August 04, 2020 Article

Product Liability 101 in Canada: What to Know about Litigating Claims North of the Border

There are important differences in the ways in which product liability claims are handled in the United States and Canada—most notably, Canada’s rejection of the strict liability principle.

By Stefanie A. Holland

Despite that Canada and the U.S. are close neighbors, there are some profound differences between the governing law and procedural rules that apply to product liability disputes. An understanding of some of these important features of Canadian product liability law can assist with developing a winning strategy in the event a U.S. litigant is forced to resolve a dispute in a Canadian court. This article highlights some of these important aspects that Canadian courts have adopted to govern product liability claims.

Legal Framework of Product Liability Law in Canada

Common law and legislation. In Canada, product liability law is derived in part from common law and in part from legislation.

The common law of negligence is applied relatively uniformly across 9 of Canada’s 10 provinces and its 3 territories, with the exception of Quebec, which is a civil law jurisdiction. Over the past decade, the majority of product liability cases from provincial superior courts have confirmed long-established principles rather than forming new law. Product liability claims typically fall into one or more of the following three categories:

  1. Design defect. The product, as designed, poses an unreasonable risk of harm to foreseeable users that could have been averted or mitigated through the use of an alternative design.
  2. Manufacturing defect. The product was not manufactured in accordance with the applicable design or specifications. Though a product’s design was safe, the product may have been manufactured with dangerous flaws. Not all iterations of the same product are necessarily dangerous in these cases—just those from a defective batch.
  3. Warning defect. The manufacturer failed to warn product users of dangers it knew or ought to have known were associated with the foreseeable use of the product. This refers to cases in which a product did not come with proper safety warnings or instructions. Courts in Canada have held that the duty to warn is a continuous one, which requires that the manufacturer warn not only of dangers known at the time of sale but also of dangers discovered after the product has been sold and delivered.

Additional causes of action can be available to plaintiffs arising from provincial legislation, which may not be uniform across the country. Sale of goods legislation may provide causes of action for breach of implied warranties that the goods will be reasonably fit for the general purposes such goods serve and that the goods are of merchantable quality. Consumer protection legislation may give rise to causes of action for deceptive business practices.

There are also a number of federal product safety regimes applicable to different product categories, including food, health and beauty products, motor vehicles, hazardous products, and pest control products. Under each of these regimes are standards for product safety and duties imposed on those within the supply chain, including reporting requirements and pre-market authorization. To the extent a manufacturer fails to comply with the applicable product safety standards, there can be product liability implications.

What is the standard of care? In considering the standards by which a product may be deemed defective and who bears the burden of proof, there is a notable difference between Canada and the U.S. Unlike in the U.S., there is no strict liability in Canada’s product liability. The plaintiff must prove on a balance of probabilities that the product, as designed, manufactured, or labeled, fell short of reasonable standards, which failure caused the product to be dangerous. In other words, a plaintiff must prove that the risk arose as a result of a lack of reasonable care or skill on the part of the manufacturer (Kreutner v. Waterloo Oxford Co-Op. Inc. (2000), 50 O.R. (3d) 140; Rowe (Guardian ad litem of) v. Sears Can. Inc., 2005 NLCA 65). This is not typically a high threshold for a plaintiff. Once a defect has been established, the evidentiary burden of proving that the defect is not the result of manufacturer negligence is essentially passed to the manufacturer.

If the plaintiff cannot establish that the product in question is defective, which is most commonly done through evidence given by an expert, his or her claim ought to fail.

Potential defendants in the supply chain. In Canada, the duty of care is extended to almost all participants in the supply chain, including

  • manufacturers;
  • importers, wholesalers, distributors, and retailers;
  • installers and repairers;
  • inspectors and certifiers; and
  • product owners.

It is not uncommon for a plaintiff to commence proceedings against everyone in the supply chain. The standard of care that must be met by the defendant will depend on where it is in the supply chain, with the highest standard typically applied to manufacturers and then to importers and distributors and the lowest standard applied to retailers.

With respect to causes of action founded in negligence, liability will typically be joint and several as among the defendants who are found liable. That gives the plaintiff the right to recover 100 percent of his or her damages against any one defendant (regardless of that defendant’s share of liability relative to the other defendants), leaving that defendant the task of seeking contribution and indemnity from the other defendants to recover their shares of liability.

Litigating Product Liability Claims in Canada

Applicable limitation periods. Depending on the province, limitation periods in Canada generally range from two to six years and are subject to the “discoverability” principle—specifically, when the plaintiff “discovered” that he or she had a potential claim. In many cases, the discovery date will be the date on which the product allegedly failed and caused injury. However, in other cases, the discovery date may be extended if the claimant is not aware of injuries at that time and could not reasonably have discovered the identity of potential defendants.

The law on misnomer. The law on misnomer comes up a lot in product liability law in Canada. If the limitation period to bring a claim has expired, motions to correct a party who has been misnamed or misdescribed are common and permitted. This type of amendment can be granted typically in two scenarios: one, where it is a case of true misnomer; and two, where the action was commenced against the original defendant prior to the expiry of the limitation period. It is the second situation of which defendants ought to be mindful. A tactic commonly used by plaintiffs in product liability cases to get around the expiry of a limitation period is the reliance on the law of misnomer.

For example, where a plaintiff commences a claim against a manufacturer well beyond the two-year limitation period and then subsequently learns that it sued the wrong manufacturer, it then brings a motion to substitute the named defendant manufacturer for the correct manufacturer on the basis of misnomer. This is not the case of a classic misnomer involving a mere irregularity, such as a spelling mistake or a misnamed party. Rather, this is a case in which a plaintiff failed to exercise reasonable diligence within the two-year limitation period to identify the correct manufacturer.

In Canada, permitting amendments on the basis of misnomer after the passage of a limitation period requires the plaintiff’s intention to name the correct party (Patrick v. Southwest Middlesex (Municipality), 2017 ONSC 17). Canadian courts have held that “while the courts are prepared to override limitation periods where there has been a misnomer, the misnomer must be clear and the delay in discovering the identity of the tortfeaser must be explained” (Brown-Vidal v. John Doe, 2015 ONSC 3362, para. 58, aff’d, 2016 ONSC 4359).

When facing a potential misnomer issue, defendants ought to investigate potential limitation period issues early and take action from the outset.

Tort damages regime. The intention of the tort damages regime in Canada is to place claimants in the position they would have been in but for the injury sustained as a result of the product defect. Damages for bodily injury and damage to property are recoverable.

Product liability claimants who have suffered an injury may seek to assert claims for damages for pain and suffering, also known as general damages. Claimants may also seek damages for specific pecuniary losses sustained, referred to as special damages, as well as losses expected to be sustained in the future. Claimants typically assert claims for financial losses including loss of past and future income, loss of opportunity, loss of profits, cost of medications, medical treatment, care expenses, and property damage. Claims for nonpecuniary damages in cases of personal injury will include an amount to compensate for the pain and suffering sustained by the plaintiff, loss of amenities of life, and loss of expectation of life. Many jurisdictions provide a statutory cause of action for family members of injured or deceased plaintiffs.

Punitive damages, the purpose of which is to deter a defendant from engaging in conduct similar to that which is alleged in the claim, are recoverable but in rare cases.

Canada’s “loser pays” system. Canada’s court regime operates as a “loser pays” system. While there is entitlement to the recovery of legal fees and expenses, referred to as “costs,” the level of recovery will vary and will not equate to a full recovery. In most cases, the award of costs is on a partial indemnity basis, which equates to about a 50 percent recovery of legal costs. In some cases, courts may be inclined to grant a higher scale of recovery, which is referred to as substantial indemnity costs. This may equate to up to 75 percent to 80 percent of legal costs. Costs are discretionary by the court. Settlement offers made before trial by either party may have an impact upon the scale of costs awarded.

Potential evidentiary issues and hurdles. In a product liability action, the product itself is a crucial piece of evidence. If the product is spoliated—in other words, destroyed, damaged, or lost—it can have serious ramifications for both parties to the lawsuit. For this reason, there is an obligation to preserve the product in issue in its unaltered post-incident state. Unfortunately, this is not always achievable in product liability claims, which poses a variety of challenges for all parties involved.

In Canada, the law of spoliation sets out that the missing evidence must be relevant and have been destroyed intentionally at a time when litigation must have been ongoing or contemplated, and it must be reasonable to infer that the evidence was destroyed in order to assist the party who destroyed it (Nova Growth Corp. v. Andrzej Roman Kepinski, 2014 ONSC 2763).

Canadian courts can impose sanctions for intentional and unintentional destruction of evidence, ranging from the dismissal of the action to an adverse inference. After all, a defendant is undoubtedly prejudiced in its ability to refute the plaintiff’s allegations and defend the claim without access to the physical evidence that is key to the litigation. However, U.S. parties litigating north of the border should be mindful of the fact that even in the strongest of cases, courts are hesitant to dismiss an action, or parts of an action, on a motion for summary judgment where the only basis for such summary disposition is the failure to preserve key evidence. While this can contribute to the strength of a summary disposition motion, a defendant will typically not succeed on that basis alone.

Conclusion

Although Canada and the U.S. share some features and approaches in common, there are important differences in the ways in which product liability claims are handled in the two countries—most notably, Canada’s rejection of the strict liability principle. These features ought to be kept in mind for those defendants involved in product liability claims north of the border, specifically potential defendants in the supply chain. Familiarizing yourself with these nuances and having a plan to deal with product liability claims when they arise can help to preserve your company’s reputation and minimize the costs associated with a claim.

Stefanie A. Holland is a partner at Cassels Brock & Blackwell LLP in their Toronto, Ontario, office.


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