Farallon Mining Ltd. v. Arnold, 2011 BCSC 1532 (CanLII)
IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Farallon Mining Ltd. v. Arnold, |
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2011 BCSC 1532 |
Date: 20111110
Docket: S097310
Registry: Vancouver
Between:
Farallon Mining Ltd.
Plaintiff
And
Ronald Arnold and Donna Arnold
a.k.a. Stonecut
Defendants
Before: The Honourable Mr. Justice Silverman
Reasons for Judgment
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Counsel for the Plaintiff: |
T. Hakemi |
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Counsel for the Defendants: |
C. Cheng |
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Place and Date of Hearing: |
Vancouver, B.C. September 16, 2011 |
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Place and Date of Judgment: |
Vancouver, B.C. November 10, 2011 |
INTRODUCTION
[1] The plaintiff Farallon Mining Ltd. (“Farallon”) applies pursuant to Rule 9-7 for an assessment of the damages it suffered as a result of the defendant Ronald Arnold’s (“Arnold”) publication of defamatory statements maliciously accusing Farallon of misleading investors, engaging in fraud, and participating in a conspiracy pursuant to which Farallon stole its principal mining property (the “Postings”). It seeks both general and punitive damages.
[2] Arnold argues that Farallon has grossly overreacted to minor banter on the internet. It compounded this overreaction by pursuing a minor character in that banter. Rather than present a well-founded case of defamation, Farallon did not establish any material defamation in the alleged statements, failed to prove that it suffered any damage to business reputation that would justify general damages in more than a nominal amount, began making unfounded accusations that Arnold was involved in a conspiracy, and maintained his innocent wife in this litigation until only recently. The court should respond with an order of nominal damages, refuse an order of punitive damages, and award costs on an increased basis to Mr. Arnold.
[3] The parties agree that the assessment of damages is an appropriate matter to be dealt with pursuant to Rule 9-7.
[4] The claim against Arnold’s wife, Donna, has been dismissed by consent.
PRELIMINARY ISSUE
[5] The parties disagree as to precisely what circumstances provide the basis for the judgment with respect to liability.
[6] Farallon argues that Arnold has admitted liability for defamation and that all that remains is the issue of assessing damages. It argues that, because Arnold withdrew his statement of defence by virtue of a Notice of Withdrawal, and because a judgment was entered, by consent, with damages to be assessed, each and every allegation in the statement of claim must be deemed to be admitted.
[7] Arnold does not disagree with the foregoing contention so far as it goes. However, he argues that the admission of what is alleged in the statement of claim only goes so far as those allegations are capable of being reasonably interpreted. Arnold argues that Farallon’s overly optimistic interpretation of what the statement of claim alleges is not borne out by an analysis of the statement of claim itself. In that regard, Arnold argues that of all the allegations of defamation in the statement of claim, only one of them is capable of being defamatory, and it follows that the damages to be assessed can only be with respect to that one allegation.
[8] In regard to the foregoing, Arnold argues as follows:
1. The consent order, and judgment, does not expressly refer to liability. Rather, it states, in its entirety, the following:
“the defendant Ronald Arnold pay to the plaintiff Farallon Mining Ltd. damages to be assessed and costs to be assessed.”
2. Most of the Postings are not defamatory as pled. And, those Postings which may be defamatory are not materially so.
3. Words that a plaintiff claims are defamatory must be either defamatory based on the "plain meaning" of the words; or, they are defamatory because of a meaning that arises from the interpretation by a reasonable person who is aware of all of the facts and circumstances that would cause that reasonable person to derive such meaning − an innuendo.
4. Where a plaintiff relies on innuendo, the Plaintiff must, as a matter of law, plead those external facts that would cause a reasonable person, knowing those external facts, to reasonably infer the innuendo.
5. With one exception, none of the remaining Postings could cause a reasonable person to attribute a defamatory meaning to the Postings on a plain reading of them.
6. Farallon has failed to plead any facts or circumstances that would cause a reasonable person to infer a defamatory meaning from either a plain reading of the Postings, or from innuendo.
7. None of the evidence advanced assists Farallon. There are no facts that can be said to have been known by a reasonable reader that would enable that reader to interpret a defamatory meaning from the plain meaning of the Postings, or from innuendo.
8. The worst that could be said of the Postings alleged by Farallon as pled in various paragraphs of the statement of claim is that they could cause a reasonable reader to suspect that there may be dispute amongst certain individuals as to the clarity of Farallon's exclusive title to a property known as "Campo Morado". To the extent that those statements could be interpreted to have a defamatory effect, which Arnold denies, such an effect was minimal and has certainly not been substantiated by any evidence of harm to Farallon's direct or indirect business interests.
9. The one exception to the foregoing that could potentially be interpreted as having defamatory meaning is one that describes Farallon as “a bunch of crooks”. That sole defamatory Posting is, given the circumstances in which it was posted, a marginal statement supporting the finding that Farallon suffered nominal damage.
[9] Arnold argues that the deficiency in the statement of claim arises from the fact that a number of straightforward activities are pleaded as defamatory, but nowhere are the (alleged) true facts pleaded. Therefore, one cannot conclude that those statements are defamatory: Lions Gate Marketing Company Ltd. v. Used Car Dealers Association of Ontario, 2005 BCCA 274 (“Lions Gate”).
[10] I reject Arnold’s argument. The principle from Lions Gate upon which Arnold relies is different from the case at bar because in that case there was a trial. In this case, judgment was entered by consent after the statement of defence had been withdrawn.
[11] At trial, (as in Lions Gate), the question of whether the alleged statements were false required proof, as to their falsity, from the plaintiff. By necessity, that proof would have to include proof of what the true facts were. Evidence would have to be called to establish those facts. Therefore, those facts would have to be pleaded.
[12] The situation is different where there is no statement of defence in existence when judgment is entered. A consequence of that is that the defendant is deemed to have admitted all the allegations in the statement of claim: Mintie v. Iverson (1963) 1963 CanLII 876 (BC SC), 45 W.W.R. 403; ICBC v. Wiese, 2011 BCSC 238.
[13] In this case, those admitted allegations from the statement of claim include the following:
1. In the first paragraph, the reference to all of the statements as “a variety of false and defamatory statements accusing Farallon of misleading investors, engaging in fraud and bribery, and participating in a conspiracy that led to Farallon stealing its principal mining property.”
2. The allegation in paragraph 10 of the statement of claim that “From approximately April 22, 2009 to June 13, 2009, the Defendants published a variety of false and defamatory information about Farallon ....”
3. Each of the defamatory statements are then referred to specifically by date and quotation and are prefaced with the words “On or about ... the defendants falsely and maliciously published ... the following defamatory words ....”
4. Immediately following the allegation with respect to each of the specific defamatory words in the statement of claim, appears a paragraph that says the following:
“In their natural and ordinary meaning, or in the alternative, by way of innuendo, the words set out ... meant and were understood to mean ....”
5. Those paragraphs go on to state the meaning of the defamatory words. The only reasonable implication to be drawn from those various paragraphs in the statement of claim is that those defamatory words were untrue.
6. After each of the defamatory Postings referred to in the statement of claim, paragraph 25 pleads as follows:
“Each and every of the Posts was false. The Posts were, both individually and taken as a whole, grossly defamatory of Farallon.”
7. Generally, throughout the statement of claim, it is alleged that Arnold referred, both expressly and by implication, to Farallon, as having acted fraudulently and dishonestly.
[Emphasis added.]
[14] It follows that the admitted facts before the court include the fact that each and every of Arnold’s Postings were “false and defamatory”. It is inconsequential that no further facts were pleaded, with respect to the truth, in the circumstances of this case.
[15] Damages will be assessed on that basis.
BACKGROUND
The Parties
[16] Farallon is a mineral exploration and development company. Its principal operating asset is the “Campo Morado” mine in Guerrero State, Mexico, which it acquired in 1995. Its aggregate investment in the acquisition and exploration of the Project totalled approximately $250 million. It employed approximately 450 people and had gross sales of approximately $89 million in 2009.
[17] Farallon's shares were traded on the Vancouver Stock Exchange between1991 and 1997, and on the Toronto Stock Exchange (“TSX”) between 1997 and 2011. In early 2011, all of Farallon's shares were acquired by Nyrstar N.V., a Belgian mining company, pursuant to a takeover offer valued at greater than the market value of its shares.
[18] Beginning in or about March 2009, Farallon learned of various statements published on the Internet under the pseudonym "Stonecut", at a website informally referred to as the “Stockhouse Website”.
[19] The Stockhouse Website includes webpages called "Bullboards", where internet users may discuss various topics related to, among other things, publicly-traded companies. One of the Bullboards on the Stockhouse Website is dedicated to Farallon (the "Farallon Bullboard").
[20] Arnold is a resident of Alberta who communicated on the Stockhouse Website under various pseudonyms, including "Stonecut".
[21] At the time the defamatory statements were made, Arnold had made a $100,000 investment in Aztec Copper Inc., a privately-held Arizona corporation ostensibly in the business of exploring and developing a different mining property in Mexico (“Aztec Copper”). After making the defamatory statements, Arnold became President of Aztec Copper.
[22] Arnold has never done any business or had any other relationship with Farallon, its officers, or its directors.
The Defamatory Statements
[23] Arnold has admitted that he is the author of all the Postings under the Stonecut pseudonym on the Stockhouse Website referred to in the Statement of Claim.
[24] The full text of statements posted by Arnold are attached as a schedule to the statement of claim, and include the following:
1. "It has now been decided that Mr. Hermiston is the rightful owner of Campo Morado, including La Alina and the so-called property known as G9. Although Farallon filed an appeal, it was summarily thrown out within days of it being filed. The Supreme Court of Mexico has finally ruled in Hermiston's favor and I hear that all parties who had a hand in not only the fraudulent activities conducted by the so-named parties, but inclusively, all those who played a direct or indirect role in convincing people to invest in Farallon will be called to answer to the courts, not only in Canada, the USA but also Mexico."
2. "The Supreme Court of Mexico summarily ordered a complete review of the case. The review, digging far deeper than ever before, found that Mr. Hermiston was indeed denied his rights from the very beginning of his crusade for justice and that he was subsequently, as a direct result of his rights being grossly violated, entitled to see his rights restored and of course, enforced. Upon this decision being brought forward by the Supreme Court of Mexico, Farallon's attorney's [sic] filed an appeal in the form of an appeal/Camparo which was literally denied by the court and thrown out within a few days of it being filed."
3. "The most interesting thing though, as you have so correctly mentioned is that Farallon has failed to utter one word of the Court case which is ongoing wherein they are going after Pedro Ochoa and his son(s). They state clearly they are not involved in any court action now with anyone and yet they are apparently trying to gain back the 10 million US Dollars they allegedly paid to the Villigrans for - shall we say, services rendered!!!
Remember, it was also the Villigrans who represented David Hermiston and it was also the Villigrans who forged his signatures which brought about the transfer of title to Campo Morado so the plot thickens and we have not heard the last of this. In fact, I hear that it is heating up beautifully down in olde Mexico."
4. "Farallon is apparently engaged in a going after Pedro Villigran Ochoa et al. You will note that he was the Mexican lawyer representing Hermiston and that he, Villigran, has been charged with fraud and forging documents purporting to have been signed by Hermiston wherein the ownership of Campo Morado was transferred to Farallon. This is documented fact and has been accepted by the Mexican Supreme Court as such. So Villigran committed fraud, Farallon took ownership, Hermiston fought hard to regain his property, lost each time he tried, but now - the Supreme Court of Mexico agreed to hear his plea's [sic] based on their seeing that his case has merit."
5. "Look Warren, it is not directly about any previous cases. It is about the very solid facts surrounding Hermiston's legal representatives back in the day when they, his lawyers, forged documents which in effect, provided a transfer of Hermiston's interest and title in Campo Morado, over to Farallon."
6. "... hey, since you also have great difficulty spelling and when you are actually trying to correct someone else (too funny) the word phonetically is actually spelled - PHONETICALLY and the correct "Phonec" layout for the word "Farallon" is as follows putz-ball: fah-rah-Ion or, if you believe in justice and the truth as it should always be in this world of ours, the real phonetic layout is as follows for the word "fah-rah-Ion": what a bun chof k roo ks.”
[25] The substance of all the foregoing was untrue, and Arnold knew it was untrue.
History of the Action
[26] On June 15, 2009, counsel for Farallon wrote to Arnold to inform him that defamatory Postings had been made under the pseudonym "Stonecut" using Arnold’s account with Stockhouse.
[27] Arnold lied in response. He denied his involvement and continued to deny it until the available evidence made it impossible for him to continue doing so.
[28] Farallon commenced this action by endorsed writ filed October 6, 2009, naming "John Doe aka Stonecut" as defendant.
[29] On November 23, 2009, Stockhouse provided counsel for Farallon with a list of the IP addresses from which each of the Postings were made. As the IP addresses belonged to Shaw Communications Inc. ("Shaw"), Farallon brought an application for, and obtained, a court order requiring Shaw to produce its customer records related to the Stonecut Addresses.
[30] On December 10, 2009, Farallon received certain Shaw customer records, which indicated that the IP addresses had been used by an account in the name of Donna Arnold, Arnold’s wife, as a result of which Farallon obtained a court order permitting it to substitute the names of Arnold and Donna Arnold as defendants in the place of John Doe a.k.a. Stonecut.
[31] Arnold and Ms. Arnold filed an Appearance on January 28, 2010, Farallon filed a Statement of Claim on February 8, 2010, and Arnold and Ms. Arnold filed a statement of defence on March 8, 2010.
[32] Arnold was examined for discovery by counsel for Farallon on July 27 and 28, 2010.
[33] On April 18, 2011, the Court entered a consent order dismissing Farallon's claim against Ms. Arnold without costs.
[34] On April 20, 2011, Arnold filed a Notice of Withdrawal of his statement of defence.
[35] On May 17, 2011, the Court entered the consent order requiring Arnold to pay to Farallon damages and costs to be assessed.
DAMAGES
General Damages
Farallon’s Argument
[36] Farallon submits that a consideration of the standard factors in determining general damages for defamation indicate that a substantial award should be made in this case.
[37] Farallon is a public company that successfully developed its mining property and earned significant revenues. It attracts thousands of investors in the public capital markets. It has a good reputation in the mining industry and in the community in general. Arnold has provided no evidence that would suggest otherwise.
[38] Here, the defendant's Postings reveal express malice. For example, he wrote that: "if you believe in justice and the truth as it should always be in this world of ours, the real phonetic layout is as follows for the word "fah-rah-lon": what a bun chofk rooks.".
[39] Furthermore, the allegations against the plaintiffs are of the utmost seriousness. Arnold has stated that the plaintiffs have manipulated the courts; they have deceived shareholders; and they have improperly obtained the Campo Morado property. In the mining industry, these are perhaps as serious a blow as could be inflicted upon a company’s reputation.
[40] Various courts have observed that of the standard factors, the mode and extent of publication is particularly relevant in the Internet context because of the Internet’s interactive nature, its potential for being taken at face value, and its absolute and immediate worldwide ubiquity and accessibility.
[41] Arnold has never actually apologized for or retracted any of his defamatory statements.
[42] Arnold argues that certain statements made by him in without prejudice correspondence were apologies and are admissible. Farallon argues that they are not effective apologies and are not admissible because they were without prejudice comments made in the course of settlement discussions.
[43] He initially denied authorship of the Postings, and did not try to justify them. This suggests that Arnold knew at that time that his statements were untrue and defamatory. Despite this, it was only after Farallon had incurred the expense of commencing the action, obtaining the Stockhouse account information, obtaining orders for disclosure of the Shaw account information and for adding Arnold’s name as a defendant, and proceeded with the case through two days of Examination for Discovery, that Arnold admitted his liability.
[44] Arnold had an improper motive for publishing the Postings. He had made a $100,000 investment in Aztec Copper, which purports to own a Mexican mining property very similar to Farallon's Campo Morado. As his defamatory statements created doubt and uncertainty regarding Farallon's ownership of Campo Morado, the value of his shares in Aztec Copper were likely to rise. He was also made President of Aztec Copper in the months following his defamatory statements.
[45] The fact that Arnold chose to publish his statements on a website intended for the investing community is an aggravating factor. He made the decision to publish on the Stockhouse website presumably because he knew that the audience would include investors, and potential investors in Farallon. Targeting this audience ensured that the damages inflicted would be substantial.
[46] Farallon argues that, in the circumstances of this case, an appropriate award for general damages would be in the amount of $75,000.
Arnold’s Argument
[47] Farallon’s principals, perhaps frustrated at inaccurate postings about their company being made on an internet chatroom, selected Mr, Arnold, a machine repair shop owner, and Ms. Arnold, a homemaker and former child care worker, as examples to deter others from posting inaccurate facts about them. In doing so, Farallon, a former large multi-national corporation, has grossly overreached − advancing inconsistent liability theories, speculating about non-existent harm with no evidentiary support, suggesting comparisons to extreme cases to justify unjust general damage awards, and making public unsubstantiated allegations of conspiracy.
[48] This Court ought to respond with an appropriate award of nominal damages, deny Farallon’s claim for punitive damages and injunction, and award costs to Arnold on an increased basis.
[49] Certain facts should minimize the amount of damages awarded. Those facts are:
1. Farallon experienced no damage to their reputation or economic loss.
2. The defamatory statements are not serious.
3. Arnold acted in good faith.
4. Arnold attempted to apologize and rectify his error.
[50] There is no evidence that Farallon suffered any damage to their business reputation:
1. Farallon has not pled or led any facts or evidence of specific damage. There is none of the evidence that is typically led in cases of this kind: customers lost, suppliers who refuse to supply, employees who quit, investors and lenders who refuse to provide capital, or any measurement of any kind of direct or indirect financial loss.
2. Not only is there no evidence of special damage or damage to business reputation, the price of Farallon's shares traded on the TSX increased in value from the time that Arnold made his Postings in April 2009 ($0.33 on May 1) to June 2009 ($0.78 in Nov 1).
3. Farallon successfully sold to a third-party buyer for a premium above the share price when the deal was first announced.
4. Farallon no longer had a public face shortly after its shares were acquired by a larger company.
[51] Further, there is no evidence of the number of individuals who saw Arnold's Postings. The evidence refers to the number of users who have visited the Stockhouse website. However, there is no evidence to prove the most important and relevant facts to this case: the number of people who participated on Stockhouse's Farallon chatroom; and, the number of people who actually viewed any of the Postings.
[52] Most importantly, Farallon has neither pled, nor led any evidence to support, any specific claim for loss of business.
[53] The law is clear that in assessing damages for defamation:
1. Corporations cannot receive damages for personal distress, otherwise known as aggravated damages.
2. Corporations should not receive large awards for loss of reputation absent evidence of economic loss.
[54] Farallon has produced no evidence of any damage to business reputation. Instead, while Farallon complains of "immeasurable" financial harm, it became more valuable in the public markets during the time that Arnold made the Postings and thereafter. Despite emerging from one of the most difficult business climates in recent history, Farallon managed to be acquired at a price significantly higher than when the Postings were made.
[55] Further, Farallon refers to at least four lawsuits, one of them successful so far, that it has commenced against the writers of other posts involving similar allegations against Farallon, and the "Campo Morado" property. In that context, Farallon has failed to lead any evidence that specifically indicates how the Postings in this case made any unique impact on Farallon's reputation.
[56] There are degrees of seriousness when assessing defamatory statements. The Postings in this case are of a lesser degree of seriousness.
[57] The defamatory statements must be put in proper context. Arnold was responding to other persons’ postings in the Bullboard and engaged in the level of discourse consistent with that online conversation. Reasonable readers would not interpret the statements as seriously as alleged by Farallon.
[58] The most serious Posting − “What a bunch of crooks” − was, given the circumstances in which it was posted, a marginal statement that supports the finding that Farallon suffered nominal damage.
[59] Arnold acted in good faith and without malice when he made the Postings:
1. relied on material posted by other individuals making posts on the Farallon Bullboard and articles from magazines, which he believed to have been fair and accurate;
2. he stopped posting about Farallon anywhere after Farallon contacted him about alleged "defamatory" statements; and,
3. he then took active steps to remove the Postings from public view, albeit after Farallon arranged to have them removed.
[60] Arnold attempted to apologize to Farallon and made good faith efforts to acknowledge his error. Specifically, Arnold made two attempts to apologize to Farallon and pay a form of monetary restitution in the form of a donation to a charity in Farallon's name.
[61] Instead of accepting Arnold's attempt to address his error, Farallon rejected both the apology and resolution attempts.
[62] Farallon argues that Arnold’s alleged apology is inadmissible and the Court should not be considering it. It argues that the inadmissibility arises from the fact that the alleged apology was made under the blanket privilege for settlement negotiations.
[63] The settlement correspondence at issue bears the notation "WITHOUT PREJUDICE". The letter makes a “settlement offer” in the form of a $5,000 donation to the Canadian Red Cross in the name of Farallon. In addition, it states the following:
With the utmost sincerity, I wish to offer my most sincere apologies to your client, and its senior management, for all defamatory remarks, comments or statements attributable to me in the postings placed on the Stockhouse Bullboard. I accept full and complete responsibility for such postings and any and all content which your client found to be offensive in any way.
Further, I also wish to categorically state that there will never ever be another incident involving any computers, usernames or user accounts, registered to me or any of my immediate family members which will cause offence to your client or to anyone else for that matter. To that end, I give you my most sincere and absolute promise.
[64] Arnold argues that the apology is admissible and should be considered on the issue of damage assessment.
[65] Arnold argues that, in the circumstances of this case, the amount of general damages awarded should be nominal. Arnold suggests a figure of less than $5,000.
Punitive Damages
Farallon’s Argument
[66] Farallon argues that the evidence indicates that a substantial award of punitive damages is justified.
[67] Farallon is currently pursuing two other defamation actions, Farallon and Whittington v. St. Eloi, S.C.B.C. Vancouver Registry No. S096393 and Farallon v. Watt and Gleason, S.C.B.C. Vancouver Registry No. S107006. Both these other claims relate to posts on the Stockhouse website similar to those by the defendant in this case, and, in Farallon's submission, emphasize the need for punitive damages to deter others.
[68] In Barrick Gold v. Lopehandia (2004), 2004 CanLII 12938 (ON CA), 71 O.R. (3d) 416 (“Barrick Gold”), the Court of Appeal awarded punitive damages of $50,000.00 to the mining company repeatedly defamed in the online postings. In Reichmann v. Berlin, [2002] O.J. No. 2732 (“Reichmann”), two of the defendants were each ordered to pay $50,000 in punitive damages for their statements published on the internet.
[69] In Second Cup Ltd. v. Eftoda, 2006 CanLII 26174 (Ont. S.C.J.) (“Second Cup”), $75,000.00 in punitive damages was awarded against a defendant who engaged in a campaign of contacting the plaintiff company's franchisees, issuing defamatory comments about the plaintiff and its executives, and encouraging the franchisees to sue the plaintiff. The court found that "[s]uch a concerted campaign could only have been launched out of a desire to profit or out of vindictiveness, although the latter is unlikely, given the absence of any prior contact between [the parties]." Second Cup, para 11. As in Second Cup, the defendant in this action was similarly unknown to Farallon, before he began his campaign on Stockhouse.
[70] Here, Farallon suggests that punitive damages should be awarded in the amount of $10,000. This amount is less than the punitive damages awarded in similar cases, Farallon conceding that Arnold’s eventual admission of liability should be recognized under this heading.
Arnold’s Argument
[71] Arnold should pay no punitive damages for the following reasons:
1. Farallon has suffered no loss to business reputation.
2. The defamatory statements, as alleged by the Plaintiff, are not serious.
3. Arnold honestly relied on other publications as the basis for his statements, apologized for his error, and offered to make restitution.
4. The inclusion of his wife in this litigation placed incredible stress on both Arnold and Ms. Arnold.
5. Arnold's financial circumstances are dire. He has no material savings and has, for the past two years, earned little income. With these resources, he must support two dependents − his wife, who was dropped from this litigation after it was represented that she had no involvement in this action and his adult daughter who suffers from a debilitating disease. As such, any award requiring him to pay general damages to Farallon will cause him material harm such that there is no need for the court to impose any further deterrent measure on him.
[72] There is no basis on which to award punitive damages. Arnold's comments and behaviour were not so egregious as to require a measure of deterrence, denunciation, or prevention.
Injunction
[73] Farallon argues that:
1. It will suffer irreparable harm without injunctive relief.
2. An injunction is also warranted in this case because there is a real possibility that a judgment for general damages may be unenforceable. Arnold is not a resident of this province and has stated that he and his wife do not have a lot of money. There is no evidence to suggest that Arnold has any significant amount of assets.
3. In light of the fact that Arnold may be judgment proof, an injunction is warranted to restraining the defendant from further defaming Farallon and causing it to suffer additional, irreparable loss of goodwill.
[74] Arnold does not seriously oppose the granting of an injunction, but argues that there is no need to demonstrate general or specific deterrence or enforce prevention (through an injunction) in this case for three reasons:
1. Arnold has not made any further postings about Farallon, or about anyone on any matter.
2. Farallon has been acquired by another company and has no independent reputation.
3. Arnold has offered several times to apologize.
ANALYSIS
General Damages
[75] General damages in defamation cases are presumed from the very publication of the false statement and are awarded at large: Hill v. Church of Scientology, 1995 CanLII 59 (SCC), [1995] 2 S.C.R. 1130 (“Church of Scientology”), at para. 164.
[76] The purpose of general damages is to: (1) compensate the plaintiff for "insult offered and pain given"; (2) vindication of reputation; (3) compensation for injury to pride and self confidence; and (4) social damage and possible economic damage that may result but which cannot be expressly proven: Ager v. Canjex Publishing d.b.a. Canada Stockwatch, 2005 BCCA 467 ("Ager (Court of Appeal)"), para. 62, citing Brown v. Cole (1998), 1998 CanLII 6471 (BC CA), 61 B.C.L.R. (3d) 1 (C.A.), [1999] 7 W.W.R. 703, para. 107.
[77] The standard factors to consider in determining general damages for defamation include:
1. 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.
Church of Scientology, at para. 182.
[78] Within the context of those factors, I rely upon the following propositions of law, and make the following findings of fact, based on the evidence.
Position and Standing
[79] Farallon has enjoyed a reputation of high position and standing. I am satisfied that Farallon’s reputation will have suffered some general damage as a result of the defamatory Postings.
[80] Corporations are incapable of suffering personal distress and may only receive damages for injury to their business reputations: WeGo Kayaking Ltd. et al. v. Sewid, et al., 2007 BCSC 49 (“WeGo 2007”) para. 87 and 88.
[81] Proof of general economic loss may demonstrate injury to a business' reputation. Corporations generally should not receive large awards for loss of reputation, unless economic loss is also shown. Such injury, however, can include goodwill, as well as loss of income: WeGo 2007, para. 89, citing Walker v. CFTO Ltd. (1987), 1987 CanLII 126 (ON CA), 59 O.R. (2d) 104 (C.A.) ("Walker”) and Lewis v. Daily Telegraph Ltd., [1963] 2 All E.R. 151 (H.L.).
[82] It is impossible to determine how much damage was caused to Farallon’s reputation, or if there has been actual damage in the form of economic loss. There is no direct evidence of specific damage to either of those.
[83] Further complicating the issue of determining actual damage suffered are the following:
1. The value of Farallon’s shares increased after the defamatory statements were made. One can only speculate as to whether their value might have increased to an even greater extent if the defamatory statements had not been made.
2. Farallon no longer has a public face. Its shares were acquired by a larger company for a price above market value when the sale was first announced, and significantly higher than their actual value when the Postings were made.
Nature and Seriousness
[84] The second standard factor considers "the tone, language, content and gravity of the false statement, and the extent to which the defendant has sensationalized the statement”: Reichmann, at para. 8, citing Raymond E. Brown, The Law of Defamation in Canada, 2nd ed., (Carswell: Toronto, 1999).
[85] I reject Arnold’s argument that Farallon’s decision to sue him is an overreaction or is overreaching. While it may be true that Arnold is simply a machine repair shop owner, and his wife, a former child care worker, the defamatory statement on the Bullboard did not reveal his or his wife’s apparent occupations. Nor did they reveal his interest in Aztec Copper. It was the statements themselves that, understandably, caused Farallon’s reaction, not who they were written by.
[86] The allegations were serious. Having noted that, it is impossible to determine how seriously they would have been taken by readers. There is no evidence from any such readers. Some might have believed the commentary outright. Others might have considered the Bullboard as a forum for blowhards and gossips, not worthy of belief. Even so, some in the latter category might have considered that investing in or doing business with a company tainted by gossip involves a greater risk than with a company not so tainted.
[87] I do accept as accurate the submission by Arnold that Farallon’s allegation of Arnold being involved in a conspiracy against Farallon is an exaggeration.
Mode and Extent of Publication
[88] In assessing the mode of publication, the Court is "to consider the manner and extent of the defamatory publication and the size of the target audience. Ordinarily, the more widespread and frequent the publication, the larger the damages." Reichmann, para. 9.
[89] Arnold has published his defamatory statements repeatedly on a website accessible to the worldwide public. No doubt, the site is visited by, among others, those with financial interests in Farallon, and those contemplating investing in or with Farallon. According to Stockhouse, during the first quarter of 2009 its website had an average of 661,000 monthly visitors, although there is no evidence as to how many saw the defamatory comments.
Absence or Refusal of Any Retraction or Apology
[90] I am satisfied that Arnold did attempt to apologize and that the attempt is admissible in evidence, even though it was written in correspondence labelled “without prejudice”.
[91] The totality of the settlement correspondence, and of the particular letter in question, leads me to conclude that the apology was clearly intended to be distinct from the portion of the letter that can be considered as a discussion about settlement. There is nothing to indicate that it was an apology which was conditional upon any offer being accepted or made. I am satisfied it was unconditional and I consider it admissible and will consider it.
[92] Having said that, I am also satisfied that an apology of the sort provided in this case is of qualitatively less significance than an apology which might have been, and could have been, written on the same website where the original defamatory statements were posted.
[93] In that regard, I note the comments in Second Cup where the court, at para. 40, citing Walker, said this:
It has been observed that a company cannot be injured in its feelings and therefore 'damages may be small in commercial terms, unless the defendants' refusal to retract or apologize makes it possible to argue that the only way in which the reputation of the company can be vindicated in the eyes of the world is by way of a 'really substantial award of damages'.
Conduct and Motive
[94] I am satisfied that Arnold’s motive was to negatively impact the value of Farallon’s shares, and thereby indirectly increase the value of his own shares in Aztec Copper. He became President of Aztec Copper in the months following the defamatory statements.
[95] I reject Arnold’s submission that he acted in good faith.
Aggravated and Mitigating Circumstances
[96] An aggravating circumstance is that he published on a website aimed at persons interested in investing in companies such as Farallon. I am satisfied that this was a deliberate attempt to injure Farallon in the eyes of investors and potential investors and those who might do business with Farallon.
[97] I am satisfied that his attempt to apologize is a mitigating factor.
[98] I am satisfied that the fact that he stopped publication of defamatory comments after he was contacted by Farallon’s counsel is a mitigating factor, although I am cognizant of the fact that it was in his own best interests to do so.
Caselaw
[99] There have been a number of recent Canadian decisions that provide guidance with respect to the appropriate amount of damages in a case like this. See e.g., Barrick Gold; Hunter Dickinson Inc. v. Butler, 2010 BCSC 939 (“Hunter Dickinson”); Reichmann; Ager v. Canjex Publishing Ltd. dba Canada Stockwatch, 2003 BCSC 891 ("Ager (Trial)") affirmed on this point, Ager (Court of Appeal).
[100] In Barrick Gold, the Ontario Court of Appeal significantly increased an award of general damages to $75,000. The Court reasoned that evidence indicated that the motions judge had "failed to take into account the distinctive capacity of the Internet to cause instantaneous and irreparable damage to the business reputation of an individual or corporation by reason of its interactive and globally all-pervasive nature ..." Barrick Gold, paras. 43 and 44.
[101] In Hunter Dickinson, Wedge J. cited the foregoing passage from Barrick Gold relating to the Internet's distinctive capacity to cause damage to a business reputation. Farallon was one of the plaintiffs in Hunter Dickinson, which similarly involved false statements published anonymously on Stockhouse's Farallon Bullboard by a defendant unknown to the plaintiffs. Like this case, the defamatory statements accused Farallon, its President, and an associated company of misleading investors, engaging in fraud and bribery, and participating in a conspiracy to steal Campo Morado. Wedge J. was "satisfied that the plaintiffs [were] entitled to a substantial award of damages," awarding $75,000 in general damages to the corporate plaintiffs.
[102] There are a number of differences between this case and Hunter Dickinson, including the following:
1. Farallon does not allege that Arnold made any statements regarding any natural person.
2. Arnold made fewer statements over a shorter duration.
3. Even if one accepted the interpretation of the Postings alleged by Farallon, the alleged meanings are not nearly as egregious as those alleged In Hunter Dickinson.
[103] In Vanquero Energy Ltd. v. Weir, 2004 ABQB 68 (“Vanquero”), the corporate Plaintiff was awarded $10,000 in damages. It has the following similarities to the case at bar:
1. It involved a publicly traded company.
2. The alleged defamation occurred on the Stockhouse website.
3. The Court also specifically considered the nature of how libel is spread on the internet through chat rooms.
[104] Angle v. LaPierre, 2008 ABCA 120 (“Angle”), involved the publication of defamatory statements on a well-read website. And, despite what appeared to be a targeted campaign against the Plaintiff, nominal damages were awarded against a number of individuals ranging between $1 to $3,500, collectively just over $11,000.
[105] Langille v. McGrath, 2001 NBCA 106 (“Langille”), is also similar to this case in that the Defendant admitted to publishing material amounting to allegations of criminal conduct against the Plaintiff. The Court of Appeal varied the trial judge's assessment of damages for libel involving defamation against the individuals and awarded damages in the amount of $500 to the corporate plaintiff when no loss to business reputation was proven.
[106] The most significant factors suggesting that a larger award for general damages should be awarded are the following:
1. Farallon’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 Arnold’s motive was to cause economic damage to Farallon and to drive down its share value.
5. Arnold was at least in part motivated by his own interests in Aztec Copper.
6. They 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 − those who read the Bullboard and might become investors in or with Farallon.
8. Arnold did not act in good faith.
9. Arnold lied when first confronted with the statements, requiring Farallon to go to the additional expense of seeking two further court applications.
10. Whatever apology he may have made, it was not enough and was of limited effect. It should have been posted on the same Bullboard and been unconditional.
[107] The most significant factors suggesting a smaller award for general damages are the following:
1. The absence of any direct evidence that Farallon suffered any loss to business reputation.
2. The absence of any direct evidence that Farallon suffered any economic loss.
3. The general rule that corporations are limited to nominal damage in the absence of evidence of economic loss.
4. There is no evidence of the numbers of persons who saw or read the Postings.
5. The fact that Farallon’s shares went up, despite the publications, and that the company was sold at an increased value despite the publications.
6. To some extent, any chat room labelled “Bullboard” must be taken with a grain of salt. One must consider the limited effects that the statements could have on reasonable readers.
7. At least one of the claims of Farallon is exaggerated − that of Arnold being involved in a conspiracy.
8. It is impossible to separate any damage caused by Arnold from the damages which might have been caused from the other defendants that Farallon is suing for the exact same type of postings.
9. He attempted to apologize.
[108] Considering all of the foregoing, I have determined that the appropriate amount of general damages to be awarded is $40,000.
Punitive Damages
Punitive damages bear no relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the egregious conduct of the defendant. They are in the nature of a fine which is meant to act as a deterrent to the defendant and to others from acting in this manner. It is important to emphasize that punitive damages should only be awarded in those circumstances where the combined award of general and aggravated damages would be insufficient to achieve the goal of punishment and deterrence.
[110] In Second Cup at para. 51, citing Whiten v. Pilot, 2002 SCC 18, the court said this:
The primary functions of punitive damages are deterrence, denunciation, and retribution. This is to ensure that the wrongdoer does not view compensatory damages as a licence to commit wrongdoings. Nonetheless, a less than proportionate award will fail to achieve its purpose. Such award must be proportionate to: a) the blameworthiness of the defendants' conduct (involving considerations of whether the misconduct was planned and deliberate, the intent and motive of the defendants, and whether the defendants persisted in their outrageous conduct); b) the plaintiff’s degree of vulnerability; c) the harm or potential harm directed at the plaintiff; d) the need for deterrence; e) even after taking into account other penalties; and f) the advantage wrongfully gained by the defendants.
[111] I consider all of the foregoing.
[112] The award for general damages will seriously affect Arnold’s already dire financial situation. There is no need to deter or to denounce him and, in any event, an award for punitive damages will not, in the circumstances of this case, advance either of those objectives.
[113] In view of the foregoing, I am satisfied that an award for punitive damages is not appropriate.
Injunction
[114] In Astley v. Verdun, 2011 ONSC 3651, Chapnik J. stated the following at para. 21:
Permanent injunctions have consistently been ordered after findings of defamation where either: (1) there is a likelihood that the defendant will continue to publish defamatory statements despite the finding that he is liable to the plaintiff for defamation; or (2) there is a real possibility that the plaintiff will not receive any compensation, given that enforcement against the defendant of any damage award may not be possible: see Hunter Dickinson Inc. v. Butler, 2010 BCSC 939 at paras. 75-79; Griffin v. Sullivan, 2008 BCSC 827 at paras. 119-127; Newman v. Halstead, 2006 BCSC 65 at paras. 297-301; Cragg v. Stephens, 2010 BCSC 1177 at paras. 34-35, 40.
[115] Lost goodwill may never be recovered nor adequately compensated for by damages, justifying an injunction to prevent further damage to a plaintiff’s reputation: WeGo Kayaking Ltd. et al. v. Sewid et al., 2006 BCSC 334, para. 23.
[116] Arnold does not seriously oppose the application for an injunction.
[117] In the circumstances of this case, an injunction is appropriate.
DECISION
[118] General damages are assessed at $40,000.
[119] The claim for punitive damages is dismissed.
[120] There will be an injunction in the following terms:
1. Arnold, his agents, servants, or anyone acting on his behalf, is hereby restrained from publishing, or causing to be published, on the internet or by any other method or medium, whether by name, pseudonym, address, photograph or other means of identity, any defamatory statement referring in any way to Farallon Mining Ltd., its officers, directors, or affiliated persons or entities.
[121] If the parties cannot agree upon costs, they may set the matter down for hearing at a time which they consider convenient.
“Silverman J.”
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The Honourable Mr. Justice Silverman