Defamation is generally not, in the minds of most in-house counsel, a corporate problem. It seems like legal area that belongs to a different world — that of media companies, publishers, social media platforms, politicians, public figures. It is the tort of the newsroom and the tabloid, not the boardroom.
That assumption is wrong. And it can be costly.
Defamation claims arising from ordinary corporate activity are a consistent and growing feature of commercial litigation in Canada. The corporations most exposed are often the most surprised, because the risk does not announce itself as a defamation problem. It arrives disguised as a termination letter, an internal investigation report, a board memorandum, a competitive briefing, a sales deck, an internal email or a regulatory disclosure. The statements involved are typically made by competent, well-intentioned people who believed they were protected because what they said was true (or they genuinely believed it to be true), because a privilege attaching to internal communications, or because they acted in good faith. That belief is not always wrong. But it is often incomplete or at least vulnerable to serious legal challenge.
The defences to defamation claims most common in a corporate context — especially justification and qualified privilege — are real and available. But they have conditions and limits that are poorly understood by many lawyers without defamation law expertise. Understanding those limits before the statement is made is what separates a protected communication from potential liability. This article examines three corporate contexts in which that distinction can be critical.
Employment matters, board communications, and internal investigations
This is where corporate defamation exposure is both at its highest level and least understood. The reason is not that corporations behave carelessly; it is that they rely on a legal protection — qualified privilege — that is narrower and more fragile than they appreciate.
Qualified privilege protects communications made in the discharge of a legal, moral, or social duty, or in furtherance of a legitimate interest, to a person who has a corresponding duty or interest in receiving them. It is the foundation on which reference calls, internal HR communications, investigation reports, and board memoranda all rest. Without it, the ordinary communications of corporate governance would be unworkable.
But even where the requisite mutual duties or interests exist, qualified privilege does not afford blanket protection. It is defeated by malice. In this context, malice does not require spite or ill will in the colloquial sense. Instead, it means that the dominant purpose of the communication was something other than the legitimate interest the privilege is designed to protect: personal animus, a desire to harm the subject’s reputation beyond what the occasion requires, or recklessness as to whether the statement is true.
Courts infer dominant improper purpose from the tone and content of the communication itself, from surrounding circumstances, and from what emerges in discovery. A termination memo drafted in clinical, factual language rarely gives rise to a viable malice argument. One that editorializes about the departing employee’s motives, character, or integrity is more vulnerable.
Three specific situations warrant attention.
Executive departures and reference calls: Qualified privilege clearly protects a reference call given honestly in response to a legitimate inquiry. What it does not protect is a statement that goes beyond what the privileged occasion requires — for example, volunteering damaging information that was not asked for, characterizing the departure in terms that impute misconduct where the record does not support it, or allowing personal views about the departing executive to colour an otherwise factual account. That means the “stray comment” problem is real: statements made informally — in a hallway, on a call with a board member, in a message platform — can fall outside the privilege entirely if they are not necessary to the discharge of a recognized duty or to a legitimate interest.
Internal complaints and HR investigations: Conduct complaints and statements made during an investigation — in interview notes, investigation reports, and communications of findings to decision-makers — attract qualified privilege. But the privilege depends on the investigation being conducted in good faith and, critically, on communications being limited to those who need to know. The over-disclosure problem is one of the most common sources of corporate defamation liability: investigation findings shared with the full HR team, with business unit heads who played no role in the matter, or with external parties before the investigation is complete can strip privilege from statements that would otherwise have been protected.
Equally significant is the problem of the written record. Investigation reports that characterize the subject’s conduct in conclusory, editorialized terms — describing it as “dishonest,” “predatory,” or “egregious” where the findings would support a more clinical description — create defamation exposure that could be avoided with more carefully crafted document.
Board communications: Directors and senior management communicate constantly about sensitive matters like the performance of officers, the conduct of fellow directors, governance failures, and personnel decisions. Qualified privilege applies to these communications, but so too does the malice vulnerability.
The specific risk in this context is the ‘dominant purpose’ test: a board communication whose primary purpose is to damage the subject’s reputation rather than to serve a legitimate governance function loses the privilege. This becomes acutely relevant in activist shareholder situations or contested director removals, where communications about an individual’s conduct can become the subject of litigation. Board minutes and committee reports that characterize the conduct of a named individual should be drafted with the same care as investigation reports: factual, specific, and limited to what the record supports. And they should not be shared with anyone who does not truly need to know the information to perform their corporate duties and responsibilities
The practical disciplines that protect qualified privilege across all three of these contexts are consistent: need-to-know distribution (limit circulation to those with a genuine interest in the information), factual rather than characterizing language in written records, and early involvement of outside counsel experienced in the fine points of defamation law before findings are committed to writing or communicated upward. These are not bureaucratic formalities. They are the very conditions upon which the privilege survives.
Competitor disputes and injurious falsehood
Corporations that compete make statements and claims about one another. Marketing materials compare products, track records and customer satisfaction. Sales teams brief clients on why a competitor’s offering falls short. RFP responses characterize the market and the players in it. Competitive intelligence is gathered, analyzed, and circulated internally. In all these situations, statements are made about identifiable companies and, often, about the individuals who lead them.
In this context, two causes of action are in play. Defamation protects reputation — it is actionable where a statement to a third party tends to lower a person or corporation in the estimation of right-thinking members of society. In Canadian law, this is a low bar and falsity of the statement is presumed. The tort of injurious falsehood is a separate cause of action focused on protecting economic interests: it requires a false statement made with malice that causes actual financial loss. The two claims overlap but are not the same, and a sophisticated plaintiff will often plead both — defamation where individual reputation is at stake, injurious falsehood where the target is the corporation’s commercial standing or a specific product or service.
The defence most commonly assumed in this context is justification or ‘truth’. Although falsity of the statements is presumed, justification is a complete defence. The simplified understanding of this defence tends to be: the statement was true, so there is no liability. But justification requires more than technical accuracy of the statements in question. Canadian courts assess the meaning of an alleged defamatory statement as a whole, asking what impression a reasonable reader would take from it in context. A statement that is literally true can still be defamatory — or give rise to injurious falsehood — if the overall impression it conveys is false. For example, a competitive briefing that accurately recites a rival’s project delays while omitting context that would explain them, or that juxtaposes accurate facts in a way that implies a conclusion the facts alone do not support, may not ground a successful truth defence — even if every individual sentence can be sourced.
The point at which exposure arises is publication to a third party. Even internal competitive briefings create risk because they are not guaranteed to stay internal. They can be forwarded, attached to emails, accidentally shared, and occasionally leaked. In-house counsel should ensure that competitive-facing content — particularly materials prepared by sales, marketing, and business development teams — is reviewed not just for technical accuracy, but for the impression it creates. The question to ask is not only “is this true?” but “what would a reasonable reader understand this to mean?”
Shareholder and investor communications
Public corporations face an additional defamation risk that private companies do not, arising from their mandatory disclosure obligations. Where securities law requires a company to disclose information that reflects adversely on an identifiable individual — the misconduct of a named officer, the removal of a director for cause, a material breach by a counterparty — it is making a potentially defamatory statement about that person to the market. The fact that the disclosure is legally required does not automatically insulate the corporation from defamation liability.
A mandatory securities disclosure, made in compliance with applicable requirements, can attract qualified privilege. But the protection depends on the statement being limited to what the duty requires. A disclosure that goes further than the obligation demands, or that characterizes the subject’s conduct in terms stronger than the underlying facts support, may exceed the scope of the privilege and negate the defence. The drafting of reputationally sensitive disclosures is, in this respect, a legal exercise as much as a communications one. It requires the involvement of both securities counsel and litigation counsel with experience in defamation.
The informal channel problem significantly compounds this risk. A mandatory press release prepared with appropriate legal review attracts the duty-based privilege. The same information disclosed by a CEO on a quarterly investor call, or characterized on a personal LinkedIn post, does not. The privilege is tied to the formal discharge of the legal obligation, not to the subject matter of the statement. Corporations that maintain careful protocols for formal disclosures while allowing the same information to be discussed informally through executive communication channels are not protected from claims arising from the informal channel.
In-house counsel should ensure that any disclosure with the potential to reflect adversely on a named third-party — whether mandatory or voluntary — is reviewed by legal before it is made, and that the review addresses not just securities compliance but also defamation exposure. Legal, investor relations, and outside counsel need to be in the room together before these statements go out.
Managing the risk before it becomes a claim
Defamation risk is not a corporate problem because corporations have become careless. It is a corporate problem because the sheer volume and rapidity of corporate communications have expanded dramatically — across more channels, more quickly, with less deliberation — while the legal framework governing those communications has not changed. The tort is the same as it ever was. The realm of exposure has vastly expanded.
The defences available to corporations are real and they can offer real protections. But they work only where the conditions that support them are known and respected: communications limited to those who need to know, records drafted in factual rather than editorial language, disclosures reviewed for defamation exposure and not just regulatory compliance, and specialist outside counsel involved before the document is signed or the statement is made.
In-house counsel who proactively treat defamation as a live risk in their organizations — and who build it into the corporate consciousness and protocols that govern terminations, investigations, board communications, sales presentations and investor relations — are the ones best positioned to prevent it that risk from becoming a litigation matter. Actively managing such risks will pay dividends in protecting corporate interests. Those who don’t face the peril of discovering the limits of the available defences for the first time when responding to a statement of claim.
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Andrea Gonsalves, partner, is sought out for her sound judgment, practical advice, and highly effective representation. She acts for corporations, executives, and boards in defamation and injurious falsehood disputes, internal investigations, and commercial litigation where reputational risk is in play. Andrea brings particular depth in commercial disputes, corporate governance, and executive employment matters. She understands not just the defamation claim, but the competitive dynamic, the governance decision, the HR process, or the board communication that gave rise to it. She is regularly retained by in-house counsel who need a litigator with the strategic range to navigate complex commercial and reputational disputes, and the experience to take a case to trial.
Justin Safayeni, partner, is an experienced litigator. His clients appreciate his clear thinking, sound judgment, practical advice and strong courtroom advocacy skills. Justin’s practice focuses on administrative and public law, media/defamation law and commercial litigation and appeals. In his defamation law practice, Justin regularly advises corporations, journalists, publishers and individuals on how to minimize the risk of litigation — and represents them if litigation materializes. He has appeared before all levels of court in Canada, including on several occasions as lead counsel at the Supreme Court of Canada.