Supreme Court of Canada declines to deal with issue of waiver of tort raised in B.C. product liability case

27 February 2013

On January 17, 2013, the Supreme Court of Canada denied leave to appeal in the case of Koubi v. Mazda Canada Inc., et al. 2012 BCCA 310 (Koubi), a proposed class proceeding relating to defective door lock mechanisms in Mazda3 vehicles. In Koubi, the British Columbia Court of Appeal had stepped back from a trend of class action certifications based on the doctrine of “waiver of tort,” in which class counsel argued that it was not “plain and obvious” that the doctrine could not be successfully argued at trial.

Background

Koubi was a putative class action against Mazda Canada and its B.C. dealers on behalf of all B.C. owners and lessees of Mazda3 vehicles, in connection with a defective door lock mechanism. If struck in a particular location, the door would simply open without a key or other entry device. Mazda developed a solution to the problem which was introduced to its assembly line in 2007. Remedial devices were made available at no cost to owners, for installation into vehicles manufactured before this time.

While break-ins had been reported in some of the affected vehicles, the representative plaintiff had not experienced a break-in to her vehicle. While she has been informed by Mazda Canada that she could have a remedial device installed at no cost to her, the representative plaintiff declined to do so. On behalf of the entire class, her claim did not seek the recovery of any losses actually suffered by individual owners (either associated with break-ins, repairs or loss of use). Instead, the claim sought restitutionary damages and the disgorgement of profits earned by the defendants on the basis of waiver of tort. The representative plaintiff alleged that the class was entitled to recoup all profits earned by the defendants as a result of the sale and marketing of vehicles that they allegedly knew were unfit.

Judicial Treatment

The Supreme Court of British Columbia found that the requirements of the Class Proceedings Act had been met, and certified the action, including common issues related to waiver of tort. However, the British Columbia Court of Appeal allowed the appeal and set aside the certification. While the appellants raised a number of grounds of appeal, the case turned on the Court of Appeal’s finding that the alleged breaches of the Business Practices and Consumer Protection Act (BPCPA) and the Sale of Goods Act (SGA) could not provide the requisite “wrongdoing” to sustain a claim in waiver of tort.

The Court of Appeal considered whether “waiver of tort” is an independent cause of action or a remedy, and described the distinction as follows: 

[I]f waiver of tort is only remedial, the plaintiff must prove all elements of the underlying wrong, including loss, before it may elect to seek benefits in the hands of the defendant. If it is an independent cause of action, however, the plaintiff need only prove wrongful acquisition of a benefit by the defendant before claiming disgorgement of that benefit.

The Court of Appeal noted that waiver of tort had been certified in many cases in British Columbia and Ontario, but unfortunately without a great deal of analysis of its scope or proper application. There has been no judgment in Canada concerning the doctrine of waiver of tort rendered after trial. Ultimately, the Court of Appeal agreed with the chambers judge that there was an arguable case that the doctrine may provide an independent cause of action and may, therefore, permit the class to recover the profits earned by the defendants without having to prove individual harm or damages.  

However, the Court of Appeal went on to consider whether the doctrine of waiver of tort is limited to traditional tortious conduct, or alternatively, whether allegations of statutory breaches (in this case, of the BPCPA and/or the SGA) could provide the necessary wrongdoing to support such a claim. The Court of Appeal found that in circumstances in which the statute is “exhaustive” in the sense that it is intended to provide a complete and comprehensive statement of the law governing a matter and offers comprehensive regulation of the subject matter, a violation of a statutory right will not give rise to an independent civil cause of action. In this regard, the Court of Appeal stated as follows:

I discern nothing in the BPCPA to support the view that the legislature intended to augment its statutory remedies by permitting consumers to mount an action against a supplier for restitutionary relief based on the novel doctrine of waiver of tort. Such a conclusion is inconsistent with the express language of ss. 171, 172(3)(a) and 192, which clearly limit recovery for pecuniary loss to restoration of the consumer’s own damages or loss arising from a deceptive act.

With respect to the claims under the SGA, the Court of Appeal found that the SGA is not an exhaustive code, but that claims for restitutionary damages, disgorgement of profits and waiver of tort were inconsistent with the express provisions of the statute and the remedies provided therein.

As a result, the Court of Appeal decertified the class proceeding, stating that a review of the relevant legislation was sufficient to determine the legal issues and that it was not necessary to have an entire factual record (i.e., the completion of a trial) to do so.

Relevance

Prior to the Court of Appeal’s decision in Koubi (and the recent Ontario trial decision in Anderson v. St. Jude Medical, Inc., 2012 ONSC 3660, cited in Koubi)  many Canadian courts had been reluctant to undergo a pre-trial assessment of claims founded on waiver of tort, ruling instead that, as it is not plain and obvious that waiver of tort is not a cause of action, the action must be certified and the waiver of tort issue be resolved at a common issues trial on a full evidentiary record. However, these two decisions, bolstered now by the rejection of leave to appeal in Koubi, have brought this practice into question. It appears now that a pre-trial assessment of the validity of waiver of tort as a cause of action may be appropriate, and the question may be determined on an application for certification. Koubi represents a serious hurdle to future class actions seeking restitutionary damages premised on statutory breaches, in cases in which individual class members have suffered no quantifiable loss.


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