On the early termination of a power purchase agreement between the taxpayer and the Alberta government, the taxpayer received $59.7 million from the Alberta government and the Alberta government became the beneficial owner of a power generation plant of the taxpayer, although the taxpayer continued as legal title owner and continued to operate the plant under an operating agreement with the Alberta government. As the parties were clearly of the understanding that the payment received by the taxpayer was for the transfer of its capital investment in the plant rather than being a payment for future profits surrendered, under the surrogatum principle, the payment was a capital receipt. Rossiter ACJ stated (at para. 96):
According to the surrogatum principle, the characterization of damages is determined by the character of the item for which the compensation is intended to substitute. For example, compensation received for loss of profit from non-performance of business contracts is characterized as a receipt of income. Compensation for loss of capital property, goodwill, or a source of business is generally on account of capital.