It is not uncommon for defendants to wonder if the plaintiffs have an ulterior motive for bringing a lawsuit beyond the pleaded request for damages and other relief. In Huachangda Canada Holdings Inc. v. Solcz Group Inc., the defendant pleaded particulars of the plaintiff’s supposed ulterior motive for bringing the action in two paragraphs of the statement of defence. The Ontario Court of Appeal upheld the motion judge’s decision to strike out those paragraphs of the defence as frivolous and vexatious, concluding that allegations of motive are generally not relevant unless they are a constituent element of the tort being pleaded.
Background
The dispute between the parties arose from a share purchase agreement (“SPA”). The appellant, Solcz Group Inc. (“SGI”), was the vendor and defendant to the lawsuit. The respondent, Huachangda Canada Holdings Inc. (“HCH”), was the purchaser and plaintiff. HCH’s statement of claim pleaded that SGI made breached various representations and warranties in the SPA by failing to disclose or concealing serious issues with contracts made by a subsidiary of the business acquired under the SPA.
SGI’s statement of defence denied the allegations and claimed that HCH’s losses were caused by their own financial mismanagement and the actions of HCH’s principal shareholder, which was not a party to the action. The defence also pleaded that HCH’s motive in bringing the lawsuit was not “to recoup genuine damages for genuine wrongs”, but rather, to obtain a downward adjustment of the purchase price in the SPA after the fact.
HCH brought a motion to strike the two paragraphs of the statement of defence referring to HCH’s supposed ulterior motive for bringing the litigation. The motion judge struck out the impugned portions without leave to amend. He concluded that ulterior motive was irrelevant to the causes of action pleaded in the statement of claim; therefore, it was frivolous and vexatious within the meaning of Rule 25.11.
Please log in to read the full article.