Atlantic Lottery Corporation Inc. Appellant v. Douglas Babstock and Fred Small, 2020 SCC 19

SUPREME COURT OF CANADA Citation: Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420 Appeals Heard: December 3, 2019 Judgment Rendered: July 24, 2020 Docket: 38521 Between: Atlantic Lottery Corporation Inc.

Appellant and Douglas Babstock and Fred Small Respondents And Between: VLC, Inc., IGT-Canada Inc., International Game Technology, Spielo International Canada ULC and Tech Link International Entertainment Limited Appellants and Douglas Babstock and Fred Small Respondents - and - Attorney General of Ontario, Attorney General of Manitoba, Attorney General of Saskatchewan, Bally Gaming Canada Ltd., Bally Gaming Inc., Western Canada Lottery Corporation, Alberta Gaming, Liquor, and Cannabis Commission, Canadian Gaming Association, Canadian Chamber of Commerce and British Columbia Lottery Corporation Interveners Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.

Reasons for Judgment: (paras. 1 to 72) Brown J. (Abella, Moldaver, Côté and Rowe JJ. concurring) Reasons Dissenting in Part: (paras. 73 to 173) Karakatsanis J. (Wagner C.J. and Martin and Kasirer JJ. concurring) Atlantic Lottery Corporation Inc. Appellant v. Douglas Babstock and Fred Small Respondents - and - VLC, Inc., IGT-Canada Inc., International Game Technology, Spielo International Canada ULC and Tech Link International Entertainment Limited Appellants v.

Douglas Babstock and Fred Small Respondents and Attorney General of Ontario, Attorney General of Manitoba, Attorney General of Saskatchewan, Bally Gaming Canada Ltd., Bally Gaming Inc., Western Canada Lottery Corporation, Alberta Gaming, Liquor, and Cannabis Commission, Canadian Gaming Association, Canadian Chamber of Commerce and British Columbia Lottery Corporation Interveners Indexed as: Atlantic Lottery Corp. Inc. v. Babstock 2020 SCC 19 File No.: 38521. 2019: December 3; 2020: July 24.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ. on appeal from the court of appeal for newfoundland and labrador Civil procedure — Class actions — C ertification — Pleadings — Causes of action — Plaintiffs alleging defendants profited from dangerous and deceptive video lottery terminals — Plaintiffs relying on waiver of tort, breach of contract and unjust enrichment as

causes of action and seeking gain-based award — Plaintiffs’ action certified as class proceeding — Whether plaintiffs’ claims disclose reasonable cause of action . ALC, constituted by the governments of the four Atlantic provinces, is empowered to approve the operation of video lottery terminal games (“VLTs”) in Newfoundland and Labrador. The plaintiffs applied for certification of a class action against ALC, on behalf of any natural person resident in Newfoundland and Labrador who paid to play VLTs in that province in the six years preceding the class action.

The plaintiffs claim that VLTs are inherently dangerous and deceptive. Relying on three causes of action (waiver of tort, breach of contract and unjust enrichment), the plaintiffs seek a gain-based award, quantified by the profit ALC earned by licensing VLTs . ALC applied to strike the plaintiffs’ claim on the basis that it disclosed no reasonable cause of action, and the plaintiffs applied for certification of their claim as a class action. The certification judge dismissed ALC’s application, and further held that the plaintiffs had satisfied the requirements necessary for certification.

The Court of Appeal substantially upheld the certification judge’s conclusions, and allowed the plaintiffs’ claims in waiver of tort, breach of contract and unjust enrichment to proceed to trial. Held (Wagner C.J. and Karakatsanis, Martin and Kasirer JJ. dissenting in part): The appeals should be allowed, the certification order set aside and the plaintiffs’ statement of claim struck in its entirety. Per Abella, Moldaver, Côté, Brown and Rowe JJ.: Each claim that the plaintiffs have pleaded is bound to fail because it discloses no reasonable cause of action.

The plaintiffs cannot rely on the doctrine of waiver of tort as an independent cause of action for disgorgement. This 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. Despite its early acceptance, this term is a misnomer. Rather than forgiving or waiving the wrongfulness of the defendant’s conduct, plaintiffs relying on the doctrine are simply electing to pursue an alternative, gain-based, remedy.

Restitution for unjust enrichment and disgorgement for wrongdoing are two types of gain-based remedies. What the plaintiffs seek in this case is disgorgement, which does not require proof of deprivation to the plaintiff, and requires only that the defendant gained a benefit. Restitution is awarded in response to the causative event of unjust enrichment, where there is correspondence between the defendant’s gain and the plaintiff’s deprivation. Disgorgement should be viewed as an alternative remedy for certain forms of wrongful conduct, not as an independent cause of action.

In order to make out a claim for disgorgement, a plaintiff must first establish actionable misconduct. By pleading disgorgement as an independent cause of action, however, the plaintiffs in this case seek to establish an entirely new category of wrongful conduct — one that is akin to negligence but does not require proof of damage. Although disgorgement is available for some forms of wrongdoing without proof of damage (for example, breach of fiduciary duty), it is a far leap to find that disgorgement without proof of damage is available as a general proposition in response to a defendant’s negligent conduct.

Granting disgorgement for negligence without proof of damage would result in a remedy arising out of legal nothingness, and would be a radical and uncharted development. This is not the type of incremental change that falls within the remit of courts applying the common law. The plaintiffs’ claim that VLTs are “similar to” three-card monte within the meaning of s. 206 of the Criminal Code and that their operation is therefore prohibited also has no reasonable chance of success. Statutory

interpretation requires discerning legislative intent by examining statutory text in its entire context and in its grammatical and ordinary sense, in harmony with the statute’s scheme and objects. In determining what games can be considered “similar to” three-card monte, it must be kept in mind that courts cannot create common law crimes through

an act of judicial

interpretation. Furthermore, while expert evidence may assist in deciding whether the defined elements of an offence are made out on the facts of a particular charge, expert evidence cannot purport to define the elements of an offence. The text of the provision and its surrounding context suggest that the prohibition of games similar to three-card monte was directed towards the game’s concrete attributes and not towards the abstract feature of deception. Had Parliament sought to prohibit broadly deceptive games, it would have straightforwardly done so.

Games “similar to” three-card monte must therefore involve, at a minimum, a player betting on the location of an object after a series of a manipulations. Nothing in the pleadings describes VLTs as operating in this manner. The plaintiffs’ breach of contract claim is also doomed to fail. Whether this claim discloses a reasonable cause of action should be considered in light of the remedies the plaintiffs actually seek — that is, disgorgement and punitive damages — and the question of whether these remedies are available to the plaintiffs, assuming the truth of their pleadings.

The ordinary form of monetary relief for breach of contract is an award of damages, measured according to the position which the plaintiff would have occupied had the contract been performed. Disgorgement for breach of contract may be appropriate in exceptional circumstances, but only where, at a minimum, other remedies are inadequate and only where the circumstances warrant such an award. As to those circumstances, courts should in particular consider whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity.

The key to developing principles for gain-based recovery in breach of contract is to consider what legitimate interest a gain-based award serves to vindicate. A coherent approach that reconciles the relief awarded with the structure of breach of contract as a cause of action should be preferred. While the circumstances in which a gain-based award will be appropriate cannot be clearly delineated in advance, one would expect future legitimate interests protected by a gain-based award to resemble those interests that have been protected in the past.

Courts have, in some exceptional circumstances, long awarded monetary amounts departing from the ordinary measure of expectation damages. An award that appears to be measured by a defendant’s gain might serve a compensatory purpose that distinguishes it from disgorgement and which therefore tends to support recovery. Where, as here, the argument is that the quantum of loss is equal to the defendant’s gain, but the plaintiff would simply rather pursue disgorgement, a gain-based remedy is not appropriate.

Further, there is nothing exceptional about the breach of contract the plaintiffs allege: once the allegations of criminal conduct are put aside, the plaintiffs’ claim is simply that they paid to play a gambling game and did not get exactly what they paid for. The plaintiffs cannot be said to have a legitimate interest in ALC’s profit-making activity, and their claim has no reasonable chance of achieving disgorgement damages for breach of contract. Punitive damage awards for breach of contract are also exceptional, but will be awarded where the alleged breach of contract is an independent actionable wrong.

The actionable wrong need not be tortious: punitive damages may also be awarded where the

defendant breaches a contractual obligation. Not every contract, however, imposes actionable good faith obligations on contracting parties: while good faith is an organizing principle of Canadian contract law, it manifests itself in specific circumstances and its application is generally confined to existing categories of contracts and obligations. The alleged contract between ALC and the plaintiffs does not fit within any of the established good faith categories; accordingly, their claim for punitive damages has no reasonable chance of success.

Finally, the plaintiffs’ unjust enrichment claim has no reasonable chance of success. The principled unjust enrichment framework requires establishing that ALC was enriched, that the plaintiffs suffered a corresponding deprivation, and that the enrichment and corresponding deprivation occurred in the absence of any juristic reason therefor.

The juristic reason element proceeds in two stages: first, the plaintiff must demonstrate that the defendant’s enrichment cannot be justified by any of the established categories of juristic reason; and second, the defendant can rebut the plaintiff’s case by showing that there is a residual reason to deny recovery. In the present case, there is no need to go beyond the first stage. The plaintiffs’ own pleadings allege that there was a contract between ALC and the plaintiffs under which the plaintiffs paid to play VLTs, and nothing in the pleadings could serve to vitiate the alleged contract.

A defendant that acquires a benefit pursuant to a valid contract is justified in retaining that benefit. Per Wagner C.J. and Karakatsanis, Martin and Kasirer JJ. (dissenting in part): The appeal should be allowed in part. There is agreement with the majority that a mere breach of a duty of care, in the absence of loss, cannot ground a claim for disgorgement. There is also agreement that VLTs cannot constitute “three-card monte” as defined in the Criminal Code , and that the plaintiffs’ claim in unjust enrichment must be struck.

However, there is disagreement with whether the plaintiffs’ claim in breach of contract is a reasonable cause of action, as well as the conclusion that there are no available remedies for that breach. The plaintiffs’ claim should be certified as a class action on the common issues of breach of contract, punitive damages and the appropriateness of a disgorgement remedy. The elements of a cause of action for breach of contract are the existence of a contract and the breach of a term of that contract. Loss is not an essential element.

The plaintiffs have pleaded the nature of the contract, the terms they say are implied, and the manner in which ALC breached the contract between them. The first implied term pleaded is a warranty that the VLTs were not inherently dangerous. In the alternative, the plaintiffs plead that ALC breached an implied term requiring ALC to warn the plaintiff class of any inherent danger in the consumption of the games and to satisfy itself of their safety. Finally, the plaintiffs allege that ALC breached an implied term of good faith.

It is not plain and obvious that implying these terms would improperly touch on or fetter ALC’s authority as a public regulator of VLTs. The claim for breach of contract should not be struck on the basis that it is plain and obvious that there are no available remedies. There are several remedies that are open to the plaintiffs on their pleadings, including nominal damages, declaratory relief, disgorgement, and punitive damages. A court finding breach of contract may make binding declarations of right, whether or not any consequential relief is or could be claimed.

Nominal damages are always available for causes of action, like breach of contract, that do not require proof of loss. This alone precludes striking the claim. Whether disgorgement is an appropriate remedy for breach of contract in this case is a matter for trial that cannot be resolved on the pleadings alone. While the customary remedy for a breach of contract is compensation measured in the form of expectation damages, in some cases, disgorgement of a defendant’s profits can be an appropriate remedy for breach of contract.

Disgorgement is an exceptional remedy, available where a plaintiff has shown that the ordinary remedies of contract law are inadequate to protect and vindicate their contractual right. Although compensatory damages will often help to achieve deterrence of wrongful conduct, they will not always be adequate or appropriate in the circumstances of the breach. The measure of a disgorgement award implicitly effects deterrence and is dictated by the minimum amount necessary to make the wrong unprofitable. Disgorgement awards are not limited to situations in which they serve a compensatory purpose.

A self-interested and deliberate breach; the impracticability of calculating loss; and the plaintiff’s legitimate interest in preventing the defendant’s profit-making activity, including where the defendant had a quasi-fiduciary duty to the plaintiff, weigh in favour of a disgorgement remedy. No single factor is necessarily crucial or dispositive.

The plaintiffs’ pleadings in this case correspond with several factors that, if established at trial, may point to a disgorgement remedy, including that the plaintiffs were vulnerable to ALC’s abuse of its power and that ALC’s breach was self-interested, deliberate, and in bad faith. A trial judge may also find that ascertaining the actual amount lost is impracticable since VLTs are designed not to create records of who uses them and how much money they have lost. The plaintiffs have also pleaded a sufficient basis to support a claim for punitive damages.

The focus of punitive damages is on the defendant’s misconduct, not the plaintiff’s loss, and injury to the plaintiff is not a condition precedent to an award of punitive damages. The plaintiffs have pleaded a breach of the duty of honest performance, which can constitute an actionable wrong to ground a claim for punitive damages. With regard to certification, the class representative must show that there is some “basis in fact” that there is an identifiable class of two or more persons, that there is at least one common issue, and that the class action is the preferable procedure.

This standard ensures that there is an evidentiary foundation to support the certification order. The proposed class definition uses objective criteria that will allow for identification of those who can attest to playing the games, and there is a basis to believe that at least two persons will be able to establish that they paid ALC to gamble on VLT games during the proposed class period. An issue is common where its resolution is necessary to the resolution of each class member’s claim.

The issues relating to breach of contract, disgorgement, and punitive damages are appropriate common issues, but the issue relating to aggregate monetary relief is not. On breach of contract, the pleadings assert a civil wrong that is common to each member of the class: whether the terms alleged by the plaintiffs are in fact implied, and whether the functioning of the VLTs routinely violates those terms, would be the same for every consumer.

On disgorgement, determining whether the circumstances of this case are exceptional, such that other contractual remedies are inadequate, is a substantial ingredient of each member’s claim and will benefit all members of the class. For punitive

damages, ALC’s conduct and the alleged breach of the duty of good faith would be common to all class members. But there is no basis in fact to certify aggregate monetary relief as a common issue. Before making an award ofdisgorgement, the court must be satisfied that the breach of contract is causally connected to the gain to be disgorged. To ensure thatALC’s total liability is limited to that flowing from the breach, some plausible methodology is needed to estimate ALC’s liability fromits breach of contract, including what its profits might have been had it not breached its contractual obligations.

No methodology hasbeen suggested. Finally, with regard to preferability, the keystone of the plaintiffs’ action is a deception common to each member of theclass. Determining the content of a contract entered into by each member, and whether that contract was systematically breached, doesnot require individualized assessments and is more practical and efficient than individual actions. A class action has the potential toacknowledge, vindicate and protect individual players’ contractual interest in a safe and fair game. Cases Cited By Brown J. Applied: Attorney General v.

Blake, [2001] 1 A.C. 268; considered: Nunavut Tunngavik Inc. v. Canada (Attorney General),2014 NUCA 2, 580 A.R. 75; referred to: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45; Pro-Sys ConsultantsLtd. v. Microsoft Corporation, 2013 SCC 57, [2013] 3 S.C.R. 477; Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303; Hryniak v.Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87; Das v. George Weston Ltd., 2018 ONCA 1053, 43 E.T.R. (4th) 173; R. v. Salituro, (SCC), [1991] 3 S.C.R. 654; Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38, [2007] 3 S.C.R. 83; Cooper v.

Hobart,2001 SCC 79, [2001] 3 S.C.R. 537; Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261; Andersen v. St.Jude Medical, Inc., 2012 ONSC 3660; Serhan (Estate Trustee) v. Johnson & Johnson (2004), (ON SC), 72 O.R. (3d)296; Ewert v. Nippon Yusen Kabushiki Kaisha, 2019 BCCA 187, 25 B.C.L.R. (6th) 268; Authentic T-Shirt Co. ULC v. King, 2016 BCCA59; Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601; Kingstreet Investments Ltd. v. New Brunswick(Finance), 2007 SCC 1, [2007] 1 S.C.R. 3; Peel (Regional Municipality) v.

Canada, (SCC), [1992] 3 S.C.R. 762; UnitedAustralia, Ltd. v. Barclays Bank Ltd., [1941] A.C. 1; Arrow Transfer Co. Ltd. v. Royal Bank of Canada, (SCC), [1972]S.C.R. 845; Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73, [2004] 3 S.C.R. 511; Clements v. Clements, 2012SCC 32, [2012] 2 S.C.R. 181; The Queen v. Saskatchewan Wheat Pool, (SCC), [1983] 1 S.C.R. 205; R. v. D.L.W., 2016SCC 22, [2016] 1 S.C.R. 402; R. v. Levkovic, 2013 SCC 25, [2013] 2 S.C.R. 204; The King v. Rosen and Lavoie (1920), (QC CA), 61 D.L.R. 500; R. v. Heywood, (SCC), [1994] 3 S.C.R. 761; Rogers & Rogers Inc. v.

PinehurstWoodworking Co. (2005), (ON SC), 14 B.L.R. (4th) 142; Asamera Oil Corp. Ltd. v. Sea Oil & General Corp., (SCC), [1979] 1 S.C.R. 633; One Step (Support) Ltd. v. Morris-Garner, [2018] UKSC 20, [2018] 3 All E.R. 659; RBCDominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, [2008] 3 S.C.R. 79; Norberg v. Wynrib, (SCC),[1992] 2 S.C.R. 226; Sunshine Exploration Ltd. v. Dolly Varden Mines Ltd. (N.P.L.), (SCC), [1970] S.C.R. 2; WrothamPark Estate Co. v. Parkside Homes Ltd., [1974] 2 All E.R. 321; Smith v. Landstar Properties Inc., 2011 BCCA 44, 14 B.C.L.R. (5th) 48;Whiten v.

Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595; Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494; Hollick v.Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158. By Karakatsanis J. (dissenting in part) R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45; Hunt v. Carey Canada Inc., (SCC),[1990] 2 S.C.R. 959; Operation Dismantle v. The Queen, (SCC), [1985] 1 S.C.R. 441; Montreal Trust Co. of Canada v.Hickman, 2001 NFCA 42, 204 Nfld. & P.E.I.R. 58; Holland v. Saskatchewan, 2008 SCC 42, [2008] 2 S.C.R. 551; Anderson v. BellMobility Inc., 2009 NWTCA 3, 524 A.R. 1; Markevich v.

Canada, 2003 SCC 9, [2003] 1 S.C.R. 94; Minnes v. Minnes (1962), (BC CA), 39 W.W.R. 112; M.J.B. Enterprises Ltd. v. Defence Construction

(1951) Ltd., (SCC), [1999] 1S.C.R. 619; Canadian Pacific Hotels Ltd. v. Bank of Montreal, (SCC), [1987] 1 S.C.R. 711; Andrews v. Canada(Attorney General), 2014 NLCA 32, 354 Nfld. & P.E.I.R. 42; Levy v. British Columbia (Crime Victim Assistance Program), 2018 BCCA36, 7 B.C.L.R. (6th) 84; Native Women’s Assn. of Canada v. Canada, (SCC), [1994] 3 S.C.R. 627; Owners of theSteamship “Mediana” v. Owners, Master and Crew of the Lightship “Comet”, [1900] A.C. 113; Place Concorde East Ltd. Partnershipv. Shelter Corp. of Canada Ltd. (2006), (ON CA), 211 O.A.C. 141; Saskatchewan Government Insurance v.

Wilson,2012 SKCA 106, 405 Sask. R. 8; Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601; Asamera OilCorp. Ltd. v. Sea Oil & General Corp., (SCC), [1979] 1 S.C.R. 633; Robinson v. Harman (1848), 1 Ex. 850; Fidler v.Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3; IBM Canada Limited v. Waterman, 2013 SCC 70, [2013] 3 S.C.R.985; Semelhago v. Paramadevan, (SCC), [1996] 2 S.C.R. 415; Attorney General v. Blake, [2001] 1 A.C. 268; Whiten v.Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595; Attorney-General v. Observer Ltd., [1990] 1 A.C. 109; Royal Bank of Canada v.W.

Got & Associates Electric Ltd., (SCC), [1999] 3 S.C.R. 408; One Step (Support) Ltd. v. Morris-Garner, [2018]UKSC 20, [2018] 3 All E.R. 659; Nunavut Tunngavik Inc. v. Canada (Attorney General), 2014 NUCA 2, 580 A.R. 75; Cassell & Co.Ltd. v. Broome, [1972] A.C. 1027; Esso Petroleum Co. Ltd. v. Niad Ltd., [2001] EWHC Ch. 458; Experience Hendrix LLC v. PPXEnterprises Inc., [2003] EWCA Civ. 323; RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, [2008] 3 S.C.R.79; Vercoe v. Rutland Fund Management Ltd., [2010] EWHC 424; Hill v.

Church of Scientology of Toronto, (SCC),[1995] 2 S.C.R. 1130; Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494; Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013SCC 57, [2013] 3 S.C.R. 477; Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158; Taub v. Manufacturers Life Insurance Co.(1998), (ON SC), 40 O.R. (3d) 379; AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 S.C.R. 949; McCracken v.Canadian National Railway Co., 2012 ONCA 445, 111 O.R. (3d) 745; Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2009BCCA 503, 312 D.L.R. (4th) 419; Sun-Rype Products Ltd. v.

Archer Daniels Midland Company, 2013 SCC 58, [2013] 3 S.C.R. 545;Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534; Jiang v. Peoples Trust Co., 2017 BCCA 119,408 D.L.R. (4th) 1; Williams v. Mutual Life Assurance Co. of Canada (2000), (ON SC), 51 O.R. (3d) 54, aff’d(2003), (ON CA), 226 D.L.R. (4th) 112; Pioneer Corp. v. Godfrey, 2019 SCC 42, [2019] 3 S.C.R. 295; Cloud v.Canada (Attorney General) (2004), (ON CA), 73 O.R. (3d) 401; Ramdath v.

George Brown College of Applied Artsand Technology, 2015 ONCA 921, 392 D.L.R. (4th) 490; Strother v. 3464920 Canada Inc., 2007 SCC 24, [2007] 2 S.C.R. 177;Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34, [2004] 1 S.C.R. 902; Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R.

184; Chace v. Crane Canada Inc. (1997), (BC CA), 44 B.C.L.R. (3d) 264; Pederson v. Saskatchewan, 2016 SKCA142, 408 D.L.R. (4th) 661; Chalmers v. AMO Canada Co., 2010 BCCA 560, 297 B.C.A.C. 186; Fakhri v. Capers Community Markets,2004 BCCA 549, 203 B.C.A.C. 227. Statutes and Regulations Cited

Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 15(1). Class Actions Act, S.N.L. 2001, c. C-18.1, ss. 5, 8(d), 29(1), 37. Criminal Code, R.S.C. 1985, c. C-46, ss. 206, 207(1)(a), (4)(a), 209. Lotteries Act, S.N.L. 1991, c. 53, s. 5. Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D, rr. 7.16, 14.24. Video Lottery Regulations, C.N.L.R. 760/96, ss. 2(e), 3, 4, 5, 6, 8, 10. Authors Cited American Law Institute. Restatement of the Law, Third: Restitution and Unjust Enrichment, vol. 2. St. Paul, Minn.: American LawInstitute Publishers, 2011. Barnett, Katy.

Accounting for Profit for Breach of Contract: Theory and Practice. Oxford: Hart Publishing, 2012. Barton, Sandra, Mark Hines, and Shawn Therien. “Neither Cause of Action nor Remedy: Doing Away with Waiver of Tort”, in Todd L.Archibald and Randell Scott Echlin, eds. Annual Review of Civil Litigation, 2015. Toronto: Carswell, 2015. Beatson, J. “The Nature of Waiver of Tort” (1978-79), 17 U.W.O. L. Rev. 1. Benson, Peter. “Contract as a Transfer of Ownership” (2007), 48 Wm. & Mary L. Rev. 1673.

Birks, Peter. “Restitutionary damages for breach of contract: Snepp and the fusion of law and equity” (1987), 4 L.M.C.L.Q. 421. Botterell, Andrew. “Contractual Performance, Corrective Justice, and Disgorgement for Breach of Contract” (2010), 16 Legal Theory135. Burrows, Andrew. The Law of Restitution, 3rd ed. Oxford: Oxford University Press, 2011. Canada. House of Commons. House of Commons Debates, vol. 2, 5th Sess., 13th Parl., April 11, 1921, pp. 1857-58. Canada. House of Commons. House of Commons Debates, vol. 4, 5th Sess., 13th Parl., May 6, 1921, pp. 3005-6.

Canadian Oxford Dictionary, 2nd ed., by Katherine Barber, ed. Don Mills, Ont.: Oxford University Press, 2004, “three-card monte”. Cassels, Jamie, and Elizabeth Adjin-Tettey. Remedies: The Law of Damages, 3rd ed. Toronto: Irwin Law, 2014. Chitty on Contracts, vol. I, General Principles, 33rd ed., by H. G. Beale, et al., eds. London: Sweet & Maxwell, 2018. Edelman, James. Gain-Based Damages: Contract, Tort, Equity and Intellectual Property. Portland, Or.: Hart Publishing, 2002. Edelman, James. McGregor on Damages, 20th ed. London: Sweet & Maxwell/Thomson Reuters, 2018. Eisenberg, Melvin A.

Foundational Principles of Contract Law. New York: Oxford University Press, 2018. Friedmann, Daniel. “Restitution for Wrongs: The Basis of Liability”, in W. R. Cornish, et al., eds. Restitution: Past, Present and Future:Essays in Honour of Gareth Jones. Oxford: Hart Publishing, 1998, 133. Friedmann, Daniel. “Restitution of Benefits Obtained Through the Appropriation of Property or the Commission of a Wrong” (1980), 80Colum. L. Rev. 504. Gannage, Mark. “Nominal Damages for Breach of Contract in Canada” (2011), 69 Advocate 833. Hall, Geoff R. Canadian Contractual

Interpretation Law, 3rd ed. Toronto: LexisNexis, 2016. Iacobucci, Edward M., and Michael J. Trebilcock. “An Economic Analysis of Waiver of Tort in Negligence Actions” (2016), 66 U.T.L.J.173. Jones, Craig. “Panacea or Pandemic: Comparing ‘Equitable Waiver of Tort’ to ‘Aggregate Liability’ in Cases of Mass Torts withIndeterminate Causation” (2016), 2 Can. J. of Compar. & Contemp. L. 301. Jones, Craig. “The Class Action as Public Law”, in Janet Walker and Garry D. Watson, eds. Class Actions in Canada: Cases, Notes, andMaterials. Toronto: Emond Montgomery Publications: Toronto, 2014, 28.

Maddaugh, Peter D., and John D. McCamus. The Law of Restitution, vol. 1. Toronto: Thomson Reuters, 2019 (loose-leaf updatedDecember 2019, release 24).

Martin, J. M. “Waiver of Tort: An Historical and Practical Survey” (2012), 52 Can. Bus. L.J. 473. McCamus, John D. “Disgorgement for Breach of Contract: A Comparative Perspective” (2003), 36 Loy. L.A. L. Rev. 943. McCamus, John D. “Waiver of Tort: Is There a Limiting Principle?” (2014), 55 Can. Bus. L.J. 333. McInnes, Mitchell. “Gain-Based Relief for Breach of Contract: Attorney General v. Blake ” (2001), 35 Can. Bus. L.J. 72. McInnes, Mitchell. The Canadian Law of Unjust Enrichment and Restitution . Markham, Ont.: LexisNexis, 2014. O’Hagan, Cara-Marie. “Remedies”, in Lewis N.

Klar, et al., eds., Remedies in Tort , vol. 4. Toronto: Thomson Reuters, 1987 (loose-leaf updated 2020, release 5). Pitch, Harvin D., and Ronald M. Snyder. Damages for Breach of Contract , 2nd ed. Toronto: Thomson Reuters, 1989 (loose-leaf updated 2019, release 4). Pitel, Stephen G. A., and Matthew B. Lerner. “Resolving Questions of Law: A Modern Approach to Rule 21” (2014), 43 Advocates’ Q. 344. Rosenberg, H. Michael. “Waiving Goodbye: The Rise and Imminent Fall of Waiver of Tort in Class Proceedings” (2010), 6 Can. Class Action Rev. 37.

Sage, Nicholas W. “Disgorgement: From Property to Contract” (2016), 66 U.T.L.J. 244. Sangiuliano, Anthony Robert. “A Corrective Justice Account of Disgorgement for Breach of Contract by Analogy to Fiduciary Remedies” (2016), 29 Can. J.L. & Jur. 149. Sarna, Lazar. The Law of Declaratory Judgments , 4th ed. Toronto: Thomson Reuters, 2016. Sharpe, Robert J. “Commercial Law Damages: Market Efficiency or Regulation of Behaviour?”, in The Law Society of Upper Canada, ed. Special Lectures 2005: The Modern Law of Damages . Toronto: Irwin Law, 2006, 327. Sharpe, Robert J. Injunctions and Specific Performance .

Toronto: Thomson Reuters, 2012 (loose-leaf updated November 2019, release 28). Smith, Lionel D. “Disgorgement of the Profits of Breach of Contract: Property, Contract, and ‘Efficient Breach’” (1995), 24 Can. Bus. L.J. 121. Smith, Lionel D. “The Province of the Law of Restitution” (1992), 71 Can. Bar Rev. 672. Stevens, Robert. Torts and Rights . Oxford: Oxford University Press, 2007. Sullivan, Ruth. Sullivan on the Construction of Statutes , 6th ed. Markham, Ont.: LexisNexis, 2014. Swan, Angela, Jakub Adamski, and Annie Y. Na. Canadian Contract Law , 4th ed. Toronto: LexisNexis, 2018. Virgo, Graham.

The Principles of the Law of Restitution , 3rd ed. Oxford: Oxford University Press, 2015. Waddams, Stephen. Principle and Policy in Contract Law: Competing or Complementary Concepts? New York: Cambridge University Press, 2011. Waddams, Stephen M. “Breach of Contract and the Concept of Wrongdoing” (2000), 12 S.C.L.R. (2d) 1 . Watterson, Stephen. “Gain-Based Remedies for Civil Wrongs in England and Wales”, in Ewoud Hondius and André Janssen, eds. Disgorgement of Profits: Gain-Based Remedies throughout the World , Cham, Switzerland: Springer, 2015, 29.

Weber, Greg. “Waiver of Tort: Disgorgement Ex Nihilo ” (2014), 40 Queen’s L.J. 389. Weinrib, Ernest J. “Causal Uncertainty” (2016), 36 Oxford J. Legal Stud. 135. Weinrib, Ernest J. “Punishment and Disgorgement as Contract Remedies” (2003), 78 Chi.-Kent L. Rev. 55. Weinrib, Ernest J. “Restitutionary Damages as Corrective Justice” (2000), 1 Theor. Inq. L. 1. Weinrib, Ernest J. The Idea of Private Law , rev. ed. Oxford: Oxford University Press, 2012. Winterton, David. “Contract Theory and Gain-Based Recovery” (2013), 76 M.L.R. 1129.

APPEALS from a judgment of the Newfoundland and Labrador Court of Appeal (Green, Welsh and Harrington JJ.A.), 2018 NLCA 71 , 29 C.P.C. (8th) 1, 53 C.C.L.T. (4th) 12, [2018] N.J. No. 383 (QL), 2018 CarswellNlfd 470 (WL Can.), affirming in part decisions of Faour J., 2016 NLTD(G) 216, 93 C.P.C. (7th) 307, [2016] N.J. No. 443 (QL), 2016 CarswellNfld 532 (WL Can.) , and 2014 NLTD(G) 114, 356 Nfld. & P.E.I.R. 293, 1108 A.P.R. 293, [2014] N.J. No. 288 (QL), 2014 CarswellNfld 281 (WL Can.) . Appeals allowed, Wagner C.J. and Karakatsanis, Martin and Kasirer JJ. dissenting in part.

Julie Rosenthal , Mike Eizenga , Sarah Stothart and Jonathan G. Bell , for the appellant the Atlantic Lottery Corporation Inc.

Ian F. Kelly , Q.C. , and Daniel M. Glover , for the appellants VLC, Inc., IGT-Canada Inc. and International Game Technology. Colm St. R. Seviour , Q.C. , and Koren A. Thomson , for the appellant Spielo International Canada ULC . Jorge P. Segovia , for the appellant Tech Link International Entertainment Limited. Kirk M. Baert and Celeste Poltak , for the respondents. Brent Kettles and Tom McKinlay , for the intervener the Attorney General of Ontario. Denis Guénette and Tom Dobson , for the intervener the Attorney General of Manitoba. Jared G. Biden , for the intervener the Attorney General of Saskatchewan.

Paul D. Dicks , Q.C. , Michael D. Lipton , Q.C. , and Kevin J. Weber , for the interveners Bally Gaming Canada Ltd. and Bally Gaming Inc. Keith Kilback , Q.C. , and Alexander Shalashniy , for the intervener the Western Canada Lottery Corporation. Mandy L. England and Michael Sobkin , for the intervener the Alberta Gaming, Liquor and Cannabis Commission. Brandon Kain , Gillian P. Kerr and Adam Goldenberg , for the intervener the Canadian Gaming Association. Matthew Milne-Smith , for the intervener the Canadian Chamber of Commerce. K.

Michael Stephens , Shannon Ramsay and Aubin Calvert , for the intervener the British Columbia Lottery Corporation. The judgment of Abella, Moldaver, Côté, Brown and Rowe JJ. was delivered by Brown J. — I. Introduction [ 1 ] The appellant Atlantic Lottery Corporation Inc. (“ALC”), constituted by the governments of the four Atlantic provinces, is empowered to approve the operation of video lottery terminal games (“VLTs”) in Newfoundland and Labrador by the Video Lottery Regulations , C.N.L.R. 760/96 .

The respondents Douglas Babstock and Fred Small (“the plaintiffs”) applied for certification of a class action against ALC, on behalf of any natural person resident in Newfoundland and Labrador who paid to play VLTs in that province in the six years preceding the class action, or on behalf of the estate of any such person. The other appellants are suppliers of VLTs that ALC has added to the action as third-party defendants. [ 2 ] The plaintiffs’ essential claim is that VLTs are inherently dangerous and deceptive.

Indeed, they say that VLTs are so deceptive that they contravene the Criminal Code ’s prohibition of games similar to “three-card monte” ( Criminal Code , R.S.C. 1985, c. C-46, s. 206 ). Relying on three causes of action (“waiver of tort”, breach of contract and unjust enrichment), the plaintiffs seek a gain-based award, quantified by the profit ALC earned by licensing VLTs . [1] [ 3 ] More particularly, and as to waiver of tort, the plaintiffs allege that ALC breached a duty to warn of the inherent dangers associated with VLTs, including the risk of addiction and suicidal ideation.

This, they say, supports their claim in waiver of tort, which they also say is an independent cause of action that allows for a gain-based remedy to “be determined at trial of common issues without the involvement of any individual class member” (A.R., vol. II, at p. 104). [ 4 ] As to the claim for breach of contract, the plaintiffs allege a contract arising from ALC’s offer of VLTs to the public, and the plaintiffs’ corresponding acceptance by paying to play.

As an implied term of this contract, they say that ALC was required to provide safe games that were fit for use and of merchantable quality, to use reasonable skill and care in its provision of VLT gaming, and to act in good faith. ALC breached these terms, they say, by supplying deceptive VLTs. [ 5 ] Finally, the plaintiffs say that ALC has been unjustly enriched at their expense. [ 6 ] The plaintiffs succeeded in obtaining certification at the Supreme Court of Newfoundland and Labrador, and that result was substantially affirmed by the Newfoundland and Labrador Court of Appeal.

In my respectful view, however, none of these claims have any reasonable chance of success. I would therefore allow the appeals, set aside the certification order, and strike the plaintiffs’ claims against ALC. II. Overview of Proceedings A. Supreme Court of Newfoundland and Labrador — 2014 NLTD(G) 114, 356 Nfld. & P.E.I.R. 293 ; 2016 NLTD(G) 216, 93 C.P.C. (7th) 307 [ 7 ] The matter came before the certification judge in the form of two applications:

(1) ALC’s application, made under r. 14.24(1) (

a) of the Rules of the Supreme Court, 1986 , S.N.L. 1986, c. 42, Sch. D ( 2014 NLTD(G) 114, 356 Nfld. & P.E.I.R. 293 ), to strike the plaintiffs’ claim on the basis that it disclosed no reasonable cause of action, and (2) the plaintiffs’ application for certification of their claim as a class action under the Class Actions Act , S.N.L. 2001, c. C-18.1 . The parties agreed that the certification judge’s decision on ALC’s application would also determine whether the plaintiffs had satisfied the first criterion for certification in s. 5 of the Class Actions Act — that “the pleadings disclose a cause of action”.

[ 8 ] The certification judge dismissed ALC’s application, and further held that the plaintiffs had satisfied the requirements necessary for certification. In particular and because the plaintiffs intended to pursue a collective remedy (calculated on the basis of ALC’s profits) without proving individual damage, he concluded that there were common issues among the class that would be better addressed through a class action. B. Newfoundland and Labrador Court of Appeal — 2018 NLCA 71 , 29 C.P.C. (8th) 1 [ 9 ] ALC appealed the certification judge’s decisions on both applications.

Writing for the majority, Green J.A. substantially upheld the certification judge’s conclusions, and allowed the plaintiffs’ claims in waiver of tort, breach of contract and unjust enrichment to proceed to trial. [ 10 ] Regarding waiver of tort, the majority concluded that the doctrine could operate as an independent cause of action for disgorgement, where it would serve the purpose of deterring wrongful conduct. Further, according to the majority, plaintiffs alleging negligence need not prove damage to establish an entitlement to disgorgement.

All this led the majority to conclude that the plaintiffs’ claim for waiver of tort — that is, for disgorgement as a remedy for negligence in the absence of demonstrated damage — disclosed a reasonable cause of action (paras. 185 and 189). [ 11 ] Addressing the plaintiffs’ allegations of criminal conduct, the majority concluded that expert evidence would be required to conclude whether VLTs are similar to three-card monte and therefore prohibited by s. 206 of the Criminal Code .

Such claims, said the majority, would have to be determined at trial. [ 12 ] Finally, the majority held that the pleaded facts, particularly considering the allegations of criminal conduct, could reasonably support a claim for disgorgement as a remedy for breach of contract.

In view of its conclusion on waiver of tort as an independent cause of action, the majority found it unnecessary to address “issues raised in argument under the heading of unjust enrichment simpliciter , i.e. whether the pleading discloses a cause of action in unjust enrichment, calling for the application of the traditional three-part test set out in such cases as [ Garland v. Consumers’ Gas Co. , 2004 SCC 25 , [2004] 1 S.C.R. 629]” (para. 230). [ 13 ] In dissent, Welsh J.A. would have allowed ALC’s appeal and struck all the claims.

In her view, the claims in contract and tort did not have a reasonable chance of success given that the plaintiffs did not plead damage to individual plaintiffs; it was plain and obvious that VLTs were not similar to three-card monte; and, there was a juristic reason for ALC’s enrichment at the expense of the plaintiffs. III. Analysis [ 14 ] ALC’s application to strike relies on r. 14.24(1) of the Rules of the Supreme Court , which allows the court to strike any portion of a statement of claim that discloses no reasonable cause of action.

The parties agree that determining whether any reasonable cause of action is disclosed in the plaintiffs’ statement of claim will also satisfy the first requirement of the plaintiffs’ application for certification. The test to be applied under both applications, therefore, is whether it is plain and obvious, assuming the facts pleaded to be true, that each of the plaintiffs’ pleaded claims disclose no reasonable cause of action. Simply stated, if a claim has no reasonable prospect of success it should not be allowed to proceed to trial ( R. v.

Imperial Tobacco Canada Ltd. , 2011 SCC 42 , [2011] 3 S.C.R. 45, at para. 17 ). [ 15 ] A central issue in this case arises from the plaintiffs’ reliance on the doctrine of waiver of tort. The plaintiffs say that a claim relying on waiver of tort as an independent cause of action for disgorgement has at least a reasonable chance of succeeding at trial.

Before the Court of Appeal’s decision in this case, however, no Canadian authority had recognized such a cause of action, although the plaintiffs rely on a line of class action certification decisions in which courts have refrained from finding that it is plain and obvious that such an action does not exist. The plaintiffs place significant emphasis on Pro-Sys Consultants Ltd. v.

Microsoft Corporation , 2013 SCC 57 , [2013] 3 S.C.R. 477 (“ Microsoft ”), where this Court, citing conflicting authorities on this point, declined to resolve it (para. 97). [ 16 ] In my view, developments since Microsoft , and distinguishing features of this case, allow us to definitively resolve whether the novel cause of action proposed by the plaintiffs exists in Canadian law.

I say so for four reasons. [ 17 ] First, the argument in favour of recognizing the plaintiffs’ novel cause of action relies on the relationship between the concept of waiver of tort and the broader law of restitution (or, as it is now more commonly referred to in Canada, the law of unjust enrichment). This area of our law has developed rapidly in recent years in ways that have deepened our understanding of unjust enrichment (see e.g. Moore v. Sweet , 2018 SCC 52 , [2018] 3 S.C.R. 303; M. McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014), at pp. vii-ix; J. D.

McCamus, “Waiver of Tort: Is There a Limiting Principle?” (2014), 55 Can. Bus. L.J. 333, at p. 334; A. Burrows, The Law of Restitution (3rd ed. 2011), at pp. 3-9). More particularly, several commentators have, since Microsoft , made helpful contributions by specifically commenting on waiver of tort as an independent cause of action (see e.g. G. Weber, “Waiver of Tort: Disgorgement Ex Nihilo ” (2014), 40 Queen’s L.J. 389; S. Barton, M. Hines and S. Therien, “Neither Cause of Action nor Remedy: Doing Away with Waiver of Tort”, in T. L. Archibald and R. S.

Echlin, eds., Annual Review of Civil Litigation, 2015 (2015); E. M. Iacobucci and M. J. Trebilcock, “An Economic Analysis of Waiver of Tort in Negligence Actions” (2016), 66 U.T.L.J. 173). What was once seen as a state of legal uncertainty at the time Microsoft was decided has been made clearer. [ 18 ] Secondly, and since Microsoft was decided, this Court has recognized in Hryniak v. Mauldin , 2014 SCC 7 , [2014] 1 S.C.R. 87 , the need for a culture shift to promote “timely and affordable access to the civil justice system” (para. 2).

Where possible, therefore, courts should resolve legal disputes promptly, rather than referring them to a full trial (paras. 24-25 and 32). This includes resolving questions of law by striking claims that have no reasonable chance of success (S. G. A. Pitel and M. B. Lerner, “Resolving Questions of Law: A Modern Approach to Rule 21” (2014), 43 Advocates’ Q. 344, at pp. 351-52).

Indeed, the power to strike hopeless claims is “a valuable housekeeping measure essential to effective and fair litigation” ( Imperial Tobacco , at para. 19). [ 19 ] Of course, it is not determinative on a motion to strike that the law has not yet recognized the particular claim. The law is not static, and novel claims that might represent an incremental development in the law should be allowed to proceed to trial ( Imperial Tobacco , at para. 21; Das v. George Weston Ltd. , 2018 ONCA 1053 , 43 E.T.R. (4th) 173 , at para. 73 ; see also R. v. Salituro ,

(SCC), [1991] 3 S.C.R. 654, at p. 670). That said, a claim will not survive an application to strike simply because it isnovel. It is beneficial, and indeed critical to the viability of civil justice and public access thereto that claims, including novel claims,which are doomed to fail be disposed of at an early stage in the proceedings. This is because such claims present “no legal justificationfor a protracted and expensive trial” (Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38, [2007] 3 S.C.R. 83, at para. 19).

If acourt would not recognize a novel claim when the facts as pleaded are taken to be true, the claim is plainly doomed to fail and should bestruck. In making this determination, it is not uncommon for courts to resolve complex questions of law and policy (see e.g. ImperialTobacco; Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537; Syl Apps; Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24,[2011] 2 S.C.R. 261). [20] Lax J.’s observations in Andersen v. St. Jude Medical, Inc., 2012 ONSC 3660, are particularly apposite, as she heardarguments on the scope of waiver of tort after a 138-day trial.

The circumstances did not require her to resolve the issue, but Lax J.observed that the parties “did not rely on any evidence . . . to support or oppose extending the waiver of tort doctrine to a negligencecase”, nor did the plaintiffs “lead any policy evidence to explain why waiver of tort should be available” (para. 585 ).

Sheconcluded that “deciding the waiver of tort issue does not necessarily require a trial and that it may be possible to resolve the debate insome other way” (para. 587). [21] Thirdly, failing to address whether an independent cause of action for waiver of tort exists will perpetuate anundesirable state of uncertainty. As Greg Weber writes, “[w]aiver of tort has become a hollow and internally inconsistent doctrine,leaving judges and litigants confused about how and when a cause of action might support disgorgement” (p. 392).

Uncertainty aboutwhether an action lies for disgorgement without proof of damage has significant ramifications, which are most apparent in the context ofclass actions. For 16 years since Serhan (Estate Trustee) v. Johnson & Johnson (2004), (ON SC), 72 O.R. (3d) 296(S.C.), such claims have been commonly advanced but never fully tried.

In the meantime, certification judges have had “little alternativebut to affirm that the question of the doctrine’s availability is indeed a live issue for trial, which can and does result in certification to thedetriment of the defendant, who is then practically compelled to pay a settlement to the plaintiff” (J. M. Martin, “Waiver of Tort: AnHistorical and Practical Survey” (2012), 52 Can. Bus. L.J. 473, at p. 476 (footnote omitted); see also H. M. Rosenberg, “WaivingGoodbye: The Rise and Imminent Fall of Waiver of Tort in Class Proceedings” (2010), 6 Can. Class Action Rev. 37, at p. 38).

Indeed,this Court’s decision to refrain from striking the waiver of tort claim in Microsoft has been taken as an affirmative statement that suchclaims are viable (see e.g. C.A. Reasons, at para. 182; Ewert v. Nippon Yusen Kabushiki Kaisha, 2019 BCCA 187, 25 B.C.L.R. (6th)268, at para. 73; Authentic T-Shirt Co. ULC v. King, 2016 BCCA 59, at paras. 41-42 ). Nothing is gained, and much court timeand considerable litigant resources are lost, by leaving this issue unresolved. [22] Finally, while waiver of tort as a novel cause of action was not a central issue in Microsoft, it is in the presentappeals.

The Court of Appeal accordingly canvassed the law comprehensively, and concluded not only that the plaintiffs’ claim shouldproceed to trial, but that waiver of tort should be definitively recognized as an independent cause of action. On appeal to this Court, theparties and interveners have similarly devoted substantial attention to the issue. The question is therefore ripe for decision, and theseappeals presents an appropriate vehicle for deciding it. A. Disgorgement for Tortious Wrongdoing

(1) Disgorgement As a Novel Cause of Action [23] As I discuss below, the term “waiver of tort” is confusing, and should be abandoned. The concern is not for consistentterminology for its own sake, but rather for clarity of meaning: cases dealing with gain-based remedies tend to employ inconsistentnomenclature that leads to confused and confusing results. Even the term “restitution” has been applied inconsistently, sometimesreferring to the causative event of unjust enrichment and sometimes referring to a measure of relief (McInnes (2014), at pp. 10-11).

In myview, restitution properly describes the latter — meaning, restitution is the law’s remedial answer to circumstances in which a benefitmoves from the plaintiff to the defendant, and the defendant is compelled to restore that benefit. Further, restitution stands in contrast toanother measure of relief, disgorgement, which refers to awards that are calculated exclusively by reference to the defendant’s wrongfulgain, irrespective of whether it corresponds to damage suffered by the plaintiff and, indeed, irrespective of whether the plaintiff suffereddamage at all (McInnes (2014), at p. 11-12; see also L. D.

Smith, “The Province of the Law of Restitution” (1992), 71 Can. Bar Rev.672; J. Edelman, Gain-Based Damages: Contract, Tort, Equity and Intellectual Property (2002), at pp. 65-93). While this Court’sdecisions have occasionally referred to disgorgement variously as “restitution damages” or “restitution for wrongdoing”, the ambiguityinherent in such terminology calls for greater precision (see e.g. Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2S.C.R. 601, at para. 25; Kingstreet Investments Ltd. v.

New Brunswick (Finance), 2007 SCC 1, [2007] 1 S.C.R. 3, at para. 33). [24] In sum, then, restitution for unjust enrichment and disgorgement for wrongdoing are two types of gain-basedremedies (McInnes (2014), at pp. 144-49; L. D. Smith, “Disgorgement of the Profits of Breach of Contract: Property, Contract, and‘Efficient Breach’” (1995), 24 Can. Bus. L. J. 121, at pp. 121-23; G. Virgo, The Principles of the Law of Restitution (3rd ed. 2015), atpp. 415-17; Burrows, at pp. 9-12).

Each is distinct from the other: disgorgement requires only that the defendant gained a benefit (withno proof of deprivation to the plaintiff required), while restitution is awarded in response to the causative event of unjust enrichment(most recently discussed by this Court in Moore), where there is correspondence between the defendant’s gain and the plaintiff’sdeprivation (Edelman, at pp. 80-86). [25] Here, the plaintiffs seek disgorgement, not restitution: they say that they are entitled to a remedy quantified solely onthe basis of ALC’s gain, without reference to damage that any of them may have suffered.

There are two schools of thought on wheredisgorgement fits in the overall legal structure of private obligations.

The prevailing view is consistent with that which I have just stated.Disgorgement, as a gain-based remedy, is precisely that: a remedy, awarded in certain circumstances upon the plaintiff satisfying all theconstituent elements of one or more of various causes of action (specifically, breach of a duty in tort, contract, or equity). [26] Some scholars, however, see disgorgement as an independent cause of action, which addresses unjust enrichment butdoes not operate on the same basis as the principled unjust enrichment framework adopted by this Court (P. D. Maddaugh andJ. D.

McCamus, The Law of Restitution (loose-leaf), vol. 1, at pp. 3-4 to 3-7; see also J. Beatson, “The Nature of Waiver of Tort”(1978-1979), 17 U.W.O. L. Rev. 1; D. Friedmann, “Restitution for Wrongs: The Basis of Liability”, in W. R. Cornish et al., eds.,

Restitution: Past, Present and Future: Essays in Honour of Gareth Jones (1998), 133). And a handful of them have suggested that itshould be possible to pursue a remedy of disgorgement in cases that are akin to negligence, but where the plaintiff cannot prove — orchooses not to prove — resulting damage (McCamus; C. Jones, “Panacea or Pandemic: Comparing ‘Equitable Waiver of Tort’ to‘Aggregate Liability’ in Cases of Mass Torts with Indeterminate Causation” (2016), 2 Can. J. of Compar. & Contemp. L. 301).

Theplaintiffs’ waiver of tort claim relies on this latter proposition. [27] As I will explain, disgorgement should be viewed as an alternative remedy for certain forms of wrongful conduct,not as an independent cause of action. This view follows naturally from the historical origins of unjust enrichment and gain-basedremedies more generally. [28] The modern law of unjust enrichment originated in the writ of assumpsit (Peel (Regional Municipality) v. Canada, (SCC), [1992] 3 S.C.R. 762, at pp. 786-88).

Use of assumpsit allowed plaintiffs to avoid the limits imposed by otherforms of action, which might have prevented their claim from advancing (McInnes (2014), at p. 34; Martin, at pp. 482-84). While thewrit was premised upon the defendant having undertaken to pay a sum of money to the plaintiff and having broken that promise, thespecialized form of indebitatus assumpsit allowed plaintiffs to acquire the benefits of assumpsit where no such undertaking actuallyexisted.

It created the legal fiction of an implied contract, allowing plaintiffs to sue in assumpsit, “even where the imputation of apromise to pay was nonsensical, as when the defendant acquired a benefit through the commission of a tort.” (McInnes (2014), atpp. 34-35; see also Martin, at pp. 489-96). [29] Where a tort was made out but the plaintiff chose to pursue a claim in assumpsit to recover the defendant’s ill-gottengains, the plaintiff was said to “waive the tort” (Edelman, at pp. 121-22). Despite its early acceptance, however, the term waiver of tortwas a misnomer.

Rather than forgiving or waiving the wrongfulness of the defendant’s conduct, plaintiffs relying on the doctrine weresimply electing to pursue an alternative, gain-based, remedy (Edelman, at p. 122; see also United Australia, Ltd. v. Barclays Bank Ltd.,[1941] A.C. 1 (H.L.), at pp. 13 and 18). The doctrine always operated as “nothing more than a choice between possible remedies”, andnot as an independent cause of action (United Australia, at p. 13; Martin, at pp. 504-5). That this is so is apparent from decisions of thisCourt, including Arrow Transfer Co. Ltd. v.

Royal Bank of Canada, (SCC), [1972] S.C.R. 845, where Laskin J. (as hethen was), for the majority on this point, held that the plaintiff’s claim for a gain-based remedy was dependent on the tort of conversionhaving been completed (p. 877). [30] Two points follow from this. First, and as this case demonstrates, the term waiver of tort is apt to generate confusionand should therefore be abandoned (Edelman, at p. 122).

Secondly, and relatedly, in order to make out a claim for disgorgement, aplaintiff must first establish actionable misconduct. [31] Recognizing that disgorgement is simply a remedy for certain forms of wrongful conduct places the central issue inthis case in context. By pleading disgorgement as an independent cause of action, the plaintiffs seek to establish an entirely new categoryof wrongful conduct — one that is akin to negligence but does not require proof of damage.

Supporters of this type of claim assert that“there is simply no reason in principle why the rules for compensatory damages need to be identical to the rules for disgorgement”(McCamus, at p. 359) and that, given that the purpose of granting disgorgement is to deter wrongful conduct rather than to providecompensation, there is no reason to require proof of damage (p. 354). [32] I acknowledge that disgorgement is available for some forms of wrongdoing without proof of damage (for example,breach of fiduciary duty).

But it is a far leap to find that disgorgement without proof of damage is available as a general proposition inresponse to a defendant’s negligent conduct. Determining the appropriate remedy for negligence, where liability for negligence has notalready been established, is futile and even nonsensical since doing so allows “the remedy tail [to] wag the liability dog” (Haida Nationv. British Columbia (Minister of Forests), 2004 SCC 73, [2004] 3 S.C.R. 511, at para. 55).

This observation applies with no less force tothe plaintiff who seeks disgorgement, since the availability of gain-based relief lies in “aligning the remedy with the injustice it corrects”(E. J. Weinrib, “Restitutionary Damages as Corrective Justice” (2000), 1 Theor. Inq. L. 1, at p. 23 (emphasis added)). [33] It is therefore important to consider what it is that makes a defendant’s negligent conduct wrongful. As this Court hasmaintained, “[a] defendant in an action in negligence is not a wrongdoer at large: he is a wrongdoer only in respect of the damage whichhe actually causes to the plaintiff” (Clements v.

Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at para. 16). There is no right to be freefrom the prospect of damage; there is only a right not to suffer damage that results from exposure to unreasonable risk (E. J. Weinrib, TheIdea of Private Law (rev. ed. 2012), at pp. 153 and 157-58; R. Stevens, Torts and Rights (2007), at pp. 44-45 and 99). In other words,negligence “in the air” — the mere creation of risk — is not wrongful conduct. Granting disgorgement for negligence without proof ofdamage would result in a remedy “arising out of legal nothingness” (Weber, at p. 424).

It would be a radical and uncharted development,“[giving] birth to a new tort over night” (Barton, Hines and Therien, at p. 147). [34] The difficulty is not just normative, although it is at least that. The practical difficulty associated with recognizing anaction in negligence without proof of damage becomes apparent in considering how such a claim would operate. As the Court of Appealrecognized, a claim for disgorgement available to any plaintiff placed within the ambit of risk generated by the defendant would entitleany one plaintiff to the full gain realized by the defendant.

No answer is given as to why any particular plaintiff is entitled to recover thewhole of the defendant’s gain. Yet, corrective justice, the basis for recovery in tort, demands just that: an explanation as to why theplaintiff is the party entitled to a remedy (Clements, at para. 7; Weinrib (2000), at pp. 1-7). Tort law does not treat plaintiffs “merely as aconvenient conduit of social consequences” but rather as “someone to whom damages are owed to correct the wrong suffered” (Weinrib(2000), at p. 6).

A cause of action that promotes a race to recover by awarding a windfall to the first plaintiff who arrives at thecourthouse steps undermines this foundational principle of tort law. [35] This is not the type of incremental change that falls within the remit of courts applying the common law (Salituro, atp. 670). It follows that the novel cause of action proposed by the plaintiffs has no reasonable chance of succeeding at trial.

(2) Disgorgement for the Completed Tort of Negligence [36] The Court of Appeal majority concluded that, even if disgorgement for wrongdoing is not an independent cause of

action, the plaintiffs have adequately pleaded the elements of the tort of negligence, and may therefore seek disgorgement for tortiouswrongdoing on that basis. While disgorgement for tortious wrongdoing was initially applied only in the context of proprietary torts,including conversion, deceit, and trespass, it found broader application in the late 20th century (Martin, at pp. 505-6). It has even beensuggested that disgorgement may be available for negligence in certain circumstances, and the issue remains unsettled (Edelman, atpp. 129-30; C.-M. O’Hagan, “Remedies”, in L. N.

Klar et al., eds., Remedies in Tort (loose-leaf), vol. 4, at §200). While that may have tobe decided in an appropriate case, as I will explain the plaintiffs have not adequately pleaded a claim in negligence, and it is unnecessaryto resolve the question here. [37] Causation of damage is a required element of the tort of negligence. As I have explained, the conduct of a defendantin negligence is wrongful only to the extent that it causes damage (Clements, at para. 16).

While the plaintiffs allege that ALC had a dutyto warn of the inherent dangers associated with VLTs, including the risk of addiction and suicide, those dangers are not alleged to havematerialized. The plaintiffs do not allege that proper warnings would have caused them to spend less money playing VLTs or to avoidthem altogether. [38] It follows that I respectfully disagree with Court of Appeal’s conclusion that the plaintiffs would not be “precludedfrom leading evidence that the breach of duty (assuming it can be proven) led to some form of injury” (para. 186).

Again, causation ofdamage is a required element of the cause of action of negligence, and it must be pleaded. Here, not only have the plaintiffs not pleadedcausation, their pleadings expressly disclaim any intention of doing so. The absence of a pleading of causation, they acknowledge, arisesfrom an intentional litigation strategy to increase the likelihood of obtaining certification of their action as a class action by avoidinghaving to prove individual damage. This particular claim also has no reasonable chance of success. B.

Alleged Criminal Conduct [39] The plaintiffs further allege that the Criminal Code prohibits the operation of VLTs. While breach of statute is not arecognized cause of action (R. in right of Canada v. Saskatchewan Wheat Pool, (SCC), [1983] 1 S.C.R. 205, at p. 225),the allegations of criminal conduct are intended to serve two purposes. First, the plaintiffs say that the presence of criminal conductwarrants exceptional relief for breach of contract, specifically disgorgement or punitive damages.

Secondly, the plaintiffs argue that, ifALC’s conduct is criminal, there is no juristic reason for ALC’s enrichment at the plaintiffs’ expense, which grounds their claim inunjust enrichment. [40] The plaintiffs’ argument is that VLTs are so inherently deceptive that they should be considered a game “similar to”three-card monte within the meaning of s. 206 of the Criminal Code, which states in part: 206

(1) Every person is guilty of an indictable offence and liable to imprisonment for a term of not more than two years . . . who . . . (

g) induces any person to stake or hazard any money or other valuable property or thing on the result of any dice game, three-cardmonte, punch board, coin table or on the operation of a wheel of fortune; . . .

(2) In this section, three-card monte means the game commonly known as three-card monte and includes any other game that is similarto it, whether or not the game is played with cards and notwithstanding the number of cards or other things that are used for the purposeof playing. While s. 207(1)(

a) of the Criminal Code exempts provincial lottery schemes from most gaming and betting prohibitions, that exemptiondoes not extend to three-card monte (s. 207(4)(a)). Thus, the argument goes, if VLTs are games similar to three-card monte, theiroperation would be unlawful, even through a provincial lottery scheme. [41] It is well-settled that statutory

interpretation requires discerning legislative intent by examining statutory text in itsentire context and in its grammatical and ordinary sense, in harmony with the statute’s scheme and objects. In determining what gamescan be considered “similar to” three-card monte, I also bear in mind that courts cannot create common law crimes through

an act ofjudicial

interpretation (R. v. D.L.W., 2016 SCC 22, [2016] 1 S.C.R. 402, at para. 3). [42] The Court of Appeal concluded that expert evidence is required to determine the essence of three-card monte, whichwould then be used to evaluate whether VLTs share three-card monte’s essential features (para. 208). I find myself in respectfuldisagreement with that conclusion. While expert evidence may assist in deciding whether the defined elements of an offence are madeout on the facts of a particular charge, expert evidence cannot purport to define the elements of an offence (R. v.

Levkovic, 2013 SCC 25,[2013] 2 S.C.R. 204, at para. 73). While permissible expert evidence might therefore describe the features of VLTs for the purpose ofestablishing similarity, it is a court’s role, and only a court’s role, to discern Parliament’s intention in prohibiting games “similar to”three-card monte. [43] Beginning with the text of the prohibition, I observe that s. 206(2) refers to “the game commonly known as three-cardmonte”.

The Canadian Oxford Dictionary (2nd ed. 2004) defines “three-card monte” as a game played with three cards where “playersbet on which of three cards lying face down is the queen.” Similarly, and shortly before Parliament enacted this Criminal Codeprohibition, the Quebec Court of Appeal described three-card monte as “a game played with three cards . . . shuffled or manipulated bythe dealer and placed face down and the opponent backs his ability to spot the position of a particular card” (The King v. Rosen andLavoie (1920), (QC CA), 61 D.L.R. 500 (Que.

C.A.), at pp. 502-3). [44] Section 206(2)’s text has a wider reach, however, capturing “similar” games, “whether or not the game is played withcards and notwithstanding the number of cards or other things that are used for the purpose of playing”. The plaintiffs contend that thisexpanded definition is meant to capture all games of a broadly deceptive nature. In my view, however, it is apparent from the historicalbackground, from statements indicating why the provision was introduced, and from the text of the provision itself, viewed in its

surrounding context that this prohibition does not reach so far. [45] The state of the law prior to this provision’s enactment lends important insight into its purpose. In Rosen and Lavoie,the Quebec Court of Appeal held that three-card monte did not constitute a contravention of the Criminal Code’s cheating at playoffence (s. 209). Shortly thereafter, the Member of Parliament for Jacques Cartier introduced a private member’s bill to outlaw three-cardmonte specifically.

He stated during second reading that the proposed changes were a direct response to Rosen and Lavoie targeting thespecific game of three-card monte (House of Commons Debates, vol. 2, 5th Sess., 13th Parl., April 11, 1921, at p. 1858). As to why itwas necessary to further prohibit games similar to three-card monte, he explained: If we made it a crime for people to play with three cards, they might play with four cards or they might play with other instrumentsthan cards, and that is why we thought it proper to enlarge the clause so as to endeavour to cover other cases.

The Minister of Justice adopted the member’s statements and opted to include the new provisions in broader Bill of proposedamendments to the Criminal Code (House of Commons Debates, vol. 2, at p. 1857; see also House of Commons Debates, vol. 4, 5thSess., 13th Parl., May 6, 1921, at p. 3006). [46] While this Court has recognized that the statements of particular Members of Parliament cannot necessarily be takenas expressing the intention of Parliament as a whole (R. v.

Heywood, (SCC), [1994] 3 S.C.R. 761, at pp. 788-89), thestatements recounted here were made by those directly responsible for introducing the three-card monte prohibition, and as such providerelevant evidence of legislative purpose.

They indicate that the phrase “similar to” was included in s. 206(2) to capture games thatinvolve betting on the location of a particular object after a series of movements, regardless of whether the game is played with threeplaying cards. [47] The text of the provision and its surrounding context further suggest that the prohibition of games similar tothree-card monte was directed towards the game’s concrete attributes and not towards the abstract feature of deception. One wouldexpect that, had Parliament sought to prohibit broadly deceptive gambling games, it would have straightforwardly done so (R.

Sullivan,Sullivan on the Construction of Statutes (6th ed. 2014), at pp. 207-8). It defies logic that Parliament would choose to create such anoffence by prohibiting three-card monte. Moreover, three-card monte is listed alongside other types of gambling games that are definedby their physical characteristics (punch boards, coin tables, and wheels of fortune).

It would be anomalous to interpret the inclusion ofthree-card monte in this list as an intention to prohibit all deceptive games (Sullivan, at pp. 230-34). [48] All this leads me to conclude that games “similar to” three-card monte involve, at a minimum, a player betting on thelocation of an object after a series of manipulations. Nothing in the pleadings describes VLTs as operating in this manner. Thus, the claimthat VLTs are similar to three-card monte has no reasonable chance of success. C.

Breach of Contract [49] At first glance, the plaintiffs’ breach of contract claim might merit different treatment than their claim in tort, sincebreach of contract — unlike the tort of negligence — does not require proof of loss as an element of the cause of action (Rogers &Rogers Inc. v. Pinehurst Woodworking Co. (2005), (ON SC), 14 B.L.R. (4th) 142 (Ont. S.C.), at para. 91). But that isof no moment here, since the plaintiffs have made it clear — both in their pleadings and at every level of court — that they seek onlynon-compensatory remedies for breach of contract, namely disgorgement and punitive damages.

Whether the plaintiffs’ breach ofcontract claim discloses a reasonable cause of action should be considered in light of the remedies the plaintiffs actually seek. Thequestion to be decided here, then, is whether these remedies are available to the plaintiffs, assuming the truth of their pleadings.

(1) Disgorgement for Breach of Contract [50] The ordinary form of monetary relief for breach of contract is an award of damages, measured according to theposition which the plaintiff would have occupied had the contract been performed (Bank of America, at para. 25). Correspondingly, theorthodox position maintained that disgorgement of the defendant’s profits was not an available remedy for breach of contract(H. D. Pitch and R. M. Snyder, Damages for Breach of Contract (2nd ed. (loose-leaf)), at pp. 1-36 to 1-39; S. Watterson, “Gain-BasedRemedies for Civil Wrongs in England and Wales”, in E. Hondius and A.

Janssen, eds., Disgorgement of Profits: Gain-Based Remediesthroughout the World (2015), 29, at p. 55; see also Asamera Oil Corp. Ltd. v. Sea Oil & General Corp., (SCC), [1979] 1S.C.R. 633, at p. 673). [51] More recently, courts have accepted that disgorgement may be available for breach of contract in certain exceptionalcircumstances (Attorney General v. Blake, [2001] 1 A.C. 268 (H.L.); Bank of America, at paras. 25 and 30-31). In Blake, the defendantwas a former member of the British secret intelligence service who had defected to become an agent for the Soviet Union.

He wasdiscovered and sentenced to 42 years’ imprisonment, but escaped prison and fled the country. Blake later entered into a contract topublish his memoirs, in contravention of the confidentiality undertaking in his employment agreement with the intelligence service. Theinformation in his memoirs was, however, “no longer confidential, nor was its disclosure damaging to the public interest” (p. 275).Further, Blake’s fiduciary obligations ceased to exist when he was dismissed from his post.

The sole question was, therefore, whetherthe Crown could pursue disgorgement for his breach of contract. [52] Lord Nicholls, for a majority of the House, held that disgorgement for breach of contract may be appropriate inexceptional circumstances, but only where, at a minimum, the remedies of damages, specific performance, and injunction are inadequate(Blake, at p. 285; One Step (Support) Ltd. v. Morris-Garner, [2018] UKSC 20, [2018] 3 All E.R. 659, at para. 64; see also Watterson, atp. 55).

As to the types of circumstances that should be considered exceptional, Lord Nicholls concluded: No fixed rules can be prescribed. The court will have regard to all the circumstances, including the subject matter of the contract, thepurpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of thebreach and the circumstances in which relief is being sought.

A useful general guide, although not exhaustive, is whether the plaintiffhad a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit. [Emphasis added;p. 285.]

[53] Nothing in the law of Canada contradicts the “exceptional” standard articulated by Lord Nicholls in Blake. Indeed,this Court’s statement in Bank of America, at para. 31 — that “[c]ourts generally avoid [the restitution] measure of damages” — affirmsthis Court’s view, like that expressed by the House of Lords in Blake, that disgorgement awards are not generally available. In particular,and again as was held in Blake, disgorgement for breach of contract is available only where other remedies are inadequate and onlywhere the circumstances warrant such an award.

As to those circumstances, courts should in particular consider whether the plaintiff hada legitimate interest in preventing the defendant’s profit-making activity. [54] Ultimately, Lord Nicholls concluded in Blake that the circumstances before him were indeed “exceptional”. Theordinary measure of expectation damages could not have vindicated the Crown’s interest, as no economic loss resulted from thepublication of Blake’s memoirs. Further, in Lord Nicholls view, the Crown had a legitimate interest in Blake’s profits because hisconfidentiality undertaking was “closely akin to a fiduciary obligation” (p. 287).

I pause here because, I respectfully differ on this latterpoint. The imposition of “quasi-fiduciary” relationships by operation of law is a concept foreign to Canadian law (RBC DominionSecurities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, [2008] 3 S.C.R. 79, at paras. 51-54, per Abella J. (dissenting)).

I thereforeprefer the view of Professor McInnes, who states: To . . . impose relief in a contractual context on the basis of an undefined notion of quasi-fiduciary duty dangerously ignores JusticeSopinka’s warning that such obligations “should not be imposed . . . simply to improve the nature or extent of the remedy”. It is notmerely that Lord Nicholls’ approach fails to reveal a sound basis for liability; it also implicitly invites lower courts to similarlymanipulate equitable doctrine for instrumental purposes.

Such an exercise is inimical to the development of coherent principle. (“Gain-Based Relief for Breach of Contract: Attorney General v. Blake” (2001), 35 Can. Bus. L.J. 72, at p. 85, citing Norberg v. Wynrib, (SCC), [1992] 2 S.C.R. 226, at p. 312.) [55] As to what circumstances will create a legitimate interest in the defendant’s profit-making activity, I agree with LordNicholls that the boundaries of this remedy are “best hammered out on the anvil of concrete cases” (Blake, at p. 291).

I can, however,offer some observations. [56] Many scholars have recognized that it is difficult to reconcile disgorgement for breach of contract with private lawprinciples (see e.g. E. J. Weinrib, “Punishment and Disgorgement as Contract Remedies” (2003), 78 Chi.-Kent L. Rev. 55, at p. 70;D. Winterton, “Contract Theory and Gain-Based Recovery” (2013), 76 M.L.R. 1129; McInnes (2001)). This Court has gone even further,cautioning that disgorgement awards may have the undesirable effect of deterring “efficient breach[es] of contract” (Bank of America, atparas. 30-31, Weinrib (2003), at p. 73).

More importantly, it is difficult to explain disgorgement for breach of contract from thestandpoint of corrective justice (Weinrib (2003), at p. 57). Granted, some attempts have been made to articulate a corrective justicerationale, but those accounts have been met with substantial criticism (see P. Benson, “Contract as a Transfer of Ownership” (2007), 48Wm. & Mary L. Rev. 1673; A. Botterell, “Contractual Performance, Corrective Justice, and Disgorgement for Breach of Contract”(2010), 16 Legal Theory 135; and A. R.

Sangiuliano, “A Corrective Justice Account of Disgorgement for Breach of Contract by Analogyto Fiduciary Remedies” (2016), 29 Can. J.L. & Jur. 149, at pp. 160-74). [57] In my view, the key to developing principles for gain-based recovery in breach of contract is to consider whatlegitimate interest a gain-based award serves to vindicate. A coherent approach that reconciles the relief awarded with the structure ofbreach of contract as a cause of action should be preferred (McInnes (2001), at pp. 88-93; see also N. W. Sage, “Disgorgement: FromProperty to Contract” (2016), 66 U.T.L.J. 244).

To that end, it is useful to recall that courts have, in some exceptional circumstances, longawarded monetary amounts departing from the ordinary measure of expectation damages. That is to say, while disgorgement awardsquantified solely by reference to the defendant’s profit are a relatively recent development, other gain-based awards are nothing new. Forexample, this Court has awarded damages quantified by the amount a defendant saved through deficient performance, though theplaintiff would have been no better off had the contract been performed (Sunshine Exploration Ltd. v.

Dolly Varden Mines Ltd. (N.P.L.), (SCC), [1970] S.C.R. 2). The Court of Appeal of Nunavut suggested a similar measure of relief in circumstances wherethe damage caused by the defendant’s deficient performance was simply too difficult to quantify (Nunavut Tunngavik Inc. v. Canada(Attorney General), 2014 NUCA 2, 580 A.R. 75, at para. 88 (“Inuit of Nunavut”)). And courts have also granted what might be termed“negotiating damages” to prevent a defendant from obtaining for free an advantage for which it did not bargain (Wrotham Park EstateCo. v. Parkside Homes Ltd., [1974] 2 All E.R. 321 (Ch. D.); Smith v.

Landstar Properties Inc., 2011 BCCA 44, 14 B.C.L.R. (5th) 48, atparas. 39-44; see also Morris-Garner, at paras. 91-100). As the Supreme Court of the United Kingdom recently explained inMorris-Garner, at para. 95: Negotiating damages can be awarded for breach of contract where the loss suffered by the claimant is appropriately measured byreference to t

[…]