



COURT OF APPEAL FOR ONTARIO

CITATION: The Catalyst Capital Group Inc. v. Veritas
    Investment Research Corporation, 2017 ONCA 85

DATE: 20170201

DOCKET: C61665

Weiler, Blair and van Rensburg JJ.A.

BETWEEN

The Catalyst Capital Group Inc. and Callidus
    Capital Corporation

Plaintiffs

(Appellants)

and

Veritas Investment Research Corporation and West
    Face Capital Inc.

Defendants

(Respondents)

Rocco DiPucchio and Andrew Winton, for the appellants

Brendan Morrison, for the respondent Veritas Investment
    Research Corporation

Matthew Milne-Smith and Andrew Carlson for the
    respondent West Face Capital Inc.

Heard: September 20, 2016

On appeal from the order of Justice Suhail A.Q. Akhtar of
    the Superior Court of Justice, dated January 5, 2016, with reasons reported at
    2016 ONSC 23.

R.A. BLAIR J.A.:


OVERVIEW

[1]

The parties are all players in a highly-sophisticated field of the
    venture capital industry involving investments in distressed and undervalued
    Canadian companies. This action arises out of what the appellants allege was a
    wrongful and harmful short selling strategy conducted in concert by the
    respondents.  Although the action is based on allegations of civil conspiracy
    and the tort of intentional interference with economic relations as well, the
    issue on this appeal concerns the plaintiffs included claim in defamation.

[2]

The appellants seek to set aside the order of Akhtar J. striking out a single
    paragraph in their Statement of Claim as disclosing no cause of action because it
    alleged publication of the defamatory statements by one of the respondents to
    unnamed third parties at unspecified times. They say the trial judge erred in
    this respect for a number of reasons, but primarily because they had already
    established a
prima facie
case of defamation by alleging publication
    to certain named persons (representatives of the other defendant) at a specified
    time and place. They submit that, in such circumstances, the failure to name
    all of the persons to whom publication was made and/or all the times and places
    of publication  when these particulars are unknown to them but known to the
    defendant  is not automatically fatal to a defamation claim.

[3]

They also appeal from the motion judges decision to make no order as to
    costs.

[4]

The respondent, West Face Capital Inc., argues that the appellants seek
    to lower the bar for pleading to defamation so low as to provide no bar at all. 
    Indeed  in the words of its factum  to leave the impugned paragraph in the
    Statement of Claim would transform the action from one focussed narrowly on
    West Faces interaction with Veritas into an almost limitless Royal Commission
    of Inquiry into everything West Face has ever done, said or thought in respect
    of Callidus.

[5]

In spite of this ringing admonition, however, I agree with the
    appellants in the circumstances of this case. For the reasons that follow, I
    would allow the appeal.

FACTUAL BACKGROUND

[6]

The appellant, The Catalyst Capital Group Inc., and the respondent, West
    Face Capital Inc., compete in a sector of the investment industry involving
    control over distressed and undervalued Canadian companies. The appellant,
    Callidus Capital Corporation, is a publicly traded asset-backed lender that
    finances companies unable to access traditional lending facilities. Callidus
    was wholly owned by Catalyst prior to an Initial Public Offering of 40% of its
    shares in April 2014; it remains 60% controlled by investment funds managed by
    Catalyst.

[7]

The respondent, Veritas Investment Research Corporation, is an equity
    research company that prepares and publishes investment research reports that are
    distributed to subscribers. One of those reports (the Veritas Report), and an
    earlier report prepared by West Face (the West Face Report), are alleged by
    the appellants to have contained false and defamatory statements about the
    appellants. The Reports are said to have been published in the following
    circumstances.

The Short Selling Strategy

[8]

Catalyst alleges that in October 2014 West Face launched a short selling
    scheme targeting Callidus stock and later that year persuaded Veritas to join
    with it in a plan to deceive market participants into believing that Callidus
    was a poor investment, sullying the reputation of Catalyst along the way.

[9]

Short selling is a risky investment strategy with the potential for either
    a highly profitable upside or an equally unprofitable downside, depending upon
    the performance of the targeted stock on the market. It involves the sale to a
    third party of shares in a publicly traded corporation that have been borrowed
    by the seller/investor from another party. The hope of the seller/investor is
    that the value of the shares will decline, at which point the investor will buy
    back the shares at the lower price and return them to the party from whom they
    were originally borrowed, taking the profit from the difference in price for
    its own benefit. The risk is that if  instead of declining in value as
    anticipated  the shares appreciate in value the seller/investor must
    re-purchase them at the higher price and take the loss. Selling borrowed shares
    in this fashion is known as selling short.

[10]

The appellants allege that West Face launched its short selling strategy
    in retaliation against Catalyst for an earlier lawsuit Catalyst had commenced
    against it regarding the use of confidential information by an employee who had
    left Catalyst and joined West Face. They say that in order to advance its short
    selling strategy, West Faces chief executive officer and others met with named
    representatives of Veritas in December 2014 and that the joint plan was
    initiated at this meeting.

The Allegedly Defamatory Statements

[11]

At that meeting, the West Face representatives disclosed to the Veritas
    representatives the details of the West Face Report  which were unfavourable
    to, and allegedly defamatory of, Catalyst and Callidus  and advised as well
    that West Face had embarked upon a short selling strategy with respect to
    Callidus.  West Face is said to have encouraged Veritas to prepare a similarly
    negative report about Callidus and distribute it to their subscribers, thereby
    creating the impression that West Face and Veritas had independently and
    separately issued negative reports. This would have the effect of deceiving the
    market place into believing that a negative consensus was building against
    Callidus, and drive the price of Callidus stock downward which, in turn, would
    bolster West Faces short-selling strategy.

[12]

The Veritas Report is alleged to have been prepared as a result of this
    meeting and published to Veritas subscribers in April 2015. The appellants
    plead that both it and the West Face Report contained false and defamatory
    statements impugning the financial viability and conduct of both Callidus and
    Catalyst. These allegations are particularized in the Statement of Claim and
    their details are not important to the issue on this appeal.

[13]

The Veritas Report is alleged to have been published to market
    participants and distributed to Veritas subscribers, and to be available for
    download from the Veritas website by its customers. The West Face Report is
    alleged to have been published and distributed to the Veritas representatives
    attending the December 2014 meeting, and beginning in November 2014 and
    continuing to March 2015, to unknown third party market participants.

The Action and the Decision of the
    Motion Judge

[14]

In the action, Catalyst and Callidus claim damages against West Face and
    Veritas for conspiracy to publish defamatory statements about Callidus and for intentional
    interference with the economic relations of Callidus, as well as for defamation
    in relation to both Catalyst and Callidus.

[15]

West Face moved under rule 21.01(1)(b) of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194 to strike the entire Statement of Claim
    as disclosing no reasonable cause of action. Veritas moved separately to strike
    the pleadings against it with respect to intentional interference with economic
    relations and conspiracy to defame. The motion judge dismissed Veritas motion
    in its entirety.  He dismissed West Faces motion except with respect to
    paragraph 25, which he struck without leave to amend. He awarded no costs of
    the motion.

[16]

Paragraph 25 is contained in a part of the Statement of Claim under the
    heading West Face and Veritas Conspire to Publish Defamatory Statements About
    Callidus.  It states that:

Beginning in November 2014, and continuing to March 2015, on
    specific dates known only to West Face, West Face distributed a report
    impugning Callidus and Catalyst to market participants (the "West Face
    Report). The West Face Report was distributed to third parties, the identities
    of which are known to West Face.

[17]

The motion judge struck this part of the pleading on the basis that it
    contained an impermissible plea of publication to unnamed third parties at
    unspecified times. The appellants argue that he erred in doing so.

[18]

They also argue that he erred in refusing to award them costs of the
    motion, given their substantial overall success.

THE APPEAL AGAINST THE ORDER STRIKING OUT PARAGRAPH 25

[19]

After reviewing the authorities, I conclude, respectfully, that the
    motion judge erred in striking paragraph 25 of the Statement of Claim.

[20]

I agree with the appellants that the failure to name all persons to whom
    publication was made and/or to specify all the times and places of publication
    is not automatically fatal. Those particulars are unknown to the appellants but
    known to West Face and form an integral part of what is said to be an overall
    scheme of conspiracy to injure, intentional interference with economic
    relations, and defamation. The appellants have otherwise properly pleaded a
prima
    facie
claim in defamation (including publication to named persons) against
    West Face.  The Statement of Claim, read generously and as a whole, alleges
    material facts disclosing publication to unnamed third persons. Viewed in this
    overall context, the pleading that West Face distributed the allegedly
    defamatory statements to third party market participants, the identities of
    which are known to West Face, should stand.

The Jurisprudence

[21]

No one contests that the bar for striking a pleading as disclosing no
    cause of action is very high  is it plain and obvious that the plaintiff
    cannot succeed?  or that the facts as alleged in the Statement of Claim are to
    be accepted as true for purposes of deciding the motion:
Hunt v. Carey
    Canada Inc.
,

[1990] 2 S.C.R. 959. No evidence is permissible on a
    rule 21.01(1)(b) motion: rule 21.01(2)(b). The statement of claim is to be read
    as generously as possible with a view to accommodating any inadequacies in the
    allegations due to drafting difficulties.

[22]

An additional dimension to these principles arises in defamation cases
    because pleadings in such actions have traditionally been held to a higher
    standard than is the case with other types of actions, in terms of the
    precision with which the material facts must be pleaded. West Face relies on
    this higher standard  as did the motion judge  for the proposition that para.
    25 of the Statement of Claim fails to disclose a cause of action. Modern
    authorities have adopted a somewhat more flexible approach to the assessment of
    defamation pleadings than older authorities that took a very strict approach,
    however.

[23]

Like any pleading, a statement of claim in a defamation action must set
    out a concise statement of the material facts on which the [plaintiff]
    relies: rule 25.06(1). And, of course, the material facts must be sufficient,
    if proved, to establish a cause of action. In libel actions (defamatory
    statements in writing, as in this case), the material facts to be pleaded are:
    (i) particulars of the allegedly defamatory words; (ii) publication of the
    words by the defendant; (iii) to whom the words were published; and (iv) that
    the words were defamatory of the plaintiff in their plain and ordinary meaning
    or by innuendo. See, generally, Alastair Mullis & Richard Parkes, eds.,
Gatley
    on Libel and Slander
, 12th ed. (London, U.K.: Sweet & Maxwell, 2013),
    at paras. 26-1 to 26-26;
Lysko v. Braley
(2006)
, 79 O.R. (3d) 721 (C.A.), at para. 91;
Metz v.
    Tremblay-Hall
(2006), 53 C.C.E.L. (3d) 107 (Ont. S.C.), at para. 13.

[24]

At one time, the weight of authority required the pleading of these
    essential elements with strict precision, including the exact wording
    complained of and the names of all persons to whom the words had been
    published. It was, and remains the case that pleadings in defamation actions attract
    a more critical evaluation than pleadings involving other causes of action;
    they require a more detailed outline of the material facts alleged in support
    of the claim. Courts are attentive to guard against fishing expeditions in
    such cases. This is because  given the serious nature of such allegations and
    the significance of context in assessing them  it is particularly important
    that the defendant know the case it has to meet.

[25]

While the need for as much precision as possible and for enhanced
    judicial scrutiny continues, however, more recent authorities have applied
    greater flexibility in permitting defamation pleadings to stand in certain circumstances
    where the plaintiff is unable to provide full particulars of all allegations. These
    circumstances include situations where the plaintiff has revealed all the
    particulars within its knowledge, where the particulars are within the
    defendants knowledge, and  importantly  where the plaintiff has otherwise established
    a
prima facie
case of defamation (including publication) in the
    pleading. See, for example,
Paquette v. Cruji
(1979), 26 O.R. (2d) 294
    (H.C.), at p. 296-97;
Magnotta Winery Ltd. v. Ziraldo
(1995), 25 O.R.
    (3d) 575 (C.J.), at pp. 583-84;
Lysko
, approving
Paquette
and
Magnotta Winery
, at paras. 93-95; and
Guergis v. Novak
, 2013
    ONCA 449, 116 O.R. (3d) 280, at para. 52.

[26]

In
Paquette
(a case involving publication to named persons and
    others) Grange J. described the more modern approach in the following terms,
    at pp. 296-97:

It is true and has been said over and over again  see, for
    example,
Odgers Digest of the Law of Libel and Slander
, 6th ed. (1929),
    at p. 504, that pleadings in a defamation action are more important than in any
    other class of action.  It is also generally true as put by
Gatley on Libel
    and Slander
, 7th ed. (1974), p. 422, para. 1015, that  the defendant is
    entitled to particulars of the date or dates on which, and of the place or
    places where, the slander was uttered.  The defendant is also entitled to be
    told the names of the person or persons to whom the slander was uttered , and
    that the Court will not permit the plaintiff to proceed to use discovery as a fishing
    expedition to seek out a cause of action: see
Gaskin v. Retail Credit Co.
,
    [1961] O.W.N. 171;
Collins v. Jones
, [1955] 2 All E.R. 145.

There are, however, limitations to the strictness of pleading. 
    Our Courts have always refused to strike out a claim where the plaintiff has
    revealed all the particulars in his possession

and

has set forth a
prima facie
case in
    his pleading
: see
Winnett v. Appelbe et ux.
(1894), 16 P.R. (Ont.)
    57, and
Lynford v. United States Cigar Stores Ltd.
(1917), 12 O.W.N.
    68.  In the latter case Falconbridge, C.J.K.B., refused to strike out a
    statement of claim wherein the plaintiff had been unable to set forth the exact
    words of an allegedly defamatory letter which had resulted in loss of
    employment quoting with approval [at p. 69] the words of
Odgers
, 5th ed.
    (1912), at p. 624:

If the plaintiff does not know the exact words uttered, and
    cannot obtain leave to interrogate before statement of claim, he must draft his
    pleading as best he can and subsequently apply for leave to administer
    interrogatories, and, after obtaining answers, amend his statement of claim, if
    necessary. [Emphasis added.]

[27]

Applying those principles to the matter before him, Grange J. went on to
    state, at p. 297:

The plaintiff maintains he was slandered by the defendant by
    communication to persons unknown (but associated with particular institutions)
    at times unknown (though within a specified time span). He sets forth the words
    used.
He has stated everything he knows.  If he proves
    the facts pleaded he will have established a prima facie case. The law will
    always protect a defendant from a frivolous action but it should not deprive a
    plaintiff of his cause of action, ostensibly valid, where the particulars are
    not within his knowledge and are well within those of the defendant.
If
    the plaintiff should fail to prove any of the 16 slanders specifically alleged
    there is always a remedy in costs. [Emphasis added.]

[28]

This more flexible approach to defamation pleadings is reflected in the subsequent
    decision of Lane J. in
Magnotta Winery
(a case involving the
    plaintiffs inability to plead the exact wording of the allegedly defamatory
    statement
[1]
).
    After analysing many of the authorities relating to the strict requirements of
    pleading in defamation actions, Lane J. opted for a more flexible approach. He
    did so recognizing the benefits to fashioning a contemporary resolution of the
    tension between the need to prevent fishing expeditions, on the one hand, and
    the injustice of permitting defendants to escape liability for serious
    defamations on the other (p. 582).  At pp. 583-84, he concluded:

On these authorities, it is open to the court in a limited set
    of circumstances to permit a plaintiff to proceed with a defamation action in
    spite of an inability to state with certainty at the pleading stage the precise
    words published by the defendant. The plaintiff must show:

 that he has pleaded all of the particulars available to him
    with the exercise of reasonable diligence;

 that he is proceeding in good faith with a
prima facie
case and is not on a fishing expedition; normally this will require at least
    the pleading of a coherent body of fact surrounding the incident such as time,
    place, speaker and audience;

 that the coherent body of fact of which he does have
    knowledge shows not only that there was an utterance or a writing emanating
    from the defendant, but also that the emanation contained defamatory material
    of a defined character of and concerning the plaintiff;

 that the exact words are not in his knowledge, but are known
    to the defendant and will become available to be pleaded by discovery of the
    defendant, production of a document or by other defined means, pending which
    the plaintiff has pleaded words consistent with the information then at his
    disposal.

[29]

The more flexible approach was recognized by this Court in
Lysko
and, again, in
Guergis
. In
Guergis
the Court said that a
    plaintiff may plead that a defamatory statement was made to certain unnamed
    persons 
where a
    plaintiff has made out a
prima facie
case that the statement was
    made to a named person and has produced uncontradicted evidence of publication
    to other persons
 (para. 52). See also,
Gatley on Libel and
    Slander
, at para. 26.7;
Jaffe v. Americans for International Justice
    Foundation
, [1987] O.J. N. 2370 (Ont. Master), at para. 10.

Analysis

[30]

Here, although the motion judge recognized that the old rule of
    specifically pleading the defamatory words has been relaxed, he declined to give
    effect to the
Paquette
/
Magnotta Winery
/
Guergis
line
    of authorities in the circumstances.  He did so, essentially, because, in his
    view:

(a) the vagueness of the pleading made
    it difficult for West Face to know the case it had to meet (Catalyst [could
    not] provide the who, what and when details of the alleged defamation and, as
    a result, fails to satisfy the necessity of pleading a coherent body of fact);

(b) there was, of equal concern, the
    additional potential [of] a procedural quagmire  at the discovery stage given
    that the plaintiff would be question[ing] witnesses on an unacceptably broad
    basis, riding on the horse that it requires information to support those vague
    pleadings; and

(c) Catalyst had not produced
    uncontradicted evidence of publication to other persons:
Guergis
, at
    para. 52.

[31]

Respectfully, these criticisms are misplaced in the circumstances of
    this case. I say this for the following reasons.

The
    Pleading Is Not Unduly Vague And Pleads A Coherent Body of Fact

[32]

First, this is not a case where the impugned pleading, read as a whole,
    is impermissibly vague, leaving West Face in the dark and unable to respond to
    the allegations of publication, albeit the third parties to whom publication is
    said to have been made remain unnamed. Nor is it a case  as the motion judge
    appears to have viewed it  where the plaintiffs are putting forward
    allegations of defamation based on rumour, hearsay or information from third
    parties which cannot be confirmed in an evidentiary manner or where they are engaging
    in a fishing expedition and attempting to use their pleadings to search for
    the source of their cause of action at the discovery stage. The Statement of
    Claim sets out the material facts properly pleading a claim in civil
    conspiracy, intentional interference with economic relations and defamation. On
    the case as pleaded, these claims are intertwined and have common factual
    underpinnings. The Statement of Claim sets out a coherent body of facts in
    relation to them.

[33]

West Face knows that it has to respond to an already properly pleaded
    case against it in defamation (including the allegation of publication to named
    persons). West Face knows that that properly pleaded case, and the allegation
    of additional publication by it to unnamed third parties, are made in the
    context of an alleged plan by it to work together with its co-defendant,
    Veritas, to publish separate reports to market participants in order to drive
    the price of Callidus shares downwards thereby enhancing West Faces short selling
    scheme. West Face knows how and to whom it published its own report (the West
    Face Report)  those actions being a necessary part of the scheme. And West
    Face knows the time-frame within which the allegedly defamatory statements are
    said to have been made.

[34]

Even if West Face were unable to determine the names of all third party
    market participants to whom the West Face Report was published, I would not
    strike out the pleading of publication of that report to unnamed market
    participants in this case. Widespread publication of the allegedly defamatory
    West Face and Veritas Reports to market participants is a central ingredient of
    the harmful scheme complained of. As noted above, the impugned paragraph is
    contained in the section of the Statement of Claim entitled West Face and
    Veritas Conspire to Publish Defamatory Statements About Callidus and the
    appellants have pleaded the material facts relating to this claim with the
    details they have in their possession.

[35]

I do not see how West Face could legitimately expect to engage in a
    campaign designed to discredit the appellants reputations in the eyes of
    market participants by circulating the aforementioned Reports (assuming that is
    proved at trial) and at the same time legitimately expect to escape liability
    simply because the appellants are unable to name all recipients of the allegedly
    defamatory material. To repeat the observation of Lane J. in
Magnotta
    Winery
, at p. 582, modern courts are called upon to [fashion] a
    contemporary resolution of the tension between the need to prevent fishing
    expeditions, on the one hand, and the injustice of permitting defendants to
    escape liability for serious defamations on the other.  Or, as Grange J. put
    it, in
Paquette
, at p. 297:

The law will always protect a defendant from a frivolous action
    but it should not deprive a plaintiff of his cause of action, ostensibly valid,
    where the particulars are not within his knowledge and are well within those of
    the defendant.

[36]

That is the case here, in my view.

The
    Appellants Are Entitled To The Information On Discovery In Any Event

[37]

Nor am I persuaded that the motion judges second concern  the
    additional potential [of] a procedural quagmire  at the discovery stage  is
    a valid concern here. I agree with counsel for the appellants that they will be
    entitled to seek the names of the recipients of the West Face and Veritas
    Reports on discovery in any event, given the nature of the overall claim as
    pleaded.

[38]

The appellants claims based in civil conspiracy and intentional interference
    with economic relations remain in place. Both claims are rooted in the
    allegation that the appellants suffered damages as a result of West Faces and
    Veritas scheme to publish defamatory statements about Callidus by deceiving
    market participants into believing that a negative consensus was building
    regarding Callidus and by inducing market participants to sell their Callidus
    shares and/or lower their estimates of Callidus future performance (para. 33).
    Both claims will be subject to the discovery process.  With respect to both it
    will be open to the plaintiff appellants to seek information about the nature
    of the publication of the West Face and Veritas reports and about the identity
    of the recipients. Contrary to the motion judges fears, this is not a case
    where the plaintiffs would be question[ing] witnesses on an unacceptably broad
    basis, riding on the horse that it requires information to support those vague
    pleadings.  They will be entitled to probe that information one way or
    another.

The
    Statement Of Claim Pleads Publication To Unnamed Third Parties As A Material
    Fact

[39]

Finally, the motion judge erred in concluding that Catalyst had not
    produced uncontradicted evidence of publication to other persons (
Guergis
,
    at para. 52), and that:

Absent that evidence, Catalyst cannot group defendants together
    without clarifying what they actually said and did or hope that some liability
    might end up attaching to one or more of them: see
Hyprescon Inc. v. Ipex
    Inc.
, 2007 CanLII 11316 (ON SC).

[40]

There are at least two difficulties with this conclusion.

[41]

First, the motion judge appears to have conflated problems relating to naming
    the defendants alleged to have made the defamatory publications (the grouping
    of defendants  not an issue here) with problems relating to naming the recipients
    of those publications. They are not necessarily the same. Here, the appellants
    have made out a
prima facie
case against West Face and Veritas,
    including publication to named persons. The issue is whether they should be
    permitted, additionally, to plead publication to persons unknown to them but
    known to West Face in the circumstances.

[42]

Secondly, and more significantly, the motion judge appears to have overlooked
    the fact that evidence is not admissible on a rule 21.01(1)(b) motion to
    strike a claim as disclosing no reasonable cause of action: rule 21.01(2)(b).  As
    noted above, the facts as alleged in a statement of claim must be taken as true
    unless they are patently ridiculous or incapable of proof (neither of which is
    the case here) and the pleading is to be read as generously as possible with a
    view to accommodating any inadequacies in the allegations due to drafting
    difficulties: Hunt
v. Carey
.

[43]

The statement in
Guergis
and other authorities to the effect
    that there must be 
uncontradicted evidence
of
    publication to other persons
[2]
(emphasis added) must be applied with that consideration in mind. Indeed, as the
    older authorities demonstrate, the phrase itself, or similar language, was
    developed in the context of proceedings such as motions for interrogatories or
    motions for particulars, in which affidavit evidence is permitted and often
    required. That is not the case on a rule 21.01(1)(b) motion.

[44]

Here, the Statement of Claim contains numerous allegations of the fact
    of publication to unnamed third parties. Paragraph 25 itself alleges
    distribution to market participants and to third parties, the identities of
    which are known to West Face. Paragraph 24 pleads that [t]he [Defendants]
    intended to create the impression that they had separately and independently
publish[ed] negative reports about Callidus for the purpose of
    deceiving market participants
into believing that a negative consensus
    was building regarding Callidus. In paragraph 33, it is alleged that the West
    Face and Veritas Reports were published by the Defendants to harm Callidus and
    Catalyst
by inducing market participants to sell
their Callidus shares and/or lower their estimates of Callidus future
    performance. In paragraph 38, it is alleged that 
[b]y
    publishing
the Defamatory Comments,
the Defendants
    deceived third-party market participants
into believing that Callidus
    share price was overvalued and that Callidus was at risk of significant future
    losses. The Defamatory Comments
were made to induce these
    market participants to sell
their Callidus shares, thereby lowering its
    share price for a prolonged period of time (emphasis in the foregoing
    citations added).

[45]

These allegations must be accepted as true for the purpose of the motion
    and this appeal. They are uncontradicted, of course, because no statement of defence
    has as yet been filed. As I read the Statement of Claim, they lead  at the
    very least  to the irresistible inference that such publication took place. This
    is sufficient to meet the
Guergis
test for these purposes, in my
    opinion.

[46]

In view of the foregoing, I need not rely on an additional argument made
    by counsel for the appellants. He submitted that the motion judge erred in
    concluding the appellants were unable to produce any, let alone
    uncontradicted, evidence of publication to unnamed third persons because there
    were documents incorporated into the pleading by reference that could, at a
    later stage of the proceedings, be considered uncontradicted evidence of such
    publication.

[47]

The documentation referred to was an exchange of correspondence between
    counsel for Callidus and counsel for West Face in which the former sought
    production of the West Face Report to confirm whether it contained incorrect or
    misleading information regarding Callidus. Counsel for West Face replied in a
    letter dated January 6, 2015, by saying that he was not able to respond to such
    vague allegations without knowing more, but went on to add:

That said, speaking generally, West Face is confident in the
    accuracy of its investment research.
It does not discuss
    companies with third parties without extensive research to support its
    analysis.
Should Callidus commence defamation proceedings against West
    Face,
West Face will
vigorously defend itself in
    its Statement of Defence and
demonstrate the truth of any
    statements that it has made about Callidus.  West Face is also confident that
    the discovery process in any litigation commenced by Callidus will vindicate
    West Faces research.
[Emphasis added.]

[48]

Although counsel for West Face took the position in subsequent
    correspondence that in the foregoing letter he had not confirmed distribution
    of a research report to third parties, the appellants contend that the letter
    provides proof on the record of such publication. They characterize it as West
    Face having defended its conduct and essentially dared Callidus to bring a
    defamation claim.

[49]

I think that the motion judge may have overstated the case by concluding
    that the appellants were unable to produce any evidence of publication, in
    view of this material in the record. Whether it would be sufficient to satisfy
    the
Guergis
test may be another matter, however. Be that as it may, I
    need not resolve this issue. I am satisfied, for the other reasons outlined
    above, that  apart from the exchange of correspondence  there are sufficient
    facts pleaded in the Statement of Claim to constitute uncontradicted evidence
    of publication to unnamed third persons, as that phrase must be understood for
    purposes of a rule 21.01(1)(b) motion.

Conclusion

[50]

In conclusion, I return again to the language of Lane J. in
Magnotta
    Winery
, at p. 583-84. In my view, the appellants have demonstrated in the
    Statement of Claim that they are proceeding in good faith with a
prima
    facie
case and [are] not on a fishing expedition (or, to put it another
    way, that there is a coherent body of fact of which they do have knowledge,
    that gives rise to the basis for a claim); they have pleaded all of the
    particulars available to [them] with the exercise of reasonable diligence and,
    although they do not have knowledge of the names of the additional third
    parties to whom publication has been made, that knowledge will become
    available to be pleaded by discovery of the defendant, production of a document
    or by other defined means, pending which [they have] pleaded [the particulars of
    publication to unnamed third persons] consistent with the information then at [their]
    disposal.

[51]

By coherent body of fact I take Lane J. to have meant no more than the
    need for the pleading to set out the essential facts required to establish at
    least a
prima facie
cause of action in defamation. The appellants have
    done that here.  They have made out a
prima facie
cause of action in
    defamation against both West Face and Veritas.

[52]

Veritas did not, and does not attack the plea in paragraph 26 of the
    Statement of Claim that:

On or about April 16, 2015, Veritas published a report
    impugning Callidus and Catalyst to market participants (the Veritas Report). The
    Veritas Report was distributed to Veritas subscribers and is available for
    download from its website by its customers.

[53]

The motion judge refused to strike the plea that West Face published the
    West Face Report containing statements defamatory of the appellants to the
    representatives of Veritas. That plea in itself establishes a
prima facie
case of libel against West Face and the appellants will succeed in their
    defamation claim against West Face if they prove the facts underlying that
    claim at trial and the defendants are unable to offer a defence. All that
    remains in dispute is the plea that the defamatory statements were distributed
    as well to unnamed third parties, the identities of which are known to West
    Face. For purposes of the defamation claim, this additional information is not
    necessary in order to establish liability  as publication to a single person
    is sufficient for that purpose  but the scale of publication will affect the
    quantum of damages: see
Gatley on Libel and Slander
, at para. 6.1.

[54]

For the foregoing reasons, I am satisfied that the plea in paragraph 25
    of the Statement of Claim should not have been struck.

THE COSTS APPEAL

[55]

The appellants also seek to set aside the motion judges decision to
    make no order as to costs on the motion. They acknowledge that a deferential
    standard of review applies to costs appeals, but submit that they were
    substantially successful on the motion  Veritas was entirely unsuccessful and
    most of West Faces motion was dismissed  and that they should not have been
    denied costs.

[56]

West Face argues, on the other hand, that success was divided, that it
    was in fact successful on striking out the most significant and far-reaching
    paragraph in the appellants claim, and that the motion judge was entitled in
    the exercise of his discretion to make a no-costs order in such circumstances.

[57]

In view of my determination that paragraph 25 should not have been
    struck, however, the foregoing debate becomes somewhat academic. As the parties
    are now fully successful on the motion, the appellants are entitled to their
    costs both here and below.

DISPOSITION

[58]

For the foregoing reasons, I would allow the appeal and set aside the
    order below striking out paragraph 25 of the Statement of Claim. I need not
    dispose of the costs appeal as it has become moot.

[59]

I would grant the appellants their costs of the appeal, fixed in the
    amount of $13,000 inclusive of disbursements and HST, payable jointly and
    severally by the respondents.

[60]

I would award the appellants their costs of the motion below, fixed in
    the amount of $11,500, inclusive of disbursements and HST, payable jointly and
    severally by the respondents.

Released: February 1, 2017

Robert A. Blair
    J.A.

I agree K.M. Weiler
    J.A.

I
    agree K. van Rensburg J.A.





[1]
The plaintiff was able to plead the substance of the defamatory words  that
    the defendant competitors president had lodged a public complaint that the
    plaintiffs award-winning wine blend was not a true product of Canada  but
    not the exact wording.



[2]

See, for example,
Gaskin
    v. Retail Credit Co.
, [1961] O.W.N. 171 (H.C.), at p.
    173;
Jaffe v. Americans for
    International Justice Foundation

(1987), 22 C.P.C. (2d)
    286 (Ont. S.C.);
Russell v. Stubbs
, [1913] 2 K.B. 200n;
Barham
    v. Huntingfield
, [1913] 2 K.B. 193; Gerald Osborne
    Slade & Neville Faulks, eds.,
Fraser
    on Libel and Slander
, 7th ed. (London: Butterworth
    & Co., 1936), at pp. 250-52;
Gatley
    on Libel and Slander
, at para. 26.7 and cases cited
    therein at footnote 36.


