The taxpayer made a series of demands for parties to a non-compete agreement (that it had received in connection with its acquisition of a business) to comply with the agreement and, following negotiations and before the commencement by it of an action, it was agreed that it would be paid a lump sum in consideration for the cancellation of the non-compete agreement.
Noël JA noted (at para. 26) that the Tax Court had:
stated that when the settlement was made (December 17, 1998), the term “disposition” was defined only for the rules relating to taxable capital gains. However, relying on the usual meaning of disposition, he concluded that the cancellation of the non-competition agreements was a disposition for the purposes of section 14 ... .
Noël JA then stated (at para. 41):
As to the concept of “disposition”, the TCC judge did not err in referring to that word’s usual meaning for the application of section 14. That is what the Supreme Court did in Compagnie Immobilière BCN …, where it decided that the word “disposition” in English (“aliéné” in French) was sufficiently broad to include the extinguishment of a right granted by a lease… .
He went on to find that the lump sum gave rise to an eligible capital amount.