The taxpayer agreed to transfer its Toronto property to the City of Toronto with the compensation to be determined (under section 31 of the Expropriations Act) by the Ontario Municipal Board. It later was agreed that Toronto would pay compensation to the taxpayer of $2.9 million for the land, $0.1 million for the building and $9 million in respect of damages occasioned as a result of the inability of the taxpayer to relocate its business. The taxpayer treated the $9 million as a non-taxable capital receipt.
After noting that the character of the damages payment to the taxpayer turned on the actual circumstances of the payor (the City), Bell T.C.J. indicated that the total of $9 million of damages paid by the City would be added to the cost of the real property to it.