The case concerns whether the vendor (Mahal Venture Capital Inc.) or the purchaser (12175622 Canada Ltd.) was liable for omitted municipal taxes following a court-approved sale by a receiver.
The Ontario Court of Appeal overturned the motion judge’s ruling that the purchaser was responsible for the omitted taxes.
Key Facts
Mahal Venture Capital Inc. and Golden Miles Food Corporation (the “Debtors”) owned a property in Brantford.
KSV Restructuring Inc. (“KSV”) was appointed as receiver and sold the assets to 121.
At closing (May 18, 2022), known taxes ($167,000) were paid, but later omitted tax bills ($1,091,423) for 2020–2022 were issued.
The motion judge ruled that, since the omitted tax bills were issued post-closing (November 2022), they were the purchaser’s responsibility.
Court of Appeal Findings
Error in Tax Liability Timing: Under Municipal Act s. 307(3), municipal taxes are deemed due on January 1 of the taxation year, meaning the liability predated closing.
Not a Permitted Encumbrance: The omitted taxes should have been vested out under the Approval and Vesting Order (AVO), ensuring a clean title for the purchaser.
Irrelevance of Purchaser’s Knowledge: Even if 121’s principal was aware of a possible reassessment, liability was a legal question.
Outcome
Appeal allowed; KSV (the Debtors' receiver) held liable.
