To Jason’s helpful summary, I’d like to add the following points that I take to be important to the holding, the result or both:
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The claims against Maple Leaf that were denied to the Mr. Sub franchisees were those for compensation for lost past and future sales, past and future profits, capital value of the franchises and goodwill.
Maple Leaf conceded that he franchisees had a de minimis claim for disposal, destruction and clean-up costs and did not contest that portion of the original order. (para 113) The case thus provides a good reminder of the difference between
consequential economic loss and pure economic loss.
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A duty of care cannot be established just by showing that a claim fits within a category of pure economic loss. It is necessary to determine whether the alleged loss represents an injury to a right
that can be the subject of recovery in tort law and possesses the requisite factors to support a finding of proximity under that category. (para 23)
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Under the franchise agreement, the franchisees did have means, albeit conditional upon obtaining Mr. Sub’s permission, to avoid the risk of interrupted supply or to avoid actual interrupted supply
where it occurred by seeking out alternative sources of supply. As Maple Leaf had released Mr. Sub from the exclusive supply agreement some two weeks after the recall, it did not seem likely (to the majority) that Mr. Sub would have denied the franchisees’
request to also find a new supplier. The franchisees did not avail themselves of this option. (paras 91–93)
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Both the majority and the dissent agreed that the “contractual matrix” was important to the proximity analysis, but differed in the application or analysis of the tripartite relationship among supplier,
franchisor and franchisee. In other words, the case makes for a great exam question!
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JOHN C. KLEEFELD Professor, Faculty of Law University of New Brunswick PO Box 4400 41 Dineen Drive, Room 104 Fredericton NB Canada E3B 5A3 506.453.4701 |
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From: Jason W Neyers <jneyers@uwo.ca>
Date: Friday, November 6, 2020 at 5:26 PM
To: Obligations list <obligations@uwo.ca>
Subject: RE: ODG: 1688782 Ontario Inc. v. Maple Leaf Foods Inc.
❗External message:
Use caution.
Here is the correct link:
https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/18539/index.do
From: Jason W Neyers
Sent: Friday, November 6, 2020 2:25 PM
To: Obligations list <obligations@uwo.ca>
Subject: ODG: 1688782 Ontario Inc. v. Maple Leaf Foods Inc.
Dear Colleagues:
The Supreme Court of Canada has today released its decision in
1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35 which deals with the recovery of pure economic loss in negligence:
https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/18538/index.do?q=39006. Over 168 paragraphs, the court divided 5-4 as to whether the supplier (Maple Leaf Foods Inc) owed a duty to the franchisees of Mr. Sub.
The majority decision is far-reaching, and both decisions, cite numerous ODGers. Rather than attempt a case comment, and in light of the fact that I was a consultant on the case, I’ll rather indicate
some of what I take the key points of the majority to be:
1.
The best understanding of the tort of negligence is the rights-based view. The reason why pure economic loss claims fail is because rights are missing not because prima facie
duties are negated by policy.
2.
Duty is a question of law and is therefore subject to the standard of correctness on review.
Negligent Performance of a Service
3.
The combination of an undertaking and reasonable reliance is a right creating event in tort law, meaning that negligent misrepresentation and negligent performance of a service
are not separate categories of economic loss using different principles.
4.
The appellant’s claim fails on this
Hedley Bryne v Heller principle since: (a) the undertaking was not made to them (but rather to its customers), (b) nor could the appellant prove detrimental reliance since
they were bound, and had no alternative courses of action to pursue.
Winnipeg Condo
5.
The recovery in
Winnipeg Condo is justified on the basis of reasonably protecting the rights to physical integrity or property of the plaintiff. Recovery is therefore limited to situations of danger to the plaintiff him- or herself.
6.
This means that : (a) the principle, as a practical matter, will hardly every apply to justify repair costs of consumer goods since they can easily be disposed of; and (b)
that the court might be willing to draw a distinction between the cost of removing the danger and the cost of repair (which was awarded in
Winnipeg Condo) in the future.
7.
The appellant’s claim therefore fails on the
Winnipeg Condo principle since whatever costs were incurred in disposing of the tainted meat where incurred to protect the rights of the third parties/customers not the rights of the appellant.
8.
Because
Winnipeg Condo was decided before Cooper v Hobart, it cannot be fully relied upon as an authority and courts, on a going forward basis, should also robustly address proximity.
Novel Duty
9.
In relation to establishing a novel duty of care, it is best to start with the proximity stage of the analysis, rather than foreseeability since what is foreseeable will be
intimately linked to and governed by the relationship of proximity.
10.
In considering proximity in cases where there are chains of contracts, the vulnerability of the plaintiff, ie their ability to protect themselves from the loss suffered and
whether they have actually done so, could/should be examined.
11.
A plaintiff will not be said to be vulnerable when that vulnerability is self-induced or where they did not seek insurance coverage for the loss.
12.
The appellant’s novel duty claim therefore fails since the appellant choose to operate as a franchise rather than independently, which entailed certain vulnerabilities in exchange
for certain advantages (use of the franchisor’s trademark, its system of operation, and the franchisor’s buying power, etc). Moreover, the appellant
choose not to avail itself of insurance.
Happy Reading,
Jason Neyers
Professor of Law
Faculty of Law
Western University
Law Building Rm 26
e. jneyers@uwo.ca
t. 519.661.2111 (x88435)