Recoverable Losses In Tort: How The Supreme Court's Final Word On Maple Leaf Foods Impacts Canadian Business

• Published date: 05 April 2021
• Law Firm: Torys LLP
• Author: Mr Andrew Bernstein, Nicole Mantini, Alicja Puchta and Morag McGreevey

If you don't operate a meat processing plant or a sandwich franchise, it could be easy to overlook the Supreme Court's recent decision in 1688782 Ontario Inc. v. Maple Leaf Foods Inc.¹ That would be a mistake.

The Maple Leaf Foods might have expanded tort liability for business activity far beyond its historical scope, if one more Supreme Court judge had agreed. However, the 5-4 decision went against the plaintiffs, and the Court maintained the long-standing rule that "pure economic loss" caused by negligence can only be collected in a relatively narrow set of circumstances.

Maple Leaf Foods affirms that contract, not tort, remains the primary mechanism for allocating economic risks. It therefore has significant implications for Canadian class actions, which often engage issues of tort law.

Torts and economic loss

Every law student remembers learning about Donoghue v. Stevenson, the House of Lords' 1932 decision about a snail in a bottle of ginger beer. Donoghue stood for the idea that manufacturers have a duty of care to their ultimate consumer of their products, not just those parties with whom they are connected by contract. It did so by establishing a general principle that a duty of care could be applied to anyone who could be foreseeably affected by negligent conduct. This idea -sometimes called the "neighbour principle" - is the foundation for almost all modern negligence law. It is now (inelegantly) known as the "Anns/Cooper test" and it requires the court to ask two questions to establish a novel duty of care: first, are the parties in a sufficiently proximate relationship that one party's actions could foreseeably harm the other's interest; and second, are there any policy reasons why a duty should not be imposed even if the parties are sufficiently proximate?²

Like many common law concepts, the "neighbour principle" and the Anns test often raise more questions than answers. Courts continue to struggle with the question of what kind of harms should be compensable as a result of negligent conduct. Donoghue itself related to personal injury. The principle was then readily extended to property damage. But the question that has given the courts the greatest difficulty is when liability for negligence should be extended to so-called "pure economic loss" - that is, when should one person's careless conduct result in liability for losses that do not flow from an underlying injury to a person or property, such as loss of profits? Although this sounds like a technical legal question, its consequences are quite far-reaching for businesses, as the Maple Leaf Foods case demonstrates.

Background to the certification decision

In 2008, Maple Leaf suffered a listeria outbreak in one of its manufacturing plants, resulting in a national recall of processed meats. At the time, Maple Leaf had a contract to exclusively supply Mr. Submarine for certain meat products. Mr. Sub franchisees were required under their franchise agreements to purchase Maple Leaf products from Mr. Sub "corporate," but had...