Canada: Is Corporate Successor Liability A Dead Doctrine In Canada?

Last Updated: April 25 2019
Article by Marco P. Falco

The American doctrine of successor liability has long been the source of fear for the parties to an asset purchase agreement.

The doctrine provides that a purchaser corporation, which has acquired the assets of another company but not its shares, may be held responsible for the liabilities of the seller corporation. This can occur even where those liabilities were expressly not assumed in the acquisition.

Most liabilities on successor corporations are statutorily imposed. They require the successor company to pay out wages or engage in environmental remediation as a result of the predecessor's conduct.

However, at common law, the doctrine can also hold the successor company liable for contractual breaches or the tortious actions of the seller company.

In Canada, the doctrine is shrouded with mystery.

The Alberta Court of Queen's Bench effectively declared it dead in a 2016 decision, Cooperative Centrale v. Liebig 2016 ABQB 417.

By contrast, in 2018, the Ontario Superior Court in Talbot v. Nourse, 2018 ONSC 1061, may have resurrected the doctrine. The Court held that "[t]he theory has been accepted as potentially applicable in Canada".

The status of successor liability at Canadian common law is accordingly ripe for appellate review.

Why the Resistance?

Successor liability has never been fully resolved in Canada.

Unlike in the United States, where cases such as Ramirez v. Amsted Industries Inc., 431 A. 2d 11 (Sup. Ct., 1981), have firmly grounded the doctrine in American jurisprudence, Canadian Courts have only ever entertained the doctrine in the context of preliminary motions.

In these Canadian decisions, the defendant successor corporations have brought motions to remove themselves as parties to civil actions on the basis that they were never involved in the tortious conduct of their predecessor or were never parties to the contract which the seller executed.

On these motions, Canadian Courts have largely rejected the application of successor liability.

There are principled reasons for doing so.

Citing Wayne D. Gray's leading article on the issue, "The Case Against Adopting a General Doctrine of Successor Liability", 53 CanBusLJ 116 (HeinOnline), the Alberta Queen's Bench in Liebig declined to apply the doctrine in a negligence action against the successor defendant accounting firm which had purchased the assets (and not the liabilities) of its predecessor. The successor had no involvement in the underlying matters giving rise to the action.

In reaching the conclusion that the defendant successor could not be held liable for its predecessor's negligence, the Court reiterated Gray's policy reasons for not applying successor liability in Canada. Among them:

  1. As a matter of fairness and efficiency, corporate purchasers "acquire ownership of a specific set of assets for a fixed price, all or part of which may include the assumption of defined liabilities". The buyer usually does not "assume the residual liabilities of the business—in large part because [they] are difficult for the buyer to accurately quantify"; and
  2. Successor liability is inconsistent with the doctrine of privity of contract, which provides that only the parties to the contract, and not their successors, can be held liable for a breach.

Because the successor accounting firm in Liebig did not acquire the liabilities of its predecessor under the asset purchase agreement, there was no good reason to impose successor liability.

The Court held that the doctrine simply has no application in Alberta, or in Canada generally.

The Revival of Successor Liability in Ontario?

Despite the Court's declaration on successor liability in Liebig, the Ontario Superior Court in 2018 appears to have taken an entirely different approach in the Talbot decision.

Talbot involved an effort by the plaintiff to hold the defendant successor corporation liable under a promissory note entered into between the plaintiff and the defendant's corporate predecessor. Through a series of transactions, the successor had ultimately acquired the predecessor's assets after the promissory notes were entered into.

The Superior Court declined to apply successor liability in this case. It held that while most cases of successor liability involved attempts to impose tortious liability on the successor defendant, the plaintiff was seeking to use the doctrine to impose contractual liability on the successor defendant instead.

The Court noted that there were fundamental differences between negligence and contract cases which justified not applying the doctrine to matters of contract:

In negligence cases, the injured party has little, if any, control over the circumstances giving rise to the harm. In commercial cases, the situation is different. There are a number of steps a party can take to protect itself against defalcation on a promissory note that are not available to a plaintiff in a negligence claim. In addition, there are a number of corporate law principles that might apply to extend liability to [the successor]. These might include the Bulk Sales Act...oppression, piercing the corporate veil and unjust enrichment...

Despite having declined to apply successor liability, the Court in Talbot did hold that the theory "has been accepted as potentially applicable in Canada". Notably, the Court made no reference to the Alberta Liebig decision in its endorsement.

The Need for Appellate Review

The decisions above illustrate a genuine debate at Canadian common law about the wisdom of adopting successor liability in Canada.

While the Alberta Queen's Bench has declared the doctrine dead, Ontario arguably still recognizes its potential application, albeit in the context of tort actions only.

These inconsistencies must be resolved by an appellate Court.

Absent a definitive pronouncement by a higher Court in Canada, plaintiffs will continue to seek damages for tortious conduct and contractual breaches from successor corporations that may have had no involvement in the underlying dispute and that never agreed to assume such liabilities.

At the same time, successor corporations will be forced to bring preliminary motions to dismiss the actions against them, with varying and inconsistent results throughout the country.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions