1688782 Ontario Inc. v. Maple Leaf Foods Inc.

1688782 Ontario Inc. v. Maple Leaf Foods Inc.
Collection
Supreme Court Judgments
Date
2020-11-06
Neutral citation
2020 SCC 35
Report
[2020] 3 SCR 504
Case number
38187
Judges
Wagner, Richard; Abella, Rosalie Silberman; Moldaver, Michael J.; Karakatsanis, Andromache; Côté, Suzanne; Brown, Russell; Rowe, Malcolm; Martin, Sheilah; Kasirer, Nicholas
On appeal from
Ontario
Notes
Case in Brief SCC Case Information
Decision Content
SUPREME COURT OF CANADA
Citation: 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, [2020] 3 S.C.R. 504
Appeal Heard: October 15, 2019 Judgment Rendered: November 6, 2020 Docket: 38187
Between:
1688782 Ontario Inc.
Appellant
and
Maple Leaf Foods Inc. and
Maple Leaf Consumer Foods Inc.
Respondents
Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.
Joint Reasons for Judgment: (paras. 1 to 96)
Dissenting Reasons: (paras. 97 to 168)
Brown and Martin JJ. (Moldaver, Côté and Rowe JJ. concurring)
Karakatsanis J. (Wagner C.J. and Abella and Kasirer JJ. concurring)
1688782 Ontario Inc. Appellant
v.
Maple Leaf Foods Inc. and
Maple Leaf Consumer Foods Inc. Respondents
Indexed as: 1688782 Ontario Inc. v. Maple Leaf Foods Inc.
2020 SCC 35
File No.: 38187.
2019: October 15; 2020: November 6.
Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.
on appeal from the court of appeal for ontario
Torts — Negligence — Duty of care — Pure economic loss — Negligent misrepresentation or performance of service — Negligent supply of shoddy goods or structures — Proximity — Listeria outbreak at plant of exclusive meat supplier resulting in recall of meat products used by restaurant chain franchisees and causing them economic loss — Franchisees not in contractual privity with supplier but bound to purchase meat products exclusively from it through chain of indirect contracts — Whether supplier owed duty of care to franchisees such that economic losses are recoverable in tort.
In 2008, a number of Mr. Sub franchisees were affected by the decision of Maple Leaf to recall meat products that had been processed in one of its factories in which a listeria outbreak had occurred. Following the recall, the franchisees experienced a shortage of product for six to eight weeks. At the time, the relationship between Mr. Sub and Maple Leaf was governed by an exclusive supply agreement pursuant to which Maple Leaf was made the exclusive supplier of ready‑to‑eat meats served in all Mr. Sub restaurants. To give effect to this arrangement, the franchise agreement between Mr. Sub and its franchisees required them to purchase ready‑to‑eat meats produced exclusively by Maple Leaf. No contractual relationship ever existed between the franchisees and Maple Leaf, each being linked to the other indirectly through separate contracts with Mr. Sub.
A class action against Maple Leaf on behalf of the franchisees was certified, in which the franchisees claimed to have suffered economic loss and reputational injury due to their association with contaminated meat products and advanced claims in tort law, seeking compensation for lost past and future sales, past and future profits, capital value of the franchises and goodwill. Maple Leaf unsuccessfully brought a motion for summary judgment dismissing these claims. The motion judge held that Maple Leaf owed the franchisees a duty to supply a product fit for human consumption, and that the contaminated meat products posed a real and substantial danger, so as to ground a duty of care. The Court of Appeal allowed Maple Leaf’s appeal, and found that no duty of care was owed to the franchisees. It determined that the motion judge’s decision to allow these claims to proceed could not stand in light of the Court’s decision in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855, which had been decided following the disposition of the motion for summary judgment.
Held (Wagner C.J. and Abella, Karakatsanis and Kasirer JJ. dissenting): The appeal should be dismissed.
Per Moldaver, Côté, Brown, Rowe and Martin JJ.: Maple Leaf does not owe a duty of care to the franchisees in respect of these matters. Though the common law readily imposes liability for negligent interference with and injury to the rights in bodily integrity, mental health and property, it has been slow to accord protection to purely economic interests. Pure economic loss may be recoverable in certain circumstances, but there is no general right in tort protecting against the negligent or intentional infliction of pure economic loss.
Pure economic loss is economic loss that is unconnected to a physical or mental injury to the plaintiff’s person, or physical damage to property. It is distinct from consequential economic loss, being economic loss that results from damage to the plaintiff’s rights, such as wage losses or costs of care incurred by someone injured. To recover for any type of negligently caused loss, a plaintiff must prove all the elements of the tort of negligence: (1) that the defendant owed the plaintiff a duty of care; (2) that the defendant’s conduct breached the standard of care; (3) that the plaintiff sustained damage; and (4) that the damage was caused, in fact and in law, by the defendant’s breach. To satisfy the element of damage, the loss sought to be recovered must be the result of an interference with a legally cognizable right.
The current categories of pure economic loss between private parties are: (1) negligent misrepresentation or performance of a service; (2) negligent supply of shoddy goods or structures; and (3) relational economic loss. The distinguishing feature among each of these categories is that they describe how the loss occurred. However, a duty of care cannot be established by showing that a claim fits within one of these categories, as they are but mere analytical tools. Invoking a category offers no substitute for the necessary examination that must take place into whether the parties were at the time of the loss in a sufficiently proximate relationship. Proximity is and remains the controlling concept.
In Livent, cases of negligent misrepresentation and negligent performance of a service were brought into accord with the duty of care framework laid out in Anns v. London Borough of Merton, [1977] 2 All E.R. 492, and later refined in Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537. Previously, the duty analysis grounded a prima facie duty of care on mere foreseeability of injury. Cooper signalled a shift from that test by establishing the requirements of both proximity of relationship and foreseeability of injury. Foreseeability alone was deemed to be insufficient, as a duty arises only where a relationship of proximity obtains. Duty in tort law is a general notion describing a class or type of case, not a particular fact situation. In particular, the inquiry into reasonable foreseeability of injuries asks whether the type of injury to the relevant class of persons could have been foreseen. As such, each component of the Anns/Cooper analysis supporting a prima facie duty raises questions of law reviewable under the correctness standard.
In cases of negligent misrepresentation or performance of a service, two factors are determinative of whether proximity is established: the defendant’s undertaking, and the plaintiff’s reliance. The proximate relationship is formed when the defendant undertakes responsibility which invites reasonable and detrimental reliance by the plaintiff upon the defendant for that purpose. It is the intended effect of the defendant’s undertaking upon the plaintiff’s autonomy that brings the defendant into a relationship of proximity with the plaintiff. Where that effect works to the plaintiff’s detriment, it is a wrong to the plaintiff entitling it to its pre-reliance circumstance. But that entitlement operates only so far as the undertaking goes. Any reliance on the part of the plaintiff which falls outside of the scope of the undertaking falls outside the scope of the proximate relationship. That is because reliance that exceeds the purpose of the defendant’s undertaking is not reasonable, and therefore not foreseeable. In the present case, the undertaking by Maple Leaf to provide ready‑to‑eat meats fit for human consumption was made to consumers with the purpose of assuring them that their interests were being kept in mind, and not to commercial intermediaries such as the franchisees. The business interests of the franchisees lie outside the scope and purpose of the undertaking.
The parameters established in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85, recognize that recovery for economic loss in cases of negligent supply of shoddy goods or structures is founded upon the defendant’s negligent interference with a right to be free from injury to one’s person or property. A breach of the duty laid out in Winnipeg Condominium exposes the defendant to liability for the cost of averting a real and substantial danger, but not of repairing a defect. The duty is based on the reasonable foreseeability of injury to other persons and property in the community, and the presence of danger is the linchpin of the analysis. Shoddy products, as opposed to dangerous ones, raise different questions which are better channelled through the law of contract. The potential injury to persons or property grounds not only the duty but also one’s entitlement to the cost of putting the good or structure back into a non‑dangerous state. Allowing recovery exceeding the costs associated with removing the danger goes beyond what is necessary to safeguard the right protected. The Winnipeg Condominium liability rule applies to products other than building structures, but in such cases the duty is narrow. What a plaintiff can recover will ultimately be confined by the duty’s concern for averting danger, and will be determined by the feasibility of discarding the thing posing a danger. In assessing the possibility of discarding the thing, the plaintiff must show that it is effectively bereft of reasonable options. When applied to goods, such cases will be rare. Here, any danger posed by the supply of ready‑to‑eat meats could be a danger only to the ultimate consumer, and not to the franchisees. Further, while the ready‑to‑eat meats may have posed a real and substantial danger to consumers when they were manufactured, any such danger evaporated when they were recalled and destroyed.
Developments to the law of negligence signify that claims under Winnipeg Condominium must now attend to an inquiry into the requisite element of proximity. Proximity informs the foreseeability inquiry and should be considered first, as the considerations that support a finding of proximity also limit the type of injury that may be reasonably foreseen to result from the defendant’s negligence. Assessing proximity proceeds in two steps and requires asking whether, in light of the nature of the relationship at issue, the parties are in such a close and direct relationship that it would be just and fair having regard to that relationship to impose a duty of care in law. The court must first determine whether proximity can be made out by reference to an established or analogous category of proximate relationship. At this stage, the particular factors which justified recognizing that particular category should be scrutinized. As between parties to a relationship, some acts or omissions might amount to a breach of duty, while others will not. If the court determines that proximity cannot be based on an established or analogous category, it must then conduct a full proximity analysis. In so doing, all relevant factors present in the relationship must be examined, including expectations, representations, reliance, and the property or other interests involved. Under this step, the fact that the parties could have protected their interests under contract is a crucial consideration. Contractual silence will not automatically foreclose the imposition of a duty of care, but courts must be careful not to disrupt the allocations of risk reflected in relevant contractual arrangements.
In the present case, proximity cannot be established by reference to a recognized category of proximate relationship, nor by conducting a full proximity analysis. Though the franchise agreement worked a vulnerability upon the franchisees, it did not have the effect of establishing a proximate relationship between them and Maple Leaf. The franchisees were not consumers, but commercial actors whose choice to enter into that arrangement substantially informed the expectations of their relationship with Maple Leaf. As there is no relationship of proximity between Maple Leaf and the franchisees under the Winnipeg Condominium rule, there is also no proximity for the purposes of recognizing a novel duty of care.
Per Wagner C.J. and Abella, Karakatsanis and Kasirer JJ. (dissenting): There is agreement with the majority that the franchisees’ claim does not fall within an existing category of economic loss or an established or analogous relationship of proximity. However, it is just and fair to impose a novel duty of care on Maple Leaf in the circumstances, and the appeal should therefore be allowed.
Historically, the common law did not allow for recovery of losses in negligence that were not consequent to physical injury or property damage. Over the years, however, Canadian courts have repeatedly affirmed that there is no general bar against recovery of economic loss for negligence. As a cause of action, claims concerning the recovery of economic loss are identical to any other claim in negligence in that the plaintiff must establish a duty, a breach, damage and causation.
The proper approach to assessing whether a duty of care exists is the two-step inquiry established in Anns and adjusted in Cooper. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises and the court considers whether any residual policy considerations negate that duty at the second stage. Where a case falls within or is analogous to a previously recognized category of proximity, and reasonable foreseeability is also established, then a prima facie duty may be found without a full analysis.
While specific types of economic losses have been identified, it is the duty of care and not the category of economic loss that dictates whether economic loss is recoverable in negligence. The existing categories can act as analytical tools, but the scope of allowable economic loss is not limited to them. In cases engaging a novel relationship and requiring a full Anns/Cooper analysis, courts should be attentive to the specific circumstances of the case, as the traditional policy concerns may not always arise. The core inquiry is the two-step analysis, responsive to the facts at hand.
In the present case, the franchisees’ claim engages novel issues and a different set of policy considerations that should be considered through a novel duty of care analysis. The usual indication of proximity is foreseeability, and this can be a useful starting point. Assessing proximity first may be helpful in cases of negligent misrepresentation, but this will not always be the case for other types of tort claims. The reasonable foreseeability inquiry requires the court to ask whether the type of injury to the plaintiff, or to a class of persons to which the plaintiff belongs, was reasonably foreseeable to someone in the defendant’s position. It was foreseeable that the franchisees would be identified as a public‑facing retailer of potentially tainted meats while the meats posed a real danger to public health.
Reasonable foreseeability of harm must be supplemented by proximity. In assessing proximity, the overarching question is whether the parties are in such a close and direct relationship that it would be just and fair having regard to that relationship to impose a duty of care in law. The factors to assess that relationship are diverse and depend on the circumstances of each case, but include the expectations, representations, reliance, and the property or other interests involved. In the present case, there was a proximate relationship between Maple Leaf and the franchisees such that Maple Leaf was under an obligation to be mindful of the franchisees’ interests. It was clearly contemplated by the partnership agreement that the franchisees would be using and selling Maple Leaf products, and that they could enter into direct contact with Maple Leaf. Unlike other retailers of Maple Leaf products, the franchisees were bound to use Maple Leaf meats exclusively and were in a business that centred on such meats, placing them in a particularly dependent relationship. Thus, Maple Leaf established a close relationship with the franchisees.
In cases involving pure economic loss, the contractual matrix linking the parties can be an important factor in finding a lack of proximity. When considering whether a plaintiff was able to contractually protect itself from the types of economic loss claimed, a realistic approach must be taken. An overly formalistic appeal to protection through contract risks failing to take into account the parties’ actual circumstances, including their commercial sophistication and bargaining power. In the case at bar, the prospect of the franchisees protecting themselves by contract was illusory, placing them in a particularly dependent and vulnerable relationship with Maple Leaf. Far from negating proximity between Maple Leaf and the franchisees, the contractual matrix strengthens it.
In the context of this close and direct relationship, Maple Leaf was under a duty to take reasonable care not to place unsafe goods into the market that could cause economic loss to the franchisees as a result of reasonable consumer response to the health risk posed by those goods. Subject to the other requirements of negligence being met, it is fair and just to hold Maple Leaf responsible for the franchisees’ direct economic consequences of being associated with unsafe Maple Leaf products while they posed a danger to consumer health. None of the residual policy considerations — that is, the risk of a negative impact on the marketplace by raising the spectre of indeterminate liability for manufacturers or of chilling effects on manufacturers issuing voluntary recalls — are sufficiently persuasive to oust the prima facie duty of care on Maple Leaf.
Cases Cited
By Brown and Martin JJ.
Applied: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855; distinguished: Plas‑Tex Canada Ltd. v. Dow Chemical of Canada Ltd., 2004 ABCA 309, 357 A.R. 139; 376599 Alberta Inc. v. Tanshaw Products Inc., 2005 ABQB 300, 379 A.R. 1; Country Style Food Services Inc. v. 1304271 Ontario Ltd. (2005), 200 O.A.C. 172; considered: Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85; Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737; referred to: Cromane Seafoods Ltd. v. Minister for Agriculture, [2016] IESC 6, [2017] 1 I.R. 119; Anns v. London Borough of Merton, [1977] 2 All E.R. 492; Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537; Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860; D’Amato v. Badger, [1996] 2 S.C.R. 1071; Saadati v. Moorhead, 2017 SCC 28, [2017] 1 S.C.R. 543; Palsgraf v. Long Island Railroad Co., 162 N.E. 99 (1928); Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263; Donoghue v. Stevenson, [1932] A.C. 562; A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R. 177; Mogul Steamship Company v. McGregor, Gow & Co. (1889), 23 Q.B.D. 598, aff’d [1892] A.C. 25; Kripps v. Touche Ross & Co. (1992), 94 D.L.R. (4th) 284; Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210; Dorset Yacht Co. v. Home Office, [1970] A.C. 1004; Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643; Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2 S.C.R. 114; Galaske v. O’Donnell, [1994] 1 S.C.R. 670; Rankin (Rankin’s Garage & Sales) v. J.J., 2018 SCC 19, [2018] 1 S.C.R. 587; Stewart v. Pettie, [1995] 1 S.C.R. 131; Hill v. Hamilton‑Wentworth Regional Police Services Board, 2007 SCC 41, [2007] 3 S.C.R. 129; Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165; Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420; Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181; Ratych v. Bloomer, [1990] 1 S.C.R. 940; Blacklaws v. 470433 Alberta Ltd., 2000 ABCA 175, 261 A.R. 28; Morrison Steamship Co. v. Greystoke Castle (Cargo Owners), [1947] A.C. 265; Murphy v. Brentwood District Council, [1991] 1 A.C. 398; Aktieselskabet Cuzco v. The Sucarseco, 294 U.S. 394 (1935); Hasegawa & Co. v. Pepsi Bottling Group (Canada) Co., 2002 BCCA 324, 169 B.C.A.C. 261; Hughes v. Sunbeam Corp. (Canada) Ltd. (2002), 61 O.R. (3d) 433; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189; R. v. Bernard, [1988] 2 S.C.R. 833; Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653; Cardwell v. Perthen, 2007 BCCA 313, 243 B.C.A.C. 135; Arora v. Whirlpool Canada LP, 2013 ONCA 657, 118 O.R. (3d) 113; Queen v. Cognos Inc., [1993] 1 S.C.R. 87; Kamloops v. Nielson, [1984] 2 S.C.R. 2.
By Karakatsanis J. (dissenting)
Anns v. Merton London Borough Council, [1978] A.C. 728; Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855; Cattle v. Stockton Waterworks (1875), L.R. 10 Q.B. 453; Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1964] A.C. 465; Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189; Agnew‑Surpass Shoe Stores Ltd. v. Cummer‑Yonge Investments Ltd., [1976] 2 S.C.R. 221; B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228; Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021; Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85; D’Amato v. Badger, [1996] 2 S.C.R. 1071; Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860; Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537; Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737; Donoghue v. Stevenson, [1932] A.C. 562; Rankin (Rankin’s Garage & Sales) v. J.J., 2018 SCC 19, [2018] 1 S.C.R. 587; Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643; Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210; Addison Chevrolet Buick GMC Ltd. v. General Motors of Canada Ltd., 2016 ONCA 324, 130 O.R. (3d) 161; Shelanu Inc. v. Print Three Franchising Corp. (2003), 64 O.R. (3d) 533; 2176693 Ontario Ltd. v. Cora Franchise Group Inc., 2015 ONCA 152, 124 O.R. (3d) 776; Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118; Douez v. Facebook, Inc., 2017 SCC 33, [2017] 1 S.C.R. 751; Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2 S.C.R. 114; Athey v. Leonati, [1996] 3 S.C.R. 458; Janiak v. Ippolito, [1985] 1 S.C.R. 146; British Columbia v. Canadian Forest Products Ltd., 2004 SCC 38, [2004] 2 S.C.R. 74.
Statutes and Regulations Cited
Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3, s. 3(1).
Canadian Food Inspection Agency Act , S.C. 1997, c. 6, s. 19 .
Safe Food for Canadians Regulations, SOR/2018‑108, s. 84.
Authors Cited
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APPEAL from a judgment of the Ontario Court of Appeal (Sharpe, Rouleau and Fairburn JJ.A.), 2018 ONCA 407, 140 O.R. (3d) 481, 425 D.L.R. (4th) 674, 49 C.C.L.T. (4th) 28, [2018] O.J. No. 2417 (QL), 2018 CarswellOnt 12558 (WL Can.), setting aside a decision of Leitch J. Appeal dismissed, Wagner C.J. and Abella, Karakatsanis and Kasirer JJ. dissenting.
Earl A. Cherniak, Q.C., Peter W. Kryworuk and Jacob R. W. Damstra, for the appellant.
Elizabeth Bowker, Steven Stieber and Nicola Brankley, for the respondents.
The judgment of Moldaver, Côté, Brown, Rowe and Martin was delivered by
Brown and Martin JJ. —
I. Introduction
[1] This appeal is brought by 1688782 Ontario Inc., a former franchisee of Mr. Submarine Limited (“Mr. Sub”) and the class representative of 424 other Mr. Sub franchisees (“appellant” or “Mr. Sub franchisees”). The appellant says that class members were affected by the decision of the respondents (collectively, “Maple Leaf Foods”) to recall meat products that had been processed in a Maple Leaf Foods factory in which a listeria outbreak had occurred. Specifically, it says that they experienced a shortage of product for six to eight weeks causing economic loss and reputational injury due to their association with contaminated meat products. By this class proceeding, the appellant advances claims in tort law against Maple Leaf Foods, seeking compensation for lost past and future sales, past and future profits, capital value of the franchises and goodwill.
[2] The question for this Court to decide is whether Maple Leaf Foods (with which neither the appellant nor any other franchisee was in contractual privity, but rather linked indirectly through a chain of contracts) owed Mr. Sub franchisees a duty of care, enforceable under the Canadian law of negligence. The appellant says that Maple Leaf Foods, as a manufacturer, owed a duty to Mr. Sub franchisees to supply a product fit for human consumption. More specifically, the appellant says that the circumstances of its claim fall within two categories of proximity that have been recognized in respect of two forms of pure economic loss: negligent misrepresentation or performance of a service, and the negligent supply of shoddy goods or structures. Further, the appellant says that the relationship between Maple Leaf Foods and Mr. Sub franchisees is analogous to an established category of proximity that has been previously recognized in the caselaw. Finally, and while it is unclear whether the appellant actually advances a novel duty argument before us, we note that Maple Leaf Foods takes the appellant as having done so, and that both the motion judge and our colleague Karakatsanis J. would recognize a novel duty in this case. In order to take the appellant’s claim at its strongest, we therefore proceed on the basis that it also advances such an argument.
[3] Maple Leaf Foods says it owed no duty of care to Mr. Sub franchisees, and brought a motion for summary judgment dismissing these claims.
[4] The appellant successfully resisted summary judgment before the motion judge at the Ontario Superior Court of Justice, but failed before the Court of Appeal for Ontario. In the Court of Appeal’s view, the motion judge’s decision to allow these claims to proceed could not stand in light of this Court’s decision in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855, which had been decided since the motion judge’s judgment in the appellant’s favour. The Court of Appeal held that this disposed not only of the negligent misrepresentation claim, but also of the claim for negligent supply of dangerous or shoddy goods, since it followed from Livent “that the motion judge erred in her duty of care analysis” (2018 ONCA 407, 140 O.R. (3d) 481, at para. 87).
[5] For the reasons that follow, we would dismiss the appeal. Maple Leaf Foods does not owe a duty of care to Mr. Sub franchisees in respect of these matters.
II. Background
[6] As Clarke J. (as he then was) explained in Cromane Seafoods Ltd. v. Minister for Agriculture, [2016] IESC 6, [2017] 1 I.R. 119, at para. 66, like “chaos theory” in mathematics, “the true underlying difficulty [in the law of negligence] stems from the fact that we live in a highly interactive world where each of our fortunes are constantly affected, sometimes trivially, sometimes significantly, by decisions made or actions taken or avoided [by others]”. So it is in this case. As in most modern commercial arrangements of even modest complexity, the parties here operated through a multipartite arrangement comprising a chain of contracts ⸺ in this case a contract between Mr. Sub and Mr. Sub franchisees that was typical of franchisor‑franchisee relationships, and a contract of supply between Mr. Sub and Maple Leaf Foods. As we explain below, in the context of a claim brought in tort law as opposed to the law of contract, these are significant considerations.
[7] More particularly, at the material time, the relationship between Mr. Sub and its franchisees was governed by the Franchisee Renewal Agreement, dated February 1, 2006 (“franchise agreement”) (A.R., vol. II, p. 89).
[8] The relationship between Mr. Sub and Maple Leaf Foods was governed by an exclusive supply agreement — pursuant to which Maple Leaf Foods was made the exclusive supplier of 14 core Mr. Sub menu items: ready‑to‑eat (“RTE”) meats served in all Mr. Sub restaurants (“partnership agreement”, signed December 12, 2005, A.R., vol. II, at p. 12). In order to give effect to this exclusive supply arrangement, the franchise agreement between Mr. Sub and its franchisees required them to purchase RTE meats produced exclusively by Maple Leaf Foods (franchise agreement, art. 6.2). This was done not by way of direct dealings between Mr. Sub franchisees and Maple Leaf Foods; instead, the franchisees placed an order with a distributor, which would in turn place an order with Maple Leaf Foods. No contractual relationship ever existed between the franchisees and Maple Leaf Foods. Rather, each was linked to the other indirectly, through separate contracts with Mr. Sub.
[9] It is worth noting that, while their franchise agreement with Mr. Sub required Mr. Sub franchisees to purchase RTE meats exclusively from Maple Leaf Foods, the latter was under no obligation by the terms of its contract with Mr. Sub to supply. Further, the franchise agreement also provided that the franchisees could not sue Mr. Sub for delays in supply of RTE meats. Nor could they look to alternative sources of supply without first seeking Mr. Sub’s permission (franchise agreement, art. 6.2).
[10] On August 16, 2008, Maple Leaf Foods learned that one of its products had been found to contain listeria. It was required to recall that product, along with another. Several days later, it voluntarily recalled additional products, including two of the RTE meat products used by Mr. Sub franchisees. (These products were immediately destroyed, and it is unknown whether they were actually contaminated.) In early September 2008, Maple Leaf Foods released Mr. Sub from the exclusive supply arrangement. By mid‑September 2008, an alternate supplier had been selected.
[11] There is no suggestion of wrongfulness in the decision to issue this voluntary recall. That said, it interrupted an important source of supply to the franchisees, leaving them without those products for a period of six to eight weeks. During that period, the franchisees did not take advantage of the clause in the franchise agreement allowing them to seek Mr. Sub’s permission to find a different supplier.
A. Ontario Superior Court of Justice, No. 60680CP (November 18, 2016), Leitch J.
[12] The motion judge held that Maple Leaf Foods owed Mr. Sub franchisees a duty to supply a product fit for human consumption. In doing so, she accepted the appellant’s argument that she should be guided by decisions in which other courts had recognized this duty, citing Plas‑Tex Canada Ltd. v. Dow Chemical of Canada Ltd., 2004 ABCA 309, 357 A.R. 139; 376599 Alberta Inc. v. Tanshaw Products Inc., 2005 ABQB 300, 379 A.R. 1, and Country Style Food Services Inc. v. 1304271 Ontario Ltd. (2005), 200 O.A.C. 172 (S.C.J. reasons, at para. 40 (A.R., vol. I, at p. 54)). Further, she found that the contaminated RTE meats posed a “real and substantial danger”, described by this Court as grounding a duty of care in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85 (para. 53 (A.R., vol. I, at p. 58)). She also concluded that a “special relationship” existed between the appellant and Maple Leaf Foods, grounded on foreseeability of reasonable reliance upon a representation (here, that the RTE meats were fit for human consumption), so as to ground a viable cause of action in negligent misrepresentation (para. 49 (A.R., vol. I, at p. 56)).
[13] In an abundance of caution, however, in adjudicating the accompanying certification motion (2016 ONSC 4233), the motion judge conducted her own duty of care analysis as if this were a novel claim. She recognized that this required her to apply the traditional foreseeability‑based test from Anns v. London Borough of Merton, [1977] 2 All E.R. 492 (H.L.), as refined by this Court in Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537, so as to give greater prominence to the proximity, or “closeness and directness” of the relationship between the parties ⸺ a point which this Court has since confirmed in Livent, at paras. 25‑31. Doing so led her to conclude the Anns/Cooper test was satisfied here. Mr. Sub franchisees’ losses were foreseeable (S.C.J. certification reasons, at para. 61), and it was not plain and obvious that their relationship to Maple Leaf Foods was insufficiently proximate: “[the appellant and other Mr. Sub franchisees are] within a known and readily identifiable category of persons. [Maple Leaf Foods] supplied to [the appellant], an entity it had a close and direct relationship with as an exclusive supplier, a defective product dangerous to public health, knowing that the product would be offered for sale to consumers who could be injured from consuming the product thereby causing economic losses to [the franchisees]” (S.C.J. certification reasons, at para. 70). No policy considerations negated or militated against liability.
B. Court of Appeal for Ontario, 2018 ONCA 407, 140 O.R. (3d) 481, Sharpe, Rouleau and Fairburn JJ.A.
[14] The Court of Appeal allowed Maple Leaf Foods’ appeal, and granted it summary judgment. The case authorities relied upon by the motion judge — Plas‑Tex, Tanshaw and Country Style — were not truly analogous to the Mr. Sub franchisees’ claims (paras. 49 and 59), and the motion judge erred in finding that the facts in this case fell within a well‑established category of duty to supply a product fit for human consumption. It was therefore necessary to review her conclusion under the Anns/Cooper framework regarding a novel duty of care (para. 59).
[15] The Court of Appeal noted that the alleged damages are substantially the result of the recall and the consequent publicity, including publicity of the illness and death of people who had eaten tainted meat (albeit not at a Mr. Sub restaurant) (para. 65). To recognize a duty here “would constitute an unwarranted expansion of a duty owed to one class of plaintiffs”, the consumers, and “bootstrap” it so as to “extend it to the fundamentally different claim advanced by the franchisees” (para. 66). The motion judge’s conclusion regarding negligent misrepresentation is similarly unfounded. In concluding that the franchisees reasonably relied on Maple Leaf Foods’ representation that its meats were safe for human consumption, the motion judge failed to consider the scope of the proximate relationship between the parties (para. 80). The purpose of Maple Leaf Foods’s undertaking of responsibility was not to protect the business or reputational interests of the franchisees, but “to ensure that Mr. Sub customers who ate RTE meats would not become ill or die as [a] result of eating the meats” (ibid.). Accordingly, the loss suffered by the franchisees was not reasonably foreseeable (para. 84).
[16] Owing to what it saw as the motion judge’s erroneous duty of care analysis, the Court of Appeal did not consider whether the losses were recoverable as a consequence of the negligent supply of a dangerous or shoddy product (para. 87).
III. Analysis
A. Pure Economic Loss in Negligence Law
[17] As the lower courts recognized, the claims of the appellant and other Mr. Sub franchisees are for pure economic loss, in the form of lost profits, sales, capital value and goodwill. Pure economic loss is economic loss that is unconnected to a physical or mental injury to the plaintiff’s person, or to physical damage to property (Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860, at para. 34; D’Amato v. Badger, [1996] 2 S.C.R. 1071, at para. 13; Saadati v. Moorhead, 2017