Manitoba loses bid to restore $377,537 bulk-sale tax assessment

Manitoba’s Court of King’s Bench has dismissed the province’s attempt to restore a $377,537.27 tax assessment against a woman who said an apparent purchase of business assets was actually a secured loan. The ruling leaves intact the Tax Appeals Commission’s decision rescinding the assessment against her, rather than forgiving the company’s underlying tax debt.

In The Deputy Minister of Finance v. Proutt, 2026 MBKB 148, delivered October 23, 2026, Justice Toews held that the commission was entitled to determine the transaction’s nature from the full documentary record. The court was reviewing that determination, not conducting a new hearing or choosing its own preferred interpretation of the evidence.

A bill of sale or security for a loan?

The dispute arose from unpaid retail sales tax owed by Hegland Holdings Ltd., which operated the Winnipeg HVAC business Kirkfield Heating. Its tax debt, including penalties and interest, totalled $377,537.27. On March 1, 2017, owner Craig Heglin and Brooke Proutt, his stepdaughter, prepared a document describing a transfer of the company’s assets and intangibles for $20,000.

Finance treated the transaction as a bulk sale and assessed Proutt for the company’s tax debt under subsection 45(6) of The Tax Administration and Miscellaneous Taxes Act. Proutt maintained that the equipment had instead been pledged as security for a $20,000 loan. The commission accepted that characterization and rescinded the assessment, making the distinction between a sale and a secured lending arrangement decisive.

The document’s wording was central to Finance’s appeal. It described a purchase and contained no reference to a loan, security or a transaction taking effect later. Finance emphasized that Proutt herself had produced it during the audit and relied on it before the commission to establish the transaction date. In the department’s view, the commission had discounted the clearest evidence of what the parties had agreed to do.

Finance also challenged the significance the commission attached to the document being unsigned. Neither party disputed its authenticity, and the department argued that a contract need not always bear a signature. It further disputed the commission’s concern about describing the arrangement as a conditional sale, pointing out that conditional sales are legally recognized. These were arguments for overturning the commission, not separate rulings by the court invalidating its approach.

Competing accounts of the surrounding evidence

Proutt and Heglin supplied affidavits saying they had intended a secured loan despite the document’s language. They attributed the mismatch to preparing the arrangement without legal advice. Their account was that repayment was due a year later and that, after default, Proutt became entitled to the assets but allowed Heglin to continue using them while the business remained viable.

Finance argued that the commission had accepted that account without adequately confronting contradictory evidence. It pointed to Proutt’s earlier description of the transaction as a sale and to her explanation for not obtaining a clearance certificate, which the department said demonstrated awareness of the tax debt and the bulk-sale issue. Finance also argued that the family relationship, which emerged through the commission’s questioning, provided another explanation for Heglin’s continued use of the assets. The department wanted the assessment reinstated because it said the treatment of these matters amounted to a palpable and overriding error.

Proutt answered that the commission had considered the written document, the parties’ conduct and their sworn explanations together. In her account, the continued operation of the business supported the conclusion that the document did not capture the entire arrangement. She argued that Finance was seeking to give greater weight to evidence favourable to its position rather than identifying an error warranting intervention.

She also relied on how the evidentiary record had developed. Finance had not cross-examined on the affidavits or provided additional evidence when given the opportunity, she submitted. The commission had sought more information and submissions to understand the transaction. Proutt argued that it knew of the family relationship and was not required to list every item of evidence in its reasons.

Proutt further defended the commission’s treatment of the parol evidence issue: whether evidence outside the written document could be considered in determining the agreement. She said the commission had found the rule inapplicable and had alternatively considered an exception because the document did not represent the whole agreement. Her position was that the assets had ultimately been taken through realization on security, not a bulk sale to which section 45 applied.

Court declines to reweigh the record

Justice Toews focused on the court’s limited role. The parties agreed that intervention required a palpable and overriding error. The judge expressly acknowledged that his own assessment might not have produced the same conclusion as the commission’s, but said that was not a basis to substitute his view on a proceeding conducted on the existing record.

The court also emphasized the commission’s statutory authority to investigate, inquire and require evidence. Citing Manitoba appellate authority on its role as a general tax appeal tribunal, the judge connected the commission’s specialized function and governing legislative scheme with the deference required in reviewing its decision.

On the facts, the commission had a complete written record, including emails and affidavits. Justice Toews acknowledged that the apparent bill of sale was clear on its face and that its authenticity was not disputed. But the commission had explained why, when considered alongside the other evidence, that document formed part of a broader loan transaction.

The judge concluded that the commission had considered the evidence and arguments, recognized the difficulty of characterizing the arrangement, and sought clarification where necessary. Its reasons adequately explained its assessment, and its determination fell within the latitude the statute allowed. The court therefore dismissed Finance’s appeal and awarded Proutt costs for the hearing under the applicable tariff, without fixing a dollar amount in the reasons.

The outcome turns on the commission’s treatment of this record and the limits of the court’s review. It does not establish that calling a transfer a loan automatically defeats bulk-sale tax liability, that an unsigned document has no legal effect, or that business tax debts disappear when assets change hands. The assessment against Proutt remained rescinded because the court declined to disturb the commission’s supported characterization of this particular transaction.