Indemnity Clauses: The case centers on indemnity clauses in a 2009 Asset Purchase Agreement (APA) where Nord-sen Metal Industries Ltd. (Nordstrong) bought Strongco Limited Partnership’s assets.
Defective Grain Bins: Pre-APA, Strongco had a contract to supply grain bins to Westlock Terminals. After the APA, Nord-sen delivered some materials. The bins proved faulty, leading Westlock to sue Sheets, Strongco, and Nord-sen. Settlements occurred with Sheets and Strongco paying significant sums, while Nord-sen was released without payment.
Indemnification Dispute: Strongco sought indemnification from Nord-sen for the settlement paid to Westlock, arguing the APA covered these liabilities. Nord-sen argued it did not indemnify Strongco for its own negligence.
Court’s Analysis: The court found the APA’s indemnity provisions did not explicitly cover negligence. The language used was insufficient to include indemnification for Strongco’s negligence. Commercially, it was unreasonable to shift liability for Strongco’s pre-closing negligence to Nord-sen without clear terms.
Settlement Impact: The settlement agreements did not release Strongco from its obligation to pay Westlock, despite Nord-sen securing a separate release.
Reasonableness of Settlement: The court deemed the settlement amount reasonable based on expert evidence of potential damages.
Conclusion
Judgment: Strongco’s claim for indemnification was dismissed. The indemnity clauses did not clearly cover Strongco’s negligence.
Costs: Amounts paid by Strongco to settle with Westlock were not recoverable from Nord-sen under the APA.
