Court File and Parties

COURT FILE NO.: CV-19-628510 DATE: 20200417 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

JD DEVELOPMENT GROUP INC, JD DEVELOPMENT GROUP CORP., 2284649 ONTARIO INC., 2270613 LIMITED PARTNERSHIP AND 2270613 ONTARIO INC. Plaintiffs – and – KSV ADVISORY INC. AND MITCH VININSKY Defendants

Counsel: William C. McDowell and Derek Knoke, for the Plaintiffs/Respondents Matthew P. Gottlieb and Zain Naqi, for the Defendants/Moving Parties

HEARD: February 24, 2020

Kimmel J.

Anti-SLAPP Motion

[1] The plaintiffs have sued for $11 million in damages for alleged defamation arising from an article entitled “Redemption” posted on July 4, 2019 on the website of the defendants, who are insolvency professionals. The Redemption Article summarized and commented on two public receivership proceedings brought under the Bankruptcy and Insolvency Act. One of these receiverships involved a student residence project of the plaintiffs and the other involved a commercial property owned by another developer.

[2] The defendants move under s. 137.1 of the Courts of Justice Act, R.S.O. 1990, c. C.43 ("CJA"), to dismiss the action as a strategic lawsuit against public participation (“SLAPP”). The Court of Appeal for Ontario has recognized that this statutory remedy was enacted to provide “a pretrial procedure designed to quickly and inexpensively identify and dismiss those unmeritorious claims that unduly entrenched on an individual’s right to freedom of expression on matters of public interest.” See 1704604 Ontario Ltd. v. Pointes Protection Association, 2018 ONCA 685, at para. 29.

[3] The Court of Appeal described the history of the s. 137.1 legislation, also known as the "Anti-SLAPP" legislation, and its purpose, citing page 18 of the Anti-SLAPP Advisory Panel's 2010 Report to the Attorney General:

The legislation should therefore state that the purpose of the statute is to expand the democratic benefits of broad participation in public affairs and reduce the risk that such participation will be unduly hampered by fear of legal action. It would seek to accomplish these purposes by encouraging the responsible exercise of free expression by members of the public on matters of public interest and by discouraging litigation and related legal conduct that interferes unduly with such expression.

The Court of Appeal summarized the purpose of this legislation as encouraging “expression on matters of public interest.” See Pointes, at paras. 37 and 45. The Court of Appeal further states that “litigation of doubtful merit that unduly discourages or seeks to restrict free and open expression on matters of public interest should not be allowed to proceed beyond a preliminary stage.” See Pointes, at para. 45.

[4] For the reasons that follow, I find that this is a claim that unduly entrenches upon the defendants’ right to free expression on matters of public interest and the action should be dismissed.

The Plaintiffs’ Perspective on the Receivership Proceeding

[5] The plaintiffs are a group of affiliated entities in Ontario specializing in the development and operation of student residences. Certain of the plaintiffs (2284649 Ontario Inc., 270613 Limited Partnership and 2270613 Ontario Inc., collectively, the “Debtors”) were involved in a student residence project on Phillip Street in Waterloo, Ontario (the “Phillip Street Project”). An affiliate of the defendant KSV Advisory was appointed the receiver-manager of the Phillip Street Project in February 2018 at the request of China Machinery Engineering Company ("CMEC"), an investor that held a mortgage over certain parts of the Phillip Street Project lands.

[6] There was USD $17 million in additional claims made by CMEC in the receivership, said to have arisen under an engineering, procurement and construction contract with one of the plaintiffs (the “Disputed Claims”). Throughout the receivership proceedings, the plaintiffs asserted that they wished to redeem the mortgage and contest the Disputed Claims. On July 26, 2018, the plaintiffs were granted an order lifting the stay to permit them to redeem the mortgage on certain terms and conditions. They used financing that they had secured from other lenders to redeem the mortgage prior to the end of August 2018. The plaintiffs paid in excess of $17 million into court on August 23, 2018 pending the court’s determination of the Disputed Claims.

The Alleged Defamatory Words

[7] In this action, the plaintiffs claim to have been defamed by an article entitled “Redemption”, written by the defendant Mr. Vininsky and published on the KSV website on July 4, 2019. Mr. Vininsky is the managing director and one of the principals of KSV. He was not directly involved in the Phillip Street Project receivership.

[8] The Redemption Article discusses the similarities and differences between two receivership proceedings in which members of KSV had been appointed the receiver. Both receivership proceedings involved private lenders from China that held registered first mortgages against the debtors’ real property situated in Ontario. In both of these receivership proceedings, stays were granted to allow the debtors time to redeem their mortgages before the court considered the receiver’s motion for a court-approved sales process.

[9] The two receivership proceedings that are discussed in the Redemption Article are:

a. the plaintiffs’ receivership proceeding in 2018 (although the plaintiffs were not named, there was a description of CMEC as the lender and of a project said to be comprised of 20-storey multi-residential student housing towers in Waterloo, Ontario); and b. a receivership proceeding in 2019 involving an industrial single-tenant building in Port Hope, Ontario, owned by Besco International Investment Co. Ltd.

In the Redemption Article, the author, Mr. Vininsky, asked the question: “Is this a new trend?” and discussed what he perceived to be some common themes from these two cases.

[10] The Redemption Article was posted on the KSV website. It was also submitted by the defendants to the Insolvency Insider, a subscriber-based online service that covers and curates articles on Canadian insolvency filings and court cases, as well as publishes a periodic newsletter. After KSV submitted the article, Insolvency Insider, in turn, published a description of the Redemption Article and provided their subscribers a hyperlink to the KSV website where the article could be found.

[11] The Redemption Article is alleged to contain false and defamatory statements concerning the plaintiffs that were particularized in their statement of claim issued on December 3, 2019 and in a libel notice that was served on the defendants on August 1, 2019. The plaintiffs allege that these particularized “Defamatory Words”, in their natural and ordinary meaning and by innuendo, were meant and understood to mean that the plaintiffs:

a. are not reliable, trustworthy or competent developers and borrowers; b. are reckless, irresponsible and incompetent by having engaged in conduct that led to a lengthy and contentious forbearance period, made irresponsible assurances about their intent and ability to redeem the mortgage and could not be trusted to make timely and diligent efforts to redeem or repay loans; and c. did not act in good faith in their dealings with CMEC.

[12] The plaintiffs allege in the pleaded particulars in their statement of claim that:

a. there are inaccurate or misleading statements in the Redemption Article about the reasons for the lengthy and contentious forbearance period and for the appointment of the receiver (which the plaintiffs say were due to unreasonable positions taken by CMEC, not due to their actions or inactions), about the timing of the plaintiffs’ efforts to redeem the mortgage (which the plaintiffs say they had sought to do even before the receivership proceedings were initiated and that they persisted in their desire to redeem throughout) and about the terms of the stay that was granted to them (terms which the plaintiffs say they had agreed to and were not imposed by the receiver); b. the Redemption Article suggests that they were irresponsible and reckless in their professed intention to redeem by not providing independent property valuations to establish a value in excess of the CMEC debt (when there were existing appraisals that exceeded the debt and the plaintiffs made continuous efforts to secure alternative sources of financing and succeeded in doing so within six months of the receiver’s appointment); and c. the Redemption Article contains factual errors and omissions that reflect the author’s disregard for the truth, in terms of: the number of towers in the Phillip Street Project, the fact that the plaintiffs experienced no difficulties in obtaining construction financing for the second tower, the fact that they did not have to get a second mortgage from an anonymous investor and that they resumed construction of the third tower after the redemption was completed.

[13] The plaintiffs allege in their statement of claim that the defendants published the Defamatory Words irresponsibly, for improper purposes (such as the defendants’ trying to enhance their marketing and self-promotion) and with reckless disregard for the truth. They further allege that this has lowered and continues to lower the plaintiffs’ reputation as prudent, honest, responsible, competent, effective and successful real estate development companies in the real estate development, financial services and investor communities. They allege that the publication of the Redemption Article and the Defamatory Words have impaired and will continue to impair their ability to raise financing or re-financing on competitive terms on existing and future projects.

The Position of the Defendants

[14] Prior to delivery of the libel notice, the defendants had been asked by the plaintiffs to remove the Redemption Article from their website, which they agreed to do and it was removed on July 23, 2019. The defendants confirmed on August 9, 2019 that they would not publish the Redemption Article but rejected the plaintiffs' demands that they publish a retraction. The defendants maintain that they agreed to remove the Redemption Article as a courtesy and to avoid a protracted dispute over it, but they do not agree that it was defamatory.

[15] The defendants contend that the alleged Defamatory Words are demonstrably true, have no defamatory meaning or “sting” and are sourced from the public court record. They maintain that they simply reported the facts of the receivership and addressed its implications for insolvency practitioners, offering the observation that there might be a trend in allowing debtors to redeem mortgages after receiverships were underway, before sale processes were conducted. They say that the article was meant to inform a professional audience of court officers and participants with an interest in bankruptcy and insolvency matters.

[16] The defendants point to the bald allegation and absence of any admissible or compelling evidence to back up the plaintiffs’ claim for $11 million in damages. The defendants say that they have already been effectively silenced and that their ability to talk about these cases and associated trends in their professional community has been seriously impaired as a result of this lawsuit. The defendants say this bears the hallmarks of a strategic lawsuit against public participation. They surmise that this lawsuit is really a vehicle through which the plaintiffs seek reprisal for the involvement of KSV’s affiliate in the Phillip Street Project receivership proceeding, which the plaintiffs are bitter about and wish to re-hash the merits of.

The Test Under Section 137.1 of the CJA

[17] There is a two-stage test under s. 137.1(3) and (4) of the CJA:

a. First, the defendants must demonstrate that the litigation arises out of an expression relating to a matter of public interest. b. Second, if that burden is met by the defendants, then the onus shifts to the plaintiffs to satisfy the court that the lawsuit should not be dismissed. See Pointes, at paras. 68, 75, 87.

The plaintiffs’ onus has two parts. They must demonstrate:

i. Reasonable grounds to believe that their claim has “substantial merit” and that the defendants have “no valid defence” (the “Merits Hurdle”); and ii. The plaintiffs have suffered “sufficiently serious” harm that the interest in permitting the claim to proceed outweighs the public interest in protecting the defendants’ expression (the “Public Interest Hurdle”).

See Pointes, at paras. 41-42.

Are the Impugned Expressions of Public Interest?

[18] Paragraphs 30 to 32 of the statement of claim plead the alleged Defamatory Words and innuendo said to be contained in the Redemption Article. These are the expressions of the defendants that must be examined under s. 137.1 of the CJA and that the defendants must demonstrate relate to a matter of public interest.

[19] For ease of reference, I have reproduced the impugned expressions, extracted from the Redemption Article and identified in paragraph 30 of the statement of claim, to be the “Defamatory Words”:

a. “Both cases involved lengthy periods of forbearance and accommodation, ending by the appointment of a receiver when the borrower couldn’t obtain the promised financing by the time the lender’s patience ran out.” b. “In each case, prior to the commencement of a sale process, the borrower arranged the necessary financing and sought the indulgence and cooperation of the applicant creditor, the Receiver and the Court to implement the redemption and effect the discharge of the Receiver.” c. “After a lengthy and contentious forbearance period, CMEC brought an application to appoint a Receiver over the three properties subject to the CMEC mortgage.” d. “After the receivership proceedings commenced, the debtors maintained that they intended to redeem the CMEC mortgage and repatriate the projects; however, they provided little initial evidence of their ability to do so and the Receiver’s independent property valuations compared to the quantum of the CMEC debt seemed to make any redemption improbable.” e. “The Receiver required that the borrowers enter into satisfactory arrangements with the construction lien claimants to ensure that they were aware of the redemption and its implications for them.”

[20] Various alleged factual inaccuracies are also pleaded in paragraph 31 of the statement of claim:

i. The Phillip Street Project was for the construction of four 20-storey multi-residential student housing towers, not three; ii. The plaintiffs experienced no difficulties obtaining construction financing for the second tower; iii. The borrowers did not obtain a second mortgage from the anonymous investor/lender; and iv. Once the redemption was completed, the borrowers resumed construction of the third tower, not the second tower.

[21] The phrase “a matter of public interest” is not defined in the CJA. The Court of Appeal in Pointes at paragraphs 55-65 has provided the following guidance about how to apply the legal principles from Grant v. Torstar Corp., 2009 SCC 61, [2009] 3 S.C.R. 640 to decide whether an expression relates to a matter of “of public interest” for purposes of s. 137.1(3):

a. There is a distinction between statements or other expressions that make a reference to something of public interest and expressions that relate to a matter of public interest – this distinction depends on the context and must be evaluated by asking the question: what is the expression, when placed in its context and taken as a whole, about? b. Not everything that touches upon a matter of public interest necessarily relates to a matter of public interest, for example: i. a brief incidental reference to a topic capable of relating to a matter of public interest in the course of communications devoted purely to a private dispute may not be regarded as an expression relating to a matter of public interest; ii. private matters are not converted into matters relating to public interest merely because those expressions concern individuals in whom the public have an interest or involve topics that may titillate or entertain; iii. a matter of public interest may be distinguished from a matter about which the public is merely curious or has a passing interest; c. It does not require that the expression actually furthers a public interest. A qualitative assessment of the expression’s impact on the issue to which it is directed is not part of the inquiry; d. A statement relating to a matter of public interest that is demonstrably false is nonetheless an expression relating to a matter of public interest; e. A broad reading of the expression is consistent with the purposes identified in s. 137.1(1) of the CJA; f. There is no exhaustive list of topics that fall under the rubric of “public interest”. Some topics are inevitably matters of public interest. Some examples include the conduct of governmental affairs and the operation of the courts; g. Public interest does not turn on the size of the community or audience who is interested; h. The characterization of an expression as a matter of public interest will usually be made with reference to the circumstances as they existed when the expression was made.

[22] To decide whether the impugned expressions relate to a matter of public interest, I must objectively consider what the expression is about when placed in the context of the Redemption Article, taken as a whole. In answering that question, I have considered the guidance from Grant v. Torstar adopted by the Court of Appeal in Pointes and in Platnick v. Bent, 2018 ONCA 687, at paras. 34-37. I have concluded that the impugned expressions contained in the Redemption Article relate to a matter of public interest.

[23] The impugned expressions consider and compare two recent receivership proceedings and the implications for insolvency practitioners, offering the observation that there might be a trend in allowing debtors to redeem mortgages after receiverships are underway, before a sale process is conducted. It is of interest to the community of insolvency professionals to be made aware of recent instances of judicial support for rehabilitation (e.g. mortgage redemptions) over liquidation (e.g. court-sanctioned sales of assets) in distressed real estate situations.

[24] The Redemption Article informs, and would be of interest to, a professional audience of court officers and participants with an interest in bankruptcy and insolvency matters. The article comments on public court proceedings. The observations are not only important to those insolvency professionals but also to the administration of justice, which is precedent-based and relies upon those professionals to be up to date on any recent developments or trends in insolvency law and practice.

[25] Promoting discussion of possible trends in the insolvency and restructuring area and the exchange of views about the market dynamics that might affect those trends is a matter of public interest. This type of commentary on court proceedings is the sine qua non of public interest expressions. The defendants have met their onus on stage one of the s. 137.1 test.

[26] A finding that an expression relates to a matter of public interest does not mean that the impugned expression is not defamatory or that the claim will necessarily be dismissed under s. 137.1 of the CJA. The preliminary assessment of the merits of the plaintiffs’ claim will follow in the second stage of the s. 137.1 analysis in which the plaintiffs have the onus.

Does the Plaintiffs’ Claim have “substantial merit” and do the Defendants Have “no valid defence”? (the “Merits Hurdle”)

[27] The assessment of the merits of the plaintiffs’ claims is a low threshold under s. 137.1. This is intended to be a triage exercise that screens out defective claims. The question that I must decide is “whether a [subsequent] trier could reasonably conclude” that the plaintiffs’ claim has “substantial merit” and that “it is possible that the defence[s] would not succeed.” See Pointes, at paras. 73, 75 and 84; See also Lascaris v. B’nai Brith Canada, 2019 ONCA 163, at para. 33.

The Merits of the Claim of Defamation

[28] The Court of Appeal explains in Pointes, at paras. 80-81: “A claim has 'substantial merit' for purposes of s. 137.1 if, upon examination, the claim is shown to be legally tenable and supported by evidence, which could lead a reasonable trier to conclude that the claim has a real chance of success” taking into account what can reasonably be expected of the plaintiffs at this early stage of the litigation.

[29] The plaintiffs must establish three elements to support their defamation claim for libel (see Platnick, at para. 51):

a. That the alleged Defamatory Words refer to the plaintiffs; b. That the alleged Defamatory Words were communicated to at least one person other than the plaintiffs; and c. The alleged Defamatory Words in their natural and ordinary meaning or in any reasonable implication that they may bear, tend to lower the plaintiffs’ reputation in the eyes of a reasonable person.

[30] The second element is not contested by the defendants. I also find that the plaintiffs have established the first element, that an ordinary person would understand the alleged Defamatory Words to be referring to them (or at least some of them). The party need not be identified by name. See Grant v. Cormier-Grant (2001), 56 O.R. (3d) 215 (C.A.), at para. 20. The evidence of Mr. Li, a third party, is that he understood the Redemption Article to be referring to the JD Group by the description of the project. It is objectively reasonable that members of the real estate development community would similarly understand that one of the receiverships being discussed in the Redemption Article involved the Debtor plaintiffs, even though they were not specifically named, based on the other identifying information contained in the article.

[31] That leaves the third element and the question of whether the alleged Defamatory Words, including any reasonable implication those words may bear, would tend to lower the plaintiffs’ reputation in the eyes of a reasonable person. This element has two steps, only one of which is relevant for the determination of this motion. Both sides agree that I am only to decide the threshold question of whether the words pleaded are reasonably capable of defamatory meaning. They agree that it is not appropriate for the motion judge on a s. 137.1 CJA motion to embark upon the second part of the defamation analysis and decide whether, in fact, the words are defamatory. See Lawson v. Baines, 2012 BCCA 117, at paras. 26-27.

[32] In support of the third element, the plaintiffs primarily rely upon the inferences and implications that they contend the alleged Defamatory Words reasonably bear, which they say would tend to lower the plaintiffs’ reputation in the eyes of a reasonable person. The plaintiffs submitted and argued, in their written and oral submissions, a lengthy list of alleged implications of the Redemption Article. Their written and oral submissions on this motion were very focussed on the alleged implication of various statements and the alleged “thrust” of the Redemption Article, which they claim to be that: Domestic financing to the JD Group was unreasonable and only foreign capital with “covenant light” terms would extend financing to them, while reasonable domestic investors would stay away from the JD Group.

[33] This alleged “thrust” or implication of the Redemption Article is said to be derived from the concluding statement in the Redemption Article, but such an implication is not pleaded or particularized anywhere in the statement of claim, nor does the concluding statement form part of the alleged Defamatory Words. I have not considered it as part of my analysis of the merits of the plaintiffs’ defamation claim. The plaintiffs are only entitled to rely upon those implications that have been pleaded. See Platnick, at para. 51, citing Grant, at para. 28.

[34] Limiting the plaintiffs to the words, innuendo and implications that have been pleaded is important to the defendants’ position on this issue, because defamation cases in particular have very strict rules of pleading. It is well recognized by this court that pleadings in a defamation action need to be clear. “Pleadings are of critical importance in a defamation action, and the technical rules which are featured in a defamation action must be complied with strictly. A party will be bound by his pleadings.” See Rupic v. Toronto Star Newspapers Ltd., 2009 ONSC 500, 307 D.L.R. (4th) 233 (Ont. C.A.), at para. 13, citing Laufer v. Bucklaschuk (1999), 145 Man. R. (2d) 1 (C.A.), at para. 24. The precise words complained of as well as their alleged imputation must be set out precisely in the statement of claim. See Raymond E. Brown, Brown on Defamation in Canada, 2d ed. (Toronto: Carswell, 2019), vol. 1, at 19(2)(a)(i).

[35] I agree with the defendants that my examination of the innuendo and implications of the Redemption Article must be limited to the natural and ordinary meaning of the words and innuendo that has been pleaded when I determine whether the plaintiffs have met their onus of demonstrating that the alleged Defamatory Words would tend to lower the plaintiffs' reputation in the eyes of a reasonable person.

[36] The analysis of whether the alleged Defamatory Words are reasonably capable of being understood in the defamatory sense that is pleaded requires an assessment of whether the implications alleged are objectively reasonable. The alleged Defamatory Words must be assessed based on their plain and ordinary meaning, “taking into account the surrounding circumstances, including the occasion of speaking and the relationship between the parties.” See Foulidis v. Ford, 2014 ONCA 530, at para. 36.

[37] The test is objective and does not depend on what the plaintiffs with hindsight suggest the words mean or imply. The alleged Defamatory Words are to be “judged by the standard of an ordinary, right-thinking member of society.” See Guergis v. Novak, 2013 ONCA 449, at para. 37. On their face, the pleaded Defamatory Words are not objectively defamatory.

[38] The pleaded implications in paragraph 32 of the statement of claim are that: the plaintiffs are not reliable, trustworthy or competent borrowers or developers; that they are reckless, irresponsible and incompetent by having engaged in conduct that led to a lengthy and contentious forbearance period, made irresponsible assurances about their intent and ability to redeem loans and cannot be trusted to make timely and diligent efforts to redeem or repay their loans; and that they did not act in good faith in their dealings with their lender, CMEC.

[39] These pleaded implications are a far stretch from the alleged Defamatory Words. None of the words “reckless”, “irresponsible” or “incompetent” appear in the Redemption Article. The Redemption Article does not use any disparaging language. It does not discuss the plaintiffs’ business practices or comment negatively upon their conduct before, during or after the CMEC receivership.

[40] The pleaded implications do not account for the broader context of the Redemption Article, which is about how the Debtors (within the plaintiff group) were permitted to, and did in fact, successfully redeem their mortgage with CMEC. The pleaded implications also do not account for the audience of professionals to whom the Redemption Article was directed and that they would be aware that there may be a variety of reasons for a company to be put into receivership that have nothing to do with poor management or irresponsible conduct.

[41] Bald allegations or unsubstantiated claims are not sufficient to establish the necessary “grounds to believe” that the proceeding has substantial merit under s. 137.1(1). The merits assessment can involve the weighing of the evidence and even credibility evaluations. See Pointes, at para. 82

[42] The plaintiffs rely on the evidence of a third party, Mr. Li, in support of their contention that the Redemption Article painted them in an unfavourable light that would engender contempt, ridicule, fear, or disesteem. Their wish is to portray Mr. Li as the objective, ordinary and right-thinking member of society.

[43] Mr. Li is a real estate agent. He deposes that he had a client who was interested, in July 2019, in making an investment of CAD $10 million into a project in North York, Ontario for which the JD Group was raising funds. He says that after he disclosed the Redemption Article to his client, the client questioned the creditworthiness of the JD Group and decided to withhold his investment pending a further explanation or clarification. He further deposes that, while his client had said he would invest if the Redemption Article was retracted, when there was no retraction the client decided that the risk was too great and chose not to make the investment.

[44] The evidence on information and belief from Mr. Li does not attribute his client’s questioning of the creditworthiness of the JD Group to the alleged Defamatory Words. Nor does Mr. Li explain why the client was willing to reconsider its investment with the JD Group if the Redemption Article was retracted. These statements are nonetheless relied upon by the plaintiffs for the inference (if the court is prepared to draw it on the basis of an unidentified source for Mr. Li’s hearsay testimony) that there was something about the Redemption Article that caused this client of Mr. Li to be concerned about the creditworthiness of the JD Group, beyond the mere fact that the Phillip Street Project had been in receivership.

[45] Mr. Li and his unidentified client do not say anything in their evidence about the particularized innuendo at paragraph 32 of the statement of claim, that the JD Group mismanaged the Phillip Street Project and that they:

a. are not reliable, trustworthy or competent developers and borrowers; b. are reckless, irresponsible and incompetent by having engaged in conduct that lead to a lengthy and contentious forbearance period, made irresponsible assurances about their intent and ability to redeem the mortgage and could not be trusted to make timely and diligent efforts to redeem or repay loans; and c. did not act in good faith in their dealings with CMEC.

[46] Further, the defendants challenge the admissibility of this evidence, which they say is not compliant with Rule 39.01(4) of the Rules of Civil Procedure in that Mr. Li does not identify the source of the information. When asked on cross-examination, Mr. Li refused to identify his client/investor, who was the source of the information. He said it would not be convenient for him to do so because the client did not wish to be identified. Even if I were to exercise my discretion to admit this evidence from Mr. Li, which I would be prepared to do, I am not prepared to decide this motion based on the strength of this evidence alone, given its deficiencies. I am not satisfied that a reasonable trier of fact could accept this evidence.

[47] Although the threshold is low, the plaintiffs have not made it easy for me to find that “a [subsequent] trier could reasonably conclude” that the plaintiffs’ claim has “substantial merit” and that the alleged Defamatory Words in their natural and ordinary meaning or in any reasonable implication that they may bear, tend to lower the plaintiffs’ reputation in the eyes of a reasonable person. To meet their burden, the Court of Appeal has said that the plaintiffs must do more than simply show that [the] claim has some chance of success.” To have substantial merit, the action must be “shown to be legally tenable and supported by evidence, which could lead a reasonable trier to conclude that the claim has a real chance of success.” See Pointes, at paras. 79-80.

[48] Since this first part of the Merits Hurdle (whether the plaintiffs’ defamation claim has been shown to be legally tenable and supported by evidence) is a close call, I will move on to consider the second part of the Merits Hurdle and the Public Interest Hurdle. [1]

The Merits of the Defences Raised

[49] The onus is on the plaintiffs to persuade me that a trier could conclude that none of the defences raised to their claim would succeed. That assessment must be made based on those defences reasonably available on the record. See Pointes, at paras. 83-84.

[50] The plaintiffs need only show “that it is possible that the defence[s] would not succeed.” See Lascaris, at para. 33. I must determine whether, on a balance of probabilities, it is possible for a trier of fact, on a full record, to conclude that none of the defences would succeed. See Pointes, at para. 84. See also Bondfield Construction Company Limited v. The Globe and Mail Inc., 2019 ONCA 166, at para. 15.

The Defence of Justification or “Truth” of the Alleged Defamatory Words

[51] The defendants must establish the truth of the Defamatory Words and every defamatory imputation to be able to rely on the defence of justification: Peter A. Downard, The Law of Libel, 3rd ed. (Markham: LexisNexis, 2014), at p. 106, s. 6.4.

[52] The defendants contend that each of the five statements that comprise the alleged Defamatory Words extracted from the Redemption Article are substantially true and accurate, and they come from the court record. The plaintiffs argue that the Redemption Article was selective in what it chose to report on from the public court file and that this rendered the report and select Defamatory Words as misleading. I do not accept the innuendo and implications that the plaintiffs plead to have arisen from the Defamatory Words to be objectively reasonable, for the reasons outlined in the previous section dealing with the merits of the plaintiffs’ claims and summarized below.

[53] When each of the statements pleaded in paragraph 30 of the statement of claim to comprise the Defamatory Words are considered, they are true:

a. “Both cases involved lengthy periods of forbearance and accommodation, ending by the appointment of a receiver when the borrower couldn’t obtain the promised financing by the time the lender’s patience ran out.” It is factually accurate that the plaintiffs defaulted on millions of dollars in loans and, for an extended period of time, they failed to meet their obligations to repay the amounts outstanding. It is a fact that there was a lengthy forbearance that ended when the lender chose to stop accommodating the Debtors’ default. The public court file of the Phillip Street Project receivership proceeding is replete with references to the ongoing default of the Debtors, which lasted well over eighteen months, because the loan matured in June 2016 and CMEC did not enforce it until February 2018. The plaintiffs contend that the statement is misleading because it does not refer to their efforts to redeem the mortgage prior to the receivership, which, if accepted, could have avoided the receivership. However, the fact remains that those offers to redeem were not accepted by CMEC. The plaintiffs’ prior efforts to redeem do not render the essence of the statement to be inaccurate. It remains true that, after a lengthy forbearance period that did not lead to a refinancing proposal acceptable to CMEC, in February 2018, CMEC exercised its enforcement rights to seek the appointment of a receiver. b. “In each case, prior to the commencement of a sale process, the borrower arranged the necessary financing and sought the indulgence and cooperation of the applicant creditor, the Receiver and the Court to implement the redemption and effect the discharge of the Receiver.” This is true in the case of the Phillip Street Project receivership and is an accurate reflection of what is recorded in the public court file. The plaintiffs’ contention that this statement suggests that they were only willing to redeem when faced with a sales process is not an objectively reasonable interpretation of this statement. The plaintiffs’ contention that this inaccurately suggests that CMEC’s cooperation or indulgence was required misread the words, which accurately record that their indulgence and cooperation were sought. c. “After a lengthy and contentious forbearance period, CMEC brought an application to appoint a Receiver over the three properties subject to the CMEC mortgage.” This is true and is an accurate reflection of what is recorded in the public court file for the receivership involving the Phillip Street Project. The same comments apply as in (a) above. The plaintiffs’ contention that this suggests that they were responsible for the lengthy and contentious forbearance period is not an objectively reasonable interpretation of this statement, which does not attribute the length or contentiousness of the forbearance period to anyone in particular. d. “After the receivership proceedings commenced, the debtors maintained that they intended to redeem the CMEC mortgage and repatriate the projects; however, they provided little initial evidence of their ability to do so and the Receiver’s independent property valuations compared to the quantum of the CMEC debt seemed to make any redemption improbable.” There is no factual dispute on the record before me that: (i) the plaintiffs maintained their intention to redeem after the receivership, (ii) they did not present evidence to the court about their ability to redeem until July 2018, more than five months after the receivership commenced, and (iii) the receiver’s view at the time, based on independent property valuations, was that the redemption was improbable. The plaintiffs contend that this statement suggests that they were irresponsible and reckless when they maintained their intention to redeem the mortgage. That is not an objectively reasonable interpretation of this statement, particularly when considered in the context of the Redemption Article, the premise of which is that they successfully redeemed the mortgage. The plaintiffs also contend that this statement omits an important fact or “qualifying comment”, namely that there was a Disputed Amount of the debt, which might have softened the point that the debt exceeded the property valuations. The additional fact that there was a Disputed Amount of debt does not, on an objective view, alter the meaning of the statement that the quantum of the debt compared to the valuations seemed to make redemption improbable. e. “The Receiver required that the borrowers enter into satisfactory arrangements with the construction lien claimants to ensure that they were aware of the redemption and its implications for them.” It is factually accurate that a proper resolution and satisfaction of the lien claims was a requirement from the receiver to allow the Debtors to redeem. The plaintiffs argue that this is misleading because they took the initiative on their own to address the lien claims and did not require the receiver’s prompting. Their initiative in relation to the lien claims does not materially alter the meaning or implication of this statement, which is factually accurate.

[54] I do not agree the that innuendo and implications of the alleged Defamatory Words that the plaintiffs plead is an objectively reasonable interpretation of the words. However, even if the main thrust of these statements could be seen to portray the plaintiffs in an unfavourable light that would engender contempt, ridicule, fear, or disesteem, that would be justified by their accuracy.

[55] If the main thrust of the alleged Defamatory Words is justified, then minor factual inaccuracies, such as those pleaded in paragraph 31 of the statement of claim, will not prevent the defendant from establishing the defence of justification. See e.g. Grant, at para. 33.

[56] I am not persuaded by the plaintiffs that a trier would reasonably conclude that the defence of justification would not succeed.

The Defence of Qualified Privilege

[57] Qualified privilege attaches to occasions where the defendant had an interest or duty – social, moral or legal – to make the communication to a particular group, and the group has a corresponding interest or duty in receiving it. See Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, 1995 SCC 59, at para. 143. The public has a common law right to be informed about all aspects of judicial proceedings, and the right (interest or duty) to report on judicial proceedings extends to all pleadings and court documents filed with the court. See Hill, at paras. 151-153.

[58] The defendants argue that the Redemption Article falls squarely within this privilege, being a report on judicial proceedings that reviewed developments in the administration of justice relating to insolvency and restructuring and was published for an audience of insolvency professionals. The defendants also maintain that they did not exceed the occasion of the privilege in that they communicated facts that were reasonably appropriate to the legitimate purpose of informing a professional audience about the cases in question. See Hill, at paras. 146-148.

[59] The plaintiffs argue that this defence is intended to be used only in cases of a communication between parties in a special relationship, and not communications to the public at large. Whereas it might apply to the placement of something containing allegedly defamatory statements into the court file, and perhaps might be extended to statements made to a news outlet during an interview about the contents of a statement of claim (as I did recently in the case of Joshi v. All-State Insurance Company of Canada, 2019 ONSC 4382, at paras. 56-59), the plaintiffs argue that this is not a defence available to anyone who chooses to publish something based on the contents of a court file. The limitations on this defence are supported, according to the plaintiffs, by the availability to the media of a different defence of fair comment or responsible journalism. The plaintiffs rely on more recent cases (such as Cusson v. Quan, 2007 ONCA 771, at paras. 48 and 59, var'd on other grounds, Quan v. Cusson, 2009 SCC 62, Warman v. Veck, 2015 ONSC 4860, at para. 38, and Kent v. Martin, 2016 ABQB 314, at paras. 117-118; var’d on other grounds, 2018 ABCA 202) for the proposition that there needs to be a special personal relationship. They contend that such a relationship did not exist here between the defendants and any audience, and certainly not with Mr. Li's client, who read the Redemption Article. They further contend that publications to the world are rarely an occasion for qualified privilege and that the media should use the defence of responsible journalism instead.

[60] The plaintiffs further argue that a bona fide report on judicial proceedings must be fair and balanced in order to be accurate and not omit important facts, as they argue occurred in this case. See Young v. Toronto Star Newspapers Ltd. (2003), 66 O.R. (3d) 170 (S.C.), at para. 149, aff’d (2005), 77 O.R. (3d) 680 (C.A.). They say the Redemption Article was not balanced because of its omission to mention the Disputed Amount of the debt and because of the alleged “reckless” failure of the defendants to consult with the JD Group before publishing it.

[61] The defendants point out that the Young case involved a blatant omission to report a contrary finding to the accusation that was the subject of the report, not the omission of a fact about a dispute over a debt that was not material to any of the statements pleaded to comprise the Defamatory Words (discussed above) or to the point of the article, which was to identify a possible trend towards allowing for redemptions during insolvency proceedings.

[62] The defendants say that the plaintiffs place too narrow of an interpretation on the availability of this defence, pointing to the example of the case of Chidley-Hill v Daw, 2010 ONSC 1576, at para. 33, var'd on other grounds 2010 ONCA 835, which talks about the privilege that exists, “both at common law and under statute, to publish a fair and accurate report of judicial proceedings”, without limiting it to circumstances of a court filing or special relationship. The defendants note that the defendant in Chidley-Hill was a journalist for the Toronto Star and the defendant in the Hill case was a Crown Attorney speaking to the media on the courthouse steps, quoting from court-filed materials.

[63] I do not need to resolve the controversy on the law about the availability of the defence of qualified privilege to statements made to the public at large, because I have already found it to be more likely than not that a trier would find the defence of justification to be available to the defendants. I agree with the plaintiffs that, for the various reasons that they have identified, it is possible that the defence of qualified privilege may not succeed.

The Defence of Responsible Communication on a Matter of Public Interest

[64] The defence of responsible communication is available to anyone who publishes on any medium. It requires that the publication be on a matter of public interest and that the author be diligent in verifying the alleged Defamatory Words. See Grant, at paras. 96 and 98.

[65] I have already found that the Redemption Article relates to a matter of public interest. The second element of this defence refers to the due diligence exercised by the defendant to verify the alleged Defamatory Words. The Supreme Court of Canada in Grant identified, at paras. 110-123, certain relevant factors that affect the degree of due diligence required. A fair amount of evidence on this motion from the defence side was devoted to these factors and the diligence that was applied. In the balance:

a. The alleged Defamatory Words are not as serious as the plaintiffs allege (for reasons that I have already indicated, I do not accept the imputations and implications that they attach to them as objectively reasonable) and I do not agree with the plaintiffs’ contention that there is no public interest value in the Redemption Article, to the contrary, I have found that there is. I further find that it is important to the public to be able to receive commentaries from professionals involved in specialized fields such as receiverships. I also find that the tone of the Redemption Article was balanced and it did not use vindictive or exaggerated language. b. On the flip side, there was no necessity or urgency to publish the Redemption Article (in which the receiverships at the subject of the Article occurred nearly a year after the events in question) such that the defendants would not have had time to verify the Article's accuracy.

[66] The plaintiffs are critical of Mr. Vininsky for relying only on the receiver’s reports filed in the receivership and verifying the accuracy with only the receiver and receiver’s counsel, and not with the JD Group. However, there is not an absolute obligation on an author to verify the accuracy of an article with the parties who may be implicated in it. There is a risk that if verification does not occur, there may be inaccuracies but here I have found that there were no material inaccuracies (or untruths) in the Redemption Article.

[67] The defendants argue that because the Redemption Article is about implications of the outcome rather than the events themselves, there was no obligation to consult with the plaintiffs before publishing. See Grant, at para. 116-117. The defendants say that even though there was a recognition that the plaintiffs’ interests might be implicated in the communications between Mr. Vininsky and his sources, that does not rise to the level of requiring them to consult with the plaintiffs.

[68] The defendants maintain that the fact-checking that was done with the court officers involved in the file, the receiver and receiver’s counsel, establishes the appropriate level of diligence for the defence of responsible communication. I agree that the due diligence required in a situation such as this involving a report on public receivership proceedings that have concluded, based on materials in the public court file, does not require the author, commenting on future trends, implications and outcomes, to consult with the debtors in the receivership.

[69] I am not persuaded by the plaintiffs that a trier would reasonably conclude that the defence of responsible communication would not succeed.

Conclusion on the Merits of the Defences Raised

[70] Even if the defamation claim was found by me to be legally tenable and supported by evidence that could lead the trier of fact to conclude that the claim has a real chance of success (as required, see Pointes, at paras. 79-80), the plaintiffs have not persuaded me on a balance of probabilities that a trier could reasonably conclude that none of the defences advanced on behalf of the defendants would succeed (Pointes, at para. 84).

Does the Balance of Interests Favour Continuing with the Litigation or Protecting the Defendants’ Expression? (the “Public Interest Hurdle”)

[71] The last question that must be addressed in a s. 137.1 analysis is whether the balance of interests favours continuing with the litigation, or more specifically, because the plaintiffs have suffered “sufficiently serious” harm that the public interest in permitting the claim to proceed outweighs the public interest in protecting the defendants’ expression (the “Public Interest Hurdle”). See Pointes, at paras. 41-42.

[72] Section 137.1(4)(b) of the CJA provides that when the Merits Hurdle is met, there may be some claims that target expression on matters of public interest that are properly terminated under a s. 137.1 motion even though they could succeed at trial. I am not obliged to address this aspect because the plaintiffs’ claims failed the Merits Hurdle under s. 137.1(4)(a)(i) and/or (ii): Pointes, at para. 99. I have not found there to be substantial merit to the claim, nor have I found there to be a possibility that none of the defences will succeed.

[73] Even if the Merits Hurdle had been met, the plaintiffs would still have had to satisfy me that the harm caused by the defendants' expression is "sufficiently serious" that the public interest in allowing the plaintiffs' claim to proceed outweighs the public interest in protecting the defendants’ freedom of expression. See Pointes, at para. 87.

[74] In doing so, “the plaintiff cannot, however, rely on bald assertions in the statement of claim relating to damages, or on unsourced unexplained damage claims contained in the pleadings or affidavits filed on the s. 137.1 motion. The motion judge must be able to make an informed assessment, at least at a general 'ballpark' level, about the nature and quantum of the damages suffered or likely to be suffered by the plaintiff.” See Pointes, at para. 91.

[75] While unnecessary, in the interests of the completeness of the analysis, I will deal with the question of the plaintiffs’ alleged harm and whether sufficient evidence has been provided to allow the court to make an informed assessment of the quantum of the damages suffered or likely to be suffered by the plaintiffs.

[76] The plaintiffs argue that they are not required to prove their damages at this stage. They say all they need to present is sufficient “potentially credible evidence of significant general and pecuniary damages attributable to the allegations.” See Platnick, at para. 108.

[77] The plaintiffs rely upon the anonymous investor who Mr. Li identified and who decided not to invest in another project in North York, Ontario with the JD Group. They say they lost this prospective investor and did not proceed with that project. The defendants argue that this evidence is contrived, and the damages claim predicated upon it is untenable because:

a. The evidence about the loss of this investor is based entirely upon unattributed hearsay from Mr. Li, who refuses to disclose the prospective investor’s identity; b. No documents supporting the existence of a commitment on the part of the investor or about the investment were appended to the filed evidence on the motion. The defendants object to the plaintiffs’ attempts to argue that some evidence of the commitment was available at the cross-examination of Ms. Zhang (the plaintiffs’ representative); c. The North York project ostensibly lost was only a concept; no land had been acquired and no bank financing had been arranged; d. The North York land was still available for the plaintiffs to acquire so they did not lose the chance to acquire the lands; and e. Nothing was provided to support the forecasted loss of $30 million in profits, said to be attributed to a loss of the $10 million investment from the anonymous investor with whom the plaintiffs had no direct dealings.

[78] The plaintiffs do not need to prove their damages, but they would have to do more than they have done to pass the threshold of establishing some harm attributable to the Redemption Article. I find that they have not presented sufficient “potentially credible evidence of significant general and pecuniary damages” attributable to the Defamatory Words. Their failure to even particularize in a general way how they have forecast their lost profits is highly problematic. This is in contrast with the case the plaintiffs rely upon, Bondfield, in which it is apparent from the lower court’s decision (2018 ONSC 1180, at paras. 72-74), that the court was satisfied that evidence had been presented of business losses that were well-documented and supported by calculations. There was a letter from the third party explaining how the negative publicity generated by the articles had made Bondfield Co. an unattractive business partner.

[79] In the balance, the superficial evidence, akin to unsupported allegations, that the plaintiffs have presented does not offset the public interest in the Redemption Article and the underlying values of freedom of expression which the Anti-SLAPP legislation seeks to protect, such as the proper functioning of democratic governance (e.g. free debate and access to, and diffusion of, ideas). See Pointes at paras. 93-94.

[80] Even if the Redemption Article does not rise to the level of a prima facie expression of free speech under the Canadian Charter of Rights and Freedoms, the defendants have established that it is deserving of the public interest protection that the Court of Appeal talks about in Pointes (at para. 93), in that: (i) the author was well-motivated in a desire to promote dialogue through thoughtful commentary among insolvency professionals about a possible new trend; (ii) the Redemption Article was responsibly written, measured and was intended to be informative; and (iii) there is evidence of libel chill in that the defendants immediately agreed to remove it from their website and have not discussed the issues raised in it since receiving the initial threats and demands of the plaintiffs. Contrary to what the plaintiffs allege, the fact that they did so as a “courtesy” and without an admission that they were obligated to remove the Redemption Article from their website does not detract from the chill of the plaintiffs’ threats and Mr. Vininsky’s evidence that this lawsuit has prevented him from fully participating in his professional community.

[81] When balanced against the weak evidence of harm to the plaintiffs, the public interest in permitting their claim to proceed in order to vindicate the “harm” caused to them is slight and overridden by the high interest in protecting the freedom of expression of the defendants. Put another way, it would not be in the public interest to discourage professionals from commenting on public cases and talking about future possible trends.

[82] The hallmarks of SLAPP lawsuits (for example, a power imbalance or a history of the use of litigation to silence critics) do not all have to be present in order to grant a motion to dismiss under s. 137.1(3), although defamation actions supported by minimal or nominal damages do fit squarely within the traditional notion of a SLAPP suit. See Pointes, at para. 103; Air Georgian Limited v. Eugeni, 2019 ONSC 3250, at paras. 55 and 56.

[83] I find that the stated purposes of s. 137.1, to:

a. Encourage individuals to express themselves on matters of public interest; b. To promote broad participation in debates on matters of public interest; c. To discourage the use of litigation as a means of unduly limiting expression on matters of public interest; and d. To reduce the risk that participation by the public in debates on matters of public interest will be hampered by fear of legal action,

are all fulfilled by dismissing this action.

Disposition and Costs

[84] The defendants’ motion is granted, and the action is dismissed.

[85] The defendants have asked for full indemnity costs. No written or oral submissions have been made on costs. I would hope the parties, who are both represented by very experienced counsel, will be able to reach an agreement on costs. However, if they are unable to do so, I will allow them an opportunity to make written cost submissions. If an agreement on costs is reached, counsel are asked to advise the court of such by April 30, 2020. Failing agreement, each side may provide a written cost submission (not to exceed 3 pages double spaced) together with their bill of costs by May 7, 2020 and each may provide a written responding cost submission (not to exceed 1.5 pages double spaced) by May 14, 2020.

[86] Notwithstanding Rule 59.05, this judgment and the dismissal of the action is effective from and after the date indicated below and it is enforceable without any need for the entry and filing of a formal order. In accordance with Rule 1.04, no formal order is required unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this endorsement may nonetheless submit a formal order for original signing, entry and filing when the Court returns to regular operations.

Kimmel J.

Released: April 17, 2020

Reasons for Decision

COURT FILE NO.: CV-19-628510 DATE: 20200417 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

JD DEVELOPMENT GROUP INC, JD DEVELOPMENT GROUP CORP., 2284649 ONTARIO INC., 2270613 LIMITED PARTNERSHIP AND 2270613 ONTARIO INC. Plaintiffs – and – KSV ADVISORY INC. AND MITCH VININSKY Defendants

REASONS FOR decision Kimmel J.

Released: April 17, 2020

[1] An argument was raised in the defendants’ factum about non-compliance with s. 5(1) of the Libel and Slander Act, R.S.O. 1990, c. L.12, requiring a libel notice, which the defendants say was only provided by one plaintiff, JD Development Group Inc. As such, the defendants argue that the claims by the other plaintiffs would be statute-barred. There was an issue raised about the applicability of this requirement of a libel notice for an online publication such as the Redemption Article, depending on whether it can be said to fall within the definition of publication in a “newspaper” or “broadcast” as those terms are defined in the Libel and Slander Act. The parties agreed to defer that to another day and I was not asked to rule on this point as part of the merits analysis.