Ontario Court Of Appeal Summaries (April 30 – May 4, 2018)

Good evening.

Following are summaries of this week's civil decisions of the Court of Appeal for Ontario.

In Maple Leafs Foods, a class action brought by Mr. Sub franchisees against Maple Leaf for economic loss suffered as a result of the listeria outbreak at a Maple Leaf plant several years ago was dismissed. The Court held that while Maple Leaf may well have had liability for personal injury suffered by anyone who consumed contaminated meat, it did not have a duty not to harm the reputation or profits of Mr. Sub franchisees who sold Maple Leaf meats.

In a doctor's professional discipline decision, the Court restored the penalty for professional misconduct imposed by the discipline committee, in the process, overturning the Divisional Court.

In Jackson v. Stephen Durbin and Associates, the Court held that any retainer agreement between a lawyer and client that ties the amount of compensation to be paid to the outcome is a contingency fee agreement. The retainer agreement at issue was for a family law matter. Section 28.1(3)(b) of the Solicitors Act prohibits contingency fee agreements in family law cases.

Finally, the Court released its decision in Forcillo in R. v. Forcillo. The appeal from the conviction of the constable for attempted murder was dismissed.

I hope everyone has an enjoyable weekend.

John Polyzogopoulos

Blaney McMurtry LLP

jpolyzogopoulos@blaney.com

Tel: 416 593 2953

https://www.blaney.com/lawyers/john-polyzogopoulos

Civil Decisions:

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

[Sharpe, Rouleau and Fairburn JJ.A.]

Counsel:

S. Stieber and E. Bowker, for the appellants

P.W. Kryworuk, R. Case and J. Damstra, for the respondent

Keywords:Torts, Negligence, Duty of Care, Established Categories, Proximity, Foreseeability, Damages, Pure Economic Loss, Anns/Cooper Test, Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.); Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537, Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, PlasTex 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, Civil Procedure, Class Actions, Summary Judgment

Facts:

In August 2008, certain Maple Leaf brand ready-to-eat ("RTE") meats became contaminated with listeria. 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. The recall and plant closure affected the supply of two of the RTE meats used by the franchisees of Mr. Submarine Ltd. ("Mr. Sub"). 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. Sub's approval. 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.

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.

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. The appeal by Maple Leaf arises from the motion judge's 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."

Issues:

(1) Did the motion judge err in finding that Maple Leaf supplied the representative plaintiff with a defective product dangerous to public health?

(2) Did the motion judge err in concluding that this case falls within a recognized duty of care?

(3) Did the motion judge err in failing to consider and properly apply the Anns/Cooper test?

(4) Did the motion judge err in finding that damages for pure economic loss are recoverable in this case?

Holding: Appeal allowed.

Reasoning:

(1) No. Reading the impugned comment in context, 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.

(2) Yes. Maple Leaf submitted that the motion judge improperly relied on three decisions to conclude that Maple Leaf's relationship with the representative plaintiff fell within a recognized duty to supply a product fit for human consumption: PlasTex Canada Ltd. v. Dow Chemical of Canada Ltd., 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; Country Style Food Services Inc. v. 1304271 Ontario Ltd. (2005), 200 O.A.C. 172. 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.

The motion judge's summary judgment reasons are not entirely clear on this point, but 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 judge's 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."

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 Leaf's relationship with the representative plaintiff fell within a recognized duty of care to supply a product fit for human consumption. The majority in Livent warned that courts should be cautious in finding proximity based upon a previously established or analogous category.

Plas-Tex, Tanshaw and Country Style 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 conduct a full Anns/Cooper analysis to assess whether the motion judge's conclusion that the relationship between Maple Leaf and the franchisees was such that a duty of care to supply fit meat extends to the damages at issue on this appeal is sustainable.

(3) Yes. 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 plaintiff's legitimate interests in conducting its affairs. The motion judge erred in failing to consider the scope of the proximate relationship or scope of any such duty arising from it.

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

The alleged damages are, in large part, a consequence of the public announcement of the recall and resulting publicity. 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. 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.

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". However, this...