Silvercorp not defamed by us, says Bronte
2012-04-12 14:31 ET - Street Wire
by Mike Caswell Bronte Capital Management Pty. Ltd., the Australian hedge fund manager facing a defamation lawsuit from Silvercorp Metals Inc., denies that it had any role in a short-and-distort scheme that targeted the company in 2011. Bronte says a report on its website that suggested shorting the stock merely conveyed an opinion. The fund manager had no intention to manipulate Silvercorp with the posting. The statements come in response to a lawsuit that Bronte faces in the Supreme Court of British Columbia from Silvercorp over an Oct. 25, 2011, blog posting. The post, written by Bronte employee John Hempton, left readers with the impression that the company was a fraud on investors, the suit claimed. It questioned the company's reported costs for its Ying mine in China, saying they were "ludicrously cheap." Bronte claims that there was nothing defamatory about the report, and certainly nothing that would portray Silvercorp as a fraud on investors. Even if there were a defamatory meaning, the report constitutes fair comment on a matter of public interest, Bronte says. The case against Bronte is separate from the defamation action that Silvercorp is pursuing in New York against hedge fund manager Anthion Management LLC (also known as Chinastockwatch.com) and Alfredlittle.com. In that case, the company complains about a letter sent to regulators and media in August, 2011, that accused Silvercorp of being an accounting fraud. The letter stated that the company had reported 2010 earnings of $66-million (U.S.) in North America when government filings in China showed a $500,000 (U.S.) loss. Anthion denies any wrongdoing, and the case has not yet been decided. Silvercorp sues Bronte The case against Bronte began on Dec. 1, 2011, when Silvercorp filed a notice of claim against it and Mr. Hempton at the Vancouver courthouse. The claim identified Mr. Hempton as a British national living in Australia who served as the chief investment officer of Bronte. The blog posting that the suit complained of appeared on Oct. 25, 2011, right after a report by KPMG cleared Silvercorp of the accounting issues raised by Chinastockwatch.com. Mr. Hempton wrote that the KPMG report "does not mean that [Silvercorp] is not a fraud but it does mean that it is not a simple fraud as alleged by the anonymous short sellers." He went on to compare the company's cost of developing the Ying mine with costs incurred by mining companies in Australia, and found that Silvercorp's expenses were so low as to be implausible. Silvercorp complained that the post left readers with the impression that the company was engaged in fraudulent business practices and was a fraud on investors. The post also contained links to the earlier Alfredlittle.com and Chinastockwatch.com reports, which constituted a republication of statements that Mr. Hempton knew were false. The suit further claimed that Mr. Hempton and Bronte were part of a broader conspiracy that included the authors of the Alfredlittle.com and Chinastockwatch.com reports. Silvercorp sought an accounting of profits, general damages, special damages, aggravated damages and punitive damages. It also asked that the court enter an injunction barring future publication of the article and an injunction preventing Bronte from dissipating assets. Vancouver lawyer Howard Shapray of Shapray Cramer LLP filed the suit on Silvercorp's behalf. Bronte's response In their response to the suit, filed on Tuesday, April 10, Bronte and Mr. Hempton deny that they did anything wrong. They say that the blog had a disclaimer which stated that the content represented Mr. Hempton's opinions. The disclaimer also advised readers that the content should not be used for investment advice and "is intended solely for the entertainment of the reader, and the author." Bronte and Mr. Hempton further deny conspiring with Chinastockwatch.com or Alfredlittle.com. They say they had little or no knowledge of Silvercorp until September, 2011, after the short-and-distort scheme the company complains of had already begun. They also say that if Silvercorp did suffer any damages from such a scheme, those damages were caused by others, including the authors of the Alfredlittle.com and Chinastockwatch.com reports. In legal terms, the defence that Bronte relies on is fair comment on a matter of public interest. Mr. Hempton made the comment honestly and without malice, the response states. He also included a link to a website that Silvercorp had set up to respond to allegations the short-sellers were making. Bronte and Mr. Hempton ask that the case be dismissed, with costs. Vancouver lawyer Jim Schmidt of Fraser Milner Casgrain LLP filed the response on their behalf.
Reader Comments - Comments are open to paying subscribers of Stockwatch and unmoderated, although libelous remarks, obscene language and impersonations may be deleted. Opinions expressed do not necessarily reflect the views of Stockwatch.
For information regarding Canadian libel law, please view the University of Ottawa's FAQ regarding Defamation and SLAPPs .
test123 kjk
