The Risks of Defamation in the Condominium Setting

A recent court case highlights the unique risks of defamation in the condominium setting. It also notes the special defamation defence that can be available to a condominium director.

In the case of Wan v Lau, Mr. Lau was seeking election to the condominium’s board. He sought proxies for two units that were owned by the Huang family corporation. One of the family members, Mr. Huang, signed a proxy (for the Huang family units) in favour of electing Mr. Lau. However, at the meeting, another attendee (Ms. Chiu) produced a “competing proxy” for the same units, in favour of electing a different candidate. The competing proxy was signed by Mrs. Huang. Ms. Chiu said that the proxy had been supplied to her by Mr. Wan.

The Manager contacted Mr. Huang by telephone. Mr. Huang confirmed the proxies that he had provided to Mr. Lau. Mrs. Huang was out of the country, and it wasn’t possible to reach her to confirm her competing proxy. Therefore, the proxy provided to Mr. Lau was accepted; and the proxy provided to Ms Chiu was rejected.

Mr. Lau was elected at the meeting.

After the meeting, Mr. Lau met with Mr. Huang about the competing proxy (signed by Mrs. Huang). The Court describes the meeting as follows:

Mr Huang examined the proxy and said that the signature appeared to be his wife’s. However, he was adamant that the signature could not be genuine. To his knowledge, his wife was in Hong Kong and knew nothing about the AGM. To his knowledge, his wife knew no one named “Margaret” or “Howard”.

Mr Lau asked Mr Huang to call his wife to confirm these things. Mr Huang refused. In his view there was no need. The signature could not possibly be genuine. How dare “these people” have the audacity to forge his wife’s signature? They could just as easily forge her signature on a deed selling the properties!

Mr. Lau then wrote an email to fourteen persons (including other board members, members of management and certain owners), in which he said that the competing proxy was a forgery. As it turned out, this was not the case. Mrs. Huang had in fact signed the proxy provided to Mr. Wan!

When Mr. Lau learned the truth, he immediately sent a “retraction email” in which he corrected the false statements in his earlier email and said: “If this matter has caused damage or loss to anyone, I will do my best to compensate!”.

The Court said that Mr. Lau’s first email was clearly false and defamatory of Mr. Wan. However, the Court said that Mr. Lau was not liable to Mr. Wan because of the defence of “qualified privilege”. This defence is available to any person (like a corporate director) who has a duty to report to others. The defence applies to any communication that is properly part of the person’s reporting function, as long as the report is made without malice and relates to a matter falling within the interests of the overall organization.

Here’s what the Court said:

Mr Lau was a candidate in the election for which the proxy was obtained from Mrs Huang. He was elected to the board and thus was a director of the condominium corporation at the time of his conversation with Mr. Huang. And he was also a unitholder in the condominium corporation. All three of these circumstances were sufficient to give rise to a legitimate interest to report his conversations with Mr Huang to the board of directors and/or to management of the condominium corporation. I would go further and also conclude that Mr Lau had an interest in communicating these matters to other unitholders in the condominium corporation. These communications would have, as their underlying legitimate purposes, identifying a need for further investigation into Mr Huang’s allegations that the proxy was a forgery. The directors, management, and all unitholders, had a legitimate interest in knowing that a unitholder was alleging fundamental misconduct in the conduct of condominium affairs.

So, in summary, the defence of qualified privilege (as in this case) may protect a condominium director even in the event of a truly false and defamatory statement by that director; but the key is that the reporting must be justified and without malice.

One last thing: the Court said that Mr. Lau’s “retraction letter” was only “partially effective” because it did not include specific mention of Mr. Wan’s name. The Court said:

The substance of the retraction is that the misconduct alleged by the impugned words never took place. In my view, this is a complete retraction of the impugned words. That said, I agree with Mr Wan that the Retraction should have mentioned Mr Wan by name and expressly said that he had done no wrong, contrary to what had been suggested in the impugned words. I find that the Retraction is effective, but not 100% effective, in eliminating the damage caused by the impugned words. Thus, had I found Mr Lau liable, I would have discounted the damages arising from the defamatory publication by 80% because of the swift publication of the Retraction.

So the lesson here is: Condominium Directors do have certain protections when it comes to defamation. But it’s still always best to carefully check the accuracy of a planned publication before pressing the “send” button!