Waiver Of Tort Is Dead, Long Live Waiver Of Tort!

• Published date: 28 July 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Class Actions, Professional Negligence
• Law Firm: Lenczner Slaght
• Author: Mr Paul-Erik Veel

Waiver of tort has long been a contentious subject in Canadian law. Many, many courts have permitted waiver of tort claims to proceed in class actions. Yet no court had definitively ruled as to whether waiver of tort in fact existed. It was for this reason that the Supreme Court of Canada's decision in Atlantic Lottery Corporation v Babstock has been so highly anticipated. Most expected that the Supreme Court would finally answer whether a waiver of tort existed as an independent cause of action under Canadian law. This in turn would have significant consequences for many types of cases, including many types of class actions.

As it turned out, the Supreme Court of Canada's decision was noteworthy for many reasons. Most importantly, the Court rejected the existence of waiver of tort as a cause of action, while potentially preserving it under a different name as a remedial option. Yet the Court also commented on a number of other points that are significant for both class action lawyers and the commercial litigation bar.

Background

My colleague Kelly Hayden previously commented on this case after leave to appeal was granted by the Supreme Court of Canada, so I will not delve into the underlying decisions in too much detail. In short, the plaintiffs had brought a proposed class action against the Government of Newfoundland and Labrador in respect of the operation of video lottery terminals. The plaintiffs alleged that video lottery terminals were inherently dangerous and deceptive. They framed their claim primarily to seek a gain-based remedy quantified by the profits that the Atlantic Lottery Corporation had earned by licencing video lottery terminals. The claims advanced were for waiver of tort, breach of contract, and unjust enrichment.

At first instance, the Atlantic Lottery Corporation applied to strike the plaintiffs' claim on the basis that it disclosed no reasonable cause of action and sought certification of the claim as a class action. At first instance, the claim was certified as a class action, and the Atlantic Lottery Corporation's application to strike was dismissed. The Court of Appeal essentially affirmed the application judge's decision and allowed the claims to proceed.

The Supreme Court of Canada unanimously rejected the viability of the waiver of tort claims in this case, and they were also unanimous in their analysis pertaining to waiver of tort. However as to some of the other claims, the Court split on the result. The five-member majority held that none of the claims disclosed a reasonable cause of action. The dissent, by contrast, accepted that the claim did not disclose a reasonable cause of action in either waiver of tort or unjust enrichment. However, the dissent felt that the breach of contract cause of action was appropriate. Consequently, those four members of the Court would have allowed the claims to be certified as a class action only to proceed in respect of the breach of contract claim.

Waiver of Tort is No More... As a Cause of Action, Anyway

The most important takeaway from the Court's decision is that waiver of tort is not an independent cause of action under Canadian law. This resolved many years of judicial uncertainty after Courts had repeatedly dodged the question.

For those not familiar with the concept of waiver of tort, I will say at the outset that it is murky and complicated, I will not pretend to do justice to the significant judicial and academic commentary on the topic. However, at its most general, the basic concept of waiver of tort is that a plaintiff could advance a claim for some tortious wrongdoing by the defendant that would allow the plaintiff to recover the defendant's profits from that wrongdoing. At a high level, there were two broad schools of thought regarding what waiver of tort could be. One view was that waiver of tort was essentially remedial, such that a plaintiff that had established a particular cause of action could then "waive the tort" and instead recover the defendant's benefit. A second view was that waiver of tort was a freestanding cause of action that could allow a plaintiff to recover the defendant's gains from the misconduct, without evidence of the plaintiff themselves having suffered any loss.

This second view of waiver of tort had been particularly popular...