|
Torts - Negligence - Product Liability. North v. Bayerische Motoren Werke AG
In North v. Bayerische Motoren Werke AG (Ont CA, 2025) the Ontario Court of Appeal allowed an appeal from a class proceeding certification decision, where the central issue was "the type of losses recoverable at law in a negligence action involving an allegedly defective product".
The court distinguishes 'pure economic loss' from physical damages, here in a product liability context:(1) Pure economic loss v. claim for damages arising from injury to person or property
[23] This case highlights the distinction between a pure economic loss claim and a traditional negligence claim.
[24] Pure economic loss is economic loss unconnected to a physical or mental injury to the plaintiff’s person or physical property: 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, [2020] 3 S.C.R. 504, at para. 17, aff’d 2018 ONCA 407, 140 O.R. (3d) 481.
[25] The legal distinction between a standard negligence claim and a claim for pure economic loss relating to a defective product is explained in Lewis N. Klar, et al., Remedies in Tort, Vol. 3 (Toronto: Thomson Reuters, 2024), at §23:23:In terms of liability, the common [law] draws a significant distinction between a product that is damaged by an external force or incident and a product that is inherently flawed and likely to become damaged and perhaps a safety risk to others. Whereas the former gives rise to a standard negligence claim, the latter raises difficult questions about the recovery of pure economic losses. [26] So, for example, in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 1995 CanLII 146 (SCC), [1995] 1 S.C.R. 85, La Forest J. observed that the losses claimed by the condominium corporation were all quite clearly under the category of “economic loss”. The corporation claimed damages in excess of $1.5 million, representing the cost of repairing the condominium building subsequent to the collapse of some of its exterior cladding. The corporation did not claim that anyone was injured by the collapse or that the collapse damaged any of its “other property”: Winnipeg Condominium, at paras. 13-14. Rather, as La Forest J. explained, “its claim is simply for the costs of repairing the allegedly defective masonry and putting the exterior of the building back into safe working condition”: Winnipeg Condominium, at para. 13.
[27] Building on Winnipeg Condominium, the majority in Maple Leaf Foods clarified the basis and limits of recovery for pure economic loss arising from shoddy or defective goods.
[28] The common law imposes liability for negligent interference with and injury to “the rights in bodily integrity, mental health and property”: Maple Leaf Foods, at para. 18. There is no general right, in tort, that protects one from the negligent or intentional infliction of pure economic loss. And, to be sure, recovery of pure economic loss is the exception and not the rule.
[29] The current categories of pure economic loss incurred between private parties include “the negligent supply of shoddy goods or structures”: Maple Leaf Foods, at para. 21. However, the fact that a claim arises from a particular kind of pure economic loss does not necessarily signify that such loss is recoverable. Rather, the categories are analytical tools adopted “for ease of analysis in ensuring that courts treat like cases alike”: Maple Leaf Foods, at para. 22. To establish liability, the plaintiff must prove all of the elements of the tort of negligence, including that the plaintiff sustained damage.
[30] Generally speaking, there is no liability for negligence “in the air” and no right to be free from the “prospect of damage”, only a right not to suffer damage resulting from the “exposure to unreasonable risk”: Maple Leaf Foods, at para. 44, citing Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420, at para. 33 (emphasis in original). That said, the law will view the plaintiff as having sustained actual injury to person or property where a design or construction defect poses a real and substantial danger and the plaintiff incurs costs in preventing the injury from occurring: Maple Leaf Foods, at para. 45. In other words, economic loss incurred to avert danger “is analogized to physical injury to the plaintiff’s person or property”: Maple Leaf Foods, at para. 45.
[31] In such cases, the scope of recovery is limited to the costs of averting real and substantial danger, as explained at paras. 48-49 of Maple Leaf Foods:It follows that the normative basis for the duty not only limits its scope, but in doing so also furnishes a principled basis for limiting the scope of recovery. As La Forest J. explained [in Winnipeg Condominium, at para. 36], the potential injury to persons or property grounds not only the duty but also one’s entitlement to “the cost of repairing the defect”, that is, the cost of mitigating the danger by “fixing the defect and putting the building back into a non-dangerous state”. In other words, allowing recovery exceeding the costs associated with removing the danger goes beyond what is necessary to safeguard the right to be free from injury caused to one’s person or property (see Winnipeg Condominium, at para. 49).
[W]hat a plaintiff can recover, irrespective of whether the claim is in respect of a building structure or a good, will be confined by the duty’s concern for averting danger. The point is not to preserve the plaintiff’s continued use of a product; rather, recovery is for the cost of averting a real and substantial danger of “personal injury or damage to other property” (Winnipeg Condominium, at para. 35). [Italics in original; underlining added.] [32] Accordingly, there is no basis for any recovery exceeding the costs associated with removing the real and substantial danger. In the words of Maple Leaf Foods, “a breach of the duty recognized in Winnipeg Condominium exposes the defendant to liability for the cost of averting a real and substantial danger, and not of repairing a defect per se”: Maple Leaf Foods, at para. 51 (italics in original; underlining added). In other words, what is protected is a right to be free of a negligently caused real and substantial danger, “not to the continued use of a product”: Maple Leaf Foods, at para. 54. This means that if the danger can be removed without repair, “the right is no less vindicated”: Maple Leaf Foods, at para. 54. In that situation, “if the plaintiff incurs a reasonably foreseeable cost in discarding the product – such as a regulatory disposal fee – that is recoverable as a cost of removing the danger”: Maple Leaf Foods, at para. 54 (emphasis added).
....
[70] In the text Lawrence G. Theall, et al., Product Liability: Canadian Law and Practice (Toronto: Carswell, 2023), at p. 9-19, the authors recognize that the limits on recovery for pure economic loss may not seem intuitive:It may seem odd to identify a claim for the cost of repairing a product or structure as “pure economic loss” when a defect in the product or structure itself causes damage to the whole of the product or structure. The layperson would have no difficulty finding property damage in these circumstances. However, the Supreme Court of Canada has rejected the so-called “complex structure” theory, which would allow recovery for the cost of repairs where one part damages the whole. [71] Although this logic has bothered many courts, the legal distinction rests on the ability of parties to allocate the risk among themselves by contract: Allen M. Linden et al., Canadian Tort Law, 12th ed. (Toronto: LexisNexis Canada, 2022), at pp. 471-472.
....
[78] The certification judge was correct that recovery is not possible, as a matter of law, where there are no repair or disposal costs. If there is no physical injury or actual property damage, Maple Leaf Foods limits recoverable damages to the costs of repair or disposal to avert real and substantial danger. The plaintiffs have not pointed to any case law where plaintiffs were permitted to recover for notional or speculative repair costs, and the language of Maple Leaf Foods, at para. 45, talks about “expenditures incurred” or “economic loss incurred” to avert real and substantial danger.
....
[94] In Maple Leaf Foods, at paras. 54-55, the majority discussed the recoverability of disposal costs:[T]here is the good whose dangerous defect can realistically be addressed by discarding it. This will, we expect, apply to most defective consumer goods. Again, the liability rule in Winnipeg Condominium protects a right to be free of a negligently caused real and substantial danger, not to the continued use of a product. If the danger can be removed without repair, the right is no less vindicated. (To be clear, if the plaintiff incurs a reasonably foreseeable cost in discarding the product – such as a regulatory disposal fee – that is recoverable as a cost of removing the danger).
Secondly, there is the kind of good like the RTE meats, for which “repair” is simply not possible. The good must, therefore, also be discarded. While in such circumstances the plaintiff may recover any costs of disposal, that is the extent of its possible recovery under this liability rule. It must be remembered that, because the right protected by this liability rule is that in the physical integrity of person or property, recovery is confined to the cost of removing a real and substantial danger to that right – by, where possible, discarding it. Conversely, it does not extend to the diminution or loss of other interests that the appellant invokes here, such as business goodwill, business reputation, sales, profits, capital value or replacement of the RTE meats. [Italics in original; underlining added.] ....
[96] According to Maple Leaf Foods, “a reasonably foreseeable cost in discarding the product” is recoverable “as a cost of removing the danger”: at para. 54. What is protected is “a right to be free of a negligently caused real and substantial danger, not the continued use of a product”: Maple Leaf Foods, at para. 54. Recovery of disposal costs “is confined to the cost of removing a real and substantial danger” to “the physical integrity of person or property”: Maple Leaf Foods, at para. 55. In other words, disposal costs, like repair costs, are recoverable if they are incurred to avert real and substantial danger. . Fernandez Leon v. Bayer Inc.
In Fernandez Leon v. Bayer Inc. (Ont CA, 2023) the Court of Appeal considered (and granted) an appeal of a motion order that struck product liability pleadings [under R21.01(1)(b)] without leave to amend:[3] Bayer’s motion was brought under r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, asserting that the statement of claim did not disclose a cause of action. The motion judge agreed, concluding that there were substantial foundational deficiencies in the appellants’ claim that could not be cured by simply amending the pleading.
[4] Irrespective of the deficiencies that she identified in the appellants’ pleading, the motion judge erred in refusing to grant leave to amend the statement of claim. She did not advert to or apply the test for amendment of pleadings articulated by this court. Instead, the motion judge concluded that there was “no benefit in permitting the [appellants] to try and find some tenable basis in fact for a claim against Bayer when none [had] been found by them to date”.
[5] Leave to amend a statement of claim should be denied only in the clearest of cases, when it is plain and obvious there is no tenable cause of action, the proposed pleading is scandalous, frivolous or vexatious, or there is non-compensable prejudice to the defendants: see McHale v. Lewis, 2018 ONCA 1048, at paras. 6 and 22; Klassen v. Beausoleil, 2019 ONCA 407, 34 C.P.C. (8th) 180, at para. 25. This test applies even where it is determined that the statement of claim, as pleaded, should be struck: see Burns v. RBC Life Insurance Company, 2020 ONCA 347, 151 O.R. (3d) 209; Tran v. University of Western Ontario, 2015 ONCA 295. The fact that allegations are bald and lack supporting material facts is not itself a reason for refusing leave to amend: Miguna v. Ontario (Attorney General) (2005), 2005 CanLII 46385 (ON CA), 205 O.A.C. 257, at para. 22.
....
[8] The test for striking pleadings for not disclosing a reasonable cause of action is stringent, and the moving party must satisfy a very high threshold in order to succeed. This may occur where the allegations do not fall within a cause of action known to law, or because the statement of claim fails to plead all the essential elements of a recognized cause of action: Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 1998 CanLII 4831 (ON CA), 164 D.L.R. (4th) 257 (Ont. C.A.), at para. 10. Unless it is “plain and obvious” that there is no chance of success, a claim, even a novel one, ought to be allowed to proceed. The pleading must be read generously, erring on the side of permitting an arguable claim to proceed to trial: see Rausch v. Pickering (City), 2013 ONCA 740, 369 D.L.R. (4th) 691, at para. 34.
....
[11] In our view the proposed amendments plead the essential elements of the claims for negligent design and manufacture. The proposed amendments plead the material facts that are required to support the pleaded causes of action. That is, they meet the low threshold for pleading a cause of action.
[12] We do not agree with Bayer that in every case where a plaintiff alleges negligence in the design and manufacture of a product, the statement of claim must be struck unless it identifies the specific defect in the product that caused the injury. The particulars of a specific defect are not in our view elements of the tort that are always required to be pleaded before the claim discloses a cause of action. To identify a specific manufacturing or design defect in every case would place too onerous a burden on a plaintiff at the stage of initiating a proceeding in a product liability action. In this case, involving a medical device that is alleged to have caused injury after it was implanted for its intended use, the appellants meet the requirement to plead a cause of action in negligence, even if they cannot at this time identify a specific defect in the product’s manufacture or design. . Adam v. Ledesma-Cadhit
In Adam v. Ledesma-Cadhit (Ont CA, 2021) the Court of Appeal reviewed 'duty to warn' negligence principles for manufacturers in medical product liability cases:The governing legal principles
[19] The general principles governing the duty to warn by manufacturers of medical products are well known, not in dispute, and were summarized by the Supreme Court in Hollis v. Dow Corning Corp., 1995 CanLII 55 (SCC), [1995] 4 S.C.R. 634, at paras. 20 to 29:(i) A manufacturer of a product has a duty in tort to warn consumers of dangers inherent in the use of its product of which it has knowledge or ought to have knowledge;
(ii) The duty to warn is a continuing duty, requiring manufacturers to warn not only of dangers known at the time of sale, but also of dangers discovered after the product has been sold and delivered;
(iii) All warnings must be reasonably communicated and must clearly describe any specific dangers that arise from the ordinary use of the product;
(iv) The nature and scope of the manufacturer’s duty to warn varies with the level of danger associated with the ordinary use of the product. Where there are significant dangers, it will rarely be sufficient for manufacturers to give general warnings concerning those dangers. Instead, the warnings must be sufficiently detailed to give the consumer a full indication of each of the specific dangers arising from the use of the product;
(v) Manufacturers of products such as drugs that are ingested, consumed or otherwise placed in the body, and thereby have a great capacity to cause injury to consumers, are subject to a correspondingly high standard of care under the law of negligence;
(vi) There is a heavy onus on manufacturers of drugs to provide clear, complete, and current information concerning the risks inherent in the ordinary use of their product;
(vii) As a general rule, the duty to warn is owed directly by the manufacturer to the ultimate consumer. However, an exception known as the “learned intermediary rule” applies where a product is highly technical in nature and is intended to be used only under the supervision of experts, such as physicians, or where the nature of the product is such that the consumer will not realistically receive a direct warning from the manufacturer before using the product. Where an intermediate inspection of the product is anticipated or where a consumer is placing primary reliance on the judgment of a “learned intermediary”, such as a physician, and not on the manufacturer, a warning to the ultimate consumer may not be necessary and the manufacturer may satisfy its duty to warn the ultimate consumer by warning the learned intermediary of the risks inherent in the use of the product;
(viii) The “learned intermediary” rule presumes that the intermediary physician is “learned”, in the sense that the physician is fully apprised of the risks associated with the use of the product. A manufacturer can only be said to have discharged its duty to the consumer when the intermediary’s knowledge approximates that of the manufacturer. To allow manufacturers to claim the benefit of the rule where they have not fully warned the physician would undermine the policy rationale for the duty to warn, which is to ensure that the consumer is fully informed of all risks. [20] In Hollis, the Supreme Court identified the overarching question to be answered as whether the manufacturer owed the patient a duty to warn of a specific risk. The Supreme Court broke that overarching question down into two sub-questions:(i) Did the manufacturer have a duty to warn recipients of the medical product directly or could it satisfy its duty by warning a learned intermediary, such as a physician?
(ii) If the manufacturer could properly discharge its duty by warning the physician, did it adequately warn the physician of the specific risk in light of its state of knowledge at that time?
|
