1688782 Ontario Inc. Appellant v. Maple Leaf Foods Inc. and, 2020 SCC 35

SUPREME COURT OF CANADA Citation: 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, [2020] 3 S.C.R. 504 Appeal Heard: October 15, 2019 Judgment Rendered: November 6, 2020 Docket: 38187 Between: 1688782 Ontario Inc. Appellant and Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc. Respondents Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.

Joint Reasons for Judgment: (paras. 1 to 96) Dissenting Reasons: (paras. 97 to 168) Brown and Martin JJ. (Moldaver, Côté and Rowe JJ. concurring) Karakatsanis J. (Wagner C.J. and Abella and Kasirer JJ. concurring) 1688782 Ontario Inc. Appellant v. Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc. Respondents Indexed as: 1688782 Ontario Inc. v. Maple Leaf Foods Inc.

2020 SCC 35 File No.: 38187. 2019: October 15; 2020: November 6.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ. on appeal from the court of appeal for ontario Torts — Negligence — Duty of care — Pure economic loss — Negligent misrepresentation or performance of service — Negligent supply of shoddy goods or structures — Proximity — Listeria outbreak at plant of exclusive meat supplier resulting in recall of meat products used by restaurant chain franchisees and causing them economic loss — Franchisees not in contractual privity with supplier but bound to purchase meat products exclusively from it through chain of indirect contracts — Whether supplier owed duty of care to franchisees such that economic losses are recoverable in tort.

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. Held (Wagner C.J. and Abella, Karakatsanis and Kasirer JJ . dissenting ): The appeal should be dismissed. Per Moldaver, Côté, Brown, Rowe and Martin JJ.: Maple Leaf does not owe a duty of care to the franchisees in respect of these matters. Though the common law readily imposes liability for negligent interference with and injury to the rights in bodily integrity, mental health and property, it has been slow to accord protection to purely economic interests.

Pure economic loss may be recoverable in certain circumstances, but there is no general right in tort protecting against the negligent or intentional infliction of pure economic loss. Pure economic loss is economic loss that is unconnected to a physical or mental injury to the plaintiff’s person, or physical damage to property. It is distinct from consequential economic loss, being economic loss that results from damage to the plaintiff’s rights, such as wage losses or costs of care incurred by someone injured.

To recover for any type of negligently caused loss, a plaintiff must prove all the elements of the tort of negligence: (1) that the defendant owed the plaintiff a duty of care; (2) that the defendant’s conduct breached the standard of care; (3) that the plaintiff sustained damage; and (4) that the damage was caused, in fact and in law, by the defendant’s breach. To satisfy the element of damage, the loss sought to be recovered must be the result of an interference with a legally cognizable right.

The current categories of pure economic loss between private parties are: (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. However, a duty of care cannot be established by showing that a claim fits within one of these categories, as they are but mere analytical tools.

Invoking a category offers no substitute for the necessary examination that must take place into whether the parties were at the time of the loss in a sufficiently proximate relationship. Proximity is and remains the controlling concept. In Livent , cases of negligent misrepresentation and negligent performance of a service were brought into accord with the duty of care framework laid out in Anns v. London Borough of Merton , [1977] 2 All E.R. 492 , and later refined in Cooper v. Hobart , 2001 SCC 79 , [2001] 3 S.C.R. 537.

Previously, the duty analysis grounded a prima facie duty of care on mere foreseeability of injury. Cooper signalled a shift from that test by establishing the requirements of both proximity of relationship and foreseeability of injury. Foreseeability alone was deemed to be insufficient, as a duty arises only where a relationship of proximity obtains. Duty in tort law is a general notion describing a class or type of case, not a particular fact situation. In particular, the inquiry into reasonable foreseeability of injuries asks whether the type of injury to the relevant class of persons could have been foreseen.

As such, each component of the Anns/ Cooper analysis supporting a prima facie duty raises questions of law reviewable under the correctness standard. In cases of negligent misrepresentation or performance of a service, two factors are determinative of whether proximity is established: the defendant’s undertaking, and the plaintiff’s reliance. The proximate relationship is formed when the defendant undertakes responsibility which invites reasonable and detrimental reliance by the plaintiff upon the defendant for that purpose.

It is the intended effect of the defendant’s undertaking upon the plaintiff’s autonomy that brings the defendant into a relationship of proximity with the plaintiff. Where that effect works to the plaintiff’s detriment, it is a wrong to the plaintiff entitling it to its pre-reliance circumstance. But that entitlement operates only so far as the undertaking goes. Any reliance on the part of the plaintiff which falls outside of the scope of the undertaking falls outside the scope of the proximate relationship.

That is because reliance that exceeds the purpose of the defendant’s undertaking is not reasonable, and therefore not foreseeable. In the present case, the undertaking by Maple

Leaf to provide ready-to-eat meats fit for human consumption was made to consumers with the purpose of assuring them that theirinterests were being kept in mind, and not to commercial intermediaries such as the franchisees. The business interests of the franchiseeslie outside the scope and purpose of the undertaking. The parameters established in Winnipeg Condominium Corporation No. 36 v.

Bird Construction Co., (SCC), [1995] 1 S.C.R. 85, recognize that recovery for economic loss in cases of negligent supply of shoddy goods or structures isfounded upon the defendant’s negligent interference with a right to be free from injury to one’s person or property. A breach of the dutylaid out in Winnipeg Condominium exposes the defendant to liability for the cost of averting a real and substantial danger, but not ofrepairing a defect. The duty is based on the reasonable foreseeability of injury to other persons and property in the community, and thepresence of danger is the linchpin of the analysis.

Shoddy products, as opposed to dangerous ones, raise different questions which arebetter channelled through the law of contract. The potential injury to persons or property grounds not only the duty but also one’sentitlement to the cost of putting the good or structure back into a non-dangerous state. Allowing recovery exceeding the costs associatedwith removing the danger goes beyond what is necessary to safeguard the right protected. The Winnipeg Condominium liability ruleapplies to products other than building structures, but in such cases the duty is narrow.

What a plaintiff can recover will ultimately beconfined by the duty’s concern for averting danger, and will be determined by the feasibility of discarding the thing posing a danger. Inassessing the possibility of discarding the thing, the plaintiff must show that it is effectively bereft of reasonable options. When appliedto goods, such cases will be rare. Here, any danger posed by the supply of ready-to-eat meats could be a danger only to the ultimateconsumer, and not to the franchisees.

Further, while the ready-to-eat meats may have posed a real and substantial danger to consumerswhen they were manufactured, any such danger evaporated when they were recalled and destroyed. Developments to the law of negligence signify that claims under Winnipeg Condominium must now attend to an inquiry intothe requisite element of proximity.

Proximity informs the foreseeability inquiry and should be considered first, as the considerations thatsupport a finding of proximity also limit the type of injury that may be reasonably foreseen to result from the defendant’s negligence.Assessing proximity proceeds in two steps and requires asking whether, in light of the nature of the relationship at issue, the parties arein 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.

Thecourt must first determine whether proximity can be made out by reference to an established or analogous category of proximaterelationship. At this stage, the particular factors which justified recognizing that particular category should be scrutinized. As betweenparties to a relationship, some acts or omissions might amount to a breach of duty, while others will not. If the court determines thatproximity cannot be based on an established or analogous category, it must then conduct a full proximity analysis.

In so doing, allrelevant factors present in the relationship must be examined, including expectations, representations, reliance, and the property or otherinterests involved. Under this step, the fact that the parties could have protected their interests under contract is a crucial consideration.Contractual silence will not automatically foreclose the imposition of a duty of care, but courts must be careful not to disrupt theallocations of risk reflected in relevant contractual arrangements.

In the present case, proximity cannot be established by reference to a recognized category of proximate relationship, nor byconducting a full proximity analysis. Though the franchise agreement worked a vulnerability upon the franchisees, it did not have theeffect of establishing a proximate relationship between them and Maple Leaf. The franchisees were not consumers, but commercial actorswhose choice to enter into that arrangement substantially informed the expectations of their relationship with Maple Leaf.

As there is norelationship of proximity between Maple Leaf and the franchisees under the Winnipeg Condominium rule, there is also no proximity forthe purposes of recognizing a novel duty of care. Per Wagner C.J. and Abella, Karakatsanis and Kasirer JJ. (dissenting): There is agreement with the majority that thefranchisees’ claim does not fall within an existing category of economic loss or an established or analogous relationship of proximity.However, it is just and fair to impose a novel duty of care on Maple Leaf in the circumstances, and the appeal should therefore beallowed.

Historically, the common law did not allow for recovery of losses in negligence that were not consequent to physical injuryor property damage. Over the years, however, Canadian courts have repeatedly affirmed that there is no general bar against recovery ofeconomic loss for negligence. As a cause of action, claims concerning the recovery of economic loss are identical to any other claim innegligence in that the plaintiff must establish a duty, a breach, damage and causation. The proper approach to assessing whether a duty of care exists is the two-step inquiry established in Anns and adjusted inCooper.

If foreseeability and proximity are established at the first stage, a prima facie duty of care arises and the court considers whetherany residual policy considerations negate that duty at the second stage. Where a case falls within or is analogous to a previouslyrecognized category of proximity, and reasonable foreseeability is also established, then a prima facie duty may be found without a fullanalysis. While specific types of economic losses have been identified, it is the duty of care and not the category of economic loss thatdictates whether economic loss is recoverable in negligence.

The existing categories can act as analytical tools, but the scope ofallowable economic loss is not limited to them. In cases engaging a novel relationship and requiring a full Anns/Cooper analysis, courtsshould be attentive to the specific circumstances of the case, as the traditional policy concerns may not always arise. The core inquiry isthe two-step analysis, responsive to the facts at hand. In the present case, the franchisees’ claim engages novel issues and a different set of policy considerations that should beconsidered through a novel duty of care analysis.

The usual indication of proximity is foreseeability, and this can be a useful startingpoint. Assessing proximity first may be helpful in cases of negligent misrepresentation, but this will not always be the case for othertypes of tort claims. The reasonable foreseeability inquiry requires the court to ask whether the type of injury to the plaintiff, or to a classof persons to which the plaintiff belongs, was reasonably foreseeable to someone in the defendant’s position.

It was foreseeable that thefranchisees would be identified as a public-facing retailer of potentially tainted meats while the meats posed a real danger to publichealth. Reasonable foreseeability of harm must be supplemented by proximity. In assessing proximity, the overarching question iswhether 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. The factors to assess that relationship are diverse and depend on the circumstances of each case, but include theexpectations, representations, reliance, and the property or other interests involved. In the present case, there was a proximaterelationship between Maple Leaf and the franchisees such that Maple Leaf was under an obligation to be mindful of the franchisees’interests. It was clearly contemplated by the partnership agreement that the franchisees would be using and selling Maple Leaf products,and that they could enter into direct contact with Maple Leaf.

Unlike other retailers of Maple Leaf products, the franchisees were boundto use Maple Leaf meats exclusively and were in a business that centred on such meats, placing them in a particularly dependentrelationship. Thus, Maple Leaf established a close relationship with the franchisees. In cases involving pure economic loss, the contractual matrix linking the parties can be an important factor in finding a lackof proximity. When considering whether a plaintiff was able to contractually protect itself from the types of economic loss claimed, arealistic approach must be taken.

An overly formalistic appeal to protection through contract risks failing to take into account the parties’actual circumstances, including their commercial sophistication and bargaining power. In the case at bar, the prospect of the franchiseesprotecting themselves by contract was illusory, placing them in a particularly dependent and vulnerable relationship with Maple Leaf. Farfrom negating proximity between Maple Leaf and the franchisees, the contractual matrix strengthens it.

In the context of this close and direct relationship, Maple Leaf was under a duty to take reasonable care not to place unsafegoods into the market that could cause economic loss to the franchisees as a result of reasonable consumer response to the health riskposed by those goods. Subject to the other requirements of negligence being met, it is fair and just to hold Maple Leaf responsible for thefranchisees’ direct economic consequences of being associated with unsafe Maple Leaf products while they posed a danger to consumerhealth.

None of the residual policy considerations — that is, the risk of a negative impact on the marketplace by raising the spectre ofindeterminate liability for manufacturers or of chilling effects on manufacturers issuing voluntary recalls — are sufficiently persuasive tooust the prima facie duty of care on Maple Leaf. Cases Cited By Brown and Martin JJ. Applied: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855; distinguished: Plas-TexCanada Ltd. v. Dow Chemical of Canada Ltd., 2004 ABCA 309, 357 A.R. 139; 376599 Alberta Inc. v.

Tanshaw Products Inc., 2005ABQB 300, 379 A.R. 1; Country Style Food Services Inc. v. 1304271 Ontario Ltd. (2005), (ON CA), 200 O.A.C.172; considered: Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., (SCC), [1995] 1 S.C.R. 85;Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737; referred to: Cromane Seafoods Ltd. v. Minister for Agriculture,[2016] IESC 6, [2017] 1 I.R. 119; Anns v. London Borough of Merton, [1977] 2 All E.R. 492; Cooper v. Hobart, 2001 SCC 79, [2001] 3S.C.R. 537; Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860; D’Amato v.

Badger, (SCC), [1996] 2S.C.R. 1071; Saadati v. Moorhead, 2017 SCC 28, [2017] 1 S.C.R. 543; Palsgraf v. Long Island Railroad Co., 162 N.E. 99 (1928);Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263; Donoghue v. Stevenson, (FOREP), [1932] A.C. 562;A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R. 177; Mogul Steamship Company v. McGregor, Gow & Co.(1889), 23 Q.B.D. 598, aff’d [1892] A.C. 25; Kripps v. Touche Ross & Co. (1992), (BC CA), 94 D.L.R. (4th) 284;Canadian National Railway Co. v.

Norsk Pacific Steamship Co., (SCC), [1992] 1 S.C.R. 1021; Bow Valley Husky(Bermuda) Ltd. v. Saint John Shipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210; Dorset Yacht Co. v. Home Office, [1970]A.C. 1004; Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643; Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2S.C.R. 114; Galaske v. O’Donnell, (SCC), [1994] 1 S.C.R. 670; Rankin (Rankin’s Garage & Sales) v. J.J., 2018 SCC19, [2018] 1 S.C.R. 587; Stewart v. Pettie, (SCC), [1995] 1 S.C.R. 131; Hill v. Hamilton-Wentworth Regional PoliceServices Board, 2007 SCC 41, [2007] 3 S.C.R. 129; Hercules Managements Ltd. v.

Ernst & Young, (SCC), [1997] 2S.C.R. 165; Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420; Clements v. Clements, 2012 SCC 32, [2012] 2S.C.R. 181; Ratych v. Bloomer, (SCC), [1990] 1 S.C.R. 940; Blacklaws v. 470433 Alberta Ltd., 2000 ABCA 175, 261A.R. 28; Morrison Steamship Co. v. Greystoke Castle (Cargo Owners), [1947] A.C. 265; Murphy v. Brentwood District Council, [1991]1 A.C. 398; Aktieselskabet Cuzco v. The Sucarseco, 294 U.S. 394 (1935); Hasegawa & Co. v. Pepsi Bottling Group (Canada) Co., 2002BCCA 324, 169 B.C.A.C. 261; Hughes v.

Sunbeam Corp. (Canada) Ltd. (2002), (ON CA), 61 O.R. (3d) 433; RivtowMarine Ltd. v. Washington Iron Works, (SCC), [1974] S.C.R. 1189; R. v. Bernard, (SCC), [1988]2 S.C.R. 833; Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653; Cardwell v. Perthen,2007 BCCA 313, 243 B.C.A.C. 135; Arora v. Whirlpool Canada LP, 2013 ONCA 657, 118 O.R. (3d) 113; Queen v. Cognos Inc., (SCC), [1993] 1 S.C.R. 87; Kamloops v. Nielson, (SCC), [1984] 2 S.C.R. 2. By Karakatsanis J. (dissenting) Anns v. Merton London Borough Council, [1978] A.C. 728; Deloitte & Touche v.

Livent Inc. (Receiver of), 2017 SCC 63,[2017] 2 S.C.R. 855; Cattle v. Stockton Waterworks (1875), L.R. 10 Q.B. 453; Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1964]A.C. 465; Rivtow Marine Ltd. v. Washington Iron Works, (SCC), [1974] S.C.R. 1189; Agnew-Surpass Shoe Stores Ltd. v.Cummer-Yonge Investments Ltd., (SCC), [1976] 2 S.C.R. 221; B.D.C. Ltd. v. Hofstrand Farms Ltd., (SCC), [1986] 1 S.C.R. 228; Canadian National Railway Co. v. Norsk Pacific Steamship Co., (SCC), [1992]1 S.C.R. 1021; Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., (SCC), [1995] 1 S.C.R. 85;D’Amato v.

Badger, (SCC), [1996] 2 S.C.R. 1071; Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860;Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537; Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737; Donoghue v.Stevenson, (FOREP), [1932] A.C. 562; Rankin (Rankin’s Garage & Sales) v. J.J., 2018 SCC 19, [2018] 1 S.C.R. 587;Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643; Hercules Managements Ltd. v. Ernst & Young, (SCC),[1997] 2 S.C.R. 165; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210;Addison Chevrolet Buick GMC Ltd. v.

General Motors of Canada Ltd., 2016 ONCA 324, 130 O.R. (3d) 161; Shelanu Inc. v. Print ThreeFranchising Corp. (2003), (ON CA), 64 O.R. (3d) 533; 2176693 Ontario Ltd. v. Cora Franchise Group Inc., 2015ONCA 152, 124 O.R. (3d) 776; Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118; Douez v. Facebook, Inc., 2017SCC 33, [2017] 1 S.C.R. 751; Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2 S.C.R. 114; Athey v. Leonati, (SCC), [1996] 3 S.C.R. 458; Janiak v. Ippolito, (SCC), [1985] 1 S.C.R. 146; British Columbia v. Canadian ForestProducts Ltd., 2004 SCC 38, [2004] 2 S.C.R. 74.

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APPEAL from a judgment of the Ontario Court of Appeal (Sharpe, Rouleau and Fairburn JJ.A.), 2018 ONCA 407 , 140 O.R. (3d) 481 , 425 D.L.R. (4th) 674 , 49 C.C.L.T. (4th) 28 , [2018] O.J. No. 2417 (QL) , 2018 CarswellOnt 12558 (WL Can.) , setting aside a decision of Leitch J. Appeal dismissed, Wagner C.J. and Abella, Karakatsanis and Kasirer JJ. dissenting. Earl A. Cherniak , Q.C. , Peter W. Kryworuk and Jacob R. W. Damstra , for the appellant. Elizabeth Bowker , Steven Stieber and Nicola Brankley , for the respondents. The judgment of Moldaver, Côté, Brown, Rowe and Martin was delivered by

Brown and Martin JJ. — I. Introduction [ 1 ] This appeal is brought by 1688782 Ontario Inc., a former franchisee of Mr. Submarine Limited (“Mr. Sub”) and the class representative of 424 other Mr. Sub franchisees (“appellant” or “Mr. Sub franchisees”). The appellant says that class members were affected by the decision of the respondents (collectively, “Maple Leaf Foods”) to recall meat products that had been processed in a Maple Leaf Foods factory in which a listeria outbreak had occurred.

Specifically, it says that they experienced a shortage of product for six to eight weeks causing economic loss and reputational injury due to their association with contaminated meat products.

By this class proceeding, the appellant advances claims in tort law against Maple Leaf Foods, seeking compensation for lost past and future sales, past and future profits, capital value of the franchises and goodwill. [ 2 ] 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. [ 3 ] Maple Leaf Foods says it owed no duty of care to Mr. Sub franchisees, and brought a motion for

summary judgment dismissing these claims. [ 4 ] The appellant successfully resisted

summary judgment before the motion judge at the Ontario Superior Court of Justice, but failed before the Court of Appeal for Ontario. In the Court of Appeal’s view, the motion judge’s decision to allow these claims to proceed could not stand in light of this Court’s decision in Deloitte & Touche v. Livent Inc. (Receiver of) , 2017 SCC 63 , [2017] 2 S.C.R. 855, which had been decided since the motion judge’s judgment in the appellant’s favour.

The Court of Appeal held that this disposed not only of the negligent misrepresentation claim, but also of the claim for negligent supply of dangerous or shoddy goods, since it followed from Livent “that the motion judge erred in her duty of care analysis” ( 2018 ONCA 407 , 140 O.R. (3d) 481, at para. 87 ). [ 5 ] For the reasons that follow, we would dismiss the appeal. Maple Leaf Foods does not owe a duty of care to Mr. Sub franchisees in respect of these matters. II. Background [ 6 ] As Clarke J. (as he then was) explained in Cromane Seafoods Ltd. v.

Minister for Agriculture , [2016] IESC 6, [2017] 1 I.R. 119, at para. 66 , like “chaos theory” in mathematics, “the true underlying difficulty [in the law of negligence] stems from the fact that we live in a highly interactive world where each of our fortunes are constantly affected, sometimes trivially, sometimes significantly, by decisions made or actions taken or avoided [by others]”. So it is in this case. As in most modern commercial arrangements of even modest complexity, the parties here operated through a multipartite arrangement comprising a chain of contracts ⸺ in this case a contract between Mr.

Sub and Mr. Sub franchisees that was typical of franchisor-franchisee relationships, and a contract of supply between Mr. Sub and Maple Leaf Foods. As we explain below, in the context of a claim brought in tort law as opposed to the law of contract, these are significant considerations. [ 7 ] More particularly, at the material time, the relationship between Mr. Sub and its franchisees was governed by the Franchisee Renewal Agreement, dated February 1, 2006 (“franchise agreement”) (A.R., vol. II, p. 89). [ 8 ] The relationship between Mr.

Sub and Maple Leaf Foods was governed by an exclusive supply agreement — pursuant to which Maple Leaf Foods was made the exclusive supplier of 14 core Mr. Sub menu items: ready-to-eat (“RTE”) meats served in all Mr. Sub restaurants (“partnership agreement”, signed December 12, 2005, A.R., vol. II, at p. 12). In order to give effect to this exclusive supply arrangement, the franchise agreement between Mr. Sub and its franchisees required them to purchase RTE meats produced exclusively by Maple Leaf Foods (franchise agreement, art. 6.2). This was done not by way of direct dealings between Mr.

Sub franchisees and Maple Leaf Foods; instead, the franchisees placed an order with a distributor, which would in turn place an order with Maple Leaf Foods. No contractual relationship ever existed between the franchisees and Maple Leaf Foods. Rather, each was linked to the other indirectly, through separate contracts with Mr. Sub. [ 9 ] It is worth noting that, while their franchise agreement with Mr. Sub required Mr. Sub franchisees to purchase RTE meats exclusively from Maple Leaf Foods, the latter was under no obligation by the terms of its contract with Mr. Sub to supply .

Further, the franchise agreement also provided that the franchisees could not sue Mr. Sub for delays in supply of RTE meats. Nor could they look to alternative sources of supply without first seeking Mr. Sub’s permission (franchise agreement, art. 6.2). [ 10 ] On August 16, 2008, Maple Leaf Foods learned that one of its products had been found to contain listeria. It was required to recall that product, along with another. Several days later, it voluntarily recalled additional products, including two of the RTE meat products used by Mr.

Sub franchisees. (These products were immediately destroyed, and it is unknown whether they were actually contaminated.) In early September 2008, Maple Leaf Foods released Mr. Sub from the exclusive supply arrangement. By mid-September 2008, an alternate supplier had been selected. [ 11 ] There is no suggestion of wrongfulness in the decision to issue this voluntary recall. That said, it interrupted an important source of supply to the franchisees, leaving them without those products for a period of six to eight weeks. During that period,

the franchisees did not take advantage of the clause in the franchise agreement allowing them to seek Mr. Sub’s permission to find adifferent supplier. A. Ontario Superior Court of Justice, No. 60680CP (November 18, 2016), Leitch J. [12] The motion judge held that Maple Leaf Foods owed Mr. Sub franchisees a duty to supply a product fit for humanconsumption. In doing so, she accepted the appellant’s argument that she should be guided by decisions in which other courts hadrecognized this duty, citing Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd., 2004 ABCA 309, 357 A.R. 139; 376599 Alberta Inc.v.

Tanshaw Products Inc., 2005 ABQB 300, 379 A.R. 1, and Country Style Food Services Inc. v. 1304271 Ontario Ltd. (2005), (ON CA), 200 O.A.C. 172 (S.C.J. reasons, at para. 40 (A.R., vol. I, at p. 54)). Further, she found that the contaminatedRTE meats posed a “real and substantial danger”, described by this Court as grounding a duty of care in Winnipeg CondominiumCorporation No. 36 v. Bird Construction Co., (SCC), [1995] 1 S.C.R. 85 (para. 53 (A.R., vol. I, at p. 58)).

She alsoconcluded that a “special relationship” existed between the appellant and Maple Leaf Foods, grounded on foreseeability of reasonablereliance upon a representation (here, that the RTE meats were fit for human consumption), so as to ground a viable cause of action innegligent misrepresentation (para. 49 (A.R., vol. I, at p. 56)). [13] In an abundance of caution, however, in adjudicating the accompanying certification motion (2016 ONSC 4233), themotion judge conducted her own duty of care analysis as if this were a novel claim.

She recognized that this required her to apply thetraditional foreseeability-based test from Anns v. London Borough of Merton, [1977] 2 All E.R. 492 (H.L.), as refined by this Court inCooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537, so as to give greater prominence to the proximity, or “closeness and directness” ofthe relationship between the parties ⸺ a point which this Court has since confirmed in Livent, at paras. 25-31. Doing so led her toconclude the Anns/Cooper test was satisfied here. Mr.

Sub franchisees’ losses were foreseeable (S.C.J. certification reasons, at para. 61),and it was not plain and obvious that their relationship to Maple Leaf Foods was insufficiently proximate: “[the appellant and other Mr.Sub franchisees are] within a known and readily identifiable category of persons. [Maple Leaf Foods] supplied to [the appellant], anentity it had a close and direct relationship with as an exclusive supplier, a defective product dangerous to public health, knowing that theproduct would be offered for sale to consumers who could be injured from consuming the product thereby causing economic losses to[the franchisees]” (S.C.J. certification reasons, at para. 70).

No policy considerations negated or militated against liability. B. Court of Appeal for Ontario, 2018 ONCA 407, 140 O.R. (3d) 481, Sharpe, Rouleau and Fairburn JJ.A. [14] The Court of Appeal allowed Maple Leaf Foods’ appeal, and granted it

summary judgment. The case authoritiesrelied upon by the motion judge — Plas-Tex, Tanshaw and Country Style — were not truly analogous to the Mr. Sub franchisees’ claims(paras. 49 and 59), and the motion judge erred in finding that the facts in this case fell within a well-established category of duty tosupply a product fit for human consumption.

It was therefore necessary to review her conclusion under the Anns/Cooper frameworkregarding a novel duty of care (para. 59). [15] The Court of Appeal noted that the alleged damages are substantially the result of the recall and the consequentpublicity, including publicity of the illness and death of people who had eaten tainted meat (albeit not at a Mr.

Sub restaurant) (para. 65).To recognize a duty here “would constitute an unwarranted expansion of a duty owed to one class of plaintiffs”, the consumers, and“bootstrap” it so as to “extend it to the fundamentally different claim advanced by the franchisees” (para. 66). The motion judge’sconclusion regarding negligent misrepresentation is similarly unfounded. In concluding that the franchisees reasonably relied on MapleLeaf Foods’ representation that its meats were safe for human consumption, the motion judge failed to consider the scope of theproximate relationship between the parties (para. 80).

The purpose of Maple Leaf Foods’s undertaking of responsibility was not toprotect the business or reputational interests of the franchisees, but “to ensure that Mr. Sub customers who ate RTE meats would notbecome ill or die as [a] result of eating the meats” (ibid.). Accordingly, the loss suffered by the franchisees was not reasonablyforeseeable (para. 84). [16] Owing to what it saw as the motion judge’s erroneous duty of care analysis, the Court of Appeal did not considerwhether the losses were recoverable as a consequence of the negligent supply of a dangerous or shoddy product (para. 87). III. Analysis A.

Pure Economic Loss in Negligence Law [17] As the lower courts recognized, the claims of the appellant and other Mr. Sub franchisees are for pure economic loss,in the form of lost profits, sales, capital value and goodwill. Pure economic loss is economic loss that is unconnected to a physical ormental injury to the plaintiff’s person, or to physical damage to property (Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R.860, at para. 34; D’Amato v. Badger, (SCC), [1996] 2 S.C.R. 1071, at para. 13; Saadati v. Moorhead, 2017 SCC 28,[2017] 1 S.C.R. 543, at para. 23).

It is distinct, therefore, from consequential economic loss, being economic loss that results fromdamage to the plaintiff’s rights, such as wage losses or costs of care incurred by someone physically or mentally injured, or the value oflost production caused by damage to machinery, or lost sales caused by damage to delivery vehicles. [18] To recover for negligently caused loss, irrespective of the type of loss alleged, a plaintiff must prove all the elementsof the tort of negligence: (1) that the defendant owed the plaintiff a duty of care; (2) that the defendant’s conduct breached the standardof care; (3) that the plaintiff sustained damage; and (4) that the damage was caused, in fact and in law, by the defendant’s breach.

Tosatisfy the element of damage, the loss sought to be recovered must be the result of an interference with a legally cognizable right. AsCardozo C.J. explained in Palsgraf v. Long Island Railroad Co., 162 N.E. 99 (N.Y. 1928), “[n]egligence is not actionable unless itinvolves the invasion of a legally protected interest, the violation of a right” (p. 99; see also Odhavji Estate v. Woodhouse, 2003 SCC 69,[2003] 3 S.C.R. 263, at para. 45; Livent, at para. 30; R. Stevens, Torts and Rights (2007), at p. 24).

It is well established that the lawimposes liability for negligent interference with and injury to the rights in bodily integrity, mental health and property (Saadati, atpara. 23, citing A. Ripstein, Private Wrongs (2016), at pp. 87 and 252-53). Recovery for injuries to these rights is grounded in the duty ofcare recognized in Donoghue v. Stevenson, (FOREP), [1932] A.C. 562 (H.L.). [19] This explains why the common law has been slow to accord protection to purely economic interests. While this Court

has recognized that pure economic loss may be recoverable in certain circumstances, there is no general right, in tort, protecting againstthe negligent or intentional infliction of pure economic loss. For example, economic loss caused by ordinary marketplace competition isnot, without something more, actionable in negligence (A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R.177, at para. 31, citing Mogul Steamship Company v. McGregor, Gow & Co. (1889), 23 Q.B.D. 598 (C.A.), at p. 614, aff’d [1892] A.C.25 (H.L.)).

Such loss falls outside the scope of a plaintiff’s legal rights — the loss is damnum absque injuria and unrecoverable (E. J.Weinrib, “The Disintegration of Duty” (2006), 31 Adv. Q. 212, at p. 226; D. Nolan, “Rights, Damage and Loss” (2017), 37 Oxf. J. Leg.Stud. 255, at pp. 262-68). Indeed, the essential goal of competition is to attract more business, which may mean taking business awayfrom others. Absent a contractual or statutory entitlement, there is no right to a customer or to the quality of a bargain, let alone to amarket share. As Taylor J.A. wrote for the British Columbia Court of Appeal in Kripps v.

Touche Ross & Co. (1992), (BC CA), 94 D.L.R. (4th) 284, at p. 297: It seems possible that pure economic loss simpliciter accounts for the overwhelming majority of all loss suffered by oneperson as a foreseeable and proximate result of the acts or omissions of another . . . . This must necessarily be so in a free market forgoods and services, employment and investment, and the continuing struggle for property, promotion and profit. [20] Citing the work of Professor Feldthusen (B. Feldthusen, “Economic Loss in the Supreme Court of Canada: Yesterdayand Tomorrow” (1991), 17 Can. Bus. L.J. 356, at pp. 357-58; B.

Feldthusen, Economic Negligence: The Recovery of Pure EconomicLoss (2nd ed. 1989), at para. 200 (currently in its sixth edition)), this Court has applied a classificatory scheme that identifies fourcategories of pure economic loss that can arise between private parties (Canadian National Railway Co. v.

Norsk Pacific Steamship Co., (SCC), [1992] 1 S.C.R. 1021, at p. 1049; Winnipeg Condominium, at para. 12).[1] In Livent, the Court effectivelyreduced the categories to three, by its treatment of two of the previously stated categories ⸺ negligent misrepresentation, andnegligent performance of a service ⸺ as a single kind of pure economic loss. This made sense, because the considerations that informthe proximity analysis are identical for both.

In particular, the same two factors ⸺ the defendant’s undertaking, and the plaintiff’sreliance ⸺ are in such cases determinative of the proximity analysis (para. 30), upon which we will elaborate below. [21] 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 howthe loss occurs can, however, put strain on the analysis by obfuscating both fundamental differences and similarities among cases of pureeconomic 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 andwhether a reciprocal duty of care exists (Livent, at para. 30).

It is proximity, and not a template of how a loss factually occurred, thatremains 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). [22] Properly understood, then, these categories are simply “analytical tools” that “provide greater structure to a diverserange of factual situations . . . that raise similar . . . concerns” (Martel, at para. 45; Design Services, at para. 31).

Organizing cases in thisway was and is therefore done for ease of analysis in ensuring that courts treat like cases alike. The fact that a claim arises from aparticular kind of pure economic loss does not necessarily signify that such loss is recoverable.[2] Where the loss is recoverable,however, this Court has clarified that the decided cases within these categories should be regarded as reflecting particular kinds ofproximate relationships (Cooper, at para. 36; Livent, at paras. 26-27).

But to be clear, the invocation of a category, by itself, offers nosubstitute for the necessary examination that must take place “of the particular relationship at issue in each case” between the plaintiffand 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 thetime of the loss in a sufficiently proximate relationship.

Where they are, it may be because the relationship falls within a previouslyestablished 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 CanadaLtd., 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 fullAnns/Cooper analysis. [23] With respect, the appellant’s submissions reflect a misunderstanding of the significance of the categories of pureeconomic loss. The appellant argues that a duty of care in this case “is established through the application of two well-establishedcategories of recovery for pure economic loss [of] negligent misrepresentation or negligent performance of a service, and negligentsupply of dangerous goods” (A.F., at para. 50).

Again, a duty of care cannot be established by showing that a claim fits within a categoryof pure economic loss. It is necessary to determine whether the appellant’s alleged loss represents an injury to a right that can be thesubject of recovery in tort law and possesses the requisite factors to support a finding of proximity under that category. We repeat: themanner in which pure economic loss is said to have occurred or how that loss has been catalogued within the categories of pure economicloss does not signify that the defendant whose negligence caused that loss owes the plaintiff a duty of care.

The relevant “category” forthe purpose of supporting a duty of care is that of proximity of relationship. Meaning, what is necessary to support a duty of care is thatthe relationship between a plaintiff and a defendant bear the requisite closeness and directness, such that it falls within a previouslyestablished category of proximity or is analogous to one (Livent, at para. 26; see also Childs, at para. 15; Mustapha, at para. 5). B. Standard of Review [24] Maple Leaf Foods argues that the standard of review to be applied to a motion judge’s decision on duty of care is thatof 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, (SCC), [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 apparentwhen one considers that the existence of a duty of care is a preliminary question, typically answered when “the facts are not yet known toa sufficiently specific degree because breach of the standard of care and causation have not been addressed” (Linden et al., at §7.3).

Itfollows that each component of the Anns/Cooper analysis supporting a prima facie duty ⸺ proximity of relationship and reasonableforeseeability of injury (Livent, at paras. 20 and 23) ⸺ raises questions of law (Klar and Jefferies, at pp. 210-11 and fn. 60). [25] The implications of this standard of review for the duty analysis, and particularly for its constituent inquiry intoreasonable foreseeability of injury, was considered by this Court in Stewart v.

Pettie, (SCC), [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 endlessseries of details of conduct. “Duty” is more appropriately reserved for the problem of whether the relation between the parties (likemanufacturer and consumer or occupier and trespasser) warrants the imposition upon one of an obligation of care for the benefit of theother, 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 tomeasure the defendant’s conduct . . . . [Emphasis added; para. 32.] [26] 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 etal., at §7.4; Galaske, at p. 691).

And again, this question is a question of law. C. The Appellant’s Claims [27] As we have already recounted, the appellant says that it and other Mr. Sub franchisees are owed a duty of care by themanufacturer Maple Leaf to provide RTE meats fit for consumption, such that they may recover lost profits, sales, capital value andgoodwill when their supply is disrupted by the recall of the meat products. [28] Respectfully, we have found it somewhat difficult to pinpoint with precision the legal bases on which the appellantgrounds this duty.

In the circumstances, and to treat as fairly as possible the appellant’s claim, we first of all assume that its argumentsare concerned with categories of proximate relationships and not categories of pure economic loss.

The appellant appears to propose, aswe have also recounted, three different pathways to impressing Maple Leaf Foods with a duty of care: first, under the principles of Liventgoverning negligent misrepresentation and negligent performance of a service; secondly, under the parameters of the duty of carerecognized in Winnipeg Condominium — and subsequent cases — involving the negligent supply of shoddy goods or structures; andthirdly, based on the recognition of a novel duty of care.

(1) Negligent Misrepresentation or Performance of a Service [29] In Livent, this Court restated the analytical framework governing cases of negligent misrepresentation or performanceof a service. In doing so, it brought the analytical approach in such cases into accord with the refined Anns/Cooper framework laid out inCooper. Previously, the duty analysis had been stated in Hercules Managements Ltd. v. Ernst & Young, (SCC), [1997]2 S.C.R. 165, which grounded a prima facie duty of care on mere foreseeability of injury.

Cooper, however, “signalled a shift from th[at]test” (Livent, at para. 22; see also para. 23). [30] Under the Anns/Cooper framework, a prima facie duty of care is established by the conjunction of proximity ofrelationship and foreseeability of injury. As this Court affirmed, “foreseeability alone” is insufficient to ground the existence of a duty ofcare.

Rather, a duty arises only where a relationship of “proximity” obtains (Cooper, at paras. 22 and 30-32; see also Livent, at para. 23).Whether a proximate relationship exists between two parties at large, or inheres only for particular purposes or in relation to particularactions, will depend on the nature of the relationships at issue (Livent, at para. 27). It may also depend on the nature of the particularkind of pure economic loss alleged. [31] A party may seek “to base a finding of proximity upon a previously established or analogous category” (Livent, atpara. 28).

But where no established proximate relationship can be identified, courts must undertake a full proximity analysis in order todetermine whether the close and direct relationship ⸺ which this Court has repeatedly affirmed to be the hallmark of the common lawduty of care ⸺ exists in the circumstances of the case (ibid., at para. 29; Saadati, at para. 24; Cooper, at para. 32). [32] In cases of negligent misrepresentation or performance of a service, two factors are determinative of whetherproximity is established: the defendant’s undertaking, and the plaintiff’s reliance (Livent, at para. 30).

Specifically, “[w]here thedefendant undertakes to provide a representation or service in circumstances that invite the plaintiff’s reasonable reliance, the defendantbecomes obligated to take reasonable care”, and “the plaintiff has a right to rely on the defendant’s undertaking to do so” (ibid.). “Thesecorollary rights and obligations”, the Court added, “create a relationship of proximity” (ibid.). In other words, the proximate relationshipis formed when the defendant undertakes responsibility which invites reasonable and detrimental reliance by the plaintiff upon thedefendant for that purpose (P.

Benson, “Should White v Jones Represent Canadian Law: A Return to First Principles”, in J. W. Neyers,E. Chamberlain and S. G. A. Pitel, eds., Emerging Issues in Tort Law (2007), 141, at p. 166). [33] Taking Cooper and Livent together, then, this Court has emphasized the requirement of proximity within the dutyanalysis, and has tied that requirement in cases of negligent misrepresentation or performance of a service to the defendant’s undertakingof responsibility and its inducement of reasonable and detrimental reliance in the plaintiff.

Framing the analysis in this manner alsoilluminates the legal interest being protected and, therefore, the right sought to be vindicated by such claims. When a defendant

undertakes to represent a state of affairs or to otherwise do something, it assumes the task of doing so reasonably, thereby manifesting an intention to induce the plaintiff’s reliance upon the defendant’s exercise of reasonable care in carrying out the task. And where the inducement has that intended effect ⸺ that is, where the plaintiff reasonably relies, it alters its position, possibly foregoing alternative and more beneficial courses of action that were available at the time of the inducement.

That is, the plaintiff may show that the defendant’s inducement caused the plaintiff to relinquish its pre-reliance position and suffer economic detriment as a consequence. [ 34 ] 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). [ 35 ] That entitlement, however, operates only so far as the undertaking goes. As this Court cautioned in Livent , “[r]ights, like duties, are . . . not limitless.

Any reliance on the part of the plaintiff which falls outside of the scope of the defendant’s undertaking of responsibility ⸺ that is, of the purpose for which the representation was made or the service was undertaken ⸺ necessarily falls outside the scope of the proximate relationship and, therefore, of the defendant’s duty of care” (para. 31, citing Weinrib, and A. Beever, Rediscovering the Law of Negligence (2007), at pp. 293-94). This “end and aim” rule precludes imposing liability upon a defendant for loss arising where the plaintiff’s reliance falls outside the purpose of the defendant’s undertaking.

Livent makes clear, then, that considerations of undertaking and reliance furnish not only a principled basis for drawing the line in cases of negligent misrepresentation or performance of a service between duty and no-duty, but also for delineating the scope of the duty in particular cases, based upon the purpose for which the defendant undertakes responsibility. Reliance that exceeds the purpose of the defendant’s undertaking is not reasonable, and therefore not foreseeable (para. 35). [ 36 ] It follows from the foregoing that the allegations advanced on behalf of Mr.

Sub franchisees of negligent misrepresentation require us to direct our attention to whether an undertaking of responsibility on the part of Maple Leaf Foods had the effect of inducing foreseeable, reasonable and detrimental reliance on the part of Mr. Sub franchisees. [ 37 ] 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). [ 38 ] But as we have also canvassed (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). [ 39 ] 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. [ 40 ] 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 (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.

(2) Negligent Supply of Shoddy Goods or Structures (

a) The Correlative Right and Duty of Care in Winnipeg Condominium [ 41 ] Until this appeal, the sole occasion on which this Court has considered a claim for pure economic loss arising from the negligent supply of shoddy goods or structures is its judgment in Winnipeg Condominium . It is therefore worth carefully reviewing the liability rule that it established, with attention to the nature of the legal right and correlative duty of care on which it is founded.

Further, and as we will explain, subsequent developments to the law of negligence in Cooper and Livent signify that claims under Winnipeg Condominium must now account for the requisite element of proximity. [ 42 ] In Winnipeg Condominium , the plaintiff condominium corporation sued the defendant builder for the cost of repairing exterior four-inch thick stone cladding on its 15-storey building. Approximately eight years after construction, the board of directors of the condominium corporation observed that some of the cladding had broken away and that cracks were developing in the remaining cladding.

They retained engineers, who recommended minor remedial work, which was done. Seven years later, a storey-high

section of

the cladding fell from the ninth-storey level of the building to the ground below. Again, engineers were retained and they recommendedremoval and replacement of the cladding at substantial cost, for which the condominium corporation sued the builder.

Not being inprivity, the claim was brought in tort, raising the issue of whether the builder owed a duty to the condominium owners, as “subsequentpurchasers” (meaning that they came after the original purchaser on the distributive chain). [43] On that question, and for the Court, La Forest J. recognized a duty of care based on the reasonable foreseeability ofinjury to “other persons and property in the community” (para. 21). In doing so, he posited that the presence of danger was the linchpinof the analysis.

As he emphasized, the building structure in this case was “not merely shoddy; it was dangerous” (para. 12 (emphasisadded)). Further, he added that “the degree of danger to persons and other property” created by the negligent construction is “acornerstone” of the analysis that must be undertaken in determining whether the cost of repair is recoverable in tort (ibid. (emphasisadded)).

As opposed to merely substandard construction, only those defects that posed “a real and substantial danger to the occupants ofthe building” and had “the capacity to cause serious damage to other persons and property in the community” were actionable (para. 21).Returning to this point later in his reasons, he reiterated: . . . the facts of the present case . . . fall squarely within the category of what I would define as a “real and substantialdanger”.

It is clear from the available facts that the masonry work . . . was in a sufficiently poor state to constitute a real and substantialdanger to inhabitants of the building and to passers-by. The piece of cladding that fell from the building was a storey high, was made of4” thick Tyndall stone, and dropped nine storeys.

Had this cladding landed on a person or on other property, it would unquestionablyhave caused serious injury or damage. [Emphasis added; para. 38.] Given the “reasonable likelihood that a defect in a building will cause injury to its inhabitants . . . if it poses a real and substantialdanger”, the Court held that a builder owed a duty to take reasonable care in the design or construction of building structures to avoidcreating a real and substantial danger to health and safety (para. 36). [44] At first glance, the liability rule in Winnipeg Condominium may appear curious, since it appears as though liability isimposed not in respect of damage that has occurred to the plaintiff’s rights, but in respect of a real and substantial danger thereto.

As ageneral principle, there is no liability for negligence “in the air”, for “[t]here is no right to be free from the prospect of damage” but“only a right not to suffer damage that results from exposure to unreasonable risk” (Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19,[2020] 2 S.C.R. 420, at para. 33 (emphasis in original); Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at para. 16; Ratych v.Bloomer, (SCC), [1990] 1 S.C.R. 940, at p. 964). [45] We maintain, however, that, properly understood, the liability rule in Winnipeg Condominium is consonant with thatprinciple.

In that case, the Court was clear about the source of the right to which the duty of care corresponds: the plaintiff’s rights inperson or property (paras. 21, 36 and 42).[3] Where a design or construction defect poses a real and substantial danger ⸺ that is, whatFraser C.J.A. and Côté J.A. described in Blacklaws v. 470433 Alberta Ltd., 2000 ABCA 175, 261 A.R. 28, at para. 62, as “imminent risk”of “physical harm to the plaintiffs or their chattels” or property ⸺ and the danger “would unquestionably have caused serious injury ordamage” if realized, given the “reasonable likelihood that a defect . . . will cause injury to its inhabitants”, it makes little differencewhether the plaintiff recovers for an injury actually suffered or for expenditures incurred in preventing the injury from occurring(Winnipeg Condominium, at paras. 36 and 38; see also Morrison Steamship Co. v.

Greystoke Castle (Cargo Owners), [1947] A.C. 265(H.L.), at p. 280; Murphy v. Brentwood District Council, [1991] 1 A.C. 398 (H.L.), at p. 488, per Lord Oliver of Aylmerton). Thus, theeconomic loss incurred to avert the danger “is analogized to physical injury to the plaintiff’s person or property” (P. Benson, “The Basisfor Excluding Liability for Economic Loss in Tort Law”, in D. G. Owen, ed., Philosophical Foundations of Tort Law (1995), 427, atp. 429).

The point is that the law views the plaintiff as having sustained actual injury to its right in person or property because of thenecessity of taking measures to put itself or its other property “outside the ambit of perceived danger” (ibid., at p. 440; see alsoAktieselskabet Cuzco v. The Sucarseco, 294 U.S. 394 (1935), at p. 404). [46] As we see it, then, recovery for the economic loss sustained in Winnipeg Condominium was founded upon the ideathat, in the eyes of the law, the defendant negligently interfered with rights in person or property.

We see this as having been La ForestJ.’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 dangerousdefect is discovered and the owner of the building wishes to mitigate the danger . . . .

In both cases, the duty in tort serves to protect thebodily 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. [47] 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 inbuilding structures and products.

But merely shoddy products, as opposed to dangerous products, raise different questions pertaining toissues such as implied conditions and warranties as to quality and fitness for purpose, and not of real and substantial threats to person orproperty (Winnipeg Condominium, at para. 42). In our view, those claims are better channelled through the law of contract, which is thetypical 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 rightprotected under tort law. As Laskin J.A. explained in Hughes v. Sunbeam Corp. (Canada) Ltd. (2002), (ON CA), 61O.R. (3d) 433 (C.A.), at para. 26, in identifying the limits of the duty, “compensation to repair a defective but not dangerous product willimprove the product’s quality but not its safety”.

Again, we observe that, absent a contractual or statutory entitlement, there is no right tothe quality of a bargain. [48] It follows that the normative basis for the duty not only limits its scope, but in doing so also furnishes a principledbasis for limiting the scope of recovery. As La Forest J. explained, the potential injury to persons or property grounds not only the dutybut 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 removingthe danger goes beyond what is necessary to safeguard the right to be free from injury caused to one’s person or property (see WinnipegCondominium, at para. 49). Like our colleague at para. 125, we note that, in making this point, La Forest J. relied on the dissentingreasons of Laskin J. (as he then was) in Rivtow Marine Ltd. v.

Washington Iron Works, (SCC), [1974] S.C.R. 1189. [49] We do agree with the appellant, however, that this same normative force of protecting physical integrity in the face ofa real and substantial danger can apply to products other than building structures ⸺ that is, to goods. That said, in applying theWinnipeg 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 canrecover, irrespective of whether the claim is in respect of a building structure or a good, will be confined by the duty’s concern foraverting danger.

The point is not to preserve the plaintiff’s continued use of a product; rather, recovery is for the cost of averting a realand substantial danger of “personal injury or damage to other property” (Winnipeg Condominium, at para. 35). [50] It follows that where it is feasible for the plaintiff to simply discard the defective product, the danger to the plaintiff’srights, along with the basis for recovery, falls away.

The significance of this point is perhaps best appreciated by recalling that, inWinnipeg 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 defectwhich would render it dangerous in use but which is discovered by the purchaser in time to avert any possibility of injury. The purchasermay 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: . . . it is based upon an unrealistic view of the choice faced by home owners in deciding whether to repair a dangerous defectin 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 ahome as a long term investment and few home owners, upon discovering a dangerous defect in the home, will choose to abandon or sellthe building rather than to repair the defect. Indeed, in most cases, the cost of fixing a defect in a house or building, within the reasonablelife of that house or building, will be far outweighed by the cost of replacing the house or buying a new one.

This was certainlydemonstrated in this case by the fact that the Condominium Corporation incurred costs of over $1.5 million in repairing the buildingrather than choosing to abandon or sell the building. [Emphasis added; para. 40.] [51] Whether, then, one is considering defects in a building structure or a good, it is the feasibility of discarding the thingas the means of averting the danger which will determine whether the plaintiff’s loss is recoverable.

We agree that few homeowners orowners of other kinds of building structures can reasonably remove the real and substantial danger posed by a defect by walking awayfrom the building structure. And we accept that, in Winnipeg Condominium, this Court held that, in such circumstances, no legallysignificant distinction could be drawn between the cost of removing the danger and the cost of repairing the defect or replacing thedefective component. No party has asked us to reconsider that holding and, in the absence of full submissions, we would not risk clarityand certainty in the law by doing so here (R. v.

Bernard, (SCC), [1988] 2 S.C.R. 833, at pp. 858-59; Canada (Minister ofCitizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 20). In our view, however, Lord Keith of Kinkel’sargument is more readily applicable in dealing with goods, and courts must be alive to this possibility.

We reiterate that a breach of theduty recognized in Winnipeg Condominium exposes the defendant to liability for the cost of averting a real and substantial danger, andnot of repairing a defect per se. [52] An instructive example of a dangerously defective good which could not be feasibly discarded is provided byPlas-Tex, where the defendant Dow Chemical sold polyethylene resin to the plaintiffs, knowing that it would be used in the constructionof 3,000 miles of pipeline (1,700 miles of which was buried underground) used to transport natural gas, and knowing that it wasdangerously defective (the resin tended to crack, allowing natural gas to escape, creating the risk of an explosion, and indeed had alreadycaused an explosion).

This dangerously defective product was so integrated with the plaintiffs’ pipeline operation (and with the pipelineitself) that repair was the only feasible option.

Indeed, discarding the pipeline without undertaking mitigation might well have increasedthe already real and substantial danger which Picard J.A. identified. [53] There will, of course, be other goods containing defects which present real and substantial dangers, and to which LaForest 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 witha dangerously defective home, be shown to be effectively bereft of reasonable options. When applied to goods, this describes the rarecase. [54] The foregoing kind of good stands in contrast to two other kinds of goods. First, and more commonly, there is thegood whose dangerous defect can realistically be addressed by discarding it. This will, we expect, apply to most defective consumergoods. 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 theplaintiff incurs a reasonably foreseeable cost in discarding the product ⸺ such as a regulatory disposal fee ⸺ that is recoverable as acost of removing the danger). [55] 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 possiblerecovery under this liability rule.

It must be remembered that, because the right protected by this liability rule is that in the physicalintegrity of person or property, recovery is confined to the cost of removing a real and substantial danger to that right ⸺ by, wherepossible, discarding it. Conversely, it does not extend to the diminution or loss of other interests that the appellant invokes here, such asbusiness goodwill, business reputation, sales, profits, capital value or replacement of the RTE meats. [56] We add this.

We find ourselves in respectful disagreement with our colleague’s view that Laskin J.’s dissentingreasons in Rivtow, “which were explicitly adopted in Winnipeg Condominium, at para. 36, suggest that additional economic losses maybe recoverable under this class of duty” (para. 125). This is significant, she explains, because it suggests that courts ought not to restrictrecovery 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

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