Stewart v. Complex 329 Ltd. et al., (1990) 109 N.B.R.(2d) 115 (TD)

• Judge: Paul S. Creaghan, J.
• Court: Court of Queen's Bench of New Brunswick (Canada)
• Case Date: June 06, 1990
• Jurisdiction: New Brunswick
• Citations: (1990), 109 N.B.R.(2d) 115 (TD)

Stewart v. Complex 329 Ltd. (1990), 109 N.B.R.(2d) 115 (TD);

    109 R.N.-B.(2e) 115; 273 A.P.R. 115

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Terry Stewart (plaintiff) v. Complex 329 Ltd. et al. (defendants)

(M/C/38/88)

Indexed As: Stewart v. Complex 329 Ltd. et al.

New Brunswick Court of Queen's Bench

Trial Division

Judicial District of Moncton

Paul S. Creaghan, J.

June 6, 1990.

Summary:

The vendor provided false financial statements to a potential purchaser. The purchaser relied on the statements and purchased the vendor's company. The purchaser later discovered the deceit and attempted to rescind the contract. The vendor ignored the purchaser. The purchaser continued to operate the company. The company failed three months later. The purchaser sued the vendor for rescission and damages on the ground of fraudulent misrepresentation.

The New Brunswick Court of Queen's Bench, Trial Division, granted the application.

Contracts - Topic 4188

Remedies for breach - Rescission - Time for - The New Brunswick Court of Queen's Bench, Trial Division, dealt with the issue of when rescission of a contract took effect: the date the rescinding party gave notice of the rescission to the other party; the date the action for rescission was commenced; the date the assets were sold by a receiver; or the date of the court's judgment - The court held that the date of rescission was the date the rescinding party gave notice to the other party - See paragraph 52.

Contracts - Topic 4193

Remedies for breach - Rescission - Grounds - Fraudulent misrepresentation - Stewart purchased a business from the defendants for $250,000 - The defendants warranted that the financial information which formed part of the Agreement of Purchase of Sale was true and correct - The financial information concerning the business was false - Stewart attempted to rescind the sale three months after closing but was ignored by the defendants - The business failed three months later - Stewart sued for rescission and damages on the ground of the defendants' fraudulent misrepresentation - The New Brunswick Court of Queen's Bench, Trial Division, granted the application.

Contracts - Topic 4197

Remedies for breach - Rescission - Bars - Sale to third parties - Stewart was induced to purchase the defendants' business by means of false financial statements - Stewart transferred the assets to Cam-Steam (1987) - Stewart discovered the fraud and sued for rescission - The vendors submitted that rescission was not available because it would damage the interest of an innocent third party (Cam-Steam (1987)) which had acquired its interest before Stewart decided to rescind - The New Brunswick Court of Queen's Bench, Trial Division, held that the interest of the third party would be better served by allowing rescission - See paragraphs 54 and 58.

Contracts - Topic 4197

Remedies for breach - Rescission - Bars - Restitutio in integrum - A vendor induced a purchaser to purchase a company by providing false financial statements - The purchaser later attempted to rescind the agreement - The vendor ignored him - The business failed three months later and the assets were sold by the receiver - The purchaser sued for rescission and damages - The vendors submitted that rescission was not a remedy because the purchaser was not in a position to return what was purchased - The New Brunswick Court of Queen's Bench, Trial Division, ruled that the vendors could not rely on the doctrine of restitutio in integrum when it was the vendor's conduct which caused these events to come to pass - See paragraph 53.

Contracts - Topic 4197

Remedies for breach - Rescission - Bars - Due diligence - The purchaser sued for rescission on the ground of the defendants' fraudulent misrepresentation regarding the purchased company's financial statements - The defendants claimed that rescission was not available because the plaintiff would have discovered the fraud if he had checked - The New Brunswick Court of Queen's Bench, Trial Division, stated that "it is no defence to an action to rescind the contract that the person to whom the representation was made had the means of discovery, or might, with reasonable diligence, have discovered that it was untrue." - See paragraph 26.

Cases Noticed:

Redgrave v. Hurd (1881), 20 Ch. D. 1, folld. [para. 26].

Thuenken et al. v. Schweer et al. (1987), 83 N.B.R.(2d) 244; 212 A.P.R. 244, refd to. [para. 34].

Kupchak v. Dayson Holdings (1965), 53 D.L.R.(2d) 482 (B.C.C.A.), refd to. [para. 53].

Wadinger v. Lake (1977), 16 O.R.(2d) 362 (Ont. H.C.), refd to. [para. 53].

Authors and Works Noticed:

Cheshire, Fifoot & Furmston, Law of Contract (11th Ed. 1986), p. 276 [para. 52].

Chitty on Contracts, p. 281 [para. 55].

Waddams, The Law of Contract (2nd Ed. 1984), p. 308 [para. 51].

Counsel:

G. Scott Ellsworth, for the plaintiff;

Camille Malenfant, for himself and as the president, director and principal shareholder of Complex 329 Ltd.;

The defendant Complex 329 Ltd. was not represented by a solicitor.

This action was heard on May 14 to 18, 1990, by Paul S. Creaghan, J., of the New Brunswick Court of Queen's Bench, Trial Division, Judicial District of Moncton, who delivered the following judgment on June 6, 1990.