Product Liability & Safety 2019

Last Updated July 09, 2019


Law and Practice


Gowling WLG (Canada) LLP advises clients in various industries that are susceptible to product liability claims, including the automotive sector and highly regulated area(s) of electrical products (such as washers, dryers, ranges, medical equipment, ATVs, motorcycles, alarms, food, paint/stain products, heavy machinery, and forestry equipment); it is also active in pharmaceutical and medical device litigation, and food, beverages and cosmetics litigation. Gowling WLG’s team of 12 partners throughout Canada advises local manufacturers and distributors on supply-chain verification and traceability protocols to mitigate the enterprise risk associated with production. It guides clients on product classification, the interpretation of regulations, product labelling and advertising, licensing and temporary marketing authorisations, import and export, manufacturing and processing, including good manufacturing practices, safety and efficacy, quality control and clinical trials. The firm has extensive expertise in all facets of crisis management and hands-on industry experience, enabling it to help clients avoid and/or manage a wide variety of critical situations and issues. We would like to thank Amber Bonnell, an associate in our Waterloo Region office as well as articling students Emily Metcalfe and Nareg Froundjian for their contribution to this chapter.

There are three levels of government in Canada – federal, provincial and municipal. Canadian provinces, other than Quebec, are common law jurisdictions. In civil law jurisdictions, such as Quebec, legislation and codified law predominates, while law is expressed in published court decisions in common law jurisdictions. As cases are decided, they become precedents that guide judges making future decisions. Every court is bound to follow decisions by courts above them in the hierarchy and from the same jurisdiction. In Quebec, the Civil Code of Quebec is at the core of the legislative framework governing relationships between private persons (individuals and businesses alike). While the power of precedent is not legally binding in Quebec, lower courts tend to follow the decisions of the courts above them.

In 2011, the federal government enacted the Canada Consumer Product Safety Act, broad legislation that affects all manufacturers, distributors, retailers and importers of consumer products in Canada. Every Canadian province also has its own legislation, which applies within that particular province and provides remedies to consumers for defective consumer products. These statutes generally provide statutory warranties of merchantability and fitness for purpose with respect to all consumer products marketed within the province. These statutes also provide for individual causes of action for breach of deemed warranties, in addition to possible government action. Remedies available include rescission of the contract of purchase and sale, and injunctive relief. Some legislation also provides for punitive damages as a dissuasive measure.

There are also other statutes that regulate particular classes of products, such as the federal Food and Drugs Act in respect of foods and medicines, and the Motor Vehicle Safety Act with respect to vehicles.

The main regulator in Canada is a federal ministry, Health Canada, which oversees both the Canada Consumer Product Safety Act (CCPSA) and the Food and Drugs Act. Under the CCPSA, Health Canada regulates all products, including components, parts or accessories that may reasonably be expected to be obtained by an individual for non-commercial use, including for domestic, recreational and sports purposes. The regulations apply to the product and its packaging. The CCPSA imposes obligations and liabilities upon each member of the product supply chain. The CCPSA further provides for the following:

  • a blanket prohibition on the marketing of unsafe products;
  • support by a supplier of the safety of their product;
  • an obligation on a supplier to report adverse events; and
  • broad governmental investigatory and enforcement powers, including ordering product recall.

Each province also has its own ministry dedicated to enforcement of their own consumer protection legislation.

At common law, every participant in the product supply chain has a duty to prevent harm arising from use of its product. This duty may include notification of risk and product recall in certain circumstances, not as a standalone duty, but as part of the “duty to warn” jurisprudence. This duty is further codified into the Civil Code of Quebec, and is interpreted in a similar manner. The Quebec Consumer Protection Act also provides an obligation for suppliers, manufacturers and advertisers to disclose any important facts to a consumer.

In addition to the potential common law obligation, the Canada Consumer Product Safety Act gives the Federal Minister of Health power to order a consumer product recall where the Minister is satisfied a recall is warranted. The recall of food and agricultural products can be required under companion legislation governing such products. There are no formal pre-set requirements for recalls, but rather each particular incident is viewed as unique for the purposes of determining the scope of necessary measures, analysed in terms of the risk and the likelihood of the risk materialising.

Reports to Health Canada pursuant to the Canada Consumer Product Safety Act are mandatory where a participant in the supply chain becomes aware of the following:

  • an occurrence in Canada or elsewhere that resulted or may reasonably have been expected to result in an individual’s death, or in serious adverse effects on their health, including a serious injury;
  • a defect or characteristic that may reasonably be expected to result in an individual’s death or in serious adverse effects on their health, including a serious injury;
  • incorrect or insufficient information on a label or in instructions – or the lack of a label or instructions – that may reasonably be expected to result in an individual’s death or in serious adverse effects on their health, including a serious injury; or
  • a recall or measure that is initiated for the reason of human health or safety.

Persons are required to provide a preliminary report within two days of becoming aware of the foregoing, and to provide a more detailed report within ten days. Although Health Canada does have forms for reporting, it will accept reports in other forms, provided they provide sufficient information.

Penalties for breaches of the Canada Consumer Product Safety Act come in the form of fines of up to CAD5 million and/or prison terms of up to two years. In addition to those statutory penalties, persons may be civilly liable at common law for breaches of their duty of care to persons who suffered actual damages as a result of their contact with the product, whether through use or otherwise. Failure to disclose product safety information can further expose a person to punitive damages, as demonstrated by recent Quebec jurisprudence.

Product liability claims may be founded in contract or tort law. Breaches of contract claims are typically based on alleged breaches of conditions or warranties. Each Canadian province has its own sale of goods legislation, according to which conditions are incorporated into sales of goods contracts. 

In any negligence action, including tort claims based on product liability, the plaintiff bears the onus of proof on a balance of probabilities. The plaintiff must prove that the defendant owed a duty of care to the plaintiff, that the defendant breached the requisite standard of care, that the plaintiff sustained damages, and that the damages were caused by the defendant’s breach.

The manufacturer’s basic obligation is to manufacture products with reasonable care, and to make them reasonably safe and fit for their intended purpose. Product liability claims focus on three phases of production and sale: (a) negligent design, development and testing; (b) negligent manufacturing; and (c) negligent distribution, marketing and sale. Established duties of care are imposed on manufacturers, such as:

  • a duty to design their product to avoid safety risks, and to make the product reasonably safe for its intended purpose;
  • a duty to ensure that there are no manufacturing defects that are likely to cause injury during ordinary use of the product;
  • a duty to warn consumers of dangers inherent in the use of the product, provided the manufacturer knew or ought to have known of the dangers. This duty is a continuous one, so a manufacturer should warn consumers if it learns of defects or dangers after time passes from the manufacture and sale of the product; and
  • a duty to compensate consumers for the cost of repairing a dangerous product that presents a real and substantial danger.

There are a number of potential defendants in product liability situations: manufacturers and part suppliers; importers, wholesalers and retailers; repairers and installers; inspectors and certifiers; and occupiers.

In Quebec, product liability can also arise from two distinct sources: contractual liability, which is a result of a breach of a statutory warranty of product quality; and extra-contractual liability, which stems from a general duty to not cause injury to other persons.

The term contractual liability might seem to apply only to situations where there is a contractual relationship between the plaintiff and the defendant. However, the term refers to the responsibility of a seller to warrant the quality of a product they sell – and this responsibility extends to the distributor, wholesaler, manufacturer, supplier and every party upstream in the supply chain related through a contractual relationship. The most common type of defect for contractual liability cases is commonly known as a latent defect – ie, a defect that is not apparent to the seller or purchaser. 

There are three general types of defects that can give rise to contractual liability: design, manufacturing, and safety. A design defect makes the product unfit for the use for which it is destined, and usually affects all the products manufactured with this design. It will typically require a recall to fix. A manufacturing defect is usually due to poor quality control issues and will affect one unit or one batch, but not all the products in the supply chain. While a design or manufacturing defect can cause a safety defect, this notion is broader and extends to situations where insufficient information was provided as to the safe use of the product. To give rise to a liability claim, the defect must be serious enough to diminish the intended use of the product, must be hidden or non apparent to a diligent buyer, and must have existed at the time of sale. A professional seller will not be able to exclude this statutory warranty of quality, and will be presumed liable for all defects that render a product unfit for its intended use.

In a consumer setting, the notion of contractual warranty is broader and extends to the following:

  • a warranty of unencumbered ownership of the product;
  • a warranty of the product’s fitness for its intended use;
  • a warranty of the product’s durability for a reasonable period;
  • a warranty as to the availability of service and parts;
  • any other contractual warranties a merchant has made; and
  • warranties against latent defects, as explained in the paragraph above, with minor differences (eg, the manufacturer is presumed to know the defect).

Extra-contractual liability is similar to the common law notion of tort that exists in other Canadian jurisdictions. The general liability regime it provides is predicated on the existence of an injury to a person caused by the fault of another person. When it comes to injury arising from the safety defect of a product, the manufacturer, distributor or supplier of the product is presumed to be liable for the injury caused, irrespective of an actual fault and notwithstanding additional damages if it is found that they had actual knowledge of the safety issue and failed to act. A product is considered to have a safety defect where it does not afford the safety a person is normally entitled to expect. This can happen because of a defect in design or manufacture, poor preservation or presentation, or the lack of sufficient indications as to the risks and dangers it involves, or as to the means to avoid those dangers. This regime is intended for third parties to a contractual relationship, and the victim that is contractually bound will not be allowed to pick and choose between regimes.

A product sold by a professional seller that perishes prematurely compared to other products of a similar nature is presumed to be affected by a latent defect – and to have perished for the same reason. The onus to rebut this presumption rests with the defendant, who must demonstrate that the product was used improperly either by the end user or by someone servicing the product, or that they were unaware of the defect and that a person exercising reasonable care, given the state of available technology, would not have been able to discover such defect.

It is common for any party who has had interaction with anyone in the “supply chain” to bring a proceeding against every party in that supply chain, be it an individual or corporation. Unrelated parties will also sue for contribution and indemnity. The supply chain consists of the product's manufacturers, suppliers, assemblers, installers, repairers, sub-manufacturers, importers, wholesalers, distributors and retailers, inspectors, certifiers and occupiers.

In Quebec, anyone who has suffered injury has standing to bring a claim, be it an individual or a corporation. This is similar to the rest of Canada, where any party who has had an interaction with anyone in the supply chain has standing to bring a claim for contractual liability. However, standing to bring a claim is not predicated on a direct (end-user to retailer) or even indirect (end-user to manufacturer) contractual relationship between the parties. A party with a contractual relationship cannot bring a claim using the rules of extra-contractual liability, which is a regime that is reserved to third parties only.

Limitation periods within which a legal proceeding must be brought are prescribed by statute. Generally speaking, limitation periods in Canada range from two to six years from the time that the cause of action arises. In Quebec, the general rule sets a three-year time limit from the time the defect or injury was discovered for product liability claims. Limitation periods usually run from the date the claim was discovered or “ought to have been discovered” by a reasonable person.

“Tolling” agreements may be entered into by potential litigants to extend limitation periods where, for example, parties wish to negotiate or engage in other alternative dispute resolution methods, rather than commence proceedings immediately. In addition, class proceedings legislation usually contains a statutory “tolling” of the limitation period for absent class members.

Many provinces have an “ultimate limitation period”, which provides that no action may be brought regardless of discoverability. In Ontario, this arises on the fifteenth anniversary of the day on which the actionable act or omission occurs. In the case of continuing acts or omissions, the ultimate limitation period occurs on the fifteenth anniversary of the day on which the actionable act or omissions cease(s).

In 2012, the Supreme Court of Canada delivered a trilogy of decisions that substantially revised and simplified the test for personal jurisdiction in tort cases in Canadian courts. As a result, cases framed in product liability must fit within one of the following four categories with “presumptive connecting factors” in order to give rise to a court’s jurisdiction over the matter:

  • the defendant is domiciled or resident in the province;
  • the defendant carries on business in the province;
  • the tort was committed in the province; or
  • a contract connected with the dispute was made in the province.

While the list of presumptive connecting factors is not closed, the Supreme Court of Canada has made it difficult to expand the categories above. To qualify, a new category would have to be similar to the four presumptive categories, or find substantial support in case law, statute or the law of other legal systems with a shared commitment to order, fairness and comity. The presumptive factors – whether existing or new – can be rebutted, but with difficulty. The Supreme Court emphasised that the presumptive connecting factors must be “objective”. Courts have been discouraged from considering jurisdictional findings to be an exercise of discretion. Of significant change, the presence of a plaintiff in a province, or even a plaintiff who suffers injury in a province arising from a tort committed elsewhere, is no longer a sufficient connecting factor to determine jurisdiction.

Quebec consumer protection legislation provides that, for remote agreements (meaning for the most part online agreements), the agreement is deemed to have been executed at the consumer’s residence. This means that the last element of the test – ie, the contract connected with the dispute being made in the province – will always apply with respect to consumer contracts where the consumer is a resident of Quebec.

In Canada, there are no formal requirements that must be fulfilled before proceedings can be commenced, unless the parties have contractually agreed to do so.

For Quebec, and indeed as a best practice elsewhere in Canada, it is advisable for the plaintiff to send a demand letter to the defendant, detailing the remedy sought, before commencing any action. Omitting to send a demand letter may either limit the plaintiff’s right of action or result in the court ordering the plaintiff to pay the costs associated with instituting proceedings, seeing as the failure to send such a demand letter precludes the defendant from providing an out-of-court remedy.

More particular to Quebec, if the plaintiff wishes to allege the presence of a latent defect that the seller or manufacturer ought to have known about, they must notify those persons of this within a reasonable time of discovering it. Where the defect appears gradually, the time begins to run on the day that the buyer could suspect the seriousness and extent of the defect. The seller may not invoke the tardiness of a notice from the buyer if he or she was aware of the defect, or could not have been unaware of it.

The rules for the preservation of documents and property in civil litigation apply generally to product liability cases. Each province has its own set of Rules of Procedure. For example, in Ontario, the duty to preserve evidence arises from the Ontario Rules of Civil Procedure: “Every document relevant to any matter in issue in an action that is or has been in the possession, control or power of a party to the action shall be disclosed whether or not privilege is claimed in respect of the document.” Preventive measures may also be taken through preservation orders. The court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding, and for that purpose may authorise entry on or into any property in the possession of a party or a person.

The subject matter of product liability claims is often a product that is claimed to have caused damages to a party, so preservation of the product in question, and the circumstances surrounding such incident, become critical. It is standard practice for a party to send a preservation letter (otherwise known as a ‘litigation hold’ letter) to an opposing party, outlining their obligation to preserve evidence.

When evidence relating to product liability litigation has not been preserved, spoliation may be alleged. Spoliation occurs “where a party has intentionally destroyed evidence relevant to ongoing or contemplated litigation in circumstances where a reasonable inference can be drawn that the evidence was destroyed to affect the litigation.

The finding of spoliation requires four elements to be established on a balance of probabilities, namely:

  • the missing evidence must be relevant;
  • the missing evidence must have been destroyed intentionally;
  • at the time of destruction, litigation must have been ongoing or contemplated; and
  • it must be reasonable to infer that the evidence was destroyed in order to affect the outcome of the litigation.

A finding of spoliation “carries a presumption that the evidence destroyed would have been unfavourable to the party who destroyed it, but that presumption may be rebutted.

The more difficult problem is finding an appropriate remedy for spoliation. The sanctions or remedies available to litigants who suffer due to spoliation include procedural remedies, evidentiary presumptions, contempt proceedings, inclusions of expert reports, less weight being given to the spoiled evidence, dismissal of the action, and costs orders.

The defendant should take steps to notify the plaintiff of their desire to preserve evidence within a reasonable timeframe, otherwise the court may find the defendant’s failure overrides that of the plaintiff’s obligations.

The jurisprudence on the “tort of spoliation” is an open question in Canada. It could be recognised as an independent tort. Some cases have allowed the plaintiff to amend statement(s) of claim to plead the independent tort of spoliation and to proceed to trial, but other cases have not, and motions to strike such amendments as disclosing no cause of action have been successful.

In Quebec, there are specific rules regarding the preservation of evidence, other than a requirement to notify the seller upon noticing the appearance of a defect. While this is not a direct rule for the preservation of evidence, it serves to provide the parties with an opportunity to assess the extent of the defect at the time of its appearance. Furthermore, parties to civil proceedings should behave in a manner that favours loyal debate, and destruction of evidence would be in breach of such a duty. Courts in Quebec have looked very unfavourably on parties that have intentionally attempted to dissimulate documents or any evidence of product defect or safety issues.

While spoliation of evidence as a recognised independent tort in the rest of Canada is an open question, it has been applied sparingly in Quebec. Namely, the court would draw an adverse inference with respect to the evidence not presented or spoiled. In 2019, for the first time, a Quebec judge dismissed a claim as a result of a party’s failure to preserve evidence, which in turn affected the opposing party’s right to inspect a thing or property that may affect the outcome of the dispute. The duty to preserve also exists by virtue of a general duty of good faith that is imposed on all persons. Spoliation of evidence is even more important in product liability cases where a party that is unable to inspect the property will be denied the opportunity to defend itself, by reason of the presumptions of liability that stands against them.

Each party to a proceeding is required to disclose the existence of all documents in their possession, power or control that are relevant to any matter in issue in the proceeding, and to make such documents available to any other party. Each party is also required to disclose the existence of any documents over which they claim privilege or that are relevant to the proceeding, but are otherwise unavailable to the party. Such documentary discovery ordinarily takes place prior to oral discovery of a witness; however, the obligation to disclose the existence of documents is ongoing through to the end of trial. It is possible to obtain pre-proceeding discovery, but this requires obtaining a court order and is very rarely done. In Quebec, pre-trial examination is key for proper disclosure of evidence, as it provides parties with an opportunity to discover what kind of documents they should request from the opposing party.

Expert witnesses are required to deliver a report detailing their findings, opinions and conclusions prior to trial, and upon which they may be cross-examined. Unless such a report is delivered to the opposing party, the expert’s evidence will be refused by the court. The court has the discretion to accept, accept with qualifications, or reject all or part of an expert’s opinions and conclusions.

In Quebec, there are three types of recognised expert evidence: joint expertise, party expertise, and court-designated expertise. The expert’s role is to elucidate complex issues for the court. Joint expertise is always favoured by the court, and parties have to justify resorting to their expert, should they wish to do so. Parties intending to call an expert witness must indicate it to opposing counsel and the court at the time they agree on a case protocol – although they may choose to call an expert at a later time, with the court’s authorisation. There can only be one expert called for each topic. The expert must be qualified – their expert report and their CV detailing their expertise must be adduced as evidence and communicated pre-trial. The expert report must be able to hold on its own, without requiring the expert to be present at trial for examination.

The plaintiff bears the burden of proving the constituent elements of the case on a balance of probabilities. The constituent elements are: duty of care owed; breach of that duty (fault); causation in fact and causation at law; and resultant damages. There is no reverse onus, although in certain cases the defendant’s failure to lead evidence refuting a plaintiff’s case has led to an adverse inference against it.

In Quebec, for contractual liability cases, the plaintiff may benefit from legal presumptions. If the product was sold by a professional – ie, not an individual – and perished prematurely, it is presumed to have perished because of a latent defect that existed at the time of sale and, furthermore, the seller is presumed to have had knowledge of such defect at the time of sale. This reverses the onus onto the professional seller. The defendant must then demonstrate that the product was used improperly either by the end user or by someone servicing the product, or that they were unaware of the defect and that a person exercising reasonable care, given the state of available technology, would not have been able to discover such defect.

For extra-contractual liability cases, the plaintiff also benefits from the same presumption of knowledge by the professional seller. The Civil Code of Quebec also provides that if the seller knew or ought to have known about the defect, they are also bound to repair injury caused as a reason of the defect. To give rise to a liability claim, the plaintiff must prove the following, on a balance of probabilities:

  • the existence of a fault of the seller/manufacturer by demonstrating that the injurious product did not afford the normally expected safety level compared objectively to similar products on the market;
  • the extent of the injury they sustained; and
  • the causality between the fault and their injury.

Product liability cases may be brought in any of the provincial civil courts or in the federal courts. There is no constitutional right to trial by jury. Although most common law jurisdictions allow for jury trials, civil jury cases remain infrequent outside motor vehicle personal injury claims. In complex litigation, such as product liability trials, where expert testimony is often based on complicated scientific or other technical issues, the trial will usually be heard by a judge alone. If a jury notice has been served, a motion to strike such notice will often be brought at the outset of the trial. Class action proceedings may only be instituted in Provincial Superior Courts or the Federal Court, depending on the province.

Damages are recoverable for personal and property damage, and for both cost and loss of use of the product when reasonably foreseeable as a result of the wrongdoing. This includes non-pecuniary damages (for pain and suffering), and pecuniary damages (loss of income, loss of earning potential, business profits, dependency claims for the loss of care and companionships, out-of-pocket expenses, etc).

The Supreme Court of Canada set a “cap” on non-pecuniary damages in personal injury cases in a trilogy of cases decided in 1978. The decision was based on public policy grounds that there should be a limit to the amount of compensation awarded for pain and suffering. The cap was set at CAD100,000 in 1978 and is regularly adjusted for inflation'; as of March 2019, the cap was CAD385,757. This cap only comes into play in the most serious of personal injury cases. Subject to the exception of non-pecuniary damages, there is no upper threshold award of damages for product liability cases.

All jurisdictions in Canada provide at least two levels of appeal from a trial court decision. In some instances, as in Ontario, there is the possibility of three levels of appeal. Leave of the court to which the appeal is to be brought may be required, depending upon the nature of the issue decided, such as if the decision relates to interlocutory as opposed to final determinations. Each individual court – those of the provinces or the federal courts – have their own particular timeframes and rules governing the bringing of appeals, with the general rule for most appellate courts being 30 days within the decision from the lower court.

In addition to defences arising out of an inability by the plaintiff to prove the constituent elements of a tort, including legal causation, a number of affirmative defences may be available, including:

  • evidence that the product was not defective when it left the manufacturer’s facility;
  • the absence of causation between the alleged defects and alleged damages;
  • the absence of negligence from the manufacturer, even if a defect were present (a manufacturer who created the defective productive may escape liability on the ground that it took all possible care on the basis of knowledge available at the time of the manufacture and distribution. This arises, for example, in pharmaceutical cases – a drug may be considered safe when manufactured, but turns out to be dangerous at a later date);
  • learned intermediary doctrine (a manufacturer’s duty of care could be limited where the product is sold, prescribed or implemented by a skilled third party. This doctrine applies, for example, to implanted medical devices where neither the device nor its packaging are placed in the hands of the ultimate patient prior to use);
  • subsequent modification of the product by third parties;
  • the plaintiff’s actual knowledge of the defect and subsequent use of the product;
  • contributory negligence from the plaintiff;
  • contractual limitation; and
  • the expiry of a limitation period, usually one to three years from the date of discovery, depending on the province and applicable act.

In Quebec, a party to the supply chain can limit their liability arising from a contractual regime where the injured party had a contractual relationship with the seller or anyone upstream in the supply chain, by raising the following defences:

  • the product perished as a result of “force majeure” or “superior force”, meaning an unforeseeable and unstoppable event;
  • the defect is not serious enough to give rise to liability;
  • the defect does not affect the intended or foreseeable use of the product;
  • there was no defect;
  • the defect is a result of the misuse of the buyer; or
  • the defect was known or ought to have been known by the buyer.

Note that in no case can a professional seller contractually exclude their liability for defects arising from their fault. They also cannot claim ignorance of the defect and, therefore, some of the defences available for extra-contractual liability cases cannot be used for contractual liability cases.

For extra-contractual liability, a number of defences are available to sellers and others upstream in the supply chain. They can prove that:

  • the injury of the victim was a result of “force majeure” or “superior force”, meaning an unforeseeable and unstoppable event;
  • the injury of the victim was a result of the intervention of a third party that may be assimilated to a superior force;
  • the injury resulted from misuse by the victim;
  • the victim knew or ought to have known of the existence of the defect, had they been reasonably prudent and diligent in their use of the product;
  • information about the defect could not have been known given the state of the art of the technology available at the time, and any information concerning the defect was diligently provided once such knowledge was available – however, this defence is not available in a consumer setting;
  • the product was not affected by a defect;
  • the defect was not dangerous given the indicated and foreseeable uses of the product; or
  • there was a contractual limitation for any non-bodily injuries, subject to lack of wilful misconduct or gross negligence – please also note that liability for bodily or moral injury can never be contracted out in Quebec.

Evidence that a manufacturer complied with all relevant regulatory and/or statutory requirements is not a defence to a product liability claim. Lack of compliance with regulatory standards or prevailing industry standards will be relevant to the determination of whether the requisite standard of care has been breached, but will not dispose of the question of whether a manufacturer ought to be found liable in civil proceedings for damages arising out of use of its product.

Generally speaking, a successful party is entitled to an award of costs in respect of the expenses incurred in prosecuting or defending a proceeding. Recoverable expenses include all court filing fees, legal fees and disbursements, including expert costs.

Depending upon the conduct of the litigation, that percentage amount may be higher or lower to reflect the court’s approval (or disapproval) of the steps taken by the party in the litigation. The range of costs is between 50% and 75%. Several factors can influence a judge to increase the costs award percentage range. For example, a judge may award costs on a higher percentage if the losing party failed to accept an offer to settle and the successful party met or beat the offer at trial, or if the losing party or its lawyers engaged in egregious behaviour.

The purpose behind the awarding of costs, however, is to indemnify successful litigants for the costs of the litigation, to encourage settlements, and to discourage and sanction inappropriate behaviour by litigants.

In Quebec, the rules for the payment of costs are the same across all types of claims – the general rule states that only court fees and expert fees may be awarded to the successful party, and each party is to pay its own legal costs, with exceptions. Exceptions are generally rooted in some form of abuse of procedure, which can result from frivolous claims or from the egregious attitude of the party during proceedings. Note that courts will only consider abuse that occurred during proceedings for such purposes – a party’s actions before proceedings are instituted are not considered for this purpose.

Third party funding of claims was prohibited in Canada until recently, when decisions in the context of class actions have approved third party funding arrangements; other types of litigation are also considering third party litigation funding. Although it is allowed, litigation funding is a rare occurrence in Quebec.

Contingency fees are acceptable throughout Canada. It has become normal practice for product liability class actions to be prosecuted by counsel working on a contingency fee basis for a percentage of the amount recovered in the action.

In jurisdictions outside of Quebec, the courts have identified the following principles to consider in approving third party funding/contingency arrangements:

  • the arrangement (for class actions) must be promptly disclosed, court-approved and transparent;
  • the arrangement must not diminish the representative plaintiff’s ability to instruct and control the litigation;
  • the court must be satisfied (for class actions) that the arrangement is necessary to provide the class members access to justice;
  • the arrangement must not compromise or impair the lawyer and client relationship;
  • the court must be satisfied (for class actions) that the representative plaintiff will not become indifferent in giving instructions to class counsel in the best interests of class members due to the fact that the representative plaintiff will be insulated from adverse cost consequences.

All but one Canadian province have enacted legislation allowing for the certification of class action proceedings. Before a class action is allowed to proceed, the parties must go through a certification process by which a court decides on the suitability of the proposed action for class treatment against enumerated criteria.

Generally speaking, any individual may institute a proposed class action on behalf of a defined class of proposed plaintiffs. The interests of the plaintiff class are represented by a court-approved representative plaintiff(s) who is prepared to act, and who has no conflict of interest with the class.

Certification of “common issues” is applied to avoid duplication of fact-finding and analysis, even though the resolution of the common issues may not resolve the litigation as a whole. Adjudication of the common issues must resolve an element that is common to each class member’s claim, and a class action must be found to be a preferable procedure for the adjudication of the common issues.

Class actions are now a central part of the Canadian product liability landscape, and are brought primarily in Ontario, Quebec, British Columbia and Saskatchewan. An extensive body of jurisprudence has been developed with respect to class action procedures.

One procedural issue that has caused a great deal of discussion in recent years is the so-called “multi-jurisdictional” problem, where class actions regarding the same matters are brought against the same defendants by different plaintiffs in different jurisdictions. Although proposals have been made to solve the current situation whereby duplicative, overlapping actions proceed in a multiplicity of courts, there is currently no legislative solution in place.

1688782 Ontario Inc v Maple Leaf Foods Inc, 2018 ONCA 407 (Ont CA) – leave to appeal allowed, February 7, 2019

In this Ontario Appeal Court case, the Court of Appeal narrowed the liability on manufacturers. Hundreds of people became ill after consuming ready to eat meats manufactured by Maple Leaf Foods. At the time, Maple Leaf and Mr. Sub had an exclusive supplier arrangement. In the class action case, Mr. Sub franchisees claimed that Maple Leaf was negligent, and sought damages for loss of sales along with reputational harm flowing from Maple Leaf’s recall. The case tipped on the question of whether Maple Leaf owed a duty of care to Mr. Sub resulting in liability for the damages claimed by Mr. Sub.

The Court of Appeal narrowed the liability of manufacturers by concluding that “to find Maple Leaf owed a duty of care in tort to the franchisees to protect them against the kinds of damages at issue on this appeal would be to enlarge the duty to safeguard the health and safety of customers by supplying fit meat to include a quite different and added duty to franchisees to protect against reputational harm. In my view, to do so would constitute an unwarranted expansion of a duty owed to one class of plaintiffs and extend it to the fundamentally different claim advanced by the franchise.

Richardson v Samsung, 2018 ONSC 6130 and Presley v Van Dusen, 2019 ONCA 66

These cases, taken together, show that if a manufacturer fails to respond adequately to a consumer complaint, it may risk extending the relevant limitation period and exposing itself to additional risks.

In Van Dusen, Van Dusen’s failure to sufficiently respond to the complaints made by the plaintiff homeowners and the assurances given to the plaintiff by the manufacturer led the Court to find the plaintiff had not been sufficiently compensated. Furthermore, the Court went as far as to extend the limitation period and found that, although ongoing communications, investigations or negotiations do not extend the limitation period, the limitation period could be extended where a manufacturer’s response and risk management system caused the plaintiff to bring the action outside the limitation period. The Court concluded a reasonable person, given such a response by a manufacturer, would not conclude that bringing an action would be an appropriate remedy.

In contrast, in Samsung, Samsung halted sales, initiated a recall, and provided a replacement or full refund to the effected consumers. The Court found that this response was adequate and, thus, denied the plaintiffs the right to bring a class action. The Court concluded that the class had already received compensation, and access to justice issues did not arise. In doing so, the Court noted that Samsung’s crisis management system was to be commended and, thus, encouraged rather than discouraged.

McCluskey v Ford Motor Co., 2017 PESC 17

This case is a product liability action where the plaintiffs allege that the defendant failed to provide proper quality control during the manufacture of the plaintiffs' 2008 Ford Ranger, such that the retaining nut on the alternator charging cable was not tight, causing the wire to come loose, leading to arcing and engine failure while the vehicle was being operated. The plaintiffs alleged negligence.

The claim was dismissed. The Court found that it was unreasonable for the plaintiff owners to assert that their seven-year-old vehicle was not mechanically altered during servicing. The expert mechanical engineer testified to the manufacturer's multi-step programme for ensuring that the essential fasteners on vehicles were torqued properly. There was no evidence to show that the manufacturer's conduct was less than reasonable, and the Court commented that the evidence showed “the contrary”, as the defendant manufacturers had a multi-step programme in place. The Court noted that “strict liability on manufacturers is not the law in Canada. The plaintiffs must lead more evidence than the fact that a product component failed, to establish negligence on the part of the manufacturer.

On 1 January 2019, the Ontario Automated Vehicle Pilot Program’s regulatory framework was expanded, and now includes the testing and sale of autonomous vehicles. These expansions will have product liability implications in that actions that used to be between individual drivers for negligence will now have direct implications for autonomous vehicle manufacturers. A collision involving a technology malfunction will give rise to a product liability claim against a manufacturer. Currently, under the Highway Traffic Act, only a driver can be liable for the damages caused to a person through negligence, meaning a defendant would have to issue a third party claim against a manufacturer.

Third party litigation funding is on the rise. Expanded types of litigation, more regulation for the third party funders and disclosures of agreements are trends to watch.

Many expected that the introduction of the Canada Consumer Product Safety Act would result in an increase in Canadian product liability litigation. To date, however, such a trend has not been seen.

The Internet of things (IoT) is the extension of internet connectivity into physical devices and everyday objects. Recent technological advances – namely the digitisation and networking of society – have permeated all spheres of life and led to the ubiquitous IoT phenomenon. Everyday consumer items have become part of this information era by becoming increasingly data-driven and intelligent. In today’s home, there is an array of connected products, such as smart thermostats, kitchen appliances, speakers, and lighting devices. While this is helpful to manufacturers taking advantage of the market trends by being provided with novel opportunities for sales in the consumer goods sector that traditionally experienced slower growth due to market saturation (ie, how many fridges do you need!), it also opens the door for future liability considerations related to these connected devices.

For one, the complexity of IoT products can potentially complicate the product supply chain. Such a product may be designed by one party, manufactured by another, installed by a third, maintained by a fourth, and run software created by a fifth and possibly updated by a sixth. There is a huge potential in relation to product safety and product liability, raising questions about who will be responsible if harm is caused by an “artificially intelligent” home product. This complexity is also present in the case of autonomous vehicles, where the liable party can be one of the many in the supply chain or in the operation of such vehicles. This will raise novel questions for home and auto insurance providers, who are closely tracking developments in this space.

This phenomenon is also affected by recent concerns about data breaches, hacking, privacy, and cybersecurity. Software itself has become an inherent part of the product. While this was the case before, with firmware for elevators or engine control units for cars, the software is now almost constantly connected to the internet, exposing such devices to a new set of risks. There are also entirely new devices such as home assistants that are responsible for controlling many of these new IoT creations. As such, these connected products are susceptible to being hacked and put to malicious uses – and a determination of liability becomes increasingly difficult with so many actors involved. The hacks can cause physical harms (eg, a car being forced off-road) but they can also cause harm to user privacy as they are often privy to extremely sensitive information – eg, a smart home assistant listening in to voice commands with a microphone. Given that technology generally is becoming increasingly complex, a challenge for companies is to stay ahead of cybersecurity and product safety, while also creating excellent products. Future policy development will be necessary to protect users in product liability situations, but also to provide greater certainty to manufacturers who seek to innovate.

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Gowling WLG (Canada) LLP advises clients in various industries that are susceptible to product liability claims, including the automotive sector and highly regulated area(s) of electrical products (such as washers, dryers, ranges, medical equipment, ATVs, motorcycles, alarms, food, paint/stain products, heavy machinery, and forestry equipment); it is also active in pharmaceutical and medical device litigation, and food, beverages and cosmetics litigation. Gowling WLG’s team of 12 partners throughout Canada advises local manufacturers and distributors on supply-chain verification and traceability protocols to mitigate the enterprise risk associated with production. It guides clients on product classification, the interpretation of regulations, product labelling and advertising, licensing and temporary marketing authorisations, import and export, manufacturing and processing, including good manufacturing practices, safety and efficacy, quality control and clinical trials. The firm has extensive expertise in all facets of crisis management and hands-on industry experience, enabling it to help clients avoid and/or manage a wide variety of critical situations and issues. We would like to thank Amber Bonnell, an associate in our Waterloo Region office as well as articling students Emily Metcalfe and Nareg Froundjian for their contribution to this chapter.

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