Arora v Whirlpool Canada LP: Negligence and Policy Considerations in the Context of a Defective, Non-Dangerous Consumer Product

In Arora v Whirlpool Canada LP, 2013 ONCA 657 [Whirlpool], a decision released by the Ontario Court of Appeal on October 31, 2013, the court upheld the denial of a class action certification claim by the motion judge (2012 ONSC 4642). The claim stemmed from the alleged poor design of front-loading washing machines manufactured by Whirlpool, which were prone to developing an unpleasant smell. Damages had been claimed for negligence, breach of express and implied warranty, breach of the Competition Act, RSC 1985, c C-34, and waiver of tort. However, the motion judge refused certification on the basis that none of these claims disclosed a cause of action.

Factual Background and Judicial History

In 2001, Whirlpool began manufacturing front-loading washing machines. While they were more energy- and water-efficient, they did not self-clean as well as top-loading machines. From 2001 to 2008, Whirlpool sought to improve their design, having received complaints of odour, mould, and mildew from customers.

In 2010, three appellants in Ontario launched a proposed class action on behalf of customers who had purchased a front-loading washing machine manufactured by Whirlpool between 2001 and 2008. This action was launched against Whirlpool, not the companies from which they had purchased their machines. While the appellants did not allege that the washing machines were harmful, they did allege that the machines suffered from a common design defect that led to the growth of mould, mildew, bacteria, and fungi, which in turn led to a musty or mouldy smell attaching to clothes washed in the machine, the machine itself, and in their respective laundry rooms. The “heart of the appellants’ claim, therefore, is that the machines purchased were shoddy goods that were not worth their purchase price. They seek what they style as damages for the overpayment – a form of rebate, or ‘diminution in value’” (Whirlpool at para 8).

Though the appellants raised several claims, the most significant claim – jurisprudentially – was in negligence for pure economic loss for negligent design against a manufacturer of a non-dangerous consumer product (ibid at para 9).

On the motion for certification, the motion judge found that the pleadings did not disclose a cause of action and, even if they did, a class action was not the preferable procedure for their negligence claim.

Pleadings Must Disclose a Cause of Action

As per section 5(1)(a) of the Class Proceedings Act, 1992, SO 1992, c 6, a proceeding will not be certified as a class proceeding if the pleadings do not disclose a cause of action, such that even if the pleaded facts are assumed to be true, the pleading still does not disclose a reasonable cause of action.

With brevity in mind, I will focus exclusively on the appellants’ negligence claim. It should be noted, however, that the appellants’ claims for breach of express and implied warranty, breach of the Competition Act, and waiver of tort were dismissed by the Ontario Court of Appeal.

Economic Loss for Negligent Design of a Non-Dangerous Product

Canadian courts have limited tort recovery for economic loss where there is no corresponding physical harm or damage to property. The court cited an insightful passage by the Supreme Court in Martel Building Ltd v Canada, 2000 SCC 60, explaining why at para 37:

[I]t has been recognized that in limited circumstances damages for economic loss absent physical or proprietary harm may be recovered. The circumstances in which such damages have been awarded to date are few. To a large extent, this caution derives from the same policy rationale that supported the traditional approach not to recognize the claim at all. First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests. Second, an unbridled recognition of economic loss raises the spectre of indeterminate liability. Third, economic losses often arise in a commercial context where they are often an inherent business risk best guarded against by the party on whom they fall through such means as insurance. Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate lawsuits.

The appellants’ claim in this case was categorized by the court as the negligent supply of shoddy goods or structures. In his decision, the motion judge interpreted Winnipeg Condominium Corporation No 36 v Bird Construction Co, [1995] 1 SCR 85 [Winnipeg Condominium], the leading Canadian case on recovery for pure economic loss, to mean that there is “no product-liability negligence action for pure economic loss against a manufacturer for negligently designing a non-dangerous consumer product” (Whirlpool at para 61). As such, he found that their negligence claim could not succeed.

However, the motion judge went on to state that if he were wrong that this issue had been settled by Winnipeg Condominium, the appellants would be unable to satisfy the requirement in a negligence claim that there be a duty of care. In cases where the relationship between the parties does not fall into a category that automatically gives rise to a duty of care such as this one, the court must determine whether there is a duty of care based on the two-step “Anns test” (ibid at para 54):

1. Is there a sufficiently close relationship between the parties so that, in the reasonable contemplation of the defendant, carelessness on its part might cause loss or harm to the plaintiff?
2. If so, are there any residual policy considerations that should negate or limit the scope of the prima facie duty of care, the class of persons to whom it is owed or the damage to which a breach of it might give rise?

While the motion judge assumed that the first stage of the test would be satisfied, he found that there were overriding policy considerations that negated the duty of care and, as such, the appellants’ negligence claim could not succeed because no duty of care existed.

In its decision, the Ontario Court of Appeal upheld the motion judge’s decision that the negligence claim could not succeed. In doing so, however, the court found that the motion judge erred in finding that Winnipeg Condominium settled the fact that there is no recovery in tort for defective, non-dangerous consumer products.

In Winnipeg Condominium, the Supreme Court of Canada allowed recovery for the cost of repairing structural defects in a building because they posed a real and substantial danger. As it related to non-dangerous defects, however, the Court left the issue open by stating the following at para 41: “Given the clear presence of a real and substantial danger in this case, I do not find it necessary to consider whether contractors should also in principle be held to owe a duty to subsequent purchasers for the cost of repairing non-dangerous defects in buildings.” The Ontario Court of Appeal went on to find that no subsequent cases have settled this issue in Ontario.

The gravity of the motion judge’s error, however, was lessened because he had gone on to analyze the claim on the basis that the issue of recovery for defective, non-dangerous consumer products had not yet been decided (as discussed above, the motion judge found that policy considerations negated the finding of a duty of care).

The appellants submitted that such a policy analysis warranted the full evidentiary record afforded by a trial. However, the court found that the motion judge was entitled to decide this issue on the certification motion. The court emphasized the need to consider what, if anything, a factual record could reasonably be expected to add to the court’s determination. Finding that the motion judge had significant jurisprudence to guide his policy decision, the court went on to state the following (Whirlpool at para 91):

On the facts pleaded in this case, it is doubtful that a full factual record would have been of assistance to the trial judge in deciding the legal question of whether Whirlpool owes the appellants a duty of care.  As discussed above, the pleading raises the most minimal allegations of harm.  This is not a case where a trial is needed to see how much of what is claimed is actually proved. Nor did counsel provide any meaningful indication of the nature of the policy evidence the appellants would lead if the matter proceeded to trial.

In finding that the appellants’ negligence claim had no reasonable prospect of success and, in turn, upholding the motion judge’s decision on this matter, the court stated the following (ibid at para 105):

At its heart, the appellants’ claim is that they paid more for their washing machines than they are worth. It is squarely about relative product quality – a matter that, as LaForest J. noted in Winnipeg Condominium, is customarily dealt with by contract and not easily defined by tort. In my view, requiring the courts to analyze a myriad of consumer transactions – some involving 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.

The Ontario Court of Appeal emphasized the fact that the province has enacted broad consumer protection legislation, such as the Business Practices Act, RSO 1990, c B-18 (though this act has been repealed and only applies respect of consumer agreements entered into before July 30, 2005) and the Consumer Protection Act, 2002, SO 2002, C-30. Both pieces of legislation “permit a consumer to claim against a manufacturer who engages in an ‘unfair practice’, which is defined to include false, misleading, deceptive and unconscionable representations” (ibid at para 109) and damages are an available remedy under both acts. However, the appellants abandoned a claim that they were pursuing under the Consumer Protection Act prior to the certification motion.

In short, the court found that “policy considerations negate recognizing a cause of action in negligence for diminution in value for a defective, non-dangerous consumer product” (ibid at para 116) and that the appellants should be left to any available statutory or contractual remedies. In doing so, the court was quick to differentiate Whirlpool from Winnipeg Condominium, suggesting that “recognizing the possibility of tort liability on the pleaded facts of this case would represent such a quantum leap” from that decision (ibid at para 97).

Conclusion

While Arora v Whirlpool Canada LP does not resolve the general question of whether tortious liability is available where defects in design are not dangerous and there is therefore no risk of injury, this case does make it clear that there are compelling policy reasons for refusing to recognize a cause of action in negligence for the reduction in value of a defective, non-dangerous consumer product. Indeed, there were a myriad of legal avenues available to the appellants in this case by way of statutory remedies against both the seller (for breach of implied warranties of quality and fitness for purpose) and manufacturer (for unfair practices) of the Whirlpool products.

Importantly, though, this case opened a door that had been previously shut by the motion judge; that is, it has not been settled in Ontario that there is no recovery in tort for defective, non-dangerous consumer products.