Montréal (QC), November 23, 2007 – The Supreme Court of Canada yesterday rendered a landmark decision on manufacturers’ liability in Quebec. In ABB Inc. v. Domtar Inc., the Court upheld Domtar’s action against ABB Inc. and Alstom Canada Inc. for nearly 39 million dollars, in capital and interest. In so doing, it confirmed that rarely will a manufacturer be able to rely on an exclusion or limitation of liability clause to avoid liability for the consequences of a latent defect in products it sells in Quebec, even when dealing with a sophisticated buyer.

Quebec law presumes that manufacturers and other professional sellers know of any defect in the products they sell and requires them to disclose these defects to buyers. This includes both defects of which they were actually aware and those of which they are presumed to know. According to the Supreme Court, manufacturers in particular are subject to a “high standard of diligence” and “will have difficulty” showing that they could not reasonably have known about a defect.

The Court notes that Quebec law’s approach differs from the common law where limitation of liability clauses carry greater weight. However, it concludes that the common law cannot easily be grafted onto Quebec civil law.

Olivier F. Kott, senior partner at Ogilvy Renault, explains the impact for manufacturers of this anxiously awaited Supreme Court of Canada decision on product liability. “As a result of this judgment, a manufacturer who sells in Quebec must be aware that only in rare cases will it be able to avoid liability for the consequences of latent defects in its products by relying on exclusionary clauses in its contracts.”