Canada: Court Of Appeal Affirms Refusal To Dismiss Counterclaim On Anti-SLAPP Motion

Anti-SLAPP motions are a useful tool for obtaining the early dismissal of an action that arises from an expression on a matter of public interest. The use of anti-SLAPP motions has received some academic criticism and courts have recognized that it has become an expensive tool which has added to the costs of litigation, particularly where the motion is brought to dismiss a counterclaim in whole or in part. This is contrary to the purposes of section 137.1 of the Courts of Justice Act ("CJA"). Accordingly, courts should be hesitant to dismiss a counterclaim on an anti-SLAPP motion because even if a counterclaim is dismissed, the parties will remain locked in litigation.

In Park Lawn Corp. v. Kahu Capital Partners Ltd., 2023 ONCA 129 (CanLII), the Court of Appeal for Ontario affirmed a motion judge's decision to refuse to dismiss a counterclaim on an anti-SLAPP motion. Ironically, the court noted that while section 137.1 was designed to allow for the early dismissal of strategic litigation against public participation, the motion to dismiss the defendant's counterclaim was itself strategic and tactical.

The corporate plaintiff, Park Lawn Corporation ("Park Lawn"), was Canada's largest funeral home and deathcare service provider. As part of its business, it sold pre-need or future-care funeral services. The funds collected for these services were maintained in trust and were managed by the defendant management company.

During an investigation by Park Lawn into allegations of misconduct by its Chief Executive Officer ("CEO"), concerns were expressed about the management company's relationship with Park Lawn. Park Lawn ultimately sued its CEO, who had resigned from his position, settled with him, and then sued the management company on the grounds that it had knowingly assisted the CEO in alleged wrongdoing in connection with the trust funds.

Park Lawn's new CEO, G, then made statements to a funeral services newsletter wherein unflattering comments were made about the management company. The comments suggested, among other things, that the management company was not to be trusted because it had committed a crime and fraud, and had engaged in dishonest, immoral and dishonourable conduct. Accordingly, the management company counterclaimed against Park Lawn for breach of contract and defamation.

The management company alleged that as a result of the comments made by G it had lost the opportunity to market new funds.

Park Lawn sought to have the counterclaim dismissed under section 137.1 of the CJA on the basis that the counterclaim represented strategic litigation against public participation. The motion judge dismissed the motion and Park Lawn and G appealed.

At issue on the appeal was whether the motion judge had erred in finding that allowing the management company's counterclaim to proceed outweighed the public interest in protecting the moving parties' expression about the management company.

Park Lawn and G argued that the motion judge had erred in his analysis of the public interest hurdle found in section 137.1(4)(b) of the CJA. More specifically, Park Lawn and G alleged that there was no evidence that the management company had suffered any harm because of the impugned statements made by G and that the motion judge had inadequately weighed the management company's harm against the public interest in protecting the impugned expressions on what was a matter of public interest.

The public interest hurdle in section 137.1(4)(b) was described by the Supreme Court of Canada as the crux of section 137.1. Under this provision a court is directed to examine what is really going on in the case. Although a responding party to an anti-SLAPP motion is required to establish harm and causation suffered as a result of the moving party's expression, the Court of Appeal of Ontario explained that under the principles that govern anti-SLAPP motions, a responding party is not required to prove harm, but can simply provide evidence from which an inference of the likelihood of harm (and causation) can be drawn. As determined in Lascaris v. B'nai Brith Canada, 2019 ONCA 163 (CanLII), where a plaintiff's statements are likely to cause serious damage to a person's reputation, the likelihood of harm will be readily inferred.

Furthermore, general damages are presumed in a defamation action. This is sufficient to constitute harm. However, a responding party is required to provide support where special damages are claimed.

The statements made against the management company were serious and, indeed, the moving parties had conceded on the anti-SLAPP motion that G's statements had caused damage to the management company.

While these findings favoured the dismissal of the anti-SLAPP motion under section 137.4(b), the appellate court further delved into the purpose of the moving parties' motion and the fact that the motion had been brought to dismiss a counterclaim. Although the Court of Appeal recognized that section 137.1 did not preclude the granting of an anti-SLAPP motion to dismiss a counterclaim, a motion to do so was contrary to the purposes of the legislation because the parties would remain locked in litigation. The motion judge had stated:

Remarkably, unlike most anti-SLAPP motions, if Park Lawn and [G's] motion succeeds, the proceedings will not be done. Park Lawn's action will go forward, and it will seek to prove that what [G] expressed to [the industries newsletter] was true. However, if the anti-SLAPP Motion succeeds, and Park Lawn fails to prove its case, [the management company] will be precluded from claiming damages [for] harm caused to its reputation by Park Lawn's failure to prove that what [G] said was true. An anti-SLAPP motion designed to suppress strategic litigation is being used very strategically and tactically.

The Court of Appeal found no error in the motion judge's decision.

This case demonstrates that a party must be cautious when seeking to dismiss a counterclaim using an anti-SLAPP motion. Notwithstanding the presumption against awarding costs to the management company for successfully defending the anti-SLAPP motion, the motion judge had awarded costs to it. The Court of Appeal also affirmed this finding and noted overall that the moving parties had sought more than $350,000 in costs if their motion had succeeded compared to the approximately $31,000 in costs that were awarded to the management company. The high costs sought by Park Lawn and G, and the high costs generally sought on anti-SLAPP motions, prompted the Court of Appeal to suggest that, as a guideline, costs for an anti-SLAPP should not generally exceed $50,000 on a full indemnity basis, subject to exceptions.

It will be interesting to see how the appellate court's guideline will be utilized by motion judges in future anti-SLAPP motion cost awards. particularly in light of its $273,211.22 full indemnity costs award granted to the plaintiff who successful defeated an anti-SLAPP motion in Boyer v. Callidus Capital Corporation, 2023 ONCA 311, released on May 2, 2023. A PDF version is available to download here.

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