Waiver of tort continues to surface in a variety of class actions cases across Canada. While the topic is not amenable to a deep analysis within the confines of a blog entry, I will touch on a few themes from the last few years:

  1. Waiver of tort analysis at the cause of action stage of certification motions largely continues to be deferred;
  2. There are several decisions that find breaches of statute alone cannot serve as the basis for the needed “wrongdoing” to ground a waiver of tort claim;
  3. Waiver of tort common issues may be framed in a bifurcated manner; and
  4. Waiver of tort issues have been dismissed by some courts in a fashion that suggests the doctrine can only be parasitic.

Deferral

There are several recent examples of the Court’s continuing failure to address the nature and scope of waiver of tort at certification by clinging to the assertion that a trial is needed for this purpose. In Sweetland v GlaxoSmithkline 2016 NSSC 18 [“Sweetland“] Wood J. concluded “I am not prepared to dismiss the possibility of compensation based upon waiver of tort at this stage. Nor am I foreclosing the defendants from arguing that it is not a stand-alone cause of action and is only remedial in nature.”

Also see Lee v Transamerica Life Insurance Canada 2016 BCSC 191 at para 128, “It remains unclear whether waiver of tort is an independent cause of action or an alternate remedy only. As the name suggests, however, there must be an actionable underlying tort before the doctrine can be invoked.” Whether alleged participation in a fraudulent scheme could ground a restitutionary claim in waiver or tort “is an issue to be decided at a later date.”

The B.C. Court of Appeal took the same approach in Authentic T-Shirt Company 2016 BCCA 59, an individual action against a former employee and her new employer for misuse of confidential information. The plaintiff expressly waived damages and pursued the gain said to have been made as a result of the confidential information. The Court upheld the chambers judge’s decision to refuse to strike the waiver of tort claim on the basis that the law remains unsettled on this point, relying in part on the Supreme Court Pro-Sys decision which found that it was inappropriate to work out the details of waiver of tort in the circumstances of that appeal.

However, note another B.C. decision, Vaugeois v Budget Rent-A-Car 2015 BCSC 802 where the Court succinctly noted:

[15] To the extent the plaintiffs’ cause is waiver of tort as an independent cause of action, such an independent cause of action has not yet been recognized at law. Moreover, the plaintiffs in the relief sought in paragraph 18(j) of their Amended Notice of Civil Claim refer only to restitution to the plaintiff(s) and other class members “in an amount equal to the monies received on account of the Scheme”. The plaintiffs’ pleadings do not set forth their view of the elements of the action. Under Part 3: Legal Basis, it is stated in general terms:

In the alternative, the Plaintiff waives the tort and pleads that he and other Class members are entitled to recover under restitutionary principles.

[16] In sum, the plaintiffs have not satisfied the rule in Hunt with respect to a cause of action based on waiver of tort.

Last, Perell J. has strongly questioned any implication that Pro-Sys precludes a cause of action analysis of waiver of tort at certification. In O’Brien v Bard 2015 ONSC 2470 (a defective pelvic mesh product liability case) he held:

[157] In Pro-Sys Consultants Ltd. v. Microsoft Corporation, supra at para. 97, the Supreme Court of Canada held that the questions about the consequences of identifying waiver of tort as an independent cause of action involve matters of policy that should not be determined at the pleadings stage….

[158] Pro-Sys Consultants Ltd. was a competition law action. The case at bar is a products liability tort case. For decades, going at least as far back as Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), and continuing to this day, courts have determined matters of policy in tort claims at the pleadings stage and if it were necessary to do so I would decide whether waiver of tort is a cause of action and, if it is a cause of action I would decide whether it is a viable cause of action for a products liability proposed class action so as to satisfy the cause of action criterion of certification.

He went on to conclude it would be “inconceivable” why class members would ever waive tortious personal injury damages in favour of disgorgement. Therefore, it was not “reasonable” to pursue waiver of tort in the circumstances of that class action.

Breach of Statute

Most Courts have said very little about the parameters of waiver of tort other than the Plaintiff must at least prove the Defendant did something “wrong” before a disgorgement remedy is possible. Some Courts have concluded that if no other accepted causes of action in tort are available then waiver of tort cannot stand on its own.[1] As noted earlier, Lee v Transamerica holds that “there must be an actionable underlying tort before the doctrine can be invoked.” This, of course, begs the question (which apparently cannot be answered until trial according to most Courts) how waiver of tort can possibly be an independent cause of action if its substantive underpinning depends entirely on a separate tort.

There is also a growing body of law from British Columbia which stands for the proposition that a breach of statute alone cannot serve as the wrongdoing to underlie a waiver of tort claim.

Wakelam v Wyeth Healthcare 2014 BCCA 36 is a case involving the sale of children’s cough medicine. It was alleged that the defendant made false and misleading misrepresentations in breach of the Competition Act and B.C.’s consumer protection legislation. No cause of action of action in tort was pleaded. On the basis that the aforementioned statutes were breached, the plaintiffs pleaded waiver of tort and claimed restitutionary disgorgement remedies even though the statutes did not provide for such remedies. Drawing on the Court’s previous reasoning in Koubi v Mazda, the Court held that restitutionary claims based solely on breach of statute in this instance were not permissible. In other words breach of statute alone could not constitute the predicate wrongdoing to proceed under waiver of tort. The Court noted that there was nothing to suggest the legislature intended that the causes of action created by these statutes could be expanded or augmented by grafting restitutionary claims onto them.

The Court continued with this line of reasoning in Charlton v Abbot Laboratories 2015 BCCA 26 , “In light of the decisions in Koubi and Wakelam, the class proceeding cannot have been certified to permit the plaintiffs to advance a claim for recovery from the defendants of enrichment accruing to them as a result of the marketing of sibutramine in breach of a statutory duty. The action must be for damages, or, in waiver of tort, for breach of what are referred to in Koubi as “anti-harm” torts.”

Watson v Bank of America Corp. 2015 BCCA 362 involved a claim whether standard terms imposed by credit card companies on merchants concerning fees infringed the Competition Act or constituted a conspiracy under that Act and at common law. Waiver of tort was pleaded in the alternative seeking recovery under restitutionary principles. The Court discussed Wakelam and noted it barred “claims in restitution for simple breach of the Competition Act.” Where a claim is based on “non-observance of the Act and nothing else…the remedy provided by the Act in s. 36 is the sole route to recovery.” However, the Court clarified that breaches of statute can potentially be relied on as the components of certain torts, such as the unlawfulness criteria in conspiracy claims. In this scenario, waiver of tort, could be pursued but only to the extent it is grounded in the tort.

Madam Justice Brown had earlier come to the same conclusion in Fairhurst v. Anglo American PLC, 2014 BCSC 2270 at para 16, “that the plaintiff s claims for restitution, to the extent that they are based on breaches of the Competition Act are not viable. However, I cannot be satisfied that the tort claims based on these breaches are bound to fail. Moreover, in this case, the breaches of the Competition Act are not the only wrongs alleged in the tort and restitutionary claims, and so those claims would be viable in any event.”

Justice Perell disagreed with Watson and Fairhurst in Shah v LG Chem Ltd. 2015 ONSC 6148 on the point whether any breach of the Competition Act could serve as the unlawful component in a conspiracy claim. Instead he preferred a broader reading from Wakelam that “Parliament did not intend the statutory right of action should be augmented by a general right in consumers to sue in tort or to seek restitutionary remedies on the basis of breaches…of the Competition Act.” Waiver of tort was not pleaded in Shah but the unjust enrichment pleading was found not to disclose a cause of action based on this reasoning.[2]

Also note Harrison v Afexa Life Sciences 2016 BCCA 83 where the Plaintiff sought damages under deceit, fraudulent misrepresentation and s. 36 of the Competition Act in relation to misrepresentations involving Cold-FX. Waiver of tort was relied on to seek reimbursement of all funds spent on Cold-FX. In allowing the waiver of tort claim to proceed, the Court appears to suggest that a cause of action based solely on the Competition Act could support a claim in waiver of tort:

[61] The plaintiff pleads waiver of tort on the basis of causes of action for deceit, fraud and fraudulent misrepresentation, as well as breach of the Competition Act.

[63] In my previous reasons, I allowed the claim for unjust enrichment and waiver of tort to proceed based on s. 36 of the Competition Act, following Pro-Sys Consultants in the Supreme Court of Canada. This claim must be allowed to proceed on the basis of s. 36 of the Competition Act.

However, it’s not clear from Pro-sys whether the waiver of tort claim in that case was connected only to the Competition Act rather than the other various torts pleaded.

Other jurisdictions have made general comments that suggest breaches of statute could ground a waiver of tort action. In Babstock v Atlantic Lottery Corp. 2014 NLTD 114 the Court noted at para 203:

If the doctrine is an independent cause of action, then proving wrongful conduct, either by breach of a statute, breach of contract, or failure to act in accordance with a duty of care, is sufficient to give rise to a restitutionary remedy, in the absence of proof of individual damages.

Bifurcation

In Sweetland Justice Wood followed Ontario authorities that have bifurcated questions of a potential entitlement to elect a disgorgement remedy from the quantification of such a remedy.[3] The reasoning in the Ontario cases is, in part, that class member are unable to make an informed decision whether to elect a disgorgement remedy without the ability to compare the value of compensatory damages. Such damages can only be determined after individual trials on causation and liability.

Justice Wood also described the process that would follow the common determination of entitlement as an individualistic process:

85… If the common issues trial decides that a restitutionary remedy is available to the plaintiffs the quantification may raise a number of questions requiring individual consideration. These include whether there must be an election to take restitution in lieu of compensatory damages. Depending on their different circumstances some plaintiffs may be entitled to restitution and others not. These issues may lend themselves to determination in individual assessments or as further common issues across the main class or new subclasses. The resolution of all of these matters can be addressed within the broad authority of the trial judge following the initial decision on this common issue.

Parasitic View/Underlying Loss

Other courts have simply refused to certify waiver of tort issues for reasons apparently based on a view that waiver of tort has no ability to exist without the existence of other causes of action and/or where loss has not been suffered.

While certifying other issues, Justice Gabrielson rejected a waiver of tort issue in Dembrowski v Bayer 2015 SKQB (an action involving birth control pills alleged to carry higher risks of various conditions than other pills). Gabrielson J. treated the waiver of tort issue, which asked whether the defendant should disgorge all or some of its revenue, as a claim for aggregate damages. He noted, “in order to have a viable cause of action, the individual plaintiffs must prove that they suffered loss or injury as a result of the defendants’ breach of duty.” The determination of the waiver of tort issue could not then be determined, “until such time as liability has been established based upon individual member’s personal circumstances.” The Court further noted why a common issue based on waiver of tort was not appropriate, “this is not a case where damage to each member of a class is a given. Here, some users of Yasmin and Yaz, may have had a benefit and no adverse reaction. There remains a factual issue to be determined before liability is established.”

Last, in Sandhoff v Loblaw 2015 SKQB 345 Keene J. summarily dismissed a proposed class action wherein the Plaintiffs alleged that it was wrongful for the Defendants to market some of their soda products as being low in sodium. There was no dispute the soda in question was actually low in sodium since all soda is low in sodium. However, the plaintiff filed expert evidence attempting to raise a genuine issue concerning the misleading nature of the defendant’s labelling.

The claim was summarily dismissed since there was no evidence the plaintiff relied upon the low sodium representation or that the plaintiff suffered any losses. The claim was based on waiver of tort along with negligence, breach of consumer protection legislation and the Competition Act. After dispensing with the other causes of action the Court said in relation to waiver of tort, unjust enrichment and punitive damages, “I have grouped these claims here and find that none would apply or be sustained in this claim.” As with other cases, the concept of whether any wrong had occurred appears to have been assessed through the lens of other known causes of action rather than anything that could be said to be inherent within the concept of waiver of tort.