The Supreme Court of Canada recently refused leave to appeal the decision of the Ontario Court of Appeal which determined that plaintiffs cannot recover for pure economic loss resulting from the negligent design of a non-dangerous product.
Ontario Superior Court of Justice Determines No Reasonable Cause of Action
This action arises out of a proposed class action brought by three consumers against Whirlpool Canada LP and Whirlpool Corporation (collectively, “Whirlpool”) claiming that front-loading washing machines were improperly designed and prone to developing an unpleasant smell. The consumers sought damages for breach of express and implied warranty, breach of the Competition Act, negligence and waiver of tort. The consumers did not allege that the washing machines were dangerous or caused injury, but rather that they incurred repair costs and/or damage to their clothing arising out of the machines. As a result, the consumers sought damages for overpayment in respect of the machines, for the difference in value between what the consumer paid and what they said the machine was worth.
Justice Perell for the Superior Court refused to certify the case, because it was plain and obvious that the pleading disclosed no reasonable cause of action. Justice Perell further held that the plaintiffs “should not look to tort law to negotiate a better bargain for themselves,” because compensation for economic loss is best regulated by contract and property law. Accordingly, Justice Perell concluded that the action had no reasonable prospect of success. This was ultimately upheld by the Ontario Court of Appeal.
Ontario Court of Appeal Upholds Decision of the Superior Court of Justice
In denying the consumers’ appeal, the Appellate Court found that the consumers had no claim against Whirlpool under either the express warranties or an implied warranty of fitness. The Competition Act prohibition against misrepresentations did not extend to Whirlpool's failure to disclose problems with the machines' self-cleaning capabilities and the consumers had no actionable claim in negligence because they failed to plead what economic losses they suffered. The Appellate Court further refused to participate in a valuation of the machines purchased to determine whether or not they were overpriced. There was no legal wrongdoing and no basis to argue waiver of tort.
The Appellate Court observed that the plaintiffs had failed to plead that they had a cause of action in respect of damage to property. The Court summarized the plaintiffs’ claim as being one where “they paid more for their washing machines than they are worth. It is squarely about relative product quality - a matter that is customarily dealt with by contract and not easily defined by tort.” There is consumer protection legislation in Ontario that might have allowed for potential claims by the plaintiffs, but these were not pursued. In summary, the Appellate Court agreed with Justice Perell that the plaintiffs ought to be left to their statutory and contractual remedies, and that negligence claims for defective and non-dangerous products do not belong in Ontario tort law.
The Supreme Court of Canada Refuses Leave to Appeal
Most recently, the Supreme Court of Canada dismissed the consumers’ application for leave to appeal the Appellate Court’s decision. This ultimately recognizes that claims about relative product quality are customarily dealt with by contract law and not by tort or negligence law. In other words, it is not the role of the courts to analyze consumer transactions under tort law to determine whether the consumer received value for his or her money.
Key Take-Away Principle:
This series of decisions in Arora v. Whirlpool Canada LP provides clarity on the limited availability of economic loss causes of action against manufacturers in product liability law in Ontario. It further serves to caution potential representative plaintiffs seeking to commence class proceedings on the basis of economic loss arising out of allegedly non-dangerous products. Manufacturers and their counsel may take comfort in the fact that in cases which do not involve property damage or personal injury, they will not be subject to potential tort liability, and can instead focus on the contractual and statutory aspects of product claims.