An Old Snail in a New Bottle? Waiver of Tort as An Independent Cause of Action

AuthorCharles Murray
An Old SnAil in A new BOttle?
wAiv er Of tOrt AS An
independent CAuSe Of ACtiOn
Charles Murray
“He that will not apply new remedies must expect new evils.”
— Francis Bacon
A. pArt i
1) Introduction
Products liability litigation is an uphill battle for plaintiffs; a true David and
Goliath situation. Some of the difficulties can be mitigated by class action
suits which allow plaintiffs to litigate when it might be otherwise imprac-
ticable or impossible to do so. This is particularly the case when potential
damage awards are far outstripped by the cost of litigation. While class
action suits facilitate access to justice for plaintiffs, the certification of an
action can present its own problems. In certifying an action under one of the
provincial Class Proceedings Acts, a judge must determine if there are com-
mon issues for all plaintiffs which are capable of being resolved in a class
setting. When a large number of people have been negatively affected by a
dangerous or defective product, the cause of action tends to be negligence.
The difficulty is that issues of causation and proof of harm are sometimes
impossible to determine en masse. This can present a significant bar to the
certification of class action proceedings against negligent manufacturers and
distributors of defective products.
A recent decision from Ontario, Serhan Estate v. Johnson & Johnson,1
has the potential to significantly ease the burden in certifying class action
proceedings for products liability as well as perhaps enabling plaintiffs, who
have suffered no damages as a result of the defective products, to recover.
In addition, it may allow for recovery not only in the absence of harm, but
1 (2004), 72 O.R. (3d) 296 (S.C.J.), aff’d [2006] O.J. No. 2421 (Div. Ct.)
also in the absence of financial loss. In fact, in Serhan, a motion to certify
a class action against a manufacturer was successful even though there was
no evidence that any member of the class of plaintiffs had suffered physical
or financial harm from the defective product. Moreover, none of them had
actually paid for the product in question, thus no direct or indirect loss
was incurred. It is immediately obvious that if this certification proves to
be based on good law, it will be a novel and perhaps revolutionary step in
products liability litigation.
On its face, it would seem this sort of action should be impossible.
Harm is an essential part of most tortious claims and in its absence, even
when a defendant has clearly breached its duty to the plaintiff, no recovery is
allowed. In Serhan, there was no question that the product (a blood glucose
monitoring system) was defective, nor that the manufacturer had knowingly
distributed the defective product in Canada. This particular action, though,
was not certified on a tortious cause of action, but rather on “waiver of
tort,” a doctrine associated with the law of restitution. Under waiver of tort,
rather than claiming damages caused by the defendants, the plaintiffs claim
the profits collected from the sale and distribution of the product. Seeking a
gains-based remedy in equity rather than common law damages in tort may
allow plaintiffs to bypass the strict requirements of harm and reward them
with the presumably substantial profits gained by the company. I use the
word ”may” because, though by no means a new doctrine, waiver of tort is
not well understood nor is its exact nature firmly established in Canada.
In Serhan, the doctrine was applied in a novel way: as an independent
cause of action. There are serious questions as to whether this is or should
be the function of the doctrine, and there are conflicting judicial and aca-
demic opinions on several important aspects of waiver of tort. While it is
generally accepted that waiver of tort must be grounded in some sort of
tortious conduct, the extent of this connection is unclear. Particularly, must
plaintiffs prove all the elements of the tort and simply exchange remedies,
or can waiver of tort be established without these elements? Also, is there a
limit to the sort of tortious behaviour to which the doctrine can be applied,
or will any tort serve? This paper explores these questions and attempts
to define the possible boundaries of the doctrine. The decision in Serhan
is examined, as is its effect on subsequent cases. Specific issues connected
to waiver of tort are surveyed, including the nature, scope, and policy
implications of the doctrine. On the subject of remedies, focus is placed on
accounting for profits. The relationship of restitution to punitive damages
is also given brief consideration. It is argued that waiver of tort is properly
understood as an independent cause of action in restitution which does
VOLUME 6, No 1, april 2010 7
not depend on a pre-existing actionable tort. As well, the scope of tortious
behaviour available to be waived should include any that aims to produce a
profit for the defendant, and the measure of the remedy may exceed what,
if anything, the plaintiff has lost. Since other analogous claims in restitution
do not require actual loss, it will be argued that it is inconsistent for loss to
be required in waiver of tort. Finally, while there are policy concerns over
the extent to which waiver of tort can defeat the traditional limitations of
tort law, it will be shown that the law of restitution is capable of responding
to these as it contains its own internal checks and balances.
If waiver of tort survives as a valid cause of action, the effect on prod-
ucts liability litigation in Canada and, indeed, on any claim where tortious
conduct produces a profit, will be profound. It is fortunate, in my view,
that the action in Serhan was certified since it provides, at least potentially,
a forum for clarifying some of the issues discussed in this paper. In fact,
because of the minimal or nonexistent damage component to such a claim,
it is unlikely a similar case would have been litigated outside the class action
context. In this way, it can be said that class actions not only make other-
wise impossible claims possible for plaintiffs, they can also bring to light
legal issues which may have remained buried. Given the potential future
impact of waiver of tort on both class and private actions, the importance of
this function cannot be minimized.
2) Basics of Restitution and Waiver of Tort
The law of restitution rests on the general principle that a defendant should
not be unjustly enriched. In Canada, there are two broad avenues of recov-
ery available to plaintiffs. The first is based on principle of unjust enrich-
ment as explained by Dickson J. in Pettkus v. Becker.2 The unjust enrichment
analysis depends on three factors: (1) an enrichment; (2) a corresponding
deprivation; and (3) an absence of a juristic reason for retaining the benefit.3
2 [1980] 2 S.C.R. 834 [Pettkus].
3 Courts have sometimes implied further requirements for recovery in such
cases. For example, the absence of a “special relationship” has often
been invoked in order to deny restitution. This principle originated in the
Ontario Court of Appeal case, Nicholson v. St. Denis (1975), 8 O.R. (2d)
315 at 317 [St. Denis], where the required relationship is rather poorly
defined as being “frequently contractual at the outset.” This could present
a significant bar to plaintiffs if unjust enrichment is adopted as a prereq-
uisite for waiver of tort as it was in Reid v. Ford Motor Co., [2006] B.C.J.
No. 993 (S.C.) especially in cases like Serhan, where there was no direct
contractual relationship with the manufacturer. The special relationship
requirement has been criticized as unnecessary and unduly pro-defen-

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