Background
UM Financial Inc. and affiliated entity UM Capital Inc. obtained financing from Central 1 Credit Union beginning around 2005 to support sharia-compliant mortgage products. By 2011, UM owed approximately $30 million. Central 1 commenced receivership proceedings in March 2011, with Grant Thornton appointed receiver in October 2011. UM was assigned into bankruptcy in November 2011 and remains an undischarged bankrupt.
A lengthy litigation history followed, with UM, related entities, and associated individuals bringing repeated proceedings against Central 1 and Grant Thornton from 2011 onward—all arising from the same core factual disputes regarding the lending relationship, receivership, and alleged losses. Prior courts dismissed these proceedings on grounds including limitation periods, lack of standing, abuse of process, collateral attack, and res judicata. Costs awards were made but not paid.
In February 2024, UM commenced another action claiming $5 million damages for breach of contract, negligence, and misrepresentation, advancing theories substantially similar to prior failed claims. The motion judge dismissed this action as frivolous, vexatious, and an abuse of process, and made a vexatious litigant order under section 140 of the Courts of Justice Act against UM and two non-party appellants: Dr. Omar Kalair (UM’s former principal) and Noorani Sairally (a current director).
The Court’s Holding
The Court of Appeal unanimously dismissed the appellants’ appeals. The court held that section 140 of the CJA applies to non-parties who initiate or conduct vexatious litigation through a party, not only to party-litigants themselves. The statutory language sweeps in “a person”—an inclusive term covering non-parties and parties alike. Including vexatious non-parties advances section 140’s gatekeeping purpose: preventing abusive litigation from draining judicial resources and protecting innocent parties from harassment while preserving the court’s ability to hear meritorious claims through a screening mechanism that permits plausible cases to proceed by leave.
The motion judge properly included both appellants in the vexatious litigant order. Dr. Kalair directed prior vexatious proceedings and orchestrated the present action from behind the scenes despite UM’s attempts to conceal his involvement. Mr. Sairally, who joined the board after the action commenced, swore an affidavit asserting without reasonable grounds that UM had been discharged from bankruptcy—a claim contradicted by court records. On cross-examination, he admitted to numerous other unfounded assertions and demonstrated he had made no meaningful effort to verify the affidavit’s contents before swearing it.
The court also upheld the motion judge’s order making Mr. Sairally jointly and severally liable with UM for costs. The court emphasized that deponents who swear factual propositions to the court bear responsibility for ensuring those propositions are grounded in fact. The integrity of motion practice requires that affidavits—evidence given under oath or affirmation—meet robust quality standards. Mr. Sairally’s unverified assertions that contributed to continuing abusive litigation justified personal costs consequences.
Key Takeaways
- Section 140 vexatious litigant orders apply to non-parties who conduct litigation through corporate or other entities, not solely to formal parties to litigation.
- Repeated litigation on the same essential factual matrix spanning years, dismissed on multiple grounds and subject to prior court orders, establishes a pattern warranting a vexatious litigant order.
- Corporate changes in management or directorship do not shield behind-the-scenes orchestrators from accountability or shield new directors from the consequences of continuing already-barred litigation.
- Directors and officers can be held personally liable for costs where they swear affidavits containing material assertions they have not verified and cannot support under cross-examination.
Why It Matters
This decision significantly strengthens section 140’s application by clarifying that courts can restrain non-parties acting through corporate entities, closing a potential loophole where individuals could orchestrate abusive litigation from behind the scenes or evade accountability through corporate restructuring. The ruling prevents litigants from using new board members or related entities to circumvent prior vexatious orders—a critical safeguard in litigation ecosystems prone to serial abuse.
The court’s emphasis on deponent accountability reinforces the integrity of affidavit evidence and motion practice generally. By holding Mr. Sairally personally liable for swearing unverified assertions, the judgment sends a clear message that courts will not tolerate casual or reckless affidavits, particularly where they advance abusive litigation. The decision balances preventing litigation abuse with preserving access to justice: section 140 does not block the courthouse door but rather screens out vexatious litigation while permitting genuine claims to proceed by leave, thus protecting judicial resources for the many rather than the vendettas of the few.