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Island developer loses bid to silence online critics

The developer behind the Island’s largest construction project has been shut down in its bid to silence some online criticism. In a written ruling, Justice J.
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League group's Adam Gant, left, and Emanuel Arruda in January 2012, at the site of the Capital City Centre project in Colwood.

The developer behind the Island’s largest construction project has been shut down in its bid to silence some online criticism.

In a written ruling, Justice J. Christopher Grauer quashed League’s application for an injunction to stop bloggers Rachelle Berube and Allison Barber from making further allegations online about the League group of companies and its principals Adam Gant and Emanuel Arruda, who are behind the $1-billion Capital City Centre.

The application was filed after Berube called League’s IGW real estate investment trust (REIT) a Ponzi scheme, which Gant and Arruda believed was defamatory.

In an email, Berube said “she was very happy with the result.” She appears to be prepared to continue to fight if League pushes to take it to trial.

“I have no idea if I’ll win the defamation case, but I have to try and I’ll do my best,” she said. “So far, that’s been good enough.”

Berube, a property manager based in Ontario who writes the blog, said her writing about League is meant to warn potential investors.

“What I’m saying is true and is protecting other people who might invest and do less due diligence. If I remove my warnings, I’m complicit in silence with League. How can I live with myself knowing that I caved, removed my writing which I really believe in, and a bunch more grandmas and grandpas are wiped out by the newest round of fundraising,” she wrote. “Not only do I need to leave what’s on the blog up but I’m compelled to keep writing about them.”

Gant said League is reviewing the decision with its legal counsel.

In coming to the decision to deny the injunction, Grauer noted that it hinged on the definition of the phrase “Ponzi scheme.”

A Ponzi scheme is considered to be a fraud, using new investment money to pay off earlier investors in a scheme where no investment is actually made. Meanwhile, the fraudster siphons off the early money for personal use.

“Words directly accusing either gentleman of fraudulent or criminal acts would likely support an application for injunctive relief,” Grauer wrote. “The allegations pleaded in relation to Mr. Gant and Mr. Arruda, however, depend instead on innuendo arising from the use of the term ‘Ponzi scheme.’ ”

While Grauer noted the words were “manifestly defamatory,” as Berube and Barber published the words in question, and in today’s context those words would tend to lower the reputation of League and its principals in the eyes of reasonable people, he also pointed out Berube and Barber had argued they used the term in a different sense.

The two said they used the term in the vernacular sense, rather than in accordance with a strict legal definition.

“They say that although the REIT indeed has assets, those assets are worth little and are saddled with debt, and the plaintiffs continue to bring in new money from new investors to pay back old investors,” Grauer wrote. “In the context of their comments, they assert this is sufficient to justify the use of the term Ponzi scheme in the way they used it.”

Grauer said while he thought it improbable, he couldn’t rule out the possibility that Berube and Barber could use a justification defence at a trial.

“It follows that [League, Gant and Arruda] have not satisfied the test for the granting of an interlocutory injunction in a defamation action in relation to the defendants’ description of the REIT as a Ponzi scheme,” Grauer wrote.

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