The world no 7 was beaten 4-6 6-1 6-2 by Germany???s Mona Barthel who clinched a well-deserved victory on her first match point.
After taking the first set, the 20-year-old Canadian slipped tamely to defeat after having her serve broken five times in seven games to lose in 99 minutes.
World No 42 Barthel will now face Barbora Zahlavova Strycova who beat the No 7 seed Alize Cornet 6-4 6-2.
Another seed, and world top 10 player, to lose on Thursday was Angelique Kerber who could bag just two games in her match with Italy???s Francesca Schiavone.
The veteran Schiavone crushed the German No 2 seed 6-1 6-1 in less than an hour at the indoor event.
Andrea Petkovic of Germany, at No 3, is the highest seed remaining in the tournament. She plays Dominika Cibulkova in the quarter-finals on Friday.