A commonly pleaded cause of action in many class actions is "waiver of tort". Not anymore. The longstanding debate as to whether waiver of tort is an alternative form of remedy or an independent cause of action has been settled by the
History of the Debate
The debate surrounding waiver of tort was initially sparked by a 2006 decision,
Waiver of Tort Not an Independent Cause of Action
In
As the term "waiver of tort" is prone to confusion by incorrectly implying a waiver of the defendant's wrongful conduct, the Court held that it should be abandoned.4 Instead, reference should be made to the remedy of disgorgement, which offers an alternative remedy for certain forms of wrongful conduct.5
To make out a claim for disgorgement, a plaintiff must first establish actionable misconduct (specifically, breach of a duty in tort, contract or equity).6 However, even then, depending on the nature of the actionable conduct and underlying facts, disgorgement may not be an available remedy.
Disgorgement for Negligent Conduct
In circumstances where the alleged misconduct is based on a defendant's negligent conduct, the Court observed that negligence depends on proof of causation of damage and individual damages. The conduct of a defendant in negligence is wrongful only to the extent that it causes damage.7 In this regard, the Court maintained its statement from an earlier decision that, "[a] defendant in an action in negligence is not a wrongdoer at large: he is a wrongdoer only in respect of the damage which he actually causes to the plaintiff."8
Although disgorgement is available for some forms of wrongdoing without proof of damage (for example, breach of fiduciary duty), the Court held that, "it is a far leap to find that disgorgement without proof of damage is available as a general proposition in response to a defendant's negligent conduct." In addition, "granting disgorgement for negligence without proof of damage would result in a remedy arising out of legal nothingness, and would be a radical and uncharted development."9 Hence, it will still be necessary for a plaintiff to show causation and individual damages before being able to claim disgorgement as an alternative remedy.
The reasons in
Disgorgement and Breach of Contract
Unlike a claim in negligence, loss is not an essential element of a cause of action for breach of contract.10 The remedy for breach of contract is ordinarily an award of damages measured by the position the plaintiff would have occupied had the contract been performed.11 Correspondingly, the Court held that disgorgement is an available remedy for breach of contract only in exceptional circumstances where other remedies are inadequate and the circumstances warrant it.12
According to the Court, particular attention should be given to whether the plaintiff has a legitimate interest in preventing the defendant's profit-making activity.13 This may arise where, for example, the plaintiff's loss is "impossible to calculate" or where the plaintiff's interest in performance is not reflected by a purely economic measure.14
Where the majority and minority of the Court differed was whether it should be left to the trial judge to determine if the circumstances in
Implications
Regardless of the differences between the majority and minority (5-4) decisions as to the pleadings necessary to survive a motion to strike where disgorgement is sought for breach of contract, the Court's decision in
Footnotes
1.
2.
3. Supra note 1 at para 21.
4. Ibid at para 23.
5. Ibid at para 27.
6. Ibid at para 30.
7. Ibid at para 37.
8. Ibid at para 33.
9. Ibid at paras 32-33.
10. Ibid at para 49.
11. Ibid at para 50.
12. Ibid at para 53.
13. Ibid.
14. Ibid at para 59.
15. Ibid at para 125.
16. Ibid at para 126.
17. Ibid at para 123.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
M5J 2T9
E-mail: koliveira@airdberlis.com
URL: www.airdberlis.com
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