From class actions to the private law duties of public regulators, 2013 was another active year on the product liability law front in Canada. The following is our list of the year’s notable product liability law developments.

Class Actions

In 2013, courts across the country continued to consider whether product cases should be certified as class actions. In several cases, the courts had opportunities to evaluate legal claims of putative class action plaintiffs, including claims for pure economic loss and waiver of tort.

In Arora v. Whirlpool Canada LP, the Ontario Court of Appeal upheld the lower court’s decision dismissing the motion to certify the claim as a class action against Whirlpool. The basis for the ruling was that there is no cause of action in negligence for diminution in value of a defective but non-dangerous consumer product: the Court of Appeal held that allowing recovery for pure economic loss in such circumstances would be a “quantum leap” from the existing case law. Policy considerations militate against recognizing a cause of action in negligence for diminution in value of non-dangerous products, as this would embroil courts in the analysis of a myriad of consumer transactions to determine whether the consumer received value for his or her money. The Court noted that remedies against the manufacturer and/or retailer for the wrongs alleged by the plaintiffs were available under Ontario’s Sale of Goods Act ,Consumer Protection Act, 2002 ,and Business Practices Act.

The Supreme Court of Canada denied leave to appeal from the decision of the British Columbia Court of Appeal regarding the controversial doctrine of “waiver of tort” and restitutionary remedies. Koubi v. Mazda Canada Inc., arose from defective door locks installed in certain Mazda vehicles, which led to keyless break-ins. The plaintiff alleged that the defendants’ breaches of British Columbia’s Business Practices and Consumer Protection Act and Sale of Goods Act were wrongful acts that entitled her to claim restitutionary damages and disgorgement of the defendants’ profits pursuant to the doctrine of waiver of tort. The Court of Appeal had held that plaintiff’s claim did not disclose a cause of action in waiver of tort as the legislature intended that, for alleged statutory breaches, plaintiffs should have recourse to statutory remedies. The Court thus found that the alleged statutory breaches could not support a claim in waiver of tort. The Supreme Court of Canada’s decision to deny leave to appeal arguably lends additional support to this view.

Similarly, in Miller v. Merck Frosst Canada Ltd., the B.C. Supreme Court conditionally certified a class action that alleges that male pattern baldness drugs cause sexual dysfunction. However, the court followed Koubi in finding it plain and obvious that the plaintiff could not succeed in a claim for waiver of tort and restitutionary damages based on alleged breaches of British Columbia’s Business Practices and Consumer Protection Actand the Sale of Goods Act.

In Ontario, the Divisional Court upheld the denial of certification in Martin v. Astrazeneca PLC, a proposed class action alleging that the manufacturer of the anti-psychotic drug Seroquel failed to warn consumers and Health Canada about risks of weight gain and diabetes associated with the drug. In oral reasons, the Divisional Court upheld the decision of the motion judge, having determined that (i) the plaintiffs could not assert a claim of negligent design, development and testing in relation to off-label uses of the drug; (ii) the manufacturer had no duty of care to prevent off-label use; (iii) the plaintiffs had failed to plead a cause of action for failure to warn; and (iv) the “general causation” question as to whether Seroquel can cause weight gain and diabetes could not be answered on a common basis. Also noteworthy was the motion judge’s ruling on costs, which awarded the defendants approximately $700,000. The Divisional Court did not interfere with this award, concluding that, “[t]hough the costs award apparently sets a new bench mark in favour of a defendant successfully resisting a certification motion, there is no basis upon which to interfere with the award”.

Product Labelling and Marketing Claims

Canadian class actions often follow similar proceedings brought in the United States. Among the latest examples of this phenomenon is a wave of product labelling class actions alleging false and misleading labelling and advertising of consumer products, actionable at common law, under provincial consumer protection legislation, and/or under the federal Competition Act.

In 2013, Danone Inc. settled claims in Quebec that it had advertised its Activia yogurt and DanActive drink products as having particular health benefits, without a scientific foundation for the claims. Settlements were reached in 2012 in the U.S. and Quebec. The Quebec court initially refused to approve the Quebec settlement on the basis that it involved a lower pay-out to consumers in Quebec than in the U.S. Counsel for the parties were unsuccessful in convincing the court that the differences in the settlement amounts reflected differences between the U.S. and Canadian markets. The Quebec settlement amounts were subsequently adjusted and then approved in Quebec in 2013.

Crayola Properties Inc. settled a proposed class action in Quebec alleging that it had misrepresented the capacity to stain/washable nature of its 2011 Washable Coloured Bubbles product. Crayola agreed to discontinue the product and introduce a new one with a revised formula and relabelled packaging. Crayola also agreed to reimburse the cost of the product with proof of purchase, and to compensate consumers for reasonable cleaning expenses and property damage.

On the horizon, Hyundai and KIA are facing class actions alleging that they misled consumers about the fuel efficiency of certain vehicles, and Honda is being sued in connection with claims relating to the fuel economy of Honda Civic hybrids.

Private law duties of public health agencies

In The Los Angeles Salad Company v. CFIA, the British Columbia Court of Appeal held that the Canadian Food Inspection Agency (CFIA) owed no duty of care to an exporter that had to recall and destroy product deemed contaminated by an allegedly negligent CFIA inspection. The Court of Appeal confirmed that a regulatory body generally owes no private law duty of care to those who experience economic losses as a consequence of its exercise of a statutory obligation to protect the public interest (unless its enabling statute provides for such a private law duty). While the Court of Appeal recognized that its conclusion might be seen as running counter to the demand for accountability of decision-makers, it held that the recognition of a new duty of care in these circumstances was a matter for the legislature rather than for the courts.

The Canada Consumer Product Safety Act

Administrative Monetary Penalties

In 2013, the federal government introduced regulations setting the administrative monetary penalties applicable under the Canada Consumer Product Safety Act (CCPSA), enacted in 2011. Penalties will be calculated based on history of violation (i.e., the number of violations) and the type of violation. For instance, a failure to comply with an order by the Minister to recall a product or take measures in relation to a recall are the most serious violations, subject to a potential daily penalty of $25,000.

Defining a “Danger to Human Health or Safety”

Health Canada, which is responsible for administering the CCPSA, released a guidance document describing the factors that it will consider when determining whether a consumer product poses a “danger to human health or safety” and setting out the types of corrective action that it may require in the event that it determines that such a danger exists. The guidance document also lists measures that industry members should consider taking in order to reduce such dangers.

The CCPSA prohibits the manufacturing, importing, advertising or selling of a consumer product if it poses a “danger to human health or safety”, which is defined as: “any unreasonable hazard – existing or potential – that is posed by a consumer product during or as a result of its normal or foreseeable use and that may reasonably be expected to cause the death of an individual exposed to it or have an adverse effect on that individual’s health….”