[21] In Snell's Equity, 31st ed. (John McGhee ed., London: Sweet & Maxwell, 2005), the equitable principle of rectification is defined at para. 14-02:
There will be cases where the terms of the instrument do not accord with the true agreement between the parties: a term may have been omitted, or an unwanted term included, or a term may be expressed in the wrong way. In such cases, equity has power to reform, or rectify, that instrument so as to make it accord with the true agreement. What is rectified is not a mistake in the transaction itself, but a mistake in the way in which that transaction has been expressed in writing.
[22] The appellants assert that although the application judge purported to conduct a rectification analysis, his actual conclusion - setting aside the amalgamation - does not comport with the above definition of the remedy. In light of the application judge's factual conclusion that "the true intention of TCR ... was that 846 was to be included in the amalgamation as a corporation without any liabilities", they argue that, if the law permitted, the proper rectification order would have been to amend the amalgamation to reflect this intention. This is not what the application judge did; instead, he simply set aside the amalgamation, effectively sending all of the parties back to 'square one'.
[23] There is some force to this submission. A pure rectification order amending the amalgamation to reflect the parties' intention that 846 was joining the amalgamated company with no liabilities would have violated s. 178(2)(a)(i) of the Business Corporations Act, which provides:
178(2)The articles of amalgamation shall have attached thereto a statement of a director or an officer of each amalgamating corporation stating that,
(a) there are reasonable grounds for believing that,
(i) each amalgamating corporation is and the amalgamated corporation will be able to pay its liabilities as they become due,
[24] In any event, the application judge did not make a rectification order along these lines. Rather, although he used the analysis and language of rectification, in the end he simply set aside nunc pro tunc the amalgamation.
[25] The question then becomes: was this order lawful and appropriate? In my view, it was.
[26] Broadly speaking, a superior court has "all the powers that are necessary to do justice between the parties": see 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., [1972] 2 O.R. 280 (C.A.), at p. 282. More specifically, "superior courts have equitable jurisdiction to relieve persons from the effect of their mistakes": see 771225 Ontario Inc. v. Bramco Holdings Co. (1995), 21 O.R. (3d) 739 (C.A.), at p. 741.
1 comment:
I have to disagree with your statement that the Court made a useful restatement of the law of rectification. In my opinion, the Court accepted that rectification didnt apply in this case. What was being sought was actually recission. For rectification - the deal is put together as the parties intended. For recission the deal is set aside. Then citing 80 Wellesley the Court stated it has the power to do what is justice. But that power should always be bound by the developed law - either common law or equitable law. For the remedy of recission they are tests that have to be met. But the Court did not articulate this - or any other test. This decision can simply be taken for the finding that the Court can do what it wants if it feels it is giving justice to the parties. But justice always has boundaries. And those boundaries have been developed over centuries. On the flip side - when will a commerical transaction be safe. What if they bought a property and it had a buried gas tank. Can they get rectification to set aside that purchase because they didnt intend to buy a property with a buried gas tank? Are they required to do any due diligence before they buy the property - or does buying it blindly without finding out that a gas station on the property disentitle them to rectification. The astonishing thing in this case - if you look at the trial decision - look at all the mistakes made and the complete lack of diligence by the parties. Does this decision mean that the less investigative work you do - the better your chances are of setting aside a bad deal?
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