Canada: Manufacturing, Sales & Distribution Law @ Gowlings - December 12, 2012 - Volume 1, Number 3

Last Updated: December 19 2012

Edited by Debi Sutin

In this issue:

  • Latent Defects: Shared Liability Between Experienced Purchasers and Manufacturers
  • Gowlings Speaks at Electric Vehicle Investment Forum in China
  • Data Privacy Online
  • Smaller Businesses to be Affected by Proposed Changes to Québec's Language Laws
  • Best before and packaging dates...confusing times
  • Upcoming Events

Latent Defects: Shared Liability Between Experienced Purchasers and Manufacturers

By: Laura Penketh

The Superior Court of Québec, presided by Justice Geneviève Marcotte, rendered an interesting judgment on the topic of the shared liability between purchasers and manufacturers in the case of De Luxe Produits de papier inc. c. Technical Adhesives Ltd, (De Luxe c. Technical).

De Luxe, a specialist in food packaging, had hired Technical to develop and manufacture an adhesive for its food packaging needs. De Luxe sued Technical for damages caused by having to recall its hamburger packaging due to a latent defect in the adhesive manufactured by Technical that caused residual odours in the food packaging.

De Luxe bases its recourse on the warranty of quality provisions in the Civil Code of Quebec as well as on the teachings of the Supreme Court in ABB inc. c. Domtar inc., where it was established that a defect is latent when it is serious, when it existed at the time of the sale and when it is hidden. In Québec, a defect is presumed to have existed at the time of the sale when a product perishes prematurely in comparison to similar products.

When these elements are combined, the manufacturer is presumed to have been aware of the defect given its privileged knowledge. Rebutting this presumption is an uphill battle for any manufacturer and is contingent on proving improper use of the product or an act of God.

However, on the flip side, the experience of a purchaser will come into play when determining the hidden nature of the defect and, in this case, the contributory liability of the purchaser. This is in fact what led the court to find shared liability between the purchaser and the manufacturer in De Luxe c. Technical.

On the one hand, Technical, as the manufacturer of the product, had not met its duty to inform the purchaser. More specifically, Technical was aware that diluting adhesive was normal practice for the purchaser. However, Technical chose to simply advise De Luxe that there was no need for dilution rather than articulating the adverse affects of such a practice. The duty to inform was even more burdensome in this case as the manufacturer had been advised of this potentially adverse practice prior to developing and tailoring the product to the specific needs of the purchaser. Furthermore, the manufacturer omitted to advise the purchaser of the importance of drying the product adequately so as to avoid odour formation.

On the other hand, the purchaser, who was equipped with a team of professionals capable of analyzing technical sheets and carrying out its own qualification testing was also found liable. More specifically, De Luxe had ignored the inscriptions on the technical sheets pertaining to odour formation and had also omitted to draw inferences from the odour emanating from the adhesive before it was even incorporated into the product. De Luxe was also responsible for not having inquired about the consequences of changing the method used during product testing to incorporate the adhesive into the product, a procedure in which both parties were involved.

These elements resulted in a 50/50 finding of shared liability for both the experienced purchaser and the manufacturer.

What does this mean for you? Purchasers, beware: your level of expertise can and will be held against you. Manufacturers, be transparent: you must explicitly communicate any information that may be useful to the purchaser.

Gowlings Speaks at Electric Vehicle Investment Forum in China

On October 18, Neil Abbott, co-chair of the Gowlings Automotive Group, and David Pamenter, leader of the Gowlings Technology Group, were invited to speak by the Canadian Embassy in Beijing at an Electric Vehicle Investment Forum. The event, co-sponsored by the Chinese Counsel for Promotion of International Trade (CCPIT), was held at the prestigious Tsinghai University. Neil and David spoke to over 30 manufacturers and investors, scientists and developers, and the Key State Laboratory of Automotive Safety and Engineering.

The CCPIT has expressed an interest in setting up an electric vehicle demo park in Canada to showcase vehicle technologies and supporting infrastructure. Neil and David presented on relevant Canadian issues in the morning of the one-day seminar and spent the afternoon answering questions from seminar participants. At the conclusion of the seminar, the event chair (a senior CCPIT representative) clearly stated that it was the desire of the CCPIT to see 1,000 electric vehicles on the road in Canada divided among 10 Canadian cities. The chair added that the "Ministry" had set aside the necessary capital and that the participant companies would need to co-operate to make this happen.

Gowlings has expertise in the development of all facets of electric vehicles and their marketing, patent protection and sale within Canada. Gowlings acts for Telsa Motors and "Big Three" manufacturers, as well as Nissan. Look for Gowlings to develop an informational brochure on government grants, incentives and promotion of electric vehicles in Canada in the future.

Data Privacy Online

By: Daniel Cole

Marketing leaders from around the world met recently in Chicago for the Annual Marketing Law Conference of the Promotion Marketing Association, entitled Converging Platforms and Diverging Laws. Attendees heard from a wide variety of speakers, including representatives of the world's largest brands, the Federal Trade Commission, technology pioneers and leading law firms.

The agenda was chock full of presentations designed to address the seemingly never-ending challenges that lawmakers and practitioners face while trying to keep pace with new technology and practices. Topics ranged from traditional advertising concerns and challenges with ever-changing social media and digital platforms to disclosure requirements in mobile app development. Perhaps the most commonly discussed theme, however, was that of data privacy — particularly concerns surrounding online/mobile tracking and targeting. It is clear that data privacy issues present unique challenges to an advertising industry that now relies heavily on highly targeted ads.

In the United States, it's been reported that almost 200 class action lawsuits have been filed against publishers, ad servers and advertisers. In addition, the Federal Trade Commission is pushing for the industry to adopt a "Do Not Track" option for consumers. Meanwhile, the European Union has imposed strict consent rules for tracking and targeting. Here in Canada, the Office of the Privacy Commissioner has released a policy position on online behavioural advertising (OBA). Despite stating that all information collected for OBA will be considered as "personal information" for the purposes of Canada's privacy legislation (regardless of whether that information can be reasonably used to identify an individual), the guidelines do purport to allow for the collection of personal information for OBA so long as certain requirements are met (e.g., that users be given notice of the option to immediately and persistently opt out of being tracked).

Speaking on a behavioural advertising panel, Brenda Pritchard (head of the Gowlings Manufacturing, Sales and Distribution Industry Group) advised that Canada will be following a self-regulatory model similar to that of the U.S., so expect to see an OBA icon on Canadian websites soon. Overall, there are many legal challenges facing the global advertising industry as changes in the law and regulatory action intersect with changes in technology and media. In addition to educating each other through conferences like this one, it is imperative that the industry work together to educate consumers and provide them with sufficient notice and choice.

Smaller Businesses to be Affected by Proposed Changes to Québec's Language Laws

By: Melissa Tehrani

Québec's newly elected minority government appears to be holding true to its promise to bring legislative changes to Québec's language laws within its first 100 days. On December 5, the Parti Québécois government introduced Bill 14, An Act to Amend the Charter of the French Language, the Charter of Human Rights and Freedoms and other legislative provisions, in the province's national assembly.

Although a far departure from the amendments promised during the election campaign, Bill 14 nevertheless expands the scope of theCharter of the French Language (the Charter) by legislating additional French language requirements for small businesses in the province. The bill, if and when it comes into force, will establish new French language objectives for businesses employing between 26 and 49 people for a period of more than six months over two consecutive years.

Among these objectives is to ensure that French is the normal and everyday language of work, and that companies that sell goods or services (or offer them for sale) respect a consumer's right to be informed and served in French. Where corrective measures may assist a company in achieving these objectives, "francization measures" must be implemented. Such measures may include:

  • Increasing the use of French in meetings and internal communications
  • Implementing work schedules to ensure that people are present during regular business hours to offer consumers quality French services and information
  • Providing increased training for employees in French
  • Using French in communications with customers regardless of the medium used
  • Ensuring that French-language folders, catalogues and other documents are supplied in sufficient quantity to satisfy the needs of French-speaking clientele
  • Any other means to ensure that French is the normal and everyday language of work

To meet these objectives, Bill 14 foresees the possibility for specialized business associations, sectoral workforce committees and other similar entities to develop model francization measures and to request the support of the Office québécois de la langue française(the "Office") in developing these measures.

While the Charter previously permitted employers to require the knowledge (or a specific level of knowledge) of a language other than French as a condition of employment if the nature of the duties required it, Bill 14 provides for a greater onus to be placed on the employer in this regard. Before requiring knowledge of a language other than French, the employer will be required to thoroughly evaluate the actual linguistic needs of the position, including considering the linguistic skills already required of other personnel to satisfy the needs of the company. The employer must also subsequently and periodically review these needs.

With respect to the established requirement of offering equivalent French catalogues, brochures and commercial publications, all companies must further ensure that such documentation is supplied in sufficient quantity to meet the demands of French-speaking clientele.

Bill 14 also widens the scope of duties and powers conferred on individuals designated by the Office to conduct inspections and inquiries. Under the bill, inspectors appointed by the Office will be permitted to:

  • Examine any products/goods located in the location visited
  • Verify whether signs comply with the Charter's requirements
  • Take measurements
  • Require the production of any book, account, record, file or other document for examination (or for the purpose of making copies or extracts) if the Office's representative has reasonable grounds to believe that it contains information relating to the application of the Charter or its regulations
  • Take photographs of the location visited and the equipment, goods or products found on the premises
  • Require the production of relevant documents or information within a given time frame
  • Seize anything that they have reasonable grounds to believe proves the commission of an offence under the Charter or its regulations

Arguably the most notable and alarming amendment to the Charter is the elimination of the Office's requirement to send alleged offenders formal notice to comply with the Charter prior to referring the matter to the Director of Criminal and Penal Prosecutions. In fact, the proposed provision of the Charter provides that if the Office is of the opinion that a provision of the Charter or one of its regulations has been contravened, the Office must refer the matter to the Director of Criminal and Penal Prosecutions. The Office will therefore no longer have the legal obligation to inform an alleged offender of a potential violation or grant such an offender the opportunity to rectify the situation before penal sanctions are imposed. This proposed new course of action will greatly limit an alleged offender's right to rectify a potentially non-compliant situation prior to referring a matter to the courts, and will inevitably result in the multiplication of legal proceedings that could unduly burden the judicial system.

Best before and packaging dates...confusing times

By: Ron Doering

While much of the data on food labels is incomprehensible to the average consumer, at least "best before dates" and "packaging dates" are easy to understand and provide valuable information on food safety. Right? Wrong.

According to B.01.007 of the Food and Drugs Regulations, when a pre-packaged product having a durable life of 90 days or less is packaged at a place other than the retail premises from which it is sold, the food's label must show the durable life date and provide instructions for proper storage if it requires storage conditions that differ from normal room temperature. The durable life date is to be expressed on food labels as the "best before date" using standardized bilingual symbols. So, for example, this Dec. 15 would appear as 12 DE 15.

But now it gets a little confusing. Durable life is defined as "the period, commencing on the day on which a pre-packaged product is packaged for retail sale during which the product, when stored under conditions appropriate to that product, will retain, without any appreciable deterioration, its normal wholesomeness, palatability, nutritional value and any other qualities claimed for it by the manufacturer." While it is true that "wholesomeness" is related to food safety, the durable life is really more to do with food quality. There are no rules on how to establish durable life for products, so this is a matter at the sole discretion of the manufacturer, and the date is only valid for unopened products. Many foods could be unsafe within the best before date and others perfectly safe for years after the best before date.

Even more confusing, if in the opinion of the manufacturer the shelf life exceeds 90 days, there is no requirement for any best before date. However, manufacturers now use them anyway for their own traceability purposes, so we have so-called best before dates on canned and other packaged products that can be safely on a shelf for years. Is it any wonder that a consumer is confused by a best before date on the bottom of a can that is five years away? This information says very little about quality and nothing about safety.

There appears to be no standard or scientific basis for the determination of what is a durable date or a reasonable shelf life for products. Many food items are specifically exempted from the regulation, such as pre-packaged fresh fruit and vegetables, including the chopped vegetables and pre-packaged salads that are so common today and have been the source of much foodborne illness in recent years. Foods prepared by a commissary and sold in automatic vending machines or mobile canteens are also exempt, even though they would have a higher food safety risk.

Retail-packed products also require a "packaging date," and there are definitional problems here as well. "Packaging date" means "the date on which a food is packed for the first time in a package in which it will be offered for sale to a consumer." A roast, for example, can be packaged by a butcher or a grocer, with the best before date at the retailer's discretion. While the law is clear that you cannot sell food that is putrid or unsafe, there is no labelling law that prevents the retailer from cutting up the roast at the end of its best before date and reselling it with a new best before date as stewing beef, or re-packaging it again as ground beef. Your chicken shish kabob packaged yesterday may have been chicken breasts packaged last week, and no labelling law has been broken.

Follow storage and cooking instructions carefully, always follow safe food handling procedures and think of best before dates and packaging dates primarily as rough guides to food quality. They do not provide reliable information on food safety.

This article was originally published in Food in Canada magazine.


Debi Sutin, a partner in the Toronto and Hamilton offices of Gowlings, will be speaking at the Canadian Franchise Association Annual Law Day in Toronto on January 31, 2013. She will be speaking with Gary Duvall of Dorsey & Whitney LLP, discussing U.S.-Canada franchise jurisprudence to date and predictions for the future.

Debi will also be facilitating a Business Solution Roundtable at the International Franchise Association Annual Convention in Las Vegas (February 17-20, 2013) on "Establishing and Effectively Using Franchise Advisory Councils."

Brenda Pritchard and Daniel Cole, of Gowlings Toronto office will be speaking at The Canadian Institute's annual program on Advertising & Marketing Law in Toronto on January 23 & 24, 2013.

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.

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