• Cautious Use of Rule 2.1 Against Vexatious Claims in Khan V. Krylov & Company LLP
  • September 4, 2017 | Authors: Kathryn Kirkpatrick; Jeremy Ablaza
  • Law Firm: Borden Ladner Gervais LLP - Toronto Office
  • In the recent case Khan v. Krylov & Company, 2017 ONCA 625 ("Khan"), the Ontario Court of Appeal revisited the principles to be considered by a Court when exercising its authority pursuant to Rule 2.1.01 of the Rules of Civil Procedureto stay or dismiss an action that is found to be patently frivolous, vexatious or an abuse of process, reaffirming that such relief will be granted only in the clearest of cases.

    In Khan, the plaintiff commenced an action (the "fraud action") against two law firms: the firm that had represented him in an earlier motor vehicle action (the "motor vehicle action") and the firm that represented the defendant in that action. In the fraud action, the plaintiff alleged that he was told by his law firm that the motor vehicle action settled for $82,500 all-inclusive (of which the plaintiff received $58,137.95), but he believed the action had actually settled for an amount in the range of $800,000, based on assertions that had been made to him by an associate from the law firm. The plaintiff alleged that the two law firms defrauded him and misappropriated the additional settlement funds. The defendant law firms sought a dismissal of the claim pursuant to Rule 2.1. The motion judge found that the Statement of Claim provided no particulars of the alleged breaches of fiduciary duty, negligence, fraud, misappropriation or dishonesty and dismissed the fraud action as being frivolous, vexatious or otherwise an abuse of the process of the Court. The plaintiff appealed to the Court of Appeal.

    In allowing the appeal, the Court of Appeal noted that "the law concerning rule 2.1 is new and evolving," stating:

    [12] Rule 2.1 is an extremely blunt instrument. 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. Rule 2.1 is not meant to be an easily accessible alternative to a pleadings motion, a motion for summary judgment, or a trial.

    The Court of Appeal found that the Statement of Claim in the fraud action bore none of the characteristics of a vexatious pleading that would be amenable to being struck under Rule 2.1, as summarized by the Court in Gao v. Ontario (Workplace Safety and Insurance Board), 2014 ONSC 6497 ("Gao"):

    • bringing multiple proceedings to try to re-determine an issue that has already been determined by a court of competent jurisdiction;

    • rolling forward grounds and issues from prior proceedings to repeat and supplement them in later proceedings, including bringing proceedings against counsel involved in those earlier proceedings;

    • persistent pursuit of unsuccessful appeals;

    • failure to pay costs awards of prior proceedings;

    • bringing proceedings for a purpose other than the assertion of legitimate rights, including to harass or oppress others; and

    • bringing proceedings where no reasonable person would expect to obtain the relief sought.

    The Court in Gao also noted that many vexatious pleadings are obvious on their face as they bear "unmistakable hallmarks of querulous litigant behaviour" including curious formatting, odd or irrelevant attachments, rambling discourse and multiple methods of emphasis such as colour highlighting, repeated punctuation and capitalization.

    In Khan, the Court of Appeal concluded that, when read generously, in effect the pleading alleged that the law firms conspired to defraud the plaintiff as they settled the motor vehicle action for more than the plaintiff had been told and the firms pocketed the difference. The Court of Appeal stated, "as distasteful as this allegation might be, it is not entirely implausible." The Court of Appeal found that the pleading bore none of the hallmarks described in Gao, there was nothing on the face of the claim that indicated the plaintiff was a vexatious litigant or one that engaged in "querulous litigant behaviour," nor was there any suggestion that the plaintiff would abuse the process of the Court if confronted with a motion for summary judgment.

    The decision in Khan reaffirms that the Court will exercise its authority to dismiss a claim under Rule 2.1 cautiously and sparingly, only in the clearest of cases where the vexatious, abusive nature is apparent on the face of the pleading and it is appropriate to rely on the "attenuated process" set out in the Rule. The Court will not permit the use of Rule 2.1 as a means for defendants to avoid undoubtedly more costly and complex pleadings motions, motions for summary judgment or trial.