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Monday Morning Case Bites for Monday, December 14, 2020

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Amanda Kostek & Steven Graham

St. Isidore Co-Op Limited v AG Growth International Inc. 2020 ABCA 447
Duty to Warn | Manufacturer Liability

This claim arose out of the failure of a fence post pounding machine manufactured by the Defendant, which caused serious and ultimately fatal injuries to the operator of the machine. The Plaintiff was the owner of the machine and paid damages to the estate of the operator. The Plaintiff then sought full indemnity contribution from the Defendants, claiming the machine had been negligently designed and the Defendants failed to warn users of the risk of using the machine, as well as an engineering solution (“stop tilt kit”) that was available that would have prevented the machine from tipping in the way it did and killing the operator. The trial judge held that the Defendants breached their duty of care to owners and users of the machine and was jointly liable with the Plaintiff for the operator’s death. The Defendants appeal the liability findings, and the trial judge’s post-trial ruling to amend the claim to add pre-judgment interest.

The Court of Appeal confirmed that manufacturers have both a duty to manufacture products that are reasonably safe, and to warn of inherent dangers in their products:

[19]           As provided in Tabrizi v Whallon Machine Inc[1996] 29 CCLT (2d) 176 at para 301996 CanLII 3532 (BCSC) [Tabrizi], manufacturers have two duties: “… one being the duty to manufacture products that are reasonably safe and the second being the duty to warn of dangers inherent in its products. The manufacturer may be found liable for failing to fulfill one or both of those duties”; see also Nicholson et al v John Deere Ltd et al (1986), 34 DLR (4th), 58 OR (2d) 53 (Ont HCJ), affirmed (1986), 1989 CanLII 5304 (ON CA), 57 DLR (4th) 639 (CA). The trial judge applied the correct legal tests in determining that Wheatheart had failed to fulfill both of these duties in relation to the 1999 Heavy Hitter which caused Mr Borger’s death.

The Court of Appeal found that the trial judge applied the proper legal test for determining a manufacturers duty to ensure the product was reasonably safe:

[20]           The trial judge properly found that manufacturers have a duty of care to avoid safety risks and to make products that are reasonably safe for their intended purpose, citing Daishowa-Marubeni International Ltd v Toshiba International Corporation2010 ABQB 627 at para 38, 501 AR 178 [Daishowa-Marubeni] and Kuiper v Cook (Canada) Inc2018 ONSC 6487 at paras 109-123.

[21]           The trial judge correctly stated that “[i]n considering whether a design is negligent due to alleged safety defects, the court may undertake a ‘risk-utility analysis’ which ‘weighs the risks of the impugned design against the ease, cost, risk and loss of utility of a proposed safer design’”, citing Dean F Edgell, Product Liability in Canada (Markham, Ont: Butterworths, 2000) at 52-53 [Product Liability]: Decision at para 39. Thereafter at paras 40-41, she appropriately adopted the risk-utility analysis set out in Daishowa-Marubeni at para 38 which provides as follows:

Claims in negligent design require the court to balance the risk inherent in the product as designed, considering its utility and cost, against the risks inherent in a safer, alternate product or design. One has to look at the utility of the product, the nature of the product in terms of the likelihood it will cause injury, the availability of a safer design, the potential for designing and manufacturing the product so it is safer but remains functional and reasonably priced, the ability of the plaintiff to have avoided injury with careful use of the product, the degree of awareness of the potential danger that can be attributed to the plaintiff and the manufacturer’s ability to spread any costs related to improving the safe[t]y of the design.

See also Rentway Canada Ltd

The Court of Appeal also confirmed that liability does not automatically arise if the manufacturer could have used a safer design, and that manufacturers are not required to make products immune from accident. The critical consideration is whether the manufacturer was aware of a design defect or ought to have known about one, and failed to address the risk.

[22]           While noting that industry standards “can be relevant” to the question of whether a particular product is “reasonably safe”, citing Baker v Suzuki Motor Co, [1993] 143 AR 1, at para 129, 1993 CanLII 7293 (QB) [Baker] and Tabrizi at para 37, the trial judge also found that when assessing whether a product has a design defect, “. . . the mere fact that a manufacturer could have used a safer design does not automatically result in liability. (See: Daillaire v Paul-Emile Martel Inc1989 CanLII 29 (SCC), [1989] 2 SCR 419). The law does not require products to be ‘accident proof’ so as to turn manufacturers into insurers: absent statutory provisions to the contrary, Canadian product liability law is based in negligence, not strict liability. (See: Baker at para 77)” (emphasis in original): Decision at para 38.

[23]           The trial judge expressly acknowledged that a failure to take precautions against harms that are not foreseeable does not breach the standard of care. Rather, “[a] manufacturer can only be held liable if the product in question had a design defect based on a safety risk the manufacturer either knew, or ought to have known about at the time the product was manufactured, or which came to its attention afterwards, and it failed to address that risk” (emphasis in original): Decision at para 42. She properly held that in making this assessment, “the Court will ‘consider the state of knowledge and technology at the time the product was manufactured in assessing negligence in design’ so as not to fall into the trap of assessing the issue with the wisdom of hindsight”, citing Brunski v Dominion Stores Ltd (1981), 20 CCLT 14 at para 32, 1981 CarswellOnt 591 (WL) (SC (HCJ)) and Product Liability at 52: Decision at para 43. She concluded at para 44:

That said, it is logical that a manufacturer of a product should be held to the same level of knowledge and expertise as an expert in the field: Ruegger v Shell Oil Ltd1963 CanLII 307 (ON SC), [1964] 1 OR 88, 1963 CarswellOnt 162 (WL) at para 29 (SC (HCJ)); Labrecque v Saskatchewan Wheat Pool (1977), 78 DLR (3d) 289, 1977 CanLII 1475 at para 50 (Sask QB), rev’d on other grounds. Furthermore, a manufacturer must take into consideration not just the intended use of its product, but also the environment in which the product will be utilized (Rentway at paras 53-54).

The Court of Appeal also upheld the trial judge’s finding that the Defendants failed in their duty to warn purchasers and users of the dangers in the product, once it became aware of them. That duty is an ongoing duty that requires manufacturers to warn their purchasers and users of potential dangers discovered even after the product has been sold.

[32]           As identified by the trial judge, the leading decision on duty to warn is Lambert v Lastoplex Chemicals Co1971 CanLII 27 (SCC), [1972] SCR 569, 25 DLR (3d) 121 [Lambert], which provides that a manufacturer must take reasonable steps to provide warnings that permit its product to be used safely. As the trial judge recognized, “[t]he explicitness of the required warning will vary with the danger likely to be encountered in the ordinary use of the product. . . Once the manufacturer becomes aware of a danger involved in the continued use of its product, for the purpose for which it was designed, it has a duty to warn. (See Rivtow Marine Ltd v Washington Iron Works (1973), 1973 CanLII 6 (SCC), [1974] SCR 1189. . .”: Decision at paras 50-51.

[33]           In Hollis v Dow Corning Corp, [1995] 4 SCR 634 at para 201995 CanLII 55 [Hollis], citing Lambert, the Supreme Court of Canada provided that:

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. All warnings must be reasonably communicated, and must clearly describe any specific dangers that arise from the ordinary use of the product. [Citations omitted]

As the trial judge correctly noted, despite the statistically small number of rupture incidents involving Dow’s breast implants in Hollis, the Supreme Court nevertheless found that Dow “had an obligation to consider the seriousness of the risk posed to each user by a potential rupture when determining whether it had a duty to warn (para 41)”: Decision at para 55.

[34]           Further, as the trial judge properly found at para 56:

The duty to warn is not based on mere knowledge imbalance, but rather on the manufacture or supply of products intended for use by others, and the reasonable reliance that consumers place on the manufacturer and supplier: the good neighbor principle. Where the consumer has some knowledge of the risk, but reasonably relies on the manufacturer and/or supplier, a duty to warn still exists. (See: Bow Valley Husky (Bermuda) Ltd v Saint John Shipbuilding Ltd, [1997] 3 SCR 1210, 1997 CanLII 307).

By failing to warn purchasers of the machine prior to 2005 when the stop tilt kit was introduced of both the risk and advise of the availability of the stop tilt kit, the Defendant breached its duty to warm.

With respect to the Plaintiff’s application to amend their claim and seek pre-judgment interest following the trial, the trial judge ruled that while the Plaintiff had not plead it, all the evidence required to calculated pre-judgment interest was before the Court. The Court of Appeal confirmed that answering a pleading not previously argued does not amount to prejudice, particularly as pre-judgment interest is awarded pursuant to a statute. The Court of Appeal upheld the award of pre-judgment interest, but because the Plaintiff suffered only pecuniary damages, ordered the amount of pre-judgment interest to be re-calculated to reflect the amounts set out in the legislation.