The Disadvantages of Common Law Precedant: Analysis of James Bay Resources Limited v. Mak Mera Nigeria Limited, 2025 ONCA 448 (CanLII)

The Canadian common law system has its pros and cons. On the one hand, it provides for a certain level of consistency and predictability within an area of law by having judges rely on past precedent rulings to guide future awards. On the other hand, this consistency promotes a certain bias that takes a long time to review and change, which ironically creates inconsistencies across other legal framework. A certain case may be frequently cited and relied upon in a case analysis without revisiting its original purpose or whether it is either still applicable within its own legal area or across other schemes. In broad areas of the law, these inconsistencies are caught, reversed and updated (this is an advantage of the flexible common law system). But narrow and minor legal points that are ruled in case law are rarely revisited and if so, older precedents are simply relied upon with little analysis across an entire legal framework. A good example here is the analysis of substantial defamation damages for a corporation reviewed in the recent case:  James Bay Resources Limited v. Mak Mera Nigeria Limited, 2025 ONCA 448 (“J v M”).

As a very broad summary, in J v. M, a business, James Bay, made a consulting agreement with Mak Mera to pursue oil and gas acquisitions in Nigeria. When attempts to close various transactions failed and the agreement between them was terminated, Mak Mera published defamatory statements accusing James Bay of contract breach and that Mak Mera were “defrauded by misrepresentations and deceptive conduct”. They sent these statements to representatives of the Nigerian government, urging them to suspend awarding a mining lease to James Bay. This letter clearly was written with the intent to harm James Bay’s business interests in Nigeria. James Bay was unable to complete its transactions in Nigeria and sued Mak Mera for defamation and was successful at trial court. Among other awards, the trial court awarded James Bay $200,000 in defamation damages. The Court of Appeal reversed this decision for a variety of reasons, but I think the analysis of issue #3 regarding setting aside the defamation award is telling as it relates to our common law system.

The Court of Appeal provided a different interpretation of past cases than the trial judge noting: “In the often-cited words of Lord Reid in Lewis v. Daily Telegraph Ltd., [1963] 2 All E.R. 151 (H.L.), at p. 156: “A company cannot be injured in its feelings, it can only be injured in its pocket. Its reputation can be injured by a libel but that injury must sound in money.”” Note that Lord Reid in the House of Lords wrote this line in 1963, and it is certainly cited many times on this issue and taken as well-settled legal principle – if a company cannot prove its damages, it does not get the same presumption of damages as a person because a company cannot get its feelings hurt.

That is certainly a fine principle to rely upon certainly in the case of defamation damages. However, where the inconsistency comes in is where it interacts with other legal areas and legal principles. Corporations can be criminally charged under the Criminal Code of Canada; but a corporation cannot go to jail. In Canada, a corporation must run in accordance with all stakeholders including the environment and must maintain “corporate social responsibility”. But a corporation is not a person; how can it have responsibility? Many times, courts will “pierce the corporate veil” and award damages against its human being principal owners; if there was a case with a pierced corporate veil on one side but defamation awarded in favour of the corporation on the other, will the corporation have feelings? In addition, does Lord Reid’s principle apply to only corporations? What about sole proprietorships which are basically the name of a human being, or partnerships? They are still businesses.

I am referring to all of the above examples to show the weakness and disadvantage of the common law system as a whole. Instead of reviewing case law across a variety of legal areas to ensure that a narrow legal principle is consistent (who has the time for that?), courts and lawyers typically provide an analysis based on the framework and specific case law relating to the very narrow issue they are discussing. In this case – substantial damage awards for defamation claims against corporations. This case law must be strictly followed as case precedent and are very rarely revisited since the principle (“corporations don’t have feelings”) sounds reasonable and, taken in a vacuum, makes sound law. But this principle ultimately conflicts with the application of the law across a wider scheme of the law in general and it also conflicts with reality. No, a corporation cannot have its feelings hurt, but to put the onus on a business to show significant evidence for damage either economically or to its goodwill with will make it nearly impossible for a business to win defamation damages, even when defamation is not in dispute. When an individual has the low cost of putting out defamatory statements to ruin a business’s reputation, with little risk that the person will have to pay substantial damages, there is little deterrence for the slanderer and little motivation for the business to pursue a claim. And given the narrow (and quite frankly unpopular area of law), will this ever change?

While the Court of Appeal may be correct in its decision and analysis in J v. M, this case sheds light on the disadvantages of the analyses that take place in our system. The reliance on old precedent creates an inconsistency that may not be in tune with reality; certainly in the business world. Perhaps modern technology will provide a means for ensuring that legal principles remain consistent across the board of the rule of law but maybe we should choose the lesser of two evils.

 This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.  https://www.law360.ca/ca/civillitigation/articles/2364438/the-disadvantages-of-common-law-precedent