Executive Summary: Key Legal and Evidentiary Issues

• The Court of Appeal for Ontario considered whether section 140 of the Courts of Justice Act authorizes vexatious litigant orders against non-parties.
• Both appellants argued that the motion judge wrongly attributed UM Financial Inc.'s litigation conduct to them personally.
• Evidentiary findings established that Dr. Omar Kalair directed the underlying action from behind the scenes.
• Mr. Noorani Sairally's affidavit contained unfounded assertions that he made no effort to verify before swearing them.
• Costs consequences against a non-party director required exceptional circumstances amounting to an abuse of process.
• Ultimately, the panel upheld both the vexatious litigant order and the personal costs award against Mr. Sairally.

Facts of the case

UM Financial Inc. ("UM") and an affiliated entity, UM Capital Inc., entered into lending arrangements with Central 1 Credit Union ("Central 1") beginning around 2005 to support shariah-compliant mortgage products. By 2011, the UM companies owed Central 1 approximately $30 million. Central 1 commenced receivership proceedings in March 2011, and Grant Thornton Ltd. ("Grant Thornton") was appointed receiver on October 7, 2011. UM was assigned into bankruptcy on November 23, 2011, and the motion judge found it remains an undischarged bankrupt. Grant Thornton was discharged as receiver in January 2013.

A lengthy litigation history followed, including a 2011 action, a 2014 human rights complaint and civil action by Dr. Omar Kalair (UM's former principal), and a 2021 action and proposed class proceeding. These were dismissed on grounds including limitation periods, lack of standing, abuse of process, collateral attack, and res judicata. On February 29, 2024, UM commenced the present action against Central 1 and Grant Thornton, claiming $5 million in damages for breach of contract, negligence, and misrepresentation, on the theory that the respondents had misled UM and the courts about the effect of Grant Thornton's discharge as receiver. Noorani Sairally became a UM director on January 14, 2025, after the action was already underway, and swore an affidavit in support of UM's response to the respondents' dismissal motion on February 17, 2025.

Statutory provision at issue

This case does not involve a policy or contractual clause; the central legal question was the scope of a statutory provision. Section 140(1) of the Courts of Justice Act permits a judge to order that a person may not institute or continue a proceeding without leave where that person "has persistently and without reasonable grounds instituted vexatious proceedings in any court or conducted a proceeding in any court in a vexatious manner." The appellants argued this provision could not be used against them because they were non-parties to the underlying action, not against UM itself.

Reasoning and analysis

Chief Justice Tulloch held that section 140's use of the word "person," rather than "party," was a deliberate legislative choice that captures non-parties who instigate or conduct vexatious litigation through a corporate vehicle. The reasoning noted that other CJA provisions expressly limit their application to parties, reinforcing that section 140's broader language was intentional. Including non-parties like Dr. Kalair, described as an "invisible litigant" directing proceedings from behind the scenes, was found to advance the provision's gatekeeping purpose by giving such individuals "skin in the game."

Applying this framework, the court found that the motion judge's factual findings were entitled to deference and disclosed that both appellants met the statutory threshold. Dr. Kalair was found to have directed prior vexatious proceedings, failed to pay outstanding cost awards, and orchestrated the present action despite his purported departure from UM. Mr. Sairally was found to have allowed himself to be used as a "puppet," swearing an affidavit that inaccurately claimed UM had been discharged from bankruptcy and that he later admitted, on cross-examination, contained other unfounded assertions made without meaningful effort at verification. The court also rejected arguments that the motion judge's discretion was improperly exercised, finding the order purposive and proportionate: it extended beyond UM because lesser remedies (such as unpaid costs orders) had proven ineffective, and its scope was confined to proceedings arising from the 2011 receivership rather than imposing a blanket restriction. Procedural fairness was also found to have been respected, as the appellants were properly served and participated in the motion.

On the separate costs issue, the panel confirmed that costs may be ordered against a non-party director in exceptional circumstances involving gross misconduct or abuse of process. The motion judge's decision was grounded not in Sairally's directorship alone, but in specific findings that he swore to propositions he could not support, had not reviewed key materials, and made no meaningful effort to verify his affidavit's contents. The panel found these were factual findings within the motion judge's purview and disclosed no error in principle.

Ruling and outcome

The Court of Appeal dismissed both appeals and denied Mr. Sairally leave to appeal the costs order, finding no reversible legal error, palpable and overriding factual error, or improper exercise of discretion by the motion judge. This outcome favoured Central 1 Credit Union and Grant Thornton Ltd., the respondents, whose original vexatious litigant order and costs award against Mr. Sairally were left intact. The court ordered that the appellants pay costs of the appeal to the respondents in the amount of $50,000, all-inclusive. The document does not specify the dollar amount of the earlier full-indemnity costs award made against UM and Mr. Sairally at the motion stage.