The applicants, a syndicate of lenders and various construction trades, sought declarations that the respondent surety could not rescind performance and payment bonds issued for a hospital redevelopment project.
The surety had discovered alleged fraud and collusion in the procurement process and commenced a separate action for rescission.
The applicants argued they were innocent third parties whose rights under the bonds could not be defeated by the alleged fraud of the principals.
The court dismissed the applications, finding that the applicants' rights were derivative of the principals and that rescission remained a possible equitable remedy that must be determined on a full factual record at trial.
