'Campaign of defamation' about competitor leads to $1.5M judgment against B.C. company

What began as a corporate competition for a lucrative BC Hydro contract has turned into a $1.5-million award of damages in a defamation case.

B.C. Supreme Court Justice Andrew P. A. Mayer ordered the award to Raoul Malak and the Ansan Group of traffic control companies in a decision issued Wednesday.

It's the second time the B.C. Supreme Court has found that Valley Traffic Systems Inc. (VTS), Remon Hanna, Philip Keith Jackman and Trevor Paine were liable for publishing and distributing a variety of defamatory statements about Malak.

A 2017 decision in the case was partially overturned by the B.C. Court of Appeal, which ordered a new trial.

DEFAMATION WAS PART OF ATTEMPT TO WIN CONTRACT

The defamatory statements were first made in 2012, when VTS and the Ansan Group were each responding to a request for proposals for traffic control services put out by BC Hydro.

Mayer's decision describes VTS as "one of the largest traffic control services companies in British Columbia" and Ansan Group as "its main competitor."

In mid-June of that year, a defamatory article describing Malak as "involved in corruption, bribery and money-laundering," "kick-back schemes" and "tax evasion," among other allegations, "was posted on a variety of websites, with a variety of titles and domain names," according to Mayer's decision.

Though the article was posted anonymously or under a pseudonym, the defendants in the case did not appeal or dispute the first court decision's finding that the author was Hanna.

Remon Hanna worked for Ansan Group in 2010, but left the company after his relationship with its owner Malak "deteriorated" in December of that year, according to Mayer's decision.

"At that time, his company, Advanced Traffic, did not have any equipment, employees or assets," the judge's decision reads.

"Mr. Hanna tried unsuccessfully to obtain financing in order to acquire assets to carry on a traffic control business, but did not work in any capacity until he started working on the RFP with VTS in or about January 2012."

In their lawsuit, Ansan and Malak alleged that the defamatory article and other documents – including emails and a poem posted on YouTube – were part of a "common design" to defame the company and its owner and improve the odds that VTS would be awarded the BC Hydro contract and other work.

VTS and the other defendants – Jackman, the owner and company president, and Paine, the vice-president – denied the allegations, saying they worked with Hanna on the response to the RFP, but that he acted on his own when he carried out the defamation campaign.

For a variety of reasons, Mayer sided with the plaintiffs, concluding that the court should infer that Hanna, Jackman and Paine worked together on the defamation campaign, despite their denials.

"I find that Mr. Jackman, Mr. Paine and Mr. Hanna intended to harm the reputation of Mr. Malak and the Ansan Group for the purpose of putting VTS in a better position to obtain the BC Hydro contract and other traffic control services work," the judge's decision reads.

$2.4 MILLION IN COMPENSATION

Mayer's decision lists several instances in which he found Jackman and Paine's arguments to lack credibility, writing that their testimony was sometimes inconsistent and, in some cases, "defies business logic or common sense."

The defendants told the court they began working with Hanna as a "strategic advisor" for the BC Hydro RFP, despite Hanna holding limited qualifications for the role.

Mayer notes that Hanna had no experience in the traffic control industry before working for Malak and Ansan in 2010. He testified that he "did not have any degrees or diplomas from any institution," according to the decision.

"The RFP concerned the largest traffic control services contract ever put out for bid in British Columbia," the decision reads.

"Common sense suggests that Mr. Jackman and Mr. Paine would have tried to build a qualified team to prepare a response. Instead, Mr. Jackman and Mr. Paine decided to work with Mr. Hanna as a ‘strategic advisor’ when, in my view, the evidence suggests that he had limited experience and training for this role."

Further, though VTS began working with Hanna in early 2012, he did not begin receiving payment from the company until January 2013, around the time that it was awarded the BC Hydro contract, according to the decision.

Mayer writes that VTS paid Hanna approximately $2.4 million between January 2013 and 2018, or about $500,000 per year. Roughly $1.5 million of that total was paid after the first court ruling on the case in 2017.

Jackman and Paine told the court these payments were the result of a profit-sharing agreement with Hanna, though no record of such an agreement was provided.

Paine told the court he wrote the terms of the agreement on a yellow sticky note, but could not find it, while Hanna said the agreement was a verbal one.

Regardless, the result of the arrangement was that Hanna received several times more compensation, on an annualized basis, than Paine, the company's senior employee, who made between $76,000 and $85,000 per year over the same period, according to the decision.

Mayer found it difficult to believe that the work Hanna did was worth what VTS paid for it, writing that there was "a dearth of evidence at trial concerning what Mr. Hanna actually did."

"It is possible that the alleged profit-sharing arrangement was a complete fabrication, meant to mask the true reason for payments made by VTS to Mr. Hanna, being compensation for carrying out a campaign of defamation to harm the business reputation of the plaintiffs, thereby benefiting VTS and by extension, Mr. Jackman, Mr. Paine and Mr. Hanna," the decision reads.

AWARD LESS THAN PLAINTIFFS SOUGHT

Because Jackman and Paine were the leaders of VTS and participated in the defamation scheme to further the company's interests, Mayer concluded the company is vicariously liable for the defamation.

In the lawsuit, Malak sought a total of $2.5 million in damages, with a further $500,000 for each of several companies making up the Ansan Group. Alternatively, the plaintiffs sought to have the court order a "disgorgement" of $6.9 million in profits they alleged VTS made from the BC Hydro contract, which would be paid to the Ansan Group companies in lieu of damages.

Mayer declined to order the disgorgement, citing the lack of an established causal relationship between the defamation and the awarding of the contract to VTS.

Instead, the judge awarded Malak $500,000 in general damages and $200,000 in aggravated damages. He also awarded general damages of $300,000 to the Ansan Group, and $500,000 in punitive damages to the plaintiffs, collectively.

In all, VTS, Jackman, Paine and Hanna are "jointly and severally liable" for $1.5 million in total damages.