Case citation: ATCO Energy Solutions Ltd. v Energy Dynamics Ltd., 2024 ABKB 162 

In the recent decision of ATCO Energy Solutions Ltd. v Energy Dynamics Ltd., 2024 ABKB 162, Brownlee lawyers David Pick and Kristina Persaud successfully argued that the Plaintiff could not meet the burden of proof to show a failure of a compressor engine was caused by a defective piston manufactured by Brownlee’s client.

This case centered on a natural gas compressor engine which failed in July 2014. The Plaintiff contended that a loose piston plug within one of the engine’s 16 pistons caused the failure, resulting in significant damage.  However, Brownlee persuasively argued that the more plausible explanation for the failure lay in a process called detonation rather than a piston defect. As the piston at issue was largely destroyed, the arguments mainly rested on circumstantial evidence.  

Given the limited and aging case law on product liability issues, the Court engaged in a full analysis on whether a duty of care was owed before moving on to consider whether the standard of care was met and if causation (the real crux of the case) was proven. 

Reiterating the established legal principle, the Court reaffirmed that there was a duty of care not to negligently manufacture products with defects which pose a real and substantial danger of physical harm. As one step further to this, the Court did an extensive proximity analysis finding the relationship of the parties was proximate enough to impose a duty to take care to avoid dangerous defects in products, following the liability rules established in Winnipeg Condominium. 

Unlike certain jurisdictions, Canada does not impose strict liability in cases of negligent manufacturing; rather, the standard of care is to use reasonable care in the circumstances. 

In many product liability cases, including this one, direct evidence can be unavailable and the court must rely on inferences drawn from the circumstantial evidence. However, the Defence can rebut presumptions of negligence when it provides a “reasonable explanation that is as consistent with no negligence.” Where both theories are equally plausible, the Plaintiff will fail to meet their burden. 

Despite the Plaintiff proving that four pistons had loose plugs at the time of the failure (which resulted in a damages award of roughly $19,000), they failed to establish on a balance of probabilities that the primary piston in question suffered from such a defect at the time of failure. Moreover, even if such proof were provided, the Court found that the Plaintiff did not prove how a loose piston plug could have led to the failure. Rather, the stronger inference and more probable cause of the failure was detonation based on the totality of the evidence, including certain admissions made by the Plaintiff’s witnesses. 

This case not only entailed an extensive review of product liability case law in Canada, it also addressed a number of legal issues that previously received little judicial comment, including late disclosure of evidence, the use of similar fact evidence and the use of lay witness opinion evidence. 

The Defence was successful in advocating that evidence that the Plaintiff tried to rely on that was only disclosed a week before trial and was not in an Affidavit of Records could not be relied upon. The Court focused on whether there was a sufficient reason for the failure to disclose. The Court found there was not as the evidence sought to be admitted was created in 2015 and could have been accessed when the Affidavit of Records was being drafted and at multiple points thereafter. 

While similar fact evidence was allowed based on an analysis of the factors from R v Handy, 2002 SCC 56, the Court found the evidence proffered was not enough to support the inference that the piston which failed was defective. 

The Plaintiff attempted to rely on the opinion evidence of an ATCO employee as an exception to the opinion evidence rules as a witness with expertise. However, the Court found the ATCO employee did not fit within the established categories as laid out in Kon Construction Ltd. v. Terranova Developments Ltd., 2015 ABCA 249, as he was not involved in the initial investigation of the failure and only became involved almost 4 years later. 

This case underscores how circumstantial evidence can be used and the ways the Defence can effectively rebut it in product liability matters. The Court adds further clarity to when pure economic losses can be recovered in product liability matters. It has also advanced the way lay witness expert evidence can be used and the weight it should be given. Overall, this case will become an important addition to the product liability landscape in Canada.