The taxpayer was the successor by amalgamation to a holding company ("SB Holdings") and its subsidiary ("SB Canada"). When a minority shareholder of SB Canada ("Candou") became bankrupt, SB Holdings purchased those shares from Candou for $6 million, and sold them six years later for $34 million.
The taxpayer incurred legal fees in successfully defending a frivolous action brought by a creditor of Candou alleging that the $6 million purchase price was fraudulently undervalued. In finding that the fees were deductible, McArthur T.C.J. indicated that in defending the suit the taxpayer was not acquiring or preserving an enduring benefit but was protecting its income (the creditor was after money that the taxpayer required to carry on its normal operations and the action had to be defended to protect its profitability and reputation) and that SB Holdings had not committed any deliberate delict.