Canada: Tainted Meat And The Duty Of Care

Last Updated: September 12 2018
Article by Stephen G. Ross and Jonathan Mahoney

On April 30, 2018, the Ontario Court of Appeal released its decision in 1688782 Ontario Inc. v. Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc., 2018 ONCA 407 ("Maple Leaf Foods Inc."). This case highlights the importance of properly defining and identifying the scope of any duty of care arising from a relationship between commercial parties.

Background/Facts

In August 2008, certain Maple Leaf brand ready-to-eat ("RTE") meats became contaminated with listeria monocytogenes at dangerous levels. Some people fell seriously ill and even died as a result. Naturally, media attention followed and it was reported that RTE meats as supplied by Maple Leaf were being sold by certain food sellers, including McDonalds and Mr. Sub.

1688782 Ontario Inc. v. Maple Leaf Foods Inc. is a certified class action1 where Mr. Sub franchisees allege that Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc. ("Maple Leaf") negligently supplied contaminated meat products that were not fit for human consumption to various Mr. Sub locations.

Although no Mr. Sub customer was harmed by any Maple Leaf supplied product, Mr. Sub claims that the franchisees suffered economic losses arising largely from the reputational harm from being linked to Maple Leaf, and therefore the 2008 listeria outbreak.

Mr. Sub claims damages for loss of past and future sales, past and future profits, and loss of capital value and goodwill. It also claims damages for clean-up costs and other costs related to the disposal, destruction and replacement of RTE meats.

Maple Leaf brought a summary judgment seeking dismissal of certain claims on the basis they owed the plaintiff no duty of care. In the alternative, Maple Leaf sought a dismissal of the claims for damages arising out of pure economic loss, namely alleged loss of past and future sales, past and future profits, loss of capital value of the representative plaintiff's franchise and business, and loss of goodwill.

In the motion decision, Justice Leitch found that Maple Leaf owed a duty of care to Mr. Sub in relation to the production, processing, sale and distribution of the RTE Meats. This duty was described as "a duty to supply a product fit for human consumption."

The Appeal

Maple Leafs appealed, maintaining that the motion judge erred in finding that:

  1. Maple Leaf supplied the plaintiff with a defective product dangerous to public health;
  2. This case falls within a recognized duty of care such that Maple Leaf owes the Mr. Sub franchisees a duty of care; and
  3. Damages for pure economic loss are recoverable.

Following the appeal hearing on October 31, 2017, the Supreme Court of Canada released its decision in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 ("Livent"), which had a direct impact on Maple Leaf's appeal as it clarified the analytical approach to identifying a duty of care, especially in negligent misrepresentation claims. Accordingly, the parties were provided with the opportunity to file additional written submissions.

Analysis

The Court of Appeal held that the motion judge made three fundamental errors in her duty of care analysis:

1. No recognized duty of care

The motion judge erred in finding that the relationship between Maple Leaf and the Mr. Sub franchisees fell within an established category of relationships in which proximity had already been found to exist, therefore giving rise to a duty to supply a product fit for human consumption.

The Court of Appeal held that the judge improperly relied upon distinguishable cases in coming to this conclusion. The decision in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 ("Livent") had not yet been released when the motion judge made her decision.

In Livent, the Supreme Court of Canada cautioned against finding proximity based upon a previously established or analogous category, stating that the particular relationship at issue in each case need be examined.

The Court of Appeal found that there were fundamental differences between this case and the cases relied upon by the motion judge such that a full Anns/Cooper analysis was required to determine whether there was a duty of care.

2. Failing to consider the scope of proximity of relationship

The first stage of the Anns/Cooper test raises the question of whether the facts disclose a relationship of proximity in which failure to take reasonable care might foreseeably cause loss or harm. If loss is foreseeable, a prima facie duty of care arises.

Next, it must be considered whether there are policy reasons why this prima facie duty of care should not be recognized.

The Court of Appeal concluded that the motion judge erred in failing to consider the scope of the proximate relationship between the parties or the scope of any duty of care arising from it (the first step of the Anns/Cooper test) and in concluding that the duty to supply a product fit for human consumption encompassed a duty of care to protect against the economic losses.

Writing for the Court, Fairburn J.A. stated:

[66] To conclude that Maple Leaf owed a duty of care in tort to the franchisees to protect them against the kinds of damages at issue on this appeal would be to enlarge the duty to safeguard the health and safety of customers by supplying fit meat to include a quite different and added duty to franchisees to protect against reputational harm. In my view, to do so would constitute an unwarranted expansion of a duty owed to one class of plaintiffs and extend it to the fundamentally different claim advanced by the franchisees. In other words, the franchisees cannot bootstrap their claim for damages for reputational loss to the different duty owed by Maple Leaf to their customers.

[68] Simply put, the type of injury claimed – economic losses arising from reputational harm – did not fall within the scope of any duty owed to the franchisees.

[69] In light of these conclusions, it is unnecessary to address the issue of whether there are any residual policy considerations that would negate the imposition of a duty of care...

3. No duty of care in the negligent misrepresentation context

In the context of the claim for negligent misrepresentation, the motion judge erred in failing to consider the scope of the proximate relationship between the parties.

In Livent, two factors were identified as being determinative when conducting a proximity analysis in a case of negligent misrepresentation: (1) the defendant’s undertaking and (2) the plaintiff’s reliance.

The Court of Appeal held that:

[80] ...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 RTE 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.

[84] ...The reputational damage said to be sustained by the plaintiff, arising from Maple Leaf's supply to others and from the recall – aimed at safeguarding health and safety – falls outside the scope of Maple Leaf's undertaking to the franchisees. Accordingly, the alleged injury was not reasonably foreseeable.

The reputational damage alleged by the franchisees was said to flow from the supply of tainted meat to others (not Mr. Sub franchisees or customers) and the recall of potentially tainted meat from Mr. Sub franchisees.

Given the source of the alleged damage, the Court of Appeal found that it fell outside the scope of Maple Leaf’s undertaking to the franchisees and that the alleged injury was not reasonably foreseeable.

The Takeaway

In sum, the takeaway from Maple Leaf Foods Inc. is that it is important to properly define the scope of any duty of care arising from a relationship between parties, particularly commercial entities.

There has to be a link between the duty of care and the damages suffered. Simply establishing a duty of care is not sufficient. The scope of the duty of care that is alleged must be broad enough to encompass the nature of the damages claimed, and the damages claimed must flow from a breach of the duty of care as defined.

In many cases, the existence of a recognized duty of care is simply assumed or looked at from a broad perspective. The Maple Leaf Foods Inc. and the Livent decisions serve to remind counsel and parties that careful consideration needs to be given to the specifics of a claim before the existence of a duty of care can be recognized.

In this situation, it is undeniable that there would be a duty of care as between a supplier (Maple Leaf) and a retailer (Mr. Sub) as it relates to certain types of losses such as harm caused to its customers. However, the Court of Appeal made clear that the duty must relate to the very damages claimed which, in this situation, was said not to include economic losses arising from reputational harm.

As such, going forward, the analysis of whether a duty of care exists must include a focus not just on the relationship between the parties but also the nature or type of injury being claimed.

An issue arises when many different categories of losses are advanced as against a party. It would appear that a duty of care is not an all or nothing proposition. A duty may be owed as it relates to some losses and not others. Therefore, the focus must not only include a consideration of the damages sought but on each category of damages claimed.

Livent and Maple Leaf Foods Inc. demonstrate just how critical it is to carefully consider and categorize the various heads of damages pursued to determine whether a duty of care exists for some, none, or all of the claims advanced.

Footnote

[1] 1688782 Ontario Inc. is the representative plaintiff, representing a certified class of Mr. Sub franchisees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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