Written By Jackson Spencer

Class proceedings are frequently proposed after automakers issue recall notices. Two recent decisions from the Court of Appeal for Saskatchewan, Kane v FCA US LLC, 2024 SKCA 86 (Kane) and Evans v General Motors of Canada Company, 2024 SKCA 87, (Evans) provide insight into how notices issued by automakers can and cannot provide "some basis in fact" for certification.

In Kane, the plaintiff applied for certification of a proposed class covering the owners and lessees of approximately 900,000 vehicles affected by 24 different recall notices. The only evidence relied upon by the plaintiff for the viability of the asserted causes of action and the evidence-based certification criteria was the existence of the recalls. On appeal, the Court upheld the decision not to certify the action. The recall notices relied on by the plaintiff provided some basis in fact for, among other things, the existence of the defects, the nature of the defects and some of the risks associated with the defects. However, standing alone they did not provide evidence of any interrelatedness of the defects from one recall notice to another, nor did they provide any basis in fact that any of the class members had suffered a compensable loss. As a result, the plaintiff in Kane failed to establish some basis in fact that the proposed common issues existed or that they could be answered across the entire class.

In Evans, the plaintiff relied on internal bulletins issued by the automaker, which the certification judge concluded provided some basis in fact for the proposition that the cooling system had certain design or manufacturing defects.  There was no evidence, however, as to any injuries or damages suffered, nor any evidence that the design defects had rendered any vehicles inoperable. On appeal, the Court reversed the lower court's decision to certify the action because certification of a negligence claim absent evidence of compensable harm would not further judicial economy or access to justice, and the proposed class action therefore failed to satisfy the preferable procedure criterion for certification.

At the core of both Kane and Evans were claims in negligence for pure economic loss. Without some basis in fact that the defects posed a real, substantial and imminent danger capable of causing personal injury or property damage, the Court of Appeal concluded that the proposed class actions could not be certified.

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• Kane and Evans canvass the law relating to pure economic loss and review three class action decisions from across the Country from the last few years involving allegedly defective motor vehicles: (Hyundai v Engen, 2023 ABCA 85, Carter v Ford Motor Company of Canada, 2021 ONSC 4138, and Nissan v Mueller, 2022 BCCA 338). In each of these three cases, the plaintiff was required to plead an imminent risk of real and substantial harm in order to present a reasonable cause of action to recover damages in negligence for pure economic loss.
• The Court of Appeal also considered in Kane and Evans the scope of recovery for claims for pure economic loss, as set out by the Supreme Court of Canada in 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35. Plaintiffs claiming pure economic loss—if they can make out a real, substantial, and imminent danger—are entitled to claim only the reasonable cost of repairing the defect and mitigating the danger and are not compensated for harm to interests such as business goodwill, business reputation, sales, profits, or capital value.
• The Court of Appeal also affirmed in Kane the two-step evidentiary test for the common issues criterion. That test requires the plaintiff to provide some basis in fact to show: (1) that the proposed common issues actually exist; and (2) that they can be answered across the whole class.

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