Zoom, Zoom, Zoom to Waiver of Tort Resolution

♬ Zoom! Zoom! Zoom! Capoeira mata um!
Zoom! Zoom! Zoom! Capoeira mata um!♬

Music by: Serapis Bey, in the 1993 film Only the Strong
(Sorry David)

This past Friday the Supreme Court of British Columbia released the May 6 decision in Koubi v. Mazda Canada Inc. [Mazda], certifying a class-action under the Class Proceeding Act (CPA) on behalf of representative who purchased 17,909 Mazda3 vehicles between 2004 and 2007 over an alleged door lock defect.

The 20 authorized dealers in B.C. are defendants in the action. Similar actions have been filed in Ontario and Quebec.

The plaintiff, represented by James Hanson of Hanson Wirsig Matheos, claims the defendant violated the Business Practices and Consumer Protection Act (BPCPA) by representations that were false, giving a claim under s. 29 of the CPA.

Alisha Koubi, the representative plaintiff, claims that quality security features such as door locks were a central component of her decision to purchase a vehicle, given that she travelled between sites with her laptop and confidential documents for her job [paras. 9, 13-14]. At no time, however, did Koubi actually experience either a break-in or a loss related to the alleged defect.

The defendants claim that the proposed class is not sufficiently common to meet requirements under s. 4(1)(c) of the CPA,

Class certification

4 (1) The court must certify a proceeding as a class proceeding on an application under section 2 or 3 if all of the following requirements are met:

(c) the claims of the class members raise common issues, whether or not those common issues predominate over issues affecting only individual members;

The defendants also claim that break-in rates vary across the province, and expressed a reluctance to publicize the lock problem through the media because it could exacerbate the rate of break-ins [paras. 24-25, 32].

Dardi, J. applied the principle in Glover v. Toronto (City),

[16] …Certification is a procedural motion focusing on the form of the action. As such, the court is required to assess whether there is a cause of action, shared by an identifiable class, from which common issues arise that can be resolved in a fair, efficient and manageable way that will advance the proceeding and achieve access to justice, judicial economy and the modification of the behaviour of wrongdoers: Sauer v. Canada (A.G.), [2008] O.J. No. 3419 (S.C.J.) at para.14, leave to appeal to Div. Ct. refused, [2009] O.J. No. 402.

The plaintiff claimed a cause of action under both the s. 18 a) and b) of the Sales of Goods Act (SGA), and the BPCPA. The defendant, though disputing the merits, responded that the cause under both of these acts were only applicable to those purchasing the vehicles for personal use.

But the plaintiff also made a claim under the emerging doctrine of “waiver of tort,” described in the recent BCSC case, Pro-Sys v. Microsoft,

[60] … Peter D. Maddaugh and John D. McCamus, in The Law of Restitution, looseleaf ed. (Aurora, Ontario: Canada Law Book Inc., 2009), at 24-1, describe waiver of tort and its remedy:

The doctrine known as “waiver of tort” is perhaps one of the lesser appreciated areas within the scope of the law of restitution. From the outset, it seems to have engendered an undue amount of confusion and needless complexity. … One source of this confusion stems from the doctrine’s very name. As one writer has pointed out, not entirely facetiously, it has “nothing whatever to do with waiver and really very little to do with tort”. Although the phrase might be interpreted to mean that the plaintiff is somehow excusing the defendant from the wrongful act and thereby forgoing the remedy at law, the plaintiff, in fact, does no such thing. Rather, the plaintiff is simply giving up the right to sue in tort and instead electing to base the claim in restitution, thereby seeking to recoup the benefits that the defendant has derived from the tortious conduct. In essence, then, the concept is really quite simple: in certain situations, where a tort has been committed, it may be to the plaintiff’s advantage to seek recovery of an unjust enrichment accruing to the defendant rather than normal tort damages.

Waiver of tort was previously discussed on Slaw by Barry Glaspell of BLG, and is also described in these documents from Lerners LLP. The Ontario Superior Court did certify a class proceedings on waiver of tort in 2009 in the ongoing case of Robinson v. Medtronic, and granted an appeal this past March related to claims in punitive damages and bifurcation based on conflicting cases on this issue.

The plaintiff in Mazda claims that since waiver of tort may be an independent cause of action, it should be extended to the entire class. This would include those who purchased their Mazda3 vehicle for business reasons that would not be able to access either the SGA or the BPCPA [para. 159].

The implications of the claim, as explained by Hanson, are that,

The plaintiff is seeking a trial judgment in which damages would turn on the profits made on the sale of the defective products rather than on the losses suffered by individuals behind the class-action.

After reviewing the case law on the subject, Dardi, J. concluded,

[70] At this point, doctrinally, the criteria for waiver of tort requires clarification. It is unclear given the unsettled state of the jurisprudence whether allegations of wrongful conduct in a product liability case such as this would ground a claim for restitutionary relief. It is at least arguable that such an action may be grounded in the wrongful conduct of the defendants without any need to prove all the elements of an actionable tort. It is also arguable that the plaintiff class members have an independent cause of action which would allow class members to recover any benefit the defendant gained from its alleged wrongful acts without having to demonstrate harm or prove damages to the class members.

[71] In the result, I conclude that the jurisprudence with respect to waiver of tort is not sufficiently settled such that I am permitted to strike the claim. It is a novel claim, but it is not “plain and obvious” that based on the allegations of wrongful conduct in this case that the claim for waiver of tort would fail. This cause of action satisfies the criterion under s. 4(1)(a) of the CPA.

[160] In Infineon, the Court of Appeal disagreed with the chambers judge’s conclusion that under the doctrine of waiver of tort, the unlawful gain of the defendant must be referable to the class members: paras. 30 and 32. The Court of Appeal endorsed the view expressed in some of the Ontario authorities that until the issue has been determined substantially, there is an argument to be made that a claim in waiver of tort may be established for the class as a whole by proof of wrongful conduct and resulting gain to the defendant without proof of any loss by the plaintiff. The Court of Appeal articulated that

“causation could be proven for the class as a whole upon proof that the gain would not have been obtained but for the defendants’ wrongful conduct”: para. 32.

[161] This question involves an inquiry into the conduct of the defendants and the entitlement of the class to a restitutionary remedy or disgorgement. The entire class has an interest in the resolution of this question because, where the defendant realized a gain as a result of wrongful conduct, the claim of waiver of tort might be advanced by the class as a whole without requiring proof of individual loss. Therefore, the benefit obtained by the defendants from their alleged wrongful conduct would arguably equate to the measure of recovery by the class under the waiver of tort claim…

[163] In this case, the allegations of wrongful conduct include the defendants’ marketing and sale of the Mazda3 when they knew about the alleged defect and their delay in taking remedial action. If the plaintiff can prove these allegations and that the defendants benefited from their wrongful conduct, it may be possible to determine a sufficient causal link between the alleged wrongful conduct and the amount which the defendants could be ordered to pay on a class-wide basis by way of disgorgement or restitution. It follows that the alleged wrongful conduct and corresponding benefit to the defendants may sustain a restitutionary remedy based on waiver of tort: Heward at para. 101.

[164] I conclude that whether the alleged wrongful conduct of the defendants in this case engages the doctrine of waiver of tort, whether the defendants are liable to account to any of the class members, and what restitution, if any, is payable by the defendants to the class members, are appropriate common issues.

[emphasis added]

The court did not certify an entitlement to punitive and compensatory damages, but stated that liability in waiver of tort may be justified even without individual proof of loss by members in the class [para. 173].

Although a significant part of the plaintiff’s claim rests on the fact that Mazda failed to adequately resolve the issue in a timely fashion, as Glaspell notes above it requires a burden even beyond that of negligence in showing fraud or total failure of consideration.

And although waiver of tort might not be a stand alone cause of action in this claim, it might prove necessary in extending the claim beyond the statutory causes to all of those in the approved class. Dardi, J. agreed with the plaintiff that ss. 1 and 7 of the CPA contemplated for subclasses and allowed for amendment of the certification order at any time, and the issue of whether those in the class purchased it for personal or business reasons was not fatal to their claim [para. 174].

So although we may be Zoom, Zoom, Zooming to some resolution on waiver of tort in Canada, we’re not quite there yet.

Comments

  1. Is it a fair summary of the claim in ‘waiver of tort’ to say as follows: you did something wrong, and the activity that you were carrying out when you did wrong made money, and though the wrong you did caused me no harm, I want some or all of the money you made in that activity.

    From the sound of it, the reason that the plaintiff ‘waives’ i.e. does not proceed in, tort, is that the plaintiff cannot make out the basics of a tort claim, notably harm suffered from the defendant’s fault.

    Why am I wrong?

    I would have thought that taking away someone’s wrongful earnings should be a matter for the state, i.e. to the benefit of all, not just to a particular class because they happen to have dealt with the wrongdoer. Anyone who suffered no harm because of the wrong is in my view being unjustly enriched by any recovery in such a suit.

  2. David Cheifetz

    John,

    Yeah, you have it in substance. The remedy in what’s called waiver of tort is about making the defendant disgorge money. It’s not measured by the extent (if any) of P’s injury.

    Ontario’s Serhan v Johnson & Johnson decision, which opened the floodgates for the inclusion of waiver of tort claim, has as a good as summary as any. The first instance decision is long. The leave to appeal decision, at 2004 CanLII 34032 is much shorter. The meaning of wavier of tort is succintly summarized in para. 5, quoting from the first instance decision. The certification decision was eventually approved in 2006: 2006 CanLII 20322.

    You’ll find a good summary of the law, circa whenever the article was written in 2008, in Archibald and Vernon, No Harm, No Foul? The Existence of Waiver of Tort as an Independent Cause of Action in Canadian Law, [2008] Annual Review of Civil Litigation 409.

    The reason that it’s seemingly so easy to include these claims in class actions is that, so far, (1) it isn’t plain and obvious that the waiver of tort claim must fail and, (2) because of the uncertainty in what the the law is for that claim, the class is able to satisfy the rest of the procedural and substantive requirements for a class action claim. Consider how much easier it is for the class to satisfy the common issues requirements if a claim does not require that the indvidual plaintiffs have sustained a loss? That point has been noted in certification reasons.

    A class action merits trial of the common issues was supposed to start in Ontario in mid January. It contains the waiver of tort claim: see Andersen v. St. Jude Medical 2010 ONSC 77. I don’t now if it did.

  3. David,
    Thanks for the heads up on Anderson v. St. Jude – I didn’t know of that case and I’ll keep an eye out for it.

  4. One function of a law of contracts, torts or restitution is to provide an answer or answers to the question: why should this defendant pay this plaintiff? The suggestion in a case like Serhan that, just because the defendant made money, though the plaintiff incurred no loss, is sufficient to make the defendant pay is, to use Jeremy Bentham’s phrase, “nonsense on stilts”. The need for a tort in a restitutionary claim based on “waiver of tort” is to establish that at least the plaintiff has indeed suffered a loss. There remains the need to justify making the defendant pay what it made from the tort to the plaintiff.

  5. David Cheifetz

    If not being nonsense on stilts was a requirement for all aspects of law, we’d probably have to change more than a few bedrock principles.

    (The reCAPTCHA is “British Jockey”. Was Bentham a punter, too?)