Defamation Actions: A Bad Investment

As Mr. Justice Graeme Mew of the Superior Court of Justice pointed out in the recent case of Bernstein v. Poon, “defamation litigation is a high-stakes business”.  The Bernstein case was truly a perfect example of defamation litigation being not only a high-stakes business, but also a very uneconomical one.

In this case, two prominent Toronto diet doctors got into the ring with each other in a big way.

In 2008, Dr. Bernstein sued Dr. Poon for an injunction to stop the publication of the book “Dr. Poon’s Metabolic Diet”, an injunction requiring the retraction of allegedly defamatory statements posted on Dr. Poon’s diet website, $5 million in damages and $5 million in punitive damages.

By the time of the 7½ day trial, about six years later, Dr. Bernstein had restricted his claims to damages only.

After the dust had settled, Dr. Poon was ordered to pay Dr. Bernstein the grand total of $10,000 in general damages for defamation.

As the judge indicated, “the amounts spent in this litigation are truly breathtaking”.  The plaintiffs incurred legal fees of almost $550,000. The Defendant spent about $250,000.

The judge pointed out that the parties in this case were able to afford to go to trial. But the cost of doing so was exorbitant. In fact, as the judge pointed out, in defamation cases, the costs incurred by the parties will often exceed the monetary recovery. A study of 47 libel and privacy cases in the United Kingdom published in 2009 found that the costs to plaintiffs averaged 184 percent of damages and the defendants’ costs averaged 124 percent of damages.

It appears that the fight between these parties on the question of costs was as intense as the fight over the alleged defamation.  Although the judge concluded at the trial that the case was more about ego than actual harm, Dr. Bernstein maintained that the action was a genuine attempt to end the tarnishing of his reputation, that it should not have been necessary for him to go all the way to trial to stop the behaviour complained of, and that he should be awarded 100 percent of his actual costs. This was particularly so, according to him, because even after the action started, Dr. Poon proceeded to publish yet another edition of his book and then posted on his website a Chinese language television broadcast showing Dr. Poon making defamatory remarks about Dr. Bernstein.

On the other hand, Dr. Poon sought an award of costs representing a portion of his actual legal expenses, arguing that given the paltry amount ultimately awarded to Dr. Bernstein, the entire matter had been dealt with in the wrong court. According to Dr. Poon, this action should have been brought in the Small Claims Court which has a jurisdictional limit of $25,000.  Furthermore, Dr. Bernstein’s recovery at trial was less than 0.5 percent of the total amount claimed and the claims for injunctive relief were not pursued.

At trial, the judge found that the case was “more about turf warfare in the competitive world of diet medicine than about reputation”.  In terms of Dr. Bernstein’s choice of court, the judge felt that without question, Dr. Bernstein wanted the litigation to have the maximum possible impact on Dr. Poon and bringing the action in Small Claims Court would not have met that objective. As he put it, Dr. Bernstein tried to use his financial muscle to wrestle with a competitor. The competitor, however, stubbornly refused to back down and went on the attack in terms of the way he carried on his defence in the action.

At the end of the day, Dr. Poon defeated most of Dr. Bernstein’s claims. However, some of Dr. Poon’s comments on which the liability for $10,000 was grounded were made after the litigation began. Accordingly, rather than making an offer containing even a modest monetary element, Dr. Poon “effectively fanned the flames”.

In the result, the court determined that as the overall outcome was close to being a draw, and as the exercise had cost both doctors a lot of money and used a scarce public resource in doing so, each party should bear his own costs.  Both doctors were substantially out of pocket, Dr. Bernstein even more so than Dr. Poon. One can only shake one’s head and wonder whether or not, in retrospect, either one wishes he had done things differently.

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