Prejudice To Innocent Third Parties Not An Absolute Bar To Rescission

The Ontario Court of Appeal released its decision in Urban Mechanical Contracting Ltd. Et al. v. Zurich Insurance Company Ltd. on August 17^th, 2022. It dismissed the appeal and upheld the application judge's conclusion that prejudice to innocent third parties is not an absolute bar to rescission.

The issue of whether the surety is entitled to exercise this remedy and rescind its bonds cannot be disposed of summarily by way of application but rather must be decided at trial, having regard to all the facts.

In 2011, St. Michael's Hospital entered into a public-private redevelopment agreement with Infrastructure Ontario to build a patient care tower. The contract was awarded to 2442931 Ontario Inc ("Project Co"). Bondfield Construction Company Limited ("Bondfield") was the construction contractor.