
a.
The Defendant through Manulife Financial, shall
distribute the appropriate Notice to the last known address on file for the
Class Members within 10 days of the issuance of this Order;
b.
The Notice will be published on Class Counsel’s
website, and a link to same shall be placed on the front page of the Veterans
Affairs Canada and SISIP websites within 10 days of the issuance of this Order;
c.
The Notice shall be emailed by Class Counsel to
class members of whom they are aware within 10 days of the issuance of this
Order;
d.
The parties will issue a joint press release in
respect of the Notice within 10 days of the issuance of this Order;
e.
The Defendant will pay the costs of providing
Notice, except for the cost of publishing the Notice on Class Counsel’s website
and delivering the emails to known class members;
f.
The Defendant will advise Class Counsel of any
Notice returned to sender, and Class Counsel will be entitled to take any
further steps to locate this individual at their own expense; and
g.
The opt out form shall be in the form of Annex
E.
[27]
From the amount payable under paragraph 13,
Class Counsel shall be entitled to deduct:
a.
an amount equal to 8% of the COLA Refund for its
legal fees.
b.
an amount equal to .038% of the COLA Refund for
its disbursements.
c.
the statutorily required GST, HST and applicable
provincial sales tax from the Refund and remit that amount to the Canada
Revenue Agency or applicable provincial agency.
[28]
At the same time that the payment referred to in
paragraph 13 is made, the Defendant shall pay McInnes Cooper $19 for each Class
Member paid with regard to their administrative expenses.
[29]
Class Counsel shall not deduct or charge any
legal fees or disbursements on any increased or new monthly payments after the
date of this Order.
[30]
The Court will vacate this order if more than 10
Class Members have opted out by the conclusion of the Opt Out Period and the
Defendant elects in her sole discretion to end the Agreement. The Defendant
shall give written notice of her election to the Court and Class Counsel no
later than 5 days after the expiration of the Opt Out Period. If this Order is
vacated, the parties shall be returned to the position they would have been in
had this Order not been issued.
[31]
The Court retains general supervisory
jurisdiction over the Action as well as any issues arising that may be brought
forward to the Court on application of any party.
[32]
This Order is made on a without costs basis.
"R.L. Barnes"
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