02/15/2013 11:11 EST | Updated 04/17/2013 05:12 EDT

Veterans support lawyers' $66.6-million legal fee in pension clawback case

HALIFAX - Federal lawyers argued Friday that attorneys who won a class-action lawsuit for disabled veterans shouldn't get $66.6 million in fees despite criticism from the former military members that Ottawa alone caused the case to drag through the courts.

Dozens of veterans and their spouses listened to final arguments in Federal Court on the proposed $887.8-million dollar settlement between the former military members and the federal government over their clawed back pension benefits.

Judge Robert Barnes reserved his decision on whether to approve the deal, which was reached last month after a five-year legal fight.

The Crown argued that the three lawyers who took on the case on behalf of 7,500 veterans were charging 21 times the normal hourly rate for their services over five years.

But one veteran dismissed the claim, saying the federal government challenged the case every step of the way and rejected repeated attempts to settle it without going to court.

"The federal government took our money from us and now they're trying to tell us how to spend our money," Steve Dornan, who has post-traumatic stress disorder and incurable cancer, said outside the hearing room.

"So, you didn't want us to have the money in the first place. Now you're telling us that we're spending too much on our lawyers that got us the money. It's ridiculous."

Dennis Manuge launched the lawsuit in 2007 on behalf of himself and other disabled Canadian veterans whose long-term disability benefits were reduced by the amount of the monthly Veterans Affairs disability pensions they received.

The federal government fought the initial class-action certification, appealed a certification decision in 2008 and didn't alter the clawback after it was condemned by the military ombudsman, the Senate and through a motion in the House of Commons that said the offset should end.

The Federal Court ultimately ruled last spring that it was unfair of the federal government to treat pain and suffering awards as income.

Defence Minister Peter MacKay said the government wouldn't appeal and appointed a negotiator to cut a deal.

The legal fees became a contentious issue last week after MacKay called them "grossly excessive," which Crown attorney Paul Vickery restated on the last day of the two-day hearing.

Vickery said the three principal lawyers handling the veterans' case logged about 8,600 hours and that the hourly rate for one of them amounted to about $13,400.

"This fee request is plainly excessive and should not be approved," he told the judge.

He argued that in other large class action lawsuits, like the $4-billion native residential school and $2-billion tainted blood settlements, lawyers were paid a far lower rate.

The settlement of the class-action suit in residential schools could see as much as $85 million to $100 million paid to lawyers, while the tainted-blood scandal saw a $52-million legal bill.

Ward Branch, a lawyer for the veterans, said the law firm voluntarily reduced its fee to 7.5 per cent of the total award, down from the original contract amount of 30 per cent. He added that an hourly rate could have increased their fee.

"What made me comfortable about what we were requesting is that the class was behind us," Branch said. "We saw overwhelming support from the class and they stood behind us here."

Several veterans said at the hearing the deal should include damages and arrangements should be made to prevent them from having to pay higher taxes after receiving their retroactive payments under the deal.

The deal includes $424.3 million in retroactive pay to veterans and dates back to 1976.