Rightfully Relegated: The Supreme Courtroom Ends the Debate about Waiver of Tort

The evolution of Vicarious Liability for intentional torts - Lexology

On July 24, 2020, the Supreme Court of Canada published its highly anticipated decision in the Atlantic Lottery Corporation Inc. v Babstock, 2020 SCC 19 case. The Atlantic Lottery Supreme Court took the opportunity to review and reject the long-running proposal Refraining from tort is an independent reason for action. The decision ends and ends the longstanding debate on whether or not there is a reasonable reason for the tort cancellation without evidence of harm for certification purposes, and marks another important step in the evolution of class action law in Canada.

Case overview

Atlantic Lottery was a proposed class action lawsuit against Atlantic Lottery Corporation Inc. (“ALC“), The company that oversees the operation of the video lottery terminal (“VLTs”) In Newfoundland and Labrador. Plaintiffs alleged that the VLTs were addictive and deceptive and that they were prohibited under the Criminal Code. The plaintiffs asserted claims for the waiver of tort, breach of contract and unjust enrichment, and requested the deterioration in the profits ACL had made from operating the VLT machines in question.

Significantly, plaintiffs expressly denied any loss or damage as a result of the defendants’ conduct and instead sought to rely on the doctrine of no torture rule as a basis for a cause of action. Plaintiffs filed a motion to confirm the trial as a class trial, to which ALC responded with its own motion to delete the statement of claim for failure to disclose an appropriate cause of action.

The concept of tort waiver as a stand-alone plea has a tortured history. Plaintiffs have often relied on the fact that they still have a cause of action even when they cannot demonstrate that they have suffered harm or harm (or the amount). Previously, the courts were reluctant to remove the novel tort waiver in certification, and therefore upheld the tort waiver as a reasonable cause of action and allowed them to proceed.

The petitioner heard and rejected ALC’s motion to strike and upheld the process as a class action lawsuit. The decisions were largely upheld by the Newfoundland and Labrador Appeals Court, which weighed the debate and concluded that the tort waiver was an independent plea.

On appeal to the Supreme Court of Canada

The renunciation of the new image of Tort as a separate cause of action was short-lived. The defendants appealed to the Supreme Court of Canada, which admitted the appeal, reversed the certification order, and defeated the plaintiffs’ statement of complaint in its entirety, on the grounds that it had failed to disclose reasonable cause for complaint. The Supreme Court eventually took the opportunity not used in previous cases to resolve the tort waiver debate and overturned the finding that tort waiver is an independent plea.

The central theses

The decision clarifies the Tort and Disgorgation Waiver Act, confirms that plaintiffs cannot invoke tort waiver as a standalone plea in certification or otherwise, and demonstrates the Supreme Court’s continued willingness to legalize Determine questions in the pleading phase. There are a number of major takeaways:

  • Refraining from tort is not a valid reason for action and should not be used to describe the remedy for disgorgation. The Supreme Court ruled unanimously that “in order to assert a claim for disgorgation, a plaintiff must first establish a criminal misconduct” (in particular breach of duty arising from tort, contract or equity). The Supreme Court confirmed that no liability can be accepted for negligent behavior unless the plaintiff suffers actual damage. He stated, “There is no right to be free from the prospect of harm. There is only the right not to suffer harm resulting from unreasonable risk ”(paragraphs 31-33).
  • A 5-4 majority in the Supreme Court ruled that the plaintiffs’ request for disgorgation as a legal remedy for breach of contract had no prospect of success, since “disgorgation is only available in the event of breach of contract if at least other legal remedies are insufficient … [w]here as here it is argued that the loss quantum is equal to the defendant’s profit, but that the plaintiff simply prefers to seek disgorgement, a profit-based appeal is not appropriate ”(para. 59). The Supreme Court also confirmed that disgorgation should be considered for breach of contract out of the ordinary Relief and should not be “in the choice of the plaintiff in order to avoid questions of evidence” (para. 61).
  • The same 5-4 majority in the Supreme Court ruled that plaintiffs could not seek punitive damages because the defendants had violated a good faith obligation to the plaintiffs that the defendants “considered the interests of the plaintiffs to be considered” at least the same [their] owning and not offering or delivering an inherently dangerous service or product ”(para. 64). The majority noted that the application of the “organizational principle” of good faith in Canadian contract law “is generally limited to existing categories of contracts and obligations” and “[t]The alleged contract between ALC and the plaintiffs does not fit into any of the established categories of good faith ”(para. 65). Plaintiffs did not argue that a new category of good faith should be recognized.


As the Supreme Court in the Atlantic Lottery has recognized, since the 2004 Ontario Supreme Court ruling in Serhan (Estate Trustee) v Johnson & Johnson (2004), 72 OR (3d) 296 (Sup. Ct .) Jointly asserted claims for “tort waiver” attempting to certify class actions when there is no evidence of loss of individual class members. The previous reluctance of the lower courts to refuse to certify the waiver of tort was wrongly “to the detriment of the accused, who is then in effect compelled to pay the plaintiff a settlement” (paras 19-21).

By confirming that tort waiver is not a valid plea, the Atlantic Lottery Supreme Court decision is an important step in clarifying the law on certification and otherwise. The decision confirms that the loss is an element that must be demonstrated in the context of a negligent claim and duly limits the tort waiver to what it historically included – a choice of damages once only The plaintiff recognized all elements of a claim. Removing this controversial plea may now pave the way for the streamlining of certification filings and the potential limitation of certain class actions by ensuring that only claims that reveal a viable cause of action can be brought.

The Atlantic Lottery Supreme Court ruling also sends a strong message that a claim should not survive (or be certified) a strike motion simply because it contains a novel cause of action. Rather, the majority stressed that “it is beneficial, and indeed vital, to the viability of civil justice and public access to it that claims, including novel claims that are doomed to fail, be dismissed early in the process become “(No. 19). The majority message is in line with the “culture change” put forward by the Supreme Court in its previous Hryniak v Mauldin ruling, 2014 SCC 7, and encourages judges – especially judges who hear certification requests – to make efforts to address them Determine legal issues early on in litigation.


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