Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff’s amended claim was struck as scandalous, frivolous, or vexatious, an abuse of process, and lacking a reasonable cause of action.

• The pleading failed to disclose material facts that, if proven, would entitle the plaintiff to any remedy.

• Damages claim increased from $2.9 million to over $89 million without sufficient legal foundation.

• The amended statement of claim was ruled unsalvageable under rule 25.06 of the KB Rules.

• Leave to amend was denied a second time due to prior warnings and non-compliance with procedural rules.

• Appeal was dismissed with costs; no reversible error or injustice found in the motion judge’s decision.

Background and facts

This case involves an appeal by OwniCloud Inc. against Shared Health Manitoba. Mr. Yang, the principal of OwniCloud Inc., filed a statement of claim alleging that Shared Health committed irregularities in its testing of OwniCloud’s computer software. He alleged this led to the software being misappropriated and illegally obtained by third parties, including computer hackers in China. The claim sought over $2.9 million in damages.

The defendant, Shared Health Manitoba, successfully moved to strike the statement of claim. The senior associate judge granted the motion but allowed OwniCloud Inc. thirty days to amend its claim and advised Mr. Yang to consult a lawyer. The judge also warned that any amended claim that remained deficient could be struck again without leave to amend.

Mr. Yang then filed an amended statement of claim, increasing the damages claimed to over $89 million. The defendant again moved to strike, and the amended claim was struck without leave to amend.

Issues with the pleading and court decisions

On appeal, the motion judge’s decision was upheld. The Court of Appeal agreed that the amended claim was scandalous, frivolous or vexatious, constituted an abuse of process, and failed to disclose a reasonable cause of action under rule 25.11(1) of the Manitoba King’s Bench Rules (Man Reg 553/88). The court also emphasized that the amended pleading failed to set out the material facts which, if proven, would entitle the plaintiff to any remedy.

Although counsel for the plaintiff attempted to argue that causes of action in contract, tort, and unjust enrichment could be inferred, the court was not convinced. It determined the pleading was unsalvageable and did not meet the requirements of rule 25.06 of the KB Rules.

The Court further found no basis to interfere with the motion judge’s decision to deny leave to amend a second time. It noted that Mr. Yang had already received a clear warning after the initial claim was struck and could not claim ignorance of the rules.

Outcome

The Court of Appeal dismissed the appeal with costs. It found no reversible error of fact or law by the motion judge and concluded that the decision did not amount to an injustice.

The plaintiff’s original claim was for over $2.9 million, later amended to over $89 million, but both were struck, and no award was made in their favor.