Before: The Honourable Madam Justice Fenlon

Reasons for Judgment

Counsel for the Plaintiffs:	B.G. Baynham, Q.C. and M. Merry (Articled Student)
Counsel for the Defendants:	I.G. Nathanson, Q.C. and J.C. MacInnis
Date and Place of Trial/Hearing:	April 28-30, and May 1-2, 5-9, 12-15, 2008
	Vancouver, B.C.

Table of Contents

INTRODUCTION.. 3

BACKGROUND.. 3

CONCLUSION.. 6

ANALYSIS.. 7

A. Defamation7

1. Is the Email defamatory?. 7

2. Did the defamatory words refer to the plaintiffs?. 8

3. Was the Email published on an occasion of qualified privilege?. 9

(a) The Other Defendants. 11

(b) The Second Recipients. 13

(i) Is the exception properly pleaded?. 16

(ii) Should the plaintiffs be allowed to amend their pleadings. 17

(iii) Was republication a natural and probable result?. 19

(d) Publication to MDA and PDS.. 20

4. Did the communication exceed the occasion?. 20

5. Was malice Mr. Collins’ dominant motive for sending the Email?. 22

(a) Statements made about PDS.. 24

(i) The North Island Princess. 25

(ii) The Spirit of British Columbia. 32

(b) Statements made about MDA. 34

(i) The John Atlantic Burr 34

(ii) The Quinitsa and Quinsam.. 40

6. Damages for defamation. 41

B. Injurious falsehood. 41

C. MDA’s claim for breach of contract 42

1. The John Atlantic Burr 42

2. The Quinsam and Quinitsa. 44

D. BC Ferries’ counterclaim.. 45

E. Costs. 48

INTRODUCTION

[1] This is a case in defamation. Two marine design companies and their three principals claim that British Columbia Ferry Services Inc. (“BC Ferries”) and Mark Collins published a defamatory email about them in their professional capacities. The plaintiffs also sue for injurious falsehood and in the case of one plaintiff, breach of contract. The plaintiffs seek general, aggravated and punitive damages.

[2] Each company and its principals commenced an action and the two cases were tried together in a three-week hearing.

BACKGROUND

[3] The plaintiff, Robert Armour, and the plaintiff, Ralph Marwood, are two of the leading naval architects in British Columbia. David Smiley is a well-known master mariner and project manager within the marine community. All three have a long history of providing service to BC Ferries.

[4] Mr. Armour of Polar Design Sales Ltd. (“PDS”) was involved in the design and construction of two of the largest vessels in the BC Ferries fleet, the Spirit of British Columbia and the Spirit of Vancouver Island. He was often retained to provide naval architectural services when these and other large vessels in the BC Ferries fleet needed repairs or modification.

[5] Mr. Marwood of Marine Design Associates Ltd. (“MDA”) designed the smaller K-Class ferries and the Q-Class ferries, and was regularly retained by BC Ferries when those vessels were repaired or upgraded.

[6] On March 15, 2006, that changed dramatically. The defendant, Mark Collins, who is vice president of engineering for BC Ferries, published the email that gave rise to these proceedings:

Dear All,

This is to follow up on our conversation on the Fit Eng conf call last Monday and also for the benefit of you who were not part of that call.

Effective immediately Marine Design Associates (MDA) of Victoria and Polar Design Sales of Vancouver are not approved for use for any new contracts, projects or any work whatsoever under the management of BCF Engineering.

Work already under contract by these firms may be completed but there are to be no extensions to existing contracts. You are advised to limit existing work to the minimum and to end your contracts with them, if any, at the first practical opportunity.

The action is being taken following several incidents of poor performance of MDA and PDS which have led to BCF incurring several hundred thousands of dollars of unanticipated costs. In light of these costs, we are un-approving them as suppliers to BCF Engineering.

Pls cascade this information to your appropriate staff members who may have cause to contract such services.

(the “Email”).

[7] Mr. Collins had actually made the decision to unapprove PDS in 2004, but the decision was not broadly communicated within BC Ferries’ Engineering until a conference call to internal staff on March 13, 2006 at which time the decision to unapprove MDA was also announced by Mr. Collins. The Email on March 15, 2006 confirmed those instructions to BC Ferries engineering staff.

[8] The fifteen original recipients of the Email are also defendants in both actions and were referred to by the parties as “the Other Defendants”, that is, the defendants other than Mark Collins and BC Ferries. Seven of these did not forward the Email and the plaintiffs discontinued the proceedings against them: John Constable, Amarjit Dhariwal, Bruce Paterson, Greg Peterson, Paul Radford, Wayne Ralph and Jeff Smith.

[9] The eight remaining Other Defendants who received the Email directly from Mr. Collins complied with his instructions to “cascade” the Email, collectively sending it on to 34 others (the “Second Recipients”). The Second Recipients in turn forwarded the Email to 37 others (the “Third Recipients”). The Third Recipients published the Email to a further 10 people (the “Fourth Recipients”).

[10] Mr. Armour of PDS first learned of the Email when he received a telephone call from a BC Ferries employee who told him that PDS had been unapproved by BC Ferries. Shortly after that, Mr. Armour received a faxed copy of the Email. Mr. Marwood and Mr. Smiley of MDA received a faxed copy of the Email a few days later. BC Ferries immediately terminated the employee they held responsible for sending the Email outside of BC Ferries.

[11] The effect of the Email on the plaintiffs was immediate and devastating. PDS was insulated initially because of a long-term consulting contract with Washington Marine Group to design the intermediate ferry for BC Ferries — a project that fell outside of the control of the engineering department headed by Mark Collins. But MDA, Mr. Marwood and Mr. Smiley were not as fortunate. They felt obligated to tell the shipyards that wanted to hire them as consultants on BC Ferries’ projects that they had been unapproved. As a result, say these plaintiffs, their work virtually dried up with disastrous financial results that took a heavy economic and emotional toll on them and their families.

[12] Mr. Armour and PDs anticipate that when the contract with Washington Marine Group ends, the “unapproved” status will preclude PDS from obtaining further work with companies building for BC Ferries which, not surprisingly, is the largest purchaser of marine design services in the province.

[13] At the heart of the assessment of any damages lies the question of whether the business losses of the plaintiffs were the result of the defamatory Email or the decision to unapprove the two companies for BC Ferries’ Engineering work.

CONCLUSION

[14] The plaintiffs are respected and capable professionals. Late in long and distinguished careers they were dealt an unexpected and serious blow by Mr. Collins’ decision to unapprove them for BC Ferries’ Engineering work. I have no doubt that the plaintiffs, and in particular Mr. Marwood, Mr. Smiley and their families, have suffered in no small measure both financially and personally as a consequence. Although I have great sympathy for the plaintiffs, I am compelled to find that the law does not provide a remedy for their injuries in the circumstances of this case. Mr. Collins made a harsh business decision, but it was a decision he had the right to make and to communicate to his staff—despite the fact that it was based on flawed assumptions and proved devastating to the plaintiffs. My reasons for that finding follow.

ANALYSIS

A. Defamation

[15] To establish a cause of action in defamation, a plaintiff must prove that:

(a) the words are defamatory;

(b) the words concern the plaintiffs; and

(Leenen v. Canadian Broadcasting Corp. (2000), 48 O.R. (3d) 656 at 673-74, 50 C.C.L.T. (2d) 213 (S.C.) aff’d, (2001) O.R. (3d) 612, 147 O.A.C. 317 (C.A.))

1. Is the Email defamatory?

[16] The threshold issue is whether the Email was defamatory. The plaintiffs say that the natural and ordinary meaning of the words is that:

(a) the plaintiffs had provided unsatisfactory advice and inadequate naval design services to BC Ferries;

(b) the plaintiffs were incompetent and unfit by training and experience to provide naval design services to BC Ferries;

(c) BC Ferries had incurred several hundred thousands of dollars in unanticipated costs because of the unsatisfactory advice and inadequate services provided by the plaintiffs in the past;

(d) BC Ferries had a legitimate claim to recover damages from the plaintiffs for their unsatisfactory advice and inadequate services but, when BC Ferries requested that the plaintiffs repay the alleged damages, the plaintiffs refused to do so; and

(e) the level of advice and service provided by the plaintiffs to BC Ferries was of such a low quality that they were not competent to provide naval design services generally to the marine industry as a whole.

[17] The defendants do not assert that the statements made by Mark Collins are true, and they admit the meaning of the words asserted by the plaintiffs in (a) and (d). I find that, while the Email does not carry the meaning the plaintiff asserts in (b) and (e), the ordinary, reasonable and fair-minded reader would understand the Email to mean what is set out in (c): that BC Ferries had incurred costs as a result of poor advice by the plaintiffs (Botiuk v. Toronto Free Press Publications Ltd., [1995] 3 S.C.R. 3, 126 D.L.R. (4th) 609).

[18] In summary, I find that the Email is defamatory because read naturally it means that:

(a) the plaintiffs had provided unsatisfactory advice and inadequate naval design services to BC Ferries;

(c) BC Ferries had incurred several hundred thousands of dollars in unanticipated costs because of the unsatisfactory advice and inadequate services provided by the plaintiffs in the past; and

2. Did the defamatory words refer to the plaintiffs?

[19] The Email does not name the plaintiffs Armour, Smiley, or Marwood. In order to establish that the words referred to the plaintiffs, a two-part test must be satisfied:

1. As a question of law, can the communication be regarded as capable of referring to the plaintiff?

2. As a question of fact, does the communication in fact lead reasonable people who know that plaintiff to the conclusion that it does refer to him?

(Knupffer v. London Express Newspaper Ltd., [1944] A.C. 116 at 121, Viscount Simon L.C., cited in Arnott v. College of Physicians and Surgeons of Saskatchewan, [1954] S.C.R. 538 at 554 [1955] 1 D.L.R., per Kellock J. [Arnott], cited to S.C.R.)

[20] A plaintiff may be identified “even though he is not mentioned by name, where a reference is made to something over which he exercises control or for which he has some responsibility”: (Raymond E. Brown, The Law of Defamation in Canada, 2d. ed. looseleaf, (Toronto: Carswell, 1999) Vol. 1 at §6-23).

[21] The Email went to 90 people, many of whom had worked closely and in a professional capacity with Mr. Armour and Mr. Marwood. MDA and PDS are both small private companies that are in effect vehicles for their principals to earn a living. In my view, the marine design community in British Columbia would associate any defamatory statements concerning the two companies with their principals. Accordingly, I find that this element of defamation has been made out by the plaintiffs.

3. Was the Email published on an occasion of qualified privilege?

[22] While the defendants admit that the Email was published by Mr. Collins and ultimately received by the plaintiffs and 90 others, the defendants rely on a defence of qualified privilege, asserting that the recipients and the sender fall squarely within the protective parameters of the defence.

[23] The Supreme Court of Canada in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at para. 143, 126 D.L.R. (4th) 129 [Hill, cited to S.C.R.], adopted the description of a privileged occasion set out by Lord Atkinson in Adam v. Ward, [1917] A.C. 309 at 334 (H.L.(E.)):

... a privileged occasion is ... an occasion where the person who makes a communication has an interest or a duty, legal, social, or moral, to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it. This reciprocity is essential.

[24] The duty can arise “in the conduct of the defendant’s own affairs in matters in which his interests are concerned”: Arnott, citing Halls v. Mitchell, [1928] SCR 125 at 133.

[25] Those interests can include business interests. As stated in The Law of Defamation in Canada, Vol. 3 at 13-191:

Communications by and between appropriate company personnel, involving the ordinary business affairs of the company, are generally protected by a qualified privilege. It should be a communication made during the course and scope of the employment relationship and reasonably calculated to further or protect the interest of the company. Without such a protection the ordinary business of a company could not be carried on effectively.

[26] I accept, as do the plaintiffs, that Mr. Collins had a duty to communicate his decision to appropriate personnel within BC Ferries. The issue is whether the Email was communicated beyond that circle.

[27] The pleadings allege publication by Mr. Collins to the fifteen Other Defendants who were the original recipients of the Email. The Other Defendants are alleged to have published to the Second Recipients. The plaintiffs applied during closing argument to amend their pleadings to include publication to the Third and Fourth recipients. That application is addressed later in these reasons.

(a) The Other Defendants

[28] Except for David Sharpe, the first wave of recipients who received the Email from Mr. Collins were people who reported to him directly. Cindy Richardson was Mr. Collins’ executive assistant. K.S. Ng, Mark Nichol, Amarjit Dhariwal, and Wayne Ralph were project managers. Greg Stewart, John Constable, Greg Peterson, and Paul Radford were all engineering superintendents. Mr. Armour agreed that he traditionally obtained his work from project managers and engineering superintendents. Jeff Smith managed contracts with outside consultants such as the plaintiffs.

[29] Geoff Vickery, David Carroll, and Al Winning were members of the Terminal Asset Management Group (“TAM”). The TAM Group was concerned with the construction and maintenance of terminal structures, including berths. The plaintiffs argue that it is “simply not credible” to suggest that the recipients engaged in terminal construction and maintenance would have occasion to contract for services of a naval architect.

[30] Mr. Vickery testified to the contrary. He said that the TAM Group has occasion to deal with naval architects concerning the interface between berthing structures and ships:

	Q	Is there an interrelationship between berthing
		structures and vessels?
	A	Absolutely.
	Q	Can you describe that?
	A	Well, there's several areas where it interfaces.
		Obviously, there's a geometry interface. The ship
		has got to fit in the berth, that's the first
		thing. Secondly, there's an interface with the
		fendering systems in the berth, different size
		ship might have different type of fendering
		system, we have to design for that. There's an
		interface with the ramp, the ramp has to land on
		the ship and have sufficient overlap that we can
		unload and load the passengers and the vehicles
		safely. Has to operate at all tides, so again
		there's a geometrical interface if you will. We
		have to connect -- we have to tie up the vessel so
		we've got to be compatible with the winches and
		all the tie-up points on the vessel. Electrically
		we have to plug a lot of the vessels in so that we
		don't burn diesel overnight when they are in port,
		so the electrical system has to be compatible with
		the electrical system between the terminal and the
		ship. And other services you may have to connect
		to the ship such as water, sewage discharge, that
		kind of thing.

[Trial transcript, Day 3, p. 73-74]

[31] Bruce Paterson was the head internal naval architect for BC Ferries. He attended the March 13, 2006 conference call at which Mr. Collins first announced the unapproval of the plaintiffs. Mr. Paterson had direct dealings with both PDS and MDA and had retained MDA for a major piece of work on the John Atlantic Burr, a project that figured prominently in Mr. Collins’ decision to unapprove MDA. The unapproval also brought an end to MDA’s work on that project.

[32] David Sharpe testified that his department was responsible for bid contracts, requests for proposals, and the drawing up of purchase orders for consultants’ services. He said that the Engineering Department represented the most significant “client” of his supply chain department.

(b) The Second Recipients

[33] The Second Recipients were primarily engineering superintendents and ship or terminal project managers who oversaw major vessel conversion and repair projects. They had significant budgets under their control and frequently hired naval architects and marine engineers. Their administrative assistants were among the Second Recipients.

[34] David Hahn, the president of BC Ferries, was also a second-level recipient, receiving the Email from Mr. Collins’ executive assistant. Ms. Richardson also sent the Email on to both Kumar Murugakumar and Ratch Wallace, who had direct dealings with MDA on the John Atlantic Burr project. Mr. Collins’ evidence was that since both were involved with that project it was important they be made aware of decisions that were being made by BC Ferries affecting MDA’s role in that work.

[35] Some of the Second Recipients were employees of SNC Lavalin (“SNC”). The plaintiffs say publication to SNC employees who did not report to anyone at BC Ferries cannot be protected by qualified privilege. However, the SNC employees were members of the TAM Group headed by Mr. Collins. The TAM Group was a partnership through which SNC provided program management for the maintenance, design, and construction of ferry terminals. The SNC project advisors and project managers dedicated all of their work time to these tasks. SNC project managers also approved the hiring of outside consultants by BC Ferries.

[36] Of the remaining Second Recipients (other than administrative assistants), only Al Ponting did not have authority to enter into purchase orders for the consulting services of naval architects and engineers. Mr. Ponting was a terminal construction electrical superintendent who reported to the TAM Group. Although he did not enter into contracts with naval architects, he worked with them on projects because the electrical systems in and around the terminals must be compatible with the ships’ electrical systems.

[37] While Mr. Ponting did not have any reason to contract with PDS and MDA, I accept the defendants’ submission that the court ought not to weigh on fine scales the judgment of employees sending intra-corporate communications to other employees when the senders are acting without malice in the course of their employment. To put it another way, Mr. Ponting’s role with the TAM Group was “close enough” to the work in question that he had an interest in receiving the Email, and the sender an interest in sending it.

[38] I therefore find that all of the Other Defendants had a legitimate interest in receiving and publishing the Email to the Second Recipients, and the Second Recipients had a corresponding interest in receiving that information. It follows that the Email was published to and by the Other Defendants on an occasion of qualified privilege.

(c) The Third and Fourth Recipients

[39] The plaintiffs argue that Mr. Collins and BC Ferries should be held liable for republication of the Email to the Third and Fourth Recipients, who they say fall outside of the scope of qualified privilege. The general rule is that a person is responsible only for his or her own defamatory publication, and not for republication by others. There are three exceptions to this general rule:

(1) when the person who published the defamatory statement requests or authorizes someone (impliedly or expressly) to communicate defamatory remarks to others;

(2) when the person to whom the original publication was made was under a moral, legal or social duty to repeat or publish the words to someone else; or

(3) when the republication was a "natural and probable consequence" of the original publication.

(Speight v. Gosnay (1891) 60 L.J.Q.B. 231 (C.A.) [Speight])

[40] The exceptions relied upon by a plaintiff must be pleaded.

[41] In the case at bar, the plaintiffs expressly pleaded the first and third exceptions. With respect to the first, the plaintiffs pled that Mr. Collins specifically instructed the Other Defendants to “cascade this information to your appropriate staff members who may have cause to contract such services.” The plaintiffs assert that the request and authorization to disseminate the Email make Mr. Collins liable for all subsequent republication.

[42] I do not find that this claim is made out. Mr. Collins’ request to forward the Email to others is restricted by its very terms to persons who would have a reason to enter into contracts with MDA and PDS, i.e., those who had a reciprocal interest in receiving the Email. Having expressly directed the Email to be sent to a particular and appropriate group, Mr. Collins cannot logically be held to have impliedly authorized republication beyond that group.

[43] The third exception, i.e., the claim that the republication was a natural result of the original publication, is pleaded as follows:

The EMAIL was published by the Other Defendants to persons within BCFS and to other individuals and companies outside of BCFS, the identities of which are unknown to the plaintiffs. [Collins and BC Ferries] well knew or, ought to have known, that it was likely in the ordinary course of business that the EMAIL, forwarded by the Other Defendants, would be opened and read by the other suppliers of services to BCFS, and individuals in the marine design community and the public at large. In the premises, BCFS published the said words to the other suppliers, the marine design community and the public at large.

[44] In assessing this claim for republication, three issues must be addressed:

(i) whether the exception has been properly pleaded at all;

(ii) whether the pleading should be amended to encompass publication to the Third and Fourth Recipients; and

(iii) whether publication to others was a “natural and probable result” of the original publication.

(i) Is the exception properly pleaded?

[45] The defendants argue that it is not enough for the plaintiffs to plead that it was “likely in the ordinary course of business that the Email” would be republished, because the onus to be met by the plaintiffs is that republication was probable: Brown v. Cole (1998), 61 B.C.L.R. (3d) 1 [1999] 7 W.W.R. 703 (C.A.).

[46] I find that the plaintiffs’ pleading is sufficient in this regard. The precise words used in Speight need not be pled as long as the claim is made that the republication of the defamatory material was probable in the circumstances. “Likely” is defined in Daphne Dukelow, The Dictionary of Canadian Law, 3rd ed. (Scarborough: Thomson Carswell, 2004) as “probable” or “at least more probable than not”.

(ii) Should the plaintiffs be allowed to amend their pleadings to include republication to the Third and Fourth Recipients?

[47] The plaintiffs’ claim as currently framed is restricted to republication by the Other Defendants to “other suppliers, the marine design community, or the public at large”. On its face, this claim does not include republication to the Third and Fourth Recipients who were all employees of BC Ferries. The plaintiffs led no evidence at trial to show that any of the Third and Fourth Recipients were external to BC Ferries or that they were suppliers, members of the marine design community, or members of the public at large.

[48] During final argument, the plaintiffs sought to amend and broaden their pleadings as follows so that the Third and Fourth Recipients could be caught by their claim against Mr. Collins for republication:

The Defendants BCFS and Collins are liable for all subsequent republications of the email because Collins authorized or intended the email to be republished and because some of the subsequent republications were the natural and probable result of the initial publication. [emphasis added]

[49] The plaintiffs assert that this proposed amendment should be allowed because it does not add new parties or causes of action, but at most extends the scope of Mr. Collins’ liability for republication of the Email. They argue that from the outset of the proceedings BC Ferries and Mr. Collins knew that the issue of republication was “front and centre” and that a claim for damages arising from the republication of the Email was a real issue in the proceedings.

[50] Amendments to pleadings will generally be allowed if to do so will not prejudice other parties: Langret Investments S.A. v. McDonnell (1996), 21 B.C.L.R. (3d) 145, 40 C.B.R. (3d) 44 (C.A.).

[51] Amendments to pleadings at the conclusion of or late in a trial, as in this case, should only be allowed if the following five criteria are met:

(i) The proposed amendment is not inconsistent with the pleadings already filed on behalf of the party seeking the amendment;

(ii) The proposed amendment is not inconsistent with evidence already tendered by that party and his witnesses at trial and on discovery;

(iii) The amendment would not have changed the whole course of the trial;

(iv) Allowing the amendment would not be unfair to the opposite party; and

(v) It is necessary for the purpose of determining the real issues raised or depending upon the proceedings.

(Arrow Services Ltd. v. Wedge (1964), 49 W.W.R. 65 (Sask. Q.B.), cited in Diamond Willow Ranch Ltd. v. Oliver (Village), [1988] B.C.W.L.D. 2226, [1988] B.C.J. No. 880 at para.5 (S.C. Chambers)).

[52] The defendants oppose the amendment because they say they relied on the scope of the republication claim in the pleadings, which excluded the Third and Fourth Recipients, and therefore chose not to lead evidence that those recipients had a reciprocal interest in receiving the Email that placed them under the protective mantle of qualified privilege.

[53] In my view, the amendment would prejudice the defendants and should not be allowed. Had the amendment been made prior to trial, the defendants would have had notice of an expanded scope for potential liability of BC Ferries and Mr. Collins for republication to all of the recipients of the Email, and not just to “outsiders”. I accept that, faced with the amended pleadings, the defendants would have led evidence to demonstrate that the Third and Fourth Recipients had a reciprocal interest in receiving the Email just as that evidence was led in relation to the Original and Second Recipients.

[54] While it is true, as the plaintiffs submit, that the pleadings put the defendants on notice before trial that the plaintiffs were making a claim not only for the initial publication by Mr. Collins, but also for subsequent republications, the defendants were entitled to rely on the pleadings which established what republications were in issue.

(iii) Was republication to recipients outside of the scope of qualified privilege the natural and probable result of the original publication?

[55] In my view, the restriction Mr. Collins placed on the forwarding of the Email, coupled with BC Ferries’ confidentiality policy, made it improbable that the Email would be republished beyond those who had an interest in receiving it within BC Ferries and its partner, SNC. In the result, nothing turns on the refusal of the amendment because I would not find Mr. Collins and BC Ferries liable for any republication falling outside the scope of his instructions for republication in any event.

(d) Publication to MDA and PDS

[56] The plaintiffs further argue that republication of the Email by a BC Ferries employee to PDS, and subsequently to MDA a few days later, defeated the defence of qualified privilege because neither PDS nor MDA had an interest in receiving news of the unapproval of the other. I do not find that to be the case. The occasion in issue is Mr. Collins’ and the Other Defendant’s publication of the Email. Those defendants did not publish the Email to PDS and MDA; nor did they authorize it. I have already found that external republication was not a natural and probable result of the original publication. To the contrary, BC Ferries and Mr. Collins considered it so serious a breach of BC Ferries’ confidentiality policy that the employee held responsible for sending the Email to PDS was dismissed.

[57] In the result, the Email was published by Mr. Collins and BC Ferries and republished by the Others Defendants on an occasion of qualified privilege.

[58] At this point, the burden of proof shifts to the plaintiffs to overcome the privileged nature of the occasion by showing either that:

§ the communication contained language which went beyond the occasion; or

§ the publisher was actuated by malice.

4. Did the communication exceed the occasion?

[59] The plaintiffs say that the fourth paragraph of the Email is extraneous and contains information that is neither germaine nor reasonably appropriate to the occasion. They say that all the recipients needed to receive was the information that MDA and PDS were unapproved. Telling them why the companies were unapproved, the plaintiffs submit, “served no useful purpose.”

[60] Qualified privilege may be lost if the statement made is not commensurate with the occasion. The information communicated must be “reasonably appropriate in the context of the circumstances existing on the occasion when that information was given”: Hill at paras. 146-147, RTC Engineering Consultants Ltd. v. Ontario (Solicitor General) (2002), 58 O.R. (3d) 726 at para. 18, 156 O.A.C. 96 (CA).

[61] The test is a subjective one: did the person communicating the allegedly “excessive” information honestly and on reasonable grounds believe that the information was true and a necessary part of the communication? Put another way:

... [T]he test is not whether it is logically relevant but whether, in all the circumstances, it can be inferred that the defendant either did not believe it to be true or, though believing it to be true, realised that it had nothing to do with the particular duty or interest on which the privilege was based, but nevertheless seized the opportunity to drag in irrelevant defamatory matter to vent his personal spite, or for some other improper motive.

Horrocks v. Lowe, [1975] A.C. 135 at 151, [1974] 1 All E.R. 662 (H.L.), [cited to A.C.].

[62] Mr. Collins testified that he considered it was important not only to communicate his decision to his staff, but also to give them the reasons for the decision so that they would understand it.

[63] I find that Mr. Collins believed that the information was relevant. The words he used to explain the reasons for his decision are not violent or excessively strong, and would, in my view, meet an objective test of relevance, although the bar is not set that high. Giving employees who had a need to know that MDA and PDS had been unapproved the reasons for that unapproval did not exceed the occasion of qualified privilege. It would be an autocratic manager indeed who would not communicate the reasons for a significant business decision to senior staff members.

5. Was malice Mr. Collins’ dominant motive for sending the Email?

[64] Qualified privilege will be lost if Mr. Collins’ primary motivation in communicating the Email was malice. Dislike, annoyance, and ill will may be present, but will not defeat the privilege attaching to a communication that is primarily made for a proper purpose:

Qualified privilege would be illusory, and the public interest that it is meant to serve defeated, if the protection which it affords were lost merely because a person, although acting in compliance with a duty or in protection of a legitimate interest, disliked the person whom he defamed or was indignant at what he believed to be that person's conduct and welcomed the opportunity of exposing it.

(Horrocks v. Lowe at 151)

[65] Malice is pleaded against BC Ferries and Mr. Collins. The liability of the corporate defendant must be premised on a finding of malice against Mr. Collins. As stated in Akinleye v. East Sussex Hospitals, [2008] EWHC 68 (QB) at para. 25:

… [I]n this case the Defendant trust is of course a body which may be vicariously liable for defamation published by an employee. But, as Mr Starte rightly submitted, the Claimant must identify a person or persons for whom the Defendant is liable who participated in publication of the words complained of and who did so with the necessary malicious motive: Webster v British Gas Services Ltd [2003] EWHC 1188 (QB), [30].

[66] Malice goes beyond ill will or spite, and includes speaking with reckless disregard for the truth. As noted by Lord Diplock in Horrocks v. Lowe at 150:

If he publishes untrue defamatory matter recklessly, without considering or caring whether it be true or not, he is in this, as in other branches of the law, treated as if he knew it to be false.

[67] The plaintiffs do not argue that Mr. Collins was motivated by express malice. Rather, they assert that he was reckless when he stated that there had been poor performance by the plaintiffs and that they had caused BC Ferries to incur several hundred thousands of dollars in unanticipated costs.

[68] Much evidence was led at trial concerning the work done by the plaintiffs on the four vessels in issue that led Mr. Collins to unapprove the plaintiffs for BC Ferries engineering work. Based on that evidence, I am of the view that the plaintiffs’ work was not deficient. What is essential to this analysis, however, is not whether the work was actually deficient, but whether Mr. Collins held an honest belief that it was.

[69] In Horrocks v. Lowe, the House of Lords explained “honest belief” in the following way at 150:

The freedom of speech protected by the law of qualified privilege may be availed by all sorts and conditions of men. In affording to them immunity from suit if they have acted in good faith in compliance with a legal or moral duty or in protection of a legitimate interest the law must take them as it finds them. In ordinary life it is rare indeed for people to form their beliefs by a process of logical deduction from facts ascertained by a rigorous search for all available evidence and a judicious assessment of its probative value. In greater or in less degree according to their temperaments, their training, their intelligence, they are swayed by prejudice, rely on intuition instead of reasoning, leap to conclusions on inadequate evidence and fail to recognise the cogency of material which might cast doubt on the validity of the conclusions they reach. But despite the imperfection of the mental process by which the belief is arrived at it may still be 'honest', that is, a positive belief that the conclusions they have reached are true. The law demands no more. [emphasis added]

[70] The issue to be addressed therefore is whether the plaintiffs have proved on a balance of probabilities that Mr. Collins did not have an honest belief that the conclusions he reached were true. Before turning to specific incidents, it is useful to consider the job Mr. Collins was hired to do at BC Ferries and his background.

[71] Mr. Hahn testified that Mr. Collins was hired to bring a business approach to the Engineering Department; he was to improve accountability by taking a more demanding approach towards vendors of services to BC Ferries. Mr. Collins was told to use suppliers who were going to “work with BC Ferries through good times and bad times ... who were going to take responsibility for their actions.”

[72] Early in his career Mr. Collins spent a few years at sea and had a Third Class Engineering Certificate, a designation below that held by most of the engineers on even the smallest vessels in the BC Ferries’ fleet. Mr. Collins also held a Masters in Business Administration and had worked with a Norwegian manufacturer of propulsion systems as a sales manager. When that company was purchased by the Rolls Royce Group in 2000, Mr. Collins spent time in Italy as regional vice president for southern Europe and then in Rio de Janeiro as regional vice president before joining BC Ferries in early March of 2004.

(a) Statements made about PDS

[73] There were two projects PDS and Mr. Armour were involved in between the time Mr. Collins joined BC Ferries and the time he sent out the Email. The first was the re-engining of the North Island Princess and the second was the upgrading of lifeboat equipment on the Spirit of British Columbia.

(i) The North Island Princess

[74] In March of 2004, BC Ferries was addressing a significant problem with the North Island Princess, a ferry running between Texada Island and Powell River.

[75] Mr. Armour had been engaged some months earlier to investigate and make recommendations about the re-engining requirements of that vessel which had been experiencing vibration problems leading to oil leaks and environmental fines being levied against BC Ferries. Mr. Armour had recommended installing a new engine and changing the propulsion system which involved installing a new shaft and propeller.

[76] BC Ferries followed Mr. Armour’s advice and proceeded with the re-engining of the North Island Princess. PDS prepared the specifications and drawings necessary for a shipyard to bid the work. Eventually a purchase order was issued by BC Ferries to Detroit Diesel Allison (“DDA”) for the engines, gear box, controls, and propeller. It was the responsibility of DDA to manufacture these components in accordance with the specifications provided by PDS. Mr. Armour played no role in the actual design or manufacture of the propeller.

[77] After the re-engining, the North Island Princess was put back into service. On November 2003, it crashed into a dock, injuring a passenger and one employee, as well as causing damage to passengers’ vehicles, the vessel itself, and the berth at Powell River.

[78] The crash occurred because both engines stalled as the ship was approaching the terminal, preventing the captain from slowing the vessel down as it approached the dock.

[79] The acting senior chief engineer on the vessel reported to BC Ferries that the propellers were not the problem. He concluded that the DDA-made controls were causing the problem because they were not interacting properly with the engine’s software. Mr. Armour agreed with that view.

[80] BC Ferries decided to obtain an opinion from another firm, GasTops. On March 12, 2004, GasTops supported Mr. Armour’s conclusion that the problem lay with the control system. LamaLo Technology Inc. was also retained, and conducted sea tests in early March. LamaLo concluded that the engine stalls “are a result of faulty logic in the bridge control system”. It recommended that “the control system be modified.”

[81] BC Ferries worked with DDA to try to correct the control system problem, but after repeated efforts, DDA told BC Ferries that it could do nothing further. Mr. Armour advised BC Ferries to use a “fast idle technique” to get around the control system problem which was causing the engine to operate below the stall point.

[82] The fast idle technique recommended by Mr. Armour was implemented and the engines did not stall on approach.

[83] In mid-March, Andre Berthiaume (Mr. Collins’ predecessor), Mr. Collins, and Bruce Paterson, a naval architect with BC Ferries, participated in sea trials of the vessel.

[84] Mr. Collins, Mr. Berthiaume, and Mr. Paterson discussed what should be done following that visit to the vessel. They all had concerns about using the fast idle technique which caused soot and exhaust to be expelled from the funnels at an unacceptably high level. They also tried using the engine emergency controls to override the faulty bridge controls, but found that was not optimal because if used long-term, it could damage machinery.

[85] DDA’s position was that the only way to correct the problem was to modify the propellers. This was expressed in a letter to Mr. Berthiaume in February 2004.

[86] Mr. Collins observed during the trials done on March 16, 2004, that when the ferry was pushing into the dock, the engines were unable to reach full power. He said that it confirmed what he had read in the LamaLo report “that the demand from the propeller was exceeding the available engine power at certain RPM”. He formed the opinion that the propellers were “heavily designed or aggressively designed for the ship.”

[87] Mr. Berthiaume testified that adjusting the propeller was the obvious thing to look at after taking the “easiest approach” of adjusting the controls and failing to solve the problem.

[88] On March 25, 2004, the North Island Princess stalled again while coming into dock. On March 30, 2004, Mr. Collins instructed Mr. Paterson to haul DDA and Mr. Armour into one room, and “hammer them”, on the best approach to resolve the problem. Mr. Paterson responded:

I don’t think there is an opportunity for common ground between Armour and DDA – Armour continues to point to the control system, which in my opinion is a CYA move.

[89] BC Ferries made the decision to pull the vessel from service and to crop the propellers to reduce the draw on the engine. Mr. Collins described the decision this way:

... I’d arrived at the conclusion that the propellers were not properly designed for the ship. Other people -- not everybody shared my opinion, but I personally held that view. When we had these next stalls we clearly had a very serious safety situation on our hands. There was -- the crew was refusing to sail the ship and it would have been irresponsible of us to keep her in service, so we relieved her with the Bowen Queen and said, bring her down.

(Trial Transcript - Day 10, p. 67, lines 1-10)

[90] Mr. Collins testified that he spoke with Mr. Berthiaume, Mr. Paterson, and Mr. Trant, the BC Ferries’ project manager who were all satisfied that the propeller should be modified.

[91] After the diameter of the propeller blades was reduced, the North Island Princess was put back into service and there were no further stalls. Not surprisingly, this confirmed Mr. Collins’ view that the propeller had been the problem all along.

[92] Mr. Collins formed the opinion that PDS was responsible for the problem with the size of the propeller. Although he understood that Mr. Armour had not designed the propeller, Mr. Collins held the view that, as a marine architect involved in the design, Mr. Armour was ultimately responsible for the integration of the propeller and the engines. When they failed to match, resulting in stalling of the vessel, Mr. Collins laid the blame at the feet of PDS. When asked at trial what made him think that Mr. Armour was responsible for the design of the propeller, Mr. Collins said:

Well, sir, I've been involved in perhaps 300 propulsion system commissions and I can tell you in every single one there is a hydrodynamicist or a naval architect somewhere. That person is integral to the process. When I see Mr. Armour, and I see Polar Design, I see a manufacturer, it is standard procedure in the marine business that that naval architect would have an integral role in the matching of the propeller to the engine. The physical matching is one part. I'm aware Polar Design -- when they've described matching they've described it as the physical matching of the components before. I'm talking about propeller demand curve and the engine power curve. And in every one of these systems in my experience, the naval architect is vitally concerned with that and I believe it to be the case here.

(Trial Transcript - Day 11 - pp. 43-44, lines. 43-13)

[93] Consistent with Mr. Collins’ understanding, Mr. Armour had reviewed DDA’s design for the propeller in mid-2003, and had formed the opinion that the propeller’s design complied with the constraints he had set out in his specifications.

[94] Based on the above, I am of the view that Mr. Collins had an honest belief that PDS was responsible for the design problem with the propeller, even though the experts retained by BC Ferries at the time agreed with Mr. Armour that DDA’s control system was the root of the problem.

[95] The next question to address is whether Mr. Collins reasonably could have believed in relation to the North Island Princess that Mr. Armour’s advice had cost BC Ferries significant sums of money.

[96] Mr. Collins was of the view that BC Ferries had incurred considerable costs in correcting the problems on the North Island Princess. These costs included pulling the vessel out of service and replacing it with another larger vessel which was more expensive to operate on the run during the investigation and repairs as well as the costs of actually effecting those repairs to the propeller. On Mr. Collins’ evidence, the North Island Princess losses totalled about $150,000.

[97] Mr. Collins was not the only one who held this view. Mr. Trant wrote on the project amendment form:

The new engines have been stalling on occasion causing the vessel to contact the berth heavily. One time causing injuries to a passenger and a crew member. An additional $75,000 is required to pull the vessel out of service and reduce the diameter of the propellers. The North Island Princess will be taken out of service on March 29th, 2004, in order to facilitate the modification to the propellers. The project manager intends to seek compensation from the naval architect on the basis that there was a design flaw in the specified propulsion system, specifically the propeller design.

(Trial Transcript - Day 10, pp. 74-75, lines 38-4)

I find that Mr. Collins had an honest belief that costs had been increased by BC Ferries as a result of PDS’ advice on the North Island Princess.

[98] Next I must consider whether Mr. Collins was acting recklessly and without regard for the truth when he asserted in the Email that PDS had refused to compensate BC Ferries for these extra costs. At a meeting with Mr. Armour on April 26, 2004 to discuss another vessel, Mr. Collins raised the experience on the North Island Princess with a view to ensuring that similar problems would not be encountered. Towards the end of the meeting Mr. Collins spoke to Mr. Armour, telling him that BC Ferries’ view was that the stalling had been the result of improper propeller design. Mr. Collins testified that he also told Mr. Armour that BC Ferries had incurred considerable costs correcting the propeller mismatch, and did not think BC Ferries should be responsible for the costs. According to Mr. Collins, Mr. Armour’s response was to grow indignant and to insist that there was no problem with the design of the propeller.

[99] Mr. Armour agreed that when Mr. Collins told him at the end of the meeting that the propeller was overloaded, he made it clear to Mr. Collins that he disagreed and told Mr. Collins in essence that he did not know what he was talking about. However, Mr. Armour did not agree that Mr. Collins made a demand for compensation.

[100] Mr. Collins interpreted the conversation with Mr. Armour as an inappropriate response to a customer with a concern. He said:

What concerned me even more, I think, was the underlying refusal to accept any responsibility. Refusal to even discuss whether or not there was some responsibility even there for Polar Design. There was just no discussion. And I have reached the conclusion at that point that this wasn’t the sort of supplier that I would suggest BC Ferries do business with.

(Trial Transcript - Day 10, p. 74, lines 2-10)

[101] While I do not accept that a demand for payment was made formally, I do find that Mr. Collins had an honest belief that PDS was refusing to accept responsibility, financial or otherwise, for what he saw as the propeller problem.

(ii) The Spirit of British Columbia

[102] PDS was subsequently retained in the spring of 2005 to design changes to the deck of the Spirit of British Columbia, in particular, to stiffen the deck to support a lifeboat crane called a davit, which was part of an upgrading of the lifesaving equipment.

[103] Once the work was underway, the shipyard discovered that the drawings that PDS had been working from were out of date in the sense that some modifications had been made to the deck which had not been reflected in the drawings provided to PDS to do its design work.

[104] In response, Mr. Armour prepared a modified design using two brackets. That modified design was provided to BC Ferries and the shipyard.

[105] Subsequently, the project manager informed Mr. Armour that there was an interference problem with the brackets; he asked Mr. Armour if the shipyard could change the orientation of the support to use a transverse web. Mr. Armour told him that he did not have any objection to that.

[106] The shipyard failed to put in either the brackets or the transverse web support. When Transport Canada tested the equipment, there was too much flex in the deck and Transport Canada would not approve the vessel.

[107] Mr. Collins was briefed on this problem and informed that, while the shipyard had modified the original design prepared by PDS, the shipyard had checked it with PDS before doing the modification and Mr. Armour had approved it. Mr. Collins understood that the shipyard followed the modified design and yet the ship had failed the flex test for the deck.

[108] It was Mr. Collins’ understanding that when Mr. Armour was confronted about the problem, he said that he had told the shipyard that he was “okay with” the modified design but denied actually approving it.

[109] Mr. Collins testified that he took this as further evidence that PDS was refusing to accept responsibility for work that they were doing for BC Ferries. Another BC Ferries employee, Mark Nichol, also expressed concern to Mr. Collins that a change of a relatively significant design item had occurred without BC Ferries’ knowledge.

[110] Mr. Armour acknowledged in cross-examination that he had not informed BC Ferries that the shipyard had failed to put in the modified support he had okayed or any additional support at all.

[111] In the circumstances, I am of the view that Mr. Collins could have formed the view that PDS had approved a design that failed to secure Transport Canada approval even though fault actually lay with the shipyard.

[112] In relation to the Spirit of British Columbia, BC Ferries did not demand compensation and PDS was paid in full for its work on this project.

(b) Statements made about MDA

[113] The main project Mr. Collins relied on in forming his opinion about MDA and Mssrs. Smiley and Marwood was MDA’s work on the John Atlantic Burr. This project involved moving a ferry from a lake in Utah to a shipyard in British Columbia. Of secondary significance were drawings for two Q-Class ferries, the Quinsam and the Quinitsa.

(i) The John Atlantic Burr

[114] I note at the outset that, because of MDA, BC Ferries acquired the ferry John Atlantic Burr for about $10 million less than it would have paid for a new one. Despite that, Mr. Collins was unhappy with MDA’s work on the John Atlantic Burr project. His perception was that MDA had performed poorly in two respects: first, by not identifying the significant cost to remove the ferry from the lake in Utah, and second, by failing to obtain a firm price quote from the contractor chosen by BC Ferries to transport the John Atlantic Burr to the coast. I find, after listening to what actually happened, that Mr. Collins’ assessment of MDA’s performance was not justified. But the question I must address is not whether Mr. Collins was right, but whether, at the time he wrote the Email, he honestly held his belief that MDA had not performed well.

[115] In relation to the “missed haul out costs”, Mr. Smiley had in fact told BC Ferries in July 2005 that transportation costs to move the vessel to British Columbia could be as high as $1.2 million. He advised the company of that potential cost before BC Ferries made the decision to purchase the John Atlantic Burr. However, that quote did not make its way into the preliminary budget prepared by BC Ferries, and Mr. Collins was not aware of MDA’s estimate before he sent the Email.

[116] Mr. Smiley also advised BC Ferries early on that the ship should not be taken out of the water until a firm price had been obtained from Emmert, the transport contractor. Further, he suggested making the purchase of the vessel conditional on the transportation costs not exceeding a particular value. BC Ferries failed to follow that advice.

[117] Mr. Smiley acknowledged that he did not specifically include an amount for removing the vessel from the lake itself because he thought it would cost about $10,000, which he described as a “nothing cost” given the scale of the transportation expenses that he had pegged at $1.2 million.

[118] On August 30, 2005, Mr. Paterson told Mr. Smiley that he was putting together some budget numbers and asked Mr. Smiley if Emmert’s estimate for transporting the John Atlantic Burr of $450,000 was still correct. Mr. Smiley told him it was the number he had received from Emmert, subject to a route survey being done. Mr. Smiley knew this was the road haulage estimate. He was not expecting Emmert to lift the vessel out of Lake Powell at that point, and did not expect that part of moving the ship to be significant in any way.

[119] What Mr. Smiley did not know, when he was providing the initial recommendations to BC Ferries, was that the lake in Utah had dropped to100 feet below its normal level. As a result, getting the vessel out of the lake went from being a “nothing cost” to a significant $280,000 one. Mr. Smiley acknowledged that he was shocked by that cost, as was BC Ferries when Emmert included it in the estimate.

[120] Mr. Smiley agreed that MDA was responsible for transportation of the vessel from Lake Powell to the conversion site in British Columbia including “arranging contracting with experienced heavy lift subcontractor, Emmert International”. Mr. Smiley said that he understood this meant MDA was to obtain a firm price quote from Emmert.

[121] MDA was aware it would be retained on the John Atlantic Burr project by August 31, 2005, although the statement of work was actually issued September 12, 2005.

[122] MDA initially planned to use BECO to do the haul out from Lake Powell, as they had done in 1996 when the vessel was lengthened under MDA’s supervision. It was not until a meeting with BECO and Emmert on September 7, 2005, that Mr. Smiley first became aware that the lake level was “way below normal” such that removal was beyond BECO’s resources.

[123] At that point, Mr. Smiley asked Emmert if they could remove the boat from the water, something which he described as not within their “normal mandate for doing business.”

[124] There was some delay in getting a quote from Emmert and Mr. Smiley continued to press Emmert to get on with providing a firm quotation for the job, including the haul out. He wanted that from them by September 26, 2006 so that BC Ferries would have the cost before they took possession of the vessel on October 2.

[125] Emmert provided the price quote on September 27, 2005. Mr. Smiley went to their Oregon office to meet with them. Emmert presented a letter on that date which became part of the heavy haul agreement. That agreement included the $280,000 cost to remove the vessel from the lake. Mr. Smiley said he “expressed shock” when he read it. He was so taken aback he told them he did not see BC Ferries accepting that number. According to Mr. Smiley, Emmert’s response was: “This is our price and it’s not negotiable.”

[126] Mr. Smiley immediately passed the estimate on to Mr. Paterson of BC Ferries. MDA understood on September 30 that BC Ferries nonetheless agreed to send the mobilization money to get the vessel’s removal and transportation underway.

[127] After the vessel was finally removed from the lake on October 15, 2005, Mr. Smiley returned to Vancouver. On October 19 he met with Mr. Paterson and Mr. Collins at BC Ferries’ offices in an upbeat mood now that the project was underway. However, Mr. Collins turned out not to be interested in Mr. Smiley’s description of how impressive it was seeing the ferry moving up the ramp out of the lake. Instead, Mr. Collins took what Mr. Smiley viewed as an unfriendly, aggressive and angry stance. He told Mr. Smiley that BC Ferries wanted $280,000 of haul out charges back from Emmert and if he did not get it from Emmert, he wanted it from MDA.

[128] Not surprisingly, Mr. Smiley’s reaction was negative. He felt Mr. Collins was talking down to him and reminded Mr. Collins that BC Ferries had a letter offer from Emmert which BC Ferries had accepted, including the $280,000 haul out price. Mr. Smiley told Mr. Collins that he “should read the fine print”. He also told Mr. Collins that MDA did not have that kind of money even if they were inclined to give it to BC Ferries. Mr. Collins believed that this exchange amounted to a refusal by MDA to compensate BC Ferries for this unanticipated expense. I accept that he had an honest belief in this regard.

[129] There followed a number of acrimonious calls between Mr. Collins, Emmert’s principals, and Emmert’s legal counsel. Mr. Collins was offended by the arrogant tone adopted by Emmert’s legal counsel in particular and demanded a break in the costing from Emmert.

[130] By October 31, Mr. Smiley had exhausted his efforts with Emmert. The ferry was almost ready for transport, BECO having cut it up into four hull sections and readied the dollies for the highway transportation to the ocean.

[131] Emmert and BC Ferries continued to negotiate the line items of the contract directly and Mr. Smiley stepped back from those negotiations. In his view, he was not hired to do the legal and negotiating aspects of the contract, but only to serve, in effect, as a “post master” between the two parties.

[132] Emmert and BC Ferries finally signed a heavy haul agreement on November 7, 2005. When Mr. Smiley sought payment of an invoice due to MDA on the John Atlantic Burr project on December 7, Mr. Collins told him that BC Ferries had concerns about MDA’s performance to date. MDA agreed to reduce its invoice by $7,000 because BC Ferries thought it was too high.

[133] On December 17, 2005, BC Ferries relieved MDA of the rest of the transportation work on the John Atlantic Burr project.

[134] On January 3, 2006, Mr. Smiley requested a meeting with BC Ferries to address the concerns they had raised about MDA’s performance on the John Atlantic Burr project. That meeting took place on January 27 and was, by all accounts, including Mr. Collins’, a “decent, amiable meeting.” That meeting focused on the need for MDA to advise BC Ferries if it was unable to comply with a particular deadline and an explanation by Mr. Collins of the significance of the deadlines given the new structure within BC Ferries which had been modified to assign an owner, sponsor, and project manager for each major project.

[135] At the earlier October 17, 2005 meeting, it was Mr. Collins’ evidence that, when he expressed dissatisfaction with the unexpected haul out cost, Mr. Smiley responded by saying “I missed it.” Mr. Smiley denied that he said this.

[136] Whether Mr. Smiley said that he missed it or not, on his own evidence, he agreed that he did not identify specific costs to remove the vessel from the water. That was an entirely reasonable position to take given that he expected the cost to be $10,000 and did not know that the lake level had dropped by 100 feet. However, Mr. Collins’ interpretation of the events and his belief that MDA had somehow failed BC Ferries by not identifying that there would be a cost for haul out, and potentially a significant one, was a belief honestly held in the circumstances and not one that was reckless, even if it was unreasonable.

[137] Similarly, MDA did have a role to play in obtaining a firm price quotation from Emmert, and was unable to deliver that. I find that this was due to Emmert’s hardball approach and the fact that it was bargaining from a position of strength with no competitors, knowing that BC Ferries needed to get the vessel out of the water and up to Vancouver so that it could be refitted and put into service in the Spring of 2006. Nonetheless, Mr. Collins’ perception that MDA had pulled back and left BC Ferries to pin Emmert down on a price is an accurate one. There is not much more in my view that MDA could have done to assist in the circumstances, but I find Mr. Collins’ belief that MDA had not “delivered a firm price quote from Emmert” to be one he honestly held.

(ii) The Quinitsa and Quinsam

[138] MDA was retained to do refit drawings on the Quinitsa in 2005. It was retained for similar work on the Quinsam in February 28, 2006, only two weeks before the Email was sent out.

[139] If normal procedures were followed, Mr. Collins would have signed off on the purchase order for MDA’s work on the Quinsam. MDA argues that this approval is inconsistent with an honest belief that MDA had performed poorly on the John Atlantic Burr. MDA also points to the cordial meeting in January 2006 as further evidence that Mr. Collins had not formed a negative view of MDA’s performance.

[140] A purchase order bearing Mr. Collins’ signature on the Quinsam could not be located, but I find it more probable that not that it was signed by Mr. Collins.

[141] I find that Mr. Collins was initially prepared to carry on with MDA despite his concerns over the John Atlantic Burr. However, once he decided to formally unapprove PDS, he concluded that MDA should be given the same status. The way he described this process, the inclusion of MDA was almost an afterthought. But I accept nonetheless that it was a decision Mr. Collins honestly believed was in BC Ferries’ best interest.

[142] With respect to the work on the Quinitsa and Quinsam drawings, there was some evidence that the drawings had been misplaced by a BC Ferries employee and a disagreement over the order in which the drawings needed to be submitted to Transport Canada. But overall, these were relatively insignificant issues that Mr. Collins did not even raise at the January 27, 2006 meeting to address his concerns about MDA’s performance. I do not find that Mr. Collins held an honest belief that the Quinitsa issues constituted poor performance or that they had cost BC Ferries hundreds of thousands of dollars.

6. Damages for defamation

[143] Given the findings I have made, the plaintiffs have not proved defamation and are not entitled to an award for damages.

B. Injurious falsehood

[144] The corporate plaintiffs claimed injurious falsehood in the alternative to defamation. Actual malice is a requisite element of injurious falsehood and I have found that the Email was not published maliciously with intention to injure the plaintiffs. Accordingly, this claim too must fail.

C. MDA’s claim for breach of contract

1. The John Atlantic Burr

[145] The contract for services between MDA and BC Ferries with respect to the John Atlantic Burr became effective on September 12, 2005. The contract itself consists of a “draft” statement of work prepared by Mr. Paterson and an exchange of emails between Mr. Paterson and Mr. Marwood. Formal and final documents were never produced.

[146] The parties agree that the services to be provided by MDA were on a time and materials basis.

[147] Mr. Smiley testified that he understood this to mean that “time is of the essence and it’s however long it takes to do the job is what you will be paid for.” The defendants argued that it meant that MDA was to be paid for the time expended and materials utilized to perform the services requested of them and did not contain a guarantee that all of the work set out would in fact be done by MDA and paid for by BC Ferries.

[148] The parties agree that MDA was paid for all of the time spent and materials utilized in respect of the services performed on the John Atlantic Burr. The claim advanced is for approximately $141,000 for completion of the further work that MDA expected BC Ferries would have to do on the John Atlantic Burr. That work covered the development of the technical package, obtaining regulatory approval, oversight of the conversion project and assisting with commissioning trials for the vessel.

[149] In an email dated December 13, 2005, Mr. Marwood advised BC Ferries of the status of work completed to date on the John Atlantic Burr and the drawings that would be required for completion. That was confirmed in more detail on December 16, 2005. MDA then continued to work on the drawings and other tasks, submitting invoices for its work for which it was paid in full.

[150] At a meeting on February 17, 2006, MDA was told to finish the drawings they were doing, to submit those, and to do no further work. MDA was also told that the rest of the drawings would be done by Allied Shipyard.

[151] I find that BC Ferries and MDA agreed that MDA would be paid for the work actually done on the John Atlantic Burr project, but there was no implied term that they were guaranteed all of the potential work identified in the statement of work. When MDA learned in December 2005 that BC Ferries was pulling back “in house” the transportation portion of the statement of work on the John Atlantic Burr. MDA’s response was simply to ask for confirmation of that in writing so that there would be no misunderstandings in the future about responsibility for that work.

[152] I note that when MDA was advised in February 2006 that they would not be required to do the rest of the drawings for which damages are now claimed, there was no indication that MDA considered this to be a breach of contract or that they had a firm expectation of completing the work. Rather, Mr. Smiley wrote to Bruce Paterson on March 3, 2006, setting out the final invoice for their work on the project and reminding BC Ferries that they were responsible for submitting the rest of the drawings to Transport Canada.

[153] If a breach had occurred, I would find damages under this head of $50,000 based on the following analysis. The damage claim by the plaintiffs for $141,000 must be reduced to $90,000 to $100,000 to reflect the significant portion of the work that would have been done by independent contractors retained by MDA. That sum would have to be reduced further by 50% to take into account overhead costs to do the work.

2. The Quinsam and Quinitsa claims

[154] The plaintiffs say that they had binding agreements with BC Ferries to provide services in relation to the Quinitsa and the Quinsam. Both contracts were terminated by BC Ferries immediately following the issuance of the Email. On March 17, 2006, Amanda Squires instructed Mr. Marwood and Mr. Smiley to “wrap up the Lifecycle Cost analysis on the Quinsam and put together the invoices for both ships and deliver them to me before the end of next week (for year end billing purposes).”

[155] The claim in relation to the Quinsam exclusive of GST is $15,944.30, which represents the gross revenue MDA would have received for the work it expected to complete for BC Ferries. Net of overhead damages would be $8,000.

[156] With respect to the Quinitsa, the plaintiffs claim $40,198.10, which again represents loss of gross revenue and not net profit. Net of overhead damages would be $20,100.

[157] Both the Quinitsa and Quinsam purchase orders contain a provision dealing with changes to the scope of work and termination:

Buyer reserves the right at any time, to cancel or terminate this order in whole or in part by written or telegraphic notice, or verbal notice confirmed in writing; or to make changes in any one or more of the following:

(1) Quantity of Merchandise Ordered;

(2) Specifications of Merchandise;

(3) Methods of Shipment or Package;

(4) Place of Delivery, and,

(5) Time of Delivery.

If any such change causes an increase or decrease in the cost of, or the time required for performance of this contract, an equitable adjustment shall be made in the contract price or delivery schedules, or both. ...

[158] I find that the parties agreed that BC Ferries could reduce the scope of the work to be done on the Quinsam and Quinitsa with a corresponding decrease in the amount to be paid to MDA. MDA did not advance a claim that termination of the contract increased its costs in any way; rather, they sought payment for the work they did not get to do.

[159] In the result, MDA’s claim against BC Ferries for breach of contract is dismissed.

D. BC Ferries’ counterclaim

[160] As noted above, the contract between the parties for the John Atlantic Burr project consisted of a draft statement of work and an exchange of emails between MDA and BC Ferries. The email by Mr. Marwood to Bruce Paterson dated September 16, 2006, is captioned “J.A.B. M.D.A. Charge out rates” and provides:

Bruce,

We would submit our charge-out rates on this Project to be as follows: -

Ralph L. Marwood - Principal/Project Design Manager - $115/$95 per hour.

John Smiley - Principal/Quality Control - $115/$95 per hour

John Marrack PEng. - Design - $$95 per hour

Neal Backhouse - Senior Naval Architect/Structural Designer - $85 per hour

Alan Light - Mechanical/Structural Designer - $80 per hour

George Perry - Marine Engineering Systems Designer - $80 per hour

Drafting/Aut - Cad personnel - $55 per hour

All travel and out of town expenses may be subject to a 10% mark-up whilst printing, long distance charges and sub-contractor’s charges are billed out at cost.

[161] This proposal was accepted by Bruce Paterson on September 18, 2005, with the exception of the 10% mark-up. His proposal in that regard was accepted by Mr. Marwood in an email dated September 18, 2005.

[162] None of the named individuals were employed by MDA, although they were former MDA employees. They were independent contractors who provided their services to MDA as needed and sent their work to MDA for vetting before it was sent on by MDA to BC Ferries.

[163] BC Ferries says that the named individuals were all “subcontractors” whose work should have been billed out to BC Ferries at cost under the agreement. Instead, the charge out rates set out in the contract for John Marrack, Neale Backhouse, Alan Light, and George Perry contained a mark-up over and above what those individuals were invoicing to MDA.

[164] BC Ferries says this was a breach of the John Atlantic Burr agreement and seeks recovery of the mark-up totalling $27,502 for those independent contractors.

[165] MDA argues that the contract language is clear: the parties agreed that the independent contractors whose names and services were listed in the email along with set rates would be charged to BC Ferries at that cost. MDA submits that the reference to “subcontractors” being charged at cost referred to those contractors who had never been MDA employees and who were not part of their regular team. “Subcontractors”, says MDA, were service providers with experience beyond MDA’s, and whose work MDA did not have the capability to oversee.

[166] MDA used DC Maritime Technology as electrical contractors because this was an area that MDA did not have any expertise in. They also used Merlion for computer analysis on hull resistance. Their work was submitted to BC Ferries directly and MDA charged BC Ferries for the precise amounts that Merlion and DC Maritime Technology charged MDA.

[167] Taking into account the contract as a whole, and in particular the manner in which specific charge out rates are described apart from the paragraph dealing with subcontractors, I am of the view that MDA and BC Ferries agreed on the charge out rates expressly specified in the contract, and that the agreement on “subcontractors’ charges” did not apply to those rates or services, but rather to work done by other companies retained by MDA who provided their work product directly to BC Ferries.

[168] In the result, BC Ferries’ counterclaim against MDA is dismissed.

E. Costs

[169] On the first day of trial the plaintiffs discontinued their claims against the defendants Paterson, Radford, Ralph, Smith, Dhariwal and Constable because none of them had republished the Email. The plaintiffs submitted that the claims against those individuals should be dismissed without costs.

[170] Under R. 36(4) of the Rules of Court, a plaintiff’s obligation to pay costs to a defendant on discontinuance is mandatory. The Court has no jurisdiction to relieve a plaintiff of that obligation: Scuccato v. Almazan, 2007 BCSC 1314. Bruce Paterson, who was examined for discovery, is entitled to his costs at Scale B. The remaining defendants in this group are entitled to their costs at Scale A.

[171] If the parties are unable to agree on the remaining costs, they are at liberty to speak to the issue.

“The Honourable Madam Justice L. A. Fenlon”

Citation:	*M.D.A. Marine Design Associates Ltd. v. British Columbia Ferry Services Inc.,*
	2008 BCSC 1432