Strayer
J.A.
(Décary,
McDonald,
JJ.A.):—
Relief
requested
This
is
an
appeal
from
a
decision
of
Rothstein
J.
of
the
Trial
Division
of
March
25,
1993,
in
which
he
dismissed
an
appeal
from
a
decision
of
the
Tax
Court
of
Canada
of
March
30,
1990.
The
Tax
Court
had
confirmed
the
reassessment
of
the
appellant’s
income
for
1983
by
which
the
Minister
of
National
Revenue
had
included
the
sum
of
$596,590
in
his
income
for
that
year,
to
which
the
appellant
had
objected.
This
represented
an
amount
received
by
the
appellant
in
1983
following
the
amalgamation
with
another
company
of
Canadian
Reserve
Oil
and
Gas
Ltd.
(hereafter
"Canadian
Reserve")
a
company
of
which
the
appellant
had
been
president
and
which
had
previously
granted
to
him
stock
options
not
yet
exercised
at
the
time
of
amalgamation.
The
position
of
the
appellant
throughout
has
been
that
this
amount
represented
a
settlement
of
a
claim
which
he
would
have
had
for
damages
because
of
the
"unilateral
termination"
of
his
stock
options
by
the
amalgamation
of
the
company
with
another
company,
and
it
did
not
represent
proceeds
from
the
disposition
of
his
stock
options
or
any
other
form
of
taxable
income.
Issues
The
following
issues
arise
out
of
the
pleadings
and
arguments.
A.
Taxability
under
paragraph
7(1
)(b)
This
paragraph
of
the
Income
Tax
Act,
R.S.C.
1985,
c.
1
(5th
Supp.)
(the
"Act")
provides:
7(1)
Agreement
to
issue
shares
to
employees
-Subject
to
subsection
(1.1),
where
a
corporation
has
agreed
to
sell
or
issue
shares
of
the
capital
stock
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm’s
length
to
an
employee
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm’s
length,
(b)
if
the
employee
has
transferred
or
otherwise
disposed
of
rights
under
the
agreement
in
respect
of
some
or
all
of
the
shares
to
a
person
with
whom
the
employee
was
dealing
at
arm’s
length,
a
benefit
equal
to
the
amount,
if
any,
by
which
(i)
the
value
of
the
consideration
for
the
disposition
exceeds
(ii)
the
amount,
if
any,
paid
by
the
employee
to
acquire
those
rights
shall
be
deemed
to
have
been
received
by
the
employee
by
reason
of
the
employee’s
employment
in
the
taxation
year
in
which
the
employee
made
the
disposition....
The
Minister
took
the
position
in
the
reassessment
that
the
appellant
had
"disposed"
of
rights
under
a
stock
option
agreement
within
the
meaning
of
paragraph
7(1
)(b)
and
therefore
the
proceeds
of
that
disposition,
namely
the
$596,590,
should
be
deemed
to
have
been
received
by
the
appellant
by
reason
of
his
employment
in
1983.
The
appellant
denies
that
there
was
a
"disposition"
of
his
stock
options,
which
he
says
were
terminated
by
the
amalgamation
of
Canadian
Reserve
with
another
company
and
that
the
money
received
after
the
amalgamation
was
in
settlement
of
the
claim
he
would
otherwise
have
had
for
breach
of
contract
for
unilateral
termination
of
his
stock
options.
B.
Taxability
under
paragraph
6(1
)(a)
Paragraph
7(3)(a)
of
the
Act
provides:
7(3)
Special
provision.-Where
a
corporation
has
agreed
to
sell
or
issue
shares
of
the
capital
stock
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm’s
length
to
an
employee
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm’s
length
(a)
no
benefit
shall
be
deemed
to
have
been
received
or
enjoyed
by
the
employee
under
or
by
virtue
of
the
agreement
for
the
purpose
of
this
Part
except
as
provided
by
this
section....
The
appellant
contends
that
while
the
amount
in
question
was
not
the
proceeds
of
a
"disposition"
of
his
rights
under
the
stock
option
agreement,
nevertheless
it
was
received
by
him
"by
virtue
of"
that
agreement
within
the
meaning
of
paragraph
7(3)(a)
and
therefore
it
could
only
be
deemed
to
be
income
if
some
specific
provision
of
section
7
so
deemed
it.
He
contends
that
it
does
not
fall
within
paragraph
7(1
)(b)
as
quoted
above
nor
any
other
provision
of
section
7
and
therefore
pursuant
to
paragraph
7(3)(a)
it
cannot
be
deemed
to
be
income.
The
Minister
contends,
however,
that
if
the
appellant
is
correct
and
the
amount
in
question
was
not
received
from
the
disposition
of
his
stock
options,
then
it
would
not
be
received
"by
virtue
of"
the
stock
option
agreement
and
therefore
would
not
fall
within
paragraph
7(3)(a).
This
being
the
case,
it
would
not
be
subject
exclusively
to
the
provisions
of
section
7
but
could
be
treated
as
income
under
another
section
of
the
Act,
namely
as
employment
income
within
paragraph
6(1
)(a)
of
the
Act
which
provides:
6(1)
There
shall
be
included
in
computing
the
income
of
a
taxpayer
for
a
taxation
year
as
income
from
an
office
or
employment
such
of
the
following
amounts
as
are
applicable:
(a)
the
value
of
board,
lodging
and
other
benefits
of
any
kind
whatever
received
or
enjoyed
by
him
in
the
year
in
respect
of,
in
the
course
of,
or
by
virtue
of
an
office
or
employment....
Analysis
Introduction
The
trial
of
this
matter
proceeded
on
the
basis
of
an
agreed
statement
of
facts.
It
was
argued
for
the
appellant
that
as
the
facts
were
all
settled,
and
as
in
his
view
the
learned
trial
judge
had
committed
errors
of
law,
this
Court,
in
exercising
its
undoubted
power
to
review
the
trial
judge’s
findings
of
law,
could
apply
its
own
findings
to
the
established
facts
without
any
deference
to
the
trial
judge.
Counsel
for
the
respondent,
on
the
other
hand,
argued
that
the
trial
judge
had
drawn
various
inferences
of
fact
from
the
evidence
(the
agreed
statement)
and
that
the
Court
of
Appeal
should
not
set
aside
those
inferences
unless
the
trial
judge
had
failed
to
consider
relevant
evidence,
had
misunderstood
the
evidence,
or
overlooked
the
weight
and
importance
of
the
facts
so
as
to
produce
a
result
not
supported
by
the
evidence
as
a
whole.
It
appears
to
me
that,
while
certain
facts
have
been
specifically
agreed
to
in
the
agreed
statement
of
facts,
the
findings
of
the
learned
trial
judge
involved
drawing
inferences
from
those
facts
as
to
the
true
nature
of
the
transactions
and
that
in
doing
so
he
was
obliged
to
apply
a
variety
of
legal
principles
in
characterizing
the
transactions
in
terms
of
the
provisions
of
the
Income
Tax
Act.
While
this
Court
should
set
aside
those
inferences
of
fact
only
if
they
were
not
reasonably
open
to
the
trial
judge
on
the
basis
of
the
evidence
before
him
(Stein
Estate
et
al.
v.
The
Ship
"Kathy
K"
et
al.,
[1976]
2
S.C.R.
802,
62
D.L.R.
(3d)
1,
at
page
806
(D.L.R.
3);
The
Queen
v.
Crown
Forest
Industries
Ltd.,
[1994]
1
C.T.C.
174,
94
D.T.C.
6107
(F.C.A.),
at
pages
177-78
(D.T.C.
6112)),
the
Court
can
of
course
review
the
legal
conclusions
for
correctness.
In
a
case
such
as
the
present
involving
mixed
questions
of
law
and
fact
this
Court
should
show
some
deference
to
the
factual
conclusions
of
the
learned
trial
judge.
A.
Taxability
under
paragraph
7(
1
)(b)
For
the
most
part
the
agreed
statement
of
facts
appears
to
describe
a
scheme
for
amalgamation
of
Canadian
Reserve,
of
which
the
appellant
was
president,
in
which
it
was
understood
by
all
parties
and
so
represented
to
minority
shareholders
that
as
of
the
date
of
amalgamation
the
appellant
would
willingly
be
giving
up
his
unused
stock
options
in
return
for
a
price
of
$26
per
option
minus
the
"exercise
price"
of
the
option,
namely
the
price
that
the
holder
of
the
option
would
have
had
to
pay
per
share
to
exercise
his
option.
This
in
fact
was
the
result
achieved
and
the
proceeds
of
$596,590
received
by
the
appellant
was
precisely
the
amount
to
which
he
was
entitled
under
that
arrangement.
The
essential
facts
supporting
this
view
are
as
follows.
Immediately
prior
to
the
amalgamation
of
Canadian
Reserve,
86
per
cent
of
its
shares
were
owned
by
Getty
Oil
Company
of
California
("Getty").
Getty
wished
to
merge
Canadian
Reserve
with
Getty’s
wholly
owned
subsidiary
in
Canada,
the
new
amalgamated
company
also
to
be
called
Canadian
Reserve
Oil
and
Gas
Ltd.
Getty
wished
to
ensure
that
the
amalgamated
Canadian
Reserve
would
be
wholly
owned
by
it
and
it
was
therefore
necessary
to
buy
out
the
minority
shareholders
in
Canadian
Reserve
upon
amalgamation.
For
various
regulatory
reasons
Getty
thought
it
necessary
that
the
approval
of
a
majority
of
those
minority
shareholders
should
be
obtained
for
the
amalgamation.
To
this
end
a
draft
information
circular
and
amalgamation
agreement
to
be
directed
to
shareholders
was
prepared
and
a
copy
of
this
draft
was
received
by
the
appellant
on
May
27,
1983.
At
this
time
the
appellant
owned
2,776
shares
of
Canadian
Reserve
and
held
46,000
unused
options.
The
information
circular
and
draft
agreement,
obviously
designed
to
persuade
minority
shareholders
to
support
the
amalgamation,
stated
that
upon
amalgamation
being
approved
the
directors
and
senior
officers
of
Canadian
Reserve
would
receive
the
same
price
per
share
as
all
other
shareholders,
their
options
would
be
cancelled,
and
they
would
receive
payment
for
the
cancellation
of
their
options
in
accordance
with
the
formula
set
out
in
the
amalgamation
agreement:
namely
$26
per
share
minus
the
exercise
price
of
the
option.
The
circular
went
on
to
say
that
each
of
the
directors
and
senior
officers
of
Canadian
Reserve
holding
shares
or
options
had
informed
the
company
that
such
person
intended
to
vote
his
or
her
shares
in
favour
of
approval
of
the
amalgamation
and
did
not
intend
to
exercise
any
of
his
or
her
options
prior
to
the
amalgamation.
There
was
nothing
to
suggest
that
the
appellant
ever
expressed
any
objec-
tion
to
these
representations
being
made
to
the
minority
shareholders
(as
they
were
in
fact
made
subsequently
in
material
distributed
on
June
22,
1983).
His
only
objection,
according
to
the
evidence,
is
that
he
advised
Getty
that
he
would
not
"consent"
to
the
termination
of
his
options
nor
would
he
encourage
other
option
holders
to
"consent"
to
that
termination.
(It
is
common
ground,
however,
that
no
approval
of
the
option
holders
was
required
by
the
terms
of
this
scheme.)
According
to
the
agreed
statement
of
facts,
subsequent
to
the
appellant’s
advice
to
Getty
that
he
would
not
consent,
Getty
"unilaterally"
amended
section
10.03
of
the
amalgamation
agreement
to
give
an
undertaking
of
Canadian
Reserve
to
use
its
"best
efforts"
to
obtain
"releases"
from
option
holders
with
respect
to
the
termination
of
their
options.
This
amendment
will
be
discussed
more
fully
later.
On
June
22,
1983
the
amalgamation
agreement
was
signed
on
behalf
of
Canadian
Reserve
by
the
appellant.
On
that
day
the
information
circular
as
described
above
along
with
the
amalgamation
agreement
(as
"unilaterally"
amended
by
Getty)
was
sent
out
to
shareholders
with
notice
of
an
extraordinary
general
meeting
to
be
held
on
July
29,
1983.
On
July
29,
the
amalgamation
agreement
was
approved
by
shareholders
at
the
meeting
at
approximately
11:00
a.m.,
the
amalgamation
being
made
retroactive
to
one
minute
past
midnight
of
that
day.
The
appellant
voted
his
personal
shares
in
favour
of
the
amalgamation
just
as
he
had
represented
to
minority
shareholders
through
the
information
circular.
After
11:00
a.m.
the
appellant
was
provided
with
a
notice
of
termination
of
his
outstanding
options.
This
notified
him
as
an
option
holder
that
his
options
would
terminate
on
the
effective
date
of
the
amalgamation
and
that
he
was
entitled
to
the
"cancellation
price"
calculated
in
accordance
with
the
formula
previously
mentioned,
namely
$26
per
share
minus
the
exercise
price
per
option.
The
notice
further
stated
that
the
necessary
amounts
to
cover
the
cancellation
price
of
all
the
stock
options
had
been
deposited
with
Guaranty
Trust
Company
of
Canada
in
Calgary
to
be
paid
to
the
respective
holders
of
stock
options
upon
such
respective
holders
making
demand
for
payment
of
the
cancellation
price
of
such
stock
options
in
accordance
with
the
procedures
herein
below
described.
Those
procedures
involved
the
stock
option
holder
delivering
a
demand
for
payment.
The
only
condition
for
payment
stated
in
the
notice
was
that
payment
could
be
refused
until
the
trust
company
was
satisfied
that
the
person
making
such
demand
for
payment
is
entitled
thereto
in
accordance
with
the
amalgamation
agreement
and
that
the
demand
for
payment
was
completed
and
signed
in
accordance
with
payment
instructions.
In
short,
at
that
moment
the
appellant
was
entitled
to
recover
the
cancellation
price,
the
amount
which
the
company
and
he
as
a
member
of
its
board
of
directors
had
represented
to
the
shareholders
he
would
receive
in
respect
of
his
stock
options,
the
appellant
and
the
minority
shareholders
having
voted
for
amalgamation
with
this
representation
before
them.
After
receiving
the
notice
of
termination
of
outstanding
options
on
July
29,
1983
the
appellant
executed
a
"release
agreement"
that
same
afternoon.
He
subsequently
received
the
sum
of
$596,590
which,
it
is
not
disputed,
was
exactly
the
amount
he
would
have
received
as
the
"full
aggregate
cancellation
price"
of
his
stock
options
pursuant
to
the
"notice
of
termination
of
outstanding
options"
delivered
to
him
by
the
company.
I
can
see
no
reason
why
he
could
not
have
obtained
the
same
amount
of
money
in
accordance
with
that
notice
of
termination
simply
by
filing
a
demand
for
payment
without
the
execution
of
any
release.
Counsel
for
the
appellant
argued,
in
somewhat
general
terms,
that
although
the
appellant
voted
for
the
amalgamation
with
all
its
attendant
consequences
including
the
termination
of
his
options,
as
a
director
he
was
obliged
by
his
fiduciary
duty
to
the
company
to
do
so
in
the
best
interests
of
the
company.
He
invoked
the
following
provision
of
the
Business
Corporations
Act
of
Alberta,
S.A.
1981,
c.
B-15:
117(1)
Every
director
and
officer
of
a
corporation
in
exercising
his
powers
and
discharging
his
duties
shall
(a)
act
honestly
and
in
good
faith
with
a
view
to
the
best
interests
of
the
corporation....
Counsel
for
the
appellant
cited
this
provision
and
cases
to
demonstrate
that
the
role
of
a
director
is
different
from
that
of
a
shareholder,
but
could
not
enlighten
the
Court
any
further
on
the
application
of
this
principle
to
the
case
in
hand.
It
is
the
position
of
the
appellant
that
he
went
along
with
this
scheme
because
he
wanted
to
stay
on
as
an
officer
of
the
new
amalgamated
corporation
and
did
not
want
to
create
bad
publicity
for
the
corporation,
involving
perhaps
a
negative
reaction
by
the
minority
shareholders
before
the
vote
should
it
become
apparent
that
he
was
not
in
favour
of
the
amalgamation
in
whole
or
in
part.
But
he
allowed
a
representation
to
be
made
to
the
minority
shareholders,
to
induce
an
affirmative
vote
for
amalgamation,
as
to
how
he
would
behave
as
a
shareholder
in
voting
his
shares
for
the
amalgamation.
Further,
he
did
vote
his
personal
shares
for
the
amalgamation.
I
think
one
can
readily
draw
the
inference
from
the
facts
that
he
had
concluded
that
everything
considered
it
was
in
his
own
personal
best
interests
to
go
along
with
this
deal
and
he
went
along
with
it.
It
is
a
trifle
too
precious
to
argue
that
he
behaved
as
a
shareholder
only
due
to
motives
relevant
to
his
position
as
director
when,
to
the
minority
shareholders,
it
was
represented
that
he
as
a
knowledgeable
and
responsible
insider
was
voting
his
personal
shares
in
favour
of
amalgamation
which
necessarily
involved
termination
of
his
own
stock
options
with
compensation.
Paragraph
31
of
the
agreed
statement
of
facts
confirms
that
even
prior
to
July
29,
1983
the
appellant
had
decided
that
if
the
amalgamation
agreement
was
approved
he
would
accept
the
$26
per
share
for
his
stock
options
because
he
had
concluded
it
was
in
his
own
best
interest
to
do
so.
While
he
had
earlier
concluded
that
he
would
not
"surrender"
his
stock
options,
I
can
find
no
evidence
that
anyone
ever
expected
him
to
"sur-
render"
them.
Thus
were
it
not
for
the
"release
agreement"
executed
by
the
appellant
on
July
29,
1983
after
the
amalgamation
agreement
had
come
into
effect,
it
would
be
clear
that
the
appellant
had
disposed
of
his
stock
options
within
the
meaning
of
paragraph
7(1
)(b)
of
the
Income
Tax
Act,
quoted
above,
so
that
the
amount
he
received
would
be
properly
deemed
by
the
Minister
to
be
income
in
1983.
The
term
"disposition"
has
been
held
to
have
a
broad
meaning
(Greiner
v.
The
Queen,
[1984]
C.T.C.
92,
84
D.T.C.
6073
(F.C.A.),
at
page
98
(D.T.C.
6078))
including
the
extinguishment
or
surrender
of
options
as
well
as
their
sale.
But
was
the
legal
effect
of
the
"release
agreement"
the
settlement
of
an
existing
claim
for
damages
and
thus
not
a
disposition?
Why
was
it
prepared
and
signed?
It
should
first
be
noted
that,
as
indicated
earlier,
Getty
had
amended
article
10.03
of
the
amalgamation
agreement
after
the
appellant
had
advised
Getty
that
he
would
not
"consent"
to
the
termination
of
his
stock
options
(the
agreed
statement
indicates
only
a
temporal,
not
a
causal,
relationship
between
these
two
events).
Article
10.03
as
amended
then
read
10.03
Canadian
Reserve
shall
use
its
best
efforts
(1)
to
enter
into
agreement
with
each
holder
of
options
to
purchase
shares
in
the
capital
of
Canadian
Reserve
whereby
such
holders
shall
consent
to
termination
of
the
option
held
and
accept
the
amount
payable
therefor
pursuant
to
this
article,
in
full
satisfaction
of
their
rights
under
such
options,
or
(2)
failing
that,
in
consideration
for
payment
of
such
amount
to
obtain
releases
from
such
option
holders,
releasing
and
discharging
Canadian
Reserve,
Getty
Canada
and
the
Amalgamated
Corporation
from
any
and
all
claims
in
respect
of
or
relating
to
the
termination
of
such
options
pursuant
to
this
article.
The
amendment
added
by
Getty
commenced
with
the
words
"or
(2)".
That
is,
while
the
draft
amalgamation
agreement
provided
an
undertaking
by
Canadian
Reserve
to
use
its
best
efforts
to
obtain
the
consent
of
each
option
holder
to
termination
of
their
options
and
to
accept
the
amount
payable
pursuant
to
the
agreement,
the
addition
provided
an
alternative
undertaking
to
use
its
best
efforts
to
obtain
a
release
from
such
option
holders
by
payment
of
the
same
amount
to
those
option
holders,
releasing
the
various
corporations
from
any
and
all
claims
in
respect
of
the
termination
of
the
options.
The
evidence
was
that
the
appellant’s
legal
counsel
had
reviewed
a
prepared
"release
agreement"
on
or
about
July
15,
1983
and
the
appellant
signed
it
the
afternoon
of
July
29
after
he
had
received
the
notice
of
termination
of
outstanding
options.
As
the
learned
trial
judge
pointed
out,
the
case
of
the
appellant
largely
depends
on
him
being
able
to
bring
his
situation
within
the
rationale
of
Reynolds
v.
The
Queen,
[1975]
C.T.C.
85,
75
D.T.C.
5042
(F.C.T.D.),
aff
d
by
The
Queen
v.
Huestis
(sub
nom.
Reynolds),
[1975]
C.T.C.
560,
75
D.T.C.
5393
(F.C.A.);
aff’d
[1976]
C.T.C.
792,
77
D.T.C.
5044
(S.C.C.).
In
that
case
the
assets
of
a
company
called
Bethex
Explorations
Ltd.
were
acquired
by
another
company
and
Bethex
adopted
a
resolution
to
wind
itself
up.
It
then
entered
into
agreements
with
various
of
its
employees
who
held
options
to
buy
stock
in
Bethex
whereby
Bethex
settled
all
its
liabilities
to
such
employees
by
giving
them
shares
in
the
acquiring
company.
The
Minister
sought
to
tax
the
value
of
the
latter
shares
as
income.
It
was
held
by
the
Federal
Court-Trial
Division
and
confirmed
by
the
Federal
Court
of
Appeal
and
the
Supreme
Court
of
Canada
that
these
were
not
the
proceeds
of
disposition
of
rights
under
the
stock
option
agreement
with
Bethex.
Instead,
the
resolution
to
wind-up
Bethex,
in
which
the
employees
in
question
apparently
took
no
part,
constituted
a
breach
of
those
agreements
which
gave
rise
to
new
causes
of
action
for
damages.
The
amounts
received
by
the
employees
under
the
subsequent
settlements
were
held
to
be
in
settlement
of
the
new
causes
of
action.
Similarly
in
the
present
case
the
appellant
seeks
to
show
that
the
option
agreements
were
breached
at
the
time
of
the
amalgamation
and
that
he
thereupon
had
a
right
of
action
which
was
settled
by
the
"release
agreement",
the
proceeds
thus
being
received
in
lieu
of
the
damages
he
might
have
obtained
by
suing
for
breach
of
contract.
I
am
satisfied
that
the
learned
trial
judge
was
correct
in
attributing
no
tax
consequence
to
the
"release
agreement".
In
my
view
he
was
entitled
to
look
at
the
"true
commercial
and
practical
nature"
of
the
taxpayer’s
transactions
(The
Queen
v.
Bronfman
Trust,
[1987]
1
S.C.R.
32,
[1987]
1
C.T.C.
117,
87
D.T.C.
5059,
at
page
53
(C.T.C.
128,
D.T.C.
5067)).
It
is
not
necessary
that
the
Minister
allege
a
"sham"
for
the
Court
to
consider
the
precise
legal
significance
of
various
instruments.
It
may
well
be
that
the
appellant
may
have
thought
that
he
had
some
cause
of
action
to
settle
and
it
is
agreed
that
he
had
legal
advice
to
this
effect.
That
however
does
not
necessarily
make
it
so.
In
my
view
the
learned
trial
judge
correctly
came
to
the
conclusion
that
this
was
"an
apparently
unnecessary
release
agreement".
He
demonstrated
that
by
its
very
terms
the
agreement
was
not
a
settlement
for
previous
option
rights
already
cancelled
by
the
amalgamation
agreement,
but
rather
represented
in
effect
the
confirmation
of
the
compensation
to
which
he
was
already
entitled
under
the
amalgamation
agreement.
Among
the
salient
observations
of
the
learned
trial
judge
were
the
following:
the
appellant
could
have
received
exactly
the
same
amount
of
money
pursuant
to
the
notice
of
termination
of
outstanding
options
without
signing
any
release;
the
amount
payable
under
the
"release
agreement"
was
precisely
the
same
amount
which
the
appellant
was
in
any
event
entitled
to
pursuant
to
the
terms
of
the
amalgamation
agreement
which
detracts
from
the
notion
that
this
was
somehow
paid
in
settlement
of
a
dispute
over
unilateral
termination;
and
the
agreement
speaks
in
the
present
and
the
future
concerning
the
stock
options
as
if
they
still
existed,
which
belies
the
suggestion
that
this
was
an
agreement
to
settle
a
damage
claim
for
the
loss
of
options
already
terminated
by
the
amalgamation.
Thus
the
learned
trial
judge
concluded
that
if
anything
this
"release
agreement"
was
evidence
of
an
arrangement
worked
out
prior
to
the
effective
date
of
the
amalgamation
contemplating
the
disposition
by
the
appellant
of
his
options
in
accordance
with
the
amalgamation
agreement.
The
fact
that
it
was
actually
signed
a
few
hours
after
the
amalgamation
agreement
was
approved
is
explained
by
the
appellant’s
own
stated
reluctance
to
make
any
final
commitment
until
such
time
as
the
amalgamation
agreement
had
been
approved.
The
learned
trial
judge
also
noted
that
this
"release
agreement"
included
the
curious
provision
whereby
the
company
acknowledged
the
termination
of
the
options
to
constitute
a
breach
of
those
stock
options.
He
observed
that
such
a
provision
is
so
untypical
of
a
release,
which
normally
avoids
any
acknowledgement
of
liability
by
the
party
obtaining
the
release,
that
its
inclusion
indicated
an
attempt
to
make
the
facts
of
this
case
resemble
those
in
the
Reynolds
case.
I
am
satisfied
that
it
was
open
to
him
to
so
conclude
on
the
evidence
and
one
can
therefore
reject
the
argument
that
this
"release
agreement"
must
be
treated
as
a
settlement
of
a
damage
claim
for
breach
of
the
option
agreement.
I
therefore
conclude
that
the
learned
trial
judge
was
entitled
to
find
on
the
facts
and
the
law
that
the
claimant
had
made
a
disposition
of
his
rights
under
the
option
agreement
within
the
meaning
of
paragraph
7(1)(b)
of
the
Income
Tax
Act.
B.
Taxability
under
paragraph
6(1)(a)
It
was
also
pleaded
by
the
respondent
and
argued
by
his
counsel
before
us
,
that
even
if
the
sum
in
question
were
found
not
to
be
received
by
the
appellant
as
proceeds
of
the
disposition
of
his
rights
under
the
stock
option
agreement,
that
amount
would
still
be
employment
income
and
taxable
as
such.
The
respondent
relies
in
this
respect
on
paragraph
6(1
)(a),
quoted
earlier.
Given
my
conclusion
that
the
sum
is
taxable
under
paragraph
7(1
)(b)
it
is
unnecessary
to
deal
with
this
issue.
Conclusions
As
I
can
find
no
reviewable
error
in
the
conclusions
of
Rothstein
J.
that
the
money
in
question
was
received
as
the
proceeds
of
disposition
of
the
appellant’s
rights
under
the
stock
option
agreement,
the
appeal
must
be
dismissed.
Appeal
dismissed.
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