The taxpayer negotiated a support agreement with another public corporation ("Acanthus"), which agreed to pay the taxpayer a "break fee" of $4.7 million if it should cease to support the taxpayer's bid and support another bid. After Acanthus supported a higher bid from another bidder ("Cadim"), it paid the break fee. After the taxpayer entered into a further support agreement, Cadim raised its bid, which Acanthus then supported and paid a further break fee to the taxpayer of $3.0 million; and the taxpayer sold its 19% position in Acanthus at a gain.
The trial judge found that the taxpayer's ordinary business activities included the making of business acquisitions, and that the break fees were obtained in the course of those business activities, and therefore that the break fees were income from business.
The Court dismissed the taxpayer's appeal. The taxpayer had argued that the trial judge erred in law in finding that the taxpayer was "essentially in the business of doing acquisitions and take-overs," as Neonex establishes that the acquisition of capital properties cannot be a business in itself. Sharlow J.A. stated (at para. 13):
As I read Neonex, this Court accepted the finding of the trial judge that Neonex was not carrying on a business consisting of the acquisition of income producing assets. I do not understand the Court to be establishing a rule of law that the acquisition of income producing assets can never be a business in itself.