Canadian case law: Arora et al v Whirlpool Canada LP and ...

Canadian case law: Arora et al v WhirlpoolCanada LP and Whirlpool CorporationDaniel Stern BLAKE, CASSELS & GRAYDON LLPJustice Perell of the Superior Court of Justice inOntario, Canada recently dismissed the plaintiffs’ classcertification motion in Arora et al v Whirlpool CanadaLP and Whirlpool Corporation, 1 on the basis, in part,that there can be no recovery in a product liabilitynegligence action for pure economic losses against themanufacturer of a non-dangerous consumer product.BackgroundClass actions are permitted in all provinces in Canada,with nine out of ten provinces having enacted specificclass action legislation.In most of the provinces that have enacted specificlegislation other than Quebec, an action can be certifiedas a class action if the plaintiff can establish that (a) thereis a sustainable cause of action (which will be assessedbased on the pleadings alone), (b) there is an identifiableclass with two or more persons, (c) the claims of thosepersons have substantial issues of fact or law in common,(d) a class action is the preferable procedure forresolving the common issues having regard to theobjectives of the legislation — access to justice, judicialeconomy and behaviour modification, and (e) the proposedrepresentative plaintiff can adequately representthe interests of the class.In this case, the named plaintiffs sought to representa class of persons who owned front-loading washingmachines manufactured by the defendants between 2001and 2008. The plaintiffs alleged that the washing machinessuffered from a design defect that led to buildup ofbiofilm, mould, mildew and bacteria. The pleadingsalleged that biofilm buildup led to a variety of healthproblems as a result of exposure to “toxins and allergens.”However, plaintiffs’ counsel argued the motion onthe basis that the defendants were liable in negligencefor the class members’ pure economic losses. In additionto the claims based on negligent design, the plaintiffsalso alleged negligent failure to warn, breach of warranty,and misrepresentation contrary to s 52 of theCompetition Act RSC 1985, c C-34.Negligence claimsIn considering the requirement on a class certificationmotion to plead a sustainable cause of action, JusticePerell ruled that there can be no recovery for pureeconomic losses in a product liability action in negligenceagainst the manufacturer of a non-dangerousproduct. Justice Perell grounded his decision in ananalysis of past jurisprudence as well as an analysis fromfirst principles, both of which led him to the sameconclusion.Jurisprudential analysisThe jurisprudential analysis begins with a review ofthe four policy considerations behind the law on recoveryfor pure economic loss discussed by Justices Iacobucciand Major in the Supreme Court of Canada (SCC)decision Martel Building Ltd v Canada: 2economic interests are less compelling of protection thanbodily security or proprietary interests; unlimited ability torecover for pure economic loss could lead to indeterminateliability; economic losses often arise in a commercialcontext, in which parties are best suited to guard againstthem through contracts; and recovery for economic losscould encourage inappropriate lawsuits.Justice Perell then noted the five exceptions to thisrule cited by the SCC in Canadian National Railway Cov Norsk Pacific Steamship Co: 3 negligent misrepresentation;negligence of public authorities; negligent performanceof a service; supply of shoddy goods orstructures; and relational economic losses.The SCC elaborated on the exception for the supplyof shoddy goods or structures in Winnipeg CondominiumCorporation No 36 v Bird Construction Co, 4which remains the leading Canadian appellate precedenton the matter. There, Justice La Forest held that theexception required the defect to be “dangerous” and notmerely “shoddy,” since the rationale behind the exceptionwas that courts should not require a person to bephysically injured in order to sue, when the danger isreadily apparent in advance. On the whole, Justice Perellinterpreted the Winnipeg Condominium decision to standfor the proposition that the exception is narrowly limitedto pure economic losses caused by “substantially dangerousproducts” (generally, the costs to repair a productto prevent danger from materialising), noting that “[d]angerousnesswas the cornerstone to the duty of careanalysis and a critical precondition to liability.”australian product liability reporter October 2012 299