Defamation of a corporation is not defamation of its directors
In the recent decision, Kay v Warman, in which I acted for the successful defendants/respondents, the Ontario Divisional Court confirmed that statements made about a corporation are not ordinarily of and concerning the corporation’s members. The case involved high-profile parties, but for the purpose of this blog, I want to focus on this important legal issue.
A. The law in corporate defamation cases
For a plaintiff in a defamation action to be successful, he must demonstrate that the impugned words were published, that they refer to the plaintiff, and that they were defamatory in the sense that they would tend to lower the plaintiff’s reputation in the eyes of a reasonable person. It is the second prong of that test that was primarily at issue in Warman v Kay. Where the impugned publication identifies the plaintiff by name, the second prong will almost always be established and the issue will turn on whether the publication is defamatory. Where the plaintiff is not named, however, the analysis becomes more complex.
The courts have adopted a two-part test from the UK decision Knupffer v. London Express Newspaper Ltd., [1944] A.C. 116 (H.L.). First, the court asks whether the defendant’s words were capable of referring to the plaintiff. If the answer is yes, then the second question becomes whether the words in fact referred to the plaintiff. The rubber tends to hit road at the second stage.
Where a statement, on its face, concerns a corporation, the Knupffer test presents an officer, director or shareholder of that corporation with a high hurdle to overcome. The starting point of the analysis is that defamatory remarks concerning one person do not give rise to a cause of action on behalf of another, even those closely related. In particular, an owner or officer of a corporation cannot sue personally for a defamation of the corporation, and words that are defamatory of a corporation are not ordinarily defamatory of a person connected with it.[1]
In Foulidis v Ford[2], for example, the Court applied the two-part test set out above to an individual who claimed he was defamed as a result of statements made about Tuggs Inc. The Court found that the statement was capable of referring to the plaintiff. However, the Court determined that the words in question did not actually refer to the plaintiff. Among the factors the Court considers was that the plaintiff had failed to prove that he was “the face of Tuggs, or its alter ego.”[3] He was not the corporation’s “sole actor or even its primary actor.”[4] The Court of Appeal upheld the trial judge’s decision.
The implication of Foulidis is that unless the plaintiff is the alter ego or primary actor of the corporation, words that refer to a corporation will not typically be of and concerning the plaintiff.
A plaintiff who seeks to demonstrate that the impugned publication referred to him personally may call witnesses who read the defamatory publication to testify that they understood it was the plaintiff to whom the defendant referred.[5] In my respectful view, where only the corporation is named, it is utterly incumbent on an officer/director plaintiff to tender such evidence.
Moreover, “corporate defamation” cases should not be confused or conflated with “group defamation” cases, such as the Supreme Court of Canada’s decision in Bou Malhab.[6] That case was a class action brought on behalf of taxi drivers working on Montreal whose mother tongue is Arabic or Creole. The Supreme Court established a multi-factor test to determine when a statement made about a group is of and concerning the members of that group. A court will consider 1) the size of the group, 2) the nature of the group, 3) the plaintiff’s relationship with the group, 4) the real target of the defamation, 5) the seriousness or extravagance of the allegations, 6) the plausibility of the comments and tendency to be accepted, 7) extrinsic factors.
While there is some limited overlap between these considerations and the more basic Knupfer test set out above, the two analyses are fundamentally distinct. Group defamation cases prima facie concern statements made about a group of individuals, not an independent corporate entity. This is a crucial distinction, since a statement made about an informal group of individuals (e.g. the “Smith family”) is necessarily directed at some individuals, while the same cannot be said for a statement made about a corporation (e.g. “Smith Inc.”), which has its own unique reputation, character and organizational structure, and which the law considers to be a separate and distinct entity.[8] Moreover, where a group of individuals is defamed, the implication is that all members of the class have been defamed.[9]
To be sure, every case must be decided on its own unique facts and an impugned publication must always be assessed in its complete factual context. A statement referring to a corporation could, in certain circumstances, also refer to one of the corporation’s officers, directors or shareholders. However, the starting point of the analysis is that defamation of a corporation will not ordinarily be defamation of its members unless that person’s identity is so inextricably intertwined with the identity of the corporation that a reasonable member of the public would see them as one and the same.
B. Application of these principles in Warman v Kay
In Warman v Kay, Rees J. for the Divisional Court applied the principles and case-law set out above. He upheld the trial judge’s determination that the impugned publications had been made about the Canadian Anti-Hate Network, not Mr. Warman who was one of its directors.
The impugned publications included the defendants tweets and the headline and sub-headline of an article published in The Federalist. However, the publications did not include the body of the Federalist article. This was crucial since it was the Federalist that had mentioned the plaintiff by name.
Mr. Warman argued when one read the body of the Federalist article, it was clear that the article’s headline (which the defendants had published) implicitly referred to him. However, both the trial judge and appeal court rejected this argument. While statements extrinsic to the publication itself can be used as context to understand whether a post is defamatory (and usually to explain why a post that appears defamatory at first blush is not actually defamatory), if they are used as the source of the defamation itself, then they cease to be context and become content. As Rees J. put it, “Far from mere context, Mr. Warman’s approach would import the actual meaning of the words in the article into the tweets or headlines themselves.”[10]
Notably, the plaintiff did not call any witness to testify that they had read the impugned tweets and believed that they were about the plaintiff. He also admitted in cross-examination that someone reading the tweets may not have associated them with him. Based on the totality of the evidence, the trial judge concluded the plaintiff had not demonstrated that the publication concerned him, and the Divisional Court found no error in the trial judge’s reasoning.
C. Conclusion
The law has long considered a corporation to be a distinct legal entity. It is not merely an association or group of individuals. It has its own legal personality, and thus its own unique reputation. It should be no surprise then that statements made about a corporation will not ordinarily be of and concerning any officer, director or shareholder of that corporation. While the legal concept of the “corporate veil” does not apply strictly in the context of defamation — since we are dealing with how a reasonable person would interpret a publication, rather than legal liability — a corporation’s distinct legal personhood clearly informs how the reasonable person would interpret statements made about a corporation.
To be sure, where a corporation is closely held and is indistinguishable in the public eye from its owner, defamation of the former could very well amount to defamation of the latter. But this is very much the exception not the rule. And it is an exception that will only be made out where a plaintiff can prove through persuasive evidence that a publication ostensibly concerning a corporate entity would have been understood by readers to concern the plaintiff personally as well.
Notes
[1] Raymond E. Brown, Brown on Defamation, 2d ed., (Toronto: Thomson Reuters Canada, 1999) (loose-leaf updated to 2023) at 18:21.
[2] Foulidis v. Ford, 2014 ONCA 530 (CanLII)
[3] Foulidis, ONSC, para 33.
[4] Foulidis, ONSC, para 35. The Court also noted that the defendant had expressly said that he could not accuse anyone in particular, which further supported the conclusion that the words did not concern the plaintiff personally.
[5] Brown, at 22:10, p. 22-71.
[6] Bou Malhab v. Diffusion Métromédia CMR inc., 2011 SCC 9,
[7] Ibid, para 54.
[8] Foulidis ONSC, para 24.
[9] Brown at 6:26. For example, “the Smith family are crooks!” would naturally refer to each individual in that family.
[10] Warman v. Kay, 2024 ONSC 1623 (CanLII), para 52
