The Second Opinion: A Defamation Claim Without 'Merit' — The BCCA Shields Directors From Liability For Statements Made As Part Of Continuous Corporate Disclosure

Public corporations are required by law to provide continuous disclosure of information likely to be relevant to existing or potential shareholders. The directors of such corporations must be careful to ensure that such disclosure is timely and accurate, and that it cannot be characterized as misleading. In recent years, corporate press releases, issued in order to comply with this continuous disclosure obligation, have been the subject of considerable litigation, most notably securities class actions. In dismissing a claim alleging that such a press release was defamatory, a recent ruling of the British Columbia Court of Appeal — Merit Consultants International Ltd. v. Chandler, 2014 BCCA 121 — should be hailed for providing some protection to corporate directors in the fulfilment of their continuous disclosure duties.

A dispute between a mining corporation and a construction manager led to the termination of the manager's contract. The manager then sued both the mining corporation and its parent company. Because the parent company was publicly listed, it was required by the Securities Act (B.C.) to notify current and prospective shareholders of the lawsuit. It fulfilled this continuous disclosure obligation by issuing a press release, in which it noted that it intended to bring a counterclaim against the construction manager for negligence and breach of contract.

The proposed counterclaim against the construction manager was instigated — without any allegations of negligence — but did not proceed because both the mining corporation and its parent company entered CCAA protection.

Although the construction manager's claim against the two entities was stayed by the CCAA, it commenced a fresh action against the directors of the parent company personally, arguing that the contents of the press release — asserting an intention to sue the construction manager for "negligence" — was defamatory and had caused injury to the manager's reputation.

The Court of Appeal affirmed the trial judge's ruling dismissing the defamation action against the directors.

First, the Court agreed that the directors themselves could not be said to have "published" the news release, as their actions did not fall within the categories of conduct justifying the imposition of personal liability on directors for the actions of a corporation:

[23] Without attempting to reconcile all the case law, it seems to me that the case at bar lies at the far 'no liability' end of the...