Overview

• 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.
• KSV ordered to pay $25,000 in costs.