Brompton Corp. v. Tuckamore Holdings LP et al.
[Indexed as: Brompton Corp. v. Tuckamore Holdings LP]
2017 ONCA 594
Court of Appeal for Ontario, MacPherson, Cronk and Benotto JJ.A.
July 10, 2017
Contracts — Interpretation — Acquisition agreement providing that
purchaser represented and warranted that purchaser “will have tax
pools” as described in purchaser disclosure letter “immediately prior to
Closing and after giving effect to the transactions contemplated by this
Agreement” — Motion judge not erring in interpreting that provision as
being directed solely to accurate identification of tax pools in existence
and their value up to date of closing rather than as representation and
warranty as to future tax utilization of tax pools.
Brompton purchased Tuckamore’s business in exchange for the transfer to Tuckamore of certain securities held by Brompton. As a result of that transaction, Tuckamore became a minority shareholder of Brompton. Section 5.1( l) of the acquisition
agreement stated that Brompton represented and warranted that, “Immediately
prior to Closing and after giving effect to the transactions contemplated by this
Agreement, the Purchaser will have tax pools as described in the Purchaser Disclosure Letter”. The purchaser disclosure letter set out the tax losses, deductions and
credits referred to as “tax pools” in s. 5( l) of the agreement. Some years later, Tuckamore decided to divest its minority interest in Brompton and agreed to indemnify
Brompton for its proportionate share of any tax liabilities assessed against Brompton under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) in respect of the period
when Tuckamore was a Brompton shareholder (the “Tuckamore indemnity”). In
2015, the Canada Revenue Agency disallowed Brompton’s attempted use of the tax
pools to reduce its taxable revenue during the 2009-2013 taxation years and
assessed Brompton for $11.8 million in additional taxes, interest and penalties.
Brompton invoked the Tuckamore indemnity. Tuckamore argued that Brompton
had breached the representation and warranty in s. 5.1( l) of the acquisition agreement and could not rely on the Tuckamore indemnity. The motion judge granted
Brompton’s motion for summary judgment. Tuckamore appealed.
Held, the appeal should be dismissed.
The motion judge did not err in interpreting s. 5.1( l) of the acquisition agreement as being directed solely to the accurate identification of the tax pools in
existence and their values up to the date of closing, rather than as a representation and warranty as to the future tax utilization of the tax pools.
Cases referred to
Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc. (2016), 130 O.R. (3d)
418,  O.J. No. 1705, 2016 ONCA 246, 347 O.A.C. 288, 68 R.P.R. (5th) 1,
399 D.L.R. (4th) 575, 264 A.C.W.S. (3d) 773; Deslaurier Custom Cabinets Inc. v.
1728106 Ontario Inc. (2017), 135 O.R. (3d) 241,  O.J. No. 1817, 2017 ONCA
293, 67 C.C.L.I. (5th) 36, 410 D.L.R. (4th) 14, 278 A.C. W.S. (3d) 12; Salah v. Timothy’s Coffees of the World Inc.,  O.J. No. 4336, 2010 ONCA 673, 268 O.A.C.
279, 74 B.L.R. (4th) 161, 193 A.C. W.S. (3d) 1151; Sattva Capital Corp. v. Creston
Moly Corp.,  2 S.C.R. 633,  S.C.J. No. 53, 2014 SCC 53, 2014EXP-
2369, J.E. 2014-1345, 373 D.L.R. (4th) 393,  9 W.W.R. 427, 59 B.C.L.R.
(5th) 1, 461 N.R. 335, 25 B.L.R. (5th) 1, 358 B.C.A.C. 1, 614 W.A.C. 1,
242 A.C. W.S. (3d) 266