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Court pushes back around vexatious litigation

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|Written By Alex Robinson

The Ontario Court of Appeal has reversed a lower court decision to throw out a self-represented litigant’s claim as vexatious in a ruling lawyers say shows the province’s top court’s willingness to push back against broadening the rules around vexatious litigation.

Michael Myers says that vexatious claims cannot simply be long-shot cases.Photo: Robin Kuniski
In Khan v. Krylov, a self-represented litigant brought a claim against both the law firm that represented him in a personal injury lawsuit — Krylov Lam & Company LLP — and the firm that represented the defendant in the action — Devry Smith Frank LLP.

The plaintiff alleged that the two firms had misappropriated funds from a settlement that was reached and that he only got $58,137 after being told the settlement was $82,500. He claimed that the actual amount was closer to $800,000 and that the firms pocketed the rest.

The lower court granted a request brought by the firms under rule 2.1 of the Ontario Rules of Civil Procedure asking that the claim be dismissed on the basis that it was vexatious. The Ontario Superior Court introduced the rule in 2014 in order to make it easier to dismiss vexatious litigation.

While the law around rule 2.1 is new and evolving, the Court of Appeal found in its decision that it should only be used in the “clearest of cases.”

“Rule 2.1 is an extremely blunt instrument,” the decision said on behalf of a three-judge panel made up of Justices Sarah Pepall, Peter Lauwers and Grant Huscroft.

“It is reserved for the clearest of cases, where the hallmarks of frivolous, vexatious or abusive litigation are plainly evident on the face of the pleading.”

Michael Myers, partner with Papazian Heisey Myers, who was not involved in the case, says the decision shows the Court of Appeal is not going to let lawyers use rule 2.1 as a shortcut for a motion for summary judgment or a pleadings motion in claims that are not clearly frivolous.

“The facts might be pretty ludicrous, [but] objectively, if he can prove that there was an $800,000 award from an insurance company and the lawyer stole it, it’s a real cause of action,” he says.

Myers says that vexatious claims cannot simply be long-shot cases. They need to be frivolous on their face, he says.

The motion judge had found that the plaintiff’s statement of claim provided “no particulars whatsoever” of his allegations that included breaches of fiduciary duty and negligence, fraud and misappropriation.

The Court of Appeal, however, determined that the motion judge had erred by “truncating the normal process” and that it would be inappropriate to bring the action to an end through rule 2.1.

“As distasteful as the allegation might be, it is not entirely implausible,” said the decision. “A cautious approach must be taken.”

The court determined that the claim did not have any of the “hallmarks” of vexatious litigation, and that there was no suggestion in his submissions that he would abuse the process of the court if confronted by other motions, such as one for summary judgment.

Timothy Duggan, a lawyer with Horlick Levitt Di Lella LLP, who was not involved in the case, says the decision is a reminder that rule 2.1 is reserved for only cases where the claim is manifestly devoid of merit on its face.

“What this case brings back home is that the application of rule 2.1 requires the court to focus on the pleadings and to focus on what the face of the pleadings say rather than the underlying information about the litigant and the fact that the claim might be farfetched,” he says. “Something may be farfetched, but [it] could also be true.”

He adds that the decision shows that the Court of Appeal will push back on the expansion of rule 2.1 beyond the grounds that have already been accepted.

If a claim is not properly pleaded but the court can discern a cause of action from a generous reading, then the remedy is to bring a pleadings motion rather than a request under rule 2.1, he says.

The Court of Appeal also awarded $3,000 in costs to the plaintiff for the appeal and $2,000 for the lower court motion. Myers says it is extremely rare to see courts awarding such costs to self-represented litigants.

“This is very unusual because self-reps don’t incur costs,” he says. “They incur some out of pocket . . . but, typically, costs are to compensate the parties’ legal bills and self-reps don’t have legal bills.”

Myers says the decision to award $5,000 in costs against the law firms is a message to lawyers not to use rule 2.1 unless the situation fits within the law around the rule.

“The cost award is indicative of the court’s frustration with lawyers trying to use this rule improperly,” he says.

Louis Covens, the lawyer representing Devry Smith Frank LLP, declined to comment.

Robin Moodie, the lawyer representing Krylov Lam & Company LLP, did not respond to requests for comment.

The self-represented litigant in the case could not be reached for comment.

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