Product Liability in Canada
General Liability Principles
In most Canadian provinces, liability is primarily fault based, in the absence of contractual privity or warranty, although consumer protection statutes in some provinces create implied warranties between manufacturers or distributors and users of products, where privity of contract does not otherwise exist. Where implied warranties or contractual privity exists, liability is, in effect, strict where a product is found to be defective. Liability may also be imposed for breach of statutory obligations such as breach of the implied warranties of fitness for purpose or of merchantable quality under sale of goods legislation and consumer protection legislation.
Any party within the distribution chain who failed to exercise a reasonable standard of care in the “putting up” (manufacture, distribution or sale) of the product, and whose failure in that regard caused or materially contributed to a loss may bear responsibility for the defective product in negligence may be held liable for the claimants injuries or loss.
In limited circumstances, product liability defendants may be subject to criminal penalties. The Criminal Code of Canada does not contain provisions that specifically apply to the supply of defective products, however, particular statutes may also impose criminal penalties for product liability (see for e.g. Food & Drug Act, R.S.C. 1985, c. F-27, section 31).
With respect to manufacturing defects, if the plaintiff can establish that the product came off the manufacturing line in a manner not intended (i.e. inconsistent with the design specifications), the court will assume negligence (either by an employee or in the production process) and will not require a plaintiff to establish where in the production process the negligence occurred. The test for proof of causation is “caused or materially contributed to” the injury or loss (see Athey v. Leonati,  3 S.C.R. 458 (Q.L.) at para. 18; Mizzi v. Hopkins (2003), 64 O.R. (3d) 365 (C.A.)).
If multiple potential manufacturers exist, the plaintiff must prove on a balance of probabilities which of the several possible producers manufactured the defective product, unless products of all of the manufacturers were defective, were used by the claimant and increased the risk of the injury the claimant suffered. (See Cook v. Lewis,  S.C.R. 830; and Fairchild v. Glenhaven Funeral Services Ltd.,  3 All ER 305 (H.L.) – although a UK case, it may well be considered persuasive in Canada.)
Various defenses to product liability claims include: absence of negligence (no breach of the applicable standard of care) in the context of allegations of design defect or failure to warn; absence of defect; lack of causation; and voluntary assumption of risk (where the plaintiff knows of the defect and continues to use the product). Canadian provinces typically have a “joint and several liability” regime – a manufacturer may need to plead contributory negligence, or bring third party proceedings for contribution and indemnity from other tortfeasors, to limit its liability.
Canadian courts have held that it is not a defense to show compliance with regulatory or statutory requirements relating to the product (see R v. Saskatchewan Wheat Pool  1 S.C.R. 205), although, if it can be established that a statute or regulation required the product to be manufactured, designed or labeled in the specific way in which it is alleged to be faulty, and in no other way, a defense of statutory compliance may be available (see Ryan v. Victoria (City),  1 S.C.R. 201).
Trial by jury is available in most provinces although trials in Canada are more frequently judge alone. Trial by jury is not available in Quebec.
Class actions are commonly brought, and with increasing frequency, in Canada. The threshold for class certification in Canadian provinces is generally considered to be lower than in the United States. In the provinces other than Quebec, an action can be certified as a class action if the claim asserts a sustainable cause of action (which will be assessed based on the pleadings alone), there are two or more persons in the proposed class, the claims of those persons have substantial issues of fact or law in common, it is preferable to resolve the common issues in a class action having regard to the objectives of the legislation
Statutes of Limitation
In the product liability context, as a general rule, Canadian statutes of limitation range from two years to six years from the day on which the cause of action arose, with the possibility of the period being extended if a reasonable person could not have known of the material facts giving rise to the cause of action through the exercise of reasonable diligence until sometime after the events in question occurred.
General damages for pain and suffering alone are capped in Canada by common law at today’s equivalent value of $100,000 in 1978 dollars adjusted for inflation according to the Consumer Price Index. As of March 2006, the cap is approximately $307,200.00. Family members may be able to recover damages for loss of care, guidance and companionship and certain pecuniary losses. The extent of recovery and circumstances under which recovery is available vary from province to province.
Multiple types of damages are recoverable in Canadian product liability case. Damages for bodily injury and damage to property are recoverable. Damages for mental distress generally have been held not to be recoverable in the absence of a diagnosable physical or mental illness or at least a “scar on the mind” (see Graham v. MacMillan  B.C.J. No. 334 (C.A.)).
Pure economic loss is often recoverable, particularly where the economic losses were incurred as a result of a failure to warn or misrepresentation, or to remedy a condition that was dangerous to person or property (see Winnipeg Condominium Corporation No. 36 v. Bird Construction Co.,  1 S.C.R. 85). Recovery for damage to the product itself may be available in contract or warranty subject to the terms thereof.
In general, punitive damages are recoverable only where there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. Their purpose is not to compensate the plaintiff but to achieve the goals of retribution, deterrence and denunciation of the behavior (see Whiten v. Pilot Insurance,  1 S.C.R. 595).
Costs and Funding
As a general rule, most provinces have a “loser pays” costs system whereby the successful party can recover a portion of its own legal costs and disbursements from the losing party. For example, in Ontario, a successful party can recover costs on a “partial indemnity” scale, which, depending on the level of counsel’s billing rates, often approximates from 30 to 50 percent of the party’s actual legal costs. With the use of offers to settle, a successful plaintiff may be able to recover “substantial indemnity” costs, which in Ontario are 1.5 times “partial indemnity” costs. Specific rules with respect to class proceedings in some jurisdictions prevent a successful party from recovering costs in certain circumstances.
In some cases, public funding for plaintiffs pursuing claims is available. Restrictions on the availability of public funding, however, vary from province to province, and depend also on the type of case. For example, in Ontario, where funding is available for class proceedings, the committee reviewing applications for funding may have regard to: the extent to which the issue affects the public interest; the likelihood of certification; and the amount of money in the fund created for that purpose.