Background
In Huachangda Canada Holdings Inc. v. Solcz Group Inc, the respondent claims that the appellant had an ulterior motive in bringing this suit and was looking for an after the fact reduction of share price rather than damages genuinely arising from the breaches.
The appellant under Rule 25.11 moved to strike out the respondent’s allegations that the appellant was attempting to reduce the share price as an ulterior motive.
Motion Judge
The motion judge struck out the portions of the defence that asserted the appellant had an ulterior motive. His reasons were that the they were improper, for they were irrelevant to the causes of actions put forward by the appellant. Accordingly, they were frivolous and vexatious under the R. 25.11.
Court of Appeal
The Court of Appeal agreed with the motion judge. The court outlined the law by citing some of the general propositions that respond to the legal question of whether a defendant can plead motive as a defence in the present circumstances.
First the court identified that the motive claim in this case has no bearing on the outcome of the action. The court found that whether the respondent’s allegation that the appellant was attempting to recoup their losses is true or not, does not have any bearing on the disposition of the cause of action. In other words, it does not respond to the constituting elements of the tort claimed by the appellant. On this basis, it should be not allowed in statement of defence. The court cited FM v Dr Sutherland (2000), 188 DLR (4th) 296 (Ont CA) for the proposition that pleading which raises irrelevant or superfluous allegations that cannot affect the outcome of the action are scandalous, frivolous or vexatious.
Further, in response to the respondent’s arguments, the court reviewed on the authorities that concluded not all motive claims are necessarily strikable. A plea of ulterior motive, improper intent or malice may be allowed where the plea is an essential part of the cause of action: Refco Futures (Canada) Ltd. v. Keuroghlian, [2002] O.J. No. 2981 (S.C.), at para. 38
But in this case, a theory of motive was not at issue, the breach of warranties and representations were.
The court ruled in favour the appellant.