Introduction

The meaning of the term “waiver of tort” is by no means clear.

At its strongest, it has been described as an independent cause of action that does not require the plaintiff to prove any damage suffered by them as a result of the wrongful conduct of the defendant. The remedy would be disgorgement (giving up) of the benefit, which accrued to the defendant through their illegal act. Some know this as unjust enrichment by wrongdoing, per se.

The other view is that a finding of unjust enrichment still requires the pleading and establishment of some wrongdoing resulting in a corresponding loss or deprivation in the plaintiff. This view requires the usual three-part “unjust enrichment” analysis being:

• an enrichment of the defendant,
• a corresponding deprivation suffered by the plaintiff, and
• the absence of a juristic reason for the enrichment.  

Juristic Reasons

The concept of a juristic reason was best explained by the Supreme Court of Canada in Garland v. Consumers Gas Co.

The use of the expression “juristic reason” in this connection emphasizes that “unjust” is to be addressed as a matter of law and legal reasoning rather than a free-floating conscience that may risk being overly subjective….  There are now two stages to the juristic reason inquiry.  At the first stage, a claimant (here the appellant) must show that there is no juristic reason within the established categories that would deny it recovery.  The established categories are the existence of a contract, disposition of law, donative intent, and “other valid common law, equitable or statutory obligatio[n].”  The categories may be added to over time.  On proving that none of these limited categorical reasons exist to deny recovery, the plaintiff will have made out a prima facie case of unjust enrichment.  It will have demonstrated “a positive reason for reversing the defendant’s enrichment.”

 Waiver of Tort in Canada

The law in Canada on the two versions of waiver of tort is far from settled. In Osborne, The Law of Torts, fifth edition the phrase is described in broad terms as follows:

The broadest view is that waiver of tort is an independent cause of action that is available wherever a defendant has benefitted from his wrongdoing.  That wrongdoing includes not only tortious wrongs (whether or not all the constituent elements of liability are established) but also breaches of contract, equitable wrongs, and some statutory breaches.  …  This view would clearly allow waiver of tort to operate where the defendant has committed a negligent act that has caused no harm to the plaintiff but has benefitted the defendant.  It would, in essence, create a “super-compensatory” regime, allowing plaintiffs to recover compensation in the absence of loss (or in excess of their losses) in contradiction of the general principle that a negligent actor is only liable for the harm caused by his negligence.

Some Hope for a Definitive Ruling

The Newfoundland Court of Appeal has recently dealt with the issue in Atlantic Lottery Corporation Inc. v. Babcock. The appeal was brought by the lottery corporation from the certification of a class action brought against it for damages based on claims that its video lottery terminals are inherently deceptive. The class proceeding was based on several alleged causes of action including waiver of tort.

The dissent would have allowed the appeal:

In this case, it is unnecessary to determine the nature, scope or appropriate terminology in respect of waiver of tort.  This is because the class members have not pleaded facts necessary to support wrongdoing by the Lottery Corporation. 

Indeed, no facts are pleaded which would support a cause of action based on wrongdoing by the Lottery Corporation.  The representatives of the class do not plead that they became addicted to or dependent upon VLTs as a result of playing games.  They do not plead that they were misled by any representations made by the Lottery Corporation in respect of the VLTs.  Simple allegations of misrepresentation, or that players may become addicted to or dependent on gaming, without supporting facts in the pleadings, are insufficient as the pleadings must disclose a cause of action. 

 In the absence of pleadings to support wrongdoing by the Lottery Corporation, there is no basis on which waiver of tort could be engaged.  Accordingly, it is unnecessary to address the legal issues arising from what has been described as a developing and unsettled area of the law.

The majority allowed the appeal as well but only in part. Germane to our discussion, they allowed the waiver of tort claim, amongst others, to proceed. After discussing the well-known remedy of restitution based an unjust enrichment and the traditional three-part test the majority discussed waiver of tort as follows:

The cause of action supporting the second category is not the unjust enrichment itself but the existence of a wrong (such as a tort, breach of contract, breach of fiduciary duty or perhaps even a crime) against the claimant which has the result of enabling the defendant to acquire a gain (sometimes described as an unjust enrichment), not necessarily from the claimant, that justifies the court in ordering the disgorgement of the wrongdoer’s gains. The gains can be regarded as an unjust enrichment of the defendant but the right of the claimant to them depends not only on the unjustified nature of the enrichment but on the existence of a separate wrong. Further, recovery by the plaintiff does not necessarily depend on the plaintiff having suffered any loss or deprivation, although such loss or deprivation may have occurred. Instead, the focus is not on repairing an injury to the claimant but on stripping away the gains acquired by the defendant as a result of the wrong he or she has committed so as to vindicate the notion that a wrongdoer should not profit from his or her wrong. This is so even if the claimant may, as a result, benefit from a windfall. The remedy may involve the re-transfer of a benefit of which the claimant had been deprived by virtue of the wrong but it may also involve the stripping away of ill-gotten gains even if those gains were not acquired from the claimant. 

The court was, in effect, allowing the waiver of tort claim to proceed despite its unclear history or support in the law. The lottery corporation sought and was granted leave to appeal to the Supreme Court of Canada. This is indeed good news as it likely means that the law on waiver of tort will be clarified and spelled out for the entire country. We will continue to update with new developments.

At Milosevic & Associates, our team of Toronto corporate commercial lawyers regularly represent clients in complex commercial litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including dealing with claims of oppression. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online for a consultation.