This morning, the Supreme Court of Canada denied leave to appeal in Arora v. Whirlpool. The Court’s denial of leave has important implications for product liability class actions involving claims for economic loss, and reinforces the important gate-keeping function exercised by courts at the pleadings stage when evaluating the viability of proposed class proceedings.

The Claim

Arora v. Whirlpool involved a proposed product liability class action in respect of allegedly defective front-load washing machines. The plaintiffs claimed that Whirlpool negligently designed the washing machines, resulting in odour, mould and mildew. The plaintiffs claimed that as a result, the machines were defective goods not worth their purchase price, and sought damages for overpayment or “diminution in value”.

Certification denied by the Ontario Superior Court of Justice

At the certification motion, the central issue considered by Justice Perell was whether the plaintiffs had stated a viable cause of action. Under the Class Proceedings Act, a class proceeding will not be certified if the pleadings do not disclose a cause of action. Justice Perell concluded that none of the plaintiffs’ claims disclosed a viable cause of action. In particular, he noted that there is no recognized negligence action for pure economic loss against a manufacturer for negligently designing a non-dangerous consumer product. As a result, Justice Perell refused to certify the proposed class proceeding and dismissed the plaintiffs’ action against Whirlpool.

Court of Appeal upholds Justice Perell’s decision

On appeal, the Ontario Court of Appeal upheld Justice Perell’s decision and dismissed the appeals. The Court of Appeal was not as definitive as Justice Perell with respect to whether there can be recovery in tort for pure economic loss caused by defective, non-dangerous consumer products. Rather, referring to the Supreme Court of Canada’s decision in Winnipeg Condominium and other relevant case law and academic commentary, the Court found that the law in Canada is not settled as to whether there is recovery in tort for pure economic loss where goods are shoddy, but not dangerous. However, the Court determined that the facts and claims in Whirlpool – which the Court of Appeal ultimately concluded were not about economic loss but rather were grounded in relative product quality – were such that it was not an appropriate case for considering whether the law of negligence ought to be extended. The Court held that recognizing the possibility of tort liability for economic loss for non-dangerous goods on the facts pleaded in Whirlpool would “represent such a quantum leap” from the existing case law (and specifically Winnipeg Condominium), such that it was plain and obvious that the plaintiffs’ negligence claim could not succeed. (In Winnipeg Condomimium, the Supreme Court found that the structural defects at issue posed a real and substantial danger, and, accordingly, it was not necessary to consider whether there was liability in tort for non-dangerous defects.)

In so ruling, the Court of Appeal agreed with Justice Perell that policy considerations negate recognizing a cause of action in negligence for diminution in value for a defective, non-dangerous consumer product. While the Court acknowledged that a major impetus for class proceedings legislation in Ontario was to provide access to justice for consumer claims, including for defective products, it cited the availability of remedies for Ontario consumers generally – and the appellants in particular – under the “broad” statutory framework of the Business Practices Act and the Consumer Protection Act, as well as under the Sale of Goods Act. The Court concluded that the appellants should be left to their statutory and contractual remedies, and should not look to tort law to negotiate a better bargain for themselves.

Negligence claim could be decided at certification stage

The Court of Appeal also held that the motion judge was entitled to adjudicate the negligence claim at the certification motion. The Court determined that on the facts pleaded in Whirlpool, it was doubtful that a full factual record would have been of assistance to the trial judge in deciding the legal question of whether Whirlpool owed the appellants a duty of care. The Court determined that access to justice would not be served by forcing the parties on to a costly trial where a policy analysis could be conducted on the certification motion to decide the negligence claim.

Implications of the Supreme Court’s leave decision

The Supreme Court’s denial of leave to appeal in Whirlpool indicates that the Court agreed with the Ontario Court of Appeal’s finding that the facts of Whirlpool did not lend themselves to consideration as to expanding the law of negligence for economic loss caused by defective, non-dangerous products. While there remains uncertainty as to whether there can be tort liability for pure economic loss arising from non-dangerous defective products, we can anticipate that Whirlpool will serve as a caution to potential class plaintiffs seeking to commence class proceedings grounded in pure economic loss in the context of non-dangerous consumer goods.

Additionally, the courts’ decisions and reasons in Whirlpool signal a more interventionist approach by Canadian courts with respect to preliminary motions in the context of class proceedings. Whirlpool is one of a number of recent decisions reflecting increasing willingness of Canadian courts to dispose of proposed class proceedings at a preliminary motions or certification stage in appropriate circumstances where a full trial and factual record is not required. Whirlpool reinforces the important gate-keeping role played by courts in the context of class proceedings to ensure that where a plaintiff’s claim does not disclose a viable cause of action, defendants are spared the significant expense of a protracted common issues trial.