Serhan v. Johnson & Johnson,  O.J. No. 2421 (Div. Ct.)
Back in the summer of 2004, Mr. Justice Cullity of the Ontario Superior Court of Justice granted certification of a class action on behalf of users of a certain type of blood glucose monitor, which was alleged to be "dangerously defective" but which appeared to cause no harm: Serhan v. Johnson & Johnson (2004), 72 O.R. (3d) 296 (S.C.J.).
Certification was granted – controversially – on the basis that the plaintiffs could pursue constructive trust and restitutionary claims for an accounting of the defendants’ proceeds of sales, which would not require the plaintiffs to establish any individual loss. The theoretical basis for this was the equitable doctrine of "waiver of tort,", whereby the plaintiff gives up the right to sue in tort and pursues a restitutionary claim instead, in order to recoup the profits the defendant has derived from its wrongful conduct. Waiver of tort has not traditionally been seen as a cause of action, but merely as a choice of remedy where an actionable wrong has been established, and Justice Cullity’s extension of the doctrine was notable.
In the Divisional Court, Madam Justice Epstein (with whom Mr. Justice Jennings concurred) reviewed the "much-debated" question whether waiver of tort constitutes an independent cause of action. She agreed with Justice Cullity that the issue is not settled in the cases and should be resolved in "the context of a factual background of a more fully developed factual record" – in other words, at trial. There was a strong dissent by Madam Justice Chapnick, who concluded that the basic elements of an equitable claim (unjust enrichment, a trust-like relationship, calculable loss or ongoing deprivation) had not been made out, and that allowing the claim to proceed could have the effect of imposing strict liability on manufacturers for product defects.
The defendant, Johnson & Johnson, has sought leave to appeal the decision of the Divisional Court to the Court of Appeal for Ontario. The result will be of great significance to consumers and manufacturers alike.
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This paper discusses contract law issues including decisions of relevance to commercial lawyers and business leaders giving a snapshot of particular principles of interest that arose in case law over the past 12 months.
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