CORPORATIONS - Rectification of records - Standing - Compensation for loss

Law360 Canada (December 23, 2022, 6:30 AM EST) -- Application for rectification by the Applicants, Sleep Country Canada Inc. (SCCI) and Sleep Country Canada Holdings Inc. (SCCHI). The Applicants were significant players in the retail mattress business. The Applicants sought the rectification, nunc pro tunc, of two written instruments that failed, albeit unintentionally, to effect and properly describe a share exchange transaction between them in accordance with their agreement. The Respondent did not oppose the relief sought. The Applicants entered into a share exchange transaction with one another. Put simply, drafting errors were made in certain documents that implemented the transaction agreed to. The drafting mistakes also had a trickledown effect, in that certain additional miscellaneous or consequent errors were made in other documents utilized in the share exchange transaction. Following the share exchange transaction, Sleep Country proceeded as if the transaction had been properly effected. Accordingly, the issue was straightforward yet fundamental: should the documents be rectified in the manner sought?

HELD: Application granted. Rectification was intended to correct documents that erroneously failed to accurately record a clear and unequivocal agreement. The Court was satisfied that all four requirements were met here. The evidence was overwhelming that the parties had reached an agreement. Moreover, the subsequent conduct of the parties was consistent with the conclusion that they had reached an agreement. The agreement was effective when the instrument was executed. There was no doubt that the documents sought to be rectified did not accurately record the agreement between the parties, and rectification, if granted as proposed, would be such that the instruments would in fact carry out the agreement reached. The Court was satisfied that rectification was appropriate. The Court was satisfied that the parties were not seeking to change their bargain, to retroactively effect more efficient tax planning, or indeed for any other purpose. Rather, it was satisfied that the parties were seeking an order rectifying the written instruments so that they accurately recorded the agreement previously reached, which remained in effect, unamended. Finally, additional miscellaneous mistakes unrelated to most of the rectification sought, were also made in the Share Exchange Agreement and the resolution as described at paragraph 32 of the factum of the Applicants. They were substantively immaterial but, in any event, also met the test for rectification. In the result, the Share Exchange Agreement, the Resolution and the shareholders’ ledger were rectified in the form sought by the Applicants.

Sleep Country Canada Holdings Inc. v. Canada (Attorney General), [2022] O.J. No. 4746, Ontario Superior Court of Justice, P.J. Osborne J., October 25, 2022. Digest No. TLD-December192022005

LexisNexis® Research Solutions