In the course of preparing a response to a proposed acquisition of the employer ("Nordair") by another corporation ("CP Air"), Nordair discovered that options which it had issued to the taxpayer and other employees were null and void because they contravened the requirements of Quebec's securities law. CP Air then stated that it was its "present intention ... to take such steps as may be appropriate and legally permissible to compensate (whether in cash or in some other manner) the relevant directors and officers of Nordair for the loss of benefits which would have accrued to them under the original stock option plan". Ultimately, the taxpayer received a lump sum of $58,000 while still an employee.
The Court of Appeal affirmed the finding that this amount was not taxable under s. 7(1)(b) (a finding which effectively affirmed an assessment of the Minister founded on s. 6(1)(a)). As in the Huestis case, the matter involved "the unilateral cancellation of an option contract which gave rise to the financial compensation received by the appellant and not an assignment of rights set out in a contract" (p. 6054).