Jacqueline: Okay. Maybe we'll get started then. So as you join us, good afternoon everyone. I'm Jacqueline Armstrong Gates. I am a partner in our Waterloo region office and welcome to our Product Liability Primer. We have a lovely guest list. It's a great cross-section and there's a lot of variety involved in it so we hope that we can answer a lot of the questions that you're bringing today. There's six of us today and we're super excited about spending the next hour with you. We are all part of the Product Liability group and that spans from our Canadian offices in Quebec, to Ontario, to Calgary, to Vancouver and we represent designers, manufacturers, distributors, suppliers, installers, repairers, inspectors for a variety of products. So we equally have a good cross-section. If you wish, at the end of the slide presentation which will be put up on in front of you as well as delivered to you later, we do have our contact particulars. You can also reach out under gowlingwlg to check out our profiles and we encourage you, please ask questions, reach out to us, we're happy to talk about product liability. Okay, so I'm going to ask Shannon, please and thank you, if you can turn us to slide 2. That's wonderful.
Ladies and gentlemen, this is the agenda, what we plan to cover in the next hour. It's a high overview but we want to give everyone a little taste of product liability. So you know we are recording this session. We will ensure that you will get a copy of the PowerPoint slides, separately. There is a Q&A function. We will try to answer throughout the presentation but we will also separately, do the questions posed, the answers provided and get you a hard copy of that delivered under separate cover. Okay, let's move on to defects.
If I could please ask, Shannon, if you could go to slide 4, which talks about defects. Now, you typically don't start a book by looking at the final chapter. You start by the beginning of the story. That's where we're going to start, with defects. We gain a better understanding of what a defect is and what the obligation of the manufacturer might be. It could be a manufacturer of the ultimate end product. It could be a manufacturer of a particular part or parts that go into the end product. So let's look at the basic obligation. Your basic obligation is you have to take reasonable care to make sure that what is provided is safe and fit for the intended purpose. Now when you look at the product itself it has various phases. You've got the beginning, kind of the middle and the end. Let's talk about the beginning. The beginning is you have an idea, you're going to design a product, you're going to develop a product and you're going to test a product. You want to make sure that in that particular phase that what you do again is safe and it is fit for the reasonable purpose. Because if it's negligent then you're going to have issues that arise later on down the road. Alright. You've designed a product. You're happy. You've met the test. You've met the various regulations and now you start manufacturing. The manufacturing part of things, and this manufacturing can include those that are also suppliers, so the manufacturing part of things is you want to make sure do you have proper inspection in place? Do you have checks and balances? Do you have an audit? Do you know what you're doing when you're manufacturing? Then the last part, and we're going to expand a bit more in the next slide about these things, is distribution, marketing and sale. Again, that's the end part. In the distribution, you might have direct distribution. You might have intermediary. You might have retailers with whom you have contracts where they will take all the product and you just deliver to them and then they deal with the end user. Shannon can we go to slide 5, please.
For the benefit of those on today's webinar, for your reference have 5 and 6. I'm going to keep 5 up but slide 6 kind of adds or augments to what we're looking at. So, again, the duty to design their products because some products are inherently, may be, unsafe but you want to design them in such a way that you do what's for the intended purpose of what the end user wants and you try to eliminate as much as possible any sort of safety risks. So a design defect would be a product that's not fit for the intended use and it typically will require a recall if you have the wrong design. Later on one of my colleagues is going to talk about recalls. Now, manufacturing defects, again that was the second step in the process here, actually the manufacturing. You have a duty to ensure that it's not going to cause injury during the ordinary use of the product. Now the ordinary use is kind of a bit of a key, because as much as you try to foreshadow or think about every possible lowest common denominator as to how they're going to use your product, your expectation for designing and manufacturing is what people should be doing with this particular product that they're purchasing. Manufacturing defects are usually due to poor quality control. They usually will affect a unit or a batch but not all the products. So you might have a particular one where the paint has gone off or there was a particular part in an appliance that all that part was wrong so it's in that particular batch while it's being manufactured. As I said, when you're manufacturing there's certain things you want to consider. The inspection process. The checklist. The audit where you can pull a product off, do a random test to make sure it meets all of those required safety checks and balances. The other thing you want to do is your employees. You want to make sure that the employees are properly trained. They're the ones that are putting together, whether it's automated process, but they need to make sure that they know how to ensure that the machines that are doing the automated process are running property. Can you identify where your product was manufactured. The who, the what. What particular assembly line. When it was manufactured so that you can determine what batch that might have been. Again, this manufacturing applies to suppliers but when I talk about employees being properly trained and knowing what they're doing, that applies to everyone. Right from manufacture to suppliers to installers to the retailers. You want to make sure they're properly trained.
Duty to warn. Let's say you've manufactured, you've shipped everything out and suddenly you find out, you know what, there's something wrong with our product. We thought we had done all the checks and balances. We found out that something was not as it should be. You have a duty to warn, and this duty's not just for the manufacturer but anyone else that's dealing with the product and passing it down, and it's a continuous duty. So if you learn of a defect or danger, after the time, you have a duty to warn of it. Potentially do a recall, as I said which we'll talk about later, so there's the warning aspect of things. You might also note that with warning, a lot of times appliances will come with product manuals and they'll have a warning in it by saying these are the steps you need to take to ensure that the product is safe, is it a subject to do for maintenance perspective, it is subject to do for installation, so that is a duty to warn so people know how to use the product.
Then the last aspect of things is your duty to compensate. So even though you may have taken all of those steps along the way, if it's determined that in fact there was a defect, then you have a duty to compensate consumers for repairing the dangerous product or the other damages that might arise as a result of the product. Now, I should advise that in order to give rise to a liability claim the defect must be serious enough to diminish the intended use of the product, and/or it must have been hidden or non-apparent to a diligent buyer and must have existed at the time of the sale. So if someone decides to take a product and amend it later then that is not something that you have any control over. It's something that has to be at the time of the sale. That's really what your basic obligations and duties might be with respect to a defective product. That's an overview. That's the what part of things. I think it might be helpful to understand the who. Who's liable for product defects. So, Amber, I'm going to turn it over to you and ask if you could help the audience in that regard.
Amber: Absolutely, Jacqueline. Thank you very much. By way of an introduction, good afternoon everybody. My name is Amber Bonnell and I'm an associate at the Waterloo office at Gowling WLG and I am happy to discuss liability claims with you this afternoon. If we could go to the next slide, please. First of all, we'd like to start off by discussing, as Jacqueline kindly noted, who may be liable for a product defect. So we start off by looking at the supply chain for product manufacturers and that is all parts of the supply chain. So that may include part suppliers, assemblers or installers, importers, it could be wholesale distributors or retailers, repairers, inspectors or certifiers. That's not even an exhaustive list but really what we're trying to get at here is that we are looking every party in the supply chain. It is common to bring a proceeding against every party in a supply chain if there's an alleged defect. Causes may not be known from the beginning. In fact it's quite common that they're not so it's common to bring a proceeding against every party. It is also common for unrelated parties to sue for contribution and indemnity and will be talking a little bit more about that later on. If we could please go to the next slide.
Next, who is the manufacturer? The manufacturer is a person or company engaged in a business to design and formulate, produce, create, construct, assemble or rebuild a product or a component of a product. The product is later distributed to wholesalers and retailers who then sell it to customers. A product can be composed of different products, manufactured by different entities, rendering the identification of the manufacturer, or manufacturers, responsible more difficult to identify. This is one of the reasons why it is quite common to bring an action against numerous parties in the supply chain because often, at the beginning when a defect is alleged, it is difficult to identify who may have been responsible. That comes to the next question which is who may file a suit in a product liability action? Anyone in the chain of ownership of the product can file a suit and/or a third party claim. In addition, anyone who alleges that they suffered damages, who is or was not the owner of the product, can also file a suit against anyone in the chain of ownership of the product up to the manufacturer. This means that any person or party that may allege that they'd suffered damages, even if they're not part of the supply chain, is able to bring an action. If a plaintiff has not named other parties as defendants, the manufacturer should issue a third party claim against the other party, within the time period allowed to have brought the original action. An example of this might be that if a plaintiff has brought an action as against a company, specifically, that company may want to further bring a third party claim against the installer as the installer may hold significant liability for any damages that may occur. Out of caution it's best to issue a third party claim within 2 years of the date that the statement of claim was issued. We'll be discussing limitation periods a little bit later on, however, in general 2 years is the period of time that you want to remember to have all potential claims issued.
Next, we will review who bears the burden. Except in Quebec, which my colleagues will be discussing later on in this presentation, the plaintiff, the party that brought the action bears the burden of proving the constituent elements of the case on the balance of probabilities. The constituent elements are a duty of care meaning did the company, in this instance, owe a duty of care to, in this instance, the end user? Second, a breach of the duty of care. Was that duty breached? Did this potentially alleged defect breach that duty? Third is damages. Were there actual damages? Are they quantifiable? If there are damages that is the third step of the test. The fourth step is that those damages were caused by the breach of the duty of care. That is the part of the test where liability comes in most significantly. There is no reverse onus, meaning there's not a similar duty on the defendant in the case. Although in certain cases the defendant's failure to bring evidence refuting a plaintiff's case has lead to an adverse inference against it.
Now there are several defenses available if an action has been brought in product liability. Defenses that may be available include the following five most common defenses. First, contributory negligence; that the party that brought the action did something to contribute to the damages. Second, the intervening act of another. In the installer example I gave a little bit earlier, there may be an intervening act in between the manufacturing of the product in the alleged defect that may be an available defense. Perhaps the product was installed incorrectly. Third is voluntary assumption of risk. This is where the end user of the product chooses to take a risk. For example they choose not to follow the products directions and assumes that risk voluntarily. Fourth, the expiration of a limitation period, meaning that the limitation period has expired. 2 years, or it will sometimes be a different limitation period, but typically you've known about it and chosen not to act on it within that time. Fifth, and finally, contractual limitation and liability where there is something in the contract that allows for liability to be limited.
Finally, we will look at remedies that may be available in product liability actions. These include monetary damages, the ones that you probably see the most; pecuniary damages and non-pecuniary damages; discouragement of revenue or profit where profit is required to be paid back; cancellation of the contract of purchase and sale, if there is an applicable contract; monetary fines; injunctions, which is an action to stop a party from doing something. Perhaps to stop a party from manufacturing a product. In some cases criminal sentencing. In some cases punitive damages, although these are very rare and they're very rarely over $100,000.00 Canadian, unlike what you may have seen on American television shows. Finally, interest and the cost of the proceeding which is commonly claimed in every action. Now that we've reviewed some of the liability claims we're going to move forward to discuss limitation of liability and what that might look like on a contractual basis.
Josh: Thanks, Amber. I'm Josh Hanet, a partner in the Toronto Advocacy department and I'm going to talk about, quickly, the limitation of liability clauses. A manufacturer or seller will attempt to limit its liability by including such provisions in contractual arrangements with other parties. So limitation of liability clauses can be used to achieve a number of things. You can limit the type of damages for which a manufacturer may be liable. For example it's common to see language that might limit liability to only the value of the product and not for loss of business opportunities, for example. You can limit the type of fault for which a party might be liable. For example a manufacturer may wish to limit his liability to only issues relevant to the manufacturing or design of the product and exclude issues like distribution or sale of the product. The maximum amount of liability can be limited by contract as well. Limiting damages to a specific dollar amount that's defined in the contract or to the purchase price of the product. Also limitation of liability clauses can also be used to add or reduce warranties, provided by law, or to provide a time limit for reporting of a warranty related claim. While the use of limitation of liability clauses is quite common, and really quite valuable, it's also important to note that these provisions are not without their own limitations. Next slide, please.
So first, the limitation provisions are only enforceable between the parties to the contract. So they do not limit liability to non-parties to a contract. Secondly, as Nick will discuss in a moment, Federal and Provincial legislation that protects consumers like the Canadian Consumer Protection Act, for example, provide certain protections to consumers that cannot be limited by contract. In other words, even if a manufacturer seeks to limit its liability, contractually to its suppliers, it can nevertheless still be find liable to consumers. Then finally jurisdiction. Consideration of where product may end up is an important consideration in the effectiveness of limitations in the contract. Different jurisdictions may have different restrictions on what particular warranties or harm can be limited for in a contract and it's always good to take notice of where products are going to end up. Nick will now speak further about the applicability of consumer protection laws. Nick?
Nick: Hi everyone. My name's Nick Kluge. I'm a partner in the Toronto Advocacy office. A lot of my practice involves consumer protection and product liability work including proactive measures like before something is recalled, or when a product might give rise to issues, I do a lot of work trying to immunize the client's liability. So, from a regulatory perspective as opposed to a civil law perspective, the main regulator in Canada is Health Canada which is a Federal Ministry so it applies across Canada and it oversees the main consumer protection statute which is the CCPSA, Canada Consumer Product Safety Act. So under that Act Health Canada regulates all products, including components, parts, accessories, reasonably expected to be obtained an individual for non-commercial use. So what that is intended to cover, and what it's been interpreted to cover, is basically anything that a consumer might reasonably be expected to get their hands, used in some way. They also apply, not just to the product itself, but to it's packaging and anything that comes with it. So, for example, if it comes with an instruction manual, hard plastic packaging, all of those things are regulated by Health Canada under the Act. It imposes a whole bunch of obligations and liabilities upon every member of the product supply chain. So that means from the very conception, from the person who comes up with the idea for the product all the way to the person in the store who sells it to an end user, everybody along that chain, the distributor, the manufacturer, the shipper, anybody along that supply chain route is potentially liable under the Act. As Amber mentioned earlier, very often everybody sues each other and, believe me, it always happens. I've acted in cases where Chinese manufacturers are identified as Jane Does because everybody's interested in pointing the finger at somebody else, for obvious reasons, and that plays out in law suits. So the Act also provides for a blanket prohibition of marketing of unsafe products. So it says if you're marketing a product, distributing it, doing anything with respect to the supply of it, it's got to be safe. You've got to support the safety of it. So you've got to be available to fix issues such as do recalls or make alterations to the product, etcetera. There's an obligation to report and so, again, once anybody in the supply chain becomes aware of a potential safety issue, and that's the key. The safety of the product from a personal injury perspective. There's an obligation to report basically everything you know as quickly as possible. There's specific time frames in which you're supposed to report things but the bottom line is Health Canada wants to hear about it as soon as you know, no matter what the state of knowledge. In particular the more serious the event you become aware of the quicker you need to be reporting it. Lasty, the government has very broad powers to enforce the Act. They don't use them except when they have to. That includes ordering product recalls which they will do but typically, in my experience, they're much more interested in working cooperatively with industry than imposing their will. We could move on to the next slide, please?
There's also, to add more complexity, there's Provincial legislation. Prior to the CCPSA coming into effect, which was 10 years ago almost to the day, most of the consumer protection statues were Provincial. That's now changed. Health Canada stepped into the breach. But each Canadian Province maintains their own consumer protection statutes. For example Ontario has its Sale of Goods Act but each Province is different. What these statutes typically do is they don't necessarily overlap with the CCPSA but they do provide rights and remedies for consumers where a good is not quote/unquote fit for the purpose. So the interpretation of what that means is sort of a long discussion, but the bottom line is it's intended to ensure that consumers are supplied with goods that actually do what they're supposed to do, in a way that the consumer expects. Very often the statutes provide for causes of action. So the ability to sue people where there's been a breach of the deemed warranty for purpose. Also in some cases you have the Provincial Government taking power for itself to enforce the provisions of the Act where it isn't being done by individual parties. Could we get the next slide, please?
I mentioned a recall and there's no formal preset requirements for recalls. Each incident is viewed as unique and that makes sense because the possible range of issues that can arise are impossible to quantify. So the way I typically explain it is that the recall, and recall can mean not just taking the products off the shelves and shipping them back which is what many people think is a recall. But a recall is defined by Health Canada as any step to correct something with respect to a product that's in the market place and includes a variety of different measures. What needs to be done will always be assessed on the unique facts by Health Canada, usually in close consultation with the parties who's making the report, about the severity of the risk and the likelihood of the risk materializing. If the risk that's something that may cause death, but it's an extremely rare occurrence, that's at one range. The other range is death almost certain to happen and the severity of the response that's required is obviously commensurate with that risk. The opposite is true. Where you're talking about very minor possible results and very unlikely that the risk will materialize. You may not have to do anything at all but the reporting and the consultation that goes with that is mandatory. Whenever anybody in the supply chain becomes aware of an incident that has resulted, or may reasonably have been expected to result, in individual's death or quote/unquote serious adverse effects on their health. That's, again, not codified because it's viewed uniquely in respect of each product and each potential risk. Bottom line, you do not want to be offside with CCPSA because Health Canada has a broad menu of powers to enforce the obligations and if you're in the business of supplying consumer products, in any capacity, you do not want to be on the bad side of Health Canada. If we could go to the next slide. I'm going to hand it over to my colleague, Alex, who practices out of our Montreal office, because as we know Quebec is a distinct society and has some distinct issues with respect to its consumer protection laws. Alex?
Alex: Thank you, Nick. Like you said Quebec does differ a little bit from the rest of Canada. Hello everyone. My name is Alexandre Sami. I'm a partner in the Montreal office and my practice focuses on product liability but also on construction law. So, we will start by discussing the consumer protection in Quebec. The Quebec Consumer Protection Act provides for specific legal warranties that apply to manufacturers. They constitute the minimal protection granted to consumers which means they can't be excluded or limited by contract. That said manufacturers are, of course, free to offer more generous contractual warranties. The specific legal warranties provided in the Act are the ones that you see up on the screen. The warranty of fitness for purpose; warranty of durability; warranty as to post sale service and parts; warranty of conformity to contract; warranty against latent defects and warranty of sufficient instructions or warnings. Turning to the next slide, please.
In addition under Article 53 of the Consumer Protection Act, there's a specific presumption of knowledge of the defect by the manufacturer. The manufacturer cannot plead that he was unaware of the defect. The defenses that the manufacturer could raise are to try to demonstrate that the consumer knew of the defect, for example, the manufacturer may show that he disclosed the defect to the consumer or that the consumer, could be an ordinary examination of the product, detect the defect. The manufacturer could also try to demonstrate the consumer's misuse of the product. We'll now turn to the next slide.
The next section will be the Quebec specifications with respect to product liability. There are important differences between Quebec and the rest of Canada and the US when it comes to product liability. We could give an entire presentation only on Quebec product liability law. Our objective today is to provide you with an overview. As we said anyone injured by a defective product can have a product liability claim. Any injury suffered in Quebec may trigger the application of Quebec law and justify a law suit in Quebec regardless of where the manufacturer is located. Therefore, potential liability under Quebec law should be identified and understood. The Province of Quebec distinguishes itself from the rest of Canada in that Quebec law is governed by a Civil Code, which contains the comprehensive set of legal principles, covering all aspects of civil law. The general principles of Quebec product liability are contained in the Civil Code while the specific provisions applicable to consumers are contained the Consumer Protection Act, which we saw earlier. Going to the next slide we'll discuss legal warranty of safety.
So the legal warranty of safety is much narrower than the legal warranty of quality, that we'll discuss later, because it relates mainly to third parties. Meaning those who aren't in the supply chains. Those who are outside of the contractual relationship with the manufacturer. We call this extra contractual liability of the manufacturer. The notion of safety defect is defined in the Civil Code and it provides that a safety defect can result from three different sources. A defective design or manufacturing. In this case the safety defect must render the produce dangerous to give rise to the manufacturer's liability. The poor preservation or presentation of the product which concerns the adequacy of the packaging and processing of a product after its manufacturing. For example, a distributor who has to distribute a vaccine may be held liable as a result of his negligence in ensuring that the vaccine is kept at the appropriate temperatures during the distribution process. Switching over to the next slide.
The insufficient indications as to the risks and dangers involved in the product or as to the safety precautions that should be taken in the use of the product. This relates to proper warning of the dangers and to the sufficient instructions to use the product safely. As we said any victim of a safety defect may bring suit, not only a purchaser, it's there for an extra contractual claim. Finally, various factors can be taken into account when it comes to evaluating the safety of a product. The circumstances surrounding the normal use of the product. The type of person who normally uses the product, children or the elderly, and the user's level of expertise regarding the product. We'll now turn over to the next slide which discusses legal warranty of quality.
So in Quebec the legal warranty of quality is set out at Article 1726 of the Civil Code of Quebec. It states that the seller's bound to warrant the buyer, that the property and its accessories are at the time of sale free of latent defects which render it unfit for the use for which it was intended, or which so diminish its usefulness that the buyer would not have bought it or paid so a high price if he had been aware of them. The seller is not, however, bound to warrant against any latent defects known to the buyer or any apparent defect. An apparent defect is a defect that can be perceived by a prudent and diligent buyer without any need of expert assistance. So if a product is sold and it's affected by a latent or a hidden defect, meaning a defect that's not apparent, the seller, and anyone who can be held to the warranty, will be in breach of their warranty obligations and will be liable to the buyer as a result of this breach. So the objective of the warranty of quality is to ensure the usefulness of the product. Turning over to the next slide.
The notion of a latent defect therefore turns around how the usefulness is effected. A defect can be material where the product is delivered broken or damaged. It can be functional where the product is unfit for its intended use, or it can be conventional where the product is fit for its intended use but is unfit for a particular use which was expected by the buyer, in view of the seller's representation or the seller's knowledge of the buyer's intended use of the product. We'll go onto the next slide, please.
So to give rise to the manufacturer's liability in Quebec, the criteria are the same as in the rest of Canada. The defect must be serious rendering the good unfit for its intended use. Must be hidden, meaning it must not be apparent and it would have been impossible for a prudent buyer to realize that there was a defect by examining the product. The defect must be unknown to the buyer and the defect must have existed at the time of sale. This avoids attributing a liability to the seller for a defect that is used to the improper use by the buyer. We'll carry on to the next slide where we discuss the legal presumptions.
The real difference between Quebec and the rest of Canada and the US is the Quebec legislator has created a legal presumption to help the buyer substantiate his or her claim when the product was purchased from a professional seller. Which includes every person involved in the chain of distribution of the product, and that's set out at Article 1729 of the Civil code, which states that in a sale by a professional seller a defect is presumed to have existed at the time of sale, if the property malfunctions or it deteriorates prematurely in comparison with identical property or property of the same type. Such a presumption is rebutted if the defect is due to improper use of the property by the buyer. So what's a professional seller? A professional seller is a person whose occupation is a sale of goods. This is a very raw definition, as the professional qualification of the seller applies to all products he sells, regardless of whether or not he possesses any specialized knowledge concerning these products. Manufacturers are also considered professional sellers with respect to the products they manufacture, assemble or distribute. So the legal presumption, which is really unique to Quebec, significantly lightens the burden of proof on the buyer, the injured party who instead of having to prove the existence of the defect only has to show that the product deteriorated or malfunctioned prematurely. Once that's demonstrated, it's presumed that the product did have a hidden defect at the time of sale. Switching over.
This slide here, we have a decision that is quite known from the Supreme Court of Canada in the matter ABB versus Domtar which established that a professional seller, including a manufacturer, is presumed to have knowledge of any defect affecting its products. In this case the Supreme Court rendered a decision which essentially stated that in Quebec civil law, the manufacturer is considered to be the ultimate experts with respect to goods, because they have control over the labour and material used to produce them. The manufacturer essentially is unable to rely on limitation of liability clauses unless it can rebut this presumption of knowledge. Switching over to the next slide.
In a more recent decision the Court of Appeal elaborated and the presumption that exists in Quebec law evolved into what we see here. Three essentially presumptions. The presumption that there was a hidden defect in the property. The presumption that such a defect existed at the time of sale and the presumption that the defect caused the injury. These presumptions, taken as a whole constitute a presumption of liability on the manufacturer. Going on to the next one which is the rebuttal of legal presumptions.
So although there is a high threshold against the manufacturer, the manufacturer can rebut the presumptions of liability if he demonstrates that the defect is due to the improper use of the product by the purchaser, a fault on the part of the third party, superior force majeure or that it would have been impossible to detect a defect. So with that said I will turn it over to my partner, Suzie, and she will discuss the next topic which are damages in Quebec.
Suzie: Hi, thank you, Alex. Hi, my name is Suzie Lanthier. I'm a partner based in the Montreal office. I've been a lawyer for 14 years. I also have a Masters degree in business law. I practice in commercial litigation so any commercial dispute, either product liability claims, environmental, real estate or just general liability claims. My clients in product liability claims based outside of Quebec are often, if not always, quite surprised of the legal framework in Quebec. Especially regarding the validity of the limitation of liability clauses. So let's jump into to it. As discussed earlier there are different types of damages that can be claimed in product liability claims. In Quebec, just so you are aware, a quality defect only gives rise to the repair, replacement or refund of the defective product. It is the knowledge of that defect that gives rise to all other types of damages including consequential damages. But since there's a legal presumption that the manufacturer and professional sellers were aware of the defect, in practice, any type of damages are usually claimed. For safety defect, however, any type of damages can be claimed by the victim. Next slide, please.
Now on limits of limitation of liability clauses in Quebec. There is a provision in the Civil Code of Quebec, namely Article 1733, that provides that the seller may not contractually exclude or limit its liability for defects it was aware of. But remember there's a presumption that the manufacturer and professional sellers were aware of the defect. So therefore, technically, it is more difficult to effectively limit the manufacturer's or professional seller's liability in Quebec. That is why a lot of efforts in the defense of a product liability chase are devoted to refuting that the product was defective and therefore, the focus will usually be on the misuse or abuse of the product. If the defense successfully refutes the presumption that the product was defective then the castle crumbles and the presumption of awareness is irrelevant. Also on limits of limitation of liability clauses, you need to know that you cannot contractually limit your liability for bodily injuries or for intentional fault or gross negligence in Quebec. Accordingly, you cannot limit your liability for punitive damages Since punitive damages are awarded in case of a blameful conduct, which almost always means that the conduct was intentional or was gross negligence. Next slide.
Finally, since the manufacturer usually has no control on where the end user will be domiciled and where the product will be used, and since the buyer and end user can sue anyone and everyone in the change of ownership of the product, the manufacturer will always have a risk of being sued, notwithstanding the limitations and choice of law clause in the seller's contract. Also, and specifically, the Civil Code of Quebec provides that the claimant in a product liability claim against a manufacturer can choose that the governing law be the laws of Quebec. If either the product was purchased in Quebec, or if the manufacturer has a place of business in Quebec, even if the sales contract has a choice of law clause. For example, a manufacturer outside of Quebec sells to a distributor, still outside of Quebec, which in turn sells to a supplier, still outside of Quebec, if that supplier sells to a Quebec buyer, well, that Quebec buyer, as claimant, can invoke the legal presumptions in Quebec in its case against a manufacturer. So my take away today is to be aware that your standard sales contract, especially your limitation of liability clauses, might not give you the protection that you would expect in other jurisdictions. So you can better assess your risks. Your sales divisions should also be aware of this specification. Now, turning it over to Josh, who will address practical considerations in class actions.
Josh: Thanks, Suzie. So one of the practical realities of product liability issues are the potential for class action law suits and unlike regular actions a proposed class action must be certified by the court before it may proceed. In Ontario a punitive class action is filed with a view toward having it certified as a class action by the court. Most common law Provinces in Canada follow the same procedural route. In Quebec, an application for authorization is filed, and if authorized by the court the plaintiff files a class action law suit. At the certification motion the judge determines whether a proposed class action is suitable to be certified as a class proceeding. This is a procedural motion. It's not a determination on the merits of the case and so it's limited in scope. However, defendant can oppose a motion and attack the suitability of the action to proceed as a class proceeding but not necessarily attack the case on its merits. In the common law Provinces there's generally a five part test for certification. The burden is on the plaintiff to provide all five of these factors. First, the pleadings. So the claim must disclose a cause of action. There must be an identifiable class of two or more persons. The claim of the class members must raise common issues. The class proceeding must be the preferable procedure for the resolution of the common issues. Then finally, the fifth factor, is that there must be a representative plaintiff who would fairly and adequately represent the interests of the class. Class actions are now an essential part of the Canadian product liability landscape, frequently in Ontario, Quebec, British Columbia and Saskatchewan. Next slide, please.
A few relevant considerations one facing product liability class actions are in Ontario, in particular, there are amendments to the Class Proceedings Act that took effect late last year. These amendments are, in a word, more favourable to defendants. They ensure the cases proceed more quickly. They provide more opportunities for frivolous claims to be dismissed at an early stage in the proceeding and they also provide the courts with a more balanced framework in which to better assess whether their claims are truly well suited for certification as a class action. It's always important to note that common issues trials for product liability class actions are rare. This is in part due to the fact that they're costly, time consuming and in personal injury actions, unlikely to resolve the ultimate issue between the parties and what ends up following after a long lengthy common issues trial are individual trials to determine specific damages for each particular class member. In many Provinces, including Ontario, court approval is required to discontinue or dismiss a class proceeding. So even an ill advised claim that was commenced or, quite commonly, unmotivated plaintiff's counsel will fail to move an action ahead. These actions cannot simply be dismissed because the court is always sitting in the shoes of the absent class members and looking out for the interests of those who are not before the court. So an application or motion to the court is required in order to have an action dismissed. Settlements are quite often reached in class actions. The most common or frequent time period in which these are reached is right around the time of a certification motion. This often has to do with the fact that the evidence has been flushed out a little bit. The parties have acknowledged the complexity of proceeding with the case and conversations are about resolving cases. Finally, with any settlement in a class action, court approval is required and the test to be met by the court is that the settlement must be fair, reasonable and in the best interest of the class. Now I'll turn it back to Jacqueline.
Jacqueline: Thank you so much. Yes, now you've heard about in Quebec they're talking about choice of law. You've heard about different Provinces. Different legislation. You've heard about Federal so just quickly some practical considerations, not only when your considering a law suit, but at the very beginning when you're entering into contracts with respect to manufacturing, provide it to suppliers, asking the parts groupings, sending it to retailers, think about what the contract says. There is unfortunately situations we've seen where the contract says we were here, this Province governs but if we're going to have an arbitration or a legal dispute, this Province governs. So think about the law of the jurisdiction. That's particularly important because you've heard that Quebec is a little bit different in the balance of other Provinces in Canada. Think about first step. Where do you want it to be? That's also a practical aspect of things because different limitation periods, you heard Amber talk about limitation periods, but there's different limitation periods. Quebec is 3 years. Ontario is 2 years. Other Provinces have different limitations so think about where you want to have that take place. Also think about where your witnesses might be because that's a practical consideration about what the governing law is. At the beginning take a few moments to digest to that. Amber, what else can you tell us with respect to conflict of laws in jurisdiction?
Amber: There are two governing law, Jacqueline. There are situations where there are multiple jurisdictions and this can result in a conflict of laws. This may be where the product was designed in place and manufactured and sold in another. This potential conflict in laws in jurisdictions can result in the plaintiff racing to file in the jurisdiction that they would prefer. There is a test where the court determines jurisdiction and where it should be. This test has 4 parts. First is whether or not the defendant is domiciled or resident in the Province. Second, whether the defendant carries on business in the Province. Third, whether the tort was committed in the Province and, fourth, whether the contract connected with the dispute was made in the Province. Really, what we're looking for is a causal connection between what happened and whether it happened or occurred in that Province. Jacqueline, if you could point us to some practical considerations next of joint and several liability.
Jacqueline: Yes, I'd be happy to do so and I also want to highlight, because I've seen a few questions and answers, we're trying to give a high overview. We're giving a lot of information in a short timeframe. I think I heard Alex say we could probably spend a whole day just on Quebec. We could spend a whole day on Ontario. So rest assured to everybody that we are going to provide the slides to you. This is being recorded if you want to go back and take a look at things and the question and answers will be provided, separately, in written form as well. Okay. A few more practical considerations, joint and several, you've probably heard that. You probably don't know what that means. Let me try to explain. Joint is you can have more than one defendant and they're responsible up to the full amount of the obligation. So if it's $100.00 then they're responsible for the $100.00. Several is kind of proportional. Let's just say you're only responsible for 25%. So you're only responsible for the $25.00. The tricky part is the joint and several and you'll probably hear people throwing this terminology around. It could potentially produce some unfairness and that's because you might have a defendant who's only responsible for 25%, but because you've got the joint aspect of things they're going to be responsible for the entire 100%, because the other defendant doesn't have the money. Their judgement proof. That type of thing. So it may also be a situation where you a peripheral defendant and they become responsible for paying the entire loss because the primary target doesn't have the money. So those are things where plaintiffs will often try to bring in everybody, the deep pockets, the insurers, the professional advisors, because they know that they're more likely having the ability to make a payment at the end. So consider, again, if you're suing someone consider do they have the ability to collect on the judgment. Is their contribution an indemnity? If you're being sued consider should I be adding someone else to the party? Be it a third party or even a fourth party aspect of things. As Amber, and I believe Suzie, both highlighted that you know what, it's not just one person. It's going to be the whole supply chain that potentially people can bring actions against. Alright. Amber, I think we're going to go back to you one more time with respect to time limits.
Amber: Absolutely. Limitation periods runs from the date discovered, or ought to have been discovered, by a reasonable person. This is the first date that you feasibly could have understood that something had occurred. It does not run if the potential claimant is incapable of commencing a proceeding due to physical, mental or psychological conditions. Finally, a statue of limitations may expire. This is a high bar for a potential claimant to overcome so if it's been over the limitation period, be that 2 years or 3 years, there has to be a very strong reason as to why the action should still proceed and it's uncommon for it to do so. Finally, I'd like to turn it back over to Jacqueline with respect to litigation considerations.
Jacqueline: Thank you, Shannon. Perfect. That's the slide we need. Highlighting duration of litigation, I want people to understand that when you're dealing with litigation there's costs, you pay your lawyers. There's potential costs you might pay the other side but there's also the cost to you emotionally, physically in the fact that you're being distracted from the running of your business when you're looking at litigation. Litigation can take a long time. Documents. Somebody had asked a question about document disclosure and anything that is relevant to the law suit must be disclosed. Nowadays with everything be copied and sent by email, you may have upwards of thousand emails. So those are things you want to consider. The last thing is the reputation/precedent effect in that litigation is public and once a law suit is out there people start to know about things. You may either have a concern about your reputation because there's something out there that you don't necessarily want to have out there. Or it may be completely false and you want to protect your reputation so you're going to try to do it with a certain amount of diligence. There may also be a situation where there's a law suit and there's a decision made by a judge, and once that decision is made it becomes a precedent effect, and other people can look to it in future law suits and figure out whether they can rely upon that. So important factors to consider. Recovery of legal costs. A whole other webinar but there are certain things that money you can recover or not recover or responsibility that you have. So those are all considerations that you have to take in when you're looking at what to do with this. I'm going to turn it over to Nick and Josh, just quickly to highlight some best practices. Being mindful of the time we're going to wrap up with a last couple of slides and then those that need to leave, we say thank you for joining us and those that wish to stay a little bit longer, we're happy to stay a little bit longer as well. Over to you, Nick.
Nick: So we're already at one o'clock so I'll be extremely brief. Preservation of evidence. Bottom line is the courts take very seriously their role as to try to uncover the truth and the truth is arrived at through examination of evidence. So there has long been a very broad principle that you ought not to get rid of evidence. You ought not to destroy it. As part of that duty there may be, in certain circumstances, a duty to preserve evidence. So I won't go into this in any detail other than to say if you are in a situation where you believe a law suit might be possible, there may be an obligation on you to preserve evidence in your possession, power and control. But you definitely ought to consult counsel or look for a more full discussion of this issue. I'm going to hand it over to Amber for emerging areas.
Amber: Just briefly with respect to spoilation of evidence, thank you, Nick. When evidence has been destroyed, intentionally destroyed, that's called spoilation of evidence. If that does happen, it's often pleaded in product liability cases, the remedy to that is that an adverse inference will be found against the party that intentionally destroyed the evidence. Bottom line is that if there's an obligation to preserve evidence, which there often is, you'll want to preserve it as best as possible and plead spoilation if it has been destroyed.
Jacqueline: Shannon, if you could just quickly go back to emerging trends. We welcome everybody to ... areas. There is connected and autonomous vehicles. Our own Josh Hanet wrote a wonderful article about that which you can find on the website. We've heard lots of things about data breaches, hacking, privacy, cyber security. Those are things to be mindful of. We're hearing about the internet of things, on the radio, on the news, on the internet and you also heard about Consumer Protection Act, both from Quebec and when Josh and Nick were highlighting it for you. So those are emerging areas. We welcome anyone to reach out to us, as I said. If we go to the next slide, please, Shannon, you will see our contact particulars. On behalf of Josh, Nick, Suzie, Alex, Amber and all of our Gowling WLG team. Hey everyone, show your cameras so everyone can see you now, we want to thank you for joining us. As I said there's so much to cover we could spend an entire day, and maybe one we will spend the entire day with you, but we do welcome you to give us a call, email us, look us up on our profile and talk about product liability. We'll see if we can answer those questions for you. So being mindful of the time, we'll stay on for a few more minutes and anyone might want to send us a chat or ask us a question, but otherwise we're going to bid you all a wonderful afternoon and take care.