Court of Appeal for Ontario

Date: April 19, 2018 Docket: C62936

Judges: Hoy A.C.J.O., Huscroft and Paciocco JJ.A.

Between

Walsh Energy Inc. (c.o.b. as "The Energy Centre") and Waltek Energy Services Inc. (c.o.b. as "Waltek" or "Energy Plus and Chateau Heating and Cooling")

Plaintiffs (Respondent/Appellant by way of cross-appeal)

and

Better Business Bureau of Ottawa-Hull Incorporated/Bureau D'Ethique Commerciale D'Ottawa-Hull Incorporée (c.o.b. as "Better Business Bureau serving Eastern and Northern Ontario and the Outaouais") and Better Business Bureau of Ottawa-Hull Inc.

Defendants (Appellants/Respondents by way of cross-appeal)

Counsel

David Sherriff-Scott and Karen Perron, for the appellants

John H. Yach, for the respondent

Heard

September 13, 2017

Appeal Information

On appeal from the judgment of the Divisional Court (Justice David L. Corbett, Justice Charles T. Hackland and Renee M. Pomerance), dated March 11, 2016, with reasons reported at 2016 ONSC 1606, setting aside the judgment of Justice Hugh R. McLean of the Superior Court of Justice, dated December 12, 2012, with reasons reported at 2012 ONSC 5819.

Decision

Huscroft J.A.:

Overview

[1] The appellants, the Better Business Bureau of Ottawa-Hull Incorporated/Bureau d'Ethique Commercial d'Ottawa-Hull Incorporée and Better Business Bureau of Ottawa-Hull Inc. (collectively the "BBB"), are part of a network of not-for-profit organizations of fee-paying members whose goals include investigating consumer complaints and promoting the reliability of businesses. Members are required to respond to consumer complaints made to the BBB; non-members may also do so and utilize the BBB's mediation process. The BBB also provides ratings about businesses, which are posted on its website.

[2] Barry Walsh controls the respondent company, Walsh Energy Inc. ("Walsh"), as well as Waltek Energy Services Inc. ("Waltek"). Both companies were plaintiffs in these proceedings, but only Walsh is a party to this appeal. Both Walsh and Waltek were members of the BBB until they resigned in 2007.

[3] Shortly following their resignation, the BBB received a complaint from a Walsh customer, Mr. Fleischman. Walsh did not respond to the BBB concerning the complaint pursuant to the BBB protocol, nor did it resolve the complaint independently. As a result, the BBB changed Walsh's website-posted rating from "satisfactory" to "unsatisfactory". The posted rating included the information that it was the result of an unresolved consumer complaint. The rating appeared on the BBB website for approximately one year, until the BBB adopted a new rating system in January, 2009.

[4] The new rating system was designed by the BBB's umbrella organization and the BBB was required to adopt it. The system operated using the umbrella organization's proprietary software, which generated letter grades based on 17 factors considered by the BBB. The new ratings system generated a grade of B for Waltek and D- for Walsh, and these grades were posted on the BBB website.

[5] Waltek and Walsh sued the BBB in defamation, claiming that the grades posted on the BBB website caused substantial damages.

[6] The trial judge found that Waltek's B grade was not a relatively lower grade than the former "neutral" rating it had been assigned, and if anything suggested that the company had improved. It was not defamatory. The trial judge found, further, that Walsh's D- grade was not defamatory, stating that it was uncertain whether the grade was a diminution or an improvement over Walsh's prior "unsatisfactory" rating. He rejected the argument that the grades of both companies suggested that they were untrustworthy.

[7] The trial judge went on to conclude that the ratings were protected by defences of qualified privilege and fair comment in any event, and that there was no evidence of malice. He concluded, further, that Waltek and Walsh had failed to prove special damages and that general damages of only $15,000 would have been appropriate had they established liability. The trial judge awarded the BBB approximately $348,000 in costs on a partial indemnity basis.

[8] Waltek and Walsh appealed to the Divisional Court, but Waltek abandoned its appeal prior to the hearing. The Divisional Court allowed the Walsh appeal, concluding that the D- grade was defamatory and ordering a new trial on the issues of fair comment, malice, and damages. The Divisional Court also allowed the abandoned Waltek appeal and ordered a new trial on whether it had been defamed.

[9] The parties sought directions concerning the appropriate order and the Divisional Court provided supplementary reasons. The court noted the parties' agreement to the following points:

• Waltek's claims were abandoned prior to argument of the appeal and should not be remitted for retrial;
• Walsh's claim for lost profits was not pursued on appeal and should not be remitted for retrial;
• The Divisional Court had decided that the BBB's impugned words were defamatory as against Walsh; and
• The Divisional Court had decided that the defence of qualified privilege was not available.

[10] The Divisional Court held that issues of fair comment, malice, and damages other than lost profits should be remitted for determination by a new trial judge, who should have an unrestricted ability to make findings of credibility and fact, draw inferences, and determine the outstanding issues. The court held, further, that although it had found that the impugned words were defamatory, the precise defamatory meaning of the impugned words should be determined by the trial judge based on the record at the new trial.

[11] The BBB appeals with leave of this court and raises several issues. The BBB submits that the Divisional Court erred by:

(1) concluding that the impugned publication was defamatory;

(2) concluding that the fair comment defence had not been established and ordering a new trial on the issue;

(3) concluding that the impugned publication was not made on an occasion of qualified privilege;

(4) ordering a new trial on the question of malice;

(5) acting in a procedurally unfair manner on the question of damages; and

(6) ordering a new trial on the question of damages.

[12] Walsh cross-appeals. It submits that the record before the Divisional Court was sufficient for it to substitute its own decision and seeks judgment against the BBB, including awards of general, special and punitive damages. In the alternative, in the event that the case is referred to a new trial, Walsh seeks a direction requiring the trial judge to determine whether the facts underlying the impugned publication were sufficiently known to readers such that the defence of fair comment is available. In the further alternative, in the event the BBB succeeds on its appeal, Walsh seeks a reduction in the costs awarded at trial.

[13] In my view, the Divisional Court did not err in determining that the impugned publication was defamatory. The Divisional Court did err, however, in ordering a new trial on the fair comment issue. The record is sufficient to permit this court to conclude that the test for fair comment is satisfied. With the exception of the issue of the costs at trial raised by Walsh, which I address at the end of these reasons, these conclusions are sufficient to dispose of the appeal and cross-appeal and there is no need to address the other issues raised.

Discussion

(1) Was the publication defamatory?

[14] There is no question in this case that the impugned words were published by the BBB and were "of and about" Walsh. The question was whether the D- grade was defamatory, in the sense that it would tend to lower Walsh's reputation in the eyes of a reasonable person: Grant v. Torstar Corp., 2009 SCC 61, [2009] 3 S.C.R. 640 at para. 28.

[15] The trial judge found that it was not. He considered that it was uncertain whether the D- grade was a diminution or an improvement over Walsh's previous rating of "unsatisfactory", and inferred that Walsh was content with the unsatisfactory rating because it did nothing about it. The trial judge found, further, that although the plural word "complaints" appeared on the BBB website, the website correctly stated that there was only one unresolved complaint. Moreover, there were disclaimers and explanations on the website that made clear that the accuracy of the ratings was not guaranteed. The trial judge rejected the inference the D- grade was an innuendo that Walsh was untrustworthy and does not respond to customer complaints. However, the trial judge did not address the pleading that this was also the plain and ordinary meaning of the grade.

[16] The BBB submits that whether the D- grade was defamatory was a question of mixed fact and law and the trial judge's decision was entitled to deference. Instead, the Divisional Court substituted its view, and in doing so adopted the worst possible meaning of the impugned words.

[17] I do not agree.

[18] Although the trial judge's conclusion was otherwise entitled to deference, the Divisional Court properly concluded that the trial judge erred in principle by failing to make a finding as to the plain and ordinary meaning of the grade. The focus of the trial judge's analysis was on the context in which the grade was assigned and its connection to the prior "unsatisfactory" rating Walsh had received, as para. 25 of his decision makes clear:

It appears that his complaint is really that the rating system has changed, not with the rating itself. Specifically, the allegation is that the 'D-' was libelous when compared with an 'unsatisfactory' rating. The court finds, however, that in considering both the words in and of themselves, and in their greater context, it is not satisfied on the balance of probabilities that defamation has been made out. Indeed it is uncertain whether 'D-' was a diminution or an improvement over 'unsatisfactory'.

[19] The context in which words are used is relevant to determining meaning. So too are any reasonable implications the words may bear, the audience to whom they were published, and the manner in which they were presented: Botiuk v. Toronto Free Press Publications Ltd., [1995] 3 S.C.R. 3, at para. 62. But it need not be established that an impugned statement is worse than prior statements made by a defendant in order for that statement to be defamatory. Although context may be important in determining whether a statement is defamatory, the plain and ordinary meaning must also be considered.

[20] Given the trial judge's error, it fell to the Divisional Court to determine whether the D- grade was defamatory. In my view, it was open to the Divisional Court on the record that was before it to conclude that it was defamatory. As the court explained, at para. 31:

In summary, the rating means, in its plain and ordinary meaning, in the context in which it was written, that BBB has conducted a fair and impartial assessment of [Walsh] and concluded, on the limited information available to BBB, that [Walsh] is not trustworthy, ethical or responsive to customer complaints.

I do not accept the BBB's submission that the Divisional Court adopted the worst possible meaning. The D- grade must be understood in the context of the BBB's stated purpose. The BBB website states that its mission is to be "the leader in advancing marketplace trust", which it accomplishes by, among other things, "[d]enouncing substandard marketplace behavior". The website goes on to state that it regards trust as a function of integrity and performance, and defines integrity as including "respect, ethics and intent". Performance is described as relating to a "business' track record of delivering results in accordance with BBB standards and/or addressing customer concerns in a timely, satisfactory manner". In light of this, it was open to the court to find that the plain and ordinary meaning of the D- grade the BBB assigned Walsh was defamatory.

(2) Was the publication protected as fair comment?

[21] The test for fair comment was refined by the Supreme Court in WIC Radio v. Simpson, 2008 SCC 40, [2008] 2 S.C.R. 420, at para. 28 and recapitulated in Grant at para. 31. A defendant claiming fair comment must satisfy the following test:

(a) the comment must be on a matter of public interest;

(b) the comment must be based on fact;

(c) the comment, though it can include inferences of fact, must be recognisable as comment;

(d) the comment must satisfy the following objective test: could any person honestly express that opinion on the proved facts?; and

(e) even though the comment satisfies the objective test the defence can be defeated if the plaintiff proves that the defendant was actuated by express malice.

[22] The trial judge dealt only briefly with the fair comment defence, stating the test and concluding it was met. The Divisional Court held that the trial judge erred by conflating fair comment with the defence of qualified privilege, and in applying the fair comment defence without first construing the plain and ordinary meaning of the impugned words. Despite its criticism of the trial judge's decision, the Divisional Court acknowledged that the trial judge found that the BBB's ratings concerned a "matter of public interest" – the integrity and customer service record of small businesses – and agreed with his finding. The court acknowledged, further, that that the D- grade was a comment, easily recognizable as an opinion as opposed to statement of fact, and was based on facts. These conclusions aligned with those of the trial judge and satisfied the first three prongs of the test from WIC Radio. However, the court remitted the matter for a new trial rather than itself determining whether the test was met on the facts, because it found the trial judge failed to analyze the "objective honest belief" branch of the test.

[23] The BBB submits that the Divisional Court made findings that were contradicted by the evidence and erred in its application of the fair comment test. In particular, the court erred in failing to characterize the BBB's opinion as based on its criteria and the facts in the BBB file, and in requiring the impugned statement to satisfy a test of objective reasonableness. The BBB submits that the only facts necessary to apply the fair comment test were the BBB website and Walsh's admission that it had refused to respond to a customer complaint. It was not necessary to remit the matter for a new trial.

[24] In its cross-appeal, Walsh submits that the Divisional Court erred in its application of the second branch of the fair comment test. In particular, Walsh submits that the BBB did not disclose Walsh's D- grade was the result of a failure to respond to a single complaint, and that Walsh had informed the BBB that it would not respond to BBB complaints but would deal directly with any customers that contacted it with a complaint. In the absence of this information, Walsh says that it was impossible for readers to assess the merits of the D- grade it was assigned.

[25] In my view, it was open to the Divisional Court to determine whether the fair comment defence was satisfied on the record before it, and the court ought to have done so rather than remit the matter for new trial. I address the parties' submissions below.

Was the opinion based on fact?

[26] The second branch of the fair comment test requires that the facts underlying an impugned opinion be "sufficiently stated or otherwise be known to the listeners" to allow the listeners to make up their own minds about the opinion: WIC Radio, at para. 31. The defence of fair comment is not available if the factual foundation for an opinion is either unstated or unknown, or turns out to be false. That said, if there is a factual foundation for an opinion, there is no requirement that the opinion be reasonable.

[27] I see no need to remit the fair comment defence for new trial to determine if there was a factual basis for the BBB's opinion. The issue is not so complex that it requires a new trial.

[28] In my view, the factual basis for the BBB's opinion was clearly set out in the record. As the Divisional Court noted, under the BBB's rating system, "[a] single refusal to address a customer complaint through BBB mediation would result in a grade of A being reduced to D-." Here, Walsh admitted that it had not responded to the individual complaint. Moreover, it is undisputed that the BBB website identified the points applicable to specific criteria, how scores were converted into letter grades, and definitions of the weighted factors. Nothing further was required.

Could any person honestly express that opinion on the proved facts?

[29] Although the trial judge set out the test from WIC Radio and stated that it was satisfied, the Divisional Court held that the trial judge erred in failing to deal with this branch of the test – the objective test, which turns on whether any person could honestly express the BBB's opinion on the proved facts. Again, however, it was open to the Divisional Court to deal with the matter on the basis of the record that was before the court. Remitting the matter for a new trial was unnecessary.

[30] Following WIC Radio, an objective test replaced the subjective test for this branch of the fair comment analysis. What matters at this stage is whether a person could honestly express the opinion, given the proved facts – not whether the BBB actually held the opinion. The court does not evaluate the objective reasonableness of an opinion in light of the facts. It is enough that the opinion could honestly be held and has "a basis" in the facts. A court does not consider whether the facts "warranted" the comment or whether the comment "fairly" arose out of the facts: WIC Radio, at para. 39. As Binnie J. acknowledged in WIC Radio, at para. 50, "the 'objective' test is not a high threshold for the defendants to meet, but nor is it in the public interest to deny the defence to a piece of devil's advocacy that the writer may have doubts about (but is quite capable of honest belief) which contributes to the debate on a matter of public interest."

[31] The drop to a D- grade simply on the basis of one unanswered complaint may be thought harsh, but it is inherent in the fair comment defence that, provided the BBB's opinion is based on facts and could honestly be held, it is protected whether it is harsh or gentle, reasonable or unreasonable. As Binnie J. explained in WIC Radio, a trier of fact "is not required to assess whether the comment is a reasonable and proportional response to the stated or understood facts": see para. 28.

[32] In my view, the D- grade was an opinion that could honestly have been expressed on the proved facts. Put another way, it cannot be said that no one could honestly hold that opinion. This is sufficient to satisfy, in the general terms required, the fourth branch of the fair comment test. Accordingly, there was no reason to remit the matter for new trial. The fair comment defence was established.

(3) Was fair comment defeated by malice?

[33] The defence of fair comment, like qualified privilege, is defeated if the plaintiff establishes the impugned comment was made with malice. Malice includes spite or ill-will, but may also be established by showing that a comment was made with an indirect motive or ulterior purpose, dishonestly, or in knowing or reckless disregard for the truth. See Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, at para. 145.

[34] The trial judge found that Walsh failed to meet its burden. The BBB website made clear that there was only one unanswered complaint against Walsh; there was no plan or hidden agenda to force Wash into the BBB's conciliation process or BBB membership; and there was no evidence that the BBB dealt with Walsh differently than any other companies. In sum, the trial judge concluded that the there was "simply no evidence" of malice in this case.

[35] The BBB submits that the Divisional Court ought to have deferred to these findings. There was no basis for the Divisional Court to remit the question of malice for new trial. I agree.

[36] Walsh submits that it must be inferred that the D- grade was assigned for the dominant purpose of preferring the interests of BBB members and encouraging non-members to become paying members of the BBB. It notes that the A+ grade is only available to BBB members. A BBB member with an A+ grade would be less affected if it failed to respond to a customer complaint than a non-member, who would be starting from a maximum grade of A.

[37] I see no palpable and overriding error in the trial judge's analysis. The trial judge stated the applicable test, considered the arguments that made by the parties, and concluded that Walsh had failed to meet the difficult burden of establishing malice. The trial judge was not required to draw the inference Walsh submits. The trial judge reached a conclusion that was open to him on the record, and the Divisional Court erred in concluding otherwise.

(4) Costs awarded at trial

[38] The trial judge awarded partial indemnity costs to the BBB of $348,135.96. That award was set aside by the Divisional Court, which left the matter of costs to the trial judge presiding at the new trial the court ordered. Given the outcome of this appeal, it is necessary to revisit the trial judge's costs decision.

[39] In my view, the trial judge's award of costs is so excessive as to call for appellate intervention.

[40] It is well established that the court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27. As this court held in Boucher v. Public Accountants Council for the Province of Ontario, 71 O.R. (3d) 291 at para. 37, the overriding principle in assessing costs is the reasonableness of the costs award: "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice." The assessment of costs is not purely mathematical exercise, but should reflect what is fair and reasonable in all of the circumstances: Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722 at para. 52.

[41] The costs awarded by the trial judge are considerable in the context of a defamation action, but they are not unfair and unreasonable solely on this account. The problem is that they are grossly disproportionate to the costs incurred by the appellant in bringing the action. Counsel for the BBB billed for over three times as many hours in defending the action as the appellant's counsel billed in bringing it. The partial indemnity costs awarded by the trial judge to the BBB are more than three times Walsh's costs, calculated on a partial indemnity scale. Walsh could not reasonably have expected that it would be faced with costs award of this magnitude.

[42] The trial judge considered that this was a complicated matter and lengthy trial, involving expert witnesses and a great deal of evidence. He noted, further, that although BBB's offers to settle the action before trial did not trigger the costs consequences of r. 49.10 of the Rules of Civil Procedure, he considered them under r. 57. But the trial judge failed to consider the fairness and reasonableness of the costs awarded, and did not provide an adequate justification for the striking disparity in the costs incurred by the parties. The result is a costs award that is contrary to the fundamental objective of access to justice.

[43] In my view, the trial judge's costs award is not fair and reasonable and must be set aside. In all of the circumstances, I would substitute an award of $175,000, inclusive of taxes and disbursements.

Conclusion

[44] I would allow the appeal, set aside the March 11, 2016 judgment of the Divisional Court, and restore the December 12, 2012 judgment of the trial judge dismissing the action. I would dismiss the cross-appeal, save in regard to trial costs as set out below.

[45] The BBB is entitled to its costs in the Divisional Court in the agreed amount of $50,000.

[46] I would grant leave to appeal and allow Walsh's cross-appeal on the matter of trial costs. I would fix the BBB's trial costs in the amount of $175,000, inclusive of taxes and disbursements.

[47] The BBB is entitled to its costs of the leave application and the appeal in this court. In light of Walsh's success on its costs appeal, I would award the BBB costs in the amount of $50,000, inclusive of taxes and disbursements.

Released: April 19, 2018 ("G.H.")

"Grant Huscroft J.A."

"I agree. Alexandra Hoy A.C.J.O."

"I agree. David M. Paciocco J.A."