The taxpayer, which had acquired the title to minerals from various Saskatchewan landowners, incurred legal expenses in defending actions by various of the landowners in which it was alleged that the taxpayer had obtained the mineral rights by fraudulent misrepresentation, and incurred further legal expenses in opposing the introduction of special Saskatchewan legislation which would have led to a renegotiation of the purchase contracts. Martland J. held that although the legal expenses arguably were deductible under s. 12(1)(a), they were non-deductible capital expenditures by virtue of s. 12(1)(b). The mineral rights clearly were items of fixed capital to the taxpayer, and it laid out the legal expenses for the purpose of preserving those capital assets. Martland J. noted (at p. 5281) that:
"The Dominion case has established the proposition that legal expense incurred with a view of preserving an asset [or] advantage for the enduring benefit of the trade is a capital expenditure and is not deductible."