Domtar is a paper company .It built a new paper mill in Windsor Quebec. In December 1984, the company purchased a $13,500,000 recovery boiler machine that was manufactured by C.E.Regarding the sale contract it included a clause that limited seller liability. The machine had a super heater with H-style tie welds. The company was aware of the the faults that resulted from the use of such welds.

18 months after the machine was put into service Domtar revealed there were hundreds of cracks and leaks in the super heater tubes. The manufacturer of the machine C.E replaced a few H-styles tie welds with Hinge –pin attachments. However, there were disagreements as to how the problem could have been solved permanently.

In October 1989, Domtar brought against the C.E Company and it was based against the warranty of the latent defects and the duty information. Domtar also sued insurers including Arkwright and Chubb the former due to the all risk insurance policy held by Domtar and the latter due to the performance bond, which was granted to C.E due to latent defects. However, concerning Lloyd’s insurer Domtar discontinued the action as the company agreed to pay $1,578,900.

The superior court rejected the latent defect claim though it found C.E had not performed the duty to inform the risk associated with tie welds.