ONCA Sees Right Through Negligence Claim (and Chicken Sandwiches) in Subway Franchise Systems of Canada Inc. v Canadian Broadcasting Corporation

Last Monday, the Ontario Court of Appeal (“ONCA”) released two decisions back-to-back involving the Canadian Broadcasting Company’s (CBC) controversial investigative report on the chicken content of chicken sandwiches manufactured by Subway Franchise Systems of Canada Inc. This post focuses on Subway Franchise Systems of Canada Inc. v Canadian Broadcasting Corporation 2021 ONCA 25 [Subway].  The decision concerns itself with an appeal raised by Trent University (“Trent”), one of the defendants that Subway sued for negligent testing of the chicken sandwiches, negligent expression of the facts and defamation for their involvement in the CBC investigative report.

Much to Subway’s dismay, the ONCA ruled in favour of Trent and allowed their appeal, granting their motion to dismiss a part of Subway’s negligence claim against Trent under s. 137.1 of the Courts of Justice Act, RSO 1990, c C-43 [CJA]. This case is significant because it is the first to employ the Supreme Court of Canada’s (SCC) reasoning regarding anti-Strategic Litigation Against Public Participation (“SLAPP”) motions from 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22 [Pointes]. It is also more likely that this decision will be appealed than its partner decision because it eliminates a major avenue of recourse for Subway against Trent. 

Background

On February 24, 2017, the CBC aired an investigative report questioning the chicken content of chicken sandwiches in their show “Marketplace”. CBC had retained Trent to test samples of Subway’s sandwiches, as well as those of its competitors. Trent’s DNA tests revealed that Subway’s chicken sandwiches were 50% soy, contrary to Subway’s assertions that they contain 1% or less soy (Subway, para 16).

Following the Marketplace report, Subway brought an action against Trent for defamation and negligence. In response, Trent acted under s. 137.1 of the CJA to dismiss only the negligence claim, specifically as it pertains to the negligent expression (Subway, para 19). Trent argued that the negligence claim arose “on a matter related to the public interest” and that Subway could not meet the burden set out in s. 137.1(4) to avoid the claim from being dismissed (Subway, para 20). The other actions—the defamation and the negligent testing actions—had not been challenged.

The motion judge dismissed Trent’s s. 137.1 motion, holding that Subway’s claim against Trent was for negligence on the quality of “Trent’s laboratory testing, standards, and methodology, not the reporting of the results” (Subway, para 25). The motion judge proceeded to state that even if the claim was against an expression made by Trent, the negligence claim made by Subway would have sufficient merit to be sustained (Subway, para 27). However, the motion judge did not consider whether Subway satisfied the factors under s. 137.1(4) to prove that the harm they suffered from the moving party’s expression outweighed the public interest that could be harmed in protecting expression (Subway, para 26).

Reasoning

The appeal thus dealt with two issues: first, whether the negligence claim was one that arose from “an expression that relates to a matter of public interest” and second, if there were grounds to believe that the claim had substantial merit. The bench found that the negligence claim arose from an expression of public interest, but did not think the claim had merit to proceed, allowing Trent’s motion to dismiss Subway’s action.

The ONCA relied on the recent SCC decision in Pointes to state that the moving party—in this case, Trent—must meet the threshold requirement to benefit from s. 137.1(1) of the CJA. For a threshold requirement to be met, the defendant must establish that “(i) the proceeding arose from the defendant having done what the law seeks to encourage—express itself on a matter of public interest, and (ii) the proceeding might be litigation being used to unduly limit such expression” (Subway, para 32). Based on this threshold, the court concluded that the motion judge erred in finding a negligence claim arising from an expression as the same as a defamation-related tort (Subway, para 35).

Contrary to Subway’s argument that for a claim to meet the threshold the expression must be “the gravamen of the claim”, the court clarified that a claim that “arises from” an expression need not actually be concerning the expression and that there only needs to be “a nexus between them” (Subway, para 41; Pointes, para 102). Here, Trent had conducted the tests on Subway products “for the purpose of broadcasting conclusions” and Subway’s suit was concerned with what Trent had communicated about its tests (Subway, para 45). In other words, if the test results were never published, no lawsuit would have ensued. Moreover, the court adds that the expression is obviously a matter of public interest, since Trent’s testing is not merely about the DNA content of the chicken sandwiches as Subway alleges but about the chicken content in Subway sandwiches consumed by the broader public (Subway, para 46).

Finding that the Subway’s claim indeed arose from an expression on a matter of public interest, the ONCA continued to answer the question of whether Subway’s claim had substantial merit. The court writes that the test for substantial merit looks at whether a case has a “real prospect of success”; more specifically, the claim must “be legally tenable and supported by evidence that is reasonably capable of belief” (Subway, para 49). Trent argued that the claim is not legally tenable for two reasons: the negligence claim was a “dressed-up defamation claim” and there was no duty of care owed by Trent to Subway (Subway, para 50).

The court disagreed with Trent’s first line of reasoning, suggesting that the negligence claim was more than a mere dressed-up defamation claim. Relying on Bella v Young, 2006 SCC 3, Trent argues that for a claim to be more than a defamation claim, two prongs must be met: there must be a duty of care owed by the defendant and the damages claimed must cover the harm beyond that caused to the plaintiff’s reputation. Although Trent interpreted the second prong as meaning that the damages claimed could include consequential financial losses—as Subway had for seeking loss of sales and expenses to defend legal proceedings—the ONCA disputes this interpretation. The scope of damages are to be limited to reputational ones and economic damages are distinct. Thus, the damages sought by Subway cannot be seen as a mere extension of reputational damages (Subway, para 87).

Trent also argued that, separate from the first prong to be met in Bella, a duty of care ought to be established for a negligence claim to proceed. The court found that because Subway cannot establish sufficient proximity to support a duty of care owed by Trent, no negligence claim for pure economic loss can be made out. Proximity is one of the main factors—if not the main factor—needed to establish a duty of care owed, especially in pure economic loss cases as there is no general right of protection in tort for negligent or intentional economic loss unless established (1688782 Ontario Inc. v Maple Leaf Foods Inc., 2020 SCC 35 [Maple Leaf Foods]; Subway, para 79). Proximity can be established either by finding an existing category or a category analogous to the relationship of the parties, or by establishing a novel duty of care.

In the current case, Subway asserted that its claim for pure economic loss falls outside of the existing categories of proximity and thus a novel category of duty of care ought to be established (Subway, para 98). The court agreed. However, they dismissed Subway’s attempts of establishing a relationship of proximity because they could not show that Trent had undertaken responsibility in favour of Subway, which Subway relied upon (Subway, para 100). Additionally, all of the factors provided by Subway as evidence of proximity actually pointed to foreseeability of harm (Subway, para 128). As no proximity was made out between Subway and Trent, Subway could not argue that Trent owed them a duty of care and subsequently, cannot bring forward a negligence claim against them.

Appealing the Decision: Plausibility of Success and Merits

The present decision leaves Subway in an inconvenient situation in their lawsuit against Trent, but is it worth appealing it to the SCC? The short answer is no because the likelihood of the appeal succeeding is minimal. For one, an anti-SLAPP motion appeal was dealt with in Pointes in September and the SCC wrote a lengthy decision describing the analysis of s. 137.1. Thus, it is unlikely that they will revisit the issue again and allow the leave to appeal. Moreover, Subway can still pursue the defamation claim against Trent and with the ONCA allowing Subway’s appeal against CBC, they can also continue with their defamation lawsuit against CBC. Subway can have its grievances addressed through these routes, albeit for a lesser compensation as damages.

That said, there is one piece of evidence that could be further utilized as basis for an appeal on the pure economic loss argument if Subway chooses to do so. Prior to the airing of the show, the Trent lab’s director had expressed concerns surrounding the test results. Subway, however, would not have been aware of this as their correspondence with CBC regarding the data only stated the data as ‘preliminary’ (Subway, para 22). Thus, it could be argued that Trent, being a laboratory in a distinguished university, had undertaken a representation that the results were certain towards Subway by not stating otherwise. If Subway had known that Trent was uncertain about the results, they could have chosen a different approach in responding to the investigative report and spared economic loss. Though this is an alternate line of reasoning and it is unclear that evidence of Subway’s lack of knowledge on the lab’s doubts had been submitted to the courts, it could be one way in which Subway can establish proximity between them and Trent.

Conclusion

Subway Franchise Systems of Canada, Inc. v Canadian Broadcasting Corporation is not only an interesting case because of its subject matter. It reinforces the existing reasoning on pure economic loss claims and anti-SLAPP motions that the Supreme Court of Canada has explored in the past year’s rulings of Pointes and Maple Leaf Foods. It will be interesting to see whether Subway chooses to appeal this unfavourable decision, because it is unlikely that they will succeed in its leave to appeal. If anything, the takeaway from this case may be to not mask a defamation claim as a negligence claim surrounding pure economic loss, and to not mask soy as chicken in one’s sandwiches.