Nazerali v. Mitchell, 2015 BCSC 2560

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Nazerali v. Mitchell, 2015 BCSC 2560 Date: 20150619 Docket: S116979 Registry: Vancouver Between: Altaf Nazerali Plaintiff And: Mark Mitchell, Patrick Byrne, Deep Capture LLC, High Plains Investments LLC, Godaddy.com, Inc., Nozone, Inc. dba Steadfast Networks, Google Inc. and Google Canada Corporation Defendants - and - Docket: S137262 Registry: Vancouver Between: Altaf Nazerali Plaintiff And Judd Bagley, Evren Karpak and Overstock.com, Inc. Defendants Corrected Judgment: The cover of the Judgment was corrected on March 10, 2016. Before: The Honourable Mr.

Justice Affleck Oral Ruling on Dismissal Application Counsel for the Plaintiff: D.W. Burnett Q.C. H. Maconachie Counsel for the Defendants Mark Mitchell, Patrick Byrne, Deep Capture LLC, High Plains Investments LLC. and Judd Bagley: R.D. McConchie R.A. McConchie Counsel for Overstock.com: S.R. Schachter, QC Place and Dates of Trial: Vancouver, B.C. April 13-17, 20-21, 23-24, 2015 June 15-19, 2015 Place and Date of Judgment: Vancouver, B.C. June 19, 2015 [ 1 ] THE COURT: This defamation trial involves two actions which are being tried at the same time.

The plaintiff has closed his case after 11 1/2 days of trial, and the defendant, Overstock.com, Inc., applies to dismiss action number S137262, relying on Rule 12-5(4) of the Supreme Court Civil Rules , B.C. Reg. 168/2009, arguing the plaintiff has led no evidence to support his claim against Overstock. These are my reasons for judgment on that application. If they are transcribed I reserve the right to edit them.

[ 2 ] In the action in which the application is made, which I will refer to as "the Overstock action," like the other action, number S116979, which I will refer to as the “Deep Capture action,” the plaintiff seeks injunctive relief and damages alleging defamatory publications on a website located at www.deepcapture.com, which is owned by Deep Capture LLC, which is one of the defendants in the Deep Capture action. [ 3 ] The plaintiff's case in both actions has been put forward through numerous documents by the plaintiff himself, who testified over ten days, through four other witnesses who testified viva voce and through extensive read-ins of questions and answers from the examination for discovery transcripts of Judd Bagley, a defendant in the Overstock action, and from the examination for discovery transcripts of Mark Mitchell and Patrick Byrne, who are defendants in the Deep Capture action. [ 4 ] During the examinations for discovery a number of documents were marked as exhibits and became exhibits on the trial through the discovery read-in process. [ 5 ] Mr.

Byrne has been examined for discovery in his personal capacity, not as a representative of any of the corporate defendants in the Deep Capture action. [ 6 ] The effect of the provisions of Rule 12-5(46) is that evidence read-in from Mr. Bagley in the Overstock action and from Mr. Byrne and Mr.

Mitchell read in from the Deep Capture action as well as the documents which became evidence on the trial through the examination for discovery process are inadmissible against Overstock. [ 7 ] The plaintiff accepts that that is the usual rule, but in an alternative submission in response to Overstock's application for a non-suit submits this court has a discretion to alter the strictures of that rule. I will return to that question later in these reasons. [ 8 ] I am advised the plaintiff did not examine for discovery a representative of Overstock in that capacity.

The allegations in the Overstock action are that on the Deep Capture website the plaintiff has been repeatedly defamed in a series of what are called “chapters” with the title "The Miscreants' Global Bust-Out." [ 9 ] Overstock is alleged to be vicariously liable for the defamation and libel as a publisher.

In particular it is alleged in para. 15 of the notice of civil claim in the Overstock action that Patrick Byrne is the publisher of the Deep Capture website and carries out that role within and in conjunction with his activities as chief executive officer of Overstock and therefore Overstock is a publisher and vicariously liable for the alleged misconduct of Deep Capture LLC. [ 10 ] In para. 5 of the notice of civil claim in the Overstock action the defendant Bagley is alleged to be an employee or contractor with Overstock and that at relevant times in the course of his duties with Overstock and as a publisher, as the plaintiff alleges, of all expression contained in the Deep Capture website. [ 11 ] Para. 16 of the notice of civil claim in the Overstock action alleges Mr.

Bagley carried out his role as publisher of the Deep Capture website within or in conjunction with his role as an employee of Overstock, and thus Overstock is vicariously liable for the alleged misconduct of Deep Capture LLC. [ 12 ] Para. 17 in the notice of civil claim in the Overstock action alleges the resources of Overstock have been used in the publication of the Deep Capture website, which is alleged to be a further basis for the liability of Overstock for the conduct of Deep Capture. [ 13 ] Overstock acknowledges that the plaintiff has proven certain publications by the defendant Deep Capture and acknowledges the plaintiff has proven the defendant Patrick Byrne in the Deep Capture action is the owner of Deep Capture LLC. but submits the plaintiff's case against it lacks any evidence that could lead to liability for Overstock as alleged in the Overstock action. [ 14 ] Overstock submits that neither the plaintiff himself nor any of his witnesses who gave viva voce evidence testified to facts or introduced documents which support the allegations of Overstock's liability.

If that submission is correct Overstock submits the action against it must now be dismissed. [ 15 ] The question to be decided on the present application is whether there is any evidence offered in the plaintiff's case on which a properly instructed jury or a judge performing the fact-finding role of a jury could reasonably base a finding of liability against Overstock. [ 16 ] In Maughan v. UBC , 2008 BCSC 14 , Mr.

Justice Cullen as he then was, reviewed the authorities governing a no-evidence motion and wrote the following at para. 21 of his reasons: [21] I conclude therefore that in considering the no evidence motion in this case, I am obliged in the case of elements of the torts being advanced which are supported by direct evidence, not to weigh the evidence, but only to consider whether it meets a threshold of reasonableness such that a properly instructed jury could make the requisite finding.

In the case of elements supported solely by circumstantial evidence, on the other hand, I am obliged to engage in a limited weighing of the evidence to ensure that it is reasonably capable of bridging the inferential gap between the evidence proffered and the element to be proved. [ 17 ] In Maughan v. University of British Columbia, 2009 BCCA 447 , the conclusion of Mr. Justice Cullen was upheld. In reasons recently handed down by the Court of Appeal in Brule v.

Rutledge , 2015 BCCA 25 , the Court reiterated its approval of the analysis in Maughan and emphasized that the role of a trial judge is not to weigh the evidence but to determine as a matter of law whether there is any evidence that can support the claim. [ 18 ] A no-evidence motion is to be approached with caution in a trial with multiple defendants because of the prejudice the remaining defendants may suffer through the loss of the ability to apportion fault. In Craigdarloch Holdings Ltd. v. Syscon Justice Systems Canada Ltd. , 2010 BCSC 46 , Mr.

Justice Hinkson, as he then was, considered the authorities when an application is made for a non-suit in a trial involving multiple defendants. At para. 27 of the reasons the following is found:

[27] Additional case law sheds some light on the issue of whether or not one defendant can be successful in seeking a non-suit wherethere are multiple defendants. In Diamond Willow Ranch Ltd. v. Oliver, [1987] B.C.J. No. 2973 [Diamond Willow], Davies J. concludedthe following: I considered firstly the question of whether one defendant can succeed on non-suit when there is more than one defendant in an action. In Ayer Mountain Estates Ltd. v.

McElhanney Surveying and Engineering (1978), (BC SC), 7 B.C.L.R. 310, my brotherLegg held that in an action with more than one defendant, non-suit should only be granted if it can be granted to all defendants. Hisreasoning was that it would be unfair to release a defendant even though no case could be made against it for to do so may preventanother defendant claiming degrees of fault amongst the defendants pursuant to the Negligence Act. I should say that from my review ofthe authorities which included the dissent of Craig, J.A. in Funk v. Clapp, [1986] B.C.J.

No. 122 (February 1986, B.C.C.A.), I haveconcluded that non-suit may be granted to one defendant at the close of the plaintiff's case but only where, 1. There is no possibility of liability against the defendant, and; 2. No possibility of a claim for apportionment of fault under the Negligence Act by the remaining defendant or defendants. [19] At para. 28 Mr. Justice Hinkson observed that Diamond Willow was subsequently applied in Knight’s Mineral Exploration &Company Ltd. Partnership v. Corcoran & Co. Partnership, [1994] B.C.J. No. 92, where Mr.

Justice Cohen commented at para. 30: 30 In light of the above evidence, there is no basis upon which I can find that the plaintiff has met the onus on it to prove itsallegations of reliance upon Mr. Krueckl. While, the general rule is that where there are multiple defendants a non-suit should not begranted in favour of one of them, I think Mr. Krueckl's application falls within the exception to the general rule set out in DiamondWillow Ranch Ltd. v. The Municipality of the Village of Oliver et al., [1987] B.C.J. No. 2973 (December l8, l987), Vancouver C96l93l(B.C.S.C.).

The plaintiff has failed to establish the key element of its claim against Mr. Krueckl, and I can see no prejudice to the otherdefendants in granting his application. Therefore, fairness dictates that Mr. Krueckl's application be allowed. [20] The plaintiff before me submits this is an instance where the multiple-defendants rule ought to apply to defeat the non-suitapplication. The plaintiff also refers to Semenoff Estate v. Bridgeman, 2013 BCSC 1022, in which a third party moved for a non-suit.

Para. 58 of those reasons reads: [58] There is case law that prevents a party from invoking a non suit where there are several defendants and the results of that non suitwould not effectively dispose of all issues between defendants: see Ayer Mountain Estates Ltd. v. McElhanney Surveying & EngineeringLtd. (1978), (BC SC), 7 B.C.L.R. 310, Hunt v. MacLeod Construction Co., (SCC), [1958] S.C.R. 737,Craigdarloch Holdings Ltd. v. Syscon Justice Systems Canada Ltd., 2010 BCSC 46, Smith v. Matsqui (1986), (BCSC), 4 B.C.L.R. (2d) 342. In Oh. v.

Usher, 2009 BCSC 1888. [21] The plaintiff also refers to Westbank Indian Band v. Tomat (1992), (BC CA), 63 BCLR (2d) 273 (C.A.),where the Court of Appeal ordered a new trial in a defamation action. The plaintiff submits that the Court observed that damage awardsin defamation cases involving multiple plaintiffs must take into account the conduct and degree of involvement of each plaintiff. [22] That in my view is not controversial but does not create an impediment for a judge to decide a non-suit application of the typebrought by the defendant Overstock involving several defendants.

If one defendant succeeds in having the action dismissed against itthat does not prevent me on this trial, if liability is found against remaining defendants from assessing damages against those defendantswho are found liable according to the degree of their participation in the tortious conduct. [23] The plaintiff also draws my attention to the Libel and Slander Act, R.S.B.C. 1996, c. 263, which at s. 16 reads under theheading "Verdict, damages and costs in consolidated actions":

(1) In a consolidated action under

section 15, the court or jury must assess the whole amount of the damages, if any, in one sum, but aseparate verdict must be taken for or against each defendant, in the same way as if the actions consolidated had been tried separately.

(2) If the court or jury finds a verdict against the defendant or defendants in more than one of the actions consolidated, they must proceedto apportion the amount of damages that they have found between and against the defendants.

(3) If the court awards costs to the plaintiff, the court must make an order it thinks just for the apportionment of costs between andagainst the defendants. [24] I am not persuaded those sections stand in the way of the application of Overstock.

I will note that the two actions before mewere consolidated by an order dated June 24, 2014, but no steps had been taken by the parties prior to the trial to put the consolidationorder into effect by, for example, preparing a single set of pleadings in a single trial record. [25] The trial proceeded on the basis the actions would be tried together and during the course of the trial the parties consented to anorder de-consolidating the actions.

Irrespective of whether ss. 15 and 16 of the Libel and Slander Act are intended to apply only to a trueconsolidated trial or to multiple actions tried at the same time, in my view, if a defendant in a defamation action with multiple defendantssucceeds in a non-suit application, that would not necessarily prevent the Court from applying the provisions of s. 16 of the Libel andSlander Act if liability is found unless the defendants seek contribution from each other. [26] I am informed that the defendants before me do not intend to make cross claims, and no such claims are pleaded.

As Iunderstand the plaintiff's position, he also submits the remaining defendants in the Overstock action may be motivated to overstate therole of Overstock if the present application succeeds, thus distorting the assessment of damages to the disadvantage of the plaintiff. [27] The removal of Overstock from the action may affect the dynamics of damage assessment in ways that are unpredictable. Iagree those matters are possibilities, but it is for the judge or jury, if there is one in such circumstances, to determine on the evidence thedegree of fault of each of the remaining defendants.

If there is no case against Overstock made out by the plaintiff and no defendant

intends to cast blame on Overstock, as I am told is the case, I do not detect any prejudice to the plaintiff in this trial if the so-calledmultiple defendants rule is not applied to prevent Overstock succeeding on its application. [28] As mentioned above Overstock submits that in the case put forward by the plaintiff the evidence is incapable of establishingOverstock's vicarious liability. Overstock relies on Fullowka v. Pinkerton's of Canada Ltd., 2010 SCC 5, in which Mr.

Justice Cromwellfor the Court held at para. 142: [142] The question of whether vicarious liability should be imposed is approached in three steps. First, the court determines whether theissue is unambiguously determined by the precedents. If not, a further two-part analysis is used to determine if vicarious liability shouldbe imposed in light of its broader policy rationales: Bazley v. Curry, (SCC), [1999] 2 S.C.R. 534, at para. 15; John Doev. Bennett, 2004 SCC 17, [2004] 1 S.C.R. 436, at para. 20.

The plaintiff must show that the relationship between the tortfeasor and theperson against whom liability is sought is sufficiently close and that the wrongful act is sufficiently connected to the conduct authorizedby the party against whom liability is sought: Bennett, at para. 20.

The object of the analysis is to determine whether imposition ofvicarious liability in a particular case will serve the goals of doing so: imposing liability for risks which the enterprise creates or to whichit contributes, encouraging reduction of risk and providing fair and effective compensation: Bennett, at para. 20. [29] In Bazley v.

Curry, (SCC), [1999] 2 S.C.R. 534, referred to in the Fullowka case, Madam Justice McLachlin,as she then was, speaking for the Court at paras. 37 and 41(2) wrote: 37 Underlying the cases holding employers vicariously liable for the unauthorized acts of employees is the idea that employers mayjustly be held liable where the act falls within the ambit of the risk that the employer’s enterprise creates or exacerbates.

Similarly, thepolicy purposes underlying the imposition of vicarious liability on employers are served only where the wrong is so connected with theemployment that it can be said that the employer has introduced the risk of the wrong (and is thereby fairly and usefully charged with itsmanagement and minimization).

The question in each case is whether there is a connection or nexus between the employment enterpriseand that wrong that justifies imposition of vicarious liability on the employer for the wrong, in terms of fair allocation of theconsequences of the risk and/or deterrence. 41 Reviewing the jurisprudence, and considering the policy issues involved, I conclude that in determining whether an employer isvicariously liable for an employee’s unauthorized, intentional wrong in cases where precedent is inconclusive, courts should be guidedby the following principles: …

(2) The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer to justify theimposition of vicarious liability. Vicarious liability is generally appropriate where there is a significant connection between the creationor enhancement of a risk and the wrong that accrues therefrom, even if unrelated to the employer’s desires. Where this is so, vicariousliability will serve the policy considerations of provision of an adequate and just remedy and deterrence. Incidental connections to theemployment enterprise, like time and place (without more), will not suffice.

Once engaged in a particular business, it is fair that anemployer be made to pay the generally foreseeable costs of that business. In contrast, to impose liability for costs unrelated to the riskwould effectively make the employer an involuntary insurer. [30] Overstock submits that the law of vicarious liability in this context is articulated in Brown on Defamation, loose-leaf edition(Carswell, 1994) at 18-176 and is clear.

It reads: If there is nothing to show that a servant is doing anything relating to his or her employment or acting within the scope of employment amaster is not vicariously liable for the servant's defamatory statement.

On the other hand liability on the part of the master may beimposed where he expressly directs the servant to publish the defamatory statement or the servant is acting in the course of hisemployment and within the scope of his authority or the principal has subsequently adopted and ratified the acts of the servant. [31] And at page 7-26 and 7-27 these words are found: Nor is it sufficient merely to show that the defendant contributed the background information for the

article that was written or that hisoffice was used to compose a piece written by someone else or that his employees were used to deliver it to a newspaper for publication. To be responsible a person must knowingly be involved in the process of publishing the relevant words. The defendant must beconscious of the fact that he or she is publishing a defamation. There must be some affirmative act on the part of the defendant whichdemonstrates that he or she directed or participated in the publication.

It is not enough that a person merely plays a passive instrumentalrole in the process. [32] Overstock submits there is no evidence admissible against the defendants Byrne, Bagley and Karpak, the last was never served,that any of them published the alleged defamatory words while in the course of or within the scope of their employment with Overstockor that Overstock contributed to the risk of the publication of the defamatory words on a website it did not own. [33] The plaintiff relies on the Bazley case, which the plaintiff submits has broadened the scope of the factors for a court to considerwhen there is an allegation of vicarious liability, and the plaintiff submits that that consideration should lead to caution in addressing thepresent non-suit application. [34] I agree the Supreme Court of Canada in Bazley articulated a more principled and nuanced approach that has been applied insome of the older cases, and I have taken that into account when considering these reasons. [35] If I conclude Overstock's application is correct and that there is no admissible evidence against it, the plaintiff proposes twoalternatives.

The first is to relax the constraints of Rule 12-5(46), which makes the examination for discovery evidence admissible onlyagainst the adverse party who is examined. The second proposed alternative is to allow the plaintiff to reopen the trial to permit him toemploy the adverse witness rule to cross-examine some or all of the individual defendants to obtain the evidence against Overstockwhich now may be lacking because of the constraints of Rule 12-5(46).

[36] The plaintiff's position as I understand it is there can be no surprise for Overstock about the evidence that the plaintiff wants toput before the court. It is found, in the examination for discovery read-ins of Messrs. Bagley, Mitchell and Byrne, and the documentsthey each identify. [37] There are at least two problems I foresee may arise if Rule 12-5(46) is relaxed. One arises from the fact that none of theexaminations were conducted or defended on the basis that the witnesses were testifying for Overstock.

I have no means of knowingwhether counsel acting for Overstock would have approached the defence of the examination for discovery differently if a person,perhaps Mr. Byrne or someone else, had been examined as a representative of Overstock, whose evidence would be binding onOverstock. I do not know if someone other than Mr. Byrne had been put forward as Overstock's representative to be examined, if thatperson would have been more knowledgeable about some matters in which he or she was examined. I expect the answer is probably not,but I cannot be certain.

The prejudice to Overstock in now finding itself bound by a large number of answers given on discovery in asomewhat different context cannot now be determined. [38] The second concern I have with relaxing Rule 12-5(46) is the implications for the trial so far if that should happen. If counselfor Overstock had known that the evidence given on the discovery of Messrs.

Bagley, Mitchell and Byrne was the evidence ofOverstock, would he have avoided cross-examining the plaintiff's witnesses as he has so far done on this trial? [39] That consideration applies with even greater force if the trial is reopened to permit the plaintiff to cross-examine the witnesseswho are examined for discovery. It cannot be known in advance with precision what their evidence would be if that was permitted. Perhaps counsel for Overstock would then seek to recall the plaintiff.

We would thus risk abandoning an orderly trial. [40] In my view, if the examination for discovery evidence that has been read in is entirely excluded from consideration in the casebefore Overstock, the non-suit application must succeed. [41] Overstock submits that even if Rule 12-5(46) was relaxed to permit that evidence to be received against Overstock, there wouldstill be no evidence on which a jury could reasonably find liability. I do not agree. Exhibit 25 is a binder containing 22 exhibits markedon the examinations for discovery of Mr. Byrne, Mr. Mitchell and Mr. Bagley. Exhibit 1 from the discovery of Mr.

Byrne is found at thefirst tab of Exhibit 25 on the trial. It is an e-mail from Patrick Byrne sent from the e-mail address pbyrne@overstock.com to MarkMitchell. The subject line reads through page 70, and attached to the e-mail is a 233-page document entitled "The Miscreants' Ball andthe Global Bust-Out Investigating the Financial Underworld of Destructive Financial Crime,

Chapter 1, Was the United States Attackedby Financial Terrorists?" [42] The document appears to be an edited version of at least some of the published defamatory words of which the plaintiffcomplains.

At page 32, for example, there are these words: Nazerali dabbled in arms dealing, delivering weapons to war zones in Africa and to the mujahedeen in Afghanistan, but his primary lineof business in the early 1980s was his Mafia brokerage, First Commerce Securities, which soon became an important component of theBCCI syndicate. [43] There are other portions of the text of the attachment to the e-mail which are very similar and perhaps identical to the allegeddefamatory publications.

In my opinion if that e-mail and its attachment was put before a jury it could reasonably conclude there wasevidence to support the plaintiff's case against Overstock. [44] I make no comment on the weight to attach to that evidence. At this stage of the trial I find only that it is evidence that could goto a jury. However, it is not evidence against Overstock because of the constraints of Rule 12-5(46). [45] Nevertheless, a trial is a search for the truth. The object of the rules is to determine cases on their merits.

In this instance toapply Rule 12-5(46) rigorously in my opinion would thwart the search for truth and may lead to an outcome which has little to do withthe merits of the plaintiff's case. As I have said the evidence found at tab 1 of Exhibit 25 is obviously no surprise to Overstock. [46] Can Rule 12-5(46) be relaxed? The plaintiff brings Le Soleil Hotel & Suites Ltd. v. Le Soleil Management Inc., 2009 BCSC1303, to my attention.

At paras. 47 and 48 Madam Justice Dickson made the following observations: [47] The viva voce testimony of Dato Chee, Deborah Chang and Michael Tham and the Documents are plainly admissible evidenceagainst all of the defendants. As a general rule, however, admissions made in the course of examinations for discovery are admissibleagainst only the party who made them: Bower v. Cominco (1998), (BC SC), 53 B.C.L.R. (3d) 322 (S.C.).

Accordingly, the discovery evidence read-in by the plaintiffs would typically be admissible against only the individual defendantinvolved. [48] An exception to the general rule may arise where the admitting party has a common or identical interest with other defendants. In particular, where parties have a community of joint interest in the conduct of their business affairs and associated litigation to theextent one may fairly be characterised as representing the others that party’s admissions on discovery may be used as evidence againstthe others: Tri-Con Concrete Finishing Co. v. Caravaggio, [2002] O.J.

No. 2771 (Q.L.) (Ont. Sup.Ct.). Such circumstances areunusual, however, and, in the absence of express agreement, should only be found where the independent evidence of commonality isabundantly clear. [47] I accept that in the present instance there is a common interest among the defendants that provides for the exception to thegeneral rule which would exclude the discovery evidence. Nevertheless, I am not prepared to receive all of the evidence read in by theplaintiff as evidence against Overstock.

I have already commented on the difficulties that may impose if it occurred. [48] I am, however, prepared to admit the document at tab 1 of Exhibit 25, and it will become evidence at large. Having receivedthat document, there is evidence which as I have already commented could go to a jury on the question of Overstock's liability. Thenon-suit application is dismissed on that basis.

“Affleck J.”