Product Liability e-COMMUNIQUÉ - November 2017

Product Liability

11/06/2017       By Peter Henein, Chris Hersh, Suhuyini Abudulai, Stefanie Holland, Christopher Horkins, Jeremy Martin

In This Issue

  1. Product Liability 101: What You Need To Know
  2. Consumer Protection in Product Liability Claims
  3. The Relationship Between Regulation and Litigation
  4. Is Canada Losing Ground In The Autonomous Vehicle Industry?
  5. BC Court Toasts Vicarious Liability Claim for “Defective Sandwich”
  6. It Had to Be You: A Primer on the Law of Misnomer

Message from Peter Henein, Chair, Product Liability Group: I want to thank Chris Hersh and Suhuyini Abudulai for contributing to this issue. Chris brings his extensive regulatory knowledge and experience while Suhuyini adds her expertise on consumer protection legislation - both add considerable depth to our product liability work. I hope you enjoy this newsletter. We’ve taken it back to basics on some key areas of law relevant to all industries.

Product Liability 101: What You Need To Know

By Stefanie Holland

In Canada, all parties in the supply chain can be exposed to liability for a defective product including the manufacturers, importers, distributors and retailers. Product liability claims typically fall into one or more of the following three categories:

  1. Design defect. The product, as designed, poses an unreasonable risk of harm to foreseeable users that could have been averted or mitigated through the use of an alternative design.
  2. Manufacturing defect. The product was not manufactured in accordance with the applicable design or specifications. Though the product’s design was safe, products are sometimes manufactured with dangerous flaws. Not all of the same product are necessarily dangerous in these cases — just those from a defective batch.
  3. Warning defect. The manufacturer failed to warn product users of dangers it knew or ought to have known were associated with the foreseeable use of the product. This refers to cases in which a product did not come with proper safety warnings or instructions.

What Is The Standard Of Care?

A plaintiff must establish that the defendant owed it a duty of care, that the defendant breached the standard of care and that the plaintiff suffered damages that are linked to that breach.

Is There a Limitation Period for Product Liability Claims?

Depending on the province, limitation periods in Canada generally range from two to six years and are subject to the “discoverability” principle – in other words, when the plaintiff “discovered” that it had a potential claim.

What Types Of Damages Can Be Claimed For?

Damages for bodily injury and damage to property are recoverable. There is no limit on the quantum of damages recoverable from one manufacturer, with the exception of general damages for pain and suffering being capped at $371,000. Punitive damages, the purpose of which is to deter a defendant from engaging in conduct similar to that which formed the basis of the claim, are recoverable but in rare cases.

What Does This Mean For Manufacturers?

There is a proximate relationship between the purchaser of a product and the manufacturer of the product. In light of this, manufacturers should take reasonable steps to ensure that its products will not result in personal injury or property damage, at least within the scope of the product’s foreseeable uses. In order to ensure that it has averted or at the very least, mitigated, any foreseeable claims, manufacturers should ensure that their products comply with the applicable legislation and regulatory regimes, and they should review their insurance coverage and limits with their respective insurance broker.

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Consumer Protection in Product Liability Claims

By Suhuyini Abudulai

While the standard of liability for product liability claims in Canada is negligence, there is a mix of federal, provincial, and territorial consumer protection laws, which could potentially give rise to additional causes of action. The following are some relevant areas under certain Canadian jurisdictions that may apply in a product liability claim.

  • Implied warranties. The implied conditions and warranties under sale of goods legislation cannot be varied or excluded (e.g., implied conditions of fitness and merchantability).
  • Misrepresentations. It is illegal to make false, misleading, deceptive or unconscionable representations. Some examples of these representations include:

o a representation that the goods are of a particular standard, grade, style or model, if they are not;

o using exaggeration, innuendo, or ambiguity regarding a material fact; or

o taking advantage of a consumer’s ignorance, illiteracy, or disability.

  • No waiver of rights. Any agreement or waiver of a consumer’s substantive and procedural rights under consumer protection legislation is not enforceable.
  • Mandatory arbitration and class action waivers. Mandatory arbitration provisions and class action waivers in consumer agreements are not enforceable.

Given that the consumer protection laws are not entirely harmonized, the laws of the applicable jurisdiction must be considered by manufacturers, suppliers, and others when engaging in a transaction with consumers that may give rise to product liability claims.

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The Relationship Between Regulation and Litigation

By Chris Hersh

All products, consumer products such as electronics, clothes, food and beverage in particular, are increasingly frequent targets for product liability litigation. This trend is likely to continue given consumers’ increased focus on both health and safety-related issues (both real and imagined) as well as the accuracy of the advertising claims made regarding the efficacy or quality of a product.

Accordingly, to minimize potential exposure to regulatory sanctions and potential product liability claims, companies seeking to sell their products in Canada need to consider the regulatory regime applicable to their products and ensure that their products meet all relevant standards before making them available to Canadian customers. While there are numerous federal laws governing product standards and marketing claims, in many cases, there are also separate provincial regulatory regimes that may apply, depending on the specific product. Some of the key federal product-related statues include:

  • Canada Consumer Product Safety Act. The CCPSA regulates the manufacture and import, advertising and sale of consumer products and includes a number of product-specific regulations (for example relating to baby products and clothing, textile flammability, and toys).
  • Competition Act. The CA contains a broad range of provisions, but of particular relevance are the criminal and non-criminal provisions prohibiting misleading advertising.
  • Consumer Packaging and Labelling Act. The CPLA governs the packaging and labelling of a broad range of products and sets out the mandatory label information.
  • Canada Agricultural Products Act (and Regulations). The CAPA regulates agricultural practices and to the production, manufacture, composition, packaging, labelling, grading, marketing, storage, advertising, importation and exportation of food products.
  • Food and Drugs Act. The FDA regulates the labelling, packaging, treating processing, sale or marketing of food, drug or medical device products and includes a number of product-specific regulations (for example relating to cosmetics, drugs, medical devices and natural health products).
  • Motor Vehicle Safety Act. The MVSA regulates the manufacture, and importation of motor vehicles and motor vehicle-related equipment and includes regulations regarding standards for a broad range of vehicles.

In addition, there are number of product-specific federal regulatory regimes applicable to products including, aircraft, boats, hazardous products, fertilizers, pesticides, jewellery, explosives, alcohol and textiles, among others.

In addition to the federal regulatory regime, there are also several provincial regimes applicable to a wide range of products. The various provincial product regulatory regimes regarding standards for electrical products, environmental standards, food safety, fertilizers, pesticides, among others.
As the list of federal and provincial product-related laws discussed above illustrates, the Canadian regulatory landscape essential covers all products sold in Canada  and in many cases, multiple regulatory regimes apply to a single product. Given the increased enforcement of these regimes, in particular those relating to health and safety and the accuracy of promotional claims, it is critical that companies operating in Canada ensure that they understand and comply with all regulations relevant to their products. This is especially so given that regulatory non-compliance often leads to related product liability claims.

While complying with the applicable regulations doesn’t necessarily immunize a product from liability claims, non-compliance with regulations certainly increases both the risk of exposure to product liability claims and the related negative publicity these types of claims can have on the value of your brand.

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Is Canada Losing Ground In The Autonomous Vehicle Industry?

By Stefanie Holland

Autonomous Vehicles (AVs) have the potential to change every sector of our economy but is Canada late to the party? Some would say yes. We previously reported on the status of AVs.1 Since then, despite some minor advancements progressing towards self-driving cars becoming the new norm, no new regulations have been put into place.

The Province of Ontario was the first province to allow on-road testing of AVs. Under this pilot program, seven groups were approved for on-road testing: Uber, the University of Waterloo, the Erwin Hymer Group, QNX, Continental, X-matik Inc., and Magna.2 Despite this, Canada has been criticized as being “dead last” in the self-driving industry because it has yet to pass legislation to manage the technology.3 Perhaps the real concern is that Ontario’s pilot project, which was launched over a year ago,4 will not be successful if the anticipated regulations are too stringent to encourage the development of this rapidly evolving technology. Earlier this year, Transportation Minister Marc Garneau summed up this challenge by saying “it’s to try to ensure safety when autonomous vehicles arrive, but at the same time not to bury the developers in regulations.”5

When compared to other jurisdictions (such as the UK or Michigan), Ontario appears to progressing at a slower rate. For example, Michigan passed self-driving laws that allow companies to test autonomous cars without a driver or a steering wheel. In Ann Arbor, Michigan, Dominos Pizza has started testing people-free pizza delivery. This would not be allowed in Canada under the existing Motor Vehicle Safety Act. As another example, the UK put $164 million towards research, development and testing of AVs in just 2015 alone.

While Canada may not be as far down the road as other jurisdictions, it is certainly not the last. By virtue of the fact that Ontario has any self-driving regulations at all and has initiated a pilot project, it is ahead of a majority of other jurisdictions. It is anticipated that Transport Canada will have a position regarding policy issued some time in 2017, which will provide a framework regarding regulation and give auto makers, tech companies and investors the necessary guidance.

Despite the potential profits and benefits that accompany the AV industry, one thing is clear – the development of this technology cannot, and should not, be rushed. System and ethical wrinkles that require ironing out still remain - and when lives are at stake, sorting these issues out outweighs any potential benefit that could be gained by prematurely rolling out the technology. Our product liability team is keeping a close watch on any advancements made in the AV industry and will report to provide you with regular updates.

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1 The Robotic Revolution – Are Autonomous Vehicles an Escape from Accountability? http://www.casselsbrock.com/CBArticle/The_Robotic_Revolution___Are_Autonomous_Vehicles_an_Escape_from_Accountability_/
2 _/
https://www.thestar.com/news/gta/2017/08/22/ubers-self-driving-cars-hit-toronto-streets-today-in-manual-mode.html
3 
http://business.financialpost.com/transportation/car-wars-canada-is-dead-last-in-the-potentially-huge-self-driving-industry
4 
http://www.mto.gov.on.ca/english/vehicles/automated-vehicles.shtml
5 
http://www.metronews.ca/news/ottawa/2017/07/05/garneau-pledges-funding-for-autonomous-vehicle-rule-update.html

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BC Court Toasts Vicarious Liability Claim for “Defective Sandwich”

By Christopher Horkins

In one of the great opening lines of modern jurisprudence, the British Columbia Supreme Court recently stated in Chow v Subway Franchise Restaurants of Canada Ltd.: “This case concerns a claim for personal injury damages caused by a defective sandwich.”1

The plaintiff in this case alleged that she purchased a sandwich from a franchised Subway restaurant in Victoria, British Columbia and, while consuming the sandwich, found blood on the bun and the wrapper. The plaintiff alleged that this caused her to suffer personal injury damages for mental distress, shock and similar claims. The plaintiff’s claim, however, was not directed at the individual franchisee or any of its employees. Instead, she advanced a claim against the franchisor and its affiliates, without specifically pleading a theory of vicarious liability.

In response, the franchisor brought a motion for summary judgment and put forward evidence that the location was operated by a separately-owned franchisee corporation and that all of the employees of the location, including management, were employees of the franchisee. The franchisor further explained that all of the day-to-day operations of the restaurant, including training employees on food preparation, inspection and work safety procedures, were handled by the franchisee.

After reviewing the well-established legal principles surrounding vicarious liability, the court concluded that the plaintiff’s claims could not succeed, given that the plaintiff did not sue the “direct tortfeasor” (namely, the franchisee employee who prepared the allegedly defective sandwich) or their employer, the franchisee, and made no claim that could extend any liability by the direct tortfeasor to the franchisor. The claim was dismissed with costs.

Key Take-Away Principle

The Chow case demonstrates the importance of proper pleadings in product liability cases where claims are made against third parties by way of vicarious liability. This may apply where the end retailer (be it an automotive dealer or sandwich restaurant) is a separate and distinct entity from the original manufacturer or brand licensor. While the plaintiff may associate the product with the larger company and seek to pursue them for their deeper pockets, that company may ultimately have little or nothing to do with the defect alleged in the product. Poorly pleaded claims seeking to fix liability against the latter may be subject to early dismissal by way of summary judgment.

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1 Chow v Subway Franchise Restaurants of Canada Ltd., 2017 BCSC 1034 (CanLII), <http://canlii.ca/t/h4fnn>

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It Had to Be You: A Primer on the Law of Misnomer

By Peter Henein

We wanted to provide a primer, or reminder, on the law of misnomer, as this issue comes up a lot in product liability cases.

If the limitation period to bring a claim has expired, correcting a party who has been misnamed or misdescribed is permitted.1 Motions to add defendants or correct names of parties are often brought under Rules 26.01 and 5.04(2) of the Ontario Rules of Civil Procedure.2 Under Rule 26.01, the Court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. Under Rule 5.04(2), the Court is permitted to “add, delete or substitute a party” or “correct the name of a party incorrectly named,” under the same terms.

Case law indicates that when “there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made” even if the limitation period has passed.3 However, every case of misnomer does not result in leave to amend. The Court retains residual discretion to refuse leave where non-compensable prejudice would result.4 If the “litigation finger” is pointed at the defendant, it may be unjust to allow him or her to avoid liability by relying on a technical defence under the Limitations Act, 2002.5

The first step of the two-step test for misnomer is determining who the “litigation finger” is pointed at6:

How would a reasonable person receiving the document take it?  If, in all the circumstances of the case and looking at the document as a whole, he would say to himself: “Of course it must mean me, but they have got my name wrong”. Then there is a case of mere misnomer.  If, on the other hand, he would say:  “I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries”, then it seems to me that one is getting beyond the realm of misnomer.7

A plaintiff's pleading will be viewed as reflecting a correctible “misnomer” in respect of a defendant where it is apparent: (1) that the plaintiff intended to name the defendant; and (2) that the intended defendant knew it was the intended defendant in relation to the plaintiff’s claim. As previously indicated, such a misnomer can be corrected notwithstanding that it requires that the defendant be added to the litigation after the expiry of the limitation period.8

If it is a case of misnomer, the second question to answer is whether the Court should use its discretion under Rule 5.04(2).9

Plaintiffs and defendants alike must be mindful of the relationship between named parties and unnamed parties. Parties, and defendants specifically, should review descriptions of parties to ensure that all defendants and their roles are accurately described. Importance of prejudice to the proposed substituted defendants is key.10 A party denying that it is not the manufacturer is not sufficient; the party must indicate at whom the “litigation finger” is pointed, taking prejudice into account. For example, in Mitusev v. General Motors Corp., it was “inconceivable” that the plaintiffs’ solicitors did nothing to inform the true manufacturer of the recliner mechanism at issue.11

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1 Limitations Act, 2002, SO 2002, c 24, Sched B, ss 21(1) & (2).
2 RRO 1990, Reg 194.
3 Lloyd v. Clark, 2008 ONCA 343 at para 4; Bennett v JK (Jim) Moore Ltd., 2014 ONSC 2859 and Ormerod v Strathroy Middlesex General Hospital, 2009 ONCA 697.
4 Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 OR (3d) 768 (Ont. CA). Note that the special circumstances doctrine no longer applies under the Limitations Act, 2002 and since Joseph v Paramount Canada’s Wonderland, 2008 ONCA 469 so we cannot rely on any special circumstances that would otherwise justify the amendment. This notion of prejudice is cited in case law as recent as 2016 i.e., Fontanilla Estate v Thermo Cool Mechanical, 2016 ONSC 7032.
5 See 970708 Ontario Inc. v PCS Security Systems Inc, 2014 ONSC 4433 at para 44, citing Brand Name Marketing Inc. v Rogers Communications Inc, 2010 ONSC 2892 (Ont. Master) at para 84 for an example of this scenario.
6 970708 Ontario Inc. v PCS Security Systems Inc., 2014 ONSC 4433 at para 55.
7 Davies v Elsby Brothers Ltd., [1960] 3 All ER 672 (Eng. CA); See also Mohabir v Mohabir, 2014 ONSC 5484 at para 13.
8 Stekel v Toyota Canada Inc., 2011 ONSC 6507 at para 24; Bearss v Scobie, 2013 ONSC 5910.
9 Ormerod v Strathroy Middlesex General Hospital, 2009 ONCA 697 at para 28.
10 Bennett v JK (Jim) Moore Ltd., 2014 ONSC 2859.
11 Mitusev v General Motors Corp., 2005 CarswellOnt 4266 (Ont. SCJ) at para 24.

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