The Supreme Court of Canada recently refused leave to appeal the
decision of the Ontario Court of Appeal which determined that
plaintiffs cannot recover for pure economic loss resulting from the
negligent design of a non-dangerous product.
Ontario Superior Court of Justice Determines No Reasonable
Cause of Action
This action arises out of a proposed class action brought by
three consumers against Whirlpool Canada LP and Whirlpool
Corporation (collectively, "Whirlpool") claiming that
front-loading washing machines were improperly designed and prone
to developing an unpleasant smell. The consumers sought damages for
breach of express and implied warranty, breach of the
Competition Act, negligence and waiver of tort. The
consumers did not allege that the washing machines were dangerous
or caused injury, but rather that they incurred repair costs and/or
damage to their clothing arising out of the machines. As a
result, the consumers sought damages for overpayment in respect of
the machines, for the difference in value between what the consumer
paid and what they said the machine was worth.
Justice Perell for the Superior Court refused to certify the
case, because it was plain and obvious that the pleading disclosed
no reasonable cause of action. Justice Perell further held
that the plaintiffs "should not look to tort law to negotiate
a better bargain for themselves," because compensation for
economic loss is best regulated by contract and property
law. Accordingly, Justice Perell concluded that the action had
no reasonable prospect of success. This was ultimately upheld by
the Ontario Court of Appeal.
Ontario Court of Appeal Upholds Decision of the Superior Court
In denying the consumers' appeal, the Appellate Court found
that the consumers had no claim against Whirlpool under either the
express warranties or an implied warranty of fitness. The
Competition Act prohibition against misrepresentations did
not extend to Whirlpool's failure to disclose problems with the
machines' self-cleaning capabilities and the consumers had no
actionable claim in negligence because they failed to plead what
economic losses they suffered. The Appellate Court further refused
to participate in a valuation of the machines purchased to
determine whether or not they were overpriced. There was no legal
wrongdoing and no basis to argue waiver of tort.
The Appellate Court observed that the plaintiffs had failed to
plead that they had a cause of action in respect of damage to
property. The Court summarized the plaintiffs' claim as being
one where "they paid more for their washing machines than they
are worth. It is squarely about relative product quality - a matter
that is customarily dealt with by contract and not easily defined
by tort." There is consumer protection legislation in Ontario
that might have allowed for potential claims by the plaintiffs, but
these were not pursued. In summary, the Appellate Court agreed with
Justice Perell that the plaintiffs ought to be left to their
statutory and contractual remedies, and that negligence claims for
defective and non-dangerous products do not belong in Ontario tort
The Supreme Court of Canada Refuses Leave to Appeal
Most recently, the Supreme Court of Canada dismissed the
consumers' application for leave to appeal the Appellate
Court's decision. This ultimately recognizes that claims
about relative product quality are customarily dealt with by
contract law and not by tort or negligence law. In other words, it
is not the role of the courts to analyze consumer transactions
under tort law to determine whether the consumer received value for
his or her money.
Key Take-Away Principle:
This series of decisions in Arora v. Whirlpool Canada
LP provides clarity on the limited availability of economic
loss causes of action against manufacturers in product liability
law in Ontario. It further serves to caution potential
representative plaintiffs seeking to commence class proceedings on
the basis of economic loss arising out of allegedly non-dangerous
products. Manufacturers and their counsel may take comfort in
the fact that in cases which do not involve property damage or
personal injury, they will not be subject to potential tort
liability, and can instead focus on the contractual and statutory
aspects of product claims.
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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The recent decision of the Ontario Court of Appeal in BMW Financial Services Canada, a Division of BMW Canada Inc. v. McLean provides some useful insight into the relationship between automobile dealers and the financing arms of the manufacturers for whom those dealers are franchisees.
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