RTC Engineering Consultants Ltd. v. Her Majesty the Queen in Right of Ontario as represented by the Ministry of the Solicitor General and Correctional Services - Office of the Fire Marshal

[Indexed as: RTC Engineering Consultants Ltd. v. Ontario (Solicitor General)]

58 O.R. (3d) 726

[2002] O.J. No. 1001

Docket No. C34588

Court of Appeal for Ontario

Laskin, Sharpe and Simmons JJ.A.

March 18, 2002

Torts -- Libel and slander -- Defences -- Qualified privilege -- Plaintiff engineer sent letter to investigators of explosion suggesting that explosion was caused by defect in heater to which defendant supplied natural gas -- Defendant's lawyer sent letter to recipients of plaintiff's letter stating that plaintiff's allegations were "professionally irresponsible if not deceitful or at worst malicious" -- Statements defamatory but defence of qualified privilege available to defendants -- Plaintiff's letter constituted attack on defendant's interests -- Defendant's lawyer entitled to protect his client's legitimate interests by writing to recipients of plaintiff's letter -- Malice was not dominant motive for lawyer's letter -- Letter reasonably germane and appropriate to occasion.

The plaintiff, a professional engineer, was retained to investigate the cause of an explosion. He theorized that the explosion was caused by a design defect in a heater to which the defendant C Co. supplied natural gas. Other investigators rejected this theory. After his retainer ended, the plaintiff wrote those other investigators alleging that the explosion had probably been caused by defective wiring in the heater. The defendant O, a lawyer, replying to the same individuals on behalf of his client C Co., described the plaintiff's allegations as "at best professionally irresponsible if not deceitful or at worst malicious". Before sending that letter, O had satisfied himself, on the basis of a number of reports, that the heater did not in fact have an electrical wiring problem. O sought a retraction or an apology from the plaintiff. The plaintiff offered neither, and instead brought an action for damages for defamation. The action was dismissed on the ground of qualified privilege. The plaintiff appealed.

Held, the appeal should be dismissed.

O's letter was admittedly defamatory of the plaintiff but the trial judge was correct in finding that the defence of qualified privilege defeated the plaintiff's action. A lawyer may have a qualified privilege in trying to protect the legitimate interests of a client. Moreover, a person attacked may respond in kind, in the same way and to the same audience chosen by the person making the attack. The plaintiff's letter constituted an attack on C Co.'s interests. O was thus entitled to protect his client's legitimate interests by writing to the very same people to whom the plaintiff had sent his letter. O was careful to restrict the recipients of his letter to those who had received the plaintiff's letter. Had he not done so, the defendants' qualified privilege may have been lost. In the circumstances, O's letter was sent on an occasion of qualified privilege.

To defeat the defence of qualified privilege, the law requires a plaintiff to show that malice was the dominant motive for the communication. The trial judge did not err in finding no dominant malicious motive in O's letter.

A qualified privilege will be defeated if the communication is not reasonably germane and appropriate to the occasion. The trial judge did not err in holding that O's letter was reasonably appropriate. The plaintiff's letter merited a strongly worded response, and a person whose interests are attacked is entitled to reasonable latitude in responding. Even accepting that O's language was "indelicate" and even taking into account that O was a lawyer, his letter did not exceed the bounds of reasonable latitude.

APPEAL from a judgment dismissing an action for damages for defamation.

Cases referred to Botiuk v. Toronto Free Press Publications Ltd., 1995 60 (SCC), [1995] 3 S.C.R. 3, 126 D.L.R. (4th) 609, 186 N.R. 1, 26 C.C.L.T. (2d) 109 (sub nom. Botiuk v. Bardyn); Douglas v. Tucker, 1951 54 (SCC), [1952] 1 S.C.R. 275, [1952] 1 D.L.R. 657; Falk v. Smith (1940), 1940 96 (ON CA), [1941] O.R. 17, [1940] 4 D.L.R. 765 (H.C.J.), affirmed (1940), 1940 325 (ON CA), [1941] O.R. 17 at 19, [1940] O.W.N. 515 (C.A.); Hill v. Church of Scientology of Toronto, 1995 59 (SCC), [1995] 2 S.C.R. 1130, 24 O.R. (3d) 865n, 126 D.L.R. (4th) 129, 184 N.R. 1, 30 C.R.R. (2d) 189, 25 C.C.L.T. (2d) 89, affg (1994), 1994 10572 (ON CA), 18 O.R. (3d) 385, 114 D.L.R. (4th) 1, 20 C.C.L.T. (2d) 129 (C.A.); Netupsky v. Craig, 1972 19 (SCC), [1973] S.C.R. 55, 28 D.L.R. (3d) 742, affg 1970 46 (ON CA), [1971] 1 O.R. 51, 14 D.L.R. (3d) 387 (C.A.) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.01 Authorities referred to Brown, The Law of Defamation in Canada, 2nd ed. (Toronto: Carswell, 1999)

Lorne M. Honickman, for appellants. Julian Porter, Q.C., for respondent Outerbridge. Cynthia R.C. Sefton, for respondent Consumers' Gas.

The judgment of the court was delivered by

LASKIN J.A.: --

A. Introduction

[1] The appellants Richard Carlstrom and his company RTC Engineering Consultants Ltd. sued for libel because of a defamatory letter written by the respondent Ian Outerbridge, a lawyer, on behalf of his client, the other respondent, Consumers' Gas Company. The main question on this appeal is whether the trial judge erred in holding that the defence of qualified privilege defeated the appellants' action.

[2] The action arose out of an explosion in Concord, Ontario. Carlstrom, a professional engineer, was retained to investigate the cause of the explosion. He theorized that the explosion was caused by a design defect in a heater to which Consumers' Gas supplied natural gas. Everyone else who had investigated the explosion, including the provincial regulators, rejected his theory. After his retainer ended, Carlstrom persisted with his theory and wrote these other investigators alleging that the explosion had probably been caused by defective wiring in the heater. Outerbridge replied to the same individuals and said that Carlstrom's allegations were "at best professionally irresponsible if not deceitful or at worst malicious".

[3] The appellants sued. The trial judge, Roberts J., dismissed the action on the ground of qualified privilege. He assessed the appellants' damages at $40,000 for general damages and nothing for either special or punitive damages. The appellants appeal on four grounds:

1. The trial judge erred in holding that Outerbridge's letter was written on a privileged occasion;

2. the trial judge erred in holding that the letter was written without malice;

3. the trial judge erred in holding that the letter was reasonably appropriate; and

4. the trial judge's assessment of general damages was unreasonably low.

We called on counsel for the respondents only on the third ground of appeal. For the reasons that follow, I would dismiss the appeal.

B. Background Facts

[4] The explosion took place on November 27, 1992 in a building rented by Inline Fibreglass Limited, a manufacturer of fibreglass and vinyl windows and doors. Both the Fuels Safety Branch of the Ministry of Consumer and Commercial Relations and the Ontario Fire Marshal's Office investigated the explosion. They concluded that it was caused by the overheating of a 45- gallon acetone drum located in Inline's premises.

[5] Carlstrom, who had been retained by Trow Engineering on behalf of Inline, came to a different conclusion. In his opinion, not one but two explosions had occurred. The first explosion had been caused by design failure in a unit heater above the acetone drum. The design failure allowed natural gas to accumulate in one chamber of the heater, where it was ignited by the open pilot light in the other chamber. According to Carlstrom, the explosion in the acetone drum was the second explosion. No one else supported Carlstrom's opinion.

[6] Although Carlstrom's retainer with Trow ended in January 1993, he mounted a letter writing campaign to persuade others of the validity of his theory. He claimed to have done so because the explosion raised a question of public safety.

[7] Because of Carlstrom's persistence, the Fuels Safety Branch and the Ontario Fire Marshal's Office agreed to test the unit heater. The heater was pre-tested on May 5th and fully tested on May 9, 1994. Carlstrom was present for the May 9th testing. The heater worked perfectly and disclosed no deficiencies. Still, Don Beck, an engineer with the Fuels Safety Branch who watched the test, did not rule out the possibility that the heater had been miswired. Beck asked to review photographs of the heater and Carlstrom supplied him with one he had taken.

[8] The next day, however, without waiting for Beck's review, Carlstrom wrote a strongly worded letter to Trow reiterating his opinion that there had been two explosions, that natural gas had exploded first, and that the design of the heater "was involved as part of the first explosion". He noted the government's "[i]ncredible resistance" to his concerns and said "[o]bviously something was seriously wrong somewhere". He also referred to the May 5th and 9th testings, claiming that they showed "a very serious wiring problem" and concluding that it was "fortunate that no fatality was involved". He ended his letter with a "special request":

Please advise INLINE as soon as possible of this probable deficiency with this specific unit heater, and possible identical problem with other unit heaters, so that they can contact CONSUMERS GAS to discuss the efforts necessary [to] ensure that all electrical circuit wiring to these unit heaters is as required by CGA, (which electrical circuit wiring must include at all times the safety controls).

[9] Significantly for this appeal, Carlstrom sent a copy of his letter to the president of Consumers' Gas, three adjusters who had investigated the explosion, three employees of the Fuels Safety Branch, including Beck, and two employees of the Ontario Fire Marshal's Office. The trial judge concluded that the letter constituted an "attack" on Consumers' Gas' interests.

[10] On receipt of the letter, Consumers' Gas became concerned that it had a safety problem. By regulation it was prohibited from supplying natural gas to an unsafe appliance. It asked its lawyer, Outerbridge, to deal with Carlstrom's allegations. Outerbridge already had a report from Consumers' Gas' own adjuster suggesting no safety problem existed but he was not content with it. He asked an experienced paralegal on his staff to investigate further. Within two weeks of receiving Carlstrom's letter, Outerbridge's office had three reports -- two from engineers with the Ontario Fire Marshal's Office and one from Beck -- all stating that the heater did not have an electrical wiring problem. Outerbridge was briefed by his paralegal on the two reports from the Fire Marshal's Office and he read Beck's report. Beck summarized his conclusion that the heater was not miswired in the following paragraph:

An analysis of photographs taken shortly after the incident occurred do not provide any evidence that supports a possibility that mis-wiring of the power supply lines to the appliance could have resulted in an unsafe condition. The tests demonstrated good ignition and combustion of the unit heater. The tests also showed that the pilot safety shut-off components would actuate as intended in less than approximately 45 seconds after a pilot outage.

[11] Armed with these three opinions, Outerbridge then drafted a reply to Carlstrom. His letter dated June 1, 1994 and sent on June 3rd to the same people to whom Carlstrom had written is the subject of the appellants' libel action. The gravamen of the appellant's complaint is found in the second last paragraph of the letter. The full text of Outerbridge's letter -- with the offending paragraph italicized for emphasis -- is as follows:

RTC Engineering Consultants Ltd. P.O. Box 245 Rexdale, Ontario M9W 5L1

Dear Sirs:

Re: Fire Loss November 27, 1992 141 Syndercroft Road, Concord, Ontario Our File No. 0001/09241

We act for Consumers Gas Company

Mr. R. Carlstrom, P. Eng., caused to be delivered to our client a report dated May 10, 1994, on the letterhead of your company addressed to Trow Consultants Ltd. ostensibly prepared by him on their instructions at the request of Inline Fibreglass. This report was published and made public by Mr. Carlstrom by providing a copy of same to the following persons:

Consumers Gas: President Fuels Safety Branch: M. Philip; Don Beck; Ken Taylor G.W. Cleary: Bob Krywiak S.B. Sobel: Steve Sobel Lowthian Smith Sharoun: Raymond Smith Ontario Fire Marshal: Mr. Moyle; Armen Kassabien

There is no privilege attaching to this publication.

Specifically the statements on page 4 under the heading "Conclusion" and under the heading "Special Request" are untrue and known to be untrue by Mr. Carlstrom or alternatively, should have been known to be untrue and constitute a defamation of Consumers Gas.

In consequence of the publication by Mr. Carlstrom, we have caused an intensive investigation into the facts and circumstances underlying his allegations and have determined that there is no substance whatever to his suggestion that the unit in question was incorrectly wired on the premises of Inline.

The wiring "problem" to which he alludes was one which was created deliberately by Mr. Hilla on or about the first week of May, 1994, in order to facilitate the testing of the individual components of the heater and this information was known or should have been known to Mr. Carlstrom.

His opinion premised on the possibility that such a wiring configuration "probably" occurred prior to having been made by Mr. Hilla is at best professionally irresponsible if not deceitful, or at worst malicious.

That being the case we request of you on behalf of our client that your disassociate yourself from this publication or alternatively acknowledge that the publication was done on your authority and with your knowledge, in which event, we ask for an apology and a retraction forthwith addressed to the Consumers Gas Company.

[12] As the last paragraph of the letter shows, Outerbridge sought a retraction or an apology from Carlstrom. But Carlstrom offered neither. Instead, he sued for libel.

C. Discussion

(a) The defence of qualified privilege

[13] Outerbridge's letter is admittedly defamatory of Carlstrom and his company. The appellant's action failed because of the trial judge's conclusion that the respondents were entitled to rely on qualified privilege.

[14] Qualified privilege is a defence to a defamation action. The privilege attaches to the occasion when a defamatory statement is made, not to the statement itself. But on an occasion of qualified privilege a person may defame another -- either orally or in writing -- without attracting liability. The law presumes that the defamatory statement was made honestly and in good faith.

[15] The rationale for the defence is that the interest sought to be protected by the statement is considered important enough to justify a limited immunity from an action for defamation. Immunity is limited because it extends only to statements that are germane and reasonably appropriate, and that are made honestly and in good faith or without malice. Thus, the defence of qualified privilege reflects a balancing of competing interests: the interest the maker of the statement seeks to serve and the interest in reputation that the defamed party seeks to protect.

[16] At the heart of the defence of qualified privilege is the notion of reciprocity or mutuality. A defendant must have some interest in making the statement and those to whom the statement is made must have some interest in receiving it. "Interest", however, should not be viewed technically or narrowly. The interest sought to be served may be personal, social, business, financial, or legal. The context is important. The nature of the statement, the circumstances under which it was made, and by whom and to whom it was made are all relevant in determining whether the defence of qualified privilege applies.

[17] Two examples are relevant here. First, a lawyer may have a qualified privilege in trying to protect the legitimate interests of a client. And second, a person attacked by another may respond in kind, in the same way and to the same audience chosen by the person making the attack: Netupsky v. Craig, 1970 46 (ON CA), [1971] 1 O.R. 51, 14 D.L.R. (3d) 387 (C.A.), affd 1972 19 (SCC), [1973] S.C.R. 55, 28 D.L.R. (3d) 742; Falk v. Smith, 1940 96 (ON CA), [1941] O.R. 17, [1940] 4 D.L.R. 765 (H.C.J.). And see generally Brown, The Law of Defamation in Canada, 2nd ed. (Toronto: Carswell, 1999), Vol. 2, Ch. 13; Hill v. Church of Scientology of Toronto, 1995 59 (SCC), [1995] 2 S.C.R. 1130, 126 D.L.R. (4th) 129; Botiuk v. Toronto Free Press Publications Ltd., 1995 60 (SCC), [1995] 3 S.C.R. 3, 126 D.L.R. (4th) 609.

[18] Not everything said or written on an occasion of qualified privilege is protected. As is evident from the term "qualified privilege" itself and from the previous discussion, the privilege is not absolute. It may be lost in one of two ways. First, it may be lost if the dominant motive for making the statement was malice. In this context, malice means not just ill will towards another but any ulterior motive that conflicts with the interest or duty created by the occasion. And it includes recklessness. Both dishonesty and a reckless disregard for the truth may amount to malice. Second, a privilege may be lost if the statement is not commensurate with the occasion, either because the statement is not germane and reasonably appropriate to the occasion or because the recipients of the statement have no interest in receiving it. Put differently, to maintain privilege a defendant must communicate appropriate information to appropriate people. See Hill v. Church of Scientology, supra, and Douglas v. Tucker, 1951 54 (SCC), [1952] 1 S.C.R. 275, [1952] 1 D.L.R. 657.

[19] I turn now to the issues on the appeal.

(b) The issues

1. Did the trial judge err in holding that Outerbridge's letter was written on an occasion of qualified privilege?

[20] The trial judge held that Carlstrom's May 10th letter, especially the last paragraph headed "Special Request", constituted an "attack" on Consumers' Gas' interests. He therefore concluded that Carlstrom's letter created an occasion of qualified privilege, triggering "an interest or duty in the defendants to reply". The appellants acknowledge that Consumers' Gas, through its lawyer, was entitled to respond to the letter to protect its interests but submit that Outerbridge should have replied only to Carlstrom. The appellants point out that as an engineer Carlstrom had a professional obligation to report a situation he believed may endanger the safety or welfare of the public. If Consumers' Gas did not agree with Carlstrom's opinion it should have communicated with him alone. Thus, the appellants contend that whatever privilege might have existed was lost because Outerbridge sent his letter to more people than he should have.

[21] I do not accept this contention. The trial judge was correct in characterizing Carlstrom's strongly worded letter as an attack on Consumers' Gas' interests. Consumers' Gas carries on business in a highly regulated industry. If the heater at Inline and others like it in the province were unsafe, Consumers' Gas was obligated to inspect them, no doubt at great cost to itself. Outerbridge was thus entitled to protect his client's legitimate interests by writing to the very same people to whom Carlstrom had sent his letter. Indeed, Outerbridge was careful to restrict the recipients of his letter to those who had received Carlstrom's letter. Had he not done so, the respondents' qualified privilege may have been lost. In the context of what occurred here, however, I agree with the trial judge that Outerbridge's letter was sent on an occasion of qualified privilege.

2. Did the trial judge err in holding that Outerbridge's letter was written without malice?

[22] The trial judge found as a fact that Mr. Outerbridge honestly believed the statements he made. And he held that "on all the evidence . . . there was no malicious motive nor were the defendants reckless with respect to the truth." The appellants attack the trial judge's finding of no malice. They submit that Outerbridge's ulterior motive in writing the letter was to teach Carlstrom a lesson. They note Outerbridge's own testimony that he thought Carlstrom was "sort of trolling for business".

[23] Even if this evidence reflects some ill will toward Carlstrom, it was but a minor motive for the letter. To defeat the defence of qualified privilege the law requires a plaintiff to show that malice was the dominant motive for the communication. Here, the trial judge found no dominant malicious motive and that finding is amply supported by the evidence.

[24] Outerbridge testified that he honestly and on reasonable grounds believed what he wrote was true and necessary. He was not cross-examined and his evidence was not otherwise contradicted. Outerbridge knew that his client's interests were threatened by Carlstrom's letter. But instead of relying on the report of Consumers' Gas' own adjuster, he carefully researched the question whether the heater was defective before replying. When he wrote his letter on June 1, 1994, Outerbridge had the benefit of three engineering reports, each of which had concluded that the heater was not defective. The care taken by Outerbridge may be contrasted with the reckless behaviour of the defendant lawyers in Botiuk, supra, whose failure to investigate the facts before defaming the plaintiff Mr. Botiuk was properly criticized by the Supreme Court of Canada. I would not give effect to this ground of appeal.

3. Did the trial judge err in holding that the letter was reasonably appropriate?

[25] This was the main ground of appeal and the only ground on which we called on the respondents.

[26] A qualified privilege will be defeated if the communication is not reasonably germane and appropriate to the occasion. The appellants accept that Outerbridge's letter was germane to the occasion in the sense that it addressed the matters raised by Carlstrom in his letter. But the appellants submit that the trial judge erred in concluding that the words used by Outerbridge were reasonably appropriate. The appellants particularly complain about Outerbridge's statement that Carlstrom's opinion was "at best professionally irresponsible if not deceitful or at worst malicious." In support of this submission the appellants argue that because Outerbridge was a lawyer the trial judge should have scrutinized his words and actions more carefully. The appellants point to the following proposition from the reasons of Cory J. in Botiuk, supra, at p. 35 S.C.R.:

However, when the defendants are lawyers who must be presumed to be reasonably familiar with both the law of libel and the legal consequences flowing from the signing of a document, their actions will be more closely scrutinized than would those of a lay person.

The trial judge did not ignore this proposition but the appellants submit that he did not give it enough weight.

[27] I do not agree with this submission, and I do not agree that the trial judge erred in concluding that Outerbridge's words were reasonably appropriate to the occasion. Three main considerations support the trial judge's conclusion.

[28] First, Carlstrom's letter merited a strongly worded response. Indeed, in my view, Outerbridge was entitled to question Carlstrom's professional responsibility, truthfulness, and bona fides. Carlstrom wrote as a professional engineer, yet he did not refer at all to the many professional opinions that contradicted his own. Moreover, when he wrote his letter, as the trial judge found, he "knew or ought to have known . . . that at the very least there was no definitive evidence of miss-wiring [sic] and further . . . that Mr. Beck was reviewing the two photographs to see if they disclosed any further evidence of miss-wiring". Despite what he knew or ought to have known, Carlstrom referred to a "very serious wiring problem" and urged that Inline be told not of a possible deficiency with its heater but of a "probable deficiency", a distinction whose significance could not be lost on a professional engineer. In addition, Carlstrom raised the spectre of Consumers' Gas having been fortunate to have avoided a fatality, a scare tactic some might well consider malicious. I therefore agree with the trial judge's holding that "the seriousness of the attacks contained in the May 10th letter based on misstatements of the facts and omissions including the omissions of any reference or qualification arising from the multitude of contrary opinions, required strong language from the defendants to protect their interests."

[29] A second relevant consideration is that a person whose interests are attacked is entitled to reasonable latitude in responding. Even accepting that Outerbridge's language was, to use the trial judge's word, "indelicate" and even taking into account that Outerbridge is a lawyer, I do not think his letter exceeded the bounds of reasonable latitude.

[30] A final consideration, pointed out by Mr. Porter in his argument, is that Outerbridge had a wider scope to comment because he investigated the issues raised by Carlstrom before responding to them. See Hill v. Church of Scientology, supra, at p. 1193 S.C.R.

[31] For these reasons, I would not give effect to this ground of appeal. I would therefore dismiss the appellant's appeal.

4. Was the trial judge's assessment of damages unreasonably low?

[32] It is not necessary to address this ground of appeal because I would dismiss the appeal on liability. That said, I see no reviewable error in the trial judge's assessment of $40,000 for general damages. That figure is not so low that it warrants this court's intervention.

(c) Costs

[33] The respondents are entitled to their costs of the appeal on a partial indemnity scale. The amendments to rule 57.01 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] effective in January of this year require this court to fix the respondents' costs in accordance with rule 57.01(1) and the Tariff. I would fix their costs at $20,000.

[34] Although Mr. Porter acted for Outerbridge and Ms. Sefton for Consumers' Gas, their position was identical. Thus, they quite properly prepared a joint factum and Mr. Porter made oral submissions on behalf of both respondents. For costs purposes, I would treat the respondents as a single party. The argument of the appeal took 2 3/4 hours. Both Mr. Porter and Ms. Sefton have over 20 years experience at the bar. Their total fees claimed, using the top hourly rate of $350 per hour, are approximately $40,000. I have no doubt that they spent the hours they said they did. Nevertheless, having regard to the factors set out in rule 57.01(1)(a), (c) and (d) I think that $20,000 is a fair figure for the respondents' fees.

D. Conclusion

[35] I would dismiss the appeal with costs on a partial indemnity scale. I would fix the respondents' costs at $20,000 plus the disbursements set out in Ms. Sefton's bill of costs together with the appropriate amount for GST.

Appeal dismissed.