S.C.C. File No. 38187

IN THE SUPREME COURT OF (ON APPEAL FROM THE COURT OF APPEAL FOR )

BETWEEN:

1688782 ONTARIO INC.

APPLICANT (Respondent)

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MAPLE LEAF INC. and MAPLE LEAF CONSUMER FOODS INC.

RESPONDENTS (Appellants)

RESPONSE ON BEHALF OF THE RESPONDENTS, MAPLE LEAF FOODS INC. and MAPLE LEAF CONSUMER FOODS INC. (pursuant to Rule 27 of the Rules of the Supreme Court of Canada)

STIEBER BERLACH LLP SUPREME ADVOCACY LLP 130 Adelaide Street West 340 Gilmour St., Suite 100 18th Floor Ottawa, Ontario K2P 0R3 Toronto ON M5H 3P5 Marie-France Major Steven Stieber Tel: 613-695-8855 Elizabeth Bowker Fax: 613-695-8580 Nicola Brankley Email: [email protected] Tel: (416) 366-1400 Fax: (416) 366-1466 Ottawa Agent to Counsel for the Email: [email protected] Respondents, Maple Leaf Foods Inc. and Email: [email protected] Maple Leaf Consumer Foods Inc. Email: [email protected]

Counsel for the Respondents, Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc.

LERNERS LLP GOWLING WLG (CANADA) LLP 130 Adelaide Street West 160 Elgin Street, Suite 2600 Suite 2400 Ottawa, Ontario Toronto ON M5H 3P5 K1P 1C3

Earl A. Cherniak, Q.C. Jeffrey W. Beedell Tel: (416) 601-2350 Tel: (613) 786-0171 Fax: (416) 867-2402 Fax: (613) 788-3587 Email: [email protected] Email: [email protected]

Peter W. Kryworuk Ottawa Agent to Counsel for the Applicant, Tel: (519) 672-6317 1688782 Ontario Inc. Fax: (519) 932-3317 Email: [email protected]

Jacob Damstra Tel: (519) 640-6333 Fax: (519) 932-3333 Email: [email protected]

Counsel for the Applicant, 1688782 Ontario Inc.

TABLE OF CONTENTS

PART I – OVERVIEW AND STATEMENT OF FACTS ...... 1

A. Overview ...... 1

B. Facts ...... 3

C. August 2008 Recall ...... 4

D. Damages Claimed by Franchisees ...... 6

E. Procedural History ...... 7

PART II – QUESTIONS IN ISSUE ...... 9

PART III – ARGUMENT ...... 9

A. Applicant’s Question #i – Application of Duty of Care Analysis for Negligent Supply of Defective Goods...... 10

i. Condominium ...... 10

ii. Applying the Duty of Care Analysis ...... 12

B. Applicant’s Question #ii – Claims for Reputational Harm ...... 13

C. Applicant’s Question #iii – Standard of Review of Motion Judge’s Findings of Fact ...... 15

PART IV – COSTS AND ORDER SOUGHT ...... 18

PART V – TABLE OF AUTHORITIES ...... 19

PART VI – STATUTORY AUTHORITIES ...... 20 - 1 -

PART I - OVERVIEW AND STATEMENT OF FACTS

A. Overview

1. The Applicant is a franchisee - with no contractual relationship with the Respondent manufacturer (Maple Leaf) - that purchased its goods from a third party distributer. It now sues the manufacturer in negligence for alleged loss of sales after two products were temporarily unavailable due to a recall and as a result of it being publically named as a restaurant which had sold Maple Leaf’s recalled products. This is not a case in which damages flow from the actual supply of a dangerous product to the Applicant; rather, the alleged damages flow from the removal of goods from the marketplace in order to protect the public.

2. This is a unique set of circumstances in which no previous or analogous case has found a duty of care to be owed. As the claim by the Applicant is novel, a full Anns analysis is required. It is clear that there is no proximity between the Applicant and Maple Leaf.

3. The proper application and interpretation of the duty of care analysis has been fulsomely and recently addressed by this Honourable Court in Deloitte & Touche v Livent Inc. (Receiver of) 2017 SCC 63 (“Livent”). The ample guidance provided in Livent enables courts in Ontario and across Canada to properly respond to the questions posed by the Applicant in this application, and was appropriately relied upon by the Ontario Court of Appeal in the within matter.

4. The Applicant’s argument in this leave application is predicated upon two erroneous assumptions. First, the questions it asks this Court to address incorrectly presuppose that the Applicant and Maple Leaf are in a proximate relationship, which proximity allegedly includes protecting the Applicant from damages for reputational harm and economic loss from a recall in which there is no evidence of injury suffered by any Mr. Sub customer. Second, the Applicant speciously presumes that if a party labels its claim as a ‘negligent supply of defective products’ or as ‘negligent misrepresentation’, then a claim for economic loss is automatically permitted to proceed as a recognized category without any need to consider if the facts of the case are the same or analogous to cases which have permitted such claims.

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5. The foundation upon which this application is premised ignores that this Court has clarified that the proximity analysis requires the Applicant to prove both the existence of a proximate relationship and the scope of the rights and duties flowing from that relationship. The arguments raised by the Applicant presuppose that a proximate and foreseeable relationship between it and Maple Leaf has already been established and jumps to focusing on whether its claim for economic loss therefore ought to succeed. In framing its argument in this manner, the Applicant has put the cart before the horse and ignores the truly relevant question: whether the relationship between the Applicant and Maple Leaf extends to include an obligation for Maple Leaf to protect the Applicant from economic loss resulting from alleged reputational harm. The mere knowledge that the Applicant existed or sold Maple Leaf products does not mean that a relationship of proximity exists or extends to the actual duty claimed. This is particularly so where, as here, the extent of the duty is alleged to include harm which flows from the removal of goods from the marketplace following a recall to protect public safety.

6. The issues raised by the Applicant do not touch upon matters of public importance; there is no void in this area of the law. To the contrary, this very Court has recently provided the judicial interpretation sought by the Applicant. This application does not give rise to any issue of national importance and does not merit this Court’s intervention.

7. Further, and while not specifically the focus of this appeal, any prima facie duty of care would be negated by the second stage of the Anns test in any event. Public policy favours only imposing a narrow duty on manufacturers in favour of the end-users (consumers). The duty of care suggested by the Applicant would discourage manufacturers from voluntarily issuing broad product recalls out of an abundance of caution, and would instead place manufacturers in a situation where they must weigh if it is more cost-effective to risk injury to a few consumers rather than to issue a wide recall and then risk widespread claims for economic loss by everyone in the supply chain. To impose the broad duty of care urged by the Applicant would be contrary to the public interest in promoting responsible recalls by manufacturers when consumer safety is at risk. - 3 -

B. Facts

8. Maple Leaf1 operated a manufacturing and processing plant in Toronto, Ontario (the “Bartor Road Plant”) which produced Ready-To-Eat sliced meats, bologna, and deli meats for national distribution to retail and food services operations (“RTE Meats”).

9. The Applicant, 1688782 Ontario Inc., and the Class Members (together, the “Franchisees”) operated various Mr. Sub restaurants pursuant to their respective franchise agreements with Mr. Submarine Limited (the “Franchisor”) (the “Franchise Agreement”). The Franchise Agreement stipulated that the Franchisees would offer for sale only those products authorized by the Franchisor but they could request permission from the Franchisor to use products from another source.2

10. Maple Leaf had no contractual relationship with any of the Franchisees.

11. Maple Leaf was, however, a party to a contract with the Franchisor for the purchase and sale of RTE Meats (the “Partnership Agreement”). Maple Leaf was the exclusive supplier to the Franchisor of 14 sliced meat menu items (Ready to Eat or ‘RTE’ Meats), including Corned Beef and Roast Beef. Although the Franchisees could not purchase these RTE Meats elsewhere without permission from the Franchisor, there was no obligation whatsoever for Maple Leaf to supply products to the Franchisor and there was certainly no obligation to maintain a continuous

1 Maple Leaf Foods Inc. (“MLF”) carries on business in the manufacturing and processing of food products. Maple Leaf Consumer Foods Inc. (“MLCF”) was at the material time a wholly owned subsidiary of MLF. At the material time MLCF carried on business as a manufacturer of meat products as part of the Meat Product Group of MLF and its product lines included packaged meats. On January 1, 2010, MLCF was amalgamated into its parent company, MLF. These companies together are referred to as “Maple Leaf”. 2 Reasons of the Ontario Court of Appeal dated April 30, 2018 (“ONCA Reasons”) para. 7-8, Applicant’s Application Record (“AR”) Tab 6 - 4 -

supply of any RTE Meats to the Franchisor.3 While Maple Leaf provided sliced meats, the Franchisees obtained a number of other proteins and menu items from additional sources.

12. Maple Leaf sold and delivered its RTE Meats to various distributors (collectively, the “Distributors”). The Distributors in turn sold and delivered the RTE Meats to the Franchisees and others. The Franchisees ordered their requested RTE Meats directly from the Distributors, who invoiced them in turn.4

C. August 2008 Recall

13. Of Mr. Sub’s 14 Core Menu items, only two RTE Meats were affected by an August 2008 recall: Roast Beef and Corned Beef (“the Affected Products”).

14. On August 7, 2008, Maple Leaf learned that a public health authority and the Canadian Food Inspection Agency (“CFIA”) had launched an investigation into three products produced at the Bartor Road Plant. Maple Leaf immediately notified customers to place those particular products on hold. There was no reason at that time to believe that the two Affected Products might be contaminated.5

15. At 10:00 p.m. on August 16, 2008, the CFIA notified Maple Leaf that tests for Listeria on one of the three other products had returned positive. Within hours, Maple Leaf issued a news release with notice of the recall. This recall did not include the Affected Products.6

16. On August 19th, two more tests on products produced at different times on the same production lines (8 and 9) tested positive for Listeria. Maple Leaf voluntarily expanded the scope of the recall to include all products manufactured on Lines 8 and 9 from the earliest affected production date of June 2nd and then shut down the Bartor Road Plant altogether (the “Recall”). Maple Leaf immediately notified its customers that the voluntary recall had been expanded and

3 ONCA Reasons para. 8, AR Tab 6 4 ONCA Reasons para. 9, AR Tab 6 5 ONCA Reasons para. 10, AR Tab 6 6 ONCA Reasons para. 11, AR Tab 6 - 5 -

now included the Affected Products – even though many of the products, including the Affected Products themselves, had not tested positive for Listeria.7

17. Maple Leaf communicated with the Franchisor regarding the Recall and assisted the Franchisor in preparing communications to the Franchisees about the Recall. Further, Maple Leaf set up a quality assurance hotline to answer questions about the Recall.8 The Applicant confirmed that information concerning the Recall came to it from the Franchisor (not from Maple Leaf).

18. At Maple Leaf’s sole expense, the Distributors attended at each franchise location to retrieve the Affected Products. Maple Leaf credited the Distributors for the Affected Products, and understood that the Distributors in turn issued credits to the Franchisees for cases retrieved, as well as for any cases that the Franchisees reported as having been disposed. Credits for entire cases were given irrespective of whether they were closed, open, or partially used.9

19. The evidence before the lower courts supports that at the Applicant’s restaurant, the recalled Affected Products on hand included two boxes of Roast Beef and four boxes of Corned Beef, with a total combined value of $240.96.10

20. While the Bartor Road Plant remained closed, Maple Leaf encouraged the Franchisor to source alternative suppliers and even provided the names of various competitors that could supply the Affected Products. By mid-September, 2008 the Franchisor had selected its own alternate supplier to supply the Affected Products. By October 2008, RTE products were again being produced from the Bartor Road Plant.11

21. Despite its right under the Franchise Agreement to ask the Franchisor for permission to sell alternate products, the Applicant at no point sought permission to get alternate supplies of Roast Beef or Corned Beef. However, it did continue getting all of the other supplies it needed.

7 ONCA Reasons para. 12, AR Tab 6 8 ONCA Reasons para. 14, AR Tab 6 9 ONCA Reasons para. 15, AR Tab 6 10 Reasons from Summary Judgment Motion dated November 18, 2016 (“Motion Reasons”) para. 21, AR Tab 4 11 ONCA Reasons para. 116, AR Tab 6 - 6 -

The Recall had no impact on the Franchisees’ ongoing ability to other proteins and menu items from their other sources.

D. Damages Claimed by Franchisees

22. The Franchisees do not suggest that anyone was harmed by eating Maple Leaf meats at a Mr. Sub restaurant, and the Applicant suffered no property damage related to the recall.12

23. Instead, the damages alleged by the Applicant on behalf of all the Franchisees are: disposal and destruction of RTE meats (which Maple Leaf has already paid to the Distributors), clean-up and mitigation costs (which would be de mininus, if they exist); loss of past and future sales; loss of past and future profits; loss of goodwill; and loss of the capital value of their franchise and businesses. The Franchisees believe that they lost business following the Recall because:

(a) Customers simply did not come into the stores at all because of the outbreak; and/or

(b) Customers that did come in would ask whether that store carried Maple Leaf products, and then leave.13

24. Media reports dealing with the Listeria outbreak portrayed an association between Maple Leaf and certain food sellers, including Mr. Sub and McDonalds. The CFIA's "Health Hazard Alerts" included reference to food brands and sellers who used Maple Leaf products, including Mr. Sub, Boston Pizza, Compliments, Kirkland Signature, McDonalds, No Name, Pizza Nova, Safeway, Shopsy's, and Tim Horton’s.14

25. The Applicant’s claim is based on the allegation that Maple Leaf put damaged product into the marketplace and the Applicant has been ‘tagged’ as being a place where dangerous products might have been sold prior to those products being recalled.15 This is not a case wherein

12 ONCA Reasons para. 2 and 57, AR Tab 6 13 ONCA Reasons para. 19, AR Tab 6 14 ONCA Reasons para. 13, AR Tab 6 15 Motion Reasons para. 37, AR Tab 4 - 7 -

damages are claimed as a result of dangerous goods actually being supplied to the Applicant. Rather, the damages claimed by the Franchisees allegedly flow from the removal of goods from the marketplace.

E. Procedural History

26. This action was certified as a Class Proceeding on October 31, 2016, with the following common issues relevant to this application for leave to appeal:

(b) Did the defendants:

(i) owe a duty of care to the Class in relation to the production, processing, sale and distribution of the RTE Meats?

(ii) owe a duty of care with respect to any representations made that the RTE Meats were fit for human consumption and posed no risk of harm?16

27. Maple Leaf brought a summary judgment motion returnable immediately after the Certification Motion on the basis that no duty of care was owed. The Motion Judge held that the Applicant was entitled to an order which resolved Common Issues (b)(i) and (ii) in its favour. In particular, that Maple Leaf owed a duty of care to the Class regarding to the production, processing, sale, and distribution of the RTE Meats, and with respect to any representations made that the RTE Meats were fit for human consumption and posed no risk of harm.

28. Maple Leaf appealed this decision. After argument and additional written submissions regarding the application and impact of the newly-released Livent decision, Justices Sharpe, Rouleau, and Fairburn allowed the appeal and held that Maple Leaf did not owe the Applicant a duty of care in these circumstances.17

29. In concluding that the Motion Judge erred in finding that the relationship between Maple Leaf and the Franchisees fell within an established category and within a recognized duty of care to supply a product fit for human consumption, the Ontario Court of Appeal followed the

16 1688782 Ontario Inc. v Maple Leaf Foods Inc., 2016 ONSC 4233 para. 118 17 ONCA Reasons, AR Tab 6 - 8 -

guidance set out by this Honourable Court in Livent to emphasize the need for caution in finding proximity based upon a previously established or analogous category, and avoiding an overly broad characterization of an established category without considering the scope within which proximity was previously found.18

30. In proceeding to undertake an Anns/Cooper19 duty of care analysis, the Ontario Court of Appeal properly considered proximity as a question of mixed fact and law. In doing so, the Court of Appeal found that the Motion Judge failed to consider whether the duties claimed by the Applicant arose from the circumstances between the parties, and instead ended her analysis after concluding that Maple Leaf was aware of the existence of the franchisees and their use of the RTE meats. In applying the proper legal test, the Court of Appeal held that the scope of the relationship between the Applicant and Maple Leaf did not extend to protecting the Applicant’s reputation or to pay for any damages for pure economic loss arising out of Maple Leaf’s removal of goods from the marketplace in order to protect the public.20

31. As it relates to the Applicant’s claim for negligent misrepresentation, the Court of Appeal properly followed Livent in concluding that the Motion Judge had similarly failed to consider the scope of the proximate relationship and how it affects the analysis. The Court of Appeal held that the scope of the undertaking provided by Maple Leaf – through its contractual relationship with the Franchisor – was to supply RTE meats that were safe for human consumption, and that the purpose of this undertaking was to ensure that Mr. Sub customers would not become ill as a result of eating the meat. The purpose of this undertaking did not extend to protecting the reputational interests of the Franchisees.21

32. As pointed out by the Court of Appeal, the Applicant’s claim is that it relied upon Maple Leaf to protect its reputation, where reputational damage flowed not from harm to Mr. Sub customers but from the supply of tainted meat to others and the recall of potentially tainted meat from the Franchisees. In rejecting the Applicant’s position in this regard, the Court of Appeal

18 ONCA Reasons para. 41-51, AR Tab 6 19 Anns v. Merton London Borough Council [1978] A.C. 728 (H.L.); Cooper v. Hobart [2001] 3 S.C.R. 537 20 ONCA Reasons para. 64, AR Tab 6 21 ONCA Reasons para. 80, AR Tab 6 - 9 -

followed the jurisprudence of Livent that provides that a plaintiff has no right to rely on a defendant for any purpose which falls outside the scope of the defendant’s undertaking.22

PART II - QUESTIONS IN ISSUE

33. The Applicant proposes the following questions for appeal:

(i) How should courts conduct a duty of care analysis within the category of cases involving negligent supply of defective products recognized in Winnipeg Condominium in the post-Cooper era?

(ii) How can courts remedy reasonably foreseeable reputational harm caused to a known and proximate individual or class of plaintiffs by the negligence of a defendant, including:

(A) How should damages to reputation be characterized and understood for the purposes of a duty of care analysis and

(B) How should courts treat “scope” in the duty of care analysis especially in respect of undertakings in negligent misrepresentation claims?

(iii) On what standard of review should appellate courts treat the factual findings of lower court judges in relation to proximity and reasonable foreseeability in the duty of care analysis?

PART III - ARGUMENT

34. To obtain leave to appeal, the Applicant must demonstrate that its proposed appeal raises a question that “by reason of its public importance or the importance of any issue of law or any issue of mixed law and fact involved in that question… ought to be decided by the Supreme

22 ONCA Reasons para. 82-84, AR Tab 6; Livent para. 35 - 10 -

Court”.23 There is no national importance to the within application, nor is there any conflict in the authorities relied upon by the applicant.

A. Applicant’s Question #i – Application of Duty of Care Analysis for Negligent Supply of Defective Goods

35. The arguments raised by the Applicant in this first question are two-fold:

(a) The Court of Appeal erred by failing to consider the case of Winnipeg Condominium24 regarding the recovery of pure economic losses arising from the negligent supply of defective products which pose a risk to health and safety;

(b) Guidance is required by this Court on the application of the duty of care analysis in claims for economic losses allegedly arising from the negligent supply of defective products which pose a risk to health and safety.

i. Winnipeg Condominium

36. The Applicant argues that by failing to expressly address Winnipeg Condominium, the Court of Appeal failed to consider the influence on the duty of care analysis of cases which have held that economic losses can be recoverable following the supply of shoddy or defective products. In pursuing this argument, the Applicant appears to suggest that proximity between it and Maple Leaf is established either because it falls within this category or is analogous to it. This is simply incorrect.

37. At the outset, the Court of Appeal did not err by not engaging in a protracted analysis of Winnipeg Condominium in light of the fact that that Motion Judge did not rely upon Winnipeg Condominium to support her conclusion that the Applicant’s claim fell within two recognized classes in which economic losses are recoverable25. Rather, the Motion Judge relied upon the reasoning and findings in Plas-Tex26, Tanshaw27, and Country Style28 to support her decision29.

23 Supreme Court Act, RSC 1985, c S-26, s. 40(1) 24 Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 SCR 85 25 Being negligent supply of shoddy goods and negligent misrepresentation 26 Plas-Tex Canada Ltd. v. Dow Chemical of Canada Limited, 2004 ABCA 309 (“Plas-Tex”) - 11 -

Within this context, the Court of Appeal provided a detailed analysis as to why each of these cases did not in fact support the Motion Judge’s conclusion.30

38. To the extent that the Court of Appeal could also have considered Winnipeg Condominium, it is submitted that the conclusion would still have been that the within case did not fall within an established category and that a full Anns/Cooper analysis was necessary. The specific facts of that case were that sections of cladding fell off a building and inspections revealed structural defects in the masonry work; as a result, the plaintiff replaced the entire cladding at its expense. The analysis in Winnipeg Condominium focuses upon the supply of a defective building structure and the question of a duty of care between a builder and an end user (a subsequent purchaser). That case however did not address the question of a manufacturer’s duty of care to a franchisee to supply a food product fit for human consumption by an end user, nor the duty to protect the reputation of the franchisee as part of a recall to protect against personal injuries. The factual circumstances, the relationships between the parties, and the policy considerations at play are so disparate between the within case and those in Winnipeg Condominium that there is no reasonable basis for concluding that the cases are the same or even remotely analogous.

39. Winnipeg Condominium stands for the proposition that damages for pure economic losses may be recoverable where (1) the legal tests related to proximity and foreseeability are made out, and (2) where the negligence in question relates to the supply of a dangerous and defective building structure. Its facts are not comparable to those of the within case. To suggest, as the Applicant does, that the category established in Winnipeg Condominium ought to apply to the within facts would be to directly contradict the caution by this Court in Livent that:

“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

27 376599 Alberta Inc. v. Tanshaw Products Inc., 2005 ABQB 300 (“Tanshaw”) 28 Country Style Food Services Inc. v. 1304271 Ontario Ltd., 2005 CanLII 23214 (ON CA) (“Country Style”) 29 Motion Reasons para. 40, AR Tab 4 30 ONCA Reasons para. 42-59, AR Tab 6 - 12 -

analogous to that which was previously recognized. And, by corollary, courts should avoid identifying established categories in an overly broad manner because, again, residual policy considerations are not considered where proximity is found on the basis of an established category. […] [A] finding of proximity based upon a previously established or analogous category must be grounded not merely upon the identity of the parties, but upon examination of the particular relationship at issue in each case. Otherwise, courts risk recognizing prima facie duties of care without any examination of pertinent second-stage residual policy considerations”.31

40. The case of Winnipeg Condominium is simply not analogous here. It was not one of the three cases relied upon by the Motion Judge as purportedly establishing a recognized duty of care by Maple Leaf, it did not require consideration by the Court of Appeal in the within action, and, it is respectfully submitted, it has no bearing on the outcome of this case. An appeals court is not required to address every case that may be tangentially relevant, particularly where the case was not relied upon in or foundational to the lower court’s decision.

41. It is clear that Winnipeg Condominium does not establish that the relationship between the Applicant and Maple Leaf falls within a previously established category. In light of this, a full duty of care analysis had to be undertaken, which is precisely what the Court of Appeal did.

ii. Applying the Duty of Care Analysis

42. The thrust of the Applicant’s second branch of argument appears to be that the duty of care analysis applied to a claim for negligent supply of defective products differs from the duty of care analysis that is applied to other negligence claims. There is no basis for this proposition nor any principled reason why the overarching duty of care analysis clarified by this Court in Livent would not also apply to a claim for negligent supply of defective goods.

31 Livent, para. 28 - 13 -

43. Indeed, this Court in Winnipeg Condominium points out that the appropriate test to be used regarding the recoverability of economic loss and the recoverability of the cost for repairing dangerous defects is the two step approach set out in Anns.32 There is no suggestion by the Applicant that decisions since Winnipeg Condominium have proposed that anything other than the Anns/Cooper test ought to be applied.

44. Additionally, this case does not require an analysis of the additional issues suggested by the Applicant such as whether pure economic losses are recoverable for a defective but not dangerous good, whether the danger of loss must be imminent, or whether a statutory or regulatory breach constitutes evidence of danger33. Such questions can only arise after the Applicant establishes that the scope of any proximate relationship between Maple Leaf and the Applicant extends to the latter’s claim for pure economic losses due to the removal of goods from the marketplace. This has not been done.

45. Having conducted a full Anns/Cooper analysis, the Court of Appeal in the within case came to a conclusion that the Applicant does not like but which is nonetheless correct in law. The Applicant’s disagreement with the conclusion does not make this a matter of national importance.

B. Applicant’s Question #ii – Claims for Reputational Harm

46. In leaving open the potential for damages in negligence for reputational harm (as opposed to such damages flowing from defamation) in Young v Bella34, this Court also held that such a claim still requires establishing proximity and foreseeability using the Anns/Cooper analysis. No claim for reputational harm in negligence can therefore succeed unless the principles of proximity and foreseeability are made out. In addition to this analysis being satisfied, the damages claimed must relate to more than just harm to the plaintiff’s reputation.35

32 Winnipeg Condo, para. 32 33 Factum para. 50 34 Young v Bella 2006 SCC 3 35 Young v Bella 2006 SCC 3, para. 56 - 14 -

47. In its factum, the Applicant in one breath acknowledges that this Court in Young v Bella set out proximity and foreseeability as prerequisites for a successful claim for reputational damage in negligence, and in the next suggests that this Honourable Court ought to provide guidance on how to assess whether a duty of care can exist for reputational damage. There is no suggestion by the Applicant or in the law that this Court’s ruling in Young v Bella fails to provide clarity on the test to be met, nor any suggestion that there are inconsistent rulings on this issue anywhere in the country.

48. To the extent that the Applicant suggests that reputational damages could be considered as personal injury damages, it ignores that it is a corporation that is incapable of sustaining personal injury. While the Ontario Court of Appeal has discussed the ability of a corporation to suffer injury to its ‘pocket’, this was done in the context of a defamation claim36 and does not, as is suggested by the Applicant, mean that reputational harm to a corporation or loss of goodwill is akin to damage to property. Rather, as accurately stated by the Appellate Division of the Supreme Court of New York, Second Department, a plaintiff who seeks to recover damages for loss of professional reputation and business goodwill suffers no personal injury or property damage.37 Any claim it has is one for pure economic loss.

49. Both cases relied upon by the Applicant to support its assertion that reputational damage suffered by supply chain intermediaries are recoverable are cases in which there was an actual contamination of the product in question (i.e. a mouse in milk and meat sold by the plaintiff which was rotten and caused a customer to become immediately ill in the store).38 That is not the case here, making those cases readily distinguishable. The reputational damages claimed by the Applicant are said to flow from the supply of defective products to others, from the public withdrawal of those products from the marketplace by way of the recalls, and from the risk that the products supplied to Mr. Sub might possibly cause harm.

36 Walker v. CFTO Ltd. [1987] O.J. No. 236 (ONCA) 37 Catalano v Kulzer, 305 A.D.2d 356 (2003) 759 N.Y.S.2d 159 38 Southwest Ice & Dairy v Faulkenberry 220 P.2d 257 (1950); Mazetti v Armour & Co. 75 Wash. 622, 135 P 633 (1913) - 15 -

50. In requesting that this Honourable Court provide guidance on the appropriate remedy for reasonably foreseeable reputational harm caused to a known and proximate class39, the Applicant once again incorrectly presumes that proximity and reasonable foreseeability have been made out; it glides past the true question of whether there is in fact a proximate relationship between the Applicant and Maple Leaf that would impose a duty upon Maple Leaf to protect the Applicant from damages for reputational harm. The Applicant also fails to address the fact that the damages it claims do not relate to more than just harm to its reputation, and fails to account for the public policy implications of such a duty being owed.

51. The decision in the Court below does not contradict the guidance provided by this Court regarding the availability of damages for reputational harm in negligence and does not pose an issue of national or public importance. The Ontario Court of Appeal in the within case made no comment about whether such a duty of care could ever be found to exist; it simply held that no such duty was found here. The appellate court’s determination that Maple Leaf did not owe the Applicant a duty to protect against reputational harm came after a finding that the scope of the proximate relationship (or any duty arising therefrom) between the parties did not extend to the Applicant’s claim for pure economic loss.40 There is no error in this.

C. Applicant’s Question #iii – Standard of Review of Motion Judge’s Findings of Fact

52. The Applicant submits that “a finding of proximity is a fundamentally fact-specific inquiry” and that “the first stage of the Anns/Cooper analysis in relation to finding a novel duty of care predominantly entails questions of fact.”41 This erroneously suggests that the proximity analysis requires a finding that Maple Leaf had knowledge of the Applicant and its use of the RTE Meats and nothing further. Contrary to the Applicant’s assertion, proximity is not a question of fact but rather a question of mixed fact and law.

39 Factum para. 53 40 ONCA Reasons para. 62-63, AR Tab 6 41 Factum para. 65 - 16 -

53. The Court of Appeal noted that factual findings by a motion judge are owed a “high level of deference”42. However, as is clear from Justice Fairburn’s statement that she did not “take issue with the motion judge’s factual findings”43, the appeal did not turn on a question of fact but on a question of law: that is, the failure of the Motion Judge to consider the scope of the proximate relationship and the scope of any such duty of care as part of the legal principles to be applied during the duty of care analysis.44 In ending her proximity analysis after pointing to facts suggesting Maple Leaf was aware of the franchisees and their use of the RTE Meats, the Motion Judge failed to consider the proper legal test of whether the duties claimed by the Applicant arise from the circumstances of the parties. This particular error is an error of law, and was thus properly reviewed by the Court of Appeal on the standard of correctness.

54. There is no error in the Court of Appeal’s analysis in this respect, nor any confusion inserted into the law. The Court of Appeal did not dismiss or overturn any findings of fact made by the Motion Judge; rather, it granted those findings the deference to which they were entitled and determined whether the correct legal principles were applied to that factual context.

55. This issue was also dealt with by this Honourable Court in the recent decision of Livent, in which it was clarified that “the proximity analysis not only determines the existence of a relationship of proximity, but also delineates the scope of the rights and duties which flow from that relationship”.45 As such, part of determining the existence of proximity requires looking at the scope of the relationship between the parties and the specific duty alleged.

56. The context within which a claim of a duty of care is being made must be taken into account, and includes consideration of the damages sought. At issue here are alleged damages for pure economic loss flowing from reputational harm when a product was removed from the marketplace to protect the public consumers. The question before the Court, then, was whether the scope of the rights and duties that may flow from the existence of a seemingly proximate relationship extends to include such a claim. This is not, as suggested by the Applicant,

42 ONCA Reasons para. 38, AR Tab 6 43 ONCA Reasons para. 62, AR Tab 6 44 ONCA Reasons para. 62, AR Tab 6 45 Livent para. 31, emphasis in original - 17 -

“distort[ing] the duty of care question into a causation and damages issue”46. Rather, such considerations are part of a robust proximity and foreseeability analysis, which serve to prevent concerns regarding indeterminate liability.47 The Motion Judge erred when she failed to undertake this analysis, which error was corrected by the Court of Appeal.

57. It is respectfully submitted that the Court of Appeal was correct in finding no duty of care was owed here. There is no reason of public or national importance that would require this Honourable Court to further adjudicate this issue.48

46 Factum para. 35 47 Livent, para. 44 and 68 48 ONCA Reasons para. 63, AR Tab 6 - 18 -

PART IV - COSTS AND ORDER SOUGHT

58. Maple Leaf asks that this application for leave to appeal be dismissed with costs payable to it by the Applicant.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 28th day of August, 2018

Counsel for the Respondents, Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc. - 19 -

PART V – TABLE OF AUTHORITIES

Case Para.

1688782 Ontario Inc. v Maple Leaf Foods Inc., 2016 ONSC 4233 25

376599 Alberta Inc. v. Tanshaw Products Inc., 2005 ABQB 300 36

Anns v. Merton London Borough Council [1978] A.C. 728 (H.L.) 2, 29, 37, 42, 44, 45

Catalano v Kulzer, 305 A.D.2d 356 (2003) 759 N.Y.S.2d 159 47

Cooper v. Hobart [2001] 3 S.C.R. 537 29, 32, 37, 42, 44, 45

Country Style Food Services Inc. v. 1304271 Ontario Ltd. 2005 CanLII 36 23214 (ONCA)

Deloitte & Touche v Livent Inc. (Receiver of) 2017 SCC 63 3, 27, 28, 30, 31, 38, 41, 54, 55

Mazetti v Armour & Co. 75 Wash. 622, 135 P 633 (1913) 48

Plas-Tex Canada Ltd. v. Dow Chemical of Canada Limited, 2004 ABCA 309 36

Southwest Ice & Dairy v Faulkenberry 220 P.2d 257 (1950) 48

Walker v. CFTO Ltd. [1987] O.J. No. 236 (ONCA) 47

Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 32, 34, 35, 36, [1995] 1 SCR 85 37, 38, 39, 40, 42

Young v Bella 2006 SCC 3 45, 46

- 20 -

PART VI – STATUTORY AUTHORITIES

Supreme Court Act, RSC 1985, c S-26 Loi sur la Cour suprême (L.R.C. (1985), ch. S- 26)

Appeals with leave of Supreme Court Appel avec l’autorisation de la Cour

40 (1) Subject to subsection (3), an appeal lies 40 (1) Sous réserve du paragraphe (3), il peut to the Supreme Court from any final or other être interjeté appel devant la Cour de tout judgment of the Federal Court of Appeal or of jugement, définitif ou autre, rendu par la Cour the highest court of final resort in a province, d’appel fédérale ou par le plus haut tribunal de or a judge thereof, in which judgment can be dernier ressort habilité, dans une province, à had in the particular case sought to be juger l’affaire en question, ou par l’un des juges appealed to the Supreme Court, whether or de ces juridictions inférieures, que l’autorisation not leave to appeal to the Supreme Court has d’en appeler à la Cour ait ou non été refusée par been refused by any other court, where, with une autre juridiction, lorsque la Cour estime, respect to the particular case sought to be compte tenu de l’importance de l’affaire pour le appealed, the Supreme Court is of the opinion public, ou de l’importance des questions de that any question involved therein is, by droit ou des questions mixtes de droit et de fait reason of its public importance or the qu’elle comporte, ou de sa nature ou importance importance of any issue of law or any issue of à tout égard, qu’elle devrait en être saisie et mixed law and fact involved in that question, lorsqu’elle accorde en conséquence one that ought to be decided by the Supreme l’autorisation d’en appeler. Court or is, for any other reason, of such a … nature or significance as to warrant decision by it, and leave to appeal from that judgment is accordingly granted by the Supreme Court.

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