



COURT OF APPEAL FOR ONTARIO

CITATION: 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2018
    ONCA 407

Date: 20180430

DOCKET: C63107

Sharpe, Rouleau and Fairburn JJ.A.

BETWEEN

1688782 Ontario Inc.

Plaintiff (Respondent)

and

Maple Leaf Foods Inc. and Maple Leaf Consumer
    Foods Inc.

Defendants (Appellants)

Steven Stieber and Elizabeth Bowker, for the appellants

Peter W. Kryworuk, Rebecca Case and Jacob Damstra, for
    the respondent

Heard: October 31, 2017

Additional Written Submissions: January 22 and February 8, 2018

On appeal from the judgment of Justice Lynne Leitch of
    the Superior Court of Justice, dated November 18, 2016.

Fairburn J.A.:

OVERVIEW

[1]

In August 2008, certain Maple Leaf brand
    ready-to-eat (RTE) meats became contaminated with listeria monocytogenes at
    dangerous levels.
[1]
Some people fell seriously ill and some died after eating the meat. Maple Leaf recalled
    meats that were produced at the production plant where the infected meat
    originated, and the plant was temporarily closed. The recall and plant closure affected
    the supply of two of the RTE meats used by the franchisees of Mr. Submarine
    Ltd. (Mr. Sub).

[2]

A class action was certified on behalf of Mr.
    Sub franchisees against Maple Leaf Foods Inc. and Maple Leaf Consumer Foods
    Inc. (collectively Maple Leaf).  The representative plaintiff, 1688782
    Ontario Inc., claims damages on the basis that Maple Leaf: (a) negligently
    manufactured and supplied potentially contaminated meat; and (b) negligently represented
    that the supplied meats were fit for human consumption. There is no evidence
    that any Mr. Sub customer was harmed by any contaminated product. However, the representative
    plaintiff alleges that the franchisees suffered economic losses arising in
    large part from the reputational harm they say they experienced from being
    publicly associated with Maple Leaf in the aftermath of the listeria outbreak.
    In particular, the representative plaintiff 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.

[3]

After certification of the class action, Maple
    Leaf brought a summary judgment motion seeking dismissal of certain claims on
    the basis that Maple Leaf owed no duty of care to the class. The representative
    plaintiff, in turn, asked that summary judgment be granted in its favour.

[4]

This appeal arises from the motion judges decision
    concluding that Maple Leaf owed a duty of care to the franchisees in relation
    to the production, processing, sale and distribution of the RTE Meats and a
    duty of care with respect to any representations made that the RTE Meats were
    fit for human consumption and posed no risk of harm.

[5]

The Supreme Courts decision in
Deloitte
    & Touche v. Livent Inc. (Receiver of),
2017 SCC 63, [2017] 2 S.C.R.
    855, was released after this appeal was heard. The judgment has direct
    application to this case as it clarifies the analytical approach to identifying
    a duty of care, especially in the context of negligent misrepresentation claims.
    Accordingly, the parties were provided with the opportunity to file additional
    written submissions focused on the application of
Livent
to this case.

[6]

For the reasons that follow, I would allow the
    appeal.

BACKGROUND

(1)

Facts

[7]

A franchise agreement governs the relationship
    between the franchisor, Mr. Sub, and its franchisees. The agreement requires
    the franchisees to purchase products exclusively from Mr. Sub or sources or
    suppliers approved by it. Although franchisees may purchase products not
    previously authorized by Mr. Sub, this may only be done with Mr. Subs approval.

[8]

At the time of the listeria outbreak in 2008, Maple
    Leaf was in a contractual relationship with Mr. Sub. The agreement involved an
    exclusive supplier arrangement, whereby Mr. Sub contracted for 14 core menu
    items, including the two RTE meats relevant to this appeal, to be supplied only
    by Maple Leaf. However, under the terms of the agreement, Maple Leaf had no corresponding
    obligation to supply the RTE meats to Mr. Sub or its franchisees. At any time,
    Maple Leaf could have stopped supplying any or all of the 14 core menu items.

[9]

The franchisees did not buy the RTE meats directly
    from Maple Leaf. Instead, Maple Leaf dealt with distributors who, in turn,
    dealt with the franchisees. The franchisees would place their orders with, and
    be invoiced by, the distributors. Similarly, the distributors would place their
    orders with Maple Leaf and, in turn, be invoiced by Maple Leaf.

[10]

On August 7, 2008, the CFIA warned Maple Leaf
    that there might be an issue with some meats produced at one of its production
    plants. The CFIAs warning did not relate to any of the products used by the
    franchisees.

[11]

More than a week later, on August 16, 2008 at
    10:00 p.m., Maple Leaf was informed that one of its products had tested
    positive for listeria. Within hours of notification, at 3:30 a.m. on August 17,
    2008, Maple Leaf issued a nationwide press release and notice of recall of two
    products. Neither of these were products used by the franchisees.

[12]

On August 19, 2008, additional test results
    identified a potentially broader problem at the production plant where the
    infected meat had been produced. Maple Leaf expanded the voluntary recall to
    include two of the core menu items used by the franchisees - roast beef and
    corned beef. As tests continued to come back, Maple Leaf voluntarily decided to
    expand the recall, ultimately to 191 products, and then shut down the plant
    until the problem could be resolved.

[13]

It is not in dispute that media reports dealing
    with the listeria outbreak drew an association between Maple Leaf and certain
    food sellers, including Mr. Sub and McDonalds. The CFIAs Health Hazard Alerts
    also included reference to food brands and food sellers who used Maple Leaf
    products, including Mr. Sub, Boston Pizza, Compliments, Kirkland Signature,
    McDonalds, No Name, Pizza Nova, Safeway, Shopsys, and Tim Hortons.

[14]

Maple Leaf communicated with Mr. Sub about the
    recall and sent communications to Mr. Sub intended for its franchisees. Maple
    Leaf set up a hotline to answer any questions that the franchisees may have had
    about the recall.

[15]

Maple Leaf also paid the distributors to attend
    at the franchisees restaurants to retrieve the two core menu items affected by
    the recall. Maple Leaf then credited the distributors for the retrieved products.
    Maple Leaf believed that the distributors then issued credits to the
    franchisees, although the representative plaintiff in this case maintains that it
    received no such credit.

[16]

After the plant was closed, Maple Leaf assisted Mr.
    Sub in finding a new supplier for the two recalled products. The new supplier was
    located by mid-September. By October, Maple Leaf was again producing the RTE meat
    products.

[17]

Mr. Sub sued Maple Leaf. The claim was settled
    when Maple Leaf paid Mr. Sub $250,000 and the parties entered into a Supply and
    Settlement Agreement, whereby Maple Leaf agreed to reduce the cost of the RTE
    meats sold to Mr. Sub and relieved Mr. Sub of the exclusive supply arrangement
    in certain circumstances. Maple Leaf believed that the price reductions would
    be passed on to Mr. Sub franchisees.

[18]

The representative plaintiff maintains that Mr.
    Sub was the sole submarine sandwich restaurant identified by the media as a
    purveyor of Maple Leaf RTE meats. This association with Maple Leaf is said to
    have hurt the franchisees reputations and given their competitors a
    significant competitive advantage.

[19]

The representative plaintiff suggests that
    customers did not want to come to Mr. Sub as a consequence of the listeria
    outbreak, or they would come in but then leave. In addition, in the affidavit
    evidence filed, it is suggested that it was not possible to purchase
    replacement products for the two recalled meats for six to eight weeks. In the
    meantime, the representative plaintiff had to explain to its customers why it
    did not have the requested product. It maintains that Maple Leafs negligence
    ultimately led to its demise as a viable business.

[20]

In its Amended Statement of Claim, the
    representative plaintiff pleads that it was foreseeable that negligence on the
    part of [Maple Leaf] would result in a recall of all contaminated or
    potentially contaminated RTE Meats distributed to the [franchisees], and that
    such recall would be widely publicized and result in a loss of sales, profits
    and goodwill for the [franchisees]. It was also pleaded that the franchisees
    would be required to take remedial measures including disposing or destroying
    of any contaminated or potentially contaminated RTE Meats to prevent harm to
    their customers or employees.

(2)

Decision Below

[21]

Maple Leaf moved for summary judgment on the
    basis that Maple Leaf owed the representative 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 plaintiffs
    franchise and business, and loss of goodwill.

[22]

The representative plaintiff requested an order
    for summary judgment on all of the issues on the defendants motion and was
    largely successful.

[23]

At para. 4 of her order, the motion judge
    ordered that Maple Leaf owed a duty of care to [the franchisees] in relation to
    the production, processing, sale and distribution of the RTE Meats. In her
    reasons, she described the duty as a duty to supply a product fit for human
    consumption: para. 40. She noted that her conclusion was consistent with three
    cases, which I will discuss in some detail below.

[24]

In support of her conclusion that Maple Leaf
    owed a duty to supply a product fit for human consumption, the motion judge found
    that Maple Leaf was under an obligation to be mindful of the [representative]
    plaintiffs legitimate interests in conducting its affairs: para. 41.

[25]

In considering proximity, she noted that Maple
    Leaf was the exclusive supplier of RTE meats and the various dealings between
    Maple Leaf and the franchisees during the recall. She also noted that RTE
    products were an integral and essential part of the business of the franchisees
    without which their business could not operate: para. 42.  The quality and
    safety of the RTE meats, she found, were essential to the maintenance of the
    franchisees good will and reputation  and if the RTE meats were contaminated
    they were potentially dangerous to consumers: para. 42.

[26]

She further found that the alleged harm was a
    reasonably foreseeable consequence of Maple Leafs conduct: para. 43.

[27]

The motion judge went on to deal with the negligent misrepresentation
    claim. At para. 5 of her order, she ordered that Maple Leaf owed a duty of
    care with respect to any representations made that the RTE meats were fit for
    human consumption and posed no risk of harm. She discussed the negligent
    misrepresentation claim, at para. 49 of her reasons:

In relation to the defendants alleged representations that the
    RTE meats were fit for human consumption and posed no risk of harm, I find
    there was a special relationship between the plaintiff and [Maple Leaf] of the
    nature described in [
R v. Imperial Tobacco Canada Ltd.
, 2011 SCC 42,
    [2011] 3 S.C.R. 45] because [Maple Leaf] ought reasonably to have foreseen that
    the plaintiff would rely on their representations and its reliance was
    reasonable in the circumstances.

[28]

She
    continued, at para. 50, as follows:

The plaintiff is within a known and readily identifiable
    category of persons. [Maple Leaf] supplied the plaintiff, an entity it had a
    close and direct relationship with as its exclusive supplier, a defective
    product dangerous to public health, knowing that the product would be offered for
    sale to consumers who could be injured from consuming the product thereby
    causing economic losses to the plaintiff. There are no policy concerns arising
    from imposing a duty of care on the defendants in favour of the plaintiff and
    the class it represents. Rather, policy considerations weigh in favour of
    imposing a duty in these circumstances to heighten accountability. I disagree
    with the defendants that indeterminate liability is a concern here considering
    my findings in relation to the proximity requirement.

[29]

Success
    on the motion was divided in that the representative plaintiff also claimed
    that Maple Leaf owed a duty to warn of the presence of listeria in its plant
    and the motion judge dismissed that claim. The representative plaintiff does
    not challenge that aspect of the motion judges order.

[30]

I note that, in her reasons at para. 54, the motion judge declined
    to strike the claim for damages to cover disposal, destruction and clean-up
    costs as the fact that the plaintiff does not have a claim for [these damages]
    does not entitle the defendants to an order striking these claims which the
    plaintiff makes on behalf of the class it represents. On appeal, Maple Leaf
    does not challenge that aspect of the decision.
[2]
Rather, the focus of this appeal is the damages claimed for loss of past and
    future sales, past and future profits, and loss of capital value and goodwill.

[31]

I also note that the parties agree that the motion judges reasons
    on the summary judgment motion must be read together with her reasons on the
    certification motion: 2016 ONSC 4233.  In her certification decision, the
    motion judge dealt with duty of care at some length in assessing whether the
    pleadings disclosed a cause of action.

[32]

With
    that background, I turn now to the grounds of appeal raised by Maple Leaf.

ANALYSIS

[33]

Maple Leaf advances numerous grounds of appeal
    that can be distilled into four broad objections. Maple Leaf maintains that the
    motion judge erred in:

1.

Finding that Maple Leaf supplied the representative plaintiff with a
    defective product dangerous to public health;

2.

Concluding that this case falls within a recognized duty of care;

3.

Failing to consider and properly apply the
Anns
/
Cooper
test; and

4.

Finding that damages for pure economic loss are recoverable in this
    case.

[34]

I will first address the factual issue and then
    turn to the duty of care analysis.

(1)

Factual Finding

[35]

Maple Leaf maintains that the motion judge made
    a key finding of fact that was unsupported by the evidence and that this error
    led to her erroneous conclusion that a duty of care was owed. In particular,
    Maple Leaf points to the motion judges comment, at para. 50, that Maple Leaf supplied
    the plaintiff  a defective product dangerous to public health. Maple Leaf emphasizes
    that there is no evidence that any RTE meats contaminated with listeria reached
    the representative plaintiffs store or that either of the two core menu items
    that were recalled ever tested positive for listeria.

[36]

The representative plaintiff says that the
    motion judge did not commit a palpable and overriding error. She did not find,
    says that representative plaintiff, that any meats provided to or recalled from
    the franchisees were contaminated. Rather, she properly found that the RTE
    meats that were provided to the franchisees were at risk of contamination and
    thus posed a risk to public health and safety.

[37]

In my view, the impugned comment must be read in
    the context of the motion judges reasons on the summary judgment motion and
    her related reasons on the certification motion. In particular, I note the comment
    at para. 40 of the motion judges certification reasons where she refers to the
    risk of danger  that could occur from consumption of the product.

[38]

I am satisfied, reading the impugned comment in
    context, that the motion judge was saying that there was a
risk
that the two core menu items
could
compromise human health, given that they had been produced at the same plant as
    the tainted products. This is how the representative plaintiff encourages this
    court to read the impugned comment and, particularly in light of the high level
    of deference owed to the motion judge on findings of fact, I am prepared to do
    so.

(2)

Duty of Care

(a)

Introduction

[39]

This appeal turns on whether the motion
    judge erred in her duty of care analysis, which brings us to the
Anns
/
Cooper
framework:
Anns
    v. Merton London Borough Council
, [1978] A.C. 728 (H.L.);

Cooper v. Hobart
, 2001 SCC 79,
    [2001] 3 S.C.R. 537.


[40]

At the first stage of the
Anns
/
Cooper
framework, the question is whether the facts disclose a relationship of
    proximity in which failure to take reasonable care might foreseeably cause loss
    or harm to the plaintiff. If this is established, a
prima facie
duty
    of care arises and the analysis proceeds to the second stage, which asks
    whether there are policy reasons why this
prima facie
duty
    of care should not be recognized
: R. v. Imperial Tobacco Canada Ltd.
,
    2011 SCC 42, [2011] 3 S.C.R. 45, at para. 39, citing
Hill v. Hamilton-Wentworth
    Regional Police Services Board
, 2007 SCC 41, [2007] 3 S.C.R. 129.

[41]

However, a full
Anns/Cooper
analysis is not required in every case. If a relationship falls
    within a previously established category, or is analogous to one, then the requisite
    close and direct relationship is shown. So long, then, as a risk of reasonably
    foreseeable injury can also be shown, or has already been shown through an analogous
    precedent, the first stage of the analysis will be complete and a duty of care
    exists:
Livent
, at para. 26.

[42]

In this case, there is some controversy as to exactly
    what the motion judge decided on the established/analogous category point.

[43]

Maple Leaf submits that the motion judge
    improperly relied on three decisions to conclude that Maple Leafs relationship
    with the representative plaintiff fell within a recognized duty to supply a
    product fit for human consumption:
Plas-Tex Canada Ltd. v. Dow
    Chemical of Canada Ltd.
, 2004 ABCA 309, 245 D.L.R. (4th)
    650, leave to appeal refused [2004] S.C.C.A. No. 542;

376599
    Alberta Inc. v. Tanshaw Products Inc.,
2005 ABQB 300, 379
    A.R. 1;
Country Style Food Services Inc. v. 1304271 Ontario Ltd.
(2005)
,
200 O.A.C. 172.

[44]

The representative plaintiff, on the other hand,
    submits that the motion judge conducted an
Anns
/
Cooper
analysis as well as stating
    that her conclusion was consistent with the reasoning and findings in
Plas-Tex
,
Tanshaw
and
Country
    Style
.
Plas-Tex
and
Tanshaw
are said to support the conclusion that a manufacturer has a
    recognized duty of care to those in its supply chain not to manufacture and
    provide a product that has become dangerous as a result of negligence.

[45]

The motion judges summary judgment reasons
    are not entirely clear on this point. While she does refer to the
Anns/Cooper
analysis, she states, at para. 40, that there was a duty to supply
    a product fit for human consumption  in other words, a product that has not
    become dangerous as a result of the defendants negligence. That conclusion
    was said to be consistent with the reasoning and findings in
Plas-Tex
,
Tanshaw,
and
Country Style
, decisions
    which she discussed at some length in her certification reasons.
However, the motion judge also went on to discuss
    proximity and reasonable foreseeability at paras. 41 - 48. As outlined above,
    she made findings in support of her conclusion on proximity.  She also dealt
    with Maple Leafs arguments on foreseeability, concluding at para. 48 that it
    was reasonable, appropriate, and foreseeable for consumers to avoid buying
    food from Mr. Sub franchisees in the circumstances.

[46]

In my view, any ambiguity as to whether the
    motion judge determined that the relationship between the parties fell within
    an established category is resolved by the motion judges costs ruling.

The motion judge concluded that the certification
    and summary judgment motions did not raise a novel issue of law, noting that
the relationship between the parties fell within a
    recognized duty of care: at para. 44.

[47]

As I read her
    reasons, the motion judge relied on the three decisions to conclude that Maple
    Leafs relationship with the representative plaintiff fell within a recognized
    duty to supply a product fit for human consumption, although she went on to
    discuss proximity and foreseeability, perhaps out of an abundance of caution.

[48]

I now turn to
    whether there is an error in finding that the relationship fell within a
    recognized duty of care to supply a product fit for human consumption and, if
    so, whether under a full
Anns
/
Cooper
analysis, Maple Leaf owed such a duty. I
    will then turn to whether the motion judge erred in concluding that Maple Leaf
    owed a separate duty of care to franchisees with respect to any
    representations made that the RTE Meats were fit for human consumption and
    posed no risk of harm.

(b)

Duty to Supply a Product Fit for Human
    Consumption

(i)

Established/Analogous Category

[49]

In my view, the motion judge, who did not have
    the benefit of
Livent
when she decided this
    case, improperly relied on
Plas-Tex
,
Tanshaw
and
Country Style
to conclude that
    Maple Leafs relationship with the representative plaintiff fell within a
    recognized duty of care to supply a product fit for human consumption.

[50]

The majority in
Livent
warned, at para. 28, that
courts should be cautious in
    finding proximity based upon a previously established or analogous category:

[W]here a party seeks to base a finding of proximity upon a
    previously established or analogous category,
a court
    should be attentive to the particular factors
which justified
    recognizing that prior category in order to determine whether the relationship
    at issue is, in fact, truly the same as or analogous to that which was
    previously recognized. And, by corollary,
courts should
    avoid identifying established categories in an overly broad manner
because, again, residual policy considerations are not considered where
    proximity is found on the basis of an established category (
Cooper
, at
    para. 39).  When, therefore, a court relies on an established category of
    proximity, it follows that there are no overriding policy considerations that
    would [negate] the duty of care (
ibid.
). A consequence of this
    approach, however, is that
a finding of proximity based
    upon a previously established or analogous category must be grounded not merely
    upon the identity of the parties, but upon examination of the particular
    relationship at issue in each case
. [Emphasis added.]

[51]

Similarly, at para. 52, the majority warned
    against an overly broad characterization of an established category of
    proximity which fails to consider the scope of the activity in respect of which
    proximity was previously recognized.

[52]

In my view, there are fundamental differences
    between this case and
Plas-Tex
,
Tanshaw
and
Country Style
.

[53]

In
Plas-Tex
,
    the plaintiffs provided pipeline systems to carry natural gas. The defendant
    sold a defective polyethylene resin to the plaintiffs for use in the pipes. The
    pipes cracked, natural gas escaped and an explosion occurred. The plaintiffs
    suffered financial hardship as a result and the defendant was held liable for damages
    for economic losses, including loss of profits due to the subsequent failure of
    the plaintiffs business.

[54]

In that case, the defendant supplied a product
    that it knew was defective. Use of the product caused property damage and
    business losses. In these circumstances, policy considerations favoured
    imposing liability to deter manufacturers from engaging in such behaviour. Here,
    in contrast to the manufacturer in
Plas-Tex
,
    which put a product into the marketplace that it knew to be dangerous, as soon
    as Maple Leaf knew its meat may be dangerous, it voluntarily recalled the
    products in order to safeguard human health. To the extent people were harmed
    by Maple Leaf meats, none of them were harmed by eating Maple Leaf meats at a
    Mr. Sub restaurant.

[55]

In
Tanshaw
, the
    plaintiff nightclub owner threw a foam party, where large quantities of
    bubbles were poured from a machine onto club patrons who were mingling about. Unfortunately,
    patrons exposed to the foam suffered serious skin and eye irritation. The
    nightclub owner sued various parties involved in the manufacture and/or supply
    of the foam to the nightclub. The nightclub claimed that it suffered economic
    loss as a result of the defendants negligence. The trial judge described the
    claim as a claim about lost drink sales, expenses associated with maintaining
    drink sales, and the loss of the opportunity to raise drink prices: para. 225.

[56]

The trial judge found that there was a
prima
    facie

duty of care. Then he went on to consider residual
    policy considerations, noting that they weigh[ed] in favour of confirming a
    duty on the part of distributors and suppliers to the users of their product to
    ensure that the product is suitable and fit for its purpose and, to the extent
    that it carries hazards, adequate warnings are conveyed: para. 153. The court
    did not differentiate between the duty of care owed to the end users of the
    product, not to cause them physical harm, and a duty owed to an intermediary in
    the supply chain for pure economic losses arising from such harm.

[57]

The situation here is different than in
Tanshaw
for a number of reasons, including that in that case the
    plaintiffs patrons were harmed by the product that was unfit for its intended
    purpose whereas here no one was harmed by eating Maple Leaf meats at a Mr. Sub
    restaurant. In
Tanshaw
, the defendants were
    aware of the potential harm and failed to act, whereas here the alleged damages
    arose in the context of a product recall.

[58]

Finally,
Country Style

involved,
    among other things, a claim for damages for negligent misrepresentation arising
    out of the redesign of a shopping mall after a lease had been signed. Despite
    the lease being between the landlord and franchisor, the landlord was found to
    owe the franchisee a duty of care. This duty was breached when the landlord
    provided inaccurate site plans when the lease was negotiated.  Unlike this
    case,
Country Style
had nothing to do with the
    supply of a product and its fitness for human consumption.

[59]

In my view, these three cases are readily distinguishable
    from this case where it is alleged that Maple Leaf should be held liable for damages
    for the reputational harm to the franchisees as a result of a recall and their public
    association with Maple Leaf. As a result, it is necessary to assess whether the
    motion judges conclusion that the relationship between Maple Leaf and the
    franchisees was such that a duty of care to supply fit meat extends to the
    damage at issue on this appeal is sustainable under a full
Anns
/
Cooper
analysis.

(ii)

Anns
/
Cooper
Analysis

[60]

In addition to relying on
Plas-Tex
,
Tanshaw
and
Country
    Style
, the motion judge provided an alternative analysis
    in that she went on to discuss proximity and foreseeability. In concluding that
    Maple Leaf owed a duty to supply a product fit for human consumption to the
    representative plaintiff, the motion judge found that the circumstances of the
    relationship between the representative plaintiff and Maple Leaf were such that
    Maple Leaf was under an obligation to be mindful of the plaintiffs legitimate
    interests in conducting its affairs.

[61]

In considering the relationship between the
    parties, she focused on the fact that Maple Leaf:

·

knew the names, addresses and contact
    information of the franchisees;

·

was the exclusive supplier of the 14 core menu
    items;

·

had direct dealings and communications with the
    franchisees around the recall and in its aftermath;

·

sent communications addressed to the franchisor
    and franchisee;

·

directed and paid the distributors to retrieve
    the recalled products from the franchisees; and

·

was aware that their products were an integral
    and essential part of the franchisees business.

[62]

I do not take any issue with the motion judges factual
    findings. In my view, however, the motion judge erred in failing to consider
    the
scope
of the proximate relationship or
    scope of any such duty arising from it. As noted in
Livent,
at para. 31, the proximity analysis not only determines the
existence
of a relationship of proximity, but also delineates the
scope
of the rights and duties which flow from that relationship
    (emphasis in original).

[63]

To the extent there may be a duty to supply meat
    fit for human consumption,
[3]
it does not extend to the franchisees damages for pure economic loss at issue
    here.

[64]

As I see it, Maple Leafs duty of care in tort to
    supply meat fit for human consumption, a duty which is aimed at protecting
    human health, was owed to the franchisees customers, not the franchisees.  The
    claim advanced against Maple Leaf in this action rests upon an alleged additional
    and quite different duty owed to franchisees to protect their reputation and
    pay for any consequent damages for pure economic losses.

[65]

As noted by the motion judge, at para. 58, the
    alleged damages are, in large part, a consequence of the public announcement of
    the recall and resulting publicity. The alleged reputational damages are said
    to arise from publicity related to the illness and death of people who did not
    eat tainted meat at a Mr. Sub, and the recall of meat.

[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.

[67]

The motion judge found that it was reasonable,
    appropriate, and foreseeable for consumers to avoid buying food from a
    restaurant where there had been a food recall arising from problems in the
    plant of its meat supplier that were not resolved for a relatively
    significant period of time: para. 48. However, this finding of reasonable
    foreseeability is not enough to give rise to a duty of care in tort to the
    franchisees which can only arise where the foreseeable harm falls within the
    scope of a proximate relationship.

[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. However, one point warrants
    brief mention.

[70]

The motion judge was of the view that imposing a
    duty in the circumstances of this case would heighten accountability. I agree
    that accountability is important but question whether imposing a duty in the
    circumstances of this case would achieve that end or be consistent with
    concerns about safeguarding public health.

[71]

To the extent that the franchisees alleged
    damages relate to the recall itself, policy considerations call into question imposing
    liability. There is a strong public interest in encouraging manufacturers to act
    expeditiously in recalling products from the marketplace to avoid potential
    danger to consumers.

[72]

In summary, I conclude that the motion
    judge erred in finding that the duty to supply a product fit for human
    consumption encompassed a duty of care to protect against the economic losses at
    issue on this appeal.

(c)

Duty of Care - Negligent Misrepresentation

[73]

In concluding that there was a special relationship
    between the representative plaintiff and Maple Leaf, the motion judge referred
    to
Imperial Tobacco
in which the Supreme Court discussed the duty of
    care in the negligent misrepresentation context, at para. 42:

Proximity and foreseeability are heightened concerns in claims
    for economic loss, such as negligent misrepresentation In a claim of negligent
    misrepresentation, both these requirements for a
prima facie
duty
    of care are established if there was a special relationship between the
    parties:
Hercules Managements

Ltd. v. Ernst & Young
,
    [1997] 2 S.C.R. 165, at para. 24.  In
Hercules Managements
,
    the Court,
per
La Forest J., held that a special relationship
    will be established where: (1) the defendant ought reasonably to foresee that
    the plaintiff will rely on his or her representation; and (2) reliance by the
    plaintiff would be reasonable in the circumstances of the case (
ibid.
). 
    Where such a relationship is established, the defendant may be liable for
    losses suffered by the plaintiff as a result of a negligent misstatement.

[74]

Maple Leaf maintains that the motion judge erred in her

Anns
/
Cooper
analysis
    on this issue. In particular, it argues that the claim falls outside the scope
    of the proximate relationship and the losses claimed are not reasonably
    foreseeable. It also argues that there are serious residual policy concerns,
    including indeterminacy.

[75]

In
the context of negligent misrepresentation cases, proximity is most
    usefully considered before foreseeability because [w]hat the defendant reasonably
    foresees as flowing from his or her negligence depends upon the characteristics
    of his or her relationship with the plaintiff, and specifically  the purpose
    of the defendants undertaking:
Livent,
at
    para. 24.

[76]

While
Livent
affirms that when undertaking a full proximity analysis the
    court must examine all relevant factors arising out of the relationship between
    the plaintiff and the defendant, two factors are determinative in the case of
    negligent misrepresentation - the defendants undertaking and the plaintiffs
    reliance:
Livent
, at para. 30. Where the defendant undertakes to
    provide a representation or service in circumstances that invite the
    plaintiffs reasonable reliance, the defendant becomes obligated to take
    reasonable care:
Livent
at para. 30.

[77]

According
    to
Livent
at para. 31, [a]ny reliance on the part of the plaintiff
    which falls outside of the scope of the defendants undertaking of
    responsibility  that is, of the purpose for which the representation was made
    or the service was undertaken  necessarily falls outside the scope of the
    proximate relationship and, therefore of the defendants duty of care.
A defendant cannot be liable for a risk of injury against which he
    did not undertake to protect:
Livent,
at
    para. 31.

[78]

In
    cases of negligent misrepresentation, the proximate relationship informs the
    foreseeability inquiry in that the purpose underlying [the] undertaking and
    [the] corresponding reliance limits the type of injury which could be
    reasonably foreseen to result from the defendants negligence:
Livent
,
    at para. 34.

[79]

Here
, the motion judge found that Maple Leaf
    ought reasonably to have foreseen that the representative plaintiff would rely
    on its representation  namely, that the RTE meats were fit for human
    consumption and posed no risk of harm  and its reliance was reasonable in the
    circumstances. She noted that the representative plaintiff was within a known
    and readily identifiable category of persons and that Maple Leaf was the
    representative plaintiffs exclusive supplier. Maple Leaf was aware that the
    RTE meats would be offered for sale to consumers who could be injured if it was
    unfit.

[80]

In my view, there was an error in failing to
    consider the
scope
of the proximate relationship
    between the parties, which in turn affected the foreseeability analysis. 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.

[81]

The representative plaintiff maintains that it
    was reasonably foreseeable that the media would connect Mr. Sub to Maple Leafs
    listeria outbreak, causing reputational harm. As the motion judge put it at
    para. 37 of her reasons, the plaintiff alleged it was tagged as a place where
    dangerous products might have been sold prior to the recall.

[82]

The question is whether, in light of Maple Leafs undertaking, the
    representative plaintiffs alleged reputational injury was reasonably
    foreseeable. In
Livent
, the majority discussed
    reasonable foreseeability in the context of negligent misrepresentation, at
    para. 35:

[A] plaintiff has a right to rely on a defendant to act with
    reasonable care for the particular purpose of the defendants undertaking, and
    his or her reliance on the defendant for that purpose is therefore both
    reasonable and reasonably foreseeable. But a plaintiff has no right to rely on
    a defendant for any other purpose, because such reliance would fall
    outside the scope of the defendants undertaking.  As such, any consequent
    injury could not have been reasonably foreseeable.

[83]

Here, the plaintiff essentially says that, based on Maple Leafs
    representation, the franchisees relied on Maple Leaf to protect their reputations
    even in circumstances where the alleged reputational damage did not flow from
    the supply of tainted meat to Mr. Sub franchisees and harm to their customers,
    but rather from: (a) the supply of tainted meat
to others
; and (b) the
recall
of
potentially
    tainted
meat from Mr. Sub franchisees.

[84]

I
    disagree.
The reputational damage said to be sustained by the
    plaintiff, arising from Maple Leafs supply to others and from the recall 
    aimed at safeguarding health and safety  falls outside the scope of Maple
    Leafs undertaking to the franchisees. Accordingly, the alleged injury was not
    reasonably foreseeable.

[85]

In light of my conclusions on stage one of the
Anns/Cooper
analysis, it is unnecessary to address residual policy
    considerations other than to note that the concern about encouraging effective recalls
    is equally applicable in this context.

[86]

In conclusion, Maple Leafs duty of care with
    respect to any representations made that the RTE meats were fit for human
    consumption and posed no risk of harm does not extend to the damages for pure
    economic loss claimed here.

(3)

Availability of Damages in Negligence for Pure Economic
    Loss

[87]

Finally, Maple Leaf argues that the motion judge
    erred in determining that the damages claimed as arising out of economic losses
    were recoverable. In particular, it says that there can be no claim in
    negligence for a defective but non-dangerous good, where no personal injury or
    damage to property was incurred. Given my conclusion that the motion judge
    erred in her duty of care analysis, it is unnecessary to consider this argument
    on appeal and I decline to do so.

DISPOSITION

[88]

I would allow the appeal and set aside paras. 4 and 5 of the motion
    judges order except as they relate to the claim for the clean-up costs and
    other costs related to the disposal, destruction and replacement of RTE meats,
    which is not at issue on this appeal.

[89]

The parties are agreed on costs for the appeal. The representative
    plaintiff shall pay costs to Maple Leaf of $30,000, inclusive of applicable
    taxes and disbursements.

[90]

As for the costs on the summary judgment motion, we will accept written
    costs submissions of no more than five pages in length. Maple Leaf shall file its
    submissions within 15 days of release of this judgment and the franchisee will
    file within seven days of receiving those submissions.

Released: PR Apr 30 2018

Fairburn J.A.
I agree. Robert J. Sharpe J.A.
I agree. Paul Rouleau J.A.





[1]
The Canadian Food Inspection Agency (CFIA) says that l
isteria
    monocytogenes often appear in food. Only when it reaches certain levels does it
    create a risk, particularly to certain segments of the population, such as the
    elderly, immunocompromised individuals and pregnant women. When I use the term
    listeria in this judgment, it should not be understood in the benign sense,
    but as a short form reference to the bacteria having reached dangerous levels,
    which may result in the illness listeriosis.



[2]

In its factum Maple Leaf acknowledges that there is also a
de
    minimus
claim for the cost of disposing or cleaning up for RTE Meats that
    actually reached the restaurant and for the costs of the RTE Meats themselves
    but says that the evidence on the motion was that Maple Leaf provided full
    credits to the Distributors for the costs of the destroyed cases of RTE Meats
    and that the plaintiff itself did not incur any disposal or cleaning costs.



[3]

Again, I note that the damages related to the disposal,
    destruction and replacement of RTE meats are not at issue on this appeal.


