1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35 (38187)

“In 2008, a number of Mr. Sub franchisees were affected by the decision of Maple Leaf to recall meat products that had been processed in one of its factories in which a listeria outbreak had occurred. Following the recall, the franchisees experienced a shortage of product for six to eight weeks. At the time, the relationship between Mr. Sub and Maple Leaf was governed by an exclusive supply agreement pursuant to which Maple Leaf was made the exclusive supplier of ready‑to‑eat meats served in all Mr. Sub restaurants. To give effect to this arrangement, the franchise agreement between Mr. Sub and its franchisees required them to purchase ready‑to‑eat meats produced exclusively by Maple Leaf. No contractual relationship ever existed between the franchisees and Maple Leaf, each being linked to the other indirectly through separate contracts with Mr. Sub.

A class action against Maple Leaf on behalf of the franchisees was certified, in which the franchisees claimed to have suffered economic loss and reputational injury due to their association with contaminated meat products and advanced claims in tort law, seeking compensation for lost past and future sales, past and future profits, capital value of the franchises and goodwill. Maple Leaf unsuccessfully brought a motion for summary judgment dismissing these claims. The motion judge held that Maple Leaf owed the franchisees a duty to supply a product fit for human consumption, and that the contaminated meat products posed a real and substantial danger, so as to ground a duty of care. The Court of Appeal allowed Maple Leaf’s appeal, and found that no duty of care was owed to the franchisees. It determined that the motion judge’s decision to allow these claims to proceed could not stand in light of the Court’s decision in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855, which had been decided following the disposition of the motion for summary judgment.”

The SCC (5:4) dismissed the appeal.

Justices Brown and Martin wrote as follows (at paras. 2, 21-26, 34, 37-40, 46-58, 63-68, 71-73, 94-95):”The question for this Court to decide is whether Maple Leaf Foods (with which neither the appellant nor any other franchisee was in contractual privity, but rather linked indirectly through a chain of contracts) owed Mr. Sub franchisees a duty of care, enforceable under the Canadian law of negligence. The appellant says that Maple Leaf Foods, as a manufacturer, owed a duty to Mr. Sub franchisees to supply a product fit for human consumption. More specifically, the appellant says that the circumstances of its claim fall within two categories of proximity that have been recognized in respect of two forms of pure economic loss: negligent misrepresentation or performance of a service, and the negligent supply of shoddy goods or structures. Further, the appellant says that the relationship between Maple Leaf Foods and Mr. Sub franchisees is analogous to an established category of proximity that has been previously recognized in the caselaw. Finally, and while it is unclear whether the appellant actually advances a novel duty argument before us, we note that Maple Leaf Foods takes the appellant as having done so, and that both the motion judge and our colleague Karakatsanis J. would recognize a novel duty in this case. In order to take the appellant’s claim at its strongest, we therefore proceed on the basis that it also advances such an argument.

The current categories of pure economic loss incurred between private parties are, therefore:

  • (1)  negligent misrepresentation or performance of a service;
  • (2)  negligent supply of shoddy goods or structures; and
  • (3)  relational economic loss.

The distinguishing feature among each of these categories is that they describe how the loss occurred. Focussing exclusively upon how the loss occurs can, however, put strain on the analysis by obfuscating both fundamental differences and similarities among cases of pure economic loss (J. Stapleton, “Duty of Care and Economic Loss: A Wider Agenda” (1991), 107 Law Q. Rev. 249, at pp. 262 and 284). Further, it obscures the starting point in a principled analysis of an action in negligence, which is to identify what rights are at stake and whether a reciprocal duty of care exists (Livent, at para. 30). It is proximity, and not a template of how a loss factually occurred, that remains a “controlling concept” and a “foundation of the modern law of negligence” (Norsk, at p. 1152; Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737, at para. 25).

Properly understood, then, these categories are simply “analytical tools” that “provide greater structure to a diverse range of factual situations . . . that raise similar . . . concerns” (Martel, at para. 45; Design Services, at para. 31). Organizing cases in this way was and is therefore done for ease of analysis in ensuring that courts treat like cases alike. The fact that a claim arises from a particular kind of pure economic loss does not necessarily signify that such loss is recoverable.Where the loss is recoverable, however, this Court has clarified that the decided cases within these categories should be regarded as reflecting particular kinds of proximate relationships (Cooper, at para. 36; Livent, at paras. 26‑27). But to be clear, the invocation of a category, by itself, offers no substitute for the necessary examination that must take place “of the particular relationship at issue in each case” between the plaintiff and the defendant (Livent, at para. 28; see also Dorset Yacht Co. v. Home Office, [1970] A.C. 1004 (H.L.), at p. 1038). In other words, what matters is whether the requirements for imposing a duty of care are satisfied ⸺ and, in particular, whether the parties were at the time of the loss in a sufficiently proximate relationship. Where they are, it may be because the relationship falls within a previously established category of relationship in which the requisite qualities of closeness and directness were found, or is analogous thereto (Livent, at para. 26; see also Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643, at para. 15; Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2 S.C.R. 114, at para. 5). Or, a plaintiff may seek to establish a “novel” duty of care after undertaking a full Anns/Cooper analysis.

With respect, the appellant’s submissions reflect a misunderstanding of the significance of the categories of pure economic loss. The appellant argues that a duty of care in this case “is established through the application of two well‑established categories of recovery for pure economic loss [of] negligent misrepresentation or negligent performance of a service, and negligent supply of dangerous goods” (A.F., at para. 50). Again, a duty of care cannot be established by showing that a claim fits within a category of pure economic loss. It is necessary to determine whether the appellant’s 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. We repeat: the manner in which pure economic loss is said to have occurred or how that loss has been catalogued within the categories of pure economic loss does not signify that the defendant whose negligence caused that loss owes the plaintiff a duty of care. The relevant “category” for the purpose of supporting a duty of care is that of proximity of relationship. Meaning, what is necessary to support a duty of care is that the relationship between a plaintiff and a defendant bear the requisite closeness and directness, such that it falls within a previously established category of proximity or is analogous to one (Livent, at para. 26; see also Childs, at para. 15; Mustapha, at para. 5).

Maple Leaf Foods argues that the standard of review to be applied to a motion judge’s decision on duty of care is that of correctness. As the question of whether Maple Leaf Foods owed the appellant a duty of care is a question of law, we agree (Galaske v. O’Donnell, [1994] 1 S.C.R. 670, at p. 690; Rankin (Rankin’s Garage & Sales) v. J.J., 2018 SCC 19, [2018] 1 S.C.R. 587, at para. 19; L. N. Klar and C. S. G. Jefferies, Tort Law (6th ed. 2017), at pp. 210‑11 and fn. 60; A. M. Linden et al., Canadian Tort Law (11th ed. 2018), at §6.2). Duty in tort law is “a general notion describing a class or type of case, not a particular fact situation” (A. M. Linden and B. Feldthusen, Canadian Tort Law (10th ed. 2015), at §9.57). That this is so becomes readily apparent when one considers that the existence of a duty of care is a preliminary question, typically answered when “the facts are not yet known to a sufficiently specific degree because breach of the standard of care and causation have not been addressed” (Linden et al., at §7.3). It follows that each component of the Anns/Cooper analysis supporting a prima facie duty ⸺ proximity of relationship and reasonable foreseeability of injury (Livent, at paras. 20 and 23) ⸺ raise questions of law (Klar and Jefferies, at pp. 210‑11 and fn. 60).

The implications of this standard of review for the duty analysis, and particularly for its constituent inquiry into reasonable foreseeability of injury, was considered by this Court in Stewart v. Pettie, [1995] 1 S.C.R. 131:

  • The question of whether a duty of care exists is a question of the relationship between the parties, not a question of conduct. . . . The point is made by Fleming, in his book The Law of Torts (8th ed. 1992), at pp. 105‑6:
  •  . . . In the first place, the duty issue is already sufficiently complex without fragmenting it further to cover an endless series of details of conduct. “Duty” is more appropriately reserved for the problem of whether the relation between the parties (like manufacturer and consumer or occupier and trespasser) warrants the imposition upon one of an obligation of care for the benefit of the other, and it is more convenient to deal with individual conduct in terms of the legal standard of what is required to meet that obligation. . . . It is for the court to determine the existence of a duty relationship and to lay down in general terms the standard of care by which to measure the defendant’s conduct . . . . [Emphasis added; para. 32.]

The proper inquiry is therefore not into whether the loss suffered by a particular plaintiff could have been foreseen, but whether the type of injury to a class of persons, within which the plaintiff falls, could have been foreseen (Hill v. Hamilton‑Wentworth Regional Police Services Board, 2007 SCC 41, [2007] 3 S.C.R. 129, at paras. 32‑33; Livent, at para. 78; Linden et al., at §7.4; Galaske, at p. 691). And again, this question is a question of law.

In other words, it is the intended effect of the defendant’s undertaking upon the plaintiff’s autonomy that brings the defendant into a relationship of proximity, and therefore of duty, with the plaintiff. Where that effect works to the plaintiff’s detriment, it is a wrong to the plaintiff. Having deliberately solicited the plaintiff’s reliance as a reasonable response, the defendant cannot in justice disclaim responsibility for any economic loss that the plaintiff can show was caused by such reliance. The plaintiff’s pre‑reliance circumstance has become “an entitlement that runs against the defendant” (Weinrib, at p. 230).


The appellant says that Maple Leaf Foods undertook to provide RTE meats fit for human consumption (and, relatedly, that these meats were safe). That this is so is supported, it says, by Maple Leaf Foods’ reputation for product quality and safety, and by its public motto “We Take Care” (A.F., at para. 60; see also paras. 53 and 59).

But as we have also canvassed (at paras. 32‑34), it is not enough to show that a defendant made an undertaking. Again, an undertaking of responsibility, where it induces foreseeable and reasonable reliance, is formative of a relationship of proximity between two parties. We must therefore consider whether this undertaking, if made, was made to Mr. Sub franchisees, and for what purpose. Reliance on the part of the franchisees which falls outside the scope and purpose of that representation is neither foreseeable nor reasonable (Livent, at para. 31) and therefore does not connote a proximate relationship. The appellant attempts to address this requirement by pointing not to Mr. Sub franchisees’ reliance, but instead back to the undertaking, saying that the franchisees’ reliance was “on the basis that customers could trust that [the] franchisees used . . . a supplier whose public motto is ‘We take care’” (A.F., at para. 60).

The reference to “customers” and a “public motto” is, in our view, telling, and supports the Court of Appeal’s identification of the scope and purpose of Maple Leaf Foods’ undertaking as being “to ensure that Mr. Sub customers who ate RTE meats would not become ill or die as [a] result of eating the meats” (C.A. reasons, at para. 80). That is, the undertaking, properly construed, was made to consumers, with the purpose of assuring them that their interests were being kept in mind, and not to commercial intermediaries such as Mr. Sub or Mr. Sub franchisees. Their business interests lie outside the scope and purpose of the undertaking.

Further, and in any event, the appellant has failed to establish that Mr. Sub franchisees relied reasonably, or at all, on the undertaking that it says they received from Maple Leaf Foods. Bear in mind that detrimental reliance is manifested by the plaintiff altering its position, thereby foregoing more beneficial courses of action that it would have taken, absent the defendant’s inducement. The appellant offers no evidence of such a change in position by Mr. Sub franchisees, and indeed the evidence affirms that changing their position would not have been possible. As recalled earlier (at paras. 8‑9), Mr. Sub franchisees were bound by their franchise agreement with Mr. Sub to purchase RTE meats produced exclusively by Maple Leaf Foods. While they were able to seek Mr. Sub’s permission to find alternative sources of supply, there is no evidence that they did so. It follows that no undertaking on the part of Maple Leaf Foods, even had one been made to Mr. Sub franchisees, caused the franchisees to alter their position in reliance thereon. Generally, they were bound, and had no alternative courses of action to pursue; and, to the extent they had a course of action that was contingent upon the permission of Mr. Sub, they did not seek it. At bottom, there was no interference with the autonomy of Mr. Sub franchisees. Like many franchising arrangements, theirs had already restricted their autonomy in ways that foreclose their ability to sue for negligent misrepresentation.


As we see it, then, recovery for the economic loss sustained in Winnipeg Condominium was founded upon the idea that, in the eyes of the law, the defendant negligently interfered with rights in person or property. We see this as having been La Forest J.’s point in Winnipeg Condominium where he explained:

  • If a contractor can be held liable in tort where he or she constructs a building negligently and, as a result of that negligence, the building causes damage to persons or property, it follows that the contractor should also be held liable in cases where the dangerous defect is discovered and the owner of the building wishes to mitigate the danger . . . . In both cases, the duty in tort serves to protect the bodily integrity and property interests of the inhabitants of the building. [Emphasis added; para. 36.]

In our view, this normative basis for the duty’s recognition ⸺ that it protects a right to be free from injury to one’s person or property ⸺ also delimits its scope. This is because this basis vanishes where the defect presents no imminent threat.
The appellant urges us to extend the liability rule in Winnipeg Condominium so as to recognize what La Forest J. refrained from recognizing (para. 41), which is a duty owed to subsequent purchasers for the cost of repairing non‑dangerous defects in building structures and products. But merely shoddy products, as opposed to dangerous products, raise different questions pertaining to issues such as implied conditions and warranties as to quality and fitness for purpose, and not of real and substantial threats to person or property (Winnipeg Condominium, at para. 42). In our view, those claims are better channelled through the law of contract, which is the typical vehicle for allocating risks where the only complaint is of defective quality (Hasegawa & Co. v. Pepsi Bottling Group (Canada) Co., 2002 BCCA 324, 169 B.C.A.C. 261, at paras. 57‑61). Further, and even more fundamentally, such concerns do not implicate a right protected under tort law. As Laskin J.A. explained in Hughes v. Sunbeam Corp. (Canada) Ltd. (2002), 61 O.R. (3d) 433 (C.A.), at para. 36 in identifying the limits of the duty, “compensation to repair a defective but not dangerous product will improve the product’s quality but not its safety.” Again, we observe that, absent a contractual or statutory entitlement, there is no right to the quality of a bargain.

It follows that the normative basis for the duty not only limits its scope, but in doing so also furnishes a principled basis for limiting the scope of recovery. As La Forest J. explained, the potential injury to persons or property grounds not only the duty but also one’s entitlement to “the cost of repairing the defect”, that is, the cost of mitigating the danger by “fixing the defect and putting the building back into a non‑dangerous state” (para. 36). In other words, allowing recovery exceeding the costs associated with removing the danger goes beyond what is necessary to safeguard the right to be free from injury caused to one’s person or property (see Winnipeg Condominium, at para. 49). Like our colleague at para. 125, we note that, in making this point, La Forest J. relied on the dissenting reasons of Laskin J. (as he then was) in Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189.

We do agree with the appellant, however, that this same normative force of protecting physical integrity in the face of a real and substantial danger can apply to products other than building structures ⸺ that is, to goods. That said, in applying the Winnipeg Condominium liability rule to goods, it must be borne in mind that, properly understood, it states a narrow duty. While, therefore, there is no principled reason for confining its application to dangerously defective building structures, what a plaintiff can recover, irrespective of whether the claim is in respect of a building structure or a good, will be confined by the duty’s concern for averting danger. The point is not to preserve the plaintiff’s continued use of a product; rather, recovery is for the cost of averting a real and substantial danger of “personal injury or damage to other property” (Winnipeg Condominium, at para. 35).

It follows that where it is feasible for the plaintiff to simply discard the defective product, the danger to the plaintiff’s rights, along with the basis for recovery, falls away. The significance of this point is perhaps best appreciated by recalling that, in Winnipeg Condominium, La Forest J. cited an argument made by Lord Keith of Kinkel at the House of Lords in Murphy, at p. 465, that “[i]t is difficult to draw a distinction in principle between an article which is useless or valueless and one which suffers from a defect which would render it dangerous in use but which is discovered by the purchaser in time to avert any possibility of injury. The purchaser may incur expense in putting right the defect, or, more probably, discard the article” (para. 39). On the facts of Winnipeg Condominium, which involved a residential structure, La Forest J. did not accept that this argument should apply:

  • [I]t is based upon an unrealistic view of the choice faced by home owners in deciding whether to repair a dangerous defect in their home. In fact, a choice to “discard” a home instead of repairing the dangerous defect is no choice at all: most home owners buy a home as a long term investment and few home owners, upon discovering a dangerous defect in the home, will choose to abandon or sell the building rather than to repair the defect. Indeed, in most cases, the cost of fixing a defect in a house or building, within the reasonable life of that house or building, will be far outweighed by the cost of replacing the house or buying a new one. This was certainly demonstrated in this case by the fact that the Condominium Corporation incurred costs of over $1.5 million in repairing the building rather than choosing to abandon or sell the building. [Emphasis added; para. 40.]

Whether, then, one is considering defects in a building structure or a good, it is the feasibility of discarding the thing as the means of averting the danger which will determine whether the plaintiff’s loss is recoverable. We agree that few homeowners or owners of other kinds of building structures can reasonably remove the real and substantial danger posed by a defect by walking away from the building structure. And we accept that, in Winnipeg Condominium, this Court held that, in such circumstances, no legally significant distinction could be drawn between the cost of removing the danger and the cost of repairing the defect or replacing the defective component. No party has asked us to reconsider that holding and, in the absence of full submissions, we would not risk clarity and certainty in the law by doing so here (R. v. Bernard, [1988] 2 S.C.R. 833, at pp. 858‑59; Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, at para. 20). In our view, however, Lord Keith of Kinkel’s argument is more readily applicable in dealing with goods, and courts must be alive to this possibility. We reiterate that a breach of the duty recognized in Winnipeg Condominium exposes the defendant to liability for the cost of averting a real and substantial danger, and not of repairing a defect per se.

An instructive example of a dangerously defective good which could not be feasibly discarded is provided by Plas‑Tex, where the defendant Dow Chemical sold polyethylene resin to the plaintiffs, knowing that it would be used in the construction of 3000 miles of pipeline (1,700 miles of which was buried underground) used to transport natural gas, and knowing that it was dangerously defective (the resin tended to crack, allowing natural gas to escape, creating the risk of an explosion, and indeed had already caused an explosion). This dangerously defective product was so integrated with the plaintiffs’ pipeline operation (and with the pipeline itself) that repair was the only feasible option. Indeed, discarding the pipeline without undertaking mitigation might well have increased the already real and substantial danger which Picard J.A. identified.

There will, of course, be other goods containing defects which present real and substantial dangers, and to which La Forest J.’s observations in Winnipeg Condominium about the impossibility of discarding homes and other building structures may apply. To be clear, this is a high threshold that we do not anticipate will be regularly met. The plaintiff must, like most homeowners faced with a dangerously defective home, be shown to be effectively bereft of reasonable options. When applied to goods, this describes the rare case.

The foregoing kind of good stands in contrast to two other kinds of goods. First, and more commonly, there is the good whose dangerous defect can realistically be addressed by discarding it. This will, we expect, apply to most defective consumer goods. Again, the liability rule in Winnipeg Condominium protects a right to be free of a negligently caused real and substantial danger, not to the continued use of a product. If the danger can be removed without repair, the right is no less vindicated. (To be clear, if the plaintiff incurs a reasonably foreseeable cost in discarding the product ⸺ such as a regulatory disposal fee ⸺ that is recoverable as a cost of removing the danger).

Secondly, there is the kind of good like the RTE meats, for which “repair” is simply not possible. The good must, therefore, also be discarded. While in such circumstances the plaintiff may recover any costs of disposal, that is the extent of its possible recovery under this liability rule. It must be remembered that, because the right protected by this liability rule is that in the physical integrity of person or property, recovery is confined to the cost of removing a real and substantial danger to that right ⸺ by, where possible, discarding it. Conversely, it does not extend to the diminution or loss of other interests that the appellant invokes here, such as business goodwill, business reputation, sales, profits, capital value or replacement of the RTE meats.

We add this. We find ourselves in respectful disagreement with our colleague’s view that Laskin J.’s dissenting reasons in Rivtow, “which were explicitly adopted in Winnipeg Condominium, at para. 36, suggest that additional economic losses may be recoverable under this class of duty” (para. 125). This is significant, she explains, because it suggests that courts ought not to restrict recovery to that which was allowed in Winnipeg Condominium, since “the absence of a claim for lost profits or other direct economic losses should not be read to preclude recovery of those losses in future cases” (para. 124 (emphasis in original)). In our respectful view, this overstates the breadth of Laskin J.’s dissent and of this Court’s adoption thereof in Winnipeg Condominium. In Rivtow, the Court was unanimously of the view that the lost profits of the charterer by demise of the defective cranes were recoverable due to the manufacturer’s breach of its duty to warn. Laskin J. dissented on one narrow issue: whether the cost of repairing the cranes was also recoverable. The reasoning of Laskin J., therefore, was directed ⸺ and applied by this Court in Winnipeg Condominium (at para. 36) ⸺ only to support the plaintiff’s claim for those costs. There is simply no suggestion, either in Rivtow, including Laskin J.’s dissent, or in Winnipeg Condominium, that “additional economic losses may be recoverable”. Rather, they suggest the opposite.

 

In our view, the appellant’s claim based on negligent supply of goods must fail for two reasons. First, a duty of care in respect of the negligent supply of shoddy goods or structures is predicated, as we have explained, upon a defect posing a real and substantial danger to the plaintiff’s rights in person or property. In this case, any danger posed by the supply of RTE meats ⸺ which arose from the possibility that they were actually contaminated with listeria ⸺ could be a danger only to the ultimate consumer. No such danger was posed to the Mr. Sub franchisees. Even if the RTE meats posed a real and substantial danger to consumers, this offers no support for the franchisees’ claim that the alleged loss of past and future sales, past and future profits, capital value and goodwill was the result of interference with their rights. Effectively, the Mr. Sub franchisees are seeking to bootstrap their claim to the rights of consumers. Further, even if the franchisees could have established an imminent risk to their own rights in person or property, the most they could have recovered would have been the cost of averting this danger.

This leads us to our second reason why the appellant’s claim must fail. While the RTE meats may have posed a real and substantial danger to consumers when they were manufactured, any such danger evaporated when they were recalled and destroyed. In other words, their dangerousness was in their latency (Cardwell v. Perthen, 2007 BCCA 313, 243 B.C.A.C. 135, at paras. 34‑35). It bears repeating that removing a danger ⸺ whether in a product like the RTE meats that cannot be repaired, or in the case of goods that can ⸺ will in many (and, indeed, in most) cases be achieved by simply discarding the good at little or no expense. We therefore agree that, once that was accomplished in this case by way of the recall, the facts would not support a finding that the RTE meats posed a real and substantial danger thereafter to anyone ⸺ not to consumers, and certainly not to Mr. Sub franchisees, who can therefore show no injury to a relevant right protected under tort law.


Assessing proximity requires asking whether, in light of the nature of the relationship at issue (Livent, at para. 25), the parties are in such a “close and direct” relationship that it would be “just and fair having regard to that relationship to impose a duty of care in law” (Livent, at para. 25, citing Cooper, at paras. 32 and 34). This assessment proceeds in two steps.

First, the court must ask whether proximity can be made out by reference to an established or analogous category of proximate relationship (Livent, at paras. 26‑28). This question comes first because “[i]f a relationship falls within a previously established category, or is analogous to one, then the requisite close and direct relationship is shown” (Livent, at para. 26). Analogous categories of proximity step into a prior and continuing stream of legal development. They are, in other words, just that: analogous, in the sense of being like an established category, although different in scope. Applying an established category of proximity so as to recognize another is simply an instance of the inductive reasoning whereby the common law is developed and a duty recognized in one set of cases is applied to a similar set of cases.

In determining whether proximity can be established on the basis of an existing or analogous category, “a court should be attentive to the particular factors which justified recognizing that prior category in order to determine whether the relationship at issue is, in fact, truly the same as or analogous to that which was previously recognized” (Livent, at para. 28). This is because, as between parties to a relationship, some acts or omissions might amount to a breach of duty, while other acts or omissions within that same relationship will not. Merely because particular factors will support a finding of proximity and recognition of a duty within one aspect of a relationship and for one purpose to compensate for one kind of loss does not mean a duty will apply to all aspects of that relationship and for all purposes and to compensate for all forms of loss. While, therefore, proximity may inhere between two parties at large, it may inhere only for particular purposes or for particular actions; whether it is one or the other, and (if the other) for which purposes and which actions, will depend, as we have already recounted, upon the nature of the particular relationship at issue (Livent, at para. 27) or the type of pure economic loss alleged. Ultimately, then, to ground an analogous duty, the case authorities relied upon by the appellant must be shown to arise from an analogous relationship and analogous circumstances (ibid.).

Secondly, if the court determines that proximity cannot be based on an established or analogous category of proximate relationship, then it must conduct a full proximity analysis (Livent, at para. 29). In making this assessment, courts must examine all relevant factors present in the relationship between the plaintiff and the defendant ⸺ which, while “diverse and depend[ent] on the circumstances of each case” (Livent, at para. 29), include “expectations, representations, reliance, and the property or other interests involved” (Cooper, at para. 34).

In a case of negligent supply of shoddy goods or structures, the claim may arise in circumstances in which the parties could have protected their interests under contract. Even without being in privity of contract, the parties may nonetheless be “linked by way of contracts with a middle party”, as Maple Leaf and the Mr. Sub franchisees are linked by way of contracts with Mr. Sub (Stapleton, at p. 287). This is particularly the case in commercial transactions (as opposed to consumer purchases: Arora v. Whirlpool Canada LP, 2013 ONCA 657, 118 O.R. (3d) 115, at para. 106). Taken together, those contracts may reflect a “clear tripartite understanding of where the risk is to lie” (Stapleton, at p. 287). We see this consideration as crucial here when considering the “expectations [and] other interests involved” that must be accounted for in analysing the nature of the relationship (Cooper, at para. 34).

Given the possibility of an existing allocation of risk by contract, a proximity analysis must account for two concerns. First, the reasonable availability of adequate contractual protection within a commercial relationship, even a multipartite relationship, from the risk of loss is an “eminently sensible anti‑circumvention argument” that militates strongly against the recognition of a duty of care (Stapleton, at p. 287; see also p. 286). As La Forest J., dissenting, recognized in Norsk, at p. 1116, “the plaintiff’s ability to foresee and provide for the particular damage in question is a key factor in the proximity analysis”. For example, a plaintiff may have been able to anticipate risk and remove, confine, minimize or otherwise address it by way of a contractual term (Linden et al., at §9.87). We agree with Professor Stapleton that the boundaries of tort liability should respect that “the principal alternative paths of protection which are theoretically available . . . are by way of contracts made directly with th[e] responsible party or indirectly with a middle party” (p. 271 (emphasis added)).


The second concern is related to the first. If the possibility of reasonably addressing risk through a contractual term, even within a chain of contracts, presents a compelling argument against allowing a plaintiff to circumvent a contractual arrangement by seeking recognition of a duty of care in tort law, it follows that where the parties have done so, this consideration weighs even more heavily against such recognition. As Professor Stapleton explains, this particular anti‑circumvention argument arises “not only [where] alternative protection by way of an arrangement with [the middle] party [was] available, but was obtained” (Stapleton, at p. 287 (emphasis added)). Again, this Court’s decision in Design Services is instructive:

  • In my view, the observation of Professor Lewis N. Klar (Tort Law (3rd ed. 2003), at p. 201) — that the ordering of commercial relationships is usually in the bailiwick of the law of contract — is particularly apt in this type of case. To conclude that an action in tort is appropriate when commercial parties have deliberately arranged their affairs in contract would be to allow for an unjustifiable encroachment of tort law into the realm of contract. [Emphasis added; para. 56.]

All this is not to say that contractual silence on a matter will automatically foreclose the imposition of a duty of care. Contractual silence on certain matters is inevitable, since it is impractical for even the most sophisticated parties to bargain about every foreseeable risk (Stapleton, at p. 287). Our point, rather, is that, in the case of defective goods and structures, commercial parties between or among whom the product is transferred before it reaches the consumer will have had a chance to allocate risk and order their relationship via contract. And in assessing the proximity of relations among those parties ⸺ that is, in evaluating “expectations, representations, reliance, and the property or other interests involved” ⸺ courts must be careful not to disrupt the allocations of risk reflected, even if only implicitly, in relevant contractual arrangements.

In sum, under the Anns/Cooper framework and its rigorous proximity analysis, the determination of whether a claim of negligent supply of shoddy goods or structures is supported by a duty of care between the plaintiff and the defendant requires consideration of “expectations, representations, reliance, and the property or other interests involved”, as well as any other considerations going to whether it would be “just and fair”, having regard to the relationship between the parties, to impose a duty of care. In particular, where the parties are linked by way of contracts with a middle party that, taken together, reflect a multipartite allocation of risk, courts must be cautious about allowing parties to circumvent that allocation by way of tort claims. Courts must ask: is a party using tort law so as to circumvent the strictures of a contractual arrangement? Could the parties have addressed risk through a contractual term? And, did they? In our view, and as we will explain, these considerations loom large here.

If the vulnerability that is typical in a multipartite contractual arrangement such as this is insufficient to ground a duty of care, it is a fortiori inadequate where an available means under the terms of that arrangement for avoiding or mitigating that vulnerability was not pursued. In this regard, the appellant’s position is comparable to that of the plaintiffs in Design Services, whose failure to pursue the option under “Contract A” for a joint venture with Olympic was fatal to their tort claim.

 

In any event, and as we have explained, the appellant cannot show that it and other Mr. Sub franchisees were in a relationship of proximity with Maple Leaf Foods. That is fatal not only to its argument under Winnipeg Condominium, but also to the argument for recognition of a novel duty in these circumstances, since the novel duty also depends, inter alia, on the appellant showing that requisite proximate relationship with Maple Leaf Foods. This is because, while a novel duty, being novel, starts with a blank slate, that slate is filled by applying the same Anns/Cooper framework that, as we have just explained, operates to preclude recovery here under the liability rule in Winnipeg Condominium.”