Redcorp directors defeat Merit's defamation suit

2012-12-14 13:11 ET - Street Wire

by Mike Caswell

The dispute stemmed from a news item that Redcorp issued on May 8, 2008, in which it announced that it was facing a lawsuit after it fired a contractor, Merit Consultants International Inc. The release briefly provided Redcorp's response to the suit, stating that Redcorp had terminated the contract "due to dissatisfaction over the performance of Merit's services." The release also stated that Redcorp planned to countersue Merit for negligence.

Merit viewed the release as defamatory. It sued Redcorp's directors on June 23, 2009, claiming that the directors, in their personal capacities, had caused the company to issue the release. Merit contended that an allegation of negligence against a professional engineer is a serious attack on its reputation.

The case came before Supreme Court Justice Mark McEwan on Oct. 11, 2012, with the directors asking him to summarily dismiss the action. Their argument, as summarized by the judge, was that they were not personally responsible for the release. They also said the release was not defamatory.

Justice McEwan agreed. In his Dec. 11, 2012, decision, he found that there was no evidence that the directors had personally published anything. He said that the suit could only be properly filed against Redcorp. He noted that Merit had previously filed two lawsuits against Redcorp, which both effectively ended when the company was assigned into bankruptcy.

The judge also found that the release was not defamatory. Redcorp was simply issuing news informing shareholders that it was being sued, which the company was required to do. Merit had argued that the company should have limited itself to simply informing shareholders of the lawsuit, but the judge found that Redcorp was permitted to print its response. "It strikes me as untenable to parse the law down to the proposition that [Redcorp subsidiary] Redfern could only flatly report the [lawsuit], at the risk that anything else it said would be defamatory," the decision states.

The decision is a victory for Redcorp's board, the members of which were Terence Chandler, Kenneth Lowe, Wayne Babcock, Peter James Dey and Robert Carmichael. They were represented in the case by Simon Margolis of Bull, Housser & Tupper LLP.

Merit's lawyer was Robert King of Robert J. King Law Corp.

The directors of Redcorp Ventures Ltd., a now-defunct Toronto Stock Exchange listing, have successfully fended off a defamation lawsuit they faced in the Supreme Court of British Columbia over a news release that accused a contractor of negligence. A judge has summarily dismissed the suit, finding that the party responsible for the news release should be Redcorp, and not its directors. He also found that the release was not defamatory.