Waiver Of Torts As A New Cause Of Action

This article was originally edited and first published on www.internationallawoffice.com

The Ontario Divisional Court heard an appeal of the decision in Serhan Estate v Johnson and Johnson1 to certify a product liability class action. The motions judge held that the material facts pleaded could sustain an action based on the equitable doctrine of waiver of tort. Significantly, the motions judge found that proof of loss would not be required in such a claim. The Divisional Court upheld the appeal by a 2-1 margin, and both the Ontario Court of Appeal and the Supreme Court of Canada denied leave to appeal.

Facts

The claim in Serhan relates to defective blood glucose meters and testing strips used by diabetics to monitor their blood glucose levels. These were manufactured by LifeScan Inc, a wholly owned subsidiary of Johnson and Johnson. The defective meters failed to indicate high blood glucose levels, but instead indicated that an error had occurred. The defective strips resulted in erroneously low readings if they were incompletely inserted by one 15,000th of an inch or more. These problems were resolved by LifeScan in 1997 and 1998.

By the late 1990s a number of US federal agencies, including the Food and Drug Administration and the Department of Justice, had commenced investigations into LifeScan with respect to these products. In December 2000 LifeScan entered into a plea agreement with the prosecution and admitted knowledge of the defects dating back to 1993. Pursuant to the plea agreement, LifeScan paid a fine of US$29.4 million.

The Ontario plaintiff in this case sought damages for:

negligence; negligent and fraudulent misrepresentation; breach of Section 52(1) of the Competition Act; and conspiracy to manufacture, sell and distribute defective products in Canada. The plaintiff sought to have all the revenue generated from the sale of the defective products held in a constructive trust for the benefit of the class. It also asked for an accounting order and an order for the disgorgement of all such revenue.

Absence of Evidence of Loss

Critical to any action in tort is proof of damages. One of the primary issues in Serhan was whether a cause of action could be recognized in the absence of evidence of injury or damages. As stated by the motions judge: "[t]here is... virtually no evidence that either of the representative plaintiffs, or any other members of the putative class, suffered any injurious effects to their health by using the...