Corporate Damages for Defamation

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is a litigation lawyer practicing at Perley-Robertson, Hill & McDougall LLP in Ottawa, Ontario. He may be reached at 613.566.2823 or obourns@perlaw.ca.

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A corporation can be defamed just like a person, however, there are unique challenges and considerations where the defamed party is a corporation that are important to be aware of.  The main difference is with respect to how the Court will approach damages vis-à-vis a corporate plaintiff.

As I wrote about in a separate article, there are four types of damages in defamation actions: (a) general, (b) special/specific, (c) aggravated, and (d) punitive. All of these categories apply to corporations.  The tests and considerations for aggravated and punitive damages remain largely unchanged from an individual plaintiff.

Special Damages

 Special damages are for a specific loss suffered by the plaintiff as the “natural and proximate result of the defamation”.[1]  Unlike general damages, discussed below, they are not assumed and need to be proven at trial.  Special damages are theoretically approached the same way as in the case of an individual plaintiff, however, they are rarely awarded, particularly in the case of a corporate plaintiff.

The test to be met by a corporate plaintiff to prove its loss is:[2]

(a) that there must be a “natural and proximate result” of the defamatory publication, and capable of monetary measurement; or

(b) such losses must also be established with “reasonable certainty” and must be more than mere “speculation and surmise.”

Special damages can be difficult to prove as there are typically too many moving parts effecting the rise or decline in corporate revenues and/or corporate value to attribute any such movement to one particular factor or instance(s) of defamation.

In Focus Graphite Inc., the plaintiff sought special damages relating to a percentage of the plaintiff’s market capitalization loss which it said was caused by posts made on a website about the company and its CEO.[3]  The judge declined to award special damages because of “difficulty in terms of establishing that the Defendant’s postings were a cause of Focus’ losses”.[4]

In WeGo Kayaking Ltd.[5] a competitor disparaged the plaintiffs in an advertisement placed online, both are eco-tourism companies.  The plaintiffs sought special damages for a loss of revenue and loss of goodwill it attributed to the defamatory posts.  The plaintiffs pointed to a decline in guests the year of the postings.  However, Justice Macaulay did not award special damages because he did not accept that “the loss of potential bookings and consequent economic loss can be calculated with any reliable precision”.[6]

Further, attempting to prove special damages likely will require the corporate plaintiff to disclose confidential financial statements and information to the defendant, who may be a competitor or otherwise adverse in interest.  In Marrello Valve Ltd. v. Orbit Valve Canada Ltd.[7] , Sutherland, J. stated at para 12 that:

[T]he extent that the plaintiff claims special damages and seeks to recover, for example, actual losses of profits, it opens the way for a defence or defences seeking to show that the loss of profits arise from other causes, and that in turn broadens the scope of the questions that are relevant and proper on discovery of a representative of the plaintiff.

General Damages

General damages were historically described as compensating an individual plaintiff for emotional or personal strain and hurt feelings and pride.  Conversely, a corporate plaintiff, lacking emotions and feelings was limited to nominal general damages, unless it could prove special damages.

However, the law has evolved not only to acknowledge general emotional pain caused to individual plaintiffs, but also the general impact that defamatory comments may have upon a business reputation.  Presently, the law will presume damages to a corporate plaintiff where the libel or slander has been proven and the action will be maintainable without proof of special damages.[8]  Further, a corporate plaintiff may be awarded considerable damages at large without proving special damages where its reputation has been harmed.

In Hiltz and Seamone Co. the trial court awarded general damages of $200,000 and the trial court judge noted that:[9]

Professional organizations survive on the confidence and trust generated in those that deal with them and the integrity and the character of the work they provide to their clients. Defamatory statements, such as in the present case, strike at the foundation of the reputation and erode the confidence of the public in the defamed party, no less when it’s a corporation than when it’s an individual.

In the Focus Graphic Inc. decision, Justice Beaudoin confirmed that to determine the general damages a corporation is entitled to it is appropriate to consider the following  six factors:

  1. the plaintiff’s position and standing;
  2. the nature and seriousness of the defamatory statements;
  3. the mode and extent of publication;
  4. the absence or refusal of any retraction or apology;
  5. the whole conduct and motive of the defendant from publication through judgment; and
  6. any evidence of aggravating or mitigating circumstances.

Therefore, what we have seen is that, even where plaintiffs fail to make out a claim for special damages, the evidence proffered to show specific harm are helpful in quantifying general damages.

In WeGo Kayaking, touched upon above, there were two plaintiffs targeted by the defamatory advertisement.  One was awarded $100,000 and the other $150,000.[10]

In Second Cup Ltd. v. Eftoda[11] the defendant launched an ongoing, repeated, and “reprehensible” attack upon Second Cup by defaming the franchisor to its franchisees and encouraging the franchisees to sue the plaintiff.  In the context of finding that a nominal award of damages would insufficiently restore Second Cup’s reputation, Justice Echlin awarded $425,000.00 in general damages and stated:[12]

[42] For justice to occur in this instance, Second Cup is entitled to receive a significant confirmation from this Court that actions such as encountered in the Eftoda campaign for a number of years are simply not acceptable in Canadian commercial society.

[43] A nominal award would not “clearly demonstrate to the community the vindication of the plaintiff’s reputation” (as indicated in Hill v. Church of Scientology of Toronto, supra, at para. 169).  Indeed, in another case involving a default proceeding, the Ontario Court of Appeal increased a trial judge’s determination of damages by nearly tenfold.  (see: Barrick Gold Corp. v. Lopehandia (2004), 2004 CanLII 12938 (ON CA), 71 O.R. (3d) 416 (C.A.)).

In Farallon Mining Ltd. v. Arnold,[13] the claim concerned defamatory statements, posted online, maliciously accusing the plaintiff of misleading investors, engaging in fraud, and participating in a conspiracy.  Subsequent to the comments the value of the plaintiff’s shares increased and one could only speculate as to whether their value might have increased to an even greater extent if the defamatory statements had not been made.  Justice Silverman held that it was impossible to determine how much damage was caused to the plaintiff or if there has been actual damage in the form of economic loss, but nonetheless awarded $40,000 in general damages in considering the factors above.

Justice Silverman in Farallon Mining set the following list of factors that suggest a larger award of general damages is appropriate:[14]

  1. The plaintiff’s good reputation.
  2. The statements were serious.
  3. Although there is no direct evidence of economic damage, the potential for economic damage was large.
  4. At least part of the defendant’s motive was to cause economic damage to the plaintiff.
  5. The defendant was at least in part motivated by his own interests.
  6. The defamatory comments were published, using the internet, to reach the widest possible target audience.
  7. The target audience was precisely chosen to inflict the maximum of economic damages.
  8. The defendant did not act in good faith.
  9. The defendant lied when first confronted with the statements.
  10. Whatever apology he may have made, it was not enough and was of limited effect.

The following factors were held to suggest a smaller award for general damages is appropriate:[15]

  1. The absence of any direct evidence that the plaintiff suffered any loss to business reputation.
  2. The absence of any direct evidence that the plaintiff suffered any economic loss.
  3. The general rule that corporations are limited to nominal damage in the absence of evidence of economic loss.
  4. A lack of evidence regarding the number of people who saw or read the defamatory statements.
  5. Evidence that the company’s value was not harmed by the comments.
  6. The credibility of the location of the statements and the effects that the statements could have on reasonable readers.
  7. Whether the plaintiff’s claims were exaggerated.
  8. An inability to differentiate between the damage caused by a defendant’s statements from damages caused by other similar statements made by other defendants.
  9. Attempts to apologize by the defendant.

Therefore, while corporations are unlikely to secure special damages for those reasons outlined above, setting out in great detail how the plaintiff corporation’s reputation has been harmed may lead to a significant award of general damages.

[1] Focus Graphite Inc. v. Douglas, (2015) ONSC 1104 (CanLII) at para 57 <http://canlii.ca/t/ggfk3> [“FGI”]

[2] FGI at para 62

[3] FGI at paras 73-77

[4] FGI at para 86

[5] WeGo Kayaking Ltd. et al v. Sewid, et al, 2007 BCSC 49 (CanLII), http://canlii.ca/t/1q86c [“WeGo”]

[6] WeGo at para 115

[7] Marrello Valve Ltd. v. Orbit Valve Canada Ltd., [1988] O.J. No. 2710

[8] FGI at para 61

[9] Hiltz and Seamone Co. Ltd. v. Nova Scotia (Attorney General) et al., (1999) CanLII 13144 (NS CA)

[10] WeGo at para 119

[11] Second Cup Ltd. v. Eftoda, 2006 CanLII 26174 (ON SC), <http://canlii.ca/t/1p1sm> [“Second Cup”]

[12] Second Cup at para 43

[13] Farallon Mining Ltd. v. Arnold, (2011) BCSC 1532 (CanLII) [“Farallon Mining”] <http://canlii.ca/t/fnsmm>

[14] Farallon Mining at para 106

[15] Farallon Mining at para 107

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