Damages received by the taxpayer (a John Deere dealer) in settlement of its action against John Deere for wrongful termination of its dealership agreement represented proceeds of disposition of capital property. After noting (at para. 13) that the relevant portions of the definition of proceeds of disposition were para. (a) ("the sale price of property") and para. (b) ("compensation for property unlawfully taken"), Noël JA stated (at paras. 16, 23, 32):
The Tax Court ... [held] that the rights of Valley Equipment under the Dealer Agreement constitute “property” ... , and that this right was unlawfully “taken” when the Dealer Agreement was unilaterally cancelled.. . It follows that upon payment of the judgment award, the appellant was in receipt of proceeds resulting from the disposition of property. ...
[T]he conclusion of the Tax Court Judge that the award was paid as compensation for the loss of the John Deere distributorship is in my view unassailable. ...
In consideration for the settlement payment, Valley Equipment abandoned its right to continue as a John Deere dealer. There was a mutual exchange of property which brings the matter squarely within paragraph 40(1)(a)... .