Bill C-36 – Act Regarding the Safety of Consumer Products ("Bill C-36")
With Bill C-361, introduced in the House of Commons by the federal Minister of Health, the Honorable Leona Aglukkaq, the Federal government proposes tougher rules and new enforcement tools to foster consumer product safety.
Imposed Product Recalls
Among other means at its disposal, Health Canada will now have the authority to order the recall of hazardous consumer products2. Currently, it is up to the industry to voluntarily recall products as the government can only suggest the withdrawal of products from the market. Bill C-36 will change that by allowing the Minister to order a manufacturer, importer or seller of a commercial product to recall it "if the Minister believes on reasonable grounds that a consumer product is a danger to human health or safety"3.
Impacts on Class Actions
Chances are that the eventual coming into force of Bill C-36 will result in an increase in motions for authorization to institute a class action. The present advisory addresses certain of the issues that may arise if a class action is filed on the heels of a product recall under the new legislation.
Province of Quebec
In Quebec, petitioners will certainly attempt to plead that the Minister's decision to order a recall is sufficient for petitioner to meet the condition provided for in Article 1003b) of the Code of civil procedure ("C.P.C."), namely that there exists a serious color of right that the recourse will succeed. They may argue the existence of a latent / safety defect should be presumed because a recall was ordered by the government.
Furthermore, Petitioners may also wish to argue that a voluntary product recall constitutes an admission of liability on the part of the seller/manufacturer. In some judgments, the Court has concluded that the question as to whether a product recall constitutes or not an admission of the manufacturer's liability is a common question that can be determine by way of a class action4.
However, Courts will not accept to automatically authorize a class action merely because petitioner has alleged a product recall. Indeed, in all cases, the Court must carefully analyze the legal reasoning proposed by the petitioner in order to determine whether the alleged facts justify the conclusions sought.
For example, in Element v. Philipps Avent ("Phillips")5, the authorization of a class action was refused even though Health Canada had recommended a ban on feeding bottles. The Court ruled that the ban had been issued as a preventive measure only. The use of said products did not create a real and imminent danger for babies. The Court reiterates that a mere fear based on a hypothetical and unproven prejudice does not constitute an indemnifiable prejudice under Quebec civil law. The Court concluded that petitioner had not demonstrated a color of right.
Phillips is good law. A product recall should never lead to a presumption of liability. Products are often recalled in order to prevent potential damages to users. Whether the recall is voluntary or imposed does not change this fact. Indeed, s. 31 of the Act allows the Minister to order a recall based on a "reasonable belief" that a product may constitute a threat to safety. It does not require the occurrence of a prejudice or the certainty that one will occur. From a policy perspective, this makes sense. Consumers will be safer if the government is allowed to act on a reasonable belief and if manufacturers are allowed to take preventive action swiftly without the threat of their actions or compliance being construed as an admission of liability.
Moreover, under Quebec civil law, liability does not exist in the absence of damages. A prejudice must be proven in order to obtain compensatory damages. Petitioners have often tried to be compensated for a fear of developing a disease as a result of exposure to a hazardous product. While a future prejudice is compensable under Article 1611(2) Civil Code of Québec, it can only be indemnified if it is certain. As such, Courts have clearly ruled that the mere fear of developing a sickness or an injury after having been exposed to a hazardous product is not sufficient to obtain damages. In other words, the risk of a prejudice does not entitle a claimant to obtain damages:
"[Translation] Under Quebec civil law, an indemnity will only be granted to each member of the class if it is proven that the product at issue did effectively cause actual and certain damages to each member. In conclusion, the fact of having consumed the product and the fear that this may result in future health problems is not sufficient to establish an indemnified prejudice.6". [Our emphasis]
Therefore, a petitioner must allege the particularized facts underlying his or her prejudice in order to claim pecuniary damages. The case law recognizes that the sole demonstration of a fault does not justify the authorization of a class action. The petitioner must demonstrate a prejudice in relation with said fault. The class action is not a means to punish the ones who infringe the law. It is a means to indemnify a group of persons for real losses collectively suffered7.
Common Law Provinces
The consequences of a recall directed by the Minister may be somewhat more significant in the common law provinces than in Quebec.
In the common law provinces, the requirements for the certification of a class action—with some minor variations—are: (1) the plaintiff has pleaded a legally viable claim; (2) there is an identifiable class of persons on whose behalf relief is being claimed; (3) the claim raises legal and/or factual issues that are common among the class members; (4) a class proceeding represents a preferable procedure for the adjudication of the class members' claims; and (5) the plaintiff is an adequate representative for the class. While the fact of a ministerial recall under the provisions of Bill C-36 cannot have any bearing on the adequacy or suitability of the particular individual seeking to represent the class, it may have some impact on the application of the other criteria, particularly the first.
As is the case with the regime in Quebec for the authorization or certification of an action as a class proceeding, the first criterion in the common law provinces requires only that the pleading be formally sufficient. That is, that the facts alleged, if proven, would as a matter of law entitle the class members (or at least some of them) to some form of legal relief. The courts in all provinces have held—and the Supreme Court of Canada had confirmed8 —that the certification court is not required to conduct any form of "preliminary merits test" to determine whether the claims are likely to succeed. Nevertheless, courts have, on occasion, been prepared to ask whether the claims exhibit an "air of reality" or whether they are "authentic". In other words, even if the plaintiff has been able to plead a formally adequate claim on his or her own behalf, does the evidence disclose any genuine grievance beyond the plaintiff that could plausibly result in legal redress for the members of the class?9 Insofar as the plaintiff's failure to satisfy this minimal standard might provide grounds upon which a court would decline to certify a proposed class action, a recall under the provisions of Bill C-36 would likely persuade the court of the "authenticity" or "reality" of the claims being asserted. There have been several cases in which the courts have noted the absence of any such regulatory enforcement actions as grounds to question whether there were any genuine issues to be tried on behalf of the class.10 In one recent case, the court commented, "in many products liability cases, the link between the class and the common issues will be obvious and will be reflected by recalls, public safety alerts and complaints".11 Thus, where such a recall has been ordered, it will be virtually impossible for a defendant to argue that the claims are somehow idiosyncratic and unique to the plaintiff.
The most significant difference between Quebec and the common law provinces may be whether the recall itself will, in some cases, have the effect of creating a viable cause of action. A defendant is not liable in negligence in the absence of damages; even if it can be shown that a manufacturer has been careless in the design or manufacture of a product, if no harm results from that carelessness, the purchaser or user is not entitled to any legal remedy. Consequently, if a product is recalled before it fails and before it causes any personal injury or property damage, the person from whom the product was recalled would, presumptively, have no claim in negligence. The problem, however—and the difference from the position in Quebec—is that common law courts have shown an marked willingness to recognize anxiety, emotional distress and even mere exposure to the risk of future harm as constituting types of "damage" that may support a claim in negligence.12 Although mere anxiety and emotional upset do not constitute compensable damages in tort, a defendant will be liable if the plaintiff suffers a genuine psychological injury and it was reasonably foreseeble that the defendant's actions could result in such an injury to "a person of ordinary fortitude".13 While this is a relatively exacting threshold, courts determining certification motions have been reluctant to presume that that threshold will not be met.14 They are bolstered in this regard by comments of the Supreme Court of Canada (comments made in a non-class action case) to the effect that a claim for such damages is sufficient so long as "the statement of claim alleges that the plaintiffs had suffered mental distress, anger, depression and anxiety as a consequence of the alleged misconduct".15
The difficulty for a manufacturer whose product is recalled is that the fact of the recall may, in itself, induce the kind of anxiety and emotion upset now regarded as sufficient to ground a claim for compensation. A consumer whose product might never have failed, or which might have failed without causing any harm or injury, will have been informed that he or she has purchased and used a product that the Minister believes "is a danger to human health or safety". As the law currently stands in the common law provinces, a representative plaintiff need only plead that that information caused mental distress and anxiety, and had similar effects upon other class members, and even in the absence of other loss or damage, the cause of action requirement in the certification test will generally be regarded as having been satisfied.
With respect to the other elements of the class action certification test, a Ministerial recall under the provisions of Bill C-36 is unlikely to have any significant impact. The issue of an identifiable class, for example, is generally unproblematic in product liability class actions. The class can readily be defined as those persons who purchased, used or consumed the product in issue. Nevertheless, the fact of a recall and the manner in which the recall was conducted may provide a would-be plaintiff with valuable information about the size and composition of the class. If, for example, the product is one for which the manufacturer (or its agents) maintains records of purchasers or users, this may provide a ready-made class definition, as well as demonstrating to the court that notice can been given directly to class members by mail or similar means. In this respect, this information may also help the plaintiff and plaintiff's counsel in developing an effective and workable litigation plan.
Similarly, identifying and framing common issues is generally reasonably straightforward in a product liability class action. The central issues—whether or not broken down into more specific sub-issues—will most often be, "Is the product defective?" and "Did the defendant manufacturer fail to meet its standard or care (i.e., did it act unreasonably) in the manner in which it designed and/or manufactured the product?" While the fact of a recall may assist plaintiffs and their counsel in identifying the nature of an alleged defect, these will remain the central questions in actions of this type.
Lastly, a Ministerial recall, or simply the fact that such a regulatory recall procedure is available, may be relevant to the court's assessment of whether a class proceeding represents a "preferable procedure". It is well established that "access to justice" for class members, and "behaviour modification" for defendants engaged in alleged wrongdoing are among the legislative objectives of the class action procedure, and that the preferability inquiry should be conducted in light of these objectives. It is also settled that preferability embodies two concepts, one of which is whether the proposed class proceeding would be preferable—in the sense of superior—to other available procedures for achieving the legislation's objectives. Once Bill C-36 is enacted, defendants will presumably seek to argue that the recall procedure is an effective, and more cost-efficient, mechanism by which to ensure that consumers are protected and that manufacturers are held to account. Where, formerly, a consumer-driven class action may have been the only viable procedure for ensuring that manufacturers be made to bear the costs of their defective goods, it may be argued that this is no longer the case. Furthermore, as discussed above, in cases where no recall has been ordered, manufacturers will presumably point to this fact to persuade the court that there are no genuine claims being advanced: that is, there is no pressing need for access to justice, and no blameworthy behaviour to be modified. Whether such arguments will be accepted by courts remains to be seen.
If a recall program is ordered and it includes some sort of compensation for affected consumers (e.g., a refund of the purchase price or the provision of a substituted product), the manufacturer will be able to argue that there is no pressing "access to justice" consideration because consumers have, in substance, obtained justice. Similarly, it can be argued that a recall is a mechanism that effectively penalizes a manufacturer (both through the costs of administering the recall and through adverse impacts upon the manufacturer's goodwill), such that the "behaviour modification" objectives of the class proceedings legislation are achieved by other means.
Conclusion
Product recalls are unfortunate but the decision to go ahead or not can have a significant impact on your business. Our product liability group has extensive experience in advising manufacturers, importers, distributors and sellers on the decision to recall and the consequences of that decision. We invite you to contact us, in order to mitigate the risks your company can be exposed to and to help you face any potential class actions.
Footnotes
2. s. 31 and following of Bill C-36.
3. s.31 Bill C-36
4. See Marcoux v. Honda Canada Inc., EYB 2005-93200 (C.S.), para. [25] and [49] and Scarola v. Shell Canada ltée, J.E. 2003-1872 (C.S.).
5. Element v. Philipps Avent, J.E. 2009-1471 (C.S.).
6. Hotte v. Servier, [2002] R.J.Q. 230 (C.S.), para. [69], citing Berthiaume c. Réno-Dépôt Inc., [1995] R.J.Q. 2796 (C.A.), p. 2821.
7. Harmegnies v. Toyota Canada Inc., J.E. 2008-584 (C.A.), para. [48].
8. Hollick v. Toronto (City), [2001] 3 S.C.R. 158.
9. Courts have expressed this consideration in a variety of ways and have characterized it as relevant to several of the five certification criteria: Hoffman v. Monsanto Canada Inc., [2007] 6 W.W.R. 387 (Sask. C.A.); Cole v. Prairie Centre Credit Union Ltd., [2008] 1 W.W.R. 115 (Sask. Q.B.); Windsor v. Canadian Pacific Railway, [2007] 12 W.W.R. 5 (Alta. C.A.); Samos Investments Inc. v. Pattison (2001), 22 B.L.R. (3d) 46 (B.C.S.C.), aff'd (2003), 30 B.L.R. (3d) 177 (B.C.C.A.); Singer v. Schering-Plough Canada Inc., 2010 ONSC 42. Other courts have rejected the proposition that there is any test of "reality", "authenticity" or "genuineness" that supplements or qualifies the statutorily-prescribed criteria: Lambert v. Guidant Corporation, 2009 CanLII 23379 (Ont. S.C.J.).
10. These cases have most often involved motor vehicles, in respect of which Transport Canada does not have the power to order a recall per se, but for which there is a statutory obligation on the part of manufacturers to notify distributors and consumers of any defect once the manufacturer learns of the defect: Motor Vehicle Safety Act, S.C. 1993, c. 16, s. 10.
11. Singer v. Schering-Plough Canada Inc., 2010 ONSC 42, citing Chartrand v. General Motors Corp., [2008] B.C.J. No. 2520 (S.C.). See also, Poulin v. Ford Motor Co. of Canada (2008), 65 C.P.C. (6th) 247 (Ont. Div. Ct.).
12. Fakhri v. Alfalfa's Canada, Inc. (c.o.b. Capers Community Market), [2003] B.C.J. No. 2618 (S.C.); Anderson v. Wilson (1999). 44 O.R. (3d) 673 (Ont. C.A.); Doucette v. Eastern Regional Integrated Health Authority, [2007] N.J. No. 259 (T.D.); LeFrancois v. Guidant Corp., [2008] O.J. No. 2402 (S.C.J.); Robinson v. Medtronic, Inc., [2009] O.J. No. 4366 (S.C.J.); Koubi v. Mazda Canada Inc., [2010] B.C.J. No. 838 (S.C.); Healey v. Lakeridge Health Corp., [2006] O.J. No. 4277 (S.C.J.).
13. Mustapha v. Culligan of Canada Ltd., [2008] 2 S.C.R. 114. Although the Supreme Court in Mustapha acknowledged that it was difficult to draw the line between non-compensable emotional upset and compensable psychological injury, the court held that it was necessary to do so to impose reasonable limits on tort liability. Even after Mustapha, there is uncertainty with respect to the appropriate standard, and some suggestion that the standard that must be met is that of "recognizable psychiatric illness": see, Healey v. Lakeridge Health Corp., [2010] O.J. No. 417 (S.C.J.); Kotai v. Queen of the North (The), [2009] B.C.J. No. 2022 (S.C.).
14. The difference between the ease with which emotional injury may be pleaded for the purposes of certification and the difficulty of making out such a claim on the merits is illustrated by the decisions in Healey v. Lakeridge Health Corp. The defendant operated a hospital where two patients had been diagnosed with tuberculosis, a highly contagious disease. The defendant and health officials notified over 4,000 individuals who came into contact with those two patients and who, through the defendant's alleged negligence, might have contracted the disease. Although the great majority of those notified did not, in fact, contract tuberculosis, a class action was brought seeking compensation for these individuals in respect of their anxiety and emotional distress. The claim was found to be sufficient and the claims on behalf of these "uninfected persons" was certified ([2006] O.J. No. 4277 (S.C.J.)). In a subsequent motion for summary judgment, however, the court in Healey found that there were no genuine issues requiring a trial; it was, on a relatively limited evidentiary record, possible to determine that, as a matter of law, the defendant did not owe a duty of care to avoid causing the type of emotional injury claimed and that such injury did not rise to the level of seriousness ("recognizable psychiatric illness) entitling the class members to damages ([2010] O.J. No. 417 (S.C.J.)).
15. Odhavji Estate v. Woodhouse, [2003] 3 S.C.R. 263.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
