Not Waiving, but Drowning: Supreme Court of Canada Kills Waiver of Tort as an Independent Cause of Action

After decades of uncertainty in the area of class actions and tort law, waiver of tort is dead. In its decision in Atlantic Lottery Corp Inc v Babstock,[1] released on July 24, 2020, the Supreme Court of Canada killed off the concept once and for all, holding that, “[t]his novel cause of action does not exist in Canadian law and has no reasonable chance of succeeding at trial. In addition, the term ‘waiver of tort’ is apt to generate confusion and should be abandoned.”[2] While the plaintiffs’ claims in this case also included breach of contract and unjust enrichment, the focus of the SCC’s decision was waiver of tort (on which the Court was unanimous), and that will therefore be the focus of this article.

What is waiver of tort, how did it arise in this case, and why its sudden demise?

Waiver of Tort Explained

As the SCC explained in its decision, waiver of tort originated in the writ of assumpsit, from which arose the legal fiction of an implied contract, which allowed plaintiffs to sue “even where the imputation of a promise to pay was nonsensical, as when the defendant acquired a benefit through the commission of a tort.”[3] ‘Waiver of tort’ occurred where a tort was established, but the plaintiff chose to waive a compensatory remedy in order to pursue a claim in assumpsit and thereby recover the defendant’s ill-gotten gains by way of disgorgement. Historically, therefore, waiver of tort was an election of remedies.[4]

By contrast, certain academics have argued that waiver of tort should be a free-standing cause of action. This would allow waiver of tort claims to proceed where no loss has been sustained by the claimant at all; where loss or damage is an element of the cause of action, this means that the tort is not established. In such cases, waiver of tort would transform from a remedial device to an independent cause of action. Compensatory damages (which would return the plaintiff to the position that she occupied before the wrong) cannot be awarded in such cases because there is no loss. However, the defendants are held to have committed a wrong and benefitted from it, and are therefore made to disgorge the profits of their wrongdoing. The objective is to return the defendants to the position that they occupied before the wrong, as a means of deterring or regulating their conduct.[5] This was waiver of tort as pleaded by the plaintiffs in Babstock.