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In Yinghe Investment (Canada) Ltd. v CCM Investment Group Ltd., 2025 BCSC 2113, the Supreme Court of British Columbia granted CCM's first application to strike pleadings, confirming that repeated non-compliance with court orders and procedural rules may justify such an outcome under Rule 22-7, even on a first application. While such orders are rarely granted on a first application, the Court clarified that the mere fact an application is the first attempt is not, on its own, a reason to refuse the order.
This decision is significant, as BC courts have traditionally favored incremental sanctions and warnings before resorting to striking a pleading. However, in Yinghe, the Court found a pattern of egregious conduct including intentional non-compliance with multiple orders and a last-minute document dump that necessitated an adjournment of trial, justified the relief sought on the first attempt.
Background
CCM is a real estate developer. Yinghe is a shareholder of CCM.
On August 4, 2023, Yinghe commenced its claim seeking repayment of shareholder loans and declarations of ownership over certain strata units in the development. Yinghe argued that the loans would be retired through the transfer of strata units and that CCM held nine units in trust for Yinghe. CCM counterclaimed against Yinghe and its directing mind, Jian Sheng Chen, denying such allegations and alleging serious misconduct.
After numerous failed attempts to compel Yinghe's compliance with document production obligations and court orders, CCM applied to strike Yinghe's claim and response to counterclaim, with Yinghe and Mr. Chen acting as respondents in the application.
Pattern of Egregious Conduct
The Court's decision to grant CCM's application on the first attempt was grounded in “compounding egregious conduct” by the respondents. Despite multiple opportunities, their actions demonstrated a persistent and intentional disregard for the Rules and court orders. The Court found that the respondents' assurances about producing documents were insincere and that their non-compliance was aimed at avoiding trial and frustrating CCM's efforts to move the case forward.
Failure to Produce Documents
Seven months after the commencement of the claim, the respondents had failed to produce any documents. Partly because of this non-disclosure, the Court ordered the production of tenancy information required for CCM's compliance with statutory requirements. Minutes before the deadline, counsel advised that Mr. Chen did not know how to complete the necessary declarations, contradicting earlier statements that he had all the required information to complete those declarations.
By May 2024, the respondents still had not served a list of documents, doing so only the day before the application hearing to compel production of the same.
Misrepresentations and Intentional Delay
In November 2024, the Court ordered the respondents to produce tenancy and sale documents for certain strata units but again, they failed to comply. Instead, in January 2025, the respondents amended their list of documents, asserting that they had “carefully reviewed” their records and did not possess certain documents relating to specific strata units.
Weeks later, however, the respondents relied on documents that they claimed were not in their possession to support their injunction application. Although the respondents promised to update their list “as soon as possible,” they delayed for four and a half months, producing an updated list only on the eve of the hearing of the strike application. This late production included over 1,000 documents, many in Chinese requiring translation, which caused the trial to be adjourned.
Breach of Consent Order
Under a consent order made in June 2025, the respondents were required to deposit rent from specific units into their lawyer's trust account and provide monthly accounting. The respondents failed to confirm deposits or provide the accounting, ignoring repeated requests from CCM for confirmation. The evidence showed rent was received, but the respondents did not comply with their obligations, amounting to further intentional disregard of the order.
Legal Principles
The Court's authority to strike a claim for non-compliance arises under Rule 22‑7. This Rule allows relief to be granted when a party fails to comply with the Rules or a court order, including dismissing a proceeding, striking a pleading, or making any other order that furthers the object of the Rules. Specifically, Rule 22‑7(2) empowers the court to set aside a proceeding wholly or in part, and Rule 22‑7(5) and (6) allow the court to dismiss a claim where a party refuses or neglects to produce documents or comply with directions of the court without lawful excuse.
Court Rejects the Respondents' Defences
The Court rejected the respondents' argument that they had a valid excuse for failing to comply with document production obligations, finding the respondents' non-compliance intentional and persistent. It emphasized that such failures constitute a serious breach, and repeated disregard can justify the striking of pleadings.
The respondents argued that the application should be refused because it was CCM's first attempt to seek this “draconian” relief, and no prior warning had been given. The Court rejected this argument, holding that that a first application does not in itself insulate a party from the consequences of persistent and deliberate non-compliance. The Court further noted that prior orders and applications had already signaled the gravity of the respondents' conduct and provided sufficient notice that continued non-compliance could result in severe consequences.
The respondents further relied on proportionality principles, interpreting them as if they conferred an automatic right to multiple opportunities before a claim could be struck. The Court clarified that proportionality requires the response to match the prejudice caused.
Finally, the Court rejected the respondents' argument that the high value of their claim—approximately $12.5 million—should weigh against granting the application. The Court commented that permitting leniency on the basis of quantum would undermine the integrity of the judicial process by suggesting that parties advancing high-value claims are subject to lesser obligations to comply with the Rules and court order orders.
The Court struck Yinghe's claim and permitted CCM to proceed with its counterclaim as though no response had been filed.
Key Takeaways
This decision illustrates three key principles regarding strike applications:
- Though rare, an application to strike can succeed on the first attempt where a party's conduct demonstrates an intentional and repeated disregard for the Rules and court orders.
- The fact that an application to strike is the first of its kind is not a reason on its own to refuse granting the relief sought. Parties are not necessarily entitled to a second chance to comply where evidence demonstrates a persistent pattern of non-compliance and disregard for court orders.
- Proportionality is assessed based on the nature of the misconduct and its impact on the litigation, not on the quantum of the claim.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
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