The Challenges Of Putting Humpty Dumpty Back Together Again

A recent order of the Ontario Superior Court illustrates the complexities of the right of rescission in real estate transactions.  The purpose of the remedy of rescission is to restore the parties to the position they were in prior to the entering into of the transaction in question.  When there has been a conveyance of interests in real property and consequently, the transfer of legal ownership of those interests, which often triggers tax consequences, restoring the parties to their pre-contractual position and unwinding the transaction can be complicated and is akin to "putting Humpty Dumpty back together again."

The recent order referred to above is that of Partners REIT, in which the REIT sought to rescind its April 2014 transaction whereby it acquired three Ontario retail centres in Hamilton, London and Kemptville from Holyrood Holdings valued at approximately $90 million.  The problematic aspect of the transaction under securities laws was that the interim CEO