Canada: What Lawyers, Manufacturers And Sellers Need To Know About Product Liability Laws In The Province Of Québec
Product Liability Bulletin

Introduction

The significant differences between product liability laws in Québec, which is a civil law jurisdiction, and the laws that apply in other common law jurisdictions such as the US, often come as a shocking surprise for lawyers, manufacturers or sellers faced with product liability issues or claims in Québec. These differences can impact the assessment of the risk associated with product liability claims instituted in Québec and, in some cases, even the outcome of the case. Being aware of and understanding the applicable product liability laws In Québec is all the more important since the laws are especially favourable to purchasers and consumers, which means that manufacturers and distributors (including any wholesaler, importer or supplier of the product) face an increased risk of litigation and what is often a more complex and difficult defence of such claims when compared to other jurisdictions.

This bulletin provides important information and clarity on the applicable statutory warranties of quality and the legal presumptions applicable in cases of an alleged product defect in the Province of Québec. It sets out some of the key and unique features of Québec's product liability law and provides practical advice to lawyers, manufacturers and sellers in order to assist in assessing and minimizing the risks of litigation and defending such claims in Québec.

Statutory Warranties of Quality

The legal principles applicable to the liability of manufacturers and distributors in relation to goods sold in Québec are set out in certain specific provisions of the Civil Code of Québec, CQLR, ch. CCQ-1991 (the "CCQ"), of the Consumer Protection Act, CQLR, ch. P-40.1 (the "CPA") and the Regulation respecting the application of the Consumer Protection Act, CQLR, ch. P-40.1, r. 3 (the "Regulation").

Pursuant to article 1726 CCQ, the seller is bound to warrant the buyer that the property and its accessories are, at the time of the sale, free of latent defects. If the seller was aware or could not have been unaware of the latent defect, he is bound not only to restore the price, but also to make reparation for the injury suffered by the buyer,¹ which includes all direct damages caused to the buyer, including loss of profits.² In cases where the product defect caused bodily injury and where the seller's conduct is considered an intentional or gross fault, the seller could be ordered to pay punitive damages.³

With respect to goods sold to consumers within the meaning of the CPA⁴, its provisions provide for a warranty of quality against latent defects,⁵ a warranty of use⁶ and a warranty of durability considering the price, contract and normal conditions of use of the product, in addition to prohibitions respecting false representations in the contract or in advertisements.⁷

The breach of a statutory warranty under the CPA may entitle the consumer to pursue the following recourses:

• The cancellation of the contract of sale or contract of lease;
• The reduction of the consumer's obligations (price reduction);
• The forced execution of the obligation stated in the contract, or the authorization to have such obligation executed at the merchant's or manufacturer's expense;
• Payment of compensatory damages; and
• Payment of punitive damages.

It should be noted that the statutory warranties provided by the CCQ and the CPA may be exercised by the purchaser as well as the subsequent purchaser of the goods directly against any actor involved in the chain of distribution of a good, including the manufacturer, merchant/seller and any distributor of the good (including any importer and wholesaler).⁸

Can Statutory Warranties be Limited or Excluded?

The statutory warranties provided under the CPA cannot be excluded or limited by contract.⁹

While the parties may in principle limit or exclude the statutory warranty against latent defects provided for under section 1726 CCQ,¹⁰ a professional seller (including a manufacturer or a distributor) cannot exclude or limit his liability for defects of which he was aware or could not have been unaware.¹¹

Professional sellers¹², including manufacturers and distributors, are thus presumed to know about any defects affecting their goods.¹³ Consequently, no exclusions or limitations of liability written into a contract will protect a professional seller, unless the seller can rebut such presumption by showing (i) that he did not know about the defect, and (ii) that his lack of knowledge was justified in that he could not have discovered the defect even if he had taken every reasonable precaution.¹⁴ In practice, however, the cases where a professional seller is successful in rebutting the presumption of knowledge are rare.

Moreover, in a consumer contract, a seller may never invoke his lack of knowledge of the defect where the purchaser's claim is based on the statutory warranties under the CPA, and any clause that seeks to limit the implied warranties of quality and fitness is strictly prohibited and may even result in award of punitive damages.¹⁵

Applicable Legal Presumptions in Cases of Premature Deterioration or Malfunction of a Product

The buyer has the burden of proving that the property is affected by a defect:

1. That is sufficiently serious: the defect must render the good unfit for its intended use, to the point where the buyer would not have purchased it at the price paid or would not have purchased it at all;
2. That is latent: the defect must not be apparent, meaning that it would have been impossible for a prudent and diligent buyer of identical expertise to realize that there was a defect by examining the good, without the assistance of an expert, prior to the sale;
3. That was unknown to the buyer: it addition to being latent, the defect must have been unknown to the buyer. Unlike the presumption of knowledge imposed on the seller, the buyer is not subject to a presumption of knowledge, since the buyer is always presumed to act in good faith; and
4. That existed at the time of the sale: this criterion avoids attributing liability to the seller for a defect that is due to the improper use of the property by the buyer.

However, the Québec Legislator has created a legal presumption to help the buyer substantiate his or her claim when the product was purchased from a "professional seller" (which includes every person involved in the chain of distribution of the product):

This legal presumption significantly lightens the burden of proof on the buyer who, instead of having to prove the existence of a latent defect at the time of the sale, only has to show that the product has deteriorated or malfunctioned prematurely compared to similar goods. Once this has been demonstrated, it is presumed that the product had a latent defect at the time of sale.

In a recent Superior Court decision, it was held that the term "prematurely" means [Translation] "before the usual or suitable time".¹⁶ Although not determinative in itself, the factor of the duration of the contractual warranty provided by the manufacturer may constitute a relevant factor.¹⁷

In the decision of CNH Industrial Canada Ltd. c. Promutuel Verchères, société mutuelle d'assurances générales,¹⁸ the Québec Court of Appeal held that the presumption arising from article 1729 CCQ implies in fact three different presumptions where the malfunction or premature deterioration of the property is proven by the buyer:

1. The presumption that there was a latent defect in the property;
2. The presumption that such defect existed at the time of the sale; and
3. The presumption that the defect caused the injury.

According to the Court of Appeal, these three presumptions, taken as a whole, constitute a presumption of liability.

However, this presumption of liability is not absolute. It can be rebutted if the professional seller can demonstrate that the defect is due to the improper use of the product by the purchaser, a fault on the part of a third party, superior force, or that it would have been impossible for the seller to detect the defect given the state of scientific and technical knowledge at the time the good was marketed. This demonstration most often requires an expert's report.

The presumption of liability provided for under article 1729 CCQ distinguishes Québec law from the law applicable in most common law jurisdictions, where the purchaser has the burden of proving the existence of a latent defect in the product at the time of the sale; a fault or negligence on the part of the seller; an injury; and the causal link between the fault and the injury.

This fundamental difference was highlighted in the recent decision of Zurich Insurance Company Ltd. c. Volvo Group North America,¹⁹ in which the Superior Court of Québec applied Nova Scotia law in the context of a claim based on the warranty of quality, following a fire in a tractor trailer. Under Nova Scotian law, the plaintiffs had to demonstrate, on the balance of probabilities, that the good at issue was defective and that the fire was caused by an electrical failure. However, the Court dismissed the claim ruling that there were several possible causes for the fire, some of which were attributable to the user, and that none of these causes had been predominantly established.

To the contrary, where the presumption of liability applies, it is not sufficient for the seller to raise the argument that the defect could have several causes and that the precise cause of the defect cannot be determined.²⁰ Rather, the seller must be able to show, on the balance of probabilities, that the probable cause of the defect is attributable to the negligence of a buyer, the fault of a third party or a superior force to rebut the applicable presumption of liability.²¹ However, the seller's or manufacturer's proof need not be beyond a reasonable doubt and can leave room for certain possibilities.²²

It should be noted that similar presumptions apply to claims based on the statutory warranties provided under sections 37 and 38 of the CPA where it can be demonstrated that (i) the good does not meet the legitimate expectations of the consumer having regard to its price, the terms of the contract and its normal conditions of use, or (ii) the good deteriorated prematurely.

In practice however, the presumption of liability is hard to rebut, often as a result of a lack of evidence because the property at issue has been partially or entirely destroyed. This is particularly true since the notion of spoliation of evidence has, to date, been applied only sparingly in Québec.²³

Practical Advice When Faced with Product Defect Claims in Québec

Let us imagine the following scenario:

• The in-house lawyer of a manufacturer distributing its products around the world (the "Manufacturer") unfamiliar with the particularities of Québec law is made aware of a claim by a buyer or consumer stemming from a fire allegedly caused by a product manufactured by his or her employer. The claim contains very few details and does not include an expert's report. However, it would appear that the property has deteriorated prematurely compared to similar goods.
• As is customary practice, the lawyer assigns a number to the claim and conducts an investigation to assess whether or not the claim appears to be well-founded. The lawyer then has an in-house expert inspect the property and, if possible, the scene of the loss. Following this inspection, the in-house expert advises the lawyer that the property is in poor condition, that the cause of the fire cannot be determined and that there is no evidence of any latent defect in the property.
• On the basis of this information and assuming that the burden of proof is on the purchaser to demonstrate that the property was affected by a latent defect, the Manufacturer denies any liability in respect of the claim and closes the file. A few months later, the Manufacturer learns that it is the subject of a lawsuit filed by the purchaser for the damages caused by the fire.

This scenario raises several issues. On the one hand, not being aware of the existence of the presumptions applicable in cases of premature deterioration of a good, the Manufacturer has incorrectly assessed the risk associated with the claim, which could have negatively impacted its decision process. Moreover, it is probable that the initial investigation conducted by the in-house expert was not sufficiently thorough to uncover the evidence necessary to rebut the presumption of liability provided for in article 1729 CCQ and that it is necessary to retain the services of an external expert to conduct a new investigation and provide a report for the purposes of the legal proceedings. It is also possible that the relevant physical evidence may have deteriorated or may no longer be available for such an inspection at a later time.

In order to avoid these issues, the following are some practical tips when faced with product defect claims in the Province of Québec:

• Following the receipt of a claim, determine whether it is likely that the good will be considered to have deteriorated or malfunctioned prematurely compared to similar goods. While the duration of the contractual warranty may be a relevant indicator, this factor is not determinative in itself. If in doubt, assume that the presumption of liability will apply;
• Send a letter or email to the purchaser or his insurer reminding them of their duty to preserve physical evidence relevant to their claim and to seek your written consent before moving the physical evidence or disposing of it;²⁴
• Following an inspection by any in-house expert, it is important to remind the purchaser or his insurer that they still have the duty to preserve the relevant physical evidence until further notice and seek your written consent before moving the physical evidence or disposing of it;
• Seek the assistance of a Québec lawyer as early as possible in the process to guide you in the decision-making process and to help you retain the services of a competent expert at a very early stage of the proceedings in order to evaluate the strength of any defence to the alleged product defect claims.

Fasken's devoted and experienced product liability team is available to answer all of your questions.

Footnotes

1. Article 1728 CCQ.

2. Article 1611 CCQ.

3. Charter of human rights and freedoms, CQLR, ch. C-12, ss. 1 and 49.

4. A consumer is defined as "a natural person, except a merchant who obtains goods or services for the purposes of his business"

5. Sections 37 and 53 CPA.

6. Section 38 CPA.

7. Sections 40 to 43, 219 to 222 and 228 CPA.

8. Article 1730 CCQ; sections 53 and 54 CPA.

9. Sections 10, 261 and 262 CPA.

10. Article 1732 CCQ.

11. Article 1733 CCQ.

12. While the concept of "professional seller " is not defined by the CCQ, comments by the Minister of Justice with respect to article 1729 CCQ indicate that a professional seller is a person whose occupation is the sale of goods. According to case law, the seller must be specialized in the sale of the particular type of good involved in order to be considered a "professional seller" (Dupras v. Macaluso, 2018 QCCS 2206; Snö Innovation inc. v. MTN Snow Equipment Inc., 2013 QCCS 4843).

13. ABB Inc. v. Domtar Inc., 2007 SCC 50; General Motors Products of Canada v. Kravitz, 1979 CanLII 22 (SCC), [1979] 1 S.C.R. 790.

14. Id.

15. Section. 53 and 272 CPA, and s., 25. 4 of the Regulation.

16. 2019 QCCS 4959, at para. 44 (in French only).

17. Groupe Royal inc. c. Crewcut Investments Inc., 2019 QCCA 1839 (CanLII), at para. 32 (in French only).

18. 2017 QCCA 154 (in French only).

19. 2020 QCCS 483 (in French only).

20. Groupe Royal inc. c. Crewcut Investments Inc., 2019 QCCA 1839 (CanLII) (in French only); Veilleux c. Toyota Canada inc., 2015 QCCQ 7163 (in French only).

21. Groupe Royal inc. c. Crewcut Investments Inc., 2019 QCCA 1839 (CanLII),at para. 39 (in French only).

22. 9080-3636 Québec inc. c. 2970-7528 Québec inc., 2010 QCCQ 8482 (in French only).

23. On this subject, please refer to our bulletin regarding the case Hydro-Québec c. Bell Canada, 2019 QCCQ 263 (https://www.fasken.com/en/knowledge/2019/04/van-spoliation-of-evidence-results-in-dismissal). Upon reading the trial judge's decision, we were expecting from this case an opening to an evolution of Québec law that would favour the imposition of harsher penalties in the event of spoliation of evidence. However, by dismissing Hydro-Québec's application for leave to appeal the trial judge's decision, the Court of Appeal indicated that this decision did not raise a question of law which is new (Hydro-Québec c. Bell Canada, 2019 QCCA 527, decision in French only).

24. It should be noted that, since the coming into effect of the new Code of Civil Procedure, CQLR, ch. C-25.01 (the "CCP") in 2016, the duty to preserve the evidence relevant to a claim is specifically provided under sections 20 and 251 CCP.

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.