Date: David Cheifetz

From: Mon, 26 Feb 2007 14:48

Subject: Waiver of tort

Lionel,

On tort & gain-based awards:

Look at, if you haven't seen it, 3com Corporation v. Zorin International Corporation, 2006 CanLII 18351 (ON C.A.), particularly at para. 57.

It looks like the Ont CA wouldn't agree that there can't be a gain-based claim in tort, at least where we're dealing with intentional torts, although the statement in the case isn't restricted to intentional torts. "The appellants’ submission ignores the conceptual basis of tort law, which is restitutionary. The difference between the contract price and the price at which the appellants would otherwise have had to purchase the goods is a cost properly borne by the appellants."

This was a deceit claim were the recovery where the recovery was the gain the plaintiff would not have made but for the tort, not the plaintiff's loss.On the evidence, there was no loss on this issue. 3Com sold the goods for $X based on the deceit. The price would have been higher, otherwise. As I understand the evidence, there was no evidence that the goods could have been sold for the higher price to anybody, so 3 Com didn't sustain any loss on the sale of these goods based on the evidence. It just didn't make as much because on the sale. I suspect that was also the reality.

There's nothing in the case to indicate waiver of tort was raised. I don't have it at my fingertips but there's a passage in Maddaugh and McCamus specifically suggesting that waiver of tort might apply in a deceit-based claim. The description in M&M is literally the facts of 3Com.

David

-----Original Message-----
From: Lionel Smith
Sent: February 15, 2007 12:20 PM
Subject: ODG: Waiver of tort: Heward v. Eli Lilly & Co.

This case is now on canlii.

At [25] we find this:

"In attempting to formulate coherent principles that would explain and rationalise past decisions to accommodate the relatively recent recognition of a general law of restitution, there is no doubt that the learned commentators have greatly contributed to, and will quite properly continue to influence, its development. However, as the reasons of Epstein J. indicate, their views have not been uniform despite the enviable degree of confidence with which they have sometimes been asserted."

But it is not only the academics who get sideswiped:

[14]: "The case for certifying the proceeding was very strongly, and comprehensibly, contested by counsel for the defendants on the basis of the evidence and the authorities. They left no stone unturned and, in my opinion, turned over quite a few that were extraneous to the case presented on behalf of the plaintiffs."

Overall there is a good review of different road maps of restitution but because this is only a certification application, the judge does not need to pick one, only deciding that it is arguable that a claim in negligence might lead to a gain-based remedy, and [38] that "it is not plain and obvious that a claim based on waiver of tort must satisfy the three-part test for unjust enrichment". While he concludes that it is arguable that unjust enrichment can be established without showing any deprivation, he decides that in a case where the only facts pleaded involve negligence, there is no room for a separate claim in unjust enrichment.

Unfortunately these class actions rarely go trial in Canada -- they tend to settle after certification -- so we may never get actual decisions on the points that he decided were arguable.

Neil, what did you find objectionable in the judgment? Is it that you agreed with the BCSC in Reid, that there can be no gain-based claim for negligence?

That may well be right, but Reid seems much less thorough than this judgment; Gerow J simply assumed there that all gain-based claims are claims in unjust enrichment (which in my view is inconsistent with Soulos v Korkontzilas). In the earlier discussion on the RDG of Cullity J's other judgments, some people read him as saying that waiver of tort is an independent cause of action; I don't think this new judgment is open to that criticism. He is not deciding whether waiver of tort is (a) a gain-based claim for a wrong or (b) part of unjust enrichment, but I don't think he can be read as saying that it is neither one.

I do think that in [64] Cullity J. may have misunderstood Peter Birks' position.

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