Written By Hartlee R. Zucker and Ethan Z. Schiff
Kalra v Mercedes Benz Canada, 2017 ONSC 3795, is a recent certification decision of the Ontario Superior Court in which Justice Belobaba certified the proposed emissions standards class action seeking damages for diminution in value. In doing so, however, Justice Belobaba applied the Supreme Court's decision in Pro-Sys Consulting Ltd v Microsoft Corp, 2013 SCC 57 [Pro-Sys], to limit the common issues which could be certified such that no questions relating to the determination of any such damages were certified.
The action is being pursued against four entities in the Daimler AG family on behalf of all persons and corporations in Canada who own, owned, lease or leased a Mercedes Benz BlueTEC vehicle over the period that the vehicles were sold in Canada. The alleged defect is the "defeat device" in the vehicles, which purportedly turns off the emission control system once it reaches a certain temperature, causing the cars to emit illegal levels of nitrogen oxide into the atmosphere.
Applying Pro-Sys to Section 5(1)(c)
The statement of claim is organized primarily around negligent misrepresentation, but also pleads seven other causes of action, both under statute and at common law. Most of the causes of action survived the section 5(1)(a) analysis (claims for breach of express and implied warranty were struck), but, significantly, Justice Belobaba declined to certify several common issues based on the Supreme Court's guidance in Pro-Sys, because: (i) they could not satisfy the “some basis in fact” test; (ii) the plaintiff asserted no methodology to provide a realistic prospect of establishing loss on a class-wide basis; and/or (iii) the potential for aggregate damages was irrelevant to establishing loss.
The Court stated at paragraph 50 as follows:
Aggregate damages cannot be used to establish proof of loss where proof of loss is an essential element of proving liability. That is, aggregate damages cannot be used to establish liability. And if liability has not been established, aggregate damages cannot be certified as a common issue.
While the plaintiff adduced a methodology for establishing aggregate damages, he could not show any methodology for measuring loss on a class-wide basis for negligent misrepresentation. Justice Belobaba concluded that the plaintiff’s methodology was presented only in support of the negligent misrepresentation claim and, therefore, could not be certified as a common issue with respect to the other causes of action. The Court also noted that, as proof of loss would be required in respect of other pleaded claims, the determination of proof was appropriately deferred.
Lessons for Defence Counsel
A plaintiff’s obligation to demonstrate, not only a methodology for establishing aggregate damages, but also, and perhaps more significantly, a methodology for establishing loss is now a firmly established principle of general application on which to scrutinize plaintiffs’ proposed common issues. The application of Pro-Sys to diminution in value cases in which the individual circumstances surrounding purchasing decisions may be relevant to establishing loss has important implications for the development of class actions in this area. The further development of the law as these cases progress will be of great interest to the auto industry and to all defendants facing non-safety related allegations of defects.