The Superior Court’s decision in Compagnie d’assurances AIG du Canada c. Kenworth Québec inc., 2020 QCCS 1377, is a reminder of the principles applicable to the warranty against latent defects.
In April 2014, a Kenworth vehicle belonging to the City of Shawinigan [City] and insured by Compagnie d’assurances AIG du Canada [AIG] caught fire and was severely damaged. AIG indemnified its insured and instituted subrogation proceedings against the vendor of the vehicle, Kenworth Québec inc. [Kenworth], invoking the warranty against latent defects. Kenworth in turn filed a claim against the manufacturer, Paccar du Canada ltée [Paccar], also invoking that warranty. AIG filed an expertise report which concluded that most of the damages caused by the fire were in the motor compartment of the vehicle. The expert also underlined that there was a recall by the manufacturer in relation to risks of fire with Kenworth vehicles of the same model but assembled during a period that began a few days after the damaged vehicle was manufactured. Paccar’s expert underlined that the vehicle showed signs of excessive corrosion and that when such vehicle is used in a hostile environment, such as snow removal, particular attention is required to assure that the components of the motor are exempt of salt.
First, the Court underlined the provisions of the Civil Code of Québec governing latent defects affecting goods sold by a professional vendor and stated that this regime creates a presumption of liability when the purchaser establishes that the goods were acquired from a professional vendor or a person who is obliged to such a warranty as a professional vendor, and that the goods deteriorated prematurely in comparison to similar goods. This presumption of liability is triggered without it being necessary to prove the cause of the defect or the cause of the damages. The Court stated that it is a triple presumption of liability, namely:
- A presumption of the existence of a defect;
- A presumption that the defect existed at the time of the sale;
- A presumption of existence of a causal link between the defect and the deterioration of the property.
The presumption may be rebutted if the professional vendor establishes:
- Misuse of the property; and
- That the improper use is the cause of the premature deterioration or the improper functioning of the property.
After having analyzed the evidence, the Court noted that on the balance of probability, the vehicle had perished because of an electrical problem originating in the motor compartment. Although the Court concluded that the exact point of origin and the cause of the fire had not been established on the balance of probabilities, it underlined that this did not have to be established in a precise manner by the plaintiff in order to trigger the presumption of liability. Since the two conditions for the application of the presumption were satisfied, the causal link between the default and the damage was presumed.
The Court then proceeded to analyze whether the defendants had rebutted the presumption. In order to do so, it had to establish misuse and that the misuse caused the fire. The defendants alleged that the City could have prevented the fire by providing better maintenance for the vehicle. The Court ruled that the City had behaved appropriately by following the procedures dictated in the vehicle owner’s manual.
Accordingly, the Court granted the action and ultimately held Paccar liable.
