It is established law that corporations, like individuals, can sue when they are defamed, but the damages to which a successful corporation may be entitled are generally calculated differently. The recent decision of the Court of Appeal in James Bay Resources Limited v. Mak Mera Nigeria Limited provides a helpful outline of the principles that must be considered when making such a determination.
James Bay Resources Limited (“James Bay”) was an Ontario company that had sought oil and gas contracts in Nigeria. To extract oil and gas in that country, James Bay had to involve an Indigenous Nigerian business. In this case, James Bay got involved with Mak Mera Nigeria Limited (“Mak Mera”), a Nigerian consulting company. In 2011 and 2012, the two companies entered into agreements with one another that entitled Mak Mera to compensation, among other things, in exchange for providing services to James Bay in the oil and gas sector in that country.
The relationship between the companies eventually soured, and Mak Mera alleged that James Bay had excluded it from acquiring a particular oil mining lease, in contravention of one of their agreements. Mak Mera and its president sent a complaint letter to the Nigerian Department of Petroleum Resources (the “DPR”) and representatives of the Shell Corporation, alleging that James Bay had breached their agreement and “treated them unfairly.” Among other things, they also stated in the letter that, if they were to get no benefit from that particular oil mining lease, Mak Mera would consider itself to have been “defrauded by misrepresentations and deceptive conduct.” The letter requested that the DPR suspend the award of the oil mining lease.
In 2014, James Bay sued Mak Mera and its president, alleging breach of contract and defamation. Regarding the defamation issue, the trial judge found that the allegations of misconduct outlined in the complaint letter were defamatory of James Bay and awarded damages of $200,000.
Mak Mera and its president appealed on a variety of issues and, in relation to defamation, argued that the trial judge had erred in making such a substantial award of damages.
In finding that the trial judge had made an inordinately high award of damages, the Court of Appeal reviewed the law generally applicable to damages awarded to defamed corporations.
It began by noting that, while damages are presumed if defamation is proven, that presumption does not extend to any particular amount of damages. Further, a corporation is unlikely to be granted a substantial award “without proof of special damages or at least of a general loss of business or impact on reputation or goodwill.” It noted that a company “is not entitled to compensation for injury to hurt feelings,” unlike an individual (citing Walker v. CFTO Ltd.).
The Court of Appeal noted James Bay had not pleaded or proven special damages at trial, nor had it put forward “admissible evidence of reputational harm or economic loss or of any other impact.” Instead, the trial judge’s finding of harm was mainly based on inferences drawn by the judge and inadmissible evidence, including alleged conversations involving individuals who had not testified at trial. The Court of Appeal found that, while James Bay had made a business decision to leave Nigeria, it was speculative for the trial judge to infer that this was because DPR had pre-empted a bid by the company on the basis of the complaint letter.
Further, there was no evidence of any media publication of the complaint letter, and no experts or representatives from the Nigerian oil and gas industry were called to testify. There was thus no admissible evidentiary foundation to support the trial judge’s finding that James Bay’s reputation was “significantly undermined in the eyes of DPR and others.” In the absence of such evidence, it was an error to award substantial damages.
At trial, the judge concluded that the damage suffered by James Bay as a result of the complaint letter was aggravated by the appellants’ failure to apologize, and this justified a substantial damages award. However, as the Court of Appeal pointed out, this misapplied the law around the absence of apologies.
The Court of Appeal stated that the absence of an apology, in itself, does not justify an award of substantial damages or aggravated damages to a defamed corporate plaintiff. The reason for this is that the analysis differs for corporations compared to individuals. In the case of the former, an apology may have a “mitigating effect”; that is, it may stop the ongoing impact of the defamation, and so the absence of an apology means that the impact of the defamation may not be “attenuated.” These factors are taken into account in assessing the harm caused by defamation.
Where an individual plaintiff is not given an apology, its absence may allow that plaintiff to claim aggravated damages, “which are not for injury to reputation but for the additional separate element of injury to feelings.” A corporation, however, cannot recover damages for injured feelings. As such, it is essential that courts not grant a substantial award of damages to address what are, in reality, aggravated damages for “injured feelings or humiliation.”
As the Court of Appeal noted, while an apology can “vindicate a corporate plaintiff’s good name,” its absence does not necessarily result in further damage. Again, an apology is only relevant to an award of damages to a corporate plaintiff to the extent it acts as a check against defamation that creates “ongoing damage.” This will particularly be the case if the defamation is “widespread, continuing and destructive.” In other words, without proof of damage or impact, it is “aggravating factors such as widespread publication and continued, longstanding and repetitive libel” that may justify a substantial award of damages rather than the absence of an apology itself.
The Court of Appeal referred to the decision in Walker and earlier case law (such as Second Cup Ltd. v. Eftoda) in observing that a court should consider whether, barring circumstances that support a substantial award of damages, there are other ways to “vindicate” a successful corporate plaintiff’s reputation. For example, such vindication may occur through “the fact of the judgment itself,” nominal damages, and an award of costs.
In this case, the Court of Appeal noted that the defamation had not been published to “a potentially unlimited world-wide audience” but only to the DPR and to Shell in Nigeria. At trial, there was no evidence of any republication beyond that, nor was there any admissible evidence that DPR or Shell had acted on the defamation. As such, and despite the absence of an apology, nominal damages were appropriate since James Bay had been successful, but there had been an “extremely limited publication and … no substantial loss or the loss [was] unproven.” The Court of Appeal thus awarded damages for defamation in the amount of $1,000.
Defamation claims involving corporate plaintiffs require a careful, evidence-based approach. If your business believes it has been harmed by false statements or if you are defending against allegations of corporate defamation, experienced legal guidance is essential. The corporate defamation lawyers at Milosevic & Associates can help you assess the strength of your claim, gather the evidence needed to prove reputational or economic loss, and navigate the complex principles that govern damages for corporations. To book a confidential consultation, please contact us online or call (416) 916-1387.
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