Merit Consultants International Ltd. v. Chandler, 2012 BCSC 1868
In this decision, the British Columbia Supreme Court determined that it is not defamatory for a company to tell its shareholders how it intends to respond to a lawsuit, even if it does not end up responding that way.
In April 2007, Merit Consultants International Ltd. (Merit), an engineering firm, entered into a contract with Redfern Resources Inc. (Redfern), a mining company, under which Merit would become the construction manager at Redfern's site in northwestern B.C. Redfern terminated the contract in March 2008 and Merit sued, seeking damages for breach of contract. Redcorp Ventures Ltd. (Redcorp), Redfern's parent company, issued a news release stating that Redfern would "vigorously defend" Merit's lawsuit and would counterclaim to allege, among other things, negligence by Merit. Redfern eventually did file a counterclaim, but it did not allege negligence.
Both Redfern and Redcorp went bankrupt before the breach of contract claim could be decided. Merit then sued former directors of Redcorp alleging, among other things, that the news release was defamatory. Merit argued that an allegation of negligence against professional engineers was a serious attack on their reputation.
The directors applied for summary dismissal of the defamation claim, arguing that the news release was protected by qualified privilege, which protects communications made by a person who has an interest or duty to make it to a person who has a corresponding interest or duty to receive it and by absolute privilege, which protects communications that take place during, incidental to, and in the processing and furtherance of court proceedings.
The Court found that the communication was protected, whether the occasion was one of qualified privilege or absolute immunity, and dismissed the claim. In so doing, the Court noted that it would be untenable if Redfern was only entitled, at law, to report the fact that the claim had been commenced without also advising its shareholders that the action would be defended and on what basis.
In a related decision, the Court found that the defendants were entitled to special costs because, among other things, Merit had pursued a defamation claim that was not viable. See 2013 BCSC 582.
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