Harvest Operations Corp. v. Canada (Attorney General), 2015 ABQB 327

• Judge: Dario, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: January 27, 2015
• Citations: 2015 ABQB 327;(2015), 617 A.R. 281 (QB)

Harvest Operations Corp. v. Can. (A.G.) ( 2015 ), 617 A.R. 281 (QB)

MLB headnote and full text

Temp. Cite: [2015 ] A.R. TBEd. JN.015

Harvest Operations Corp. (applicant) v. Attorney General of Canada (respondent)

(1301 04670; 2015 ABQB 327)

Indexed As: Harvest Operations Corp. v. Canada (Attorney General)

Alberta Court of Queen's Bench

Judicial District of Calgary

Dario, J.

May 26, 2015.

Summary:

Viking Holdings Inc. (VHI), a predecessor of Harvest Operations Corp. (Harvest), entered into multi-step acquisition and restructuring transactions to acquire Krang Energy Inc. The transactions were designed to ultimately transfer certain assets acquired in the Krang acquisition to Olaf Energy Limited Partnership (Olaf). Harvest applied for rectification to correct what it claimed were two errors in agreements that resulted in unanticipated tax consequences. The first error related to the Alberta Treasury Board unexpectedly requiring Krang to repay debts in excess of $45 million prior to an arm's length purchase of shares in Krang by a numbered company owned by VHI. Viking Holdings Trust (VHT), which was an affiliate VHI, advanced $35 million to Krang directly (the Krang debt) to facilitate satisfaction of the amount owed to the Alberta Treasury Board and to allow the Krang acquisition to be completed that day. The transaction closed with the Viking group of companies benefiting from the avoidance of $67 million in capital gains through the use of the bump rules (Income Tax Act, s. 88(1)), but not getting the benefit of the increased bump room resulting from the Krang debt. The second error related to a non-arm's length transaction in which VHT failed to transfer certain assets when it transferred its partnership interest to Olaf pursuant to transfer agreements.

The Alberta Court of Queen's Bench dismissed the application where Harvest had failed to establish that the conditions for granting rectification had been met.

Deeds and Documents - Topic 5051

Rectification - When available - General - See paragraphs 15 to 53.

Deeds and Documents - Topic 5055

Rectification - When available - Intention of parties - See paragraphs 37 to 94.

Deeds and Documents - Topic 5057

Rectification - When available - Mistake - Mutual - See paragraph 60.

Deeds and Documents - Topic 5072

Rectification - Bars - Unclean hands - See paragraph 93.

Deeds and Documents - 5075

Rectification - Bars - Negligence or lack of due diligence - See paragraphs 41, 50, 85, 87 and 92.

Equity - Topic 1482

Equitable principles respecting relief - Clean hands doctrine - Application of - See paragraph 93.

Counsel:

Roger F. Smith (Norton Rose Canada LLP), for the applicant;

Valerie Meier (Department of Justice Canada), for the respondent.

This application was heard on January 27, 2015, by Dario, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following judgment on May 26, 2015.