In 1688782 Ontario Inc. v. Maple Leaf Foods Inc., the Court of Appeal for Ontario considered the availability of damages for pure economic loss in a food product recall class action. The Court's decision provides helpful guidance to litigants considering the existence and scope of a duty of care in claims for damages for pure economic loss.
The facts of the case were not in dispute. In 2008, certain Maple Leaf Foods Inc. products became contaminated with listeria. Two of the affected products were supplied to franchisees of Mr. Submarine Limited. Maple Leaf recalled the products that were produced at the plant where the contaminated products originated, and the plant was temporarily closed. This affected the supply of the two products used by the franchisees, but no customers of the franchisees were harmed by eating the contaminated products.
The franchisees commenced a class action against Maple Leaf, claiming damages on the basis that: (i) Maple Leaf negligently manufactured and supplied potentially contaminated meat; and (ii) Maple Leaf negligently represented that the supplied meats were fit for human consumption. The franchisees claimed damages for economic loss, namely, loss of past and future sales, past and future profits, and loss of capital value and goodwill.
At first instance, the motion judge certified the proposed class action. Following certification, both parties brought summary judgment motions. Maple Leaf's summary judgment motion sought a dismissal of certain claims on the basis that Maple Leaf owed no duty of care to the franchisees. The franchisees sought summary judgment in their favour. The motion judge found that Maple Leaf owed a duty of care to the franchisees in relation to the production, processing sale and distribution of the contaminated products, and a duty of care with respect to representations that the products were fit for human consumption and posed no risk of harm. Maple Leaf appealed.
On appeal, the Court overturned the motion judge's holding that Maple Leaf owed a duty of care to the franchisees with respect to the negligent manufacture/supply of the affected products, and negligent misrepresentation regarding their suitability for human consumption.
With respect to the issue of Maple Leaf's duty to supply a product fit for human consumption, the Court found that the motion judge erred in finding that the relationship between Maple Leaf and the franchisees fell within a recognized duty of care to provide a product fit for human consumption, as the cases in that category were factually distinguishable. Accordingly, the Court proceeded to evaluate their relationship under the established test for determining whether a court should recognize a new duty of care (the "Anns/Cooper" analysis). The Court found that any duty of care to supply products fit for human consumption was owed to the franchisees' customers, not the franchisees. The Court further found that finding that Maple Leaf owed a duty of care to the franchisees to protect them against damages for economic losses would constitute an unwarranted expansion of a duty owed to one class of plaintiffs and extend it to a different claim advanced by the franchisees. Accordingly, the Court concluded the motion judge erred in finding a duty to supply a product fit for human consumption encompassed a duty of care to protect against the economic losses claimed by the franchisees.
With respect to the issue of Maple Leaf's duty of care regarding representations that the contaminated productions were fit for human consumption and posed no risk of harm, the Court found that the motion judge erred in failing to consider the scope of the proximate relationship between the parties, affecting the foreseeability analysis. The Court found that the nature of the undertaking given by Maple Leaf to supply product safe for human consumption to the franchisees' customers was to ensure that their customers would not become ill or die as a result of eating the products, not to protect the reputational interests of the franchisees. Accordingly, the Court concluded that the franchisees' pure economic losses were not reasonably foreseeable to Maple Leaf.