General Climate and Recent Developments

State of legal development

In general terms, how developed are the product regulation and liability laws in your jurisdiction?

Product regulation and product liability laws in Canada are diverse but well developed. There is significant federal and provincial legislation and regulation relating to products in most major industries. The source of such legislation and regulation depends on whether the industry being regulated falls within federal or provincial jurisdiction. In common law provinces (all provinces except Quebec), the law relating to product liability is predominantly governed by case law (rather than legislation). In Quebec, the law relating to product liability is governed by the Quebec Civil Code.

Recent developments

Have there been any notable recent developments in relation to product liability law and product safety law in your jurisdiction, including any regulatory changes and case law?

A significant legislative change relating to product regulation occurred in 2011 with the adoption of the Canada Consumer Product Safety Act, which created a broad statutory regime for regulating many consumer products. More recently, a major amendment to the Motor Vehicle Safety Act (1 March 2018) gave Transport Canada the right to order automotive manufacturers to recall automobiles. 

Case law relating to product liability has largely been stable over the past 10 years. The most recent Supreme Court of Canada case addressing product liability issues dealt specifically with principles of causation. The majority of product liability cases from provincial superior courts have confirmed long-established principles rather than new law. 

Legal framework

Legislation

What primary and secondary legislation governs product safety and liability in your jurisdiction?

Product regulation in Canada falls within the jurisdiction of both the federal and provincial governments. The aviation, automotive, drug and medical device, food and consumer products industries are all federally regulated. Provincial legislation and regulation relates primarily to the sale of goods, construction, buildings and consumer transaction agreements. 

The province of Quebec distinguishes itself from the rest of Canada in that its private law is governed not by common law, but by its civil code containing a comprehensive set of legal principles covering all aspects of civil law. Provincial statutes complete this legal framework. The general principles of Quebec product liability law are contained in the Civil Code of Quebec, while specific provisions applicable to consumers only are contained in the Quebec Consumer Protection Act and the regulation respecting the application of the Consumer Protection Act.

Regulatory and enforcement authorities

Which government authorities regulate and enforce product safety and liability laws in your jurisdiction, and what is the extent of their powers?

The regulation of products is performed by both the federal and provincial governments, depending on the industry and subject matter. Aviation, motor vehicle, drug and medical device, food and consumer products are all regulated by dedicated federal departments responsible for each area. In the provincial realm, there are numerous provincial regulatory bodies responsible for product and consumer transactions and some product regulation, including motor vehicle sales, construction, buildings, electrical systems and consumer protection. The jurisdiction and powers of these regulating bodies are set out in their legislation.

Liability

Product defects

How is a ‘product defect’ defined in your jurisdiction?

Tort liability in Canadian common law provinces can arise from defects in any type of tangible personal property. Non-tangible products, such as operational systems or business protocols, are incapable of grounding a claim for product liability. 

The overarching question in Canadian common law product liability cases is whether the product is defective. A defect has commonly been described as “a defective condition unreasonably dangerous to the user or consumer or to his property”. There must be a determination that the product itself falls short of reasonable standards. The onus is on the plaintiff to prove, on the balance of probabilities and considering all circumstances, that the product, as designed, manufactured or labelled, fell below reasonable standards.

Generally, the adequacy of a product will be judged by the standard existing at the time the product entered the marketplace, not when the product caused the injury. In the province of Quebec, while a ‘product defect’ is not defined per se in the legislation, Article 1726 of the Civil Code of Quebec describes the notion of ‘latent defects’ as something that renders the product “unfit for the use for which it was intended or which so diminish its usefulness that the buyer would not have bought it or paid so high a price if he had been aware of [it]”.

Causation and burden of proof

How is causation of loss or damage established in relation to product liability claims and where does the burden of proof lie? Can this burden be shifted in any way?

Canadian courts require the plaintiff to demonstrate not only that the product was defective, but also that the defect caused or contributed to the plaintiff’s injury. The general test for causation applied by Canadian common law courts is the ‘but for’ test, which requires the plaintiff to show that the loss would not have occurred but for the negligence of the defendant. In Quebec, the plaintiff bears the burden of proving on a balance of probabilities that the damages are a direct result of the defect.

The law will not excuse a defendant from liability merely because other causal factors may have contributed to the plaintiff’s injuries (eg, Walker and Mississauga). Rather, where there is more than one potential cause of the plaintiff’s loss, causation will be established where the plaintiff can prove on the balance of probabilities that the defendant’s negligence materially caused or contributed to the injury. In the context of a ‘failure to warn’ claim, the plaintiff must prove that they would not have used the product or would have used the product in the manner prescribed, if properly warned.

In Quebec, the legislature has created a legal presumption to help the buyer prove its case, but only where the product was purchased from a professional seller, which encompasses all parties in the chain of distribution of a product, including manufacturers. In such a case, a defect is legally presumed to have existed at the time of the sale if the product malfunctions or deteriorates prematurely as compared to similar products.

This legal presumption shifts the evidentiary burden of the buyer from proving that a defect existed at the time of the sale, to proving the product’s objective malfunctioning or deterioration, as compared to similar products. Once the malfunction is proven, a defect is presumed to have existed at the time of the sale. However, the presumption is not absolute and will be rebutted if the professional seller can show that the deterioration or malfunction of the product was due to improper use by the buyer.

Legal bases for claims

On what legal bases can a product liability claim be brought?

A manufacturer or supplier of a defective product may be liable to a consumer or other party injured by the product on the basis of either contract or tort law principles. Where a contractual relationship exists between the manufacturer and the customer, liability will normally be founded on contract law principles, although independent and concurrent liability in tort law may also exist. There is no strict liability for manufacturers in Canada.

Tort liability for damages or injuries caused by a defective or dangerous product is based on the claim of negligence. In Canada, there are three main types of negligence establishing tort liability for damages or injuries caused by defective products:

  • negligent manufacture;
  • negligent design; and
  • negligent failure to warn. 

To prove negligence, the plaintiff must plead and establish that:

  • the defendant owed a duty of care to the plaintiff with respect to the product;
  •  the product was defective or unreasonably dangerous;
  • the defendant failed to meet the applicable standard of care;
  • the defect caused or contributed to the plaintiff’s damages; and
  • the plaintiff’s damages were reasonably foreseeable.

Where there is a contractual relationship between the plaintiff (typically the consumer) and the defendant manufacturer or supplier of the product, the plaintiff can enforce the express terms of the contract or warranty under the law of contract. 

Additionally, consumer contracts in common law provinces are typically governed by provincial sale of goods and consumer protection legislation. These acts legislate into consumer contracts (which encompasses most retail sales of products) implied conditions as to description, fitness, merchantability and durability. Further, the United Nations Convention on Contracts for the International Sale of Goods has also been incorporated into Canadian law.

In the province of Quebec all sellers, whether professional or not, are bound by the legal warranty of quality in the Civil Code of Quebec. Moreover, by exception to the ‘privity of contract’ principle, manufacturers, any persons who distribute products under their name or as their own, and suppliers of a product, including wholesalers and importers, are also bound to warrant the buyer in the same manner as the seller. Quebec Courts define ‘manufacturer’ as any person whose transformation activities allow the product to be used for its intended purpose.

As such, the buyer of a defective product has a contractual recourse against anyone involved in the manufacturing and sales of the product, even if his or her contractual relationship is with the seller only. Likewise, the Quebec Consumer Protection Act provides that the buyer of a defective product with a contractual recourse against the merchant or manufacturer, even if his or her contractual relationship is with the seller only.

Criminal liability

Can a defendant be held criminally liable for defective products?

Under the Canada Consumer Product Safety Act, a company, its directors and officers can be found liable of a criminal offence for breach of the act. Penalties include fines of up to C$5 million and imprisonment of up to two years. Certain offences under the Criminal Code may apply to corporations and their directors, officers and employees relating to the manufacture and distribution of products in Canada. These offences may include fraud and criminal negligence. Additionally, breaches of the Competition Act, Hazardous Products Act, Food and Drugs Act and Consumer Packaging and Labelling Act may be deemed to be criminal offences attracting fines or imprisonment. 

In order for the manufacturer or distributor of products in Canada to be criminally liable, there must be separate and independent criminal prosecution by the Crown or the governing regulatory body. Criminal liability will not arise from civil litigation relating to product liability. 

Liable parties

Which parties can be held liable for defective products?

Canadian courts have now held that the duty of care has been extended to almost all participants in the chain of product distribution, including:

  • manufacturers;
  • importers, wholesalers, distributors and retailers;
  • repairers and installers;
  • inspectors and certifiers; and
  • product owners. 

The fact that a manufacturer or other party in the distribution chain is not incorporated in or does not conduct business in Canada, will not prevent Canadian common law courts from assuming jurisdiction over such a party. Canadian courts generally accept the concept that when a manufacturer releases its product into the normal channels of trade, the court of the territory where the manufacturer knew or could have reasonably foreseen that its product would be purchased, used or consumed may be entitled to take jurisdiction over a claim for damages suffered in that jurisdiction as a result of an alleged defect in the product.

Any persons who distribute products under their name or as their own, and suppliers of a product, including manufacturers wholesalers and importers, are bound to warrant the buyer in the same manner as the seller. The buyer of a defective product therefore has a contractual recourse against anyone involved in the manufacturing and sales of the product, even if his or her contractual relationship is with the seller only.

Limitation of liability

Can liability be excluded or mitigated in any way?

A manufacturer or supplier of products in Canada can, in certain circumstances, contractually limit or exclude liability for defective products. This is commonly done through sales contracts with terms and conditions expressly setting out the extent of the seller’s obligations. Contracts between commercial entities containing clauses which exclude or limit warranties and liability for product defects are commonly enforced. In contracts with consumers, some provinces prohibit contractual limitation or exclusion of statutory warranties in consumer contracts. Equally, some courts have found certain types of consumer contracts of adhesion seeking to limit a manufacturer’s tort and warranty liability to be unenforceable. Manufacturers also cannot contract out of mandatory, statutory obligations.

Although Quebec law generally allows contractual limitations of the obligations of warranty against hidden defects, a professional seller cannot exclude or limit its liability for latent defects that it knew or is presumed to have known about and that were not disclosed to the buyer at the time of the sale. A limitation or exclusion of liability clause in a sales contract will not protect a seller from liability in such a situation.

As such, professional sellers in Quebec are legally presumed to know about defects affecting their products. As a result, they cannot rely on a limitation of liability clause to protect them from liability for defective products, unless they can successfully rebut the presumption of knowledge of defects affecting their products. A professional seller can do so only if it can establish that it did not know of the defect, so that it could not have discovered the defect even if it had taken every precaution that the buyer would be entitled to expect from a reasonable seller or manufacturer in the same circumstances. In the case of a non-professional seller, an exclusionary or limitation of liability clause may apply.

Litigation

Procedure

What is the procedure for filing a product liability claim before the courts in your jurisdiction?

Litigation practice and procedure in Canadian common law provinces is generally governed by provincial rules of court and the common law of each province. Civil claims relating to product liability are normally commenced by filing a statement or notice of claim in the provincial or superior court registry (depending of the amount of the claim) of the province where the plaintiff resides or was injured. 

Interlocutory motions

Can the court issue interlocutory orders or judgments in product liability cases? If so, what rules and procedures apply?

Interlocutory relief in civil litigation relating to product liability is available but rarely sought in a products liability claims. A number of product regulation statutes provide the regulating entity jurisdiction to issue mandatory compliance orders and, if necessary, enforce such orders with the court through injunctions or mandatory orders. The rules and procedures relating to such interlocutory proceedings will normally be governed by rules of procedure in the province where the proceeding has been commenced. 

Although interlocutory or interim relief is available, it is not something usually demanded or awarded in product liability claims in Quebec.

Pre-trial disclosure

What pre-trial disclosure/discovery mechanisms are available in product liability cases, if any?

Document discovery

Document production obligations in Canadian common law civil cases are broad. While the exact scope of document production will vary from province to province, parties to common law civil litigation are generally required to disclose all documents in their possession or control which may be relevant to matters in issue in the litigation. It is not necessary for an opposing party to initiate the production of documents by serving a document request; rather the obligation is on each party to identify and produce its relevant documents for opposing parties. 

A defendant manufacturer in a negligent design, manufacture or failure to warn claim will typically be required to produce all relevant documents relating to the design, testing, manufacture, distribution and sale of the product. Manufacturers may also be required to produce documents generated subsequent to the incident in question, including documents relating to similar complaints or accidents, warranty claims, recalls, design changes and related litigation in other jurisdictions.

Oral discovery

Canadian rules of civil procedure normally allow oral discovery in all superior court cases. Generally, each party is entitled to conduct one examination under oath of all parties adverse in interest. Where the party is a corporation, the company will generally be required to produce one representative knowledgeable of the litigation. Some provinces permit multiple examinations (questionings) of current and former employees of corporate parties without leave. 

The scope of questions which can be asked on examinations for discovery is normally broad and is similar to the scope of document discovery. A party’s counsel may object to answering a question on numerous grounds, including irrelevance and privilege. Where the representative being examined is unable to answer a question because he or she does not possess the requisite knowledge, the examining party may require the representative to undertake to make inquiries and respond in subsequent examinations or in writing. Examinations for discovery are normally taken under oath and transcribed by a court reporter. In many common law provinces, including British Columbia and Ontario, the evidence taken at an examination for discovery can be used only against the party under examination. Excerpts from examinations for discovery are often read into evidence at trial.

In Quebec, while pre-trial discovery is permitted, its scope is more limited than in the common law provinces. Examinations on discovery are usually limited to one representative of each party, except when the said representative is unable to testify on all aspects of the file. The examination on discovery of third parties is subject to the court’s approval. Other restrictions apply to actions involving low amounts of damages claimed.

Documentary discovery is also possible, either by filing a motion to that effect or requesting the communication of undertakings from the witness being examined on discovery.

Evidence standards

What evidence is accepted to support claims in product liability cases? What formalities apply to evidence submission?

Canadian common law courts require that a plaintiff prove on balance of probabilities that a manufacturer is at fault to some degree for any injuries caused by its products, by establishing that the manufacturer failed to meet the reasonable standard of care in all circumstances. 

Canadian common law courts have held that the standard of care is “to use reasonable care in the circumstances and nothing more”. There are many factors which inform the standard of care in the design and manufacture of a product. Industry practices and regulatory standards play an important role in determining the applicable standard of care in product liability cases in British Columbia and Ontario. Once the standard of care has been established, the onus rests on the plaintiff to adduce evidence proving, on balance of probabilities, that the defendant did not meet the standard of care. 

Where there is direct evidence available with respect to how the plaintiff’s injury occurred, common law courts will normally be required to decide liability on that evidence alone. However, where there is no direct evidence of negligence, the courts may consider circumstantial evidence to determine whether the plaintiff has, on balance of probabilities, established a prima facie case of negligence against the defendant. 

In Quebec, the buyer bears the burden of proving that the defect existed at the time of the sale. However, the legal presumption applicable to professional sellers significantly helps the buyer to prove its case against a professional seller by reversing the burden of proof on the seller.

Evidence in Quebec product’s liability cases is given by oral testimony, whether the witness is a fact or expert witness. Written testimony through affidavits is generally not permitted, except in particular circumstances, such as when a witness is deceased or it is otherwise impossible or unreasonable to request his or her presence at trial.

Expert evidence

Under what circumstances will the court appoint an expert to assist it in examining the merits of the case? What rules and procedures apply?

Certain common law provinces have rules of procedure which allow courts to directly appoint experts to assist the court in deciding the merits of the case. Court appointment of experts is rare in product liability cases, as most judges are satisfied to receive the opinion evidence of the parties’ respective experts. 

Can the parties rely on expert witness testimony to support their claims? If so, what rules and procedures apply?

Expert evidence is commonly accepted by the courts in product liability cases. Generally, expert evidence is adduced through both written reports and testimony at trial. As a result, the selection, instruction and preparation of experts and expert reports are critical elements of product liability litigation.

The Supreme Court of Canada has held that in order for expert evidence to qualify for admissibility, it must be:

  • relevant;
  • necessary to assist the trier of fact;
  • not barred by an exclusionary rule; and
  • given by a properly qualified expert.

Even where expert evidence may satisfy the above criteria, the court retains the discretion to exclude expert evidence that is marginal in its probative value in relation to its potential prejudicial effects. Where the scientific method underlying the expert opinion is novel, the party advancing the opinion must establish that the science is sufficiently reliable to be admissible. 

In the province of Quebec, the parties often rely on expert opinion evidence in product liability cases. However, under the rules of civil procedure, an expert’s report stands in lieu of his or her testimony, but can be asked or permitted by the courts to testify where the expertise in question is particularly complex or requires further explanation and questioning.

Class Actions

Are class actions or any other collective proceedings available for product liability claims in your jurisdiction?  If so, what is the procedure of their formation and what benefits do they afford claimants?  Are class actions formed on an opt-in or an opt-out basis? 

Class actions are permitted in nine of the 10 Canadian provinces (the one exception being Prince Edward Island), pursuant to class proceedings legislation in each of the provinces. The fundamental components of a class action proceeding are certification, trial of common issues, and (if the common issues are resolved in favour of the plaintiff), adjudication of individual issues and damages. 

In order for an action to proceed as a class proceeding, it must be certified by the court as a class action. Generally, the test for certification comprises five elements:

  • the pleading discloses a cause of action;
  • there is an identifiable class of two or more persons;
  • the claims or defences of the class members raise one or more issues that are common among all class members;
  • there is no other procedure preferable to a class proceeding for the resolution of the common issues; and
  • the representative plaintiff will fairly represent the interests of the class.

In Quebec, the requirements for authorisation (referred to as certification in the common law provinces) of a class action are as follows:

  • the recourses (ie, claims) of the members raise identical, similar or related questions of law or fact;
  • the facts alleged seem to justify the conclusions sought;
  • the class proceeding would be the preferable procedure for the resolution of the common issues; and
  • a representative who can represent the members adequately.

The theory underlying class action legal proceedings is that they achieve the following three objectives which were originally set out in the Ontario Law Reform Commission’s Report on Class Actions in 1982 and subsequently adopted by the courts: 

  • judicial economy;
  • behaviour modification; and
  • access to justice. 

Whether any given class action actually achieves any or all of those objectives is a matter of debate. For example, many defendants and members of the defence side of the bar note that the objective of ‘access to justice’ should be a two-way street benefitting both plaintiffs and defendants, a point which has been confirmed by various courts (AIC Limited and 2038742 Ontario), yet they question whether some aspects of class actions law facilitate a just process and just results for defendants in many cases.

In most provinces, individuals who fall within the definition of the class in a given case are deemed to be members of the class and are bound by the result of the common issues trial or a settlement agreement made by the representative plaintiff, unless they opt out of the class. However, in three provinces (British Columbia, New Brunswick, and Newfoundland and Labrador) class membership is bifurcated between an opt-out system for residents of the province and an opt-in system for persons residing elsewhere in Canada.

Appeals

What rules and procedures govern appeals of court decisions? 

Provincial superior court trial judgments may generally be appealed as a right to provincial courts of appeal. However, in several provinces special rules apply to appeal rights where the amount of the judgment is below a prescribed sum. 

The ultimate right of appeal in civil matters is to the Supreme Court, although leave must be granted on application by the would-be appellant. Such leave is rarely granted since the Supreme Court will generally only agree to hear a case if it raises legal issues of sufficient public importance that transcend the interests of the immediate parties to the appeal. 

Appellate courts will generally be highly deferential to the findings of fact made by the trial judge and will intervene on such findings only if it is shown that the judge made some palpable and overriding error in his or her appreciation of the evidence. By contrast, on pure questions of law, the appellate court will review the decision below on a standard of correctness.

Statute of Limitations

What is the statute of limitations for filing product liability claims?

The time for bringing an action in Canada is generally governed by provincial and territorial limitation period legislation. Therefore, the periods within which an action for compensation may be commenced will vary from province to province and may vary depending on the nature of the loss or damage for which compensation is claimed and the legal cause of action relied on to assert such a claim. 

However, in most common law provinces and territories, all such claims must be commenced within two years from the date on which the claimant discovered the claim. While in many cases, this discovery date will be the date on which the product allegedly fails and causes injury, this period may be extended if, for example, the claimant is not aware of, and could not reasonably have discovered, the identities of potential defendants at that time. 

In Quebec, the limitation period applicable to a buyer’s recourse for breach of legal warranty of quality, pursuant to both the Civil Code of Quebec and the Quebec Consumer Protection Act, is three years from the time that the buyer becomes aware of the defect.

Timeframe

What is the typical duration of proceedings in product liability cases?

There is no typical duration of product liability proceedings in Canada. The length of time that a given case may take from commencement to completion varies widely and is dependent on a variety of factors:

  • the nature of the particular plaintiff’s lawyer (ie, how aggressive or passive the lawyer may be);
  • the practice, rules or inclination respecting judicial activism in pushing cases forward of the court where the action has been commenced;
  • the state of backlog (if any) in the court where the action has been brought;
  • the degree of complexity of the case; and
  • the existence of any rules respecting delays for dismissal in the court where the action has been brought.

Costs, Fees and Funding

Can the successful party to the litigation recover court and attorneys’ fees and any other related expenses from the losing party?  If so, what rules and procedures apply? 

Although costs awards are ultimately at the discretion of the trial judge, the near-universal practice among Canadian common law courts is to award costs to the successful party in the lawsuit (in Canada, the term ‘costs’ refers to not just disbursements, but also attorney fees). Typically, this means that the unsuccessful party must pay a percentage of the successful party’s legal fees and reasonable disbursements. The specific quantum of costs and disbursements recovered depends on the rules of procedure of the particular province and will vary from province to province. 

In Quebec, the winning party can usually recover its disbursements and court costs, including judicial fees based on a tariff and expert witness fees. However, the winning party cannot recover fees paid to its own attorney unless he or she can prove abuse of process on the part of the defendant.

What rules and restrictions (if any) govern contingency fee arrangements?

Historically, contingency fee arrangements in civil litigation in Canada were also contrary to the rules respecting champtery and maintenance because they involved the litigation being financed by someone other than the plaintiff – specifically, the plaintiff’s counsel. The introduction of class action legislation in Canada led to a relaxation of these principles. It is now the case that in product liability actions, contingency fee arrangements are permitted in both class actions and individual actions. However, such arrangements must comply with the rules regulating the legal profession in each province, and their enforcement remains subject to court supervision.

Is third-party litigation funding permitted in your jurisdiction?  If so, do any rules or restrictions apply?

An amendment to the Law Society Act in 1992 established the Class Proceedings Fund as an exception to the common law rules of champerty and maintenance. The fund provides financial support to approved class action representative plaintiffs to cover disbursements incurred while conducting a class action and indemnifies representative plaintiffs for adverse costs awards which may be made against them in a class action proceeding. In return, the fund receives 10% of any judicial award or settlement in favour of the plaintiffs plus a return of any funded disbursements. 

Further, in recent years, Canadian courts in some provinces have accepted the role of litigation funding by third parties, particularly in class actions where other sources of funding are likely to be unavailable. Generally, such funding arrangements must be disclosed to the defendant and the court and are subject to court approval.  

Is legal aid (ie, public funding) available to claimants in product liability cases?  If so, what rules, restrictions and procedures apply?

Legal aid is potentially available to claimants in any type of civil litigation matter, including product liability cases. However, few product liability civil lawsuits are funded this way. Rather, the majority, if not all, product liability lawsuits are brought by plaintiffs’ lawyers pursuant to a contingency fee agreement with the plaintiffs. 

Settlement

What rules and procedures govern the settlement of product liability cases? 

There are no separate rules relating to the settlement of product liability lawsuits in Canada, relative to other types of civil lawsuit. The rules and procedures respecting settlement of lawsuits apply to all types of civil lawsuit, including product liability cases. 

Generally, court approval is not required for the settlement of private legal actions, unless the settlement involves a plaintiff under a legal disability. The most common type of legal disability relates to age (ie, if the plaintiff is under the age of majority). 

Settlements of class actions require court approval. The process for seeking court approval of a class action is much more involved than a motion for approval of a settlement of a private action. In brief, it is necessary to publish notice of the settlement agreement and the date of the hearing of the motion for court approval. Class members who may object to the terms of the settlement agreement as not being fair and reasonable, are entitled to attend the hearing of the settlement agreement approval motion and have standing to object to the court’s approval of the settlement agreement.

How common are settlements in product liability cases?

The majority of civil lawsuits, including product liability lawsuits, are resolved by way of a settlement as opposed to an adjudicated determination. 

Alternative Dispute Resolution

Are any alternative dispute resolution (ADR) methods required or advised before or in lieu of proceeding with litigation?

The most common ADR method in Canada is mediation. The courts in many Canadian jurisdictions require the parties to attempt mediation of their lawsuit as a mandatory step in the litigation process. Even where mediation is not required, many parties in civil litigation proceedings engage in voluntary mediation. 

How commonly is ADR used in relation to production liability cases in your jurisdiction? 

Mediation is conducted in the majority of product liability lawsuits in Canada.

Defences

Available Defences

What defences are available to defendants in product liability cases?

There are a number of available defences in Canada which may be raised by a defendant in a products liability claim. In addition to asserting that the plaintiff has not established the requisite elements of the claim, a defendant may also advance one or more of the following defences:

  • the plaintiff knew of and accepted the risk of injury;
  • the plaintiff improperly used the product;
  • the plaintiff modified the product in an unforeseeable way;
  • there was an unforeseeable intervening act or event which caused or contributed to the plaintiff’s injuries; and
  • the plaintiff contractually waived his or her right to sue. 

The availability of these defences is fact-specific. Beyond that, carelessness on the part of the plaintiff will generally result in a finding that the plaintiff negligently contributed to the injury, rather than a complete defence. Such contributory negligence may take the form of:

  • failing to observe warnings of risks;
  • not reading instructions for use; or
  • misusing the product.

Where it is alleged that the manufacturer failed to provide the consumer with adequate warnings, liability can be avoided if the manufacturer has adequately warned a learned intermediary where it is reasonably expected that that intermediary will convey those warnings to the product’s end user.

Canadian courts in the common law provinces will generally give effect to contractual waiver, exclusion or limitation clauses that exclude or limit liability of the manufacturer or vendor, but the courts will interpret them narrowly against the party invoking their protection. As a result, waiver, exclusion and limitation clauses in Canada must be drafted precisely in order to ensure their enforceability, particularly where the clause is intended to exclude or limit liability for negligence. The court may also refuse to give effect to such clauses if they were not adequately brought to the purchaser’s attention and therefore cannot be said to form part of the contract terms that the purchaser agreed to. Further, certain types of waiver are statutorily precluded in some provinces. For example, the Consumer Protection Act of Ontario (Section 7) and the Consumer Protection Business Practices Act of Saskatchewan (Section 15(l)) prohibit a supplier of consumer goods or services from contracting out of the statutory warranties of quality in a consumer agreement.

The defences available in Quebec are generally the same as those in the common law provinces, although Quebec law imposes more restrictive rules respecting limitation of liability clauses.

Preliminary Actions

What preliminary procedural mechanisms are available to defendants, if any?

The most common preliminary procedural motions available to defendants in product liability lawsuits include:

  • motions for security for costs;
  • pleadings motions, either to strike the action all together on the basis that it does not disclose a cause of action known at law, or to strike specific paragraphs and allegations in the statement of claim;
  • motions to stay an action based on lack of jurisdiction or forum non conveniens; and
  • motions for summary judgment after filing a statement of defence (summary judgement is not available in Quebec).

Remedies

Damages

What type of damages may be awarded in product liability cases?  What rules and standards govern their calculation?  are damages capped?

The remedy usually sought and granted in a product liability lawsuit is an award of compensatory damages.

The types of damages generally recognised by Canadian courts in product liability lawsuits include:

  • the cost of remedying the defect in the product or the differential between the value of the defective product and a non-defective product;
  • damage to property;
  • personal injury caused;
  • liabilities to third parties incurred by the plaintiff; and
  • loss of profits and damage to reputation.

Personal injury damages are typically divided into two categories:

  • pecuniary general damages; and
  • non-pecuniary general damages. 

Pecuniary damages comprise the expenses incurred by the injured plaintiff (eg, cost of future care and lost earning capacity). Non-pecuniary general damages comprise pain and suffering, loss of life expectancy and loss of enjoyment of life.

Non-pecuniary general damages are subject to a court-made cap. In three decisions rendered in 1978, the Supreme Court capped non-pecuniary general damages in personal injury cases at C$100,000. Indexed for inflation, that cap is now approximately C$375,000.

There is no cap on damages for such pecuniary items as cost of future care or loss of future income. Rather, these damages are whatever the evidence shows such loss to be. 

Are punitive damages allowed?

Although Canadian courts may award punitive damages, such awards are rare. Punitive damages will be awarded only in circumstances where the defendant’s conduct is regarded by the court as unduly harsh, high-handed, vindictive, reprehensible, oppressive, malicious or otherwise deserving of the court’s condemnation.

Punitive damages may be more readily available in Quebec. Under the Quebec Consumer Protection Act, a consumer may seek punitive damages even if:

  • the merchant was unaware of the defect;
  • no compensatory damages are granted; and
  • there is no bad faith on the part of the manufacturer.

Other Remedies

Are Any Other Remedies Available?

An alternative remedy that in some circumstances may be available in a breach of contract action is the remedy of rescission of the contract. Rescission is available where the defective product can be returned to the vendor in exchange for the purchase price. However, in the majority of defective product cases the claim will be for damage or injury beyond the product itself.

In the province of Quebec, the buyer of a defective product has the option of seeking:

  • the cancellation of the sale (known under the Civil Code of Quebec as the ‘resolution’);
  • a reduction in the purchase price paid; or
  • the forced specific performance of the seller’s obligations (ie, force the seller to repair the product).

In addition, if the seller knew of the defect or is legally presumed to have known of it, the buyer is entitled to compensation for all direct and foreseeable damages that he or she has suffered.

Product Recalls

General Requirement

Are there any statutory criteria under which a product must be recalled or other corrective action be taken?

There is no single government entity that regulates all products in Canada. However, most consumer products are now subject to a handful of product-specific regulators. Most Canadian regulators have the power to order that a supplier stop selling a product in Canada. In addition, an increasing number of product regulators now have statutory power to order suppliers of products to recall products which they believe pose a risk to health and safety.  

The primary regulators are:

  • the Canadian Food Inspection Agency (on behalf of the minister of agriculture) – which has the power to order a recall of food products;  
  • the Consumer Product Safety Directorate of Health Canada (on behalf of the minister of health) – which has the power to order a recall of various consumer products;
  • Health Canada (on behalf of the minister of health) – which has the power to order a recall of drugs and medical devices since 2014; and 
  • Transport Canada (on behalf of the minister of transport) – which has the power to order recalls of motor vehicles and certain motor vehicle components (since 1 March 2018).

Notification

What rules and procedures govern notification of the product recall to government authorities and the public?

Generally, the regulators in Canada do not prescribe a specific manner in which a recall must be conducted. Similarly, regulators in Canada do not approve the manner in which a company may conduct a recall. That said, some regulators actively express their views on the manner in which a company should conduct a recall, either in communications to the company in a specific instance, or by publishing general guidelines respecting the manner in which recalls should be conducted.  

Repairs, Replacements and Refunds

What rules and procedures govern repairs, replacements and refunds for a defective product?

Section 28(1) of Saskatchewan’s Consumer Protection and Business Practices Act provides that where a manufacturer or seller of a product breaches a statutory warranty or express warranty, and the breach is remediable, the manufacturer or seller is required to repair the product free of charge within a reasonable time. 

Generally, there are no statutory rules governing the manner in which a company is to repair defective products, provide replacements or refunds for defective products. However, recent amendments to the Motor Vehicle Safety Act (1 March 2018) have conferred on Transport Canada (on behalf of the Minister of Transport) the power to order a supplier of motor vehicles “to correct a defect or non-compliance in accordance with any terms and conditions specified in the order”.

Non-Compliance

What penalties apply for non-compliance with the legal provisions governing product recalls?

The failure to comply with an order to conduct a recall is an offence with penal consequences.

Motor Vehicle Safety Act

Every corporation that contravenes the Motor Vehicle Safety Act is guilty of:

  • an offence punishable on summary conviction and is liable to a fine of up to C$200,000; or
  • an indictable offence and is liable to a fine of up to C$2 million (Section 17(1)).

According to Section 17(2), every individual who contravenes the act is guilty of:

  • a summary conviction offence and is liable to a fine of up to C$4,000 and/or up to six months’ imprisonment; or
  • an indictable offence and is liable to a fine of up to C$20,000 and/or up to two years’ imprisonment.

Food and Drugs Act

According to Section 31.2 of the Food and Drugs Act, failure to comply with the act, in relation to drugs (but not natural health products, which are subject to less stringent penalty provisions) and medical devices, is an offence punishable:

  • on conviction by indictment, a fine of up to C$5 million per day and/or up to two years’ imprisonment;
  • on summary conviction by a fine of up to C$250,000 per day and/or up to six months’ imprisonment for a first offence. 

The amount of the fine may be increased where the offence involved false or misleading statements to Health Canada or the person knowingly or recklessly caused a serious risk of injury to human health.

Similarly, corporate officers, directors, agents and mandataries who direct, authorise, assent to, participate in or otherwise acquiesce in the commission of an offence relating to drugs or medical devices may themselves be liable and subject to the same punishment as described above, on the conviction of the company (Section 31.6 of the act).

Canadian Food Inspection Agency Act 

According to Section 19(2) of the Canadian Food Inspection Agency Act, any person who contravenes a recall order is guilty of an offence and liable on summary conviction to a fine of up to C$50,000 and/or up to six months’ imprisonment.

Canada Consumer Product Safety Act

According to Section 41of the Canada Consumer Product Safety Act, anyone who contravenes a provision of the act (other than Sections 8, 10, 11 or 20) or an order, is guilty of an offence and is liable:

  • on indictment to a fine of up to C$5 million and/or up to two years’ imprisonment; or
  • on summary conviction for a first offence to a fine of up to C$250,000 and/or up to six months’ imprisonment. 

Section 41 further provides that a person who contravenes Sections 8, 10, 11 or 20 or knowingly or recklessly contravenes any provision of the act, its regulations or an order is guilty of an offence and is liable:

  • on indictment to a fine in an amount that is at the discretion of the court and/or up to five years’ imprisonment; or
  • on summary conviction for a first offence to a fine of up to C$500,000 and/or up to 18 months’ imprisonment.

Section 42 provides that any of a corporation’s directors, officers, agents or mandatories who directed, authorised, assented to, acquiesced in or participated in the commission of the offence is a party to the offence and is liable on conviction to the abovementioned punishments.