Executive Summary: Key Legal and Evidentiary Issues

• Enforcement of an “unless” order requiring the defendants to serve proper affidavits of documents by a fixed deadline, failing which their defence would be struck.
• Adequacy of the defendants’ affidavits of documents in a simple promissory note collection action, given disclosure limited essentially to the notes and one piece of correspondence.
• Proportionality and appropriateness of striking out the defence under Rules 30.08 and 60.12 for chronic non-compliance with discovery obligations and a prior court order.
• Whether the defendants’ appeal from the strike-out order raised a serious issue, irreparable harm, and a balance of convenience favouring a stay pending appeal.
• Impact of the defendants’ ongoing non-compliance (late, deficient affidavits and unpaid prior costs) on their equitable entitlement to a stay.
• Extent to which a bare assertion of reputational damage and purely financial exposure can constitute “irreparable harm” in the context of enforcement of a default judgment.

Facts of the case

This dispute arises from a straightforward commercial collection claim. Royce Presidential Investments Inc. advanced a total of $600,000, plus interest, to Valour Group Inc., Valour Group Holdings Inc., Pro-Funds Inc., and two individual defendants, Carmen Campagnaro and Richard Hall, under several promissory notes dated September 14 and 15, 2023. The promissory notes were said to be unconditionally guaranteed by the defendants. The respondent claims that these advances have not been repaid and that the defendants are liable for the unpaid principal and interest under the promissory notes and guarantees. The defendants, however, filed a statement of defence that broadly put everything in issue. They denied entering into the promissory notes (even though they produced them), denied the guarantees, denied receiving any advances, and, in the alternative, alleged that Royce Presidential Investments was effectively an investor in their projects whose funds were lost through no fault of the defendants. This pleading position meant that virtually every aspect of the lending relationship, including execution of the notes, receipt and characterization of funds, and the nature of any guarantees, became a matter in issue for purposes of documentary disclosure.

Procedural background and discovery disputes

The action was commenced by statement of claim on September 27, 2024. The defendants served a notice of intent to defend on October 25, 2024, and their statement of defence on November 25, 2024. As the matter proceeded into discovery, Royce served its affidavit of documents on May 1, 2025. Later that month, its counsel asked defence counsel when the defendants’ affidavits of documents would be served, but received no response. On June 18, 2025, after continued silence, Royce’s counsel advised that they would move to strike the defendants’ statement of defence unless proper affidavits of documents were served by June 27, 2025. When that did not occur, a motion to strike the defence was served on July 9, 2025. Only at that point did the defendants produce an unsworn affidavit of documents for Valour Group Inc., with a link to some Schedule A productions, followed by an unsworn affidavit for Richard Hall with a similar link. Royce’s counsel responded on July 21, 2025, stating that what had been provided was “woefully inadequate” because it contained no proofs of payment, communications, financial statements, or disclosure documents, and confirming that the motion to strike was set for July 31, 2025. Defence counsel then asked for an adjournment and suggested scheduling discoveries or a timetable. Royce’s counsel agreed to adjourn but refused to craft a timetable, emphasizing that a timetable would be useless given the defendants’ delay and that only proper affidavits of documents or default judgment would advance the matter.

The August 28, 2025 “unless” order

The motion to strike came before Justice McArthur on August 28, 2025. Rather than immediately striking the defence, the court made an “unless” order designed to give the defendants one final chance to comply with their discovery obligations. The order required the defendants to produce their affidavits of documents “as required by the rules” by September 12, 2025, to be served on Royce’s counsel, “failing which the Statement of Defence shall be struck.” In addition, Justice McArthur ordered the defendants to pay $1,000 in costs and adjourned the motion to September 18, 2025, to address the status of the affidavits of documents. This order not only fixed a firm deadline but also made clear that non-compliance would automatically result in the defence being struck, subject to any residual discretion the court might exercise.

Defendants’ continued non-compliance and limited disclosure

On September 12, 2025, only Richard Hall’s affidavit of documents was served. Royce’s counsel immediately pointed out that the other defendants remained in breach and that even Hall’s affidavit was deficient. Defence counsel replied that Hall would sign on behalf of the corporate defendants and that Campagnaro’s affidavit would be the same, asserting that Hall had searched the corporate records. They further stated that no financial documentation would be produced on the theory that this was “not a judgment debtor examination,” and suggested that, absent emails or documents modifying the contract from Royce, “the relevant documents pursuant to the pleadings are the contracts.” In the result, the remaining affidavits of documents for the other defendants were not served until September 23, 2025, after the September 12 deadline stipulated in the August 28 order and only two days before a further attendance on September 25. The affidavits were identical in content and, in substance, disclosed only the promissory notes and one piece of correspondence concerning an assignment of one note by a third party. Given the breadth of the disputes raised in the statement of defence, this level of disclosure was facially incomplete. Documents relating to the receipt and characterization of funds, guarantees by the individual defendants and Pro-Funds Inc., correspondence with the lender, and internal records concerning the promissory notes and advances would ordinarily be expected in any reasonable affidavit of documents. The motion could not proceed on September 25 and was adjourned again to October 16, 2025.

The order striking the defence and the appeal

On October 16, 2025, the motion came on before a different motion judge. After hearing from counsel, the judge held that the affidavits of documents were deficient and that this was an appropriate case to strike the defendants’ statement of defence. In doing so, the motion judge relied on principles summarized by the Court of Appeal in Advanced Farm Technologies-J.A. v. Yung Soon Farm Inc. and, by reference, in Falcon Lumber Limited v. 2480375 Ontario Inc. Those authorities emphasize that striking pleadings under Rule 30.08(2) for discovery defaults is not strictly a remedy of last resort; rather, a court considers common-sense factors such as whether the failure is deliberate, clear and material, whether any reasonable explanation and credible plan to cure has been provided, and how the default affects the administration of justice and proportionality. In this case, the defendants had months of indulgence, missed clear deadlines, and supplied only skeletal, homogeneous affidavits that did not begin to match the issues raised in their own defence. The motion judge’s decision to strike the defence thus reflected accumulated non-compliance with both the Rules and the explicit August 28, 2025 order, as well as the defendants’ failure to pay the $1,000 costs ordered by Justice McArthur.

The stay motion in the Court of Appeal

The defendants appealed the October 16, 2025 order striking their statement of defence and moved in the Court of Appeal for Ontario for a stay of that order pending appeal. They argued that the motion judge erred in resorting to what they characterized as a draconian remedy when lesser sanctions could have been imposed, and that their affidavits were in substantial compliance with the Rules and the August 28 order. According to them, any debate about the sufficiency of particular classes of documents should have been addressed on a focused production motion or in examinations for discovery. They further alleged that they would suffer irreparable harm, principally to their business reputations, if a stay were not granted and Royce proceeded with default judgment enforcement. Justice Roberts, sitting as a single judge of the Court of Appeal, applied the familiar three-part test for a stay: whether there is a serious issue to be determined, whether the moving party will suffer irreparable harm if a stay is refused, and whether the balance of convenience favours granting the stay, all under the overarching question of whether the justice of the case supports such relief. The court acknowledged that the “serious issue” threshold is low and that the appeal was arguable but assessed it as very weak. On the merits, the motion judge clearly had discretion under Rules 30.08 and 60.12 and under the court’s inherent jurisdiction, especially in the face of a prior “unless” order that stipulated the defence “would, not might, be struck” upon non-compliance. The Court of Appeal found that it was open to the motion judge to deem the affidavits non-compliant, given their narrow scope and the broad issues in dispute, and that this determination attracted appellate deference.

Irreparable harm, balance of convenience, and the justice of the case

On irreparable harm, the Court of Appeal held that the defendants’ bare assertion of reputational damage was insufficient. There was no evidence that enforcement of a default judgment would destroy the defendants’ businesses, make them unable to satisfy a judgment, or render the appeal moot. Any prejudice could be unwound if the appeal ultimately succeeded, and there was no indication Royce could not repay enforcement proceeds. The harm at stake was essentially financial, which is not irreparable in this context. Accordingly, this leg of the test did not support a stay. Turning to the balance of convenience, the court recognized some inconvenience to the defendants in potentially unwinding default proceedings but found that inconvenience outweighed by prejudice to Royce if enforcement was further delayed in the face of a weak appeal. The court then considered the broader “justice of the case”, emphasizing that a stay is an equitable remedy for which a party must come with clean hands. The defendants had repeatedly failed to comply with the Rules and the August 28, 2025 order: they missed the deadline for most affidavits, provided affidavits that were substantively defective, and had not paid the $1,000 in costs. They had not sought to appeal or set aside that earlier order and still had not delivered improved affidavits of documents, while maintaining they need not do so. Their pattern of delay, including late instructions to counsel and a facially perfunctory defence to a simple collection claim, led the court to view the stay motion as another effort to postpone enforcement rather than a good-faith attempt to vindicate a strong defence on the merits.

Outcome and financial consequences

In the result, Justice Roberts dismissed the motion for a stay pending appeal. The court held that, although the appeal was technically arguable, it was weak; there was no irreparable harm; the balance of convenience favoured the respondent lender; and the defendants’ lack of clean hands militated against equitable relief. Royce Presidential Investments Inc., as the responding party, was therefore the successful party on the stay motion. The Court of Appeal ordered that Royce was entitled to its costs of the stay motion, as well as its costs of an earlier motion before Justice Gambacorta, with the parties directed to exchange brief written submissions if they could not agree on the quantum and scale of those costs. This decision left intact the underlying August 28, 2025 order for $1,000 in costs against the defendants and the October 16, 2025 order striking their statement of defence, while also granting Royce entitlement to additional costs for the appellate motion work. However, the reasons do not specify the exact dollar amount of the new costs award, leaving the total monetary sum of all costs and any ultimate judgment on the $600,000 debt and interest undetermined on the face of this decision.