Under a plan that was approved by the requisite majority of creditors in accordance with the companies' Creditors Arrangement Act, various classes of unsecured or undersecured creditors of the taxpayer ("CDL") transferred indebtedness of the taxpayer in exchange for shares of the taxpayer's parent corporation ("CL").
Bowman TCJ. found that the debts were not extinguished by novation notwithstanding that the creditors acknowledged to CDL that no further consideration was owed to them in respect of the assigned indebtedness, and stated (at p. 1802):