In 1688787 Ontario Inc. v. Maple Leaf Foods Inc., the Supreme Court of Canada found there was no duty of care by owed by Maple Leaf Foods Inc. to supply a product fit for human consumption to Mr. Sub Franchisees. However, Maple Leaf Foods Inc. was found to owe a duty to the franchisee’s consumers.
Maple Leaf Foods had an exclusive agreement with Mr. Sub, the franchisor, to supply meat. To carry out this arrangement, the franchise agreement between Mr. Sub and its franchisees required them to purchase their meet only from Maple Leaf Foods. In 2008, following a recall of meat products due to a listeria outbreak, a class action was commenced against Maple Leaf Foods on behalf of the franchisees. The franchisee claimed to have suffered an economic loss, as well as reputational injury, as a result of their association with contaminated meat products.
This latest decision is in keeping with the Court’s reticence to establish a general right in tort to recover for pure economic loss unrelated to an injury to a person or property. Pure economic loss can still be recoverable; however, at the time of the loss, it requires the parties to have a sufficiently proximate relationship. The parties did not have a contractual relationship with one another rather each having a contract with Mr. Sub, the franchisor.
The Court also addressed breach of the duty recognized in Winnipeg Condominium Corporation No. 36 v Bird Construction Co. where liability for the cost of averting a real and substantial danger can occur but not for addressing the implication of. However, the risk and danger stemming from the meat were to the consumers, not the franchisees.
Ultimately, the Supreme Court of Canada determined that the franchisees, as commercial actors, chose to enter into a franchising agreement. They had the opportunity to mitigate their risk through the inclusion of a contractual term, even within a chain of contracts arrangement. However, they chose not to exercise their right. This is the purview of contract law and the Court is clear: it is unwilling to overstep and impose a duty of tort. The parties have other means due to the unequal footing and bargaining power between franchisees and franchisors. To address this vulnerability, the onus was that the franchisees could have obtained insurance.
This case recognizes the opportunities available to franchisees to help themselves without turning to tort law. Despite their unequal bargaining power, franchisees can negotiate in the face of a standard form franchise agreements and obtain other forms of protection from loss, such as insurance.