CITATION: Focus Graphite Inc. v. Douglas, 2015 ONSC 1104
COURT FILE NO.: CV-13-57438
DATE: 20150220
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FOCUS GRAPHITE INC. and GARY ECONOMO
Plaintiffs
– and –
TED DOUGLAS also known as OGOPOGO007 also known as Drill_Deep, _Find_oil, _stay_calm
Defendant
Charles M. Gibson for the Plaintiffs
No one appearing for the Defendant
HEARD: November 12, 2014 and by written submissions delivered December 23, 2014
beaudoin j.
[1] This action proceeded as an uncontested trial on November 12, 2014. The Plaintiff then asked for additional time to file written submissions which they delivered on December 23, 2014.
[2] The first witness was Gary Economo. He testified that the Plaintiff, Focus Graphite Inc. (Focus) is a publicly traded company engaged in graphite mining and exploration as well as graphite and graphene developments. Graphite is used as the anode for lithium batteries. Mr. Economo is the President and Chief Executive Officer of Focus. Focus is engaged in the development of a mining project at Lac Knife in northern Quebec. Mr. Economo has been involved with Focus for approximately five years and is relatively new to the mining and exploration industry. His previous business experience was in the high-tech sector.
[3] The mine at Lac Knife is not yet open. Focus has raised $30 Million dollars to develop the site over a three year period. A Bankable Feasibility Study (“BFS”) prepared for Focus estimates a total cost of 165 Million dollars to fully develop a producing mine. Those funds will be raised through the investment community on issuing stock. Mr. Economo described his role as CEO as being responsible for raising the funds for Focus to develop the project.
[4] He then described the Stockhouse.com website which is an on-line bulletin board. Individual and institutional investors can sign on and find a discussion forum about different companies and their projects. According to Mr. Economo, the Stockhouse bulletin board is specifically geared towards mining exploration companies. Mr. Economo said that Stockhouse is the predominant bulletin board in terms of influence in the mining sector and the mining exploration sector.
[5] When a member posts to a bulletin board (also known as a “Bullboard”), the posting is attributed to the member’s username. As such, to the extent that members choose usernames that do not reflect their identity, these posts to the bulletin boards are anonymous. While only members may post content to the bulletin boards, the bulletin board postings are accessible for viewing by the general public. Each bulletin board is dedicated to a single stock.
[6] On January 24, 2013 and February 10, 2013, the Defendant, using the username Ogopogo007, posted statements on the bulletin board dedicated to Focus. A full screen shot with the Stockhouse logo prominently displayed in the upper left hand corner was put in evidence. One can also see advertising by other mining companies promoting discoveries they have made. The page is dedicated to Focus Graphite Inc. FMS. The posting in issue has the following heading: RE: GRAPHENE BY THE Kilo …sail.
[7] It is posted by a user “OGOPOGO007” at 12:15 a.m. on January 24, 2013 and the words “150 reads” appear next to the time entry. It says:
if you were GE, what should be done now?
I usually meet GE 2X a year, PDAC and Agora Investment Symposium.
At PDABC, 98% of the jr Co’s there are frauds. They will never find an economic ore body to mine.
Agora screens a few Co’s to present there… will be interesting to se (sic) if FMS there this year, given the mngmnt falls …MCTO and how Grafoid is structured. None are good for shareholders.
I was expecting 20 M tons in PEA. GE looked at me in the eye and stated … 20 M tons is a no-brainer. OSC and PEA basically told us, GE is a liar… no 20 M tons in the measly 6M tons has moved backwards. So from 2012 PDAC, which Co’s have increased Measured tonnage, or the year to PDAC 2013? Not FMS, so far.
In a more litigious country, FMS would be nailed with a Class Action Lawsuit, MCTO was 100% GE.
Let’s frame your question this way.
If you were the CEO of a Co looking for a secure source of graphite for the next 20 years, would your Board of Directors allow you to deal with a OSC confirmed liar?
If I was GE, would fall on my sword. He ticked off early shareholders by doing a PP at $1 when SP was $1.60 and had to sweeten the deal with warrants. I was one of the early shareholders. Still am a shareholder but not putting any fresh coin here.
Beware. Hype trap…
What’s the "Hype Trap?" Come on, man! We’ve all been caught in it, although we might not know it by name.
It’s when we buy into a technology this seemingly limitless potential. But instead of amounting to endless profits, it results in painful losses and endless regrets.
[8] Mr. Economo said the posting was brought to his attention by an investor and shareholder. He explained that the acronym PDAC refers to the Prospectors and Developers Association Conference. The reference to Agora is to the Agora investment symposium. Agora also puts out an investment newsletter.
[9] He explained that the reference to GE is a reference to himself. This particular bulletin board is dedicated to Focus. A junior company is a reference to an exploration company; a company that does not yet have a mine. Focus is a junior company. Mr. Economo denied that Focus is a fraud. He also explained the reference to an MCTO. He described this as a Management Ceased Trade Order. He conceded that there had been such an order made with respect to Focus.
[10] He explained that Focus’ website had referred to a document as a Bankable Feasibility Study (BFS) when in fact it was actually a pre-feasibility study. Information published on the website is governed by rules and regulations of the Securities Commission. Focus received a phone call from the Toronto Stock Exchange informing them that they were in default of the rules and regulations with respect to the reporting of that document. Focus took corrective action and changed the website to reflect the proper acronym for the document. Because of the erroneous information that had previously appeared on the website and disclosed to the public, the Exchange was going to put a halt on the trading of stock for the company.
[11] Focus was offered an option to either put a hold on the stock trading of the company or take a MCTO which affected Mr. Economo and the Chief Financial Officer (CFO) of the company. As a result, he and the CFO elected to take the MCTO which meant that they were not personally able to trade in the stock for a period of time until such time as Focus posted the BFS.
[12] He explained the reference to “Grafoid.” It is a private company and it is involved in taking graphite and converting it into a space age material. Focus Graphite owns approximately 19% of Grafoid. He denied being a liar as alleged in the posting. He explained that PEA is an acronym for an engineering study that indicates graphite material present. He denied telling anyone that 20 million tons was a “no-brainer.” He denied that either he or Focus had been the subject of a class action lawsuit.
[13] He explained that the reference to a PP is a private placement, not a public offering. He explained that Focus had done a private placement at one dollar but in fact, the stock was actually trading at $0.96 and not at $1.60 as claimed in the posting. He said that the offering was prepared by an accredited securities firm in Toronto.
[14] Mr. Economo claimed that a posting like this on the bulletin board would have a twofold effect. It could potentially sway away a potential investor from investing in the company. As for existing shareholders, this could encourage them to sell stock that they currently hold and getting out of the position, which drives the price of stock down.
[15] In his view, the impetus for posting this type of comment is “short selling.” Short selling is the practice of selling securities or other financial instruments that are not currently owned, and subsequently repurchased. In the event of an interim price decline, the short seller will profit if the cost of repurchase will be less than the proceeds which were received upon the initial short sale.
[16] In response to my question with regard to the posting, I noted that the title commenced with the word “RE: graphite by the kilo …sail.” Mr. Economo confirmed that this was a continuation of a prior posting. I was told that there would be typically 15 or 20 postings in the same string of online comments. I asked if there had been prior posting and I was told that there was. I also inquired whether or not any of these postings contain negative comments and Mr. Economo replied “I don’t believe so.” He then added: “I’d have to pull them up, but I don’t believe they were very negative, but this was one that was …”
[17] He also referred to the scale that appears on the posting there refers to “clarity, overall quality, credibility, usefulness.” There is a score of three out of five posted under each of those headings. It was explained that this rating comes from fellow posters.
[18] I was then referred to the next posting of February 10, 2013. It also appears as a full screen print from the Stockhouse website dedicated to Focus Graphite Inc. FMS. Once again, the posting is from Ogopogo007, this time at 9:40 p.m.:
RE: RE: RE: Most likely… GE will undermine again.
The only one undermining that stock is OGO
As the attack dogs come out, save your wrath for mngmnt. GE was in the crosshairs of OSC…liar. SP went to 40 cents.
Hence the MCTO
Tell about previous GE success stories. Load us up..or shut up.
[19] In his view, Mr. Economo believed that the person posting as “OGO” Ogopogo007 is trying to persuade the market place to reduce the price of the stock. He denied ever being accused of lying by the Ontario Securities Commission (OSC). He denied there was any correlation between the MCTO and the stock price. He denied that he or his company had any issues with the OSC. He agreed that this was also one posting in a chain of messages. He could not say how many other postings there had been and admitted that they had not been produced. Evidence later disclosed by Stockhouse disclosed that the statements dated January 24, 2013 recorded 165 views while the ones dated February 10, 2013, recorded 130 views.
[20] On April 24, 2013, counsel for the Plaintiffs sent a letter to Stockhouse requesting that the posts be removed and asking that all information relating to Ogopogo007 be provided. On April 24, 2013, a Statement of Claim was issued against “John Doe also known as OGOPOGO007” as the identity of the Defendant was unknown at that time. On or about April 30, 2013, Stockhouse complied with the Plaintiffs’ request and removed the statements from the Focus bulletin board. Stockhouse advised that a court order was required to provide any details about the Defendant.
[21] On July 4, 2013, a further posting by Ogopogo007 appeared on the bulletin board dedicated to Focus. Unlike the other postings, a full screen print has not been provided. This message reads:
BFS…Slash
Slash - ironic isn’t it, years later, Mngmnt here finally wakes up and “learns” BFS is required, in taking a jr exploration Co. from exploration into Development and then Production.
Of course GE is no miner in a hard rock sense; certainly he’s mined Bay St. and shareholders here.
Perhaps years from now, if the above is the roadmap, the cheerleaders here will wake up and ask … why doesn’t FMS own 100% of Grafraud? Why did FMS lend GE et all $$ to steal our ownership? Why does Grafraud have a biz jet to fly around in and all FMS has is a couple of rock trucks, dozer and excavator?
[22] Mr. Economo testified that he couldn’t understand what the poster is trying to achieve. In his view, the person was trying to tell others that he, Mr. Economo, had taken investor money into the company under some kind of false pretense. He explained that FMS is the trading symbol for Focus Graphite. He clarified that the reference to “Grafraud” is a reference to Focus’s private company called Grafoid. Grafoid is a material’s company. FMS invested $1.5 million into Grafoid which has turned into a $34 million asset for FMS. He denied that Grafoid has a business jet to fly around in.
[23] He explained that the reference to Slash is to another poster who goes by that name. Again we do not know what “Slash” may have posted. This posting recorded 21 views. On or about July 12, 2013, following a request from Plaintiffs’ counsel, Stockhouse removed the statements posted by the Defendant and issued a permanent suspension to OGOPOGO007.
[24] It appears that the Defendant then registered as a new member of Stockhouse under the username “Drill_Deep_Find_oil_stay_calm.” On July 14, “Drill_Deep_Find_oil_stay_calm” posted the following statements on the bulletin board dedicated to Focus. Once again, I was not provided with a full screen print.
RE: Opportunity ****
It locked down those customers three years ago.
Was that before or after the MCTO?
If anyone thinks GE and his team haven’t been taking care of FMS’s core business during this market slowdown, they should think again.
Bank Feasibility Study … why didn’t that get a wee bit of focus?
Just another pumper … that went short FMS to put coin into where GE is ripping shareholders off
JMHO
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[25] Once again, Mr. Economo became aware of this posting through one of his investors who brought it to his attention. Again, he couldn’t understand what the comments were referring to. He explained that the word “pumper” is typically referred to as somebody who promotes a particular stock just to pump the price of the stock up. He said that the statement that he was “ripping shareholders off” was false.
[26] The next posting from Drill_Deep_Find_oil_stay_calm **** was dated July 23, 2013. It is not a full screen print.
FMS at AGORA Vancouver
Attending from FMS
George Economo, Business Development Manager
Judith Mazvihwa-McLean, CFO
Laura Armiento, Corporate Development
Adrienne Mauriks, Corporate Development
Chester Burtt, Director
Robin Dow
Other than having a tabletop display there, Gary E has a 14 minute presentation on Wed, 3:06 - 3:20. 4 other Co’s presenting same time frame, elsewhere in Vancouver Fairmont.
No other presentations, no sponsored lunches...
Perhaps after flying 6 employees to Vancouver from Ottawa… Private jet? First class? ... There is no $$ left to woo potential shareholders with?
Most Co’s presenting here, even local ones like Amerigo, have just one person manning the table top.
FMS shareholder $$ well spent?
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[27] Mr. Economo testified that George Economo is his son. He added that three of the people referred to in the posting resided in Ottawa and three resided in Vancouver. Robin Dow does not work for Focus; Focus does not have a private jet and nobody flew first class. He explained the reasons for having more than one person at the event. The statements dated July 14, 2013, recorded 83 views and the statement dated July 23, 2013 recorded 353 views.
[28] On July 26, 2013, the Honourable Justice McLean signed a consent order for Stockhouse to produce and disclose to counsel for the Plaintiffs any information and documents identifying the registered member OGOPOGO007. On July 30, 2013, Stockhouse provided the Plaintiffs with all information pertaining to OGOPOGO007 which identified him as the Defendant, Ted J. Douglas. On August 12. 2013, Mr. J. Douglas was personally served with the original Statement of Claim at Westcast Industries Inc. in Stratford Ontario.
[29] On or about August 28, 2013, following further requests from Plaintiff’s counsel, Stockhouse removed the statements posted by Drill_Deep_Find_oil_stay_calm_ from the Focus bulletin board. On September 27th, 2013, Justice Toscano-Roccamo granted an order amending the Statement of Claim in its present form including the allegations against “Drill_Deep,_Find_Oil,_Stay_Calm.” The amendment was made nunc pro tunc to April 24, 2013. Mr. Douglas was served with the Amended Statement of Claim by facsimile on September 30, 2012 at the facsimile number for Westcast Industries.
[30] Stockhouse provided information that totalled the number of times a post was viewed which has been set out above. Stockhouse further advised that the totals do not record the number of unique views, but in fact, these numbers could represent a single person accessing a particular posting multiple times.
[31] The total comes up to 742 views. According to Mr. Economo, the impact of these postings on potential investors can be huge. He described the competition for investment capital in his industry as being fierce. A junior exploration company is not like an established mining producer that can report revenues. These investments are very high risk with a potentially very high reward. He admitted that no one had told him that they were not investing because of these postings. He added that these types of postings could have an impact on Focus’ ability to attract employees. He described Focus’ stock price as being in the $0.40-$0.60 range; it fluctuates up and down a couple of cents at a time.
[32] Mr. Economo testified his comments made him very upset. He also claimed that these were difficult for his family; especially for his son. He did conclude that these posts had not tarnished his reputation:
People that know me, like I said, I don’t think there’s that much of an impact at all, but people that don’t know will absolutely think twice, you know, when they see comments like that. So, you know, for my reputation within the industry, it’s a stellar one. You know, but of course the investment community is a very large community, you know, in terms of numbers of people. If potential investors that do not know me and don’t know my background, you know, read these types of comments, I’m sure will have a damaging impact, no question about that. To what extent, I don’t know.
Dr. Luc Duchesne
[33] Dr. Luc Duchesne was produced as an expert witness. He authored the report by GSN DreamWorks Inc. dated November 3, 2014 which was entered as an exhibit. Dr. Duchesne is the President of DreamWorks and he adopted the contents of his report. I noted with interest that his resume discloses that his current position is described as Vice President, Government Research, Grafoid Inc., a company that Focus is heavily invested in; Mr. Economo in fact referred to it as “our private company” in his evidence. Dr. Duchesne describes his role at Grafoid in these terms: “manages public funding portfolio for the company: seeks and qualifies the company to certain granting program, writes applications, liaises with granting authorities, and manages reporting to authorities.” He duly signed Form 53 “Acknowledgement of Expert’s Duty.”
[34] He was offered as an expert in statistical analysis of random events. He testified that his expertise is in finding methodologies to assess complex data sets, integrating various types of knowledge. He has published 85 scientific papers which were peer-reviewed. I qualified him as an expert in statistics. He conceded that he is not an expert in the financial market.
[35] I will refer to the executive summary of his Report.
Statistical analyses were performed on the volatility of the closing stock price of Focus Graphite (FMS.V) for the 10 trading average before and for the 10 trading average after five (5) subject dates. The analyses show that the mean closing price for 10 days subsequent to each subject date was significantly lower than the mean closing price for the 10 business days preceding the subject dates with at least 97.1% levels of certainty using T – tests parametric analyses. The subject dates were associated with an intense period of short selling.
A second group of statistical analyses were performed on five random dates selected in 2013 to establish the effect of the background stock volatility as compared to the subject dates. The statistical analyses were performed on the mean closing price of the 10 days before and the mean closing price of the 10 days after random dates. The results showed that random dates were followed by an increase in the mean trading value in one instance, a decrease in mean trading value in two instances and non-significant differences in two instances.
Further statistical analyses showed 89.4% certainty using Chi-squared statistics that the observed decreases in stock of Focus Graphite prices in the dates after the subject dates are not random events.
After correction for normal stock volatility, the stock value declined by a net amount of $0.042 following the subject dates. The net effect of the declines in the ten days following the subject dates on Focus Graphite’s market capitalization is $3,800,754.31.
[36] Notwithstanding the filing of the duly executed From 53, I have concerns about Dr. Duchesne’s report at this time. I note that the Report is dated November 3, 2013, although, Plaintiffs’ counsel did not retain Dr. Duchesne until November 5, 2013. That retainer letter asked him to prepare a report to develop a methodology to assess the volatility of the stock market price of Focus Graphite on five subject dates. It also asks him to quantify the economic impacts of that volatility. There is no request to assess a theory of short selling that was somehow included in his report and in his evidence.
[37] Dr. Duchesne testified that he had started the preparation of his report on or about the 20th day of October, 2013. The discrepancy between the report date and the retainer date was not explained. Dr. Duchesne concluded his Report with this disclosure:
GSN DreamWorks Inc. is an independent grant-writing contractor to Grafoid Inc., in which Focus Graphite is a shareholder.
Dr. Duchesne has purchased 10,000 common shares of Focus Graphite on the open market for investment in his RRSP account at RBC in August 2014.
[38] At trial, I asked if Dr. Duchesne worked for Grafoid, I was told that he did not and that he has only done some contract work for Grafoid. As noted in his resume, Dr. Duchesne lists his current occupation as Vice-President, Government Research, Grafoid Inc. These facts lead to the only logical inference that Dr. Duchesne’s opinion was first solicited by Focus and that he was retained because of his close relationship to Focus and only after he had prepared this favourable report with the multi-million dollar capitalization loss and a theory of short selling that was outside the scope of his retainer.
[39] I questioned Dr. Duchesne about his ownership of the shares and he admitted that it was reasonable to conclude that he could have an interest in the outcome of the litigation and that he would indirectly benefit from a large award made to Focus. Having regard to the circumstances of his retainer, the close relationship between Grafoid and Focus and the apparent conflict of interest, I attach very little weight to his report. I have further reservations about the reliability of this report which I will turn to later.
Chester Burtt
[40] Mr. Burtt is an independent board member of Focus. For the past 30 years, he has owned a public affairs advisory and lobby firm. He claims to have 20 years of experience in the small cap mining industry along with the technology sector. He testified that he has helped position mining companies for the capital markets, taken them through merger and acquisition opportunities, represented them around the world, and help them with their brands. He testified that 50% of his work deals with raising money for the mining industry.
[41] Mr. Burtt then attempted to give opinion evidence with respect to the relevant factors that individual investors take into consideration respecting investments in small cap mining companies. I had been advised, at the outset, that Mr. Burtt was being offered as a fact witness with respect to certain documents. I would not allow him to give opinion evidence and denied counsel’s subsequent request that I allow him to testify as an expert witness.
[42] Mr. Burtt is the person who produced copies of the various postings on the Stockhouse website. I questioned Mr. Burtt about the “RE” reference in the first posting dated January 20, 2013. He acknowledged that this would be the second posting in the chain following an originating posting. I questioned whether or not there were any further postings and he claimed that he did not know. He did not pull them off if there were. When asked if there were other postings to the website, he could not remember.
[43] He acknowledged that there were other bulletin boards; one called Vantage wire and another called Agora.com, but maintained that Stockhouse is probably the most recognized and the most read bulletin board.
[44] When looking at the next posting, I questioned him about the “RE: RE: RE:” reference and he confirmed that this would be the third response to an originating posting. The original posting would have used the phrase “most likely GE will undermine again…” He confirmed that this was someone other than Ogopogo007.
[45] I questioned him as to why three of the screen captures appeared differently from the originating two. He explained that this was due to his use of a different computer and that he had grabbed the information in a different way. I questioned him as to the reference to four stars appearing after the word Ogopogo007 and he did not know the significance.
[46] He claimed that these were original postings and not responses to someone else’s comments. This is at odds to Mr. Economo’s evidence with regard to BFS…Slash as a reference to another user who had made a posting to the bulletin board even though there was no “RE:” notation.
[47] He then identified a business card of the Defendant, Ted J. Douglas. Mr. Douglas gave him the card after he had had a long conversation with him at the Agora Financial Investment Conference in Vancouver. Mr. Burtt said he knew who Mr. Douglas was because he had done a Google search on Ogopogo007 and Mr. Douglas had used the same username on a singles dating site, in which he displayed his picture.
[48] Mr. Burtt had overheard Mr. Douglas being very strident and hostile to one of the corporate affairs people where Focus had a booth. Mr. Burtt spoke to Mr. Douglas in the afternoon of July 23. The posting on the Stockhouse website appeared later in the evening. In his conversation with Mr. Burtt, Mr. Douglas questioned why Focus needed all these people at the booth. He said that only four people were there; George Economo and Robin Dow were not present.
[49] Mr. Burt had explained to Mr. Douglas the two of the three people lived in Vancouver. Focus used this opportunity to interface with stockholders. Mr. Douglas asked why Focus would fly so many people out to Vancouver for this kind of event and had suggested that Focus had probably flown them out first class or business class. Mr. Burt responded that that was not the case; only two people had flown to Vancouver and they had flown economy. He indicated that Mr. Douglas wasn’t prepared to listen to what he had to say and that he only wanted to make his point that money was being wasted. Mr. Burtt said he took a long time to try to calm his fears and change his point of view.
[50] It is for this reason that he believes that Drill_Deep_Find_oil_stay_ calm is the same person as Ogopogo007 since the posting later that night reflects the very same conversation he had with Mr. Douglas in the afternoon. He testified that he has encountered people who have read these posts and they questioned whether any of these comments were true. He testified that these comments can have a significant impact on a resource company in the start-up phase.
The Law of Defamation
[51] A plaintiff in a defamation action is required to prove on a balance of probabilities:[^1]
a. that the impugned words were defamatory, in the sense that they would tend to lower the plaintiff’s reputation in the eyes of a reasonable person. That test for the meaning of the impugned words in a defamation action is what the ordinary person would infer without special knowledge, also called the natural and ordinary meaning of words, and whether they would lower the reputation of the plaintiff in the estimation of right-thinking members of society generally.
b. that the words in fact referred to the plaintiff; and
c. that the words were published, meaning that they were communicated to at least one person of the plaintiff.
[52] The elements of a cause of action for a defamatory internet publication are the same as for traditional media publications. Damages are presumed. Once a plaintiff proves the required elements, the onus shifts to the defendant to advance a defence in order to escape liability.
Damages
[53] In defamation cases, three types of damages can be awarded: compensatory [general and special], aggravated, and punitive.[^2]
General Compensatory Damages
[54] General compensatory damages are presumed once defamation is made out and once none of the common law defences are found to apply. They arise by inference of law and do not require proof of actual injury. There is no formula for the quantification of the damages. Factors such as conduct and character of the defendant, the conduct and character of the plaintiff, the impact of the defamation on the plaintiff, and the nature, scope and motive of the publication can be aggravating factors supporting a higher award. Similarly, malice is an important factor in assessing damages.
[55] Damages must also reflect both the size and nature of the audience. Defamation which enjoys a wide circulation earns a higher award. At the same time, courts also consider the nature of the audience, and whether it is the type of audience which would give any credence to the remarks.[^3]
[56] General damages are intended to provide comfort for personal distress or to vindicate one’s reputation, including one’s business reputation.[^4]
Special Damages
[57] Special damages are material and temporal losses suffered by a plaintiff as the natural and proximate result of the defamation and capable of monetary measurement. They have a specific economic or pecuniary value and are part of the compensatory award. Unlike general compensatory damages, they are not assumed to be necessary or inevitable, and therefore, must be proved at trial.[^5]
Aggravated Damages
[58] Aggravated damages may be awarded in circumstances where the defendant’s conduct has been high handed or oppressive, thereby increasing the plaintiff’s humiliation and anxiety arising from the libelous statement. Their assessment requires consideration of the entire conduct of the defendant prior to the publication of the libel and continuing to the conclusion of the trial.[^6]
[59] Corporate plaintiffs cannot receive aggravated damages because aggravated damages are intended to compensate for mental distress and hurt feelings.[^7]
Punitive Damages
[60] These are available to both an individual plaintiff and a corporate plaintiff. Punitive damages are awarded against the defendant in exceptional cases or “malicious, oppressive and high handed” misconduct that “offends the court sense of decency”. The test for punitive damages is whether the defendant’s conduct “represents a marked departure from the ordinary standards of decent behaviour” Punitive damages will be awarded where the compensatory damages are insufficient to achieve the objectives of punishment and deterrence.[^8]
Damages – Corporations
[61] In this case, one of the plaintiffs is a corporation and since corporations are incapable of suffering personal distress, they may not receive general damages under that particular head. “A company cannot be injured in its feelings, it can only be injured in its pocket”.[^9] A company, however, does have a business reputation and statements which cast aspersions upon that reputation may be actionable. If so, the law will presume damages from the publication of the libel itself and, as in the case of an individual, the action will be maintainable without proof of special damages.[^10]
[62] A corporate plaintiff may also claim special damages for special economic loss that was caused by the defamation. Special damages, unlike general damages are not presumed. The test to be met by corporate plaintiff for such losses is:
a. that there must be the “natural and proximate result” of the defamatory publication, and capable of monetary measurement; or
b. such losses must also be established with “reasonable certainty” and must be more than mere “speculation and surmise.”[^11]
[63] The Plaintiffs argue that where a court cannot determine a corporate plaintiff’s economic losses with any precision, the court can take losses into account in fixing general damages. The Plaintiffs submit that general damages for defamation may have an economic component even though it is incapable of precise quantification. They allege that this includes the market capitalization of a corporation that is negatively affected following the publication of each defamatory comment.
[64] The Plaintiffs rely on well-established case law that the fact that the assessment of damages is difficult because of the nature of the damages suffered is no reason to limit an award of damages or to refuse compensation for the plaintiffs.[^12]
[65] The quantum of general damages to be awarded is based on each individual case’s circumstances. In determining the quantum of the award, the court uses the following factors:[^13]
a. the plaintiff’s position and standing;
b. the nature and seriousness of the defamatory statements;
c. the mode and extent of publication;
d. the absence or refusal of any retraction or apology;
e. the whole conduct and motive of the defendant from publication through judgment; and
f. any evidence of aggravating or mitigating circumstances.
[66] The Plaintiffs cite recent court decisions dealing with defamation on the Internet for significant amounts of damages that have been awarded. These damages recognize the pervasive and insidious nature of the Internet and the increased risk of harm that such defamatory statements can cause.[^14] In the Uppal decision, the court would have assessed general damages at $45,000 but this was based on 19 instances of defamation. In Barrick, the Court of Appeal increased an award of general damages to $75,000 after concluding that the defendant’s conduct was “malicious, high-handed, unremitting and tenacious” and the defamatory publications were “vicious, spiteful, wide-ranging in substance and world-wide in scope”. The messages and e-mails complained of in that case filled nine thick volumes.
[67] In Hunter Dickinson, the B.C. Supreme Court also had to consider postings to the Stockhouse website which the defendant continued to post up to the date of the summary judgment application. These postings had been occurring during a period of over 6 years before the hearing. The defamatory statements were far more negative than the ones in this case. In that case, the court considered the award in Barrick and awarded general damages in the amount of $75,000 to the corporate plaintiff and $125,000 to the individual plaintiff.
[68] The Plaintiffs maintain that the postings on the bulletin board dedicated to Focus are clearly defamatory towards both Plaintiffs according to their ordinary meaning and were understood to mean that Mr. Economo:
a. is a liar;
b. makes misleading and/untrue statements in his role as Pres. and Chief Executive Officer of Focus;
c. is a trustworthy;
d. operates Focus’ business in a manner to defrauded shareholders;
e. has stolen the ownership of Grafoid (which is referred to as Grafraud);
f. is involved in fraudulent activity;
g. is ripping shareholders off; and
h. is spending shareholders money in an inappropriate way.
[69] The Plaintiffs claim that the record establishes that the defamatory statements in their natural and ordinary meaning, meant and were understood to mean that Focus:
a. has a liar as President. and CEO
b. has a President and CEO makes misleading and/or untrue statement; as a Pres. and CEO was untrustworthy
c. has a President and CEO will operate the business in a manner to defrauded shareholders;
d. has a President and CEO with stolen the ownership of Grafoid (which is referred to as Grafraud);
e. has a President and CEO who is involved in fraudulent activity;
f. has a President and CEO who is ripping shareholders off; and
g. has a President and CEO who is spending shareholders money in an inappropriate way.
[70] A corporation can only act through its various officers, directors and employees false and defamatory statements concerning the people who are responsible for supervising and conducting the appearance of a corporation, particularly a public company, that inevitably affect the business reputation of the corporation.[^15]
[71] The Plaintiffs submit that the Defendant referred to Mr. Economo as “GE” and Focus as “FMS” on the bulletin board dedicated to Focus. These allegations have been specifically pleaded to in the Statement of Claims and the Defendant is deemed to have admitted that fact. The words were published.
[72] The Plaintiffs claim that Mr. Economo suffered injury to his character and good reputation. They acknowledge that the President and Chief Executive Officer for a public company can be expected to be challenged and criticized in such a forum, but that the Defendant has engaged in defamatory personal abuse. Based on the facts of this case, and relying on previous decisions[^16], they claim damages in the amount of $100,000 in general damages and $200,000 in aggravated damages.
Focus Graphite
[73] With regard to “Focus”, the Plaintiffs claim that it has established that the stock price of Focus decreased as a proximate result of the defamatory publication which has been measured through expert evidence.
[74] The Plaintiffs submit that the reasoning in Athey v.Leonati,[^17]with respect to causation, should be applied to this case when considering the requirement of “natural and proximate result.” In the case before the court, the Plaintiffs submit that it would not have been possible to identify the cause of Focus’ market losses and that the law does not excuse a defendant from liability merely because other factors are at play.
[75] The Plaintiffs acknowledge that it would not be possible to identify the sole cause of the price decrease of the Focus shares. Stock price is influenced by many market factors. The Plaintiffs maintain that the reputation of management and its perception among investors and potential investors is vital to junior resource company like Focus as it initially proves itself through shareholder reputation. Investors or potential investors reading the defamatory statements of the leading investment bulletin board in the mining industry are more likely than not to be influenced with regard to the potential of Focus in a sector where competition for investment is fierce.
[76] The Plaintiffs rely on evidence put forward by Dr. Duchesne. They argue that it is common sense that if management, that is the face of the company, is defamed in the way that Gary Economo was defamed; it will have a negative impact on the perception of the company and consequently, a decrease in the share price. The Plaintiffs submit the reasonable person would be more likely than not to believe that the Defendant’s defamatory statements negatively affected stock price. The Plaintiffs also maintain that the Defendant’s actions were done wrongfully in gaining an advantage by short selling Focus’ stock.
[77] In the end, the Plaintiffs ask the court to apportion a percentage of Focus’ market capitalization loss to the Defendant’s defamatory statements. For every one percent of likelihood of decrease in Focus’ market capitalization that could be attributed to the Defendant’s defamatory statements, the court would attribute $38,007.54 in damages. Focus submits that at least 5% of Focus’ decline in market capitalization represents the degree of damages that should be awarded which totals over $190,000 as special damages for Focus.
[78] The Plaintiffs further claim general damages in the amount of $125,000. In the event the court is not satisfied that Focus has not met its onus to establish special damages, Focus claims $250,000 in general damages.
[79] Each Plaintiff seeks $25,000 for punitive damages. They rely on the fact that the Defendant posted anonymously after his privileges under one username were suspended is indicative of his bad faith in continuing to target the Plaintiffs.
Analysis and Conclusion
[80] In the end, I accept that the comments about GE refer to the Plaintiff, Gary Economo and that these are defamatory. I rely on Mr. Economo’s evidence and the deemed admission by the Defendant. Mr. Economo is referred to as a “confirmed liar”; the reference to his mining shareholders and the reference to Grafraud instead of Grafoid suggest that he has defrauded investors. He is alleged to have stolen ownership of a company and of being reckless with Focus’ money. I accept Mr. Economo’s evidence that he enjoyed a good reputation in the business community although he was relatively new to the mining sector. It is equally apparent however, that others were posting negative comments such as: “Most likely… GE will undermine again” so his reputation was under attack from others. Mr. Economo also conceded that he was subject to the MCTO that appears to have fueled some of the Defendant’s comments.
[81] There were only five postings; far fewer than in the cases cited by the Plaintiffs where significant general damages awards were made. These were not e-mails and it is not clear how broadly these comments were shared with persons other than persons interested in the Stockhouse website. We know that they were accessed 742 times. This does not mean 742 different viewers.
[82] There is no apology in this case. Moreover, when the Defendant was initially stopped from posting his defamatory statements, he went on to adopt a new alias so he could continue his attack on Mr. Economo, although, no new postings have been reported.
[83] I have duly considered the cases cited by the Plaintiffs and I find the facts of this case to be far less egregious than those in Barrick, Hunter Dickinson and Reichman and the other cases referred to. I conclude that the greater damage was made to Mr. Economo’s reputation and I consider an appropriate award of general damages to be $30,000.
[84] I am satisfied that Mr. Douglas attempted to circumvent Stockhouse’s suspension of his postings as OGOPOGO007 and then adopted a new username to renew his attack on Mr. Economo and a further amount of $10,000 in aggravated damages should be awarded to Mr. Economo personally.
[85] I decline to make any award of special damages and limit Focus Graphite Inc.’s general damages to $25,000.
[86] I already expressed my concerns about Dr. Duchesne’s report. Even if those issues were not present, there is a further difficulty in terms of establishing that the Defendant’s postings were a cause of Focus’ losses. Dr. Duchesne’s report is based on variations in stock price based on five subject dates. Without stating so, the necessary assumption is that these were the only postings to the subject bulletin board on those subject dates. It was admitted by Mr. Burtt that these postings were part of a chain of postings on the Stockhouse website. Moreover, in three cases, it is apparent from the “RE” notation, that Mr. Douglas did not initiate the negative comments about Focus. He was simply responding to another person’s negative comments. Mr. Burtt could not explain why he had not produced other posts made on the subject dates and I draw an adverse inference from the Plaintiffs’ failure to produce at least a sampling of the other postings.
[87] The stock market is influenced by many factors and the opinion of a financial analyst in mining and exploration stock would have been helpful. Although this type of evidence is available, Plaintiffs’ counsel conceded that this type of evidence was not sought because of the cost. Focus was a high risk investment and it is apparent that its reputation was the subject of comment by others. Focus may have been more vulnerable because of its status as junior exploration company and I have taken that into consideration as the primary basis for my assessment of any damages. I reject the Plaintiffs’ theory the Defendant was seeking to gain an advantage by short selling Focus’ stock as pure speculation.
[88] I decline to award a higher amount of general damages as was done in the case of WeGo Kayaking Ltd. There, the court declined to make an award of special damages to the corporate plaintiffs but concluded that an award of general damages could have an economic component. There, the court was satisfied on the evidence before it that the bookings with the corporate plaintiffs’ kayak businesses had declined. The causal link between the defamatory comments and the business losses was much stronger in that case. Nevertheless, the Defendant’s defamatory remarks must be denounced.
[89] I am satisfied that these awards of general and aggravated damages are sufficient to punish and deter the Defendant from making any further comments and I decline to award punitive damages to either Plaintiff.
[90] The Plaintiffs may provide short written submissions not exceeding 3 pages with respect to their costs within 20 days of the release of this decision.
Mr. Justice Robert N. Beaudoin
Released: February 20, 2015
CITATION: Focus Graphite Inc. v. Douglas, 2015 ONSC 1104
COURT FILE NO.: CV-13-57438
DATE: 20150220
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FOCUS GRAPHITE INC. and GARY ECONOMO
Plaintiffs
– and –
TED DOUGLAS also known as OGOPOGO007 also known as Drill_Deep, _Find_oil, _stay_calm
Defendant
REASONS FOR JUDGMENT
Beaudoin J.
Released: February 20, 2015
[^1]: Grant v. Torstar 2009 SCC 61; 3 S.C.R. 640 at para. 28 and 29
[^2]: Cressman, Foster Health Facility Inc. v. Furniss, 2006 CarswellOnt 8932, 160 A.C.W.S. (3d) 356 (Ont. Sup. Ct.) at para. 164
[^3]: Cressman at para. 164, citing Bellamy J. in Myers v. Canadian Broadcasting Corp. [1999] O.J. No. 4380 (Ont. S.C.J.)
[^4]: WeGo Kayaking Ltd. V. Sewind, 2007 BCSC 49 at para 87
[^5]: Cressman at para. 165
[^6]: Cressman at para. 173
[^7]: WeGo at para. 95
[^8]: WeGo at para. 98
[^9]: Walker v. CFTO Ltd, (1987), 1987 126 (ON CA), 59 O.R. (2d) 104, (C.A.) citing Lewis v. Daily Telegraph Ltd. (1963), [1963] 2 All E.R. 151 (U.K. H.L.), at 156
[^10]: Walker at para. 26
[^11]: WeGo at para. 93-94
[^12]: Penvidic Conracting Co. v. International Nickel Company of Canada Limited, 1975 6 (SCC), [1976] 1 S.C.R. 267 at paras. 22-23
[^13]: Reichmann v. Berlin, 2002 CarswellOnt 2278, (Ont. Sup. Ct.) at para. 6
[^14]: Uppal v. Diler, 2012 CarswellOnt 9909 (Ont. Sup. Ct.); Barrick Gold Corp v. Lopehandia, (2004), 2004 12938 (ON CA), 71 O.R. (3d) 416 (Ont. C.A.); Hunter Dickinson Inc. v. Butler, 2010 BCSC 939
[^15]: Barrick at para. 47-48
[^16]: Hunter Dickinson Inc. v. Butler, 2010 BCSC 939, 191 A.C.W.S. (3d) 1009 at paras 57, 67 and 73
[^17]: 1996 183 (SCC), 1996 CarswellBC, 2295 (SCC)