Court File and Parties

COURT FILE NO.: CV-11-00425431 DATE: 20190611 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

United Ventures Fitness Inc., The Treadmill Factory Inc., The Treadmill Factory (Barrie) Inc. and The Treadmill Factory (Mississauga) Inc. Plaintiffs – and – Peter Twist, Twist Conditioning Incorporated, Fitness Quest Inc. and Northern Response International Ltd. Defendants

COUNSEL: Neil G. Wilson for the Plaintiffs No one appearing for the Defendants

HEARD: February 4, 2019

REASONS FOR DECISION

NISHIKAWA J.

Overview and Procedural History

[1] The Plaintiffs commenced this proceeding seeking general and punitive damages against the Defendants, Peter Twist and Twist Conditioning Inc. (“TCI”) (together, the “Twist Defendants”), for defamation based on statements in a letter written by Mr. Twist. The Statement of Claim also alleged breach of contract against the defendants, Fitness Quest Inc. (“FQI”) and Northern Response International Limited (“Northern Response”).

[2] The Plaintiffs and Northern Response resolved their dispute before trial. FQI filed for bankruptcy protection and the proceeding against it was stayed.

[3] Although this action was commenced in April 2011, none of the Defendants served a Statement of Defence. In June 2014, the Twist Defendants and Northern Response brought a motion to strike certain portions of the Statement of Claim. The motion to strike was resolved on consent between the Plaintiffs and Northern Response.

[4] A couple of months before the hearing of the motion to strike, counsel for the Twist Defendants was removed from the record at their request. TCI did not appoint a new lawyer or serve notice as required under r. 15.03(2) and 15.04(6) of the Rules of Civil Procedure. Mr. Twist did not serve a notice of intent to act in person. No one attended the motion hearing on behalf of the Twist Defendants. The Twist Defendants were served with a copy of the order of Firestone J. dated October 10, 2014, which ordered that they pay costs of $1,000.00 on the abandoned motion to strike. The Twist Defendants have not participated in this proceeding since their counsel was removed from the record.

[5] On November 3, 2014, the Twist Defendants were noted in default and were thus not entitled to notice of any step in the action: r. 19.02(3). In July 2017, the Plaintiffs served them with the Trial Record, including the Fresh as Amended Statement of Claim (the “Claim”). The Twist Defendants did not attend a pretrial conference held in December 2018, and did not appear at trial. The matter thus proceeded as an undefended trial against the Twist Defendants.

[6] For the reasons that follow, I grant judgment to the Plaintiffs.

Factual Background

[7] As the Twist Defendants have been noted in default, they are deemed to admit the truth of all allegations of fact in the Claim: r. 19.02(1)(a). The Plaintiffs rely on the deemed admissions and the testimony of Victor Proudian, the principal of United Ventures Fitness Inc. (“United Ventures”)

The Parties

[8] The Plaintiffs, United Ventures, The Treadmill Factory Inc., The Treadmill Factory (Barrie) Inc. and The Treadmill Factory (Mississauga) Inc. (together, the “Plaintiffs”) are all corporations incorporated under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16. United Ventures carries on business under the trade name “The Treadmill Factory”, and is engaged in selling exercise and fitness-related equipment and accessories. The Plaintiffs operates a store in Markham, Ontario. United Ventures previously operated an online division known as “Canada Fitness On-Line” which has since been abandoned.

[9] The Treadmill Factory Inc., The Treadmill Factory (Barrie) Inc., and The Treadmill Factory (Mississauga) Inc. each operate a store in London, Barrie, and Mississauga. They have been in the fitness industry since the early 1990s.

[10] The principal of United Ventures is Victor Proudian, who was the sole witness at trial.

[11] The Defendant, TCI, was a corporation incorporated under the British Columbia Business Corporations Act. The Corporation Profile Report for TCI shows that it was dissolved in 2016.

[12] The Defendant, Peter Twist, was the President and Chief Executive Officer of TCI. Mr. Twist is a professional trainer who has trained professional athletes and sports teams nationally and internationally. Mr. Twist is well-known in the fitness industry. Mr. Twist continues to provide training certification.

[13] The Defendant, Northern Response, is an Ontario corporation that supplied fitness products to the Plaintiffs.

[14] The Defendant, Fitness Quest, is a Delaware company that supplied TCI with BOSU- branded products.

The Parties’ Relationship

[15] TCI was the exclusive distributor of BOSU products in Canada on behalf of Fitness Quest. The BOSU balance trainer is a dome-shaped, stability ball-type piece of exercise equipment.

[16] From 2006 to 2007, the Plaintiffs purchased BOSU products from TCI and then sold them for a price that they determined. The Plaintiffs determined the price at which they sold the BOSU ball by monitoring their competitors’ prices, and targeting their price at the middle of the range.

The Dispute Over the MAP Policy

[17] In November 2006, TCI sent its dealers an email advising that it would be instituting a minimum advertised price policy (the “MAP Policy”) effective November 1, 2006. The MAP Policy was attached to an email from Gerard Recio, Wholesale Accounts Manager, to “all our valued Dealers and Distributors.” The MAP Policy stated that it applied to all Canadian dealers and distributors, and stated that MAP pricing would be established by TCI for certain BOSU products. The MAP Policy applied to the advertised prices but not the price at which they were actually sold. For example, the BOSU “Retail Version Package” could not be advertised for less than $158.00. The purpose of the policy was to “ensure that everyone that retails [TCI’s] sport conditioning and performance fitness products are all on the same playing field.” The recipients of the email were asked to sign and return the document indicating their agreement to follow the MAP Policy.

[18] The Plaintiffs did not sign the MAP Policy and refused to adhere to it, because they believed it violated the price maintenance provisions of the Competition Act, R.S.C. c. F-34.

[19] In March 2007, when United Ventures tried to place an order for BOSU products, TCI refused to fill the order because United Ventures was not adhering to the MAP Policy. TCI then stopped providing products to the Plaintiffs. The Plaintiffs sought confirmation in writing as to the reason TCI would no longer supply them with BOSU products, but TCI refused.

[20] United Ventures purchased BOSU products from another dealer in Alberta, Physique Fitness, who was authorized to sell them. Mr. Recio, who had sent the email, attended the Plaintiffs’ stores to take photographs. TCI accused the Plaintiffs of selling counterfeit products from China, and demanded that they be removed from the floor.

[21] Some time later, Mr. Proudian received a phone call from a TCI representative named Ashley. Mr. Proudian recorded the telephone call. Ashley repeatedly asked him to raise the advertised price to $148. She did not state that the products were illegal or defective, or that United Ventures could not sell them.

The Alleged Defamatory Statements

[22] On May 1, 2009, Mr. Proudian learned from a friend at Physique Fitness that the Twist Defendants had published a letter (the “Twist Letter”) that stated as follows:

BOSU® products are sold in Canada through a network of authorized dealers selected by Twist Conditioning Inc., appointed as Canadian Master Distributor by Fitness Quest, the manufacturer of all BOSU® products. Some of these dealers may have Internet sites on which they are authorized by FQ to sell a select mix of our products. BOSU® dealers have been chosen for their ability to properly represent, sell and, in most cases, provide warranty coverage for our products. Fitness Quest provides a warranty on products sold only by our authorized dealers.

Unfortunately, BOSU® products are sometimes sold by companies that are not authorized to do so. Goods sold by these unauthorized companies are not purchased from Fitness Quest or any of our authorized dealers; instead they are acquired from a host of other sources. BOSU® products sold by unauthorized dealers sometimes are:

(1) Purchased on a secondary “gray” market;

(2) Damaged, defective or so-called “B” stock goods; or

(3) Stolen goods

Currently, in Canada the following company is NOT an authorized Dealer of BOSU products:

Treadmill Factory

Canada’s Fitness On-Line

Many web sites change names and locations frequently so they cannot be reached to solve customer problems. Other sites simply go out of business. Due to the nature of the goods sold by unauthorized dealers and their business practices, products sold by unauthorized dealers are not entitled to BOSU® warranty coverage. We are using our best efforts (including this warning) to prohibit these companies from taking advantage of consumers, but these practices still exist. We urge you to use diligence when selecting a dealer to make your purchase.

Sincerely,

Peter Twist President and CEO, Twist Conditioning Inc.

[23] The Twist Letter was dated May 1, 2009, and addressed to all “Authorised BOSU Dealers and Customers.” Mr. Proudian stated that “everyone” he knew in the fitness industry in Canada had received it, as well as some contacts in the United States. Mr. Proudian was aware that the Twist Letter had been sent to all thirty locations of the Fitness Depot, its main competitor, and that Fitness Depot was further distributing the Twist Letter to its customers.

[24] Mr. Proudian called Mr. Twist about the Twist Letter. Mr. Twist said that he was leaving on a trip to London and would call Mr. Proudian back when he returned. However, at no time did the Twist Defendants retract or correct the statements in the Letter or apologize for its content.

[25] The substance of the Twist Letter was repeated to customers. For example, when customers contacted the 1-800 telephone number for Fitness Quest, they were directed to TCI. TCI then told customers that if they purchased the product from The Treadmill Factory, there was no warranty.

[26] The Plaintiffs submit that the statements in the Twist Letter, in their natural and ordinary meaning, and by innuendo, meant:

• The BOSU products sold at The Treadmill Factory and Canada’s Fitness On-Line were damaged, defective or stolen;
• The other products sold at The Treadmill Factory and Canada’s Fitness On-Line were damaged, defective or stolen;
• The Treadmill Factory and Canada’s Fitness On-Line would ensure that they could not be reached to resolve customer problems; and
• The Treadmill Factory and Canada’s Fitness On-Line were shady and illegal operations that could not be trusted.

[27] The Plaintiffs allege that the statements are false and maliciously published, and that the Twist Defendants knew, or carelessly disregarded, whether they were false.

The Impact of the Defamatory Statements on the Plaintiffs

[28] Mr. Proudian testified that the negative impact of the Twist Letter on The Treadmill Factory’s reputation was “astronomical” and far-reaching. Customers expressed doubts about the products that the Plaintiffs were selling because they believed they were stolen, defective, or grey market products. The Plaintiffs had more difficulty selling their products because it was difficult to demonstrate that the statements in the Twist Letter were untrue, especially because of Mr. Twist’s reputation in the fitness industry.

[29] The statements also had a negative impact on the Plaintiffs’ relationships with manufacturers, who believed that the Plaintiffs would make “knock-offs” of their goods, or import cheaper, competing products. Certain manufacturers refused to continue to deal with the Plaintiffs. Mr. Proudian gave the example of having to develop a new treadmill line with a company in Taiwan because a local manufacturer would no longer supply treadmills to the Plaintiffs.

[30] The Plaintiffs allege that the impact was multiplied because of Mr. Twist’s celebrity and reputation within the sport conditioning and fitness community.

[31] Mr. Proudian testified that it has taken years to rebuild The Treadmill Factory’s reputation, and this has been achieved incrementally, through means such as individual reviews on Google.

Issues

[32] The issues to be determined are:

(i) Have the Plaintiffs established a claim for defamation? (ii) If so, to what damages are the Plaintiffs entitled? (iii) Are the Plaintiffs entitled to punitive damages?

Analysis

Were the Statements Made by Mr. Twist Defamatory?

[33] In order to establish the tort of defamation, a plaintiff must demonstrate:

(i) 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; (i) that the words in fact referred to the plaintiff; and (ii) that the words were published, meaning that they were communicated to at least one person other than the plaintiff.

Grant v. Torstar Corp., 2009 SCC 61, at para. 28

[34] If the above elements are established, falsity and damage are presumed. The plaintiffs need not show a loss. The tort of defamation is one of strict liability and does not require the plaintiff to show that the defendant intended to do harm, or even that the defendant was careless: Grant v. Torstar, 2009 SCC 61, at para. 28; Rutman v. Rabinowitz, 2018 ONCA 80, at paras. 62-63.

[35] While an essential element of the tort of defamation is that the words published refer to the plaintiff, it is not necessary that the plaintiff be specifically referred to by name. It is only necessary that the “ordinary sensible person” to whom the words were published would understand them as referring to the plaintiff: Grant v. Cormier-Grant, [2001] O.J. No. 3851 (C.A.), at para. 19.

[36] In this case, the Plaintiffs argue that the statements in the Twist Letter constitute “false innuendo.” Innuendoes occur when the defamatory meaning of the words arises from inference or implication. In this case, the Letter does not specifically state that the Plaintiffs sold grey market goods, or defective or stolen goods. After detailing the potential issues with unauthorized dealers, the Twist Letter states that The Treadmill Factory and Canada On-Line Fitness are not authorized dealers of BOSU products. In fact, there was no such thing as an “authorized dealer,” as TCI supplied dealers who wanted to purchase the products.

[37] By identifying the Plaintiffs’ business as an unauthorized dealer, squarely between two paragraphs highlighting questionable products and practices, the Twist Letter implied that the Plaintiffs engaged in those practices. An “ordinary sensible person” reading the entire letter would understand that the statements made in the Twist Letter pertained to the Plaintiffs. If the statements were not about the Plaintiffs, the identification of Treadmill Factory and Canada’s Fitness On-Line in the letter would make no sense. Moreover, since no other dealers or companies are mentioned in the Twist Letter, the clear implication is that Treadmill Factory and Canada’s Fitness On-Line are unauthorized dealers who engage in the practices detailed.

[38] In addition, the fact that Physique Fitness contacted Mr. Proudian when it received the Twist Letter demonstrates that a third party understood the statements as referring to the Plaintiffs.

Liability of Peter Twist

[39] A director, officer, or employee of a corporation may be liable for personal conduct if that conduct gives rise to an independent action in tort. This includes the tort of defamation: Best v. Spasic, [2004] O.J. No. 5765 (S.C.), at paras. 12-13. In Best v. Spasic, the court stated that the “corporate veil does not operate to protect directors, officers or any other employee from personal conduct that is tortious and upon which an independent action in tort can be shown”: at para. 12.

[40] Mr. Twist authored and signed the Twist Letter, putting his name and reputation behind the statements made therein. His conduct gives rise to an independent tort and he is therefore not insulated from liability.

Damages

[41] The purpose of general damages in defamation cases is: (i) consolation to the plaintiff for the distress suffered from the publication of the defamation; (ii) to repair the harm to reputation, including, where relevant, business reputation; and (iii) as a vindication of reputation: Mina Mar Group Inc. v. Divine, 2011 ONSC 1172, at para. 13.

[42] The factors to be considered in determining the appropriate quantum of general damages for defamation include:

(i) The plaintiff’s position and standing; (ii) The nature and seriousness of the defamatory statements; (iii) The mode and extent of the publication; (iv) The absence or refusal to retract the defamatory statement or to apologize for it; (v) The conduct and motive of the defendant; and (vi) The presence of aggravating or mitigating circumstances.

Hill v. Church of Scientology of Toronto, 1995 SCC 59, [1995] 2 S.C.R. 1130; Mina Mar Group, 2011 ONSC 1172, at para. 11.

[43] Corporations, like individuals, are entitled to compensatory damages without proof of damage, to vindicate the company’s business reputation. While a corporation is entitled to more than nominal damages, the amount may be less substantial since a corporation cannot be compensated for injured feelings: Barrick Gold Corp. v. Lopehandia, [2004] O.J. No. 2329 (C.A.), at para. 49.

[44] Since defamation cases are highly fact-specific, comparison with damage awards in other libel cases is of little assistance: Rutman v. Rabinowitz, supra, at paras. 82-83, citing Hill v. Church of Scientology, supra, at para. 190.

[45] The range of general damages awarded in defamation cases is broad. In cases involving defamation against a corporation, general damages have ranged from $15,000 to a furniture store from an email sent by a disgruntled customer to friends and colleagues (2964376 Canada Inc. (c.o.b. Ameublement Prestige Furniture) v. Bisaillon, 2012 ONSC 3113); $75,000 for an online defamation campaign against a mining company (Barrick Gold); $425,000 to New York Fries for an ongoing defamation campaign by a former franchisee alleging criminal conduct (122164 Canada Ltd. (c.o.b. New York Fries) v. C.M. Takacs Holdings Corp., 2012 ONSC 6338, default judgment set aside: 2015 ONSC 3007).

[46] In this case, the Plaintiffs had a solid business reputation earned over twenty years in the fitness industry. The Treadmill Factory is a family business that provides additional services such as in-store repairs to enhance the relationship with their customers. In a relatively small and competitive industry such as the fitness industry, the Plaintiffs’ reputation was important. The Letter created the perception that the Plaintiffs were operating in a shady manner, providing sub-standard or illegal goods and potentially disappearing overnight. The Letter was distributed to have maximum effect. The Defendants issued no retraction or apology.

[47] In Leenen v. Canadian Broadcasting Corp., [2000] O.J. No. 1359 (S.C.), at para. 205, aff’d, [2001] O.J. No. 2229 (C.A.), the Court stated that the identity of the person who made the defamatory statement is a factor to consider in assessing general damages. In that case, the fact that the CBC made the statements was considered because of its “enormous capacity to cause damage.”

[48] As someone well-known in the industry, who was sought after as a trainer by professional athletes and professional sports teams, Mr. Twist’s statements would have had a much higher level of credibility, causing greater harm to the Plaintiffs than if the statements were made by an anonymous blogger, or someone without a comparable reputation.

[49] All of the factors identified in Hill warrant a significant damages award. I grant the Plaintiffs $100,000 in general damages.

Are the Plaintiffs Entitled to Punitive Damages?

[50] Where the plaintiff has made a claim for defamation, punitive damages may be awarded where the defendant’s conduct is “so malicious, oppressive and high-handed that it offends the court’ sense of decency…. Their aim is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the egregious conduct of the defendant.”: Hill v. Church of Scientology, at para. 196.

[51] In my view, the Twist Defendants’ conduct, as described above, meets the threshold for punitive damages. As the Plaintiffs argue, Mr. Twist “weaponized” his reputation in the fitness industry to effect greater harm to the Plaintiffs. The Letter is carefully worded and drafted in a manner that would enhance its legitimacy and appear to be drafted out of concern for customers who might unwittingly purchase defective products, but is in fact intended to injure the Plaintiffs by insinuating that they are engaged in illegal and unethical conduct.

[52] There is no evidence that the Twist Defendants had any regard for the impact of the Letter on the Plaintiffs. No attempt was made to retract the statements or to correct them. After brushing Mr. Proudian off, Mr. Twist made no attempt to call him again or to respond, including in this proceeding.

[53] Perhaps most disturbing is the unavoidable inference that the Twist Letter was a reprisal for the Plaintiffs’ refusal to adhere to the MAP Policy. The Twist Defendants in effect sought to punish the Plaintiffs for refusing to engage in unlawful activity. It was not sufficient to the Twist Defendants to cut off the Plaintiffs’ supply of BOSU products, they had to take the additional step of making baseless allegations aimed at reducing their profitability or even putting them out of business.

Conclusion

[54] For the foregoing reasons, I grant judgment to the Plaintiffs against the Twist Defendants for $100,000 in general damages, and $25,000 in punitive damages, plus pre and post-judgment interest.

Costs

[55] Plaintiffs’ counsel submitted a bill of costs at the hearing for a total amount of $17,628.57 on a substantial indemnity basis, including HST and disbursements. The Plaintiffs’ costs on a partial indemnity basis are $11,903.68 including HST and disbursements. Mr. Wilson advises that he has subtracted all amounts attributable to the proceeding against Northern Response, and the abandoned motion to strike.

[56] Substantial indemnity costs are warranted where a party has engaged in reprehensible, scandalous or outrageous conduct in the proceeding: Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66 (C.A.), 2009 ONCA 722, at paras. 28-29. The Twist Defendants did not participate in the proceeding, despite initially bringing a motion to strike. However, this in itself does not warrant an award of substantial indemnity costs.

[57] Pursuant to s. 131(1) of the Courts of Justice Act, the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario, (2004), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the Court when determining the issue of costs.

[58] I have considered these factors, as well as the principle of proportionality in R. 1.01(1.1) of the Rules of Civil Procedure, while keeping in mind that the Court should seek to balance the indemnity principle with the fundamental objective of access to justice. While the matter was not particularly complex, the Plaintiffs were required to assemble evidence to prove their claims. Plaintiffs’ counsel has taken any unnecessary steps, or to have unduly lengthened the proceeding. Based on the foregoing, I fix costs on a partial indemnity basis at $11,903.68, inclusive of disbursements and HST.

Nishikawa J. Released: June 11, 2019