December 17th, 2013
In Arora v. Whirlpool Canada LP, 2013 ONCA 657, the Ontario Court of Appeal upheld Justice Perell's decision to deny certification for a proposed class action alleging pure economic loss. (Justice Perell's decision is discussed in an earlier blog entitled, “Certification Denied for Action Alleging Pure Economic Loss”). The proposed class action alleged a common design defect in early models of Whirlpool front-loading washing machines, such that an unpleasant odour developed.
The proposed class' claims with respect to breach of express and implied warranty were dismissed as the express warranty did not cover design defects and there was no privity of contract between Whirlpool and the proposed class members. The claims advanced under the Competition Act for failure to disclose the design defect were dismissed because there is no general duty of disclosure under the Act and failure to disclose does not count as a misrepresentation under s. 52 of the Act. The significance of this decision, however, lies in the Court of Appeal's reasons for dismissing the claims alleging pure economic loss for negligent design of a non-dangerous consumer product.
While the Court of Appeal upheld Justice Perell's conclusion that the proposed class action's negligent design claim had no reasonable prospect of success because it did not disclose a tenable cause of action for pure economic loss, it noted that the law in this area is not settled as the motion judge posited. The Supreme Court of Canada in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co.,  1 SCR 85, held that recovery for pure economic loss extends to cover the repair costs of a dangerously constructed building but it “did not settle that there is no recovery in tort for economic loss caused by defective, non-dangerous consumer products”. Rather, “the Supreme Court carefully left the issue of whether there should be no recovery for pure economic loss where goods are shoddy, but not dangerous, for another day.”
The Court of Appeal next evaluated whether the motion judge had to decide the Anns test on a fuller evidentiary record and found that this was not necessary. The Court of Appeal set out that on a pleadings motion, the motion judge should consider whether a full factual record will assist the trial judge in assessing the viability of a novel duty of care, and where it will not, the question of law should be decided before additional resources are expended on a costly trial. The Court of Appeal noted that the appellants had already incurred a $278,500 adverse costs award from the certification motion, and that “access to justice”, one of the fundamental principles promoted by class actions, “would not be served by forcing these parties on to an even more costly trial.”
In the opinion of the Court of Appeal, imposing a duty of care on Whirlpool to the owners of the washing machines would represent a “quantum leap” in the law from Winnipeg Condominium. In Winnipeg Condominium, policy considerations did not negate imposing a duty on the contractor to ensure that the building was free from dangerous defects because there was no risk of indeterminate liability: claimants were limited to the class of persons for whom the building was constructed, damages were limited to the reasonable cost of repairing the building to a non-dangerous state, and the contractor was only liable during the useful life of the building.
In contrast, the proposed class' claims were essentially for the difference between what consumers paid for their washing machines and what they were actually worth in light of the alleged design defect. The Court of Appeal noted that this is a contract, not a tort, remedy, and it stated that the court system cannot accommodate expanding tort law to grant this type of remedy outside of consumer protection legislation:
[R]equiring the courts to analyze a myriad of transactions—some including small outlays of money for goods that quickly depreciate and become redundant—in tort, without the framework of consumer protection legislation, to determine whether the consumer received value for his or her money, would burden an already taxed court system.
Finally, in response to the appellants' argument that denying certification in this case would thwart one of the major impetuses for creating class action legislation in Ontario—to provide access to justice for consumer claims, including those for defective products—the Court of Appeal noted that the appellants were not without alternative remedies. Both the Sale of Goods Act and the Consumer Protection Act provide the appellants with a statutory remedy against the seller of the washing machines, and the Business Practices Act and the Consumer Protection Act provide for remedies against Whirlpool for unfair practices.
The Court of Appeal emphasised that it is not the court's role to change the law of negligence to provide for a consumer remedy against Whirlpool. The Ontario legislature has specifically declined to create an exception to privity of contract in the Consumer Protection Act, which would allow consumers to recover against manufacturers for breach of implied warranties for quality or fitness for purpose. The Court of Appeal also noted that the proposed class did not argue that these statutory provisions were “difficult, expensive, inconvenient or otherwise inadequate.”
Overall, although the Court of Appeal did not bar future claims alleging pure economic loss for negligent design of non-dangerous consumer products, it signalled that it will not extend the law of negligence where a remedy can be sought under other contractual and statutory causes of action. While this decision would appear to direct future class actions for non-dangerous consumer goods to advance claims against sellers, instead of manufacturers, the Court of Appeal left open the possibility that a future class may be able to establish that the current statutory and contractual remedies are inadequate.
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