A common cause of complaint in many class action lawsuits is “waiver of tort”. No longer. The longstanding debate over whether tort waiver is an alternate form of remedy or an independent cause of action was brought up by the Supreme Court of Canada in the Atlantic Lottery Corp. published July 24, 2020. Inc. against Babstock.1 As a decision has now clarified that the waiver of tort is not an independent cause of action.
History of the debate
The tort waiver debate was originally sparked by a 2006 decision by Serhan Estate v Johnson & Johnson.2 Since then, tort-waiver claims have been brought up frequently in class action lawsuits, although they have never been fully heard . The result was an “undesirable state of uncertainty” in which conflicting jurisdictions urged certification judges to “confirm the question of the availability of the doctrine [was] in fact a live output for the process. “As a result, certification was often granted and the defendants were then forced to settle plaintiffs. 3
Waiver of unauthorized action No separate reason for action
In the Atlantic Lottery Corp. Inc., the court ruled that tort waiver does not exist as a separate plea. Rather, the underlying basis is to give plaintiffs the option of choosing an alternative, for-profit legal remedy instead of compensation – but only under certain circumstances.
Because the term “waiver of tort” can lead to confusion by falsely implying waiver of the defendant’s wrongdoing, the court ruled that it should be abandoned.4 Instead, reference should be made to the remedy for disgorgation, which is an alternative Provides legal redress for certain forms of wrongdoing
To make a claim for disgorgation, a plaintiff must first identify a criminal misconduct (in particular a breach of an obligation arising from tort, contract or equity) .6 Even then, depending on the nature of the actionable conduct and the underlying facts, there may be a Disgorgation will not be an available remedy.
Disgorgation for negligent behavior
In cases where the alleged wrongdoing is based on the negligent behavior of a defendant, the Court found that the negligence depends on evidence of the causation and individual damage. The negligent conduct of a defendant is only inadmissible insofar as it causes damage.7 In this context, the Court has retained its statement from an earlier decision that “[a] The accused in a negligent act is generally not a malefactor: he is a malefactor only in relation to the harm he actually does to the plaintiff. “8th
Although disgorgation is available for some forms of non-evidence-of-damage misconduct (e.g. breach of fiduciary duty), the Court stated, “It is a big leap to find that disgorgation without evidence of damage is available as a general response to negligent behavior of a defendant. “Furthermore,“ granting a disgorgement for negligence without proof of damage would lead to an out-of-legal remedy and represent a radical and unexplored development. ”9 Therefore, a plaintiff must continue to prove the causation and individual damage before seeking May claim disgorgation as an alternative remedy.
The rationale in the Atlantic Lottery still leaves the question of whether disgorgation for illicit misconduct is limited to even proprietary acts, including conversion, deception and abuse, or has broader application to all forms of negligence.
Disgorgation and breach of contract
In contrast to a negligent claim, the loss is not an essential element of a breach of contract.10 The remedy for breach of contract is usually an award of damages, based on the position the plaintiff would have assumed if the contract had been fulfilled. 11 Accordingly, the Court ruled that disgorgation is an available remedy for breach of contract only in exceptional circumstances, when other remedies are inadequate and the circumstances justify it
According to the Court, particular attention should be paid to whether the plaintiff has a legitimate interest in preventing the defendant from being profitable.13 This may be the case, for example, if the plaintiff’s loss is “incalculable” or if the interests of the Plaintiff’s performance is not reflected in a purely economic measure. 14
The majority and minority of the Tribunal differed in whether it should be left to the trial judge to determine whether circumstances in the Atlantic Lottery are exceptional enough to encourage disgorgation. The minority in the court was not convinced that the trial judge will inevitably conclude that this case is nothing out of the ordinary, or that plaintiffs are merely claiming that they paid to play a game and did not get exactly what they paid for to have. 15 In addition, the majority found that disgorgation was not an appropriate means when a plaintiff would rather seek disgorgation than seek compensation because he is unwilling or has insufficient evidence of the loss. On the other hand, the minority took the view that the plaintiffs’ decision not to prove individualized loss, bodily harm or specific addiction claims is not fatal, as the loss is not a legal requirement for disgorgation.16 What does the minority believe ultimately the case? The issue is whether other legal remedies for breaches of contract are insufficient to defend and protect the contractual rights of the plaintiffs
Regardless of the differences between the majority and minority (5-4) decisions regarding the briefs required to survive a strike, when disgorgation for breach of contract is sought, the ruling of the Court of Justice in the Atlantic Lottery is in its implications on class action clear. The strategy of enforcing the waiver of tortious acts in order to avoid having to prove a cause of damage and individual compensation in cases in which negligent behavior is alleged has been terminated. In addition, the decision limits the use of disgorgation in breach of contract to all but the most exceptional cases.