The Superior Court of Justice of Ontario found that "on a balance of probabilities" two missile strikes on the jetliner shortly after takeoff from Iran's capital Tehran on January 8, 2020 "were intentional."
"The plaintiffs," Justice Edward Belobaba also ruled, "have established that the shooting down of Flight 752 by the defendants was an act of terrorism."
Lawyers Mark and Jonah Arnold called the decision "unprecedented in Canadian law."
"It is significant for the impact it will have on immediate surviving family members seeking justice," they said in a statement.
The legal action seeking Can$1.5 billion (US$1.25 billion) was brought by four people who lost family members in the disaster that killed all 176 aboard, including 85 Canadian citizens and permanent residents.
They claimed the strikes were "Iran's retaliation" for the US killing of Qasem Soleimani, commander of the Islamic Revolutionary Guard Corps' Quds Force near Baghdad Airport in Iraq days earlier.
In a final report in March, the Iranian Civil Aviation Organization (CAO) pointed to the missile strikes and the "alertness" of its troops on the ground amid heightened tensions between Iran and the United States at the time.
Ukraine, which lost 11 citizens in the disaster, said the report was "a cynical attempt to hide (the) true causes" of the tragedy, while Canada said it contained "no hard facts or evidence" and pledged to soon release the results of its own investigation.
Iran did not defend itself in court, but the Islamic republic admitted three days after the disaster that its forces shot down the Kiev-bound Boeing 737-800 plane.
The amount of compensation to be awarded is to be determined at a later hearing.
Foreign states are normally immune to Canadian civil claims, but a 2012 law made an exception for those listed as sponsors of "terrorist activity," such as Iran.
Canada broke off diplomatic ties with Iran that same year, as relations frayed over Tehran's support for Bashar al-Assad's regime in Syria, its nuclear program, and threats to Israel.
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