Product liability law is the name placed on a combination of several branches of the law, including contract, tort, government regulation, damages, and insurance. It is based on the theory that consumers rely on producers and sellers to ensure products are safe for use. This leads to a wide range of claims, issues and parties. The defendants could be any party in the distribution chain, including the manufacturer, distributor, importer, or retailer. While some available defences to product liability claims are common to all potential defendants, certain defences are unique to manufacturers. Manufacturers should be aware of the many possible defences to product liability claims.
Defending claims under the Sale of Goods Act
Product liability claims are frequently grounded in provincial sale of goods legislation, such as Nova Scotia's Sale of Goods Act, (the "SOGA"). The SOGA implies certain warranties into contracts for sale, including warranties that the product is fit for its intended purpose and of merchantable quality. If faced with a claim under the SOGA, the absence of a direct contractual relationship with the consumer may provide a manufacturer with a defence.
Courts across the country have recognized that a direct contractual relationship is an essential component of a sale of goods claim. The Ontario Court of Appeal's decision in Arora v. Whirlpool Canada LP is a recent example. 1 The plaintiffs in Arora sought to certify their action as a class proceeding, alleging that the defendant manufacturer was negligent in the design and manufacture of a washing machine. Their claim was based, in part, on the warranty of fitness for purpose implied by Ontario's Sale of Goods Act. The motion judge determined this aspect of the plaintiff's claim had no reasonable prospect of success. The Ontario Court of Appeal upheld this ruling, stating that "the fact that [the defendant] did not sell the machines directly to consumers is critical to the viability of the appellants' implied warranty claim ... their remedy under the SOGA is against the seller, and in this case [the defendant] was not the seller".2 The Nova Scotia Small Claims Court has echoed this principle on several occasions.3
A manufacturer may be able to defend a sale of goods claim on the basis that it was not the seller, even if it actively participated in pre-sale negotiations. In the decision of the Ontario Superior Court of Justice in Haliburton Forest & Wildlife Reserve Ltd. v. Toromont Industries Ltd.,4 the plaintiff operated a forestry business. It purchased two pieces of forestry equipment from the defendant seller. The equipment had been manufactured by a third company. Although the plaintiff purchased the forestry equipment from the seller, the manufacturer did play a significant role in the pre-sale negotiations. A representative of the manufacturer attended meetings with the seller and the plaintiff to answer questions and discuss which equipment that would best suit the plaintiff's needs. In addition, the manufacturer helped facilitate the plaintiff's trial run of the equipment.
The plaintiff later alleged that the forestry equipment was mechanically unfit, and sued both the seller and manufacturer for breach of the implied warranties contained in Ontario's Sale of Goods Act which mirrors Nova Scotia's Act in all material respects. The manufacturer moved for summary judgment on the basis that it was not a "seller" within the meaning of Ontario's Sale of Goods Act. The Court agreed, holding that the absence of a contractual relationship defeated the claim against the manufacturer. The Court was also clear that the manufacturer's involvement in the pre-sale negotiations did not bring it within the definition of a "seller" under the Sale of Goods Act.
If a manufacturer does sell the goods, and the SOGA applies, there are still a number of available defences. Depending on the circumstances, a manufacturer may able to defeat a claim under the SOGA on the basis that a warranty of fitness for purpose is not implied into the particular contract for sale. Section 17 of Nova Scotia's SOGA imports an implied warranty of fitness for purpose, among other things. In Venedam v. Tanks & Ducts R Us Ltd., the Nova Scotia Supreme Court confirmed that the SOGA only implies a warranty of fitness for purpose when the following three factors are present:5
- The seller supplied the goods in the ordinary course of its business;
- The buyer made the intended purpose of the goods known to the seller; and
- The buyer relied on the seller's skill and judgment in purchasing the goods.
A manufacturer may be able to defeat a claim for breach of the implied warranty of fitness for purpose by establishing that one or more of the above criteria are not met.
Where these three requirements are satisfied, the SOGA does imply a warranty of fitness for purpose. In this case, the manufacturer may defend the claim by establishing that they are not in breach of the implied warranties. If the product in question has served its intended purpose for a period of time, this may defeat a claim for breach of the implied warranty of fitness for purpose. This was the outcome in MacDonald v. Holland's Carriers Ltd.6
MacDonald involved a motor vehicle accident. The defendants were operating a logging truck, which was constructed with a series of vertical posts designed to contain the logs. The accident occurred when one of the vertical posts came loose and flew off the truck, striking the plaintiffs' windshield. The defendants brought a third party claim against the retailer from whom they had purchased the logging truck. They alleged that the retailer had breached the implied warranty of fitness for purpose, among other things.
The Court rejected this argument on the basis that the logging truck was indeed fit for its intended purpose. In making this determination, the Court gave weight to the fact that the defendants had used the vehicle in question for 22 months after purchase and logged approximately 250,000 kilometeres. The Court concluded that "the extensive use of the trailer demonstrates the trailer was indeed fit for the purpose intended" and "[t]he defect which ultimately led to the accident appears to have come about because of use and was non-existent at the time of sale".
To summarize, manufacturers may be able to defend a SOGA claim on the following grounds:
- that they are not a "seller" within the meaning of the act;
- that the SOGA does not imply a warranty of fitness for purpose into the particular contract for sale" or,
- they are not in breach of the implied warranties.
Manufacturers should always consider whether an express warranty precludes liability. A manufacturer may, for example, be able to defeat a product liability claim on the basis that it falls outside the specified warranty period. In addition, manufacturers' warranties often restrict liability to the cost of repairing or replacing the product, and exclude liability for other types of damage. Such a provision could be of assistance if the consumer claims to have suffered other losses as a consequence of a defective product.
Defending claims in negligence
Absent a contractual relationship, tort law, usually the law of negligence, is the remaining path to recovery in product liability cases. Courts have recognized up to four different types of product liability negligence:
- negligent manufacture,
- negligent design,
- negligent failure to warn, and
- claims of pure economic loss for the cost of repairing a dangerously defective product.
The fourth category has its origins in the Supreme Court of Canada's decision in Winnipeg Condominium Corp. No. 36 v. Bird Construction Co.7 The Court in Winnipeg Condominium determined that a party can recover the cost a recovering a defective product or structure, provided it poses a "real and substantial danger".
The weight of Canadian authority suggests that the law of negligence does not compensate purchasers for the cost of repairing or replacing a defective but non-dangerous product. A claim for negligent manufacture or design requires proof that the defect caused personal injury or damage to other property.
Suppose a negligently manufactured piece of electrical equipment malfunctioned, caught fire, and damaged the plaintiff's home or caused personal injury. These losses would be compensable in negligence. If, on the other hand, the equipment simply broke down, the plaintiff likely could not recover the cost of repairing or replacing the faulty equipment in negligence, unless they were able to establish that it posed a "real and substantial danger". The authors of Canadian Tort Law describe the concept this way:
[N]egligence law responds only partly, if at all, to claims about product quality unless the defect manifests itself in an accident-caused personal injury or damage to other property. In England and the United States, all claims based on defective products that do not manifest themselves in an accident are governed exclusively by statutory sales law. Negligence actions are not permitted for the cost of repairing or replacing the defective products or structures themselves. In Canada, one may recover in negligence the cost of repairing or replacing a dangerously defective product or structure from a non-privity manufacturer or builder. Whether one may recover in negligence in respect of product defects that are merely shoddy but not dangerous has been debatable, but the consensus now seems to be that one may not.8
Depending on the nature of the plaintiff's injuries, a manufacturer may be able to defend along these lines.
If the plaintiff has suffered personal injury or damage to other property as a result of the faulty product, the ordinary principles of negligence apply and the plaintiff bears the burden of proving each element of negligence on a balance of probabilities. Where this is the case, the plaintiff's failure to establish one or more of the constituent elements of negligence may provide a defence to a product liability claim.
In order to succeed in negligence, the plaintiff must prove that the manufacturer breached the standard of care, usually in the manufacture or design of the product. The standard of care demanded of manufacturers is to use "reasonable care in the circumstances and nothing more". When assessing claims for negligent design specifically, courts often employ a risk-benefit analysis, balancing factors such as:
[T]he utility of the product to the consumer and the public as a whole; the likelihood of harm and its probable seriousness; the availability of a safer design; the costs in terms of functionality and price, of a safer design; the avoidably of injury by care in the use of the product; the obviousness of the danger; common knowledge and normal public expectations; and, the manufacturer's ability to spread any costs related to improving the safety of the design.9
If the plaintiff successfully proves that the manufacturer breached the standard of care, they must also establish a causal link between that breach and their alleged damage. The standard test for proving causation is the "but-for" test, which requires the trier of fact to determine whether, but for the defendant's breach of the standard of care, the claimant would have suffered damage. Evidence that the plaintiff's injuries still would have occurred, but-for the defective product, may provide another defence to product liability claims in negligence.
When faced with a product liability claim, a manufacturer may have a number of defences at their disposal. The circumstances of the case, and the manner in which the plaintiff frames their claim, will determine which of these many defences may be available.
1 2013 ONCA 657.
2 Ibid at paras 31-33.
3 See, e.g., Beaver v Home Depot Canada, 2017 NSSM 59 at para 16; Molnar v BMW Canada, 2017 NSSM 24; and Louisburg Home Construction Ltd v Eddy Group Ltd, 2013 NSSM 32 at para 25
4 2016 ONSC 3767.
5 2010 NSSC 186 at para 53.
6 2011 NSSC 130.
7  1 S.C.R. 85.
8 Allen M. Linden et al, Canadian Tort Law, 11th ed (Toronto: LexisNexis, 2018) at p. 588.
9 Ibid at p. 608.
10 Clements (Litigation Guardian of) v. Clements, 2012 SCC 32 at para. 8.
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.