On July 24, 2020, the Supreme Court of Canada published its highly anticipated decision in the Atlantic Lottery Corporation Inc. v Babstock, 2020 SCC 19 case. The Atlantic Lottery Supreme Court took the opportunity to review and reject the long-running proposal The waiver of unlawful acts is an independent cause of action. The decision ends and ends the longstanding debate on whether or not there is a reasonable reason for the tort cancellation without evidence of harm for certification purposes, and marks another important step in the evolution of class action law in Canada.
Atlantic Lottery was a proposed class action lawsuit against Atlantic Lottery Corporation Inc. (“ALC“), The company that oversees the operation of the video lottery terminal (“VLTs”) In Newfoundland and Labrador. Plaintiffs alleged that the VLTs were addictive and deceptive and that they were prohibited under the Criminal Code. The plaintiffs asserted claims for the waiver of tort, breach of contract and unjust enrichment, and requested the deterioration in the profits ACL had achieved through the operation of the VLT machines in question.
Significantly, plaintiffs expressly denied any loss or damage as a result of the defendants’ conduct and instead sought to rely on the doctrine of no torture rule as a basis for a cause of action. Plaintiffs filed a motion to confirm the trial as class, to which ALC responded with its own motion to remove the statement of claim for failure to disclose reasonable cause of action.
The concept of tort waiver as a standalone plea has a tortured history. Plaintiffs have often relied on the fact that they still have a cause of action even when they cannot demonstrate that they have suffered harm or harm (or the amount). Previously, the courts were reluctant to remove the novel tort waiver in certification, and therefore upheld the tort waiver as a reasonable cause of action and allowed them to proceed.
The petitioner judge heard and denied ALC’s motion to strike and upheld the process as a class action lawsuit. The decisions were largely upheld by the Newfoundland and Labrador Appeals Court, which weighed the debate and concluded that the tort waiver was an independent cause of action.
On appeal to the Supreme Court of Canada
The renunciation of the new image of Tort as an independent cause of complaint was short-lived. The defendants appealed to the Supreme Court of Canada, which admitted the appeal, reversed the certification order, and defeated the plaintiffs’ statement of complaint in its entirety, on the grounds that it had failed to disclose reasonable cause for complaint. The Supreme Court eventually took the opportunity not used in previous cases to resolve the tort waiver debate and overturned the finding that tort waiver is an independent plea.
The central theses
The decision clarifies the Tort and Disgorgation Waiver Act, confirms that plaintiffs cannot invoke tort waiver as a standalone plea in certification or otherwise, and demonstrates the Supreme Court’s continued willingness to take legal action Determine questions during the pleading phase. There are a number of major takeaways:
- The waiver of tort is not valid ground for legal action and should not be used to describe the remedy for disgorgation. The Supreme Court ruled unanimously that “in order to assert a claim for disgorgation, a plaintiff must first establish a criminal misconduct” (in particular breach of duty arising from tort, contract or equity). The Supreme Court confirmed that no liability can be accepted for negligent conduct unless the plaintiff suffers actual harm, stating, “There is no right to be free from the prospect of harm. There is only the right not to suffer harm resulting from undue risk ”(paragraphs 31-33).
- A majority of 5 to 4 of the Supreme Court ruled that the plaintiffs’ request for disgorgation as a legal remedy for breach of contract had no prospect of success, since “disgorgation in the event of breach of contract is only available if at least other legal remedies are inadequate…. [w]here, as here, it is argued that the loss quantum is equal to the defendant’s profit, but that the plaintiff simply prefers to seek disgorgement, a profit-based appeal is not appropriate ”(paragraph 59). The Supreme Court also confirmed that disgorgation for breach of contract should be considered out of the ordinary Relief and should not be “in the choice of the plaintiff in order to avoid questions of evidence” (para. 61).
- The same 5-4 majority in the Supreme Court ruled that plaintiffs could not seek punitive damages because the defendants had breached a good faith obligation to the plaintiffs that the defendants “considered the interests of the plaintiffs to be considered” at least the same [their] own and do not offer or deliver an inherently dangerous service or product ”(Paragraph 64). The majority noted that the application of the “organizational principle” of good faith in Canadian contract law “is generally limited to existing categories of contracts and obligations” and “[t]The alleged contract between ALC and the plaintiffs does not fit into any of the established categories of good faith ”(para. 65). Plaintiffs did not argue that a new category of good faith should be recognized.
As the Supreme Court in the Atlantic Lottery has recognized, since the 2004 Ontario Supreme Court ruling in Serhan (Estate Trustee) v Johnson & Johnson (2004), 72 OR (3d) 296 (Sup. Ct .) Jointly asserted claims for “tort waiver” attempting to certify class actions when there is no evidence of loss of individual class members. The previous reluctance of the lower courts to refuse to certify the waiver of tort was wrongly “to the detriment of the defendant who is then practically compelled to pay the plaintiff a settlement” (paras 19-21).
By confirming that tort waiver is not a valid plea, the Atlantic Lottery Supreme Court decision is an important step in clarifying the law on certification and otherwise. The decision confirms that the loss is an element to be demonstrated in the context of a negligent claim and duly limits the tort waiver to what it historically included – a choice of damages once only The plaintiff recognized all of the elements of a claim. The removal of this controversial plea may now pave the way for the streamlining of certification applications and the potential limitation of certain class actions by ensuring that only claims that reveal a viable cause of action can be brought.
The Supreme Court decision in the Atlantic Lottery also sends a strong message that a claim should not survive (or be certified) a strike motion simply because it contains a novel cause of action. Rather, the majority stressed that “it is beneficial, and indeed crucial, to the viability of civil justice and public access to it that claims, including novel claims that are doomed to fail, be dismissed early in the process become “(No. 19). The majority message is in line with the “culture change” put forward by the Supreme Court in its previous Hryniak v Mauldin ruling, 2014 SCC 7, and encourages judges – especially judges who hear certification requests – to make efforts to address them Determine legal issues early on in litigation.