Focus On

NEGLIGENCE - Duty and standard of care - Duty of care

Friday, November 06, 2020 @ 3:39 PM  

Lexis Advance® Quicklaw®
Appeal by 1688782 Ontario Inc. from a decision of the Ontario Court of Appeal that granted summary judgment to the respondents (“Maple Leaf Foods”) and dismissed the appellant’s class action. The appellant was a former franchisee of Mr. Submarine Limited (“Mr. Sub”) and the class representative of 424 other Mr. Sub franchisees. It claimed a shortage of products, due to the recall of meat products by Maple Leaf Foods, caused class members economic loss and reputational injury. It sought compensation for lost profits, capital value of the franchises and goodwill. The meat products were processed in a Maple Leaf Foods factory in which a listeria outbreak occurred. The relationship between Maple Leaf Foods and Mr. Sub was governed by an exclusive supply agreement. No contractual relationship existed between Mr. Sub franchisees and Maple Leaf Foods. Under their franchise agreements, Mr. Sub franchisees were required to purchase supplies from Maple Leaf Foods but could request permission from Mr. Sub to seek an alternative source of supply. The Ontario Superior Court of Justice dismissed Maple Leaf Foods’ motion for a summary judgment seeking the dismissal of the claims. The motion judge determined Maple Leaf Foods owed Mr. Sub franchisees a duty to supply a product fit for human consumption. The Court of Appeal allowed Maple Leaf Foods’ appeal on the basis the motion judge erred in the duty of care analysis.

HELD: Appeal dismissed. The relationship between the parties had to bear the requisite closeness and directness, such that it fell within a previously established category of proximity or was analogous to one, to support a duty of care. Maple Leaf Foods did not owe a duty of care to Mr. Sub franchisees. It was not in a relationship of proximity with Mr. Sub franchisees. With respect to negligent misrepresentation or performance of a service, Maple Leaf Foods’ undertaking, to ensure people who ate its meats would not become ill or die as a result of eating those meats, was made to consumers and not to commercial intermediaries such as Mr. Sub or Mr. Sub franchisees. The business interests of Mr. Sub franchisees lay outside the scope and purpose of Maple Leaf Foods’ undertaking. Further, it had not been established that Mr. Sub franchisees relied reasonably, or at all, on Maple Leaf Foods’ undertaking. With respect to the negligent supply of shoddy goods, the liability rule in Winnipeg Condominium protected a right to be free of a negligently caused real and substantial danger, not to the continued use of a product. Any danger posed by the supply of possibly contaminated meats was a danger only to the ultimate consumer and not to Mr. Sub franchisees that evaporated when the meats were recalled and destroyed. Maple Leaf Foods’ ability to reasonably foresee injury to Mr. Sub franchisees was insufficient to ground a finding of proximity. The pure economic losses the appellant sought to recover did not fall within the scope of a proximate relationship and could not be considered a reasonably foreseeable consequence of Maple Leaf Foods’ alleged negligence in supplying potentially contaminated meats. The appellant was attempting to circumvent the strictures of its franchise agreement by alleging a duty of care in tort. Dissenting reasons were provided.

1688782 Ontario Inc. v. Maple Leaf Foods Inc., [2020] S.C.J. No. 35, Supreme Court of Canada, R. Wagner C.J. and R.S. Abella, M.J. Moldaver, A. Karakatsanis, S. Côté, R. Brown, M. Rowe, S.L. Martin and N. Kasirer JJ., November 6, 2020. TLD-November22020012-SCC