Khan v. Krylov & Company et al.

[Indexed as: Khan v. Krylov & Co.]

Ontario Reports

Court of Appeal for Ontario

Pepall, Lauwers and Huscroft JJ.A.

July 26, 2017

138 O.R. (3d) 581 | 2017 ONCA 625

Case Summary

Civil procedure — Vexatious proceedings — Plaintiff alleging that defendant law firms defrauded him by misappropriating settlement funds — Motion judge erring in dismissing action under rule 2.1.01 as being frivolous, vexatious or abuse of process — Allegation in statement of claim not entirely implausible and nothing on face of statement of claim showing plaintiff to be vexatious litigant — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 2.1.01.

The plaintiff sued the defendant law firms, alleging that they defrauded him by misappropriating settlement funds. The defendants moved successfully to have the action dismissed under rule 2.1.01 of the Rules of Civil Procedure as being frivolous, vexatious or an abuse of process. The plaintiff appealed.

Held, the appeal should be allowed.

The allegation of misappropriation was not entirely implausible, and nothing on the face of the statement of claim showed the plaintiff to be a vexatious litigant. Once a pleading asserts a cause of action and does not bear the hallmarks of frivolous, vexatious or abusive litigation, resort to rule 2.1.01 is not appropriate as a means for bringing the action to an early end.

Cases Referred To

• Gao v. Ontario (Workplace Safety and Insurance Board), 2014 ONSC 6497
• Husain v. Craig, 2015 ONSC 1754
• Mester v. Wah, 2016 ONSC 4887
• Raji v. Borden Ladner and Gervais LLP, 2015 ONSC 801
• Scaduto v. Law Society of Upper Canada, 2015 ONCA 733

Rules and Regulations Referred To

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 2.1, 2.1.01

Parties and Counsel

APPEAL from the order of Daley R.S.J. of the Superior Court of Justice dated December 2, 2016 dismissing an action as frivolous, vexatious or abusive.

Appellant: Zaka Ullah Khan, acting in person.

Respondent Counsel:

• B. Robin Moodie, for respondent Krylov & Company.
• Louis Covens, for respondent Devry Smith Frank LLP.

Decision

[1] BY THE COURT: -- The motion judge dismissed the appellant's action under rule 2.1.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 as being frivolous, vexatious or otherwise an abuse of the process of the court.

A. The Factual Context

[2] The respondent Krylov and Company represented the appellant in his claim for damages arising from a motor vehicle accident. The respondent Devry Smith Frank LLP represented the defendant in that action.

[3] The appellant subsequently sued both respondents in the action that is the subject matter of the rule 2.1.01 dismissal. The statement of claim in this action noted:

On or about March 31, 2014 that [personal injury] action was settled and Krylov provided Khan with a cheque in the amount of $58,137.95.

Krylov told Khan that the total settlement amount was $82,500.00.

[4] However, the statement of claim also asserted the following:

Khan believes the actual settlement was higher than the alleged $82,500.00 and in the $800,000.00 range as the associate from Krylov assured him of the same.

Khan believes both defendants received a larger compensation but misappropriated the funds and provided a smaller settlement to Khan.

[5] As the motion judge noted:

At the heart of the action as asserted by the plaintiff in the statement of claim is the allegation that both defendant law firms defrauded the plaintiff by misappropriating settlement funds and forging his name to a final release or having him sign such a release without his knowledge of its contents.

B. The Governing Principles

[6] The law concerning rule 2.1 is new and evolving. It was largely summarized in Scaduto v. Law Society of Upper Canada, 2015 ONCA 733, at paras. 7-9, leave to appeal to S.C.C. refused [2015] S.C.C.A. No. 488. This court accepted the approach taken by Myers J. in a series of cases including Gao v. Ontario (Workplace Safety and Insurance Board), 2014 ONSC 6497 ("Gao (No. 2)") and Raji v. Borden Ladner and Gervais LLP, 2015 ONSC 801. The court noted in Scaduto that "the use of the rule should be limited to the clearest of cases where the abusive nature of the proceeding is apparent on the face of the pleading and there is a basis in the pleadings to support the resort to the attenuated process" (at para. 8).

[7] Justice Myers provided an important caution, at para. 18 of Gao (No. 2):

It should be borne in mind however, that even a vexatious litigant can have a legitimate complaint. It is not uncommon for there to be a real issue at the heart of a vexatious litigant's case . . . Care should be taken to allow generously for drafting deficiencies and recognizing that there may be a core complaint which is quite properly recognized as legitimate even if the proceeding itself is frivolously brought or carried out and ought to be dismissed.

C. The Principles Applied

[8] The basis of the motion judge's ruling was that the statement of claim provided "no particulars whatsoever" of alleged breaches of fiduciary duty and negligence (at para. 20), and "no particulars whatsoever" of "fraud, misappropriation and dishonesty on the part of the defendant law firms" (at para. 21). This criticism was repeated at para. 25.

[9] The motion judge also referred to "internal contradictions in that having acknowledged in the pleading that he [the appellant] was told his tort action had settled for the sum of $82,500, at paragraph 13 of the statement of claim he states that he was told by a representative of Krylov that in fact the settlement amount would be higher" (at para. 22).

[10] However, in effect and read generously, the pleading alleges that the respondent law firms settled the motor vehicle action for much more than they told the appellant, and pocketed the difference between the higher amount of the settlement and the $82,500 stated in the release. In other words, the pleading alleges that the law firms conspired to defraud the appellant.

[11] As distasteful as this allegation might be, it is not entirely implausible. A cautious approach must be taken, as Myers J. noted in Husain v. Craig, 2015 ONSC 1754, at para. 10, when he asked: "what if the plaintiff's allegations are true"?

[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.

[13] The hallmarks of a vexatious pleading amenable to being struck under rule 2.1 are well known to judges and helpfully listed in paras. 14-15 of Gao (No. 2). However, the statement of claim in this case bears none of them. It is short and to the point. There is nothing on the face of the statement of claim that shows the appellant to be a vexatious litigant or that he is engaged in what Myers J. described in Husain as "querulous litigant behavior" (at para. 15). Nor is there any suggestion in the material that the appellant will abuse the process of the court if he is confronted by other motions such as a motion for summary judgment at the instance of the respondents: Mester v. Wah, 2016 ONSC 4887, at para. 5. We also note that there is no evidence under oath of any kind, be it in the form of affidavits or examinations, generated in the action. The rule 2.1.01 request is clearly premature.

[14] We are unable to conclude that the appellant's statement of claim asserts a claim that is frivolous, vexatious or an abuse of the court's process, measured by the criteria in the cases. Once a pleading asserts a cause of action and does not bear the hallmarks of frivolous, vexatious or abusive litigation, resort to rule 2.1 is not appropriate as a means for bringing the action to an early end. The motion judge erred in truncating the normal process.

D. Disposition

[15] For these reasons, the appeal is allowed and the order of the motion judge is set aside including the cost award. Costs, payable by the respondents jointly and severally, are fixed at $3,000 for the appeal and $2,000 for the motion below, both inclusive of disbursements and applicable taxes.

Appeal allowed.

End of Document