In 2018, we wrote about an Ontario Court of Appeal decision (http://canlii.ca/t/hv65n), in which the court found that a meat manufacturer did not owe a duty of care to restaurant franchisees who had purchased listeria-contaminated meat products. The court denied the franchisees’ claim of pure economic loss in a class action against the manufacturer over the product recall.
This month, the Supreme Court of Canada issued its decision on the matter, upholding the Court of Appeal’s ruling.
Franchisees Sue Over Contaminated Meat
In 2008, Maple Leaf recalled meat products that had been processed in one of its factories where a listeria outbreak had occurred.
At the time, Mr. Sub and Maple Leaf had a supply agreement under which Maple Leaf was the exclusive supplier of ready‑to‑eat meats served in all Mr. Sub restaurants and, pursuant to the franchise agreement between Mr. Sub and its franchisees, all franchisees were required 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.
Following the meat recall, a number of Mr. Sub franchisees experienced a shortage of product for six to eight weeks.
The franchisees commenced a class action against Maple Leaf in which they claimed to have suffered economic loss and reputational injury due to their association with contaminated meat products. They sought compensation for the loss of past and future sales, past and future profits, capital value of the franchises and goodwill. They also claimed that Maple Leaf was liable for negligent misrepresentation or performance of a service.
Maple Leaf brought a motion for summary judgment dismissing the claims, but the motion judge allowed the franchisees’ claim to proceed, finding that Maple Leaf owed them a duty to supply a product fit for human consumption. Additionally, the motion judge found that the contaminated meat products had posed a real and substantial danger, so as to ground a duty of care.
The Ontario Court of Appeal allowed Maple Leaf’s appeal, finding that Maple Leaf did not owe a duty of care to the franchisees.
The franchisees appealed to the Supreme Court of Canada.
Supreme Court of Canada Finds No Duty of Care
The Supreme Court of Canada upheld the Court of Appeal’s decision, finding that Maple Leaf did not owe a duty of care to the franchisees. It stated that while pure economic loss may be recoverable in certain circumstances, there is no general right in tort protecting against the negligent or intentional infliction of pure economic loss.
The court began by explaining that, as with any claim to recover for negligently caused loss, including pure economic loss, a plaintiff must prove all the elements of the tort of negligence, the first of which is whether the defendant owed the plaintiff a duty of care.
The court then conducted a thorough review of the law of negligence in Canada, focussing on the duty of care. The court explained that, as the Anns/Cooper framework sets out, a prima facie duty of care is established by the conjunction of proximity of relationship and foreseeability of injury; foreseeability alone is insufficient to ground the existence of a duty of care, so a duty arises only where a relationship of “proximity” exists. Additionally, 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.
Ultimately, the court found that proximity could not be established by reference to a recognized category of proximate relationship, or by conducting a full proximity analysis. It found that while the franchise agreement created a vulnerability for the franchisees, it did not have the effect of establishing a proximate relationship between them and Maple Leaf. Moreover, 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 a result, the court found that there was no relationship of proximity between Maple Leaf and the franchisees; therefore, there was also no proximity for the purposes of recognizing a novel duty of care.
The court dismissed the appeal.
The manufacturers, designers and retailers of consumer goods are obligated to ensure that their products meet safety standards and will not cause harm to consumers when put to their intended use. If you have suffered an injury as a result of a faulty or defective product, it is important to seek legal guidance as soon as possible, in order to preserve evidence for a possible lawsuit.
At Campbell Litigation, our lawyers are experienced and effective litigators who will work to represent your interests against the providers, creators and retailers of defective or faulty products. Call us today at 519-886-1204 or contact us online to arrange a no-obligation consultation with our knowledgeable and experienced personal injury lawyers.