The full extent or scope of any duty of care that is owed by a defendant must be carefully scrutinized when deciding what types of damages may apply to this duty, the Ontario Court of Appeal has stressed in a class action case related to the 2008 listeriosis outbreak.
The full extent or scope of any duty of care that is owed by a defendant must be carefully scrutinized when deciding what types of damages may apply to this duty, the Ontario Court of Appeal has stressed in a class action case related to the 2008 listeriosis outbreak.
The decision in 1688782 Ontario Inc. v. Maple Leaf Foods Inc. is also the first appellate court ruling since the Supreme Court of Canada clarified the approach to identifying a duty of care last December in Deloitte & Touche v. Livent Inc.
In its decision, issued April 30, the Court of Appeal overturned the motions judge and found that any duty Maple Leaf had in supplying safe “ready-to-eat” meats to Mr. Sub franchises did not extend to economic losses suffered as a result of publicity from the recall of certain products at the time of the outbreak.
The ruling effectively reduces the class action filed by franchise owners of the submarine sandwich chain to a few minor grounds.
“There was an error in failing to consider the scope of the proximate relationship between the parties, which in turn affected the foreseeability analysis,” wrote Justice Michal Fairburn with justices Robert Sharpe and Paul Rouleau concurring.
“Maple Leaf undoubtedly undertook — in the context of its contractual relationship with the franchisor — to supply meat safe for human consumption by Mr. Sub customers. The nature or purpose of such an undertaking was to ensure that Mr. Sub customers who ate [ready-to-eat] meats would not become ill or die as result of eating the meats. The purpose of the undertaking was not, however, to protect the reputational interests of the franchisees,” Fairburn stated.
Peter Kryworuk, lead counsel for the franchisees at the Court of Appeal, says the ruling is being reviewed to decide whether to seek leave to appeal to the Supreme Court.
“This decision is significant with respect to the duty of care. It takes a very narrow and restrictive approach to the proximity analysis,” says Kryworuk, a partner at Lerners LLP in London, Ont.
Elizabeth Bowker, co-counsel for Maple Leaf, says the ruling is good news for food producers. “Typically, you would owe a duty to the end customer, not to every entity in the supply chain,” says Bowker, a partner at Stieber Berlach LLP in Toronto.
Maple Leaf was an exclusive meat supplier to Mr. Sub when the outbreak was discovered.
There is no evidence that any customer of the submarine sandwich chain was harmed. The class action, certified by Superior Court Justice Lynne Leitch, is based on alleged economic losses.
In a subsequent summary judgment motion, which was the basis of the appeal, Leitch found that the tainted meat “posed foreseeable, real and substantial danger to consumers’ health and safety” and, as a result, the economic losses of the franchise owners are recoverable.
“Policy considerations weigh in favour of imposing a duty in these circumstances to heighten accountability,” Leitch concluded.
The Court of Appeal disagreed. It stated in its ruling that the duty of care extended only to the actual customers.
“The franchisees cannot bootstrap their claim for damages for reputational loss to the different duty owed by Maple Leaf to their customers,” wrote Fairburn.
The fact that Mr. Sub was named in media reports after the outbreak as a recipient of potentially tainted Maple Leaf products does not mean it should be liable for how customers react to the coverage, says Bowker.
“There is no duty at large to protect someone’s reputation,” she explains.
The Court of Appeal is trying to bring “rigour” to the duty of care analysis, says Marie-Andrée Vermette, chairwoman of the commercial practice litigation group at WeirFoulds LLP in Toronto.
“You may have some form of duty, but what is it exactly? Where does it start and where does it end?” asks Vermette.
In its decision, the Court of Appeal is “highlighting” the need to engage in this level of analysis to define the scope of a duty of care, especially in light of the Supreme Court’s decision in Livent, says Vermette.
In the case of Maple Leaf and the Mr. Sub franchisees, she says, the Court of Appeal also examined the undertakings of the food distributor and the reliance of the store owners.
“It cannot be broader than what was undertaken. Maple Leaf did not undertake to protect the reputations of the franchisees,” says Vermette.
The fact that no customer of the franchise fell ill as a result of the outbreak was also significant. “The result of this case might have been different if a Mr. Sub customer had been harmed,” she adds.
Vermette notes that, while it was in obiter, the Court of Appeal suggested a policy reason for restricting the scope of the duty of care in this type of situation to encourage companies to go forward with recalls without being concerned about expanded liability.
“To the extent that the franchisees’ alleged damages relate to the recall itself, policy considerations call into question imposing liability,” the Court of Appeal wrote.
“There is a strong public interest in encouraging manufacturers to act expeditiously in recalling products from the marketplace to avoid potential danger to consumers.”
