Executive Summary: Key Legal and Evidentiary Issues

• The court considered whether a defence should be struck for failure to comply with two interlocutory orders requiring payment of security into court.
   
• Rule 60.12 and subrule 57.03(2) gave the court discretion to dismiss or stay a proceeding, strike a defence, or make another order.
   
• Justice Yamashita's earlier finding that the Vendor Defendants breached the Security Order without being held in contempt informed the analysis.
   
• Impecuniosity was raised as a defence to compliance, but the absence of supporting evidence weakened that argument.
   
• A key evidentiary issue was whether 2604967 Ontario Inc., which was not bound by the Security Order, should face the same consequences as the Vendor Defendants despite a jointly filed defence.
   
• Costs on the motion required weighing partial success against the scope of relief actually granted.
   

Facts of the case

Jie Zhao and Chester Z.D. Deng, a mother and son, paid $267,000 in deposits toward a residential property to be built at 146 Old Kennedy Road in Markham, Ontario, under agreements with Goldentrust Development Inc. and Spring Garden Homes Inc. (the Vendor Defendants). 2604967 Ontario Inc. formerly held title to the property. The Vendor Defendants originally promised delivery by December 18, 2021, and later failed to deliver by an extended date of May 18, 2023. The Plaintiffs terminated the Agreement of Purchase and Sale on June 8, 2023, and demanded return of their deposits, which the Defendants did not repay. The Plaintiffs commenced the action on January 22, 2024, and the Defendants jointly defended and counterclaimed on March 11, 2024. While a motion for a certificate of pending litigation or security was under reserve, Tarion's deposit guarantee program paid the Plaintiffs $100,000. On October 29, 2024, Associate Justice Brown ordered the Vendor Defendants to pay the remaining $167,000 in security into court under Rule 45.02. When the Vendor Defendants did not comply, the Plaintiffs brought a contempt motion. Justice Yamashita heard that motion on September 8, 2025, adjourned it to address deficient answers to undertakings from Mr. Zhang (the Defendants' representative), and ultimately released a decision on January 6, 2026, finding the Vendor Defendants in breach of the Security Order but declining to hold them in contempt, given evidence they lacked the funds to comply. Justice Yamashita also ordered the Vendor Defendants to comply with AJ Brown's Order within 30 days or face a motion to strike their defence, and separately ordered costs of $45,000 payable to the Plaintiffs on February 17, 2025 [as stated in the decision; this date precedes the September 2025 hearing and January 2026 ruling on the same contempt motion in the source document]. The Vendor Defendants paid neither the security nor the costs, prompting the Plaintiffs' motion before Associate Justice Glick to strike the Amended Statement of Defence and Counterclaim.

Policy and legislative provisions at issue

The motion turned on Rule 60.12 of the Rules of Civil Procedure, which allows a court to stay, dismiss, or strike a defence when a party fails to comply with an interlocutory order, and on subrule 57.03(2), which gives similar discretion where a party fails to pay costs of a motion. Both provisions permit the court to make such other order as is just. The court also drew on the multi-factor framework for exercising this discretion set out in Allen v. Kumar, 2022 ONSC 4223, itself derived from Rana v. Agnihotri, which directs courts to weigh factors such as abuse of process, the responsibility of litigants to comply with court orders, whether impecuniosity was raised at the time of the original order, and whether costs have become an inadequate remedy for continuing non-compliance.

Reasoning and analysis

Associate Justice Glick found that the Vendor Defendants' incomplete answers to undertakings from the contempt motion could not, standing alone, justify striking the defence, since the proper avenue for pursuing that information going forward was ordinary discovery rather than enforcement of the earlier undertakings. That deficiency was, however, relevant to the pattern of the Vendor Defendants' conduct under Rule 60.12. The central breach before the court was the Vendor Defendants' failure to pay the $167,000 security into court as ordered by AJ Brown and reaffirmed by Justice Yamashita, despite roughly two years having passed since the original order and six months since Justice Yamashita's order. The Vendor Defendants argued impecuniosity, but Associate Justice Glick noted they had produced no evidence to support that claim on this motion, citing Son v. Khan, 2018 ONSC 284, and Allen v. Kumar for the principle that impecuniosity does not shield a party from non-compliance with a court order, particularly where the claim was not raised when the original order was made and no motion to vary was pursued. Weighing the unpaid security, the unpaid $45,000 costs order, and the deficient undertakings together, the court concluded that an order under Rule 60.12 was warranted, since failing to act would risk turning the court into what the reasons described as a paper tiger. On the question of scope, Associate Justice Glick distinguished 2604967 Ontario Inc. from the Vendor Defendants: because 2604967 was never subject to the Security Order, its non-compliance could not be equated with that of the Vendor Defendants, even though all three Defendants had filed a joint defence.

Ruling and overall outcome

The Plaintiffs succeeded against the Vendor Defendants, Goldentrust Development Inc. and Spring Garden Homes Inc., whose Amended Statement of Defence and Counterclaim was struck, which also had the effect of dismissing their counterclaim. The motion was denied as against 2604967 Ontario Inc., which instead was ordered to serve and file an amended pleading addressing only its own defences and counterclaims within thirty days, failing which the Plaintiffs may bring a further motion to strike its defence. On costs, Associate Justice Glick awarded the Plaintiffs $5,000, inclusive, payable by the Vendor Defendants within thirty days, reflecting their partial success in obtaining relief against two of the three Defendants; no costs were ordered to or from 2604967.