The Saskatchewan Court of Appeal (the “SKCA”) recently released companion decisions involving recoverability for pure economic loss in proposed class actions involving alleged vehicle defects. The Court concluded that neither should be certified in large part due to the failure to properly plead and frame the claims involving recovery for pure economic loss. In both cases, the plaintiffs failed to plead and present sufficient evidence of imminent risk of real and substantial danger.
In Kane v FCA US LLC, 2024 SKCA 86 [Kane] the Court of Appeal upheld the denial of certification in an action involving numerous vehicle recalls. The claim for diminution of vehicle value was neither pleaded nor supported properly. Further, the Court considered the recalls to be unconnected, resulting in a lack of commonality.
In Evans v General Motors of Canada Company, 2024 SKCA 87 [Evans], the Court of Appeal set aside certification concerning a claim with a more discrete set of vehicle defects that also sought amounts based on a diminution of vehicle value.
Kane
In this case, the plaintiff pursued FCA Canada Inc. (“FCA”) in relation to more than 20 recall notices and one customer satisfaction notice affecting more than 900,000 vehicles sold in Canada over an approximate two-decade period.
Kane purchased a 2007 Jeep Liberty, which was the subject of a customer satisfaction notice involving a possible fuel tank leak in the event of a rear-end collision. FCA installed a trailer hitch on the vehicle to provide protection. Transport Canada did not require the safety notice recall procedure to be implemented.
The other proposed class members owned vehicles that were subject to various recalls covering issues such as ignition switches, mirror and tie rod ball stud issues. These recalls were all completed in accordance with all the associated rules and regulations imposed by Transport Canada.
No cause of action for pure economic loss
Kane pleaded the repairs were insufficient and that she suffered financial loss when she traded the vehicle in. She claimed no injury to her person or property arising from hitch repair or the underlying issue the repair was intended to address. She claimed no repair costs. In this case, the vehicles were of a nature that a repair was possible and the repair was performed at FCA’s expense. Further, there was no evidence raised showing that the repairs were not able to fully and adequately fix the problems with the vehicles.
As noted by the SKCA at para 41:
“Ms. Kane does not claim repair or disposal costs. There is no claim of an imminent risk and no material facts pleaded to support a real and substantial danger. The claim speaks only of potential problems that might arise in the future. In my view, Maple Leaf bars the recovery of the economic losses claimed in this matter.”
The SKCA noted Kane and the class only raised concerns of potential problems that may arise in the future. Therefore, it upheld the Court of King’s Bench finding that the pleadings were insufficient as they did not say anything about the nature, quality or imminence of the alleged danger.
The SKCA discussed various leading principles regarding claims for pure economic loss and concluded that a claim in negligence for pure economic loss is not available where the plaintiff fails to claim for personal injury or property damage, nor pleads the imminent risk of a real and substantial danger to the proposed class members.
The case law discussing pure economic loss in the context of defective motor vehicles indicates that to successfully advance a claim for pure economic loss, the assertion of an imminent, real and substantial danger is required to present a reasonable cause of action. Other appellate authorities such as Nissan v Mueller, 2022 BCCA 338 and Hyundai v Engen, 2023 ABCA 85 indicate that the degree of imminence required on the facts of a particular case may vary but in Kane the Court noted these cases “still required the presence of imminent, real and substantial harm for a reasonable cause of action to be present for a claim in pure economic loss related to an allegedly shoddy product.”
Raising a potential future harm has been found to not satisfy the requirement of the presence of an imminent threat which is required to successfully claim pure economic loss. The case law expressly bars claims where a defective product does not pose a real danger to the proposed class members or where there is a potential danger that could occur at an undetermined point in the future.
The SKCA concluded that there is no right to be free from the prospect of damage and, as a result, the claim for pure economic loss was dismissed. As a result, the claim for an increased risk or increased likelihood of future harm related to the defects and an alleged loss of value in the vehicles did not disclose a reasonable cause of action for pure economic loss.
Lack of commonality
The Court of King’s Bench held there was no commonality amongst the types of defects involved or the various models of vehicles involved. The lack of commonality between the claims made it impossible for the Court to resolve all of the claims collectively.
The SKCA agreed that there was no common issue that would encompass the entirety of the proposed class without it having to be subdivided recall by recall under a very general and broad issue. The SKCA reiterated that in order to certify a class action, the Court must be satisfied that there is commonality, including common issues that could be answered amongst the entire class.
Evans
Evans proposed a class action for alleged breaches relating to a coolant leakage issue in certain models of the Chevrolet Cruze. No recalls had been issued in relation to the alleged defect. In assessing the Court of King’s Bench decision allowing the certification of the class action, the SKCA took issue with both the pleadings it deemed to be inadequate and the lack of evidence supporting a claim for pure economic loss.
Evans focused her pleadings for pure economic loss on the class members paying too much for their vehicles given their defects and the class members experiencing a decrease in the value of their vehicles. There were no pleadings or evidence that the coolant leakage had caused any personal injury.
The SKCA noted that only the cost of averting an imminent risk of real and substantial danger is recoverable. Evans’ claim sought a category of recovery that was clearly unrecoverable even if a claim for pure economic loss had been pleaded properly. [see paragraph 62 for example]
The SKCA reiterated the same conclusion it reached in Kane that “an action in negligence for pure economic loss is barred where the plaintiff advances no claim for personal injury or property damage and does not plead the imminent risk of a real and substantial danger to person or property.” [Evans at paragraph 55]
Evans pleaded the coolant leakage issue rendered the Cruze vehicles defective, unsafe and unreliable. However, the requisite imminence factor was not pleaded. Although the SKCA noted Evans could conceivably amend the claim to rectify the deficiencies by properly asserting a claim for repair costs arising from imminent risks of real and substantial danger, the current claim did not meet the required standard.
Beyond the pleadings, the SKCA noted “Evans had to adduce some evidence to show that the alleged defect in the coolant system posed a real and substantial danger capable of causing personal injury or property damage and that the risk is imminent, not indeterminate.” [see paragraph 88]
However, despite certifying certain common issues in negligence, the certification judge had specifically found that Evans had failed to adduce some basis in fact evidencing any compensable harm or danger posed to the proposed class. That reduced the action to one for unrecoverable economic loss (diminution in value) and merely prospective property or personal damages. The SKCA concluded this offended the principles in Maple Leaf and certification of a negligence claim in the absence of evidence of compensable harm does not further the objectives of judicial economy or access to justice.
Key takeaways
Taken together, these recent Court of Appeal decisions demonstrate that the Court will not certify a class action for vehicle defects claiming pure economic loss where the claim fails to demonstrate that there is an imminent threat or risk of danger to the proposed class members. Further, to the extent the class claim pursues recoverable pure economic loss damages the plaintiff must adduce some basis in fact of a real and substantial danger capable of causing personal injury or property damage and that the risk is imminent, not indeterminate.
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Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.