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Boardwalk Cafe owner George Foulidis sued the mayor over comments made about sole-source contract with the city, but a judge dismissed the case in 2012Matthew Sherwood/The Globe and Mail

A panel of Ontario Court of Appeals judges has dismissed a defamation case against Toronto Mayor Rob Ford brought forward by a Beaches restaurant owner.

George Foulidis sued Mr. Ford two years ago after the mayor told the Toronto Sun that the deal between the city and Mr. Foulidis's Boardwalk Pub "stinks to high heaven." After a judge dismissed the $6-million lawsuit in 2012, Mr. Foulidis brought it to appeals court, where a panel of judges decided this week that the mayor's comments were not directed at the restaurant owner.

"Mr. Foulidis was not the target of Mr. Ford's words," the decision states. "Mr. Ford's words were not abusive or insulting towards Mr. Foulidis."

In the 2010 interview with the Toronto Sun, Mr. Ford spoke about "corruption and skullduggery" at City Hall meetings, before commenting on the deal involving Tuggs Incorporated, Mr. Foulidis's company that runs the Beaches restaurant. "And if that Tuggs deal doesn't stink to high heaven I…I...," the mayor said before his brother Doug Ford cut him off.

Lawyers for Mr. Foulidis argued in court that, even though the mayor never mentioned Mr. Foulidis by name in his comments to the Toronto Sun, they were defamatory because "reasonable readers make inferences. They 'read between the lines.'"

But the judges dismissed this argument. "In my view, a fair inference is that Mr. Ford regards the target of his critical comments as the entity known as Tuggs, not Mr. Foulidis personally," the decision says.