Tuesday, February 25, 2014

FreeDominion Case Update

I recently posted about a decision in a defamation action by Richard Warman against the owners of (and some contributors to) the FreeDominion internet forum.  The jury found the defendants liable for some 41 defamatory statements, and awarded a total of $42,000 in damages.

As well, the judge presiding over the trial granted an injunction prohibiting the defendants from further circulating the defamatory remarks, and awarded legal costs to Mr. Warman in the amount of $85,000.

I noted in that post that the Fourniers planned to appeal, and were fundraising in support of the appeal.  I've now received a copy of the Fourniers' Notice of Appeal.  I'm not going to link the full document, but here are the highlights:
  • Only the injunction and costs award are being appealed; not liability for defamation or damages.
  • The appeal against the injunction raises four grounds:
    • The trial judge failed to consider the impact of the Charter's guarantee of freedom of expression;
    • The trial judge misapplied the legal test for an injunction against defamation;
    • The trial judge improperly relied on the Fourniers' publication of the Notice of Libel and Statement of Claim; and
    • There was no "direct evidence" supporting a finding that the Fourniers had repeated or intended to repeat the defamatory remarks, after taking them down in 2008.
  • The appeal against the costs raises two grounds:
    • The judgment against each defendant was within the jurisdiction of the Small Claims Court, so no costs should have been awarded; and
    • The trial judge erred in principle by awarding substantial indemnity costs without regard for proportionality and by 'punishing' the defendants for generally defending the action.
These are the arguments that the Fourniers plan to make at the Court of appeal.  The arguments aren't (and don't need to be) fleshed out in detail in the Notice of Appeal, but there's enough to warrant some commentary.  Getting a better look at their grounds, I can guess at where they're going to be coming from, for the most part.  While I expect that there are certain interesting legal issues raised, I actually think that the appeal can be boiled down to a couple of very simple issues.

I should disclaim here that I am not involved in this case, and both sides are represented by experienced counsel.  My commentary here is not intended to be construed as a legal opinion as to the merits of the appeal, but rather a general commentary, for the benefit of the general public, as to how the arguments in this case fit into the larger legal framework.  (This is, after all, a newsworthy case.)  To the extent that I make predictions as to how the Court of Appeal may rule on a given issue, I should note that I do not have access to the full record, and do not actually know the specifics of the arguments to be advanced by either side, so there's a degree of speculation here, and in no way should this be interpreted as a professional opinion.

Only the Injunction and Costs Award are Being Appealed

As I noted in my previous entry, jury awards are very difficult to appeal.  An appellant is basically limited to saying that the judge made a mistake in deciding what evidence to let the jury hear, that the judge made a mistake in his or her instructions to the jury, or that there was no factual foundation whatsoever on the record to support the jury's findings.  [Appellate law 101:  Disagreeing with the result is not a basis for appeal.  An appeal can only be based on mistakes in the decision below, and given that the finder of fact is entitled to decide the facts, it's next-to-impossible to appeal a finding of fact.  So many self-represented litigants (and, occasionally, even represented litigants) make attempts to appeal that essentially boil down to "the judge (or jury) should have believed me instead", and these appeals simply can't succeed.]

So it appears that the Fourniers aren't challenging the jury's findings.  This is not surprising, but it is significant.  It means that the jury's findings are basically set in stone.  For the purpose of the appeal, and any further litigation between these parties, the jury's findings will be accepted as the truth.

The Injunction

(1) The Charter Pitch

This isn't fundamentally misplaced.  In discussions of 'internet speech', you'll find a lot of people arguing that "freedom of expression" creates something like a free-standing right to say whatever they want without consequence.  It doesn't, and those arguments are wrong, but this is a little different.  For the courts to impose an ongoing prohibition on publication of defamatory remarks is a restriction on speech to which a Charter analysis may apply.

That being said, Charter considerations have long informed the test for defamation injunctions.  It's something of a different test than is normal for injunctions, and that is very much because of the impact on freedom of expression:  If such injunctions were available in every case of defamation, it would be abhorrent to freedom of expression.  Therefore, the courts have developed a compromise solution that permits the granting of an injunction only under certain circumstances.  If that test is satisfied, then it is justifiable (even under Charter scrutiny) to impose an injunction.  (See the next subheading.)

To reiterate, because this is important:  While much of the public commentary hinges on the notion of 'freedom of speech', there is a well-established legal test, which strikes a balance in respect of freedom of speech.  So while rhetoric may turn on the Charter, at the end of the day the court's primary concern will be:  Has the test been satisfied?

In the court below, it appears that the Fourniers argued that the defamatory posts "dealt with matters of public interest".  That may strengthen a Charter analysis, if true, but the finding of malice probably works against them.

Also, while they might think that shutting down the forum and claiming to have been muzzled strengthens the notion that their Charter rights are being infringed, for reasons I explained in my prior post, that seems like something of an overreaction to the injunction.

(2) The Test

Incidentally, the test for 'permanent injunctions' recently came under scrutiny at the Court of Appeal.  In last month's decision in 1711811 Ontario Ltd. (Adline) v. Buckley Insurance Brokers Ltd., the question arose as to whether or not the test for a permanent injunction (which is relatively seldom seen) is the same as that for interlocutory injunctions (which is seen so frequently that any litigator can list off the three elements, and the name of the case setting them - RJR-MacDonald - without hesitation).

The courts had generally applied the RJR-MacDonald test for permanent injunctions, but this never made sense to me - the point of an interlocutory injunction is that it is decided before the merits of the case have been adjudicated, meaning that the court must look at the strength of the case, and the impact on the parties of granting an injunction before rights have been determined.  But with permanent injunctions not generally issuing until after the trial, that concern doesn't exist.

Accordingly, in 2010 the B.C. Court of Appeal rejected this practice, and the Ontario Court of Appeal followed suit in the Adline case.  The B.C. Court of Appeal found that the test for a final injunction simply entails the party seeking it to establish its legal rights, and then for the Court to determine whether or not an injunction is 'appropriate'.  This makes some sense.  An injunction is an 'equitable' remedy, discretionary on the courts, to be awarded in cases where other remedies are not adequate.

Applying the RJR-MacDonald test, a plaintiff would have needed to show 'irreparable harm' (among other things) - meaning that you can't get an injunction unless you can show that, without the injunction, you will suffer harm that cannot be compensated by way of damages.  The B.C. Court of Appeal's analysis likely lowers the bar on this for a final injunction (finding that "irreparable harm" is not, per se, relevant), but an equitable analysis still generally requires the inadequacy of other available remedies, so it isn't much of a change, substantively.  It's still conceptually similar to irreparable harm.

It may well be that the Fourniers intend to challenge the finding of 'irreparable harm', but this is unlikely.  For internet defamation, the existing law has turned on 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 and the characteristics of Internet communications..."

More likely, from the wording of the Notice of Appeal, it appears that the Fourniers intend to challenge the element of a permanent injunction which is relatively unique to defamation law:  Generally, a permanent injunction against defamatory remarks will be refused unless the party seeking it can establish (a) a likelihood that the defendant will continue to publish defamatory statements despite the finding of liability or (b) a real possibility that the plaintiff will not be able to enforce a judgment against the defendant.  (See 122164 Canada Limited v. C.M. Takacs Holdings Corp.)

The trouble with this argument is that the trial judge specifically addressed the probability that defamation would continue.  It's hard to read his reasons without concluding that he found, as fact, that defamation would continue.  And factual determinations are hard to challenge, needing to show a complete lack of evidence supporting the conclusion.  Which will be dealt with in the fourth argument...but before we get there, the Fourniers need to attack some of the evidence relied upon by the judge.

(3)  Reliance on the Publication of the Statement of Claim and Notice of Libel

The trial judge noted, in highlighting the persistence of the Fourniers' defamation, that they published the Statement of Claim and Notice of Libel (which would presumably include the particulars of the defamatory statements made against Warman - in order to sue, Warman needed to plead the remarks which he contended were defamatory...which means that, by publishing Warman's pleadings, the Fourniers are likewise publishing the defamatory remarks against him).

This could be an interesting argument.  The Fourniers are relying on the principle of 'open access' to the courts, that they were perfectly entitled to publish the details of the case being made against them.

And, indeed, the Statement of Claim was and is public record.  Anyone can walk into the courthouse and obtain a copy.  And there's nothing inherently wrong with publishing a public-record document (most of the time).  So, unfortunately, in order to proceed with the action, Warman needed to put the remarks themselves down in a document which would become part of the public record.  And all the Fourniers did was publish a document which was already public.

It's kind of compelling at face value, that to fault somebody for publishing a public-record document seems a little heavy-handed.

But it's more nuanced than that, too.  They aren't being found liable for additional damages on the basis of that republication.  They aren't precisely being faulted for it.  The judge looked at it as supporting the inference that, given the opportunity, they would continue to defame Mr. Warman.  Being entitled to do something doesn't mean that actually doing it can't be used to draw inferences about your behaviour.

Whether or not publication of the Statement of Claim by the Fourniers would have been independently actionable may be questionable, but it's probably still fair game to use it to infer a likelihood of continuing defamation.

Besides, open access is important, but it isn't carte blanche to spread defamatory remarks.

Ever see a news report summing up the charges against an individual, and then disclaiming "None of the allegations have been proven in court"?  They do that primarily because "I'm just repeating what I heard" isn't a defence to defamation.  When reporting on such a thing, news media have to be careful that they aren't holding out unproven allegations as being factually true.  (You're allowed to report on the fact that allegations have been made, but if that may be misinterpreted as holding the allegations out as true, you might be in trouble.)

The fact that you may be quoting from, or completely reproducing, a public record document doesn't entirely change the analysis.  In general, I think it might be a stretch to suggest that publishing a court pleading is presumptively holding out its contents - or any part of its contents - as true, but this is a lot more complex than that, in large part because of the defence led by the Fourniers.

If they published the Statement of Claim, and said of it "We never said those things about him", that would probably be hard to criticize.  After all, not only would they not be giving any credence to the alleged defamatory statements, but they'd be implicitly rejecting them.  However, that wasn't their defence.  Until trial, it appears that they maintained the defence of "justification" - i.e. that the statements were true.  Among other things.  In other words, they were publishing the Statement of Claim on their website, and all the while claiming that the defamatory statements in it were true.

Combine that with the finding of malice, and it lines up a pretty good pitch - which the trial judge appears to have accepted - that the publication of the Statement of Claim was the Fourniers' way of keeping the libellous remarks alive for the world to see.

(4) The Evidence Defamation Would Continue

This ground of appeal is set out thusly: that there was "the absence of direct evidence that the appellants had repeated or intended to repeat the defamatory words after the words were removed in May of 2008".

The test for a defamation injunction looks to the future - the conduct sought to be prevented.  So, strictly speaking, the 'since May 2008' portion is not likely to be directly relevant; the question is whether or not defamation was likely moving forward from the order in 2014.

And not only is "direct evidence" not required; in that light, a requirement for "direct evidence" would be incoherent - by its very nature, "direct evidence" is almost always incapable of showing future events, or the intentions of an adverse party.  Invariably, when asking "Is the defendant likely to continue to defame the plaintiff", there's always going to be some level of inference.

But I see why the Fourniers framed it that way; they want to pitch the following:  As far as the record is concerned, we haven't said anything defamatory in nearly six years.  If it's true that they didn't continue to defame him, that might be a factor tending towards a conclusion of "Why would they start now?"  But while it might be factually relevant to the legal question, asking an appellate court to substitute a new inference for a finding of fact by the court below...is a tall order.

Of course, if the Fourniers don't successfully argue that the judge's reliance on the publication of the Statement of Claim was misplaced, this whole pitch fails entirely, the counter-argument being "Yes, you continued to publish them.  For the whole time, you published a document which set out the defamatory remarks, and publicly took the position that the statements were true."

But I also have a problem with the argument itself, in that it would create a bit of a moving target for the plaintiff's evidentiary burden:  If I'm suing you for defamation, I'll pick the statements I want to rely upon, obtain my evidence that you said them, and move forward with an action.  If you continue to defame me, then I could theoretically amend my claim to add the new allegations, but unless it significantly strengthens my case in some way, I might not do so:  The amended claim would potentially necessitate another round of documentary disclosure and oral discoveries, which can significantly delay the proceeding.  If you keep defaming me, and I keep amending my claim to include the new defamation, we will never get to trial.

Unfortunately, procedural fairness generally prevents courts from being able to adjudicate issues as they arise in real time.  So it's not practical to expect a plaintiff to lead evidence of defamation continuing up to the date of trial, and accordingly not prudent to consider an omission of such evidence as vindicating.

Perhaps more importantly, even the history isn't all that favourable to the Fourniers:  The trial judge noted that the removal of the materials from the forum didn't occur "until approximately seven months after being served with the plaintiff's Statement of Claim and nine months after being served with the plaintiff's first Notice of Libel."  That's probably relevant.  And it couples with the finding of malice, and the fact that they have consistently refused to apologize for or retract the statements.

(Incidentally, even if they succeeded on this, their own submissions in the costs proceeding could come back to hurt them:  They argued that, being individuals of limited means, only a nominal costs award should be made.  Remember:  The test for an injunction on a defamation action is disjunctive - it requires x OR y.  Even if you can't show that the defendant is likely to 'do it again', you can get an injunction if you can show that collecting on your judgment may not be possible.  So when the defendant comes in saying "We can't afford to pay the plaintiff's costs"...)

Summary of Injunction Appeal

On my read of the grounds for appeal, it seems to me that the Fourniers absolutely need to succeed on two central points:  That it was improper of the trial judge to rely upon the publication of the Statement of Claim, and that, without relying on the publication of the Statement of Claim, the facts are incapable of sustaining the inference that they would continue to disseminate the defamatory statements.

The finding of malice really hurts the Fourniers a lot - they illustrated a great deal of reluctance to take down the defamatory posts in the first place, fought the litigation tooth and nail, all to protect what the jury found was a malicious effort to injure Warman's reputation.  It makes them pretty unsympathetic, arguing that they shouldn't be prevented from doing it again.

One of the key questions for me is this:  Would they be prepared to moderate their forum?  If there was no injunction, and one of their posters started posting defamatory remarks about Warman, would they proactively work to delete these remarks?  And this is where the 9-month delay in deleting the remarks really works against them:  They showed such reluctance to take down the offensive remarks, despite the threats and reality of legal action, that it's very clear that moderating their forum - at least, in terms of deleting remarks about Warman - is something that they really don't want to do.  (In this sense, shutting down the forum doesn't really help their case.  As I argued previously, it would be hard to hold them in contempt if they proactively moderated their forum and removed defamatory comments as soon as they discovered them.  The fact that they decided instead to shut down the forum altogether may indicate an ongoing reluctance to do so.  If I had to guess, I'd speculate that they find the notion of 'censoring' their members to be abhorrent.)

Their historical conduct that is on the record is probably sufficient, standing alone, to justify a conclusion that they're likely to revert to the old status quo, given an opportunity.  Now, if they had led evidence of the measures that they have taken to prevent further the publication of further defamatory remarks (implementing and enforcing anti-defamatory rules on the forum; appointing moderators to enforce the rules; instances of the rules having been enforced), that might have undermined the connection between their past conduct and likely future conduct.

As it is, though, it's looking like an uphill battle.


They have to seek "leave" to appeal costs, though in practice that is a fairly technical step.  Typically, the Court of Appeal decides the 'leave to appeal' application at the same time that it decides the appeal itself, and decides "leave" based on an analysis as to whether or not there's an arguable ground of appeal.  Meaning that the parties go in and argue the merits, and then the Court decides whether or not the grounds are sufficient to warrant hearing the appeal.

However, it underlines a simple fact:  Costs are discretionary, and are very difficult to appeal successfully.  It requires the appellant to illustrate an error in principle.

They're making two arguments to this effect.

Costs Argument #1:  The Recovery was Within the Small Claims Court Jurisdiction

I previously noted what looked like a strange argument described in the costs decision, that Warman's offer to settle had been within the Small Claims Court jurisdiction, and therefore Warman should be denied costs.  I remarked that it kind of looked like a reference to Rule 57.05, which permits the court to decline to award costs where the amount recovered would have been within the Small Claims Court's jurisdiction.  But an offer to settle doesn't trigger that provision.

The Notice of Appeal frames this argument in a less-nonsensical way:  The damages awarded, while cumulatively reaching $42,000, are within the Small Claims Court jurisdiction as against each defendant.  And therefore, under Rule 57.05, Warman shouldn't have gotten costs.  The reference to the offer to settle might have been a nod to Warman's own assessment of the value of the case, suggesting that he didn't expect to beat the Small Claims Court jurisdiction.  (Not a solid inference, necessarily.)

There are still a few challenges to this argument.  Firstly, Rule 57.05 is still highly discretionary.  Where it was reasonable to pursue the action at the Superior Court, Rule 57.05 is seldom invoked, even if the ultimate award is less than $25,000.  In a case where the damages are uncertain, and could reasonable have been estimated at more than $25,000, Rule 57.05 consequences are not generally to be feared.

Secondly, the subtext of the argument is that, instead of going to the Superior Court, Mr. Warman should have commenced several distinct actions against the defendants at the Small Claims Court.  That may or may not have been technically available.  (It's especially tenuous to say that the actions against the two Fourniers should have proceeded separately, which two awards did cumulatively exceed the Small Claims Court jurisdiction.)  But it's frowned upon.  Multiplicity of proceedings is to be avoided, and despite the jury's allocation of damages as against each defendant, there's overlap in the torts committed by the different defendants, so it probably wouldn't have made sense to pursue each defendant separately.  If he did so, it would have created mounds of additional paperwork and procedural redundancies.  (I've had cases before which could have been heard together at the SCJ, but instead went separately to the Small Claims Court.  It's pretty unwieldy.  In other words, even if it were only about the monetary claim, it was still pretty reasonable to proceed at the Superior Court.

Thirdly, the choice of whether or not to proceed separately against the defendants is within the plaintiff's discretion.  It's not even just a matter of whether or not it's reasonable; it was open to Warman, as plaintiff, to proceed in that manner, bringing one action against all defendants.  That action, which was at minimum permissible, generated an award of damages outside the Small Claims Court's jurisdiction.  It would not have been available to him to bring one action at Small Claims Court, seeking $42,000.  Strictly speaking, I wouldn't think that Rule 57.05 is engaged by the award of damages in this case.

Fourthly, injunctive relief isn't available at the Small Claims Court.  The injunction renders the case outside the scope of Rule 57.05.  In other words, if the Fourniers fail to defeat the injunction, this whole argument is toast on that basis alone.  But even if the injunction is reversed, that still doesn't make it unreasonable to have sought it, and proceeded to the Superior Court to do so.

Fifthly, one of the factors in determining whether or not to invoke Rule 57.05 is whether or not the case was appropriate for resolution at the Small Claims Court.  The Small Claims Court is designed for an expeditious resolution with less rigourous procedural fairness obligations.  The defendants opted for a trial by jury, which wouldn't be available at Small Claims Court, and is a big step up in terms of 'procedural fairness', increasing the cost and complexity of the trial.  It seems strange for the defendants to insist on the rigourous procedural protections of a jury trial, and then nonetheless come back and argue that the case should have been brought at the Small Claims Court.

I would generally be reluctant to appeal a refusal to apply a discretionary provision like Rule 57.05.  But in a case involving an injunction and a damage award of $42,000?  It seems like a stretch.

Costs Argument #2:  Proportionality, Substantial Indemnity Costs, and Punishing the Defendants

I noted the proportionality issue in my last entry, that it's really unusual to see a costs award of $85,000 on a judgment of $42,000, for reasons of proportionality.  However, it's less unusual in a defamation action, where the value of 'vindication' and restoring one's reputation may be significantly higher than the amount of the judgment itself.

The trial judge gave detailed reasons as to why proportionality didn't prevent such a large award in this case.  Among the reasons was that the defendants had mounted a rigourous defence to the action:  They advanced defences, requested discoveries, requested a jury trial, and insisted on their day in court without offering or agreeing to any reasonable compromise.  All of which, of course, they were entitled to do.

But the notion that they are being 'punished' by the costs award is not accurate.  Costs are, generally speaking, designed to indemnify a party for being forced to incur legal fees to secure his legal rights.  They are not (again, generally speaking) punitive in nature.  Nor are they punitive here.  The Fourniers were entitled to their day in court.  And they were entitled to insist on all manner of procedural protections to make sure it is a fair trial.  But in a 'loser pays' system, when you run up your opponent's legal bills by doing so, you run the risk of having to pay a large part of that bill at the end of the day if you're unsuccessful.

This is especially true when you were offered a reasonable 'out' earlier in the process - where, as here, the plaintiff offered to accept a relatively small sum in settlement of the claim.  The Rules are built in such a way that, most of the time, this will result in "substantial indemnity" costs.

The judge found that "substantial indemnity" was the appropriate basis for an award, because Warman had offered to accept a small settlement early in the process.  At the end of a six-year process, culminating in a three-week jury trial, he obtained a judgment for more than four times what the defendants could have paid him at the outset.  Under those circumstances, substantial indemnity costs would ordinarily be expected, and a judge would have to have a reason to not do so.

The bottom line, looking at the trial judge's decision, is this:  Warman was justified in pursuing the case, he offered very reasonable settlements to the defendants throughout, but the defendants forced him to incur very significant fees to pursue his rights.  The fees he incurred were reasonable, not out of scale to what the defendant should reasonably have expected to pay, nor disproportionate to the importance of the issues to him.

At the end of the day, the judge pretty thoroughly evaluated the factors for costs, and came to a conclusion fairly consistent with other defamation cases.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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