Canada: No Harm, No Foul: ONCA Confirms Mere Risk Of Potential Harm Is Not Legally Compensable Loss
Litigation and Dispute Resolution Bulletin

In a significant decision for pharmaceutical companies, and product manufacturers in general, Sandoz Canada Inc., along with other pharmaceutical company defendants, has successfully defeated an appeal by representative plaintiffs from a motion judge's refusal to certify a proposed product liability class action¹.

The Ontario Court of Appeal agreed with Sandoz's position that the harm alleged by the plaintiffs was non-compensable because no physical harm had actually materialized and because any psychological harm which had allegedly materialized did not meet the legal test to be compensable in tort law.

This is a welcome decision for all potential defendants to product liability class actions: the court reaffirmed the principle that where there is no compensable harm, the test for certifying a class action is not met.

Fasken lawyers Peter Pliszka and Zohaib Maladwala acted for Sandoz and three other pharmaceutical companies in this proceeding. Please contact the authors for further information about product liability class actions involving drugs, medical devices, and any other types of products.

The plaintiffs sued the defendants for allegedly negligent manufacture of valsartan, an antihypertension drug. The plaintiffs alleged that various lots of valsartan contained the allegedly carcinogenic nitrosamines NDMA and NDEA. Upon finding NDMA and NDEA in samples of valsartan, the defendants recalled the contaminated lots. The plaintiffs did not claim compensation for anyone who had allegedly developed cancer as result of the ingestion of NDMA and NDEA in any valsartan. Rather, they claimed damages for an alleged increased risk of possibly developing cancer in the future and for psychological harm allegedly suffered by the proposed class members upon learning of the recall.

The motion judge denied certification. He found that the causes of action were not viable because they were not based on concrete injury, but rather on speculation of an increased risk of cancer diagnosis, which is not compensable at law. Further, he found that there was no basis in fact that NDMA and NDEA can cause cancer in humans, and that both the present anxiety that some class members experienced upon learning of the contamination and any future psychological upset were not sufficiently serious and prolonged to qualify as legally compensable psychological harm.

On appeal, the plaintiffs argued that the motion judge erred by failing to consider, as compensable physical harm, "genotoxicity" — i.e., cellular or molecular changes in the plaintiffs' internal bodily compositions — allegedly caused by the NDMA/NDEA.

The Court of Appeal agreed with Sandoz's position and rejected this argument, stressing that injury is an essential element in a claim of negligence — "it is the materialized loss that gives rise to a defendant's obligation to compensate the plaintiff for injury," such that "there can be no viable cause of action in negligence without actual damage." The court concluded that the plaintiff's pleadings with respect to alleged genotoxicity were inadequate, finding that it was "not self-evident" that molecular changes were themselves an injury, and no material facts were pleaded to support the claim that any class member had suffered a loss as a result of molecular change.

The plaintiffs also argued on appeal that the motion judge had erred in his treatment of their claim for psychological injury — in other words, alleged psychological distress associated with learning of the alleged presence of NDMA/NDEA. The Court of Appeal agreed with Sandoz's position and rejected this argument also, finding that the plaintiffs' pleaded claims of psychological injury did not "rise above the anxieties and fears commonly experienced from time to time by people living together in society" As a result, the alleged psychological harm pleaded by the plaintiffs did not meet the legal test previously established by the Supreme Court of Canada to recover for psychological injuries. Of significance, the court found that the plaintiffs' "stock repetition of words echoing the legal tests" in their pleading was not enough — the plaintiffs had failed to plead the requisite material facts detailing the injury beyond bare assertions of mental distress.

The Court of Appeal also rejected the validity of the plaintiffs' claims for the costs of medical services and monitoring, costs thrown away, and refunds. In the absence of a viable claim for physical or psychological harm (based on the court's findings described above), these losses were purely economic. The plaintiffs argued that the motion judge erred by imposing an "imminence" of harm requirement for recovery of pure economic losses. However, again, the Court of Appeal accepted Sandoz's submissions and found that, under Supreme Court case law, the "imminence" of a threat of injury is a requisite component for recovery of pure economic losses in a tort of negligence claim seeking recovery for allegedly defective products. The Court of Appeal noted that this liability rule is consistent with the general principle that there is "no right to be free from the mere prospect of damage", but "only a right not to suffer damage that results from exposure to unreasonable risk", and accordingly the basis for recovery for pure economic loss vanishes where the alleged defect in a product presents no imminent threat.

Sandoz's success in defeating the plaintiffs' appeal in this case mirrors its success last year before the British Columbia Supreme Court in another similar putative class action concerning Ranitidine, a heartburn medication. For more information, please refer to Fasken's bulletin, "Law and Logic: Sandoz Achieves Dismissal of Pharmaceutical Class Action", which summarized the BC court's dismissal of that claim for the same reason that it, too, was devoid of evidence of any legally compensable harm.

Readers who are interested in discussing these court decisions or any other matter relating to product liability law may contact Peter Pliszka or Zohaib Maladwala.

Footnote

1. Palmer v. Teva Canada Limited, 2023 ONCA 220.

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