The case involved a class action in which a group of restaurant franchisees claimed damages from a supplier who provided them with meat potentially infected with listeria.
The franchisees convinced a Superior Court judge to grant them a summary judgment finding that the supplier owed them a duty of care for economic losses suffered as a result of reputational damage when the meat products were recalled following a number of deaths and illnesses unrelated to the franchisees.
The province’s top court reversed that decision after distinguishing the situation from others in which a duty of care was found, concluding that the recall was made voluntarily as soon as the threat was discovered, in an attempt to prevent anyone else from getting sick.
Virc, a lawyer with Steinberg Title Hope & Israel LLP, says she believes the appeal court made the right call.
“The supplier behaved exactly as we would want it to from a public policy perspective. Had the court found there was a duty of care, there is a risk it would discourage that kind of behaviour in future,” she says. “It wasn’t a surprise to me because we want the law to encourage people to behave well.”
Virc, who wasn’t involved in the case and comments generally, says the link between tort law and public policy dates back more than 80 years to a U.K. House of Lords decision, the foundational text for students of manufacturer’s liability, which involved a woman who discovered a partially decomposed snail in her bottle of ginger beer.
“Before then, plaintiffs were not able to sue people without a direct link to the harm, but the court decided that public safety concerns justified creating a liability between strangers,” Virc says.
“In this new case,” she explains, “the Court of Appeal is urging caution regarding any expansion of the recognized categories of relationships of proximity in which failure to take reasonable care might foreseeably cause loss or harm to a plaintiff.”
The plaintiff franchisees claimed damages for loss of past and future sales, past and future profits, and loss of capital value and goodwill as a result of the supplier’s alleged breach of its duty of care, according to the decision. The motion judge, who sided with the franchisees, found that the duty of care included a duty to supply a product fit for human consumption. She also found that the supplier owed a duty of care concerning any representations that its ready-to-eat products posed no risk of harm.
However, the unanimous three-judge panel of the appeal court ruled that the motion judged erred by finding the relationship between the franchisees and the supplier matched any existing categories which gave rise to a duty to supply a product fit for human consumption, according to the decision.
While such a duty may exist, “it does not extend to the franchisees’ damages for pure economic loss at issue here,” the panel wrote.
When it came to the negligent misrepresentation claim, the court found that any undertaking the supplier made to provide food that posed no risk could not be said to have been made to protect the reputational interests of the franchisees.
“The reputational damage said to be sustained by the plaintiff, arising from [the defendant’s] supply to others and from the recall — aimed at safeguarding health and safety — falls outside the scope of [the supplier’s] undertaking to the franchisees. Accordingly, the alleged injury was not reasonably foreseeable,” the appeal court panel concluded.
“The bottom line is there needs to be a link between the duty of care and the damages suffered,” says Virc, who adds that the situation would be different had the any of the franchisee’s customers been directly affected by tainted meat.
“If one of the franchisee’s customers had consumed the meat, been sick and sued them, there is no doubt that the franchisee could have added the supplier as a third party and claimed it was responsible for the plaintiff’s damages,” she says.
“Of course, if the franchisee had ignored the recall and used meat that had been recalled, then apportionment of blame between the two would have been a more complex issue.”