The Written Notice of Defect
Nadeau c. Mercedes-Benz Canada inc. (2017 QCCA 470)1, judgment, handed down on March 24, 2017, the Court of Appeal stressed that in the event of a loss, the obligation to send a written notice of defect is absolutely essential. This judgment illustrates that failure to do so will result in an outright dismissal of the action.
In this case, the plaintiff alleged that an engine part of cars built and sold by the defendants failed prematurely and that this constituted a latent defect. However, he was refused leave to launch a class action suit on the grounds that he had sent neither a written notice of defect nor a formal notice.
The Court of Appeal emphasized that this type of notice is designed to give the manufacturer and the vendor an opportunity to correct the defect at a lower cost. In fact, after having been notified of the alleged defect when the complaint was filed, the defendants offered to repair the car and provide a loaner car in the meantime.
Destruction of Property in dispute
Intact, compagnie d’assurance c. Claude Joyal inc. (2017 QCCS 4075), a recent decision handed down on August 22, 2017, applies the principles set out in the above-mentioned Court of Appeal judgment. In this case, after fewer than 550 hours of use, a combine-harvester caught fire and was declared a total loss.
After the loss, the buyer’s insurer inspected the equipment. Since it was a total loss, the insurer was unable to determine the cause of the fire. The vendor and its insurer were notified via a written notice of defect and a formal notice, however the manufacturer did not receive either notice. The vendor’s insurer had the remains of the combine-harvester inspected and also came to the conclusion that it was impossible to determine the exact cause of the fire.
Subsequently, the buyer’s insurer exercised its right of subrogation and sued both the vendor and the manufacturer. It should be noted that in the days following the loss, the manufacturer had access to the warehouse where the fire-damaged combine-harvester was being stored. Despite this, Superior Court refused to consider that a visit was equal to a valid written notice of defect.
It should be kept in mind that a notice of defect may be made verbally rather than in writing. However, it is then the responsibility of the party making this verbal notice to prove on a balance of probabilities that it did so.
The purchaser’s insurer then had the remains of the combine-harvester destroyed before instituting legal proceedings. There were thus two reasons why the manufacturer had no opportunity to examine the combine-harvester: it did not receive a notice and the remains of the machine were destroyed.
Failure to send a notice to the manufacturer could have proved fatal to the vendor’s warranty claim. However, in this case, the warranty claim was allowed since the property was declared a total loss, making it therefore unlikely that the manufacturer could have determined the exact cause of the fire.
It should nevertheless be noted that this was a special situation and limited only to cases involving a total loss. There are many other situations where failure to send a notice would prove fatal to a warranty claim against a manufacturer, vendor or distributor.
Sending a written notice of defect and a formal notice to the party believed to be responsible for the loss is a very inexpensive precautionary measure that could help to support one’s case before the courts. Except under unusual circumstances, this notice should be sent as soon as the loss occurs, even if its cause has not yet been clearly determined. The only exceptions that justify failure to send a notice are emergency situations, the opposing party’s prior denial of liability, or the explicit or implicit waiving of the notification of the defect. In addition to being unusual, these situations could lead to confusion. When in doubt, a written notice of defect should always be sent.
This precaution applies to all third parties likely to be involved in a subrogatory action, in particular, the vendor, the distributor and the manufacturer of the property. Any party being sued should also follow this practice and personally send a written notice of defect to the supplier who might be responsible for the property’s defect.
The written notice of defect must be clear enough to properly explain the nature and seriousness of the alleged defect to the liable third party. It must also provide the opposing party with a reasonable timeframe that allows it to verify the defect and correct it.
Finally, it is also strongly recommended that the property be kept until the legal proceedings have come to an end. The claims adjuster can play an important role in protecting the insurer’s right to seek a legal remedy by properly instructing the various suppliers and specialists as soon as the investigation begins.
Article written by Me Catherine Pilote-Coulombe and Me Jessica Gauthier, Lawyers, Stein Monast LLP
1. Last September 21, the Supreme Court dismissed the application for leave to appeal the judgment.