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ARTICLE · 10 JUNE 2013

Characterizing The Assumption Of Obligations When Determining The Proceeds Of Disposition

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In Daishowa-Marubeni International Ltd. v. Canada, 2013 SCC 29, the Supreme Court of Canada held 9:0 that Daishowa-Marubeni International’s proceeds from the disposition of two forest tenures should not include the reforestation obligations that were assumed by the purchasers.

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In Daishowa-Marubeni International Ltd. v. Canada, 2013 SCC 29, the Supreme Court of Canada ("SCC") held 9:0 that Daishowa-Marubeni International's ("DMI") proceeds from the disposition of two forest tenures should not include the reforestation obligations that were assumed by the purchasers.

DMI consisted of two divisions that each had a forest tenure that allowed them to harvest timber on land owned by the province of Alberta. These tenures included reforestation obligations.

In 1999 and 2000 DMI sold its divisions to Tolko Industries Ltd. ("Tolko") and Seehta Forest Products Ltd. ('Seehta") respectively. The Tolko agreement allocated $20 million of the sale price to the value of the forest tenure, with both parties agreeing that the cost of reforestation would be approximately $11 million. The Seehta agreement did not explicitly allocate any of the purchase price to the tenure nor estimate the cost of reforestation. Both agreements provided that the

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