Ronald L. Doering
Counsel
Article
5
This article originally appeared in Food in Canada and is republished with the permission of the publisher.
The 2008 Canadian Listeriosis outbreak that was linked to cold cuts from a Maple Leaf Foods plant in Toronto, Ontario resulted in 57 confirmed cases and 22 deaths. It was the deadliest food borne disease outbreak in Canadian history. The recall reportedly cost the company $20 million. A class action lawsuit from affected consumers and their families was settled quickly by Maple Leaf and its insurance company. But that was not the end of the matter. To carry out extensive sanitation, the plant was closed for several weeks with the result that retail customers and distributors did not obtain their usual supply. 424 Mr. Sub franchise operators sued Maple Leaf for lost sales and damage to reputation. In November 2020, the Supreme Court of Canada in a 5-4 majority decision dismissed the case against Maple Leaf with important implications for Canadian food companies.
Much of the reasoning in the case is quite technical but here is a brief summary. The question before the Court boiled down to whether Maple Leaf owed the requisite duty of care to the franchisees, a necessary step in establishing whether the franchisees have the right to recover damages in the tort of negligence. The Court held that Maple Leaf did not owe such a duty, especially for the protection of purely economic interest.
A duty of care must establish above all else what the law calls proximity. The Court held that the Mr. Sub franchisees failed to establish the requisite qualities of closeness and directness between the parties. (You can see there is a lot of discretion here.) The Court instead determined that the proximity, established by the responsibility and undertaking to supply meat fit for human consumption, and the rights to receive a supply of safe goods was between Maple Leaf and consumers, not the franchisees. The court reinforced the need for proximity to establish duty of care.
A key factor in the Court's ruling was the fact that the franchisees could have protected themselves in contract law. There were multipartite arrangements but these did not specifically address the liability for economic loss in the event of a failure to supply product. The Court was reluctant to impose a duty of care in circumstances where the parties could have protected themselves through contracts.
The decision in 1688782 Ontario Inc v. Maple Leaf Foods Inc 2020 SCC 35 has some important lessons for Canadian food companies.
Of course, we are not providing legal advice here but we do advise that every Canadian food company should review this case with its lawyer.
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