Executive Summary: Key Legal and Evidentiary Issues

• Peel Exterior Maintenance Inc. moved to strike the defendants' statement of defence under sub-Rule 30.08(2)(b) and Rule 60.12 of the Rules of Civil Procedure for failure to comply with production orders made on July 21, 2025 and April 21, 2026.
   
• Both parties accepted that the governing test was the set of common sense factors from Falcon Lumber Limited v. 2480375 Ontario Inc. (GN Mouldings and Doors), 2020 ONCA 310.
   
• Associate Justice Eckler found that the defendants' default was not deliberate and that most of the ordered documents had been produced by the August 27, 2026 hearing.
   
• Evidence that some of the judgment debtor's documents were destroyed in 2024 under a document retention policy did not show what was destroyed or when, or that the missing records would prevent the plaintiff from advancing its case.
   
• Reliance on Debono v. JCD Property Ltd., 2025 ONSC 4139, aff'd 2026 ONCA 310, failed because that case involved fiduciaries, erased business records, and repeated breaches of clear terms of a court order.
   
• Although the motion was dismissed, the court ordered the defendants to pay the plaintiff partial indemnity costs of $8,315.70 because their delay made the motion necessary.
   

Facts of the case

Peel Exterior Maintenance Inc. provides landscaping and snow removal services. On October 16, 2017 [one of the subcontracts in the record is described as dated October 26, 2017], it entered into eight subcontracts with a corporation or corporations controlled by Mr. Peniche to provide "Winter Maintenance" services at eight locations between December 15, 2017 and April 14, 2018. These services included snow clearing from asphalt areas, salting and de-icing, and sidewalk and walkway shovelling. The subcontracts identified the contracting company only as "GMCC" or "GMCC Inc." When it did not receive full payment, the plaintiff sued in the Small Claims Court on October 30, 2018.

2497353 Ontario Corp. o/a GMCC ("GMCC 249") defended that action and filed a defendant's claim. After a three-day trial, the Deputy Judge awarded the plaintiff the full $27,121.09 claimed, dismissed the defendant's claim, and awarded $12,000 in costs after the defendants had erroneously made allegations of fraud against the plaintiff. With interest, more than $42,000 is now owing under the judgment. At an examination in aid of execution, GMCC 249 took the position that it had no or nominal assets and had ceased operations. According to the plaintiff, GMCC 249 stopped operating about a month after being served with the Small Claims claim, while Mr. Peniche carried on the same snow removal business through one or more of the other corporate defendants.

The plaintiff then brought this simplified procedure action against GMCC 249, Ground Maintenance Cleaning Contractors Inc. ("Ground MCC Inc."), 2497352 Ontario Inc. o/a JMCC ("JMCC-249"), JMCC Ltd., and Mr. Peniche personally. It seeks damages through several causes of action, including misrepresentation and breach of contract, along with an oppression remedy. Its central allegation is that Mr. Peniche abandoned GMCC 249 and began operating its business through Ground MCC Inc. and/or other related companies to frustrate the judgment, including by transferring the business and assigning the benefits of contracts. It is undisputed that Mr. Peniche is the sole director/officer and controlling mind of each corporate defendant, and that all of them carry on business from the same registered head office at 424 Gilbert Avenue, Toronto. The defendants deny that the companies are related or affiliated and maintain that the other three corporations are neither parents nor subsidiaries of GMCC 249. They argue that the plaintiff is abusing the court's process by trying to enforce the judgment against the three other corporate defendants because they have assets and GMCC 249, the party the plaintiff contracted with, does not.

Mr. Peniche served an affidavit of documents on January 15, 2024. When the plaintiff's motion for further and better affidavits of documents first came before the court on July 23, 2024, the parties confirmed they had made no effort to agree on a discovery plan as Rule 29.1.03 requires, and the motion was adjourned. Unable to agree on a plan, the parties ultimately argued the motion on June 4, 2025. In reasons dated July 21, 2025, the court ordered the defendants to produce some, but not all, of the requested documents (the "Production Order") and awarded the partially successful plaintiff $2,750 in costs. No documents had been produced when the plaintiff served this motion to strike on December 3, 2025, returnable April 21, 2026. Defence counsel delivered the first financial and banking statements on April 1, 2026. At the April 21, 2026 attendance, counsel disclosed that some documents may have been destroyed years earlier under a record-keeping policy that called for destruction after seven years. The court gave the defendants 60 more days to produce, ordered them to pay $1,000 in costs thrown away within 30 days, and adjourned the balance of the motion to August 27, 2026. Further documents followed on June 26, August 20, and August 21, 2026.

Policy and legislative provisions at issue

The motion was brought under sub-Rule 30.08(2)(b) and Rule 60.12 of the Rules of Civil Procedure, the latter dealing with failure to comply with an interlocutory order. Under Falcon Lumber, striking a pleading under r. 30.08(2)(b) is not limited to "last resort" situations, though courts usually want a party to have a reasonable opportunity to cure its non-compliance first. That decision directs courts to weigh six common sense factors: whether the failure is deliberate or inadvertent; whether it is clear and unequivocal; whether the defaulting party offers a reasonable explanation coupled with a credible commitment to cure the default quickly; whether the default is material or minimal; the extent to which the party remains in default; and the impact of the default on the court's ability to do justice. A court may also consider the merits, although that factor plays only a limited role in production cases, and must ask whether striking the pleading is a proportional remedy. Additional considerations include how far the default has increased the other side's litigation costs and delayed final adjudication, having regard to the complexity of the claim and the amount in dispute.

Rule 29.1.03 makes a discovery plan mandatory, and under Rule 29.1.05(1) the court may refuse relief or costs on a discovery motion where no plan has been made. The oppression claim in the underlying action is brought under section 248 of the Business Corporations Act, R.S.O. 1990, c. B-16 [as rendered in the decision]. On costs, section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, gives the court discretion over by whom and to what extent costs are paid, Rule 57.01 lists the factors the court may consider, and Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), sets the objective of fixing an amount that is fair, reasonable, proportionate, and within the parties' reasonable expectations.

Reasoning and analysis

The plaintiff argued that the defendants' failure could not be inadvertent, since they had not made full production since the action began in 2023 and had unsuccessfully resisted disclosure on the production motion. It said the default was clear, unexplained, and material, breaching two court orders on top of the defendants' general disclosure obligations. In its view, the 2017 and 2018 bank statements, particularly those showing the judgment debtor's day-to-day activity before it was served with the Small Claims claim, were essential to any before-and-after analysis of the corporate defendants' operations. Two motions on the same issue had also driven up the plaintiff's costs and delayed the final adjudication of the case on its merits.

Associate Justice Eckler first distinguished Falcon Lumber, where there had been 30 dates for motions, cross-motions, and case conferences, 22 orders or judicial endorsements, and six production orders against the Lotey defendants, who still had not made full production. Here, the court found that striking the defence was not warranted and that the defendants' late or incomplete compliance could be addressed through costs, citing Aidoo v. Durbejai, 2026 ONSC 1951.

The failure to produce was not found to be deliberate. Not all of the documents the plaintiff requested on the original motion had been ordered, and the court acknowledged the defendants' point that the Production Order set no deadline, though that argument carried less weight given the plaintiff's position that the documents belonged in the defendants' affidavits of documents from the outset. Evidence showed that from April 1, 2026 onward, the defendants worked to locate and produce the ordered documents, and plaintiff's counsel conceded that a significant number had been produced by the hearing date. Given the number of defendants, their similar names, and the parties' use of different short forms, there was some confusion and slight disagreement about exactly what remained outstanding.

Bank statements for Ground MCC Inc., JMCC-249, and JMCC Ltd. appeared to have all been produced, although the parties disagreed about the status of productions for JMCC Ltd. and JMCC-249. JMCC-249's financial statements for 2017 to 2020 and Ground MCC Inc.'s for 2017 to 2022 were also in. For JMCC Ltd., the defendants said only the 2017 financial statements were missing and that they were still searching, while the plaintiff said 2018 and 2020 were missing as well. GMCC 249's financial statements for 2019 to 2023 had been produced, along with its bank records for January to March 2017 and from October 2018 onward to 2022. According to the defendants, no 2017 financial records exist for GMCC 249 because none were prepared, as it had no revenue that year. Plaintiff's counsel pointed out that the 2019 financials also appeared to show no revenue, yet financial statements for 2019 had been produced. Counsel further noted, for the first time at the hearing, that the 2017 and 2018 bank records for GMCC 249 referenced different account numbers, and defence counsel undertook to make enquiries of her clients. The court found that the majority of the ordered documents had been produced and that the account-number question and the absence of 2017 financial statements could be explored at examinations for discovery.

On the destruction of records, the plaintiff noted that some of the judgment debtor's 2017 records were destroyed in 2024, after the statement of claim was issued in 2023, and relied on Debono, where Justice Myers struck statements of defence under Rule 60.12. The court found Debono distinguishable. In that case, estate trustees alleged that David Debono, Elizabeth Muscat, and Jennifer Nesci had wrongfully removed several million dollars of business assets shortly before their mother died; the defendants were fiduciaries who had ignored court orders and repeatedly breached clear terms of an order, business software entries had been erased and replaced, and the court found a prima facie case that upwards of $6 million remained unaccounted for. Associate Justice Eckler also corrected the plaintiff's characterization of the earlier production ruling: the court had not found a prima facie case, only that "the plaintiff presented some evidence in support of the allegations," in response to the defendants' argument that there was zero evidence and that the plaintiff was on a fishing expedition.

Nothing in the record showed that any documents were destroyed after the Production Order was made. Unlike in Debono, none of the affiants had been cross-examined. The evidence did not establish which documents were destroyed in 2024 or when, and the court considered it too early to conclude that the missing records would prevent the plaintiff from advancing its case or impede a fair determination. Defence counsel had written to plaintiff's counsel on September 17, October 21, and November 17, 2025, and on April 1, April 7, and April 13, 2026, explaining that compliance would take time because of the volume of documents and their age. The defendants' evidence was that they learned of the destruction only during searches undertaken to comply with the Production Order, that they had always intended to comply, and that they had searched their records thoroughly and asked their accountant to review his files. With examinations for discovery still to come, many if not all of the remaining gaps might be filled, and the court was not satisfied that the plaintiff would suffer prejudice affecting its ability to prosecute the action. The defendants had, however, delayed the proceeding and caused the plaintiff to incur unnecessary costs, which in the court's view should be addressed through a costs award rather than by striking the defence.

Ruling and overall outcome

The motion to strike was dismissed, leaving the defendants' statement of defence in place. Associate Justice Eckler nonetheless held that it would be unfair for the plaintiff to bear the financial burden of a motion that should not have been necessary. The plaintiff had sought substantial indemnity costs of $11,087.60, with its costs outline showing partial indemnity costs of $8,315.70, both figures already reduced by the $1,000 awarded on April 21, 2026. Substantial indemnity costs were refused because the defendants had made continuous efforts to comply, had not deliberately ignored court orders, and had paid both prior costs awards. Considering the nature of the motion, the number of defendants, and the time required to review and organize the significant productions relating to the four defendants, the court found the partial indemnity figure fair, reasonable, and within the parties' expectations. While the defendants prevailed on the motion itself, they were ordered to pay the plaintiff $8,315.70 in partial indemnity costs, inclusive of fees and disbursements, within 30 days unless the parties agree otherwise.