Tag: Bankruptcy

What is defamation to character?

In Canada, defamation is any intentional or negligent false communication, whether written or spoken, that harms a person’s reputation or exposes them to ridicule, belittling, or contempt. The concept of defamation can have two possible parts; libel and slander. There is a distinction between libel and slander.

Libel is defamation either in writing or some other permanent form, while slander is defamation that is not left in a permanent way. Section 298(1) of the Canadian Criminal Code (R.S.C., 1985, c. C-46) defines a defamatory libel as any published material that is likely to injure someone’s reputation or make them the object of hatred, contempt, or ridicule, without lawful justification or excuse. Slander is more commonly associated with an oral statement. With slander, there generally will always be a fight waged between slander and freedom of speech.

Unless you have been living under a rock for the past few months, you have no doubt “heard” about, and maybe even followed, the sensational legal case of John C. Depp, II v. Amber Laura Heard. Amber Laura Heard was sued for defamation to character by Johnny Depp, who claimed US$50 million in damages, in a trial that began on April 11 and ended on June 1, 2022, in Fairfax County, Virginia.

Johnny Depp married Amber Heard in 2015, but their partnership has actually been shrouded in conflict since the beginning. Heard accused Depp of domestic abuse and they broke up in 2016. Their divorce was all settled in 2017. The jury’s ruling in favour of Johnny Depp ordered Amber Heard to pay the actor $15 million in damages for defamation. The seven-person jury also decided that Depp through his lawyer had defamed Heard on one of three counts in her countersuit, ordering him to pay $2 million.

Defamation in the Real World

Defamation is an act of harming the reputation of another person through a false statement or many of them. In the real world, defamation can lead to severe consequences, including damages to one’s reputation and livelihood. The criminal code and being found guilty of the criminal offence of criminal defamation is one thing. But in the real world, the possibility of imprisonment is not going to provide any real satisfaction to the wronged party. The way to get compensated for the suffered damages because of the defamation to character is to start a civil suit action for a defamation claim.

The jury awarded Johnny Depp $15 million in damages against Amber Heard for defamation to character, but she will only have to pay $10.35 million due to a Virginia law capping punitive damages. One little problem. According to her lawyer, Amber Heard does not have the means to pay $10.35 million in damages to her ex-husband Johnny Depp following their trial verdict in the defamation lawsuit.

After hearing of the verdict, it got me thinking. If this kind of award was handed down here from Canadian defamation actions, could the party who was found guilty of such defamation of character and now had a huge judgment against them, could they use the Canadian insolvency system to get out of paying that kind of judgment coming out of an action for defamation?

The answer is maybe! In this Brandon’s Blog, I take a look at defamation as one of the civil torts that someone would have a civil cause of action for. I then look at what would happen to the person who was found guilty in a civil suit for a defamatory allegation if they looked to the Bankruptcy and Insolvency Act (Canada) (BIA) to try to get out of paying that kind of judgment.

Does defamation to character, libel and slander judgment claim survive in a Canadian bankruptcy?

To see if a claim can be discharged through bankruptcy, we need to look at section 178(1) of the BIA. This section enumerates the debts that are not released by an order of discharge from bankruptcy. As you may recall from earlier Brandon’s Blogs, I have explained that it is not the bankruptcy itself that clears a person’s debts, it is the discharge from bankruptcy.

Notwithstanding that a discharge from bankruptcy is what clears out a person’s debts, the BIA lists several specific debts that cannot be released by an order of discharge. I looked at the list contained in section 178(1) and there is only 1 item that relates to judgment debts. That is section 178(1)(a.1) which reads as follows:

(a.1) any award of damages by a court in civil proceedings in respect of

• • (i) bodily harm intentionally inflicted, or sexual assault, or
  • (ii) wrongful death resulting therefrom;

A person’s bankruptcy discharge releases them from all claims provable in bankruptcy that are not listed in section 178(1). The question is, does Johnny Depp – Amber Heard type judgment awards for damages in defamation cases survive the bankruptcy of the party against who the judgment is?

In order for that claim to survive the person’s bankruptcy, the judgment creditor offended party would have to show that:

1. the award of damages is for bodily harm; and
2. was intentionally inflicted.

Some key bankruptcy decision trends made by Canadian courts when it comes to defamation to character law judgment claims

My research includes 3 court decisions that I believe clearly lay out how defamation to character judgment claims are handled in the Canadian bankruptcy context and whether such a claim survives a person’s bankruptcy. The cases are:

• Ross (Re), 2014 SKQB 352
• Burke v. Red Barn at Mattick’s Ltd., 2019 BCSC 69
• Cope v Gesualdi, 2021 CanLII 58972 (ON SCSM)

I will explain the main findings and general themes running through each case that seems to answer the question as to is defamation to character judgment claim is eliminated by a person’s discharge from bankruptcy? Put another way, if this was a Canadian case, could Amber Heard get out from under this judgment claim by filing either an assignment in bankruptcy or a restructuring proposal under the BIA?

I will focus on the bankruptcy aspect. The simple answer for a restructuring proposal under the BIA is that a successfully completed restructuring proposal would eliminate such a judgment claim. The real issue is what would happen in a bankruptcy.

Can I file defamation to character lawsuit against someone?

That is exactly what happened in Ross (Re). In the 2014 Saskatchewan Court of Queen’s Bench Ross (Re) decision, the question the Registrar in Bankruptcy needed to answer was “What is the appropriate disposition of the bankruptcy discharge application given the unique circumstances of this bankruptcy?” The Registrar started with the premise that it is more reprehensible to make a bankruptcy assignment with the purpose of avoiding a judgment creditor’s claim than to make a bankruptcy assignment to avoid general commercial debts.

The Registrar said that a bankrupt person’s civil judgment history may be relevant in deciding what conditions to put on that person’s bankruptcy discharge. The court determined that Mr. Ross filed for bankruptcy to avoid paying the creditor’s damage award under defamation laws. There were only two claims admitted in the bankruptcy for dividend purposes: the defamation judgment claim of $92,183 and a claim for $965.83 from a credit card issuer for a total of $93,148.83.

In this case, the Registrar did not look at all as to whether the judgment claim was of a kind that would survive Mr. Ross’ bankruptcy discharge. Rather, it was looked at only from what is an appropriate condition to place on Mr. Ross for his discharge from bankruptcy. The Registrar decided that a condition that Mr. Ross pays the amount of $34,000 or 37% of the proven claims in order to obtain his bankruptcy discharge.

Can you tell me how to file defamation to character lawsuit when the proposed defendant files bankruptcy?

This was not the main issue in this January 2019 British Columbia court decision in Burke v. Red Barn at Mattick’s Ltd. This case does not deal with defamation to character, but rather, is an analysis of section 178(1) of the BIA and particularly subsection (a.1) stating that any award of damages by a court in civil proceedings for bodily harm intentionally inflicted, sexual assault or wrongful death resulting therefrom cannot be discharged through bankruptcy proceedings.

As I previously stated, this is the section that a successful plaintiff who gets a civil judgment in defamation to character lawsuit would rely upon to have their debt survive a defendant’s bankruptcy. So the analysis this British Columbia court Judge goes through is instructive.

This case revolved around a proposed class action which stated that Mr. Schwabe, a former employee invaded the privacy of female employees by recording them without permission while they were changing in and using the restroom. The former employee then filed for bankruptcy, so the plaintiffs requested a declaration from the court to allow the plaintiffs to continue with their proposed class proceeding against him.

The BIA’s section 69.4 automatically halts any legal proceedings related to debts when an insolvency filing is made. No legal action to establish or collect a debt can continue or begin without the court’s permission. If a creditor thinks that a stay of proceedings would unfairly affect them, they can ask the court for a declaration that the stay no longer applies to them. The court can decide to grant this request if it feels that the creditor is likely to be disadvantaged by the stay continuing.

The Judge went through a thoughtful analysis of prior court decisions across Canada. The Judge acknowledged that an applicant under s. 69.4 must demonstrate to the court that at least one of these grounds is present:

1. Actions for debts that cannot be discharged through bankruptcy.
2. Actions involving complex, contingent, or unliquidated debts that cannot be valued by the Trustee alone under the BIA.
3. Actions where the bankrupt party is necessary for complete adjudication of the matter involving others.

The Judge said that going ahead with proceedings after a bankruptcy filing is an unusual situation. He added that simply having a claim listed in the paperwork is not enough to merit an exemption from the stay. To be given an exemption, there must be convincing evidence, a reasonable ground, to show that there is a chance the claim could be successful.

The Court had to take many different factors into account when making its decision in this case. One was if the plaintiff group was successful in obtaining a judgment against the bankrupt individual, would the debt be one that a discharge would not be a defence against? The section we would look to for a judgment for a debt under defamation laws due to defamation to character is the same – “bodily harm intentionally inflicted”.

The damage award to be exempt from discharge under this part of s. 178(1) must be for bodily harm resulting from an act done with the specific intent to injure. The Court’s decision acknowledged that:

• The non-consensual distribution of intimate images by the bankrupt carries with it the risk of psychological hardship and embarrassment to the victims of such crimes.
• Some people who have had their private images shared online without their consent have committed suicide as a result.
• The inferred impact of the distribution of intimate images on victims accordingly is substantial, and the moral responsibility of such offenders generally will be high.
• Moreover, our courts recognize that via the internet the images can be forever available.

The plaintiffs stated in their affidavit evidence that they have suffered psychological harm as a result of the violation they have experienced. The Judge was content that s. 2 of the Canadian Criminal Code was a full answer that psychological harm is covered under s. 178(1)(a.1)(i) of the BIA. Section 2 of the Criminal Code explains “bodily harm” as “any hurt or injury to a person that interferes with the health or comfort of the person and that is more than merely transient or trifling in nature.” Therefore the Judge determined that it encompasses the emotional trauma and hurt the plaintiffs detailed in their affidavits.

The Judge found that the psychological harm suffered by the plaintiffs constituted “bodily harm” for the purposes of s.178(1)(a.1)(i), and that this harm was “intentionally inflicted” in the sense that the images were distributed with “specific intent to injure.” The Judge ruled that the plaintiffs’ case against Mr. Schwabe is a debt action, not one that he can be discharged from. If the plaintiffs are successful, they will be awarded damages for the intentional bodily harm inflicted.

Similarly, a successful civil lawsuit judgment for a debt arising from action under defamation laws resulting from intentional bodily harm inflicted would also survive the defendant’s bankruptcy.

Can I bring a claim for emotional distress?

This is a decision out of the Milton, Ontario small claims court. Obviously, the amount of money involved fits under the small claims court jurisdiction, but it resulted in a thoughtful 31-page decision from the Court. This is a cyberbullying case between two people who once lived in a common-law relationship.

This case included cyber libel claims. The wrongness lies in making her private, intimate personal life globally public by way of online video. This case too involves bodily injury intentionally inflicted and more specifically, the plaintiff’s mental health as a direct result of the defendant’s actions.

The Court determined that when it comes to the tort of intentional infliction of nervous shock, the law does not recognize any mental states that fall short of a provable injury. The requirements for this tort are:

• The defendant’s conduct must have been extreme and outrageous.
• The defendant must have intentionally or recklessly caused the plaintiff emotional distress.
• The plaintiff must have suffered a visible and provable injury as a result of the defendant’s conduct.

Although small claims court in the Greater Toronto Area is limited to claims not exceeding $35,000, including the award, in this case, it is the care that the small claims court Deputy Judge took that impresses me. This case was only about actual damages and not punitive damages, hence the relatively The Deputy Judge stated that this court emphasizes that it is making an award of damages for bodily harm intentionally inflicted, in the event that any recourse is sought in future to the BIA and, more particularly, s. 178(1)(a.1)(i)).

This case, and the others, show that if the evidence is such that the damages were caused by intentional behaviour to inflict bodily damage, which includes a mental state that can be shown to be a provable injury based on the intentional conduct of the defendant, then that claim will not be discharged when the bankrupt obtains his or her discharge from bankruptcy.

What are the possible punishments for defamation to character?

As you can see, there could be both criminal and civil consequences for defamation to character. In the Johnny Depp – Amber Heard case, if it was Canadian and Amber Head filed for bankruptcy in order to avoid paying the judgment to Johnny Depp, assuming she had the ability to pay, that debt may very well survive her bankruptcy discharge. As outlined above, in order to survive, Johnny Depp would have to show that he has experienced bodily injury, which could include a real mental health disorder, as a result of the intentional acts of Amber Heard.

If so, like in 2 of the 3 above cases, Johnny Depp’s claim against Amber Heard for that defamatory matter would survive under section 178(1)(a.1)(i)) of the BIA.

What happens to a civil award for defamation to character in bankruptcy?

I hope this Brandon’s Blog on what would happen if the Johnny Depp – Amber Heard case and civil lawsuit judgment award was a Canadian case and then Amber Heard filed for bankruptcy to avoid paying the judgment for defamation to character. I hope it was helpful to you in understanding more about this type of debt arising from a defamatory statement which would survive the bankruptcy of a defendant like Amber Heard.

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