The British Columbia Court of Appeal has dismissed an appeal by Valley Traffic Systems Inc. (VTS) and two of its executives, upholding a $1.5 million damages award for defamation against a competitor and his companies, collectively known as The Ansan Group.
The court found that VTS and its executives — P.J. and T.P. — engaged in a “common design” to defame R.M. and The Ansan Group, their direct competitors in the traffic control services industry, by orchestrating a malicious campaign of defamatory publications.
Background
The case stems from events in late 2011, when both VTS and The Ansan Group became aware of a forthcoming request for proposals from BC Hydro for the largest traffic control services contract in the province’s history. R.M. controlled The Ansan Group, while P.J. was the president of VTS, and T.P. served as its vice-president.
In January 2012, R.H., a former employee of The Ansan Group who had a contentious falling out with R.M., approached VTS. After meetings with P.J. and T.P., R.H. entered into a confidentiality and non-solicitation agreement with VTS to prepare a proposal for the BC Hydro contract. VTS provided R.H. with business cards identifying him as their senior contracts manager.
At some point in 2012, VTS allegedly entered into a profit-sharing agreement with R.H., entitling him to 75 per cent of the profits from work performed for BC Hydro on Vancouver Island. Despite the lack of formal documentation for this arrangement, VTS paid R.H. $2.4 million over the next five years.
Defamation campaign
In June 2012, employees of The Ansan Group discovered defamatory posts about R.M. and his companies on various internet sites. The posts accused R.M. of engaging in money laundering, receiving kickbacks, and participating in bribery and other criminal activities. The defamatory content was also circulated to Telus and high-ranking government officials, including then-premier Christy Clark and Rich Coleman, the minister responsible for BC Hydro.
Despite efforts by R.M. to halt the defamation campaign, similar publications continued to surface until the end of 2012. R.H. was later found to be the author of these defamatory publications.
In August 2012, BC Hydro issued its request for proposals, and in February 2013 awarded the contract to VTS. Subsequently, R.M. and The Ansan Group initiated a defamation lawsuit against VTS, P.J., T.P., and R.H.
Trial and appeal
At the first trial, the judge found that the appellants engaged in a common design to defame R.M. and The Ansan Group. VTS was found to be directly and vicariously liable for the defamation. VTS, P.J., and T.P. appealed the liability findings, leading to a new trial.
In the second trial, R.H. did not attend, and parts of his examination for discovery were admitted into evidence. The trial judge reviewed extensive email correspondence between R.H., P.J., and T.P., including emails where P.J. forwarded or hyperlinked defamatory publications to third parties.
The judge found P.J. and T.P. not credible, rejecting their claims that they were unaware of the defamatory publications or R.H.’s involvement. The court concluded that they participated in a common design to carry out a defamation campaign against R.M. and The Ansan Group, intending to harm their reputation and knowing their actions would cause injury.
Damages awarded
The trial judge awarded R.M. $500,000 in general damages and The Ansan Group $300,000 in general damages for inferred business losses. Additionally, the judge awarded R.M. $200,000 in aggravated damages and $500,000 in punitive damages, both on a joint and several basis, citing the malicious nature of the appellants’ conduct.
Grounds of appeal
The appellants challenged both the liability findings and the damages awarded. They argued that the trial judge erred by:
- Failing to apply the participation element required for a common design tort.
- Drawing speculative inferences unsupported by evidence, particularly regarding the $2.4 million paid to R.H.
- Conflating credibility findings with factual findings.
- Relying on hearsay evidence from R.H.’s examination for discovery.
Regarding damages, the appellants contended that:
- The corporate respondents were awarded general damages without evidence of economic loss.
- The general damages awarded to R.M. were inordinately high and improperly considered the defamation’s impact on third parties.
- Aggravated damages were awarded without a finding of actual malice and duplicated factors already compensated under general damages.
- Punitive damages were awarded without assessing their necessity in light of compensatory damages.
- The aggravated and punitive damages were improperly awarded on a joint and several basis.
Court’s decision
The Court of Appeal dismissed the appeal in its entirety. Justice Fenlon, writing for the court, addressed each ground of appeal.
On liability, the court held that the trial judge correctly applied the test for common design and that the appellants’ participation was established by their payments to R.H. and their forwarding of defamatory materials. The court found ample evidence to support the inference that the $2.4 million paid to R.H. was compensation for his role in the defamation campaign, noting that the amount was disproportionate to any legitimate work performed.
The court rejected the appellants’ argument that the trial judge conflated credibility and factual findings, stating that adverse credibility assessments were appropriately considered alongside other evidence.
Regarding the use of R.H.’s examination for discovery, the court found that even if its admission was erroneous, it was not material to the outcome, as the judge’s findings were based primarily on other evidence.
On damages, the court upheld the awards, finding that the general damages to The Ansan Group were justified given the nature and severity of the defamation. The court noted that corporate plaintiffs can be awarded damages for harm to goodwill and business reputation, even without direct evidence of economic loss.
The court found that the general damages awarded to R.M. were not inordinately high, considering the malicious and pervasive nature of the defamation campaign. The consideration of the impact on third parties was appropriate in understanding the distress caused to R.M.
The trial judge had noted that the defamatory publications accused R.M. of “money laundering, obtaining contracts through illegal kickbacks, secret bribes, and other corrupt and illegal activities,” and that the appellants’ conduct was “particularly high-handed, spiteful [and] malicious.”
Regarding aggravated damages, the court determined that the trial judge did not double-count factors already considered in general damages and that the appellants’ malicious conduct warranted such an award.
The court also upheld the punitive damages, noting that they were necessary to denounce and deter the appellants’ conduct. The judge had stated that “an award of punitive damages… is justified for the purpose of denouncing the conduct of the defendants and deterring the defendants and others from seeking a competitive advantage by intentionally defaming a competitor.”
Finally, the court held that joint and several liability for aggravated and punitive damages was appropriate, as the appellants engaged in the same malicious conduct under a common design.
For more information, see Valley Traffic Systems Inc. v. Malak, 2024 BCCA 370 (CanLII).
