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The Court of Appeal affirmed that the presence of innocent third parties is not an absolute bar to rescinding a surety bond induced by fraud.
The appellants, a group of subcontractors and a bank, appealed an application judge's decision that rescission of surety bonds might be possible even if it affects innocent third parties.
The bonds were issued by Zurich Insurance Company Ltd. for a large construction project, but Zurich later discovered alleged fraudulent misrepresentations and collusion that induced it to issue the bonds.
The appellants sought a declaration that rescission was unavailable as a matter of law due to the involvement of innocent third parties.
The Court of Appeal dismissed the appeal, affirming that prejudice to third parties is not an absolute bar to rescission, especially in cases of fraudulent misrepresentation, and that such a determination requires a full factual record at trial.
Surety granted leave to intervene in construction lien reference due to direct interest in holdback distribution.
Zurich, the surety for the insolvent general contractor Bondfield, brought a motion to intervene as a party in a construction lien reference.
Zurich sought to participate in a vetting committee for the distribution of the owner's holdback among the timely lien claimants.
The court granted the motion, finding that Zurich had a direct interest in the holdback because it had made significant holdback advances to the major electrical and mechanical trades and had taken partial assignments of their lien rights.
The court ordered the timely claimants to pay Zurich's costs of $30,000.
The court maintained the established schedule for executive discoveries and set deadlines for third-party pleadings.
This case conference endorsement outlines procedural progress in a complex, multi-party construction litigation involving Carillion Construction Inc., the City of Toronto, and NORR Limited, among others.
The court addressed the schedule for executive discoveries, ruling that they must proceed as planned, contrary to the City's submission.
It also confirmed the mediation schedule for March-April 2019, involving various claimants and insurers.
Further directions were given regarding documentary production by subcontractors and the City's amended third-party claim against Metrolinx, setting deadlines for Metrolinx's response or motion.
