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Good afternoon.

There was only one substantive civil decision released by the Court of Appeal for Ontario for the week of February 13, 2023, Boliden Mineral AB v. FQM Kevitsa Sweden Holdings AB. The Court agreed with the application judge in that the vendor of a mining company was obligated under a 2016 share purchase agreement to indemnify the purchaser for tax liability that arose from a reassessment by the Finnish taxing authority in respect of a reorganization that had been undertaken back in 2010.

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John Polyzogopoulos
Blaney McMurtry LLP
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Table of Contents

Civil Decisions

Boliden Mineral AB v. FQM Kevitsa Sweden Holdings AB, 2023 ONCA 105

Keywords: Contracts, Share Purchase Agreements, Representations and Warranties, Tax Liability, Indemnity, Damages, Reasonable Foreseeability, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Beatty v. Wei, 2018 ONCA 479, Hadley v. Baxendale (1854), 156 E.R. 145 (Exch. Ct.), Victoria Laundry (Windsor) Ltd. v. Newman Indust. Ltd., [1949] 1 All E.R. 997 (C.A.)

Short Civil Decisions

Corrigan v. Ontario, 2023 ONCA 108

Keywords: Crown Liability, Civil Procedure, Costs, Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7s. 18(1)(6), and (7), Corrigan v. Ontario, 2023 ONCA 39

Harvey v. Bingemans Inc., 2023 ONCA 110

Keywords: Contracts, Interpretation, Real Property

Nowlan v. Monsour, 2023 ONCA 111

Keywords: Family Law, Equalization of Net Family Property, Valuation Date, Spousal Support


CIVIL DECISIONS

Boliden Mineral AB v. FQM Kevitsa Sweden Holdings AB, 2023 ONCA 105

[Fairburn A.C.J.O., Simmons and Zarnett JJ.A.]

Counsel:

P. Flaherty, A. Finkelstein, and B. Brammall, for the appellants

C. Smith and Z. Naqi, for the respondents

Keywords: Contracts, Share Purchase Agreements, Representations and Warranties, Tax Liability, Indemnity, Damages, Reasonable Foreseeability, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Beatty v. Wei, 2018 ONCA 479, Hadley v. Baxendale (1854), 156 E.R. 145 (Exch. Ct.), Victoria Laundry (Windsor) Ltd. v. Newman Indust. Ltd., [1949] 1 All E.R. 997 (C.A.)

facts:

The appellant, FQM Kevitsa Sweden Holdings AB (“FQM”), entered into a Share Purchase Agreement (the “SPA”) with the respondent, Boliden Mineral AB (“Boliden”) in June 2016, whereby Boliden was transferred the shares of the respondent Finnish mining company, Boliden Kevitsa Mining Oy (“Kevitsa”). The SPA was governed by Ontario law, and contained representations and warranties by FQM that Kevitsa had filed all required tax returns which were “complete and correct in all material respects”, all taxes due and payable had been paid, there was no audit underway or discussion ongoing with any tax authorities, and there were no grounds for the reassessment of Kevitsa’s taxes.

Under the general indemnification clause, FQM was required to indemnify Boliden and Kevitsa for any losses arising from any breach or inaccuracy, which included any loss, damage, penalty, tax, or interest, and specified that consequential or indirect loss was an indemnifiable loss to “the extent it is a reasonably foreseeable consequence of the event or circumstance constituting the ground for the applicable indemnification obligation”. Furthermore, the SPA contained a tax-specific indemnity, which required FQM to hold Boliden and Kevitsa harmless and to indemnify them against “any Taxes required to be paid or remitted by [Kevitsa] … with respect to any Pre-Closing Tax Period”.

Kevitsa had accumulated tax losses in the years prior to closing. Under Finnish law, tax losses of a company after a change in control are prima facie forfeited. However, a company may, after a change in control, obtain a permit from the Finnish Tax Administration (“FTA”) to use pre-existing tax losses. Kevitsa was granted such a permit. In 2017, the FTA commenced an audit of Kevitsa and issued a final reassessment in December 2018. The FTA concluded that a reorganization undertaken by FQM in 2010 was a tax avoidance measure. The result was that Kevitsa’s tax liabilities were increased by over 14 million Euros for 2017-2018. Kevitsa initiated several unsuccessful appeals in Finland regarding the reassessment, the last of which remained outstanding at the time of this appeal.

On an application brought by Kevitsa for breach of representations and warranties, the application judge determined that FQM’s indemnification obligations extended to the tax liabilities brought about by the reassessment because it had breached the representation and warranty in the SPA that there “are no grounds for the reassessment” of Kevitsa’s taxes. The application judge further found that under the tax-specific indemnity, the taxes for 2017- 2018 were taxes required to be paid with respect to a “Pre-Closing Tax Period” because they were causally linked to the reassessment of the 2012-2016 preclosing tax years.

issues:

Did the application judge err in determining that the general indemnification provision was triggered due to a breach of representation and warranty?

holding:

Appeal dismissed.

reasoning:

No.

FQM argued that the application judge made two extricable legal errors in interpreting the breadth of the representation and warranty that there were no grounds for reassessment of Kevitsa’s taxes. First, FQM submitted that representations in an agreement must be assessed as of the time they were made and are not actionable simply because in light of a subsequent event they are no longer true. The Court noted that the application judge’s statement that the representation and warranty “turned out to be inaccurate” is not akin to a finding that the grounds for reassessment only came into existence after the closing, as opposed to a finding that they existed at the time of closing but became apparent later. The application judge correctly noted that the grounds for reassessment did exist at the time of closing and the FTA subsequently acted on them. The Court held that the application judge made no error in reaching this conclusion.

Second, FQM argued that the application judge erred in treating the requirement of reasonable foreseeability of consequential or indirect losses under the general indemnification provision as the equivalent of the common law concept applied in breach of contract cases. The Court noted that, in the latter context, losses are reasonably foreseeable if they would follow from a breach of the contract in the ordinary course of things or if they would be expected to so follow by the parties at the time of contracting by virtue of their special knowledge.

FQM submitted that, in light of the meaning of the general indemnification provision in the SPA that FQM contended for, the application judge erred in failing to consider whether the reassessment was a reasonably foreseeable consequence of the 2010 reorganization, which it submitted was the ground for the applicable indemnification obligation. The Court disagreed for three reasons. First, the SPA was a contract made among sophisticated parties who chose Ontario law to govern their rights and obligations. Having used legally laden terms, it was reasonable for the application judge to have interpreted those terms against that legal backdrop. Second, the application judge was entitled not to consider a loss to be remote because a reassessment might have been viewed at the time of closing as unlikely. The question was not whether that breach was considered as likely, but rather the reasonable foreseeability of the losses that would flow from that breach if it did occur. Third, the application judge expressly considered, and found on the evidence, that it was reasonably foreseeable that Kevitsa would apply for a permit to use accumulated tax losses, and although the granting of a permit was not a foregone conclusion, it was reasonably foreseeable that the application to use them would be successful.

The Court held that the application judge made no reversible error in finding that the loss was reasonably foreseeable and that it was therefore recoverable under the general indemnification clause was justified and entitled to deference on appeal.


SHORT CIVIL DECISIONS

Corrigan v. Ontario, 2023 ONCA 108

[Doherty, Zarnett and Sossin JJ.A.]

Counsel:

H. Mackay and H. McIvor, for the appellant

K.S., acting in person

Keywords: Crown Liability, Civil Procedure, Costs, Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7s. 18(1)(6), and (7), Corrigan v. Ontario, 2023 ONCA 39

Harvey v. Bingemans Inc., 2023 ONCA 110

[Fairburn A.C.J.O., Doherty and Pardu JJ.A]

Counsel:

S.D.H, as self-represented

M. A. Radulescu, for the respondent, Bingemans Inc. and M.B.

E. Kadwell, for the respondent, Waterloo Region Police Services Board

Keywords: Contracts, Interpretation, Real Property

Nowlan v. Monsour, 2023 ONCA 111

[Fairburn A.C.J.O., Doherty and Pardu JJ.A.]

Counsel:

E. C. Anekwe, for the appellant

F. P. Huard, for the respondent

Keywords: Family Law, Equalization of Net Family Property, Valuation Date, Spousal Support


The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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Photo of John Polyzogopoulos John Polyzogopoulos

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with over two decades of experience handling a wide variety of litigation matters. John assists clients with…

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with over two decades of experience handling a wide variety of litigation matters. John assists clients with matters ranging from appeals, to injunctions, to corporate, partnership, breach of contract, construction, environmental contamination, product liability, debtor-creditor, insolvency and other business litigation. He also handles complex estates and matrimonial litigation involving disputes over property and businesses, as well as professional discipline and professional negligence matters for various types of professionals. In addition, John represents amateur sports organizations in contentious matters, and also advises them in matters of internal governance. John can be reached at 416-593-2953 or jpolyzogopoulos@blaney.com.