Date: 04.05.2004
Country: Canada
Number: 2004 MBCA 63
Court: Court of Appeal of Manitoba
Parties: Brown & Root v. Aerotech Herman Nelson Inc. et al.


(i) The plaintiff, Kellogg Brown & Root Inc. (Brown), claimed that in purchasing from the defendant, Aerotech Herman Nelson Inc. (Aerotech), 282 portable heaters (on behalf of its client, the United States government, for immediate use in Hungary), it was the victim of a fraud and entitled to rescission of the contract. The trial judge so found. Both conclusions are challenged on this appeal.

(ii) Brown is one of the world's largest engineering and construction firms with its head office in Houston, Texas. It has provided long-term service to the U.S. government, including the military, since at least 1992. In early December, 1995, Brown was retained to provide logistical support in the establishment of a life-support staging area for the U.S. military near Kaposvar. The staging area was to include living quarters and services for up to 20,000 soldiers, many of whom would be accommodated in large "festival" tents. Given the time of year and the anticipated weather conditions in Hungary, the trial judge found there was an urgent need for heat, not only to provide essential warmth but also to reduce the snow load on the roofs of the tents.

(iii) As a result of the intervention of an entrepreneur from Florida, Steven Riggins, Brown was put in contact with Aerotech, initially with Aerotech's sales manager, Peter Marykuca, and thereafter with the defendant, Paul R. Sigurdson, the president and operating mind of Aerotech.

(iv) Matters quickly came to a head on Saturday, December 16th. Discussions between Riggins and Sigurdson recommending the supply of Herman Nelson H82 heaters were followed by direct discussions between Sigurdson and Tom Barrow, Brown's purchasing department's supervisor in Houston, together with Ken Dreiling, a field buyer for Brown charged with the task of scouring the heaters. Several written proposals, accompanied by trade material and brochures, were sent by Sigurdson firstly to Riggins and then directly to Brown. Aerotech's material asserted that the Aerotech heaters were "new product." Late that afternoon in a conversation involving Barrow, Dreiling and Sigurdson, it was agreed that Aerotech, in order to expedite the installation and operation of the heaters in Hungary (Sigurdson having earlier indicated that it would take six to eight weeks to complete the testing and installation of the heaters), would send five of its technicians to Hungary to arrive concurrently with the heaters. On this understanding, Brown prepared and forwarded a facsimile notice of award to Aerotech for 240 H82 heaters later that afternoon. On December 18th, this was increased to 282 heaters. As agreed upon, the purchase price in the final purchase order was $1,392,071.50, made up as follows:

56 spare parts kits: $39,312 (U.S.) ($702 each);
282 bare base recirculating heaters: $1,319,760 (U.S.) ($4,680 each);
15 manuals: $499.50 ($33.30 each);
cable (not to exceed $7,500); and
five technical representatives (not to exceed $25,000 at a rate of $500 per day per person).

Payment in full was required before delivery.

(v) Following the wiring of the full purchase price by bank draft on December 19th, the first shipment of 141 heaters was air freighted at Brown's expense from Winnipeg to Kaposvar arriving on December 21st, and the second load the next day. The cost to Brown was $321,905.55 U.S.

(vi) Immediately after the arrival of the heaters, it became apparent to Brown's representatives at Kaposvar that the heaters were not new, but were used and had numerous missing or broken parts.

(vii) On December 22nd, Joe Williams, Brown's overall procurement manager, and Dreiling spoke with Sigurdson. The conversation was not pleasant. Sigurdson denied that the heaters were used or "couldn't be made operable," and insisted that they were new. When Williams suggested that the hour meters had been changed on the heaters, Sigurdson told Williams that he was a " liar." Williams insisted that the technicians be sent over immediately as promised (they did not arrive until January 4th). He told Sigurdson that Brown was rejecting the heaters and was not prepared to accept them until they were "up and operational."

(viii) Thereafter all efforts in Hungary, given the conditions there, were directed toward making the heaters work.
(ix) The technicians commenced work on January 5th but returned home a week later due to lack of progress and the continuing unavailability of spare parts and other accessories.

(x) In February 1996, all H82 heaters were ordered in by Brown and were not used thereafter, with the exception of six heaters which inadvertently remained in the field - three operational - for another year or so.

(xi) On March 6, 1996, Brown's legal department provided written notice to Aerotech that the contract was being rescinded. Aerotech was asked to remove the heaters and reimburse Brown for all amounts paid, including the purchase price, transportation costs and any other costs incurred.


(xii) The trial judge, in a thorough judgment, concluded that Brown "at all times expected that the H82 heaters would be a new product" in keeping with the terms of the contract and that there "was an obvious intention to mislead the buyer [by Sigurdson], albeit the used state of the heaters was evident" (at para. 64). The terms of the contract she concluded were those set out in the formal purchase order from Brown to Sigurdson. Not only did Aerotech take no steps to advise Brown of the true state of the heaters, but (at para. 84):

Instead, Aerotech took steps to disguise the fact that the goods were used by virtue of altering hour meters, painting, cleaning, reserializing and changing manufacture plates.

(xiii) The trial judge had no difficulty in finding that all of the elements of fraud had been made out against Aerotech and Sigurdson, emphasizing (at para. 96):

In this case, a reasonable buyer would have anticipated that new product was an intended and, indeed, an expressed term. There were clear misrepresentations by Aerotech and Sigurdson in this case.
And (at para. 117):

The misrepresentations are replete throughout this case but the question of "new" versus "old," the technicians and the spare parts kits best exemplify these issues. The spare parts kits simply did not exist, albeit B & R were invoiced and paid approximately $40,000.00 (U.S.) for them.

Finally (at para. 107):

I am mindful, as well, that B & R paid a significant sum for something that was valued in Aerotech's own financial statement at "nothing." I am persuaded to find it in these circumstances, based upon a heightened onus of proof, that fraud has been proven.

(xiv) The more difficult issue for her (as for us) was whether Brown had accepted the goods by attempting, after December 22, 1995, to "make the heaters work" or by such conduct had otherwise disentitled itself to reject the heaters as it purported to do by letter dated March 6, 1996.

(xv) She held that Brown was entitled to rescission, on the basis that (at para. 93):

In a number of cases it has been held that keeping and using goods for some time, in the hope that they might be made to work or be repaired, does not constitute acceptance. Again, as was stated in Fridman [Sale of Goods in Canada, 4th ed. (Toronto: Carswell, 1995) at 256]:

... A buyer who points out the defects in the goods he has bought, and attempts to have the seller rectify those defects over a period of time, does not accept the goods for the purposes of the exercise of his right to reject them for failure to be of the right quality. .... the buyer is entitled to a reasonable time within which the seller has an opportunity to make the goods function in accordance with the quality they ought to have under the contract. Until such reasonable time has elapsed, and while the efforts by the seller are taking place, the buyer's conduct in retaining the goods does not amount to acceptance.

(xvi) She found that Brown had repudiated the contract within a reasonable period of time. It was her conclusion that the fact that Brown had attempted to repair the heaters to make them useable did not constitute acceptance or bar rescission.

(xvii) In the result, judgment was given in favour of Brown with conversion to be made in Canadian dollars as at the date of the judgment.

(xviii) Punitive damages were awarded in the amount of $50,000, but Brown's claims for solicitor/client costs were rejected.


(xix) The trial judge found that "the state of the heaters was clearly at odds with what was anticipated by and contracted for by B & R" (at para. 73), and that Brown was the victim of a massive fraud. Aerotech and Sigurdson argue that in so finding the trial judge committed palpable and overriding error.

(xx) There can be no doubt that the most significant factual issue to be decided by the trial judge was: what did Brown contract for, new or used heaters? We have no hesitation in concluding that the trial judge got it right when she found that Brown had paid for and was entitled to new, unused H82 heaters. Close scrutiny of the evidence at trial, both documentary and viva voce, makes it clear that the overwhelming weight of evidence supports this finding.

(xxi) We begin our review by noting Aerotech and Sigurdson did not plead that Brown agreed to buy used military surplus heaters; indeed, as found by the trial judge, Sigurdson's posture throughout the events that gave rise to this action was that Brown had received new heaters. Only Marykuca, whose testimony was resoundingly rejected by the trial judge (as she put it, there were a "great many inconsistencies and blatant inaccuracies uncovered throughout the course of his [Marykuca] evidence" (at para. 66, and see para. 68)), testified that he had advised Brown on December 28, 1995, while in Houston that whether the heaters were supposed to be new or used was "a grey area." See paras. 56, 60 and 66-68 of the reasons.

(xxii) The trial judge had the following additional comment about Marykuca's testimony (at para. 44):

... [He] provided the court with a flavour of the company's business practices. At best those "practices" could be described as sharp. His evidence was at times evasive, confrontational and lacked the definitiveness necessary to render it totally reliable. Consequently, where the evidence diverges as to the substantive aspects of the "agreement," I accept that of the witnesses called on behalf of B & R.

(xxiii) Sigurdson did not testify at trial. The trial judge declined to draw an adverse inference from his failure to do so (though she might well have), deciding instead that: "The failure of Sigurdson to testify did not raise an adverse inference, it simply created a significant gap in the defendant's evidence" (at para. 45).

(xxiv) The scale of Aerotech and Sigurdson's deceit, as detailed in the reasons, is, if nothing else, impressive in its scale. See paras. 67-69. Aerotech, contrary to its written and verbal representations, never manufactured the type of heaters in question; they had been manufactured by others in the 1980s, previously used by the U.S. military, and purchased by Aerotech at a cost of about $45 a unit several years prior to the events that give rise to this litigation. Yet, Aerotech presented the heaters as "new product" and disingenuously attempted to persuade the trial judge that this description simply meant that it was "new" to Aerotech, as opposed to new equipment.

(xxv) Brown received anything but new heaters. Deficiencies were replete; virtually all of the 282 heaters (19 of which were H81 and not H82) were in various states of disrepair; 20 were not even transported from Winnipeg to Hungary given their condition.

(xxvi) Aerotech and Sigurdson argue that even if not new, the heaters were good, reliable military heaters and therefore fit, or capable of being made fit for the purpose. The trial judge demonstrably erred, they say, when she found that Aerotech technicians encountered "continued breakdowns" and "that a number ... that had been made operational functioned only on a temporary basis" (at paras. 28 and 60). In support of their position Aerotech and Sigurdson presented an analysis of Brown's service and use of the heaters as evidence that they were repairable and serviceable had Brown not prematurely sent Aerotech's technicians home on January 12, 1996. According to this analysis, approximately 121 heaters were made operational for some period of time, either by Brown's own staff or Aerotech's technicians, with the hour meters showing an accumulated usage of approximately 14,000 hours. Furthermore, six heaters were subsequently found in the field about a year later, three of which were operational.

(xxvii) While there can be no doubt that massive efforts were made by Brown and Aerotech's technicians to put the heaters into service, Aerotech's analysis assumes that the meter readings were accurate, a dubious proposition at best given evidence of tampering. It also assumes that those units initially repaired remained operational, which is not supported by the evidence of Murray Boles, one of Aerotech's technicians sent to Hungary, who stated a majority of the heaters they worked on that went out into the field were returned for additional work. Boles also testified that it would have taken two months for all the units to be made operational, assuming the availability of the appropriate equipment and replacement parts which as we have seen was not the case.

(xxviii) Critical to the effective and immediate operation of the heaters in Hungary was the role of Aerotech technicians, five in number, who were supposed to arrive concurrently with the heaters on December 22nd. This did not happen, nor did all the technicians possess the necessary expertise. They did not arrive until January 4th, two weeks after the delivery of the second load of heaters to Kaposvar. The trial judge summarized the evidence of Boles and Frank Nadoryk, another one of Aerotech's technicians who was in Kaposvar after January 5, 1996, as presenting a "bleak picture" (at para. 59). Nadoryk did not know how many heaters were operational on a continuous basis.

(xxix) In Boles' opinion, communicated to Brown's representatives, the technicians were fighting a "losing battle." By January 11, 1996, the technicians had run out of cabling and parts, most critically the K8 safety relay without which the units should not be operated and "which could not be replaced unless it was taken from another H82 heater" (at para. 61). Brown had been told that Aerotech had spare parts kits to maintain the H82s in the field, but none was supplied. Significant cabling was also needed and while testimony was presented by Aerotech staff to the effect that cabling had left Winnipeg before January 12th, it did not arrive prior to the departure of the technicians. In fact, the technicians never went to the field in Hungary to install the heaters. On January 11th, after a brief discussion with a Brown employee in Kaposvar, the decision was made that the Aerotech technicians should return home. Ironically, on the very same date, January 11th, Sigurdson advised Brown that the technicians were making "good progress" and that all 282 of the heaters should be operational before the end of the month.

(xxx) In our opinion, there was ample evidence to support the trial judge's conclusion that there was little effective use of the heaters before the decision was made by Brown to discontinue the attempt to service or use the heaters, and that given the "totality of the state of the used heaters ... and not each on an individual basis" (at para. 63), the heaters supplied were not fit for the purpose. In the result (at para. 94):
B & R personnel, because of the urgency of the heat situation, endeavoured to utilize and render functional the used heaters that were supplied. B & R did not signify acceptance by an attempt to repair nor did it retain the goods without reasonable notice of rejection.

(xxxi) One small item, but one which the trial judge accurately characterized as demonstrating "the flavour of Sigurdson's business dealings" (at para. 71), relates to Aerotech's invoicing to Brown. In total, Aerotech's counterclaim was in excess of $400,000 for goods and services such as manuals and spare parts kits, overtime wages for staff, and repeat invoices for accounts already paid. Only at trial was it acknowledged that none of these funds was in fact owing.

(xxxii) As to the applicable law, the trial judge correctly identified the four elements that are essential to sustain a finding of fraud and found all four to be present in the case before her (at para. 98). Aerotech and Sigurdson argue that she erred in finding that the defendants materially induced Brown to act to its detriment and that Brown had failed to prove damage. Both assertions are entirely without merit and deserve no further comment.

(xxxiii) One other observation needs to be made. Aerotech and Sigurdson, though they did not put the matter quite so bluntly, seemed to be arguing that the action of Brown, the defrauded purchaser, cannot succeed because it did not exercise due diligence on its own behalf. This position is unsustainable as a matter of law. See Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., [2002] 1 S.C.R. 678, 2002 SCC 19, at para. 67. Indeed, due diligence is not a pre-condition to rectification either. As Binnie J., writing for the court, noted (at paras. 68-69):
"[F]raud 'unravels everything'": Farah v. Barki, [1955] S.C.R. 107, at p. 115 (Kellock J. quoting Farwell J. in May v. Platt, [1900] 1 Ch.D. 616, at p. 623).

The appellants' concept of a due diligence defence in a fraud case was rejected over 125 years ago by Lord Chelmsford L.C. who said, "when once it is established that there has been any fraudulent misrepresentation or wilful concealment by which a person has been induced to enter into a contract, it is no answer to his claim to be relieved from it to tell him that he might have known the truth by proper inquiry. He has a right to retort upon his objector, 'You, at least, who have stated what is untrue, or have concealed the truth, for the purpose of drawing me into a contract, cannot accuse me of want of caution because I relied implicitly upon your fairness and honesty'": Central R. Co. of Venezuela v. Kisch (1867), L.R. 2 H.L. 99, at pp. 120-21.


(xxxiv) Was Brown entitled to reject the heaters and rescind the contract or, to put it another way, even if the right of rescission existed was the remedy lost or limited by the actions of Brown on and after December 22, 1995, in continuing to use, modify, or work on the heaters?

(xxxv) The trial judge found that Williams, on behalf of Brown, verbally rejected the heaters during his conversation with Sigurdson on December 22, 1995 (at para. 26), and that Brown's subsequent written rejection on March 6, 1996, was made "within a reasonable time" (at para. 94). As she summarized the matter in the conclusion to her judgment (at para. 115):

The conduct of Aerotech and specifically Sigurdson in these dealings was, for the lack of a better word, "appalling." There was a fundamental and total breach of contract. The used heaters, absence of spare parts kits, invoicing practices and lack of qualified technicians on a timely basis were all materially different from what was represented or contracted for. This entitles the plaintiffs [sic] to repudiation. Further, there was no undue delay in B & R's rejection of the goods to negate that remedy.

(xxxvi) The essence of Aerotech and Sigurdson's argument is that it was obvious to Brown by December 22nd that the heaters were not new and that with full knowledge of this fact Brown, by focussing its efforts on getting the heaters operational and putting some into use at field locations, precluded itself from rejecting them. Brown's response is that given the urgent circumstances, there was no other practical course of action that could be taken. It was only after the technicians arrived and started to work on January 5th that it was realized (within a week) that the situation was hopeless and the technicians were sent home.

(xxxvii) As we have already seen, there was ample evidence to support the trial judge's conclusion that Williams, in his conversation with Sigurdson on December 22nd, purported to reject the heaters, indicating that they would not be accepted "until they're up and operational." Of particular significance is that Sigurdson, while denying Williams' allegations (that the heaters were used, not new, had numerous missing and/or broken parts, there were no spare parts, cable or manuals, and that the hour meters had been tampered with), undertook to rectify all issues. He insisted throughout that the heaters were as bargained for and that with the assistance of Aerotech's expert technicians they would be operational in short order. Also of significance is the fact that Sigurdson never conceded at any time that the heaters were used military surplus, a contention he was only able to maintain because Brown, relying upon the representation and understanding that the heaters were new and a stock item, had not inspected them prior to payment and shipment.

(xxxviii) From a business standpoint, given the reality of the situation "on the ground" in Kaposvar, Brown can hardly be faulted for "conditionally" rejecting the heaters only if they were not promptly "up and operational." But the question remains, to be addressed shortly, whether, by proceeding in this way, Brown precluded itself, as a matter of law, from rejecting the heaters on March 6, 1996.

(xxxix) Before this court, counsel for Aerotech and Sigurdson argued that the conditions in Hungary were not nearly as drastic as Brown asserted and that there was in reality no real emergency facing Brown on and after December 15, 1995. This position is belied not only by the evidence of Brown's witnesses, which the trial judge accepted, but by the admission in the defendants' factum that Brown "had a one day window of opportunity to purchase heaters, as the festival tents were being constructed outside Kaposvar, Hungary, and there was a danger of these tents collapsing from snow." While Aerotech and Sigurdson in their factum went on to make the point that the "state of emergency" was not their responsibility, their concession nonetheless belies the later contention that Brown was exaggerating the sense of urgency.

(xl) Their second argument (the first being that Brown by its conduct in attempting to make the heaters work accepted the goods) that a significant number of the heaters were serviced and used in Kaposvar and put out into the field, has already been considered and rejected.

(xli) One final issue needs to be dealt with under this heading. Aerotech and Sigurdson argue that Brown is not entitled to rescission because it is not in a position to return the goods to the defendant Aerotech. This is because Brown's client, the U.S. government, became the owner of the heaters once they were delivered to Hungary and efforts were made to utilize the heaters in the field. Furthermore, the transfer of title (even if possession remains in Brown) to the U.S. Army negates Brown's ability to repudiate the contract since restitutio in integram cannot be made. See Hardy & Co. v. Hillerns and Fowler, [1923] 2 K.B. 490 (C.A.) (referred to in Alkins Brothers v. G. A. Grier & Sons Ltd. (1924), 55 O.L.R. 667 at 676-77 (S.C.,App.Div.)).

(xlii) With respect to this argument, the trial judge concluded (at para. 120):
It is true that a government property number was placed upon these machines, however, that does not result in a finding that the government owns it. Further, there was no privity of contract between the United States government and the defendants, nor any direct dealings. Consequently, I find that the action was properly constituted.

(xliii) The evidence on this point is not as clear as it might be, doubtless because Aerotech and Sigurdson did not raise the issue concerning either the transfer of the heaters by Brown to the U.S. military or the status of Brown to maintain the action in the pleadings. No evidence was presented as to the ownership of the heaters by Aerotech and Sigurdson. Evidence was given by various Brown witnesses that the consignee of the heaters in Kaposvar was the U.S. military and that the heaters were to become the property of the U.S. government at the time of purchase. But the full contractual and legal relationship between Brown and the U.S. government was never fully explored; for example, no testimony was directed to the issue of title in the heaters upon rejection by Brown.

(xliv) What we are left with, such as it is, is that Brown was the contracting purchaser and the victim of the fraud. It was Brown which rescinded the contract, commenced and maintains these proceedings. The units are in Brown's possession and are stored in Kaposvar, Hungary, available to Aerotech upon repayment of the amount of this judgment, including costs. Given the state of the evidence, there is simply no issue here.


(xlv) It is trite to say that a contract, even one entered into as a result of a fraudulent misrepresentation, is voidable, not void, at the election of the person defrauded after notice of the fraud. Until the contract is repudiated it remains in force. See United Shoe Machinery Company of Canada v. Brunet and Others, [1909] A.C. 330 (H.L.).

(xlvi) Aerotech and Sigurdson's principal argument is that Brown cannot approbate and reprobate at the same time. Once Brown had knowledge by December 22, 1995, that the heaters were not new but were used, it had to make a decision then and there - to rescind or not. See Racicot et al. v. Bertrand et al., [1979] 1 S.C.R. 441, where the Supreme Court explained (at p. 458):

One cannot at the same time claim to have a voidable and a good and valid title to a property. A person who, being aware of the defect of his title to a property, nevertheless acts in all respects and for several months as an absolute owner and exercises all the rights of such an owner, demonstrates an unambiguous intent not to avail himself of the defect of his title.

(xlvii) Strong reliance is placed on the dicta of O'Halloran J.A. in Purdy & Purdy v. Carter & Carter (May 5, 1960), 239/59 (B.C.C.A.) (at p. 4):

... because a claim for rescission requires the party claiming it to repudiate the contract at once on learning of the misrepresentation, and to treat it as no longer in effect. He cannot blow hot and cold by claiming that the contract is at an end, and at the same time treat it as subsisting and retain advantages under it. He must elect without delay once and for all. If he retains advantages, he has elected to affirm the contract, and cannot then set up that it is vitiated by misrepresentation.

(xlviii) The defendants say Brown tried to "conditionally" reject the heaters by attempting to use them and did so for at least some period of time (six heaters remaining in the field until 1997), leaving the option open at a later date to change its mind. But if the trial judge's finding that Aerotech was required to supply new heaters is correct and the goods sold to Brown were "obviously" used, Brown was fully capable of making its decision then and there, since it was impossible to make the used heaters into new ones.

(xlix) Furthermore Aerotech and Sigurdson argue, even if it was reasonable and necessary from Brown's business perspective, to attempt to utilize the non-complying heaters, this does not create a legal exception to the rule (as interpreted by the defendants) that the decision whether to repudiate or not must be made as soon as it is clear an essential term of the contract has not been met. See the trial decision in Showtime Marketing Services Ltd. v. Lower Fraser Valley Exhibition Assn., [1991] B.C.J. No. 3779 (QL) (S.C.).

(l) Both The International Sale of Goods Act, C.C.S.M., c. S11, and The Sale of Goods Act, C.C.S.M., c. S10, provide that when a purchaser receives delivery of goods, having had a reasonable opportunity to inspect them, any act done inconsistent with ownership by the seller will constitute acceptance. In considering this provision, "the courts have adopted a strict interpretation favourable to the seller." See Staiman Steel Ltd. v. Franki Canada Ltd. (1985), 23 D.L.R. (4th) 180 at 193 (Ont.C.A.).

(li) Finally, Aerotech and Sigurdson say that there is one last bar to Brown's contention that it is entitled to rescind, namely, its inability to offer restitutio in integram. Without the ability to restore the parties' positions to what they were before the contract, rescission is simply not available no matter how "reprehensible may be the briber's conduct." See Steedman v. Frigidaire Corp., [1933] 1 D.L.R. 161 at 165 (P.C.). While there was much dispute at trial as to the nature and extent of the use of the heaters by Brown, clearly some were made operational for some period of time, and hence cannot be returned as they were beforehand.

(lii) Brown responds by challenging Aerotech and Sigurdson's assertion that a decision to repudiate must be made immediately, once and for all, as soon as it is ascertained that there is non-compliance with the contract, or that, in the case of fraud, absolute restitutio is required in every case.

(liii) As to the argument that Brown waited too long to rescind, affirmation or acceptance could only take place, Brown's counsel say, when it became fully aware of the facts. While Brown's officials on the ground in Hungary could see the condition of the heaters, Sigurdson was insisting to Brown's senior management that the heaters were fit for the purpose, that the technicians would be able to have them up and running in short order, and that adequate parts would be available. This gross misrepresentation continued until the very end. This is the context in which Williams, the procurement manager, rejected the heaters on December 22nd unless Aerotech could make them operational so as to meet the ongoing emergency situation in Hungary. This did not happen.

(liv) In our opinion, it is not, and never has been, the law that victims of fraud must, as soon as there is an inkling of a misrepresentation, make up their mind then and there whether to rescind or not. Indeed, as we have seen, lack of diligence by the victim of a fraud, while potentially relevant on the issue of mitigation, is not a defence available to the fraudster. See Performance Industries. Professor G. H. L. Fridman, Q.C., The Law of Contract in Canada, 4th ed. (Toronto: Carswell, 1999), provides the following useful analysis (at p. 864):

Delay is not the only basis for a claim of affirmation, etc. The plaintiff's positive conduct may reveal that he has chosen to affirm, or may indicate that it would be inequitable to grant the remedy of rescission. This again is a question of fact. Dealing with property, after discovery of the fraud, may not amount to affirmation or election. Even using a chattel for a period of time with knowledge of the conduct which could entitle a party to rescind may not amount to affirma