IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Nazerali v. Mitchell, 2012 BCSC 205 Date: 20120209 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 Before: The Honourable Madam Justice Ross

Reasons for Judgment

Counsel for the Plaintiff: Counsel for the Defendants: Place and Date of Hearing: Place and Date of Judgment: Daniel W. Burnett Roger D. McConchie Vancouver, B.C. January 16, 2012 Vancouver, B.C. February 9, 2012

Nazerali v. Mitchell Introduction [1]

Page 2

This is an application by the defendants Mark Mitchell, Patrick Byrne, Deep

Capture LLC (DeepCapture) and High Plains Investments LLC (High Plains), for an order striking out the amended notice of civil claim filed December 2, 2011 or dismissing or staying the proceeding, on the ground that the notice of civil claim does not allege facts that, if true, would establish that the court has jurisdiction over the applicants or any of them in respect of the claims made against them in the proceeding. [2] The action is a defamation action brought by the plaintiff, Altaf Nazerali, who

is a businessman residing in Vancouver, British Columbia. The defendants collectively bringing this application are resident in the United States. The essence of the defendants application is that the pleadings, even as supplemented by the supporting affidavits, do not establish publication in British Columbia of the material at issue, as there is neither an allegation nor evidence that anyone in the province read the words that are alleged to be defamatory. Facts [3] The plaintiff commenced this proceeding by filing a notice of civil claim in

Form 1 on October 19, 2011 together with, inter alia, the first and second affidavits of the plaintiff made on October 7, 2011 and October 19, 2011. [4] On October 29, 2011, the plaintiffs solicitors sent a letter dated October 28,

2011 to DeepCapture together with, inter alia, a copy of the notice of civil claim. The letter did not enclose an endorsement in Form 11 stating the circumstances enumerated in s.10 of the Court Jurisdiction and Proceedings Transfer Act on which it is claimed that service of the notice of civil claim is permitted under Rule 4-5 of the Supreme Court Civil Rules. This letter was received by DeepCapture in Salt Lake City, Utah on or about November 4, 2011. [5] The defendant Mitchell was personally served on November 4, 2011 in

Evanston, Illinois with a letter from the plaintiffs solicitors dated October 28, 2011,

Nazerali v. Mitchell

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together with, inter alia, a copy of the notice of civil claim. Mitchell did not receive an endorsement in Form 11. [6] None of the individual or company defendants bringing this application are, or

have been, ordinarily resident in British Columbia. Neither company was incorporated in British Columbia. Neither company nor the individuals ever carried on any business in British Columbia. [7] 108. [8] On December 2, 2011, the plaintiff filed an amended notice of civil claim in On December 2, 2011, the defendants filed jurisdictional responses in Form

Form 1 purportedly pursuant to Rule 6-1(1)(a)(i). The plaintiff embedded a Form 11 endorsement into page 12 of the Form 1 amended notice of civil claim. [9] On December 2, 2011, the plaintiff also filed the first affidavit of Nelson

Skalbania, the first affidavit of John Thompson, and the first affidavit of Sam Hirji, all made that day. [10] The notice of civil claim contains the following allegations:
The deepcapture.com website is a frequently expanding website containing articles, often authored by the defendants Mark Mitchell or Patrick Byrne, which claim to expose wrongdoing and unsavoury individuals in the stock and financial markets. The website includes 21 chapters authored primarily by Mark Mitchell. The applicant is referred to in all but 5 of the 21 chapters published on www.deepcapture.com. The said chapters are gravely defamatory and false. Particulars of the defamatory publications are the following passages, and repetitions of the same or virtually identical statements appearing in other chapters on www.deepcapture.com (the Defamatory Statements). ... In their natural and ordinary meaning, the Defamatory Statements meant and were understood to mean that the plaintiff is a criminal, arms dealer, drug dealer, terrorist, fraud artist, gangster, mobster, member of the mafia, dishonest, dangerous and not to be trusted. The Defamatory Statements were motivated by express malice of the defendants Mitchell and Byrne, arising from the known publication of falsehoods, continued publication of falsehoods after notification of their falsity, and the treatment of the plaintiff as an enemy in the campaign led by

Nazerali v. Mitchell
Byrne and Mitchell to seek revenge on people they believe, falsely in the case of the Plaintiff, to have engaged in illegal short selling.

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[11]

The following affidavits were filed by the plaintiff: (a) Sam Hirji, a businessperson who resides in Vancouver, deposed that:
In late August 2011, I was researching on the Internet for news about the public company, and I found various links to www.deepcapture.com. I went to the www.deepcapture.com website and read some of the statements published there. I was shocked to see Mr. Nazerali described on www.deepcapture.com in very negative terms, in particular I remember reading statements that Mr. Nazerali was using his Aga Khan development work as a cover for nefarious activities with various terrorist organizations in central Asia, and references to Mr. Nazerali as a stock manipulator and fraudster.

(b)

Nelson Skalbania, a businessperson who resides in Vancouver,

deposed that:
In late August 2011, a prominent restaurant owner and businessman in Vancouver told me about a website that he said he learned about from his clients. I went to the website, www.deepcapture.com and I was amazed to see references to Mr. Nazerali, connecting him with terrorist organizations, Moammar Gadhafi and Al-Qaeda.

(c) that:

John Thompson, a stock broker who resides in Vancouver, deposed

In late August 2011 and early September 2011, a friend and client alerted me to a website called www.deepcapture.com. I went to that website and I was dismayed to read statements suggesting that Aly Nazerali had connections with the Mafia, Al-Qaeda, Taliban and other nefarious connections.

Jurisdiction Simpliciter [12] The approach to be taken by the court when faced with a question of disputed

jurisdiction was described by Mr. Justice Smith in Roth v. Interlock Services, Inc., 2004 BCCA 407 at para. 15, as follows:
The correct approach to the question of jurisdiction simpliciter is outlined in two decisions of this Court which were pronounced the same day: Furlan v. Shell Oil Co. (2000), 77 B.C.L.R. (3d) 35, 2000 BCCA 404 at paras. 14-16, leave to appeal to S.C.C. refused, [2000] S.C.C.A. No. 476 (Q.L.), and AG Armeno Mines and Minerals Inc. v. PT Pukuafu Indah (2000), 77 B.C.L.R. (3d) 1, 2000 BCCA 405 at paras. 14, 19. The first step is to examine the

Nazerali v. Mitchell

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plaintiff's pleading to determine whether it alleges "jurisdictional" facts sufficient to establish a real and substantial connection to the defendant or to the cause of action. Affidavit evidence of facts relevant to jurisdiction simpliciter is admissible when the facts are not alleged in the plaintiff's pleading because they are not material facts, or when they are, are not particularized in the pleading in sufficient detail to enable determination of the issue. If those unpleaded jurisdictional facts are contentious, the plaintiff bears the burden of showing a good arguable case that they can be established. Affidavit evidence is also admissible for the purpose of demonstrating that the plaintiff's claim is tenuous and without merit. In that situation, the plaintiff must show a good arguable case.

Also see Purple Echo Productions, Inc. v. KCTS Television, 2008 BCCA 85. [13] The first step, therefore, will be to address the sufficiency of the plaintiffs

pleadings. Is the Pleading of Publication Sufficient? [14] This application is brought pursuant to both Rule 21-8(1)(a) and Rule 21-

(8)(1)(b) which provide:

Disputed Jurisdiction (1) A party who has been served with an originating pleading or petition in a proceeding, whether that service was effected in or outside British Columbia, may, after filing a jurisdictional response in Form 108, (a) apply to strike out the notice of civil claim ... or to dismiss or stay the proceeding on the ground that the notice of civil claim ... does not allege facts that, if true, would establish that the court has jurisdiction over that party in respect of the claim made against that party in the proceeding, (b) apply to dismiss or stay the proceeding on the ground that the court does not have jurisdiction over that party in respect of the claim made against that party in the proceeding...

[15]

The defendants submit that the amended notice of civil claim does not allege

a cause of action in defamation. In particular, with respect to publication, it does not allege: (i) that any of the expression alleged to be defamatory was published to anyone in British Columbia; or (ii) that anyone in British Columbia has downloaded or read any of the expression alleged to be defamatory.

Nazerali v. Mitchell [16]

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Publication is an essential element that must be proved in a defamation claim.

As Madam Justice Abella stated in Crookes v. Newton, 2011 SCC 47 at para. 1 [Crookes]:
To succeed in an action for defamation, the plaintiff must prove on a balance of probabilities that the defamatory words were published, that is, that they were "communicated to at least one person other than the plaintiff" (Grant v. Torstar Corp., 2009 SCC 61, [2009] 3 S.C.R. 640, at para. 28).

[17]

In the specific context of an internet defamation claim, the publication takes

place and the tort is committed whenever and wherever a third party downloads or views the defamatory words from the website, as noted by Mr. Justice Campbell in Elfarnawani v. International Olympic Committee, 2011 ONSC 6784 at para. 31 [Elfarnawani]:
In cases where it is alleged that the defamatory material was posted on an internet website, the necessary "publication" takes place whenever and wherever a third party downloads or views the impugned material from the website. This is where the plaintiff's reputation is damaged, and this is where the tort of defamation is committed. See: Braintech Inc. v. Kostiuk, [1999] B.C.J. No. 622 (C.A.) at para. 58-63; Dow Jones Co. Inc. v. Gutnick (2002), 194 Aust.L.R. 433 (H.C.) at para. 44...The necessary "publication" may also occur in any particular location that appears to have been specifically "targeted" by the posting of the allegedly defamatory material. See: Black v. Breeden (2010), 102 O.R. (3d) 748 (C.A.) at para. 32-42...

[18]

As Abella J. noted in Crookes at para. 14, in the case of material posted on

the internet, there is no deemed publication:

In British Columbia, pursuant to the Libel and Slander Act, R.S.B.C. 1996, c. 263, publication is deemed to have occurred in certain situations. There is, however, no such presumption in relation to material published on the Internet.

[19]

Accordingly, pleadings in defamation actions concerning material posted on

the internet require an allegation that the allegedly defamatory posting was communicated to a third person in British Columbia. [20] Madam Justice Stromberg-Stein dealt with this specific issue in Crookes v.

Yahoo, 2007 BCSC 1325, affirmed 2008 BCCA 165 [Yahoo]. In that case the defendant, which was incorporated in the state of Delaware with its head office in

Nazerali v. Mitchell

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California, sought to have the action dismissed on the ground that the court lacked jurisdiction. Stromberg-Stein J. granted the application on the basis that the plaintiff had neither pleaded nor provided evidence of publication in the province of British Columbia, stating at paras. 26-31:
With respect to internet communications, the site of the alleged defamation is where the damage to reputation occurs: Dow Jones Co. Inc. v. Gutnick, (2002), 194 Aust. L.R. 433 (H.C.); Barrick Gold Corp. v. Blanchard and Co., [2003] O.J. No. 5817 (S.C.). It is when a person downloads the impugned material from the Internet that the damage to the reputation may be done, and it is at that time and place that the tort of defamation is committed. In Burke, Mr. Justice Burnyeat held that defamatory statements published on an internet site, on a server located outside British Columbia, but accessed and read by someone in British Columbia, will constitute a proceeding founded on a tort in British Columbia. Yahoo is a foreign defendant with no ties to British Columbia. In order for this court to assume jurisdiction over Yahoo, there must be a real and substantial connection between the cause of action against Yahoo and British Columbia. In other words, the alleged defamation must have been committed in British Columbia. Mr. Crookes must show that alleged defamatory postings on the GPCMembers website, hosted by Yahoo on servers outside British Columbia, were accessed, downloaded and read by someone in British Columbia, thereby damaging his reputation in British Columbia. Mr. Crookes has neither alleged nor tendered any evidence that any individual in British Columbia has downloaded and read the impugned material posted on the GPC-Members website. Publication is an essential element for an action in defamation. In this case, the pleadings are deficient as there is no pleading alleging the purported defamatory postings were published in British Columbia; that is, communicated to a third person: Braintech Inc. v. Kostiuk, [1999] B.C.J. No. 622, 1999 BCCA 169. There is no evidence anyone read the material in British Columbia and there is no basis for this court to draw that inference. As such, there is no basis to find s. 10(g) of the CJPTA applicable, that the proceeding concerns a tort committed in British Columbia. I agree with Yahoo that no tort has been committed in British Columbia and no damages have occurred in British Columbia. As such, there is no basis for this court to assume jurisdiction over Yahoo. I would dismiss the action as against Yahoo with costs.

Also see Elfarnawani at paras. 28-36. [21] The plaintiff submits that using the word publication necessarily implies that

the material posted on the website was read by someone within the province. In my view that submission is inconsistent with the holding in Yahoo. I find that the notice

Nazerali v. Mitchell of civil claim in the present case has the same deficiency as that found by

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Stromberg-Stein J. in Yahoo in that it does not contain an allegation that anyone in British Columbia either downloaded or read the defamatory words from the website. Does the Evidence Cure the Deficiency? [22] The plaintiff submits that the affidavits filed, combined with the pleading,

sufficiently establish a good arguable case of publication of the Defamatory Statements in the province. The defendants submit that even with the affidavit evidence, an arguable case of publication has not been made out because none of the deponents assert that they read the allegedly Defamatory Statements. Counsel submits that the court cannot infer that the deponents read the Defamatory Statements from their statements that they visited the website in question because only portions of the website have been alleged to be defamatory. Counsel notes that the website at issue includes 21 chapters, only portions of which are particularized in the notice of civil claim as the Defamatory Statements. [23] It is the case that none of the deponents state that they read or downloaded

the allegedly Defamatory Statements on or from the website. However, paragraph 13 of the notice of civil claim alleged that the natural and ordinary meaning of the Defamatory Statements is that the plaintiff is:
...a criminal, arms dealer, drug dealer, terrorist, fraud artist, gangster, mobster, member of the mafia, dishonest, dangerous and not to be trusted.

[24]

Mr. Hirji deposed that he recalled reading statements on the website saying

that Mr. Nazerali was involved in nefarious activities with terrorist organizations and references to him as a stock manipulator and fraudster. Mr. Skalbania deposed that he saw references on the website to Mr. Nazerali connecting him with terrorist organizations, Moammar Gadhafi and Al-Qaeda. Mr. Thompson deposed that he read statements on the website suggesting that Mr. Nazerali had connections with the Mafia, Al-Qaeda, the Taliban and other nefarious connections. These suggestions reflect the very derogatory meanings alleged in the notice of civil claim.

Nazerali v. Mitchell [25]

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In Gaskin v. Retail Credit Co., [1965] S.C.R. 297, Mr. Justice Ritchie, for the

majority, commented on the test for publication at trial as follows at p. 300:

In my opinion, however, the general principle is correctly stated in Gatley on Libel and Slander, at p. 89, where it is said: It is not necessary for the plaintiff in every case to prove directly that the words complained of were brought to the actual knowledge of some third person. If he proves facts from which it can reasonably be inferred that the words were brought to the knowledge of some third person, he will establish a prima facie case.

[26]

For the purposes of this application, the plaintiff need only establish a good

arguable case. That phrase has been considered by the Court of Appeal in AG Armeno Mines and Minerals Inc. v. Newmont Gold Co., 2000 BCCA 405, Mr. Justice Mackenzie, for the court, stated at para. 25:
The phrase "a good arguable case" is a common expression but its interpretation has not always been uniform. The Alberta Court of Appeal has cautioned that a plaintiff may often find it difficult to prove facts at this stage that may easily be proven after production of documents or oral examination at a later stage of the proceedings: see Nova, an Alberta Corporation v. Grove (1982), 140 D.L.R. (3d) 527 at p. 531. I agree that it would be unfair to impose too heavy an evidentiary burden on a plaintiff at such an early stage of litigation, when there has been no opportunity for discovery. In my respectful view the explanation of a good arguable case given by Steele J. in Ecolab Ltd. v. Greenspace Services Ltd. (1998), 38 O.R. (3d) 145 (Div. Ct.) is apt. He said (at p. 153): The court must not blindly accept the plaintiff's assertion that there is a cause of action. . . . The court itself must decide whether or not a proper cause of action has been alleged. . .[T]he threshold test is low. A "good arguable case" is no higher than a "serious question to be tried" or a "genuine issue" or "with some chance of success". The issue in Ecolab was decided on the pleadings without evidence but I think that the description is equally applicable where both pleadings and evidence are involved. The descriptive words may be largely "a question of semantics", as Steele J. commented. However, the cases in which the issues arise are likely to be so varied as to elude capture by any more precise language.

[27]

While the deponents do not say that they read the Defamatory Statements, I

have concluded that the affidavits, combined with the notice of civil claim, provide a sufficient basis for the court to infer that the Defamatory Statements were published

Nazerali v. Mitchell in the province of British Columbia, in that they were downloaded or read by someone in the province. [28]

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The plaintiff has met the burden to establish an arguable case that a tort has

been committed in British Columbia. Accordingly, the defendants application is dismissed.

Ross J.