Domtar purchased a recovery boiler from C.E. (now ABB and Alstom).
The boiler's superheater developed leaks and cracks due to the use of H-style tie welds.
Domtar replaced the superheater and sued C.E. for latent defects and breach of the duty to inform.
The Supreme Court of Canada held that the excessive cracking constituted a latent defect.
As a manufacturer, C.E. was presumed to know of the defect and failed to rebut this presumption, rendering its limitation of liability clause inapplicable.
C.E. was held liable for the replacement costs.
The Court also dismissed the appeals regarding the insurers, finding Chubb liable on its performance bond and Arkwright not liable due to a latent defect exclusion clause.
