Global Communications Ltd. v. R., [1997] 3 C.T.C. 2499, 97 D.T.C. 1293

Beaubier T.C.J.:

1 These appeals were heard together on common evidence at Calgary, Alberta on April 13-18, and April 21-27, inclusive, 1997.

• 1. disallowed for 1991,

  • (a) the deduction from its cumulative Canadian exploration expense government assistance received in 1991 of $18,841;

  • (b) the deduction of cumulative Canadian exploration expense of $5,246,062 in accordance with subsection 66.1(3) of the Income Tax Act;

• 2. for 1992,

  • (a) disallowed the deduction of cumulative Canadian exploration expense of $9,518,454 in accordance with subsection 66.1(3) of the Income Tax Act;

  • (b) added $55,408 to the Appellant's income as a “recovery of Canadian exploration expense”; and

  • (c) added $158,039 as business income from licensing seismic data.

3 In their pleadings, the parties agree that the issue is whether the purchase price of certain seismic data is a Canadian exploration expense within subsection 66.1(6) of the Income Tax Act. The term “Canadian exploration expense” is defined in section 66.1 to mean:

66.1(6) In this section,

“Canadian exploration expense” of a taxpayer means any expense incurred after May 6, 1974 that is

• (a) any expense including a geological, geophysical or geochemical expense incurred by the taxpayer (other than an expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well) for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas (other than a mineral resource) in Canada,

• (a) $1,807,958 cash; and

• (b) $13,258,358 by a limited recourse promissory note.

The Minister of National Revenue assumed that the fair market value of the seismic data purchased by the Appellant was not more than $1,807,958 and assessed accordingly.

5 The Appellant filed the following Admission of Fact:

This document is submitted to facilitate the expeditious hearing of these appeals. The facts stated below are facts that may previously have been in dispute that the Appellant now formally admits.

• 1. In acquiring the seismic Data in question, the appellant was motivated by the provisions of subsection 66.1(3) of the Income Tax Act (the “Act”) which specifically permits the deduction of expenses incurred for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas.

• 2. The economic projections done by the Appellant or on its behalf at the time of the transactions (August 1991) took into account the tax deductions afforded by subsection 66.1(3) of the Act.

1. At all times material to these appeals the Appellant had a fiscal period and a taxation year which ended on August 31.

2. The Appellant was not at any material time a “principal-business corporation” within the meaning of that phrase as used in section 66.1 of the Income Tax Act (Canada) (the “Act”).

3. The income tax appeals brought by the Appellant in Court Files 96-1598(IT)G (its 1992 taxation year) [sic] and 96-718(IT)G (its 1991 taxation year) [sic] arise out of the same transaction whereby the Appellant purchased from Technical Data Holdings Ltd. (“TDHL”) certain seismic data which was information that had been obtained by conducting specified geophysical surveys of areas in Alberta, Saskatchewan and British Columbia (“Seismic Data”).

5. The Seismic Data included all processing and interpretation of the originally recorded data, shot-point location maps, surveyors ground elevation records and notes, lists of latitudes and departures regarding shot-point locations, all drillers logs, all shooters records, all observers records, all seismographic magnetic tapes, all monitor records, all field records and record sections relating to the data and any data or material resulting from the processing of the foregoing including one normal and one reversed sepia final film section.

6. The Appellant obtained the full proprietary rights to the Seismic Data as a result of entering into the Purchase Agreement and those rights included the full legal and beneficial ownership of the Seismic Data.

9. Citadel Engineering Ltd. advised the Appellant that the fair market value of the Seismic Data was $16,277,000 as of July 1, 1991.

10. Lundberg, Goodwin & Kurt's advised the Appellant that the fair market value of the Seismic Data was $16,411,200 as of August 13, 1991.

22. In computing its income under Part I of the Act, the Appellant:

(a) treated the purchase price of the Seismic Data as a “Canadian exploration expense” (as defined in subsection 66.1(6) of the Act), and added that amount to its “cumulative Canadian exploration expense” (as defined in subsection 66.1(6) of the Act) in 1991;

(c) deducted cumulative Canadian exploration expense of $5,246,062 in accordance with subsection 66.1(3) of the Act for its 1991 taxation year;

(e) deducted cumulative Canadian exploration expense of $9,518,454 in accordance with subsection 66.1(3) of the Act for its 1992 taxation year.

23. On December 23, 1993, the Minister reassessed the Appellant's 1991 taxation year to disallow certain deductions, and on February 28, 1994 the Appellant objected to that reassessment. On July 14, 1995 the Minister reassessed the Appellant's 1991 and 1992 taxation years to:

(a) disallow the deductions claimed pursuant to subsection 66.1(3);

(b) add $18,814 and $55,408 to the Appellant's 1991 and 1992 income respectively as a “recovery of Canadian exploration expense”; and

(c) add $158,039 to the Appellant's income for 1992 as business income from licensing the Seismic Data.

24. By notices dated October 6, 1995, the Appellant objected to the reassessments dated July 14, 1995.

6 The Appellant called the following witnesses: Brian Curts, P. Eng.; Kenneth Gillies, P.Eng.; Edward Webb, P.Eng.; James McMullen, Vice-President of Shapco Resources Ltd. (“SRL”) and Lawrence Herd, a geophysicist who qualified as an expert in valuing seismic data.

7 The Respondent called Peter Hills, C.G.A., an officer of Revenue Canada; Karen Leeds, C.A.; Leo Redmond; John Tomanek, C.G.A.; Kenneth MacDonald; Gary Aitken; Robert Kondrat; Darold Parken, a lawyer; Ralph Lundberg, geophysicist; William Moore, C.A.; Hank Heerma; Kirk Osadetz, who qualified as an expert in respect to seismic data for exploration; George Kostashuk, who qualified as an expert in respect to seismic data for acquisitions, sales and valuation; Robert Finlay; Roman Adler, C.A., who qualified as an expert in business evaluations and accounting; and Michael Hriskevich, Ph.D., a geologist who qualified as an expert explorationist in the oil and gas industry.

8 A major issue before the Court is whether there was a sale of goods in Alberta and the fundamental principles of a sale of goods - property, price, possession and parties.

9 Crucial to the Appellant's appeal for 1991 (file 96-1598(IT)G) is whether the Appellant owned the seismic data in 1991. Assumptions 8(t), (u) and (v) of the Reply in this file state:

(t) Karon immediately (as pre-arranged) re-sold the seismic to TDHL under two agreements for approximately $2.2 million cash plus limited recourse promissory notes, showing the total value of the seismic at approximately $18 million:

(i) the first agreement, dated August 28, 1991, was for $15,066,316, of which TDHL was to pay $1,807,958 cash, with the remaining $13,258,358 to be covered by a limited recourse promissory note; and

(ii) the second agreement, dated August 29, 1991, was for $3,307,321, of which TDHL was to pay $463,025 cash, with the remaining $2,844,296 to be covered by a limited recourse promissory note;

(u) By agreement dated August 29, 1991, TDHL re-sold the seismic described in the first agreement referred to in (t)(i) above to the Appellant on the same terms and conditions that it had purchased that particular seismic from Karon, namely $1,807,958 cash, with the remaining $13,258,358 to be covered by a limited recourse promissory note, a copy of which is attached as Exhibit A;

(v) Notwithstanding the dates of the agreements referred to in (t) and (u) above, title to the seismic did not pass to the Appellant until after its 1991 fiscal year end;

10 The Appellant allegedly purchased the seismic data from TDHL by two agreements dated August 29, 1991, Exhibits A-4 and A-6. They were the third in a series of agreements. The chronology is as follows:

1. Petroseis to Karon

• (1) Petroseis would not proceed until the ultimate purchaser signed a brokerage deal with Petroseis 90 Limited. This did not occur until on or after September 23, 1991 (Exhibit R-47). It was signed by Technical Data Holdings Ltd. (“TDHL”) as of the 30th day of August, 1991.

• (2) Petroseis' lawyers did not receive the “cash payment” until, on September 23, 1991, Mr. Parken sent the purchase money to Cook Snowden, a law firm for Petroseis, for two groups of seismic data including the seismic data in question. The body of that letter reads:

  Re: Petroseis Data Sale

  In connection with the referenced matter and further to our telephone conversation of today's date I enclose herewith our firm trust cheque in the amount of $2,140,000.00. These funds are provided to you in trust on the express trust condition that the same not be releasable by you until such time as we have advised you that our client, Technical Data Holdings Ltd., has concluded, to its satisfaction, closing arrangements with Karon Resources Inc. regarding the acquisition of certain seismic data, a description of which your client is aware. Outstanding requirements relative to our client's closing arrangements include, but are not limited to, receipt of notification from your client Petroseis Energy Surveys Ltd. as to the change of ownership from Petroseis Energy Surveys Ltd. to Karon Resources Inc. and confirmation as to amended storage records relating to seismographic tapes and related materials indicating our client as the Owner.

  If the above trust conditions have not been satisfied or waived by us on or before October 15, 1991 the enclosed funds are to be returned together with interest accrued thereon. It is further understood that you will hold such funds at interest, interest to follow the funds.

  If you are unable to comply with the foregoing conditions kindly return the enclosed cheque or contact the writer to obtain a mutually agreeable amendment.

  Yours very truly,

  (Exhibit R-18)

  Mr. Parken's enclosed trust cheque's reference is “Global 1991 (L1039-14)”.

• (3) Title to the seismic data did not pass from Petroseis until, on October 2, 1991, Petroseis wrote Dyad Data Services (Canada) Limited (“Dyad”) a one page letter of instructions that transferred the seismic data to TDHL. Mr. McMullen received a copy of the letter. By this means the seismic data was transferred directly from Petroseis to TDHL on October 2, 1991.

12 In August, 1991 Karon did not own the seismic data which it purported to sell to TDHL. The deal with Petroseis did not close in August, 1991. The remaining percentages' dates of transfer are not in evidence. They were being sold to Petroseis and at least some of them did not transfer to Petroseis in August, 1991.

2. Karon to TDHL

13 By a “Seismic Purchase and Sales Agreement” styled “This Agreement made as of the 28th day of August, 1991”, Karon sold TDHL a 100% proprietary interest in the seismic data (Exhibit R-14). The closing date was defined to mean “August 28, 1991, or such other date as may be mutually agreed to by the Vendor and Purchaser”. Karon did not have a lawyer. TDHL was a one-purpose corporation set up to handle this matter by Shapco Resources Ltd. (“SRL”), which was owned by Len Shapiro. The price described in Exhibit R-14 is “$1,807,958 cash or cheque upon execution of this agreement” and $13,258,358 by a limited recourse promissory note, a total of $15,066,316. Karon warranted in paragraph 3.01 that it was “the sole legal and beneficial owner of the assets and 100% of all rights and interests therein”.

14 When Karon executed Exhibit R-14, Mr. McMullen, pursuant to instructions from Mr. Shapiro, telephoned Dyad. Dyad did then, and still does, store the seismic data and release it for licensing sales. Due to its storage contracts, any transfer of a proprietary interest must be confirmed in writing with Dyad which then transfers the ownership. Dyad's representative informed Mr. McMullen that Karon did not have any registration with Dyad in respect to the seismic data. Without delivery of an appropriate transfer letter from the owners, Dyad would not register the seismic data in TDHL's name.

15 Mr. Parken, TDHL's lawyer, had Karon endorse TDHL's cheque for $1,807,958 and retained it. That cheque was never delivered to Karon. Peter Hills testified that on August 29, 1991, the date of this cheque, TDHL had $3,000 in its bank account. TDHL's lawyer, Mr. Parken, phrased his testimony very carefully. Mr. Parken was referred to by Mr. Hills as an “in-house lawyer”. The SRL premises are a relatively small office area employing about eight people. Mr. Parken was a one-man law firm with an office in the premises of SRL. Mr. Shapiro handled all of the financial matters of SRL. Mr. McMullen handled the oil and gas matters of SRL under Mr. Shapiro's supervision. Related and virtually consecutive testimony of Mr. McMullen in cross-examination on this subject reads as follows:

Q. The data was still at Dyad Brokerage, Dyad?

A. The data storage firm, but there was a difficulty with transferring it and Mr. Kondrat of Karon Resources to TDHL and the problem was some documentation they required transferring it from the prior owner.

Q. So you were hearing from Dyad that there was in essence a title problem, were you?

A. There was a notification in terms of the title that was missing and they were not prepared to do anything with the data unless that was resolved so I went back to the conference room in our company and I suggested to Mr. Kondrat that he had not completed his paperwork accordingly and that I was having difficulty with that, in turn, he said, “Well, what do I need?”, and I said, “You need some letter of direction from them to transfer that data to you, obviously, and that hasn't been dealt with”, so from there that was attended to.

Q. So you knew there was a problem then between Petroseis and Karon?

A. I knew at that point there was that deficiency.

Q. How did Technical Data pay for the seismic?

A. It was in cheque form, I believe, and I left it with Mr. Parken in trust until we can be sure that the matter had been resolved.

Q. But you yourself know that the matter didn't get resolved that day, don't you?

A. Yes, I don't know exactly when it was resolved but I know I have a copy of that letter dated the 29th and I don't know exactly when Mr. Parken exactly released those funds and that is something that he looked after, after that point. I would have been able to just go on from there at that point.

Q. But you know that the funds weren't released from Technical Data Holdings to --

A. Certainly not at that moment at that initial closing, we did not. We would have had to wait for Mr. Kondrat to go wherever, whenever, to Petroseis and obtain execution of that specific letter that we talked about.

Q. So is it your evidence here today that on the 29th of August, the day the deal was supposed to close, is it your evidence here today that you were unaware of the fact that the cheque was presented to Mr. Kondrat and he simply endorsed it on behalf of Karon and Mr. Parken put the money back in his trust account?

A. I did not see that and I was not aware.

Q. That is not what I am asking. I am asking you: Are you aware today, you are here under oath giving evidence today, are you aware today that that is what happened?

A. I am aware today, yes.

Q. So the funds then at the end of the 29th were still in Mr. Parken's trust account?

A. Presumably.

Q. Was this matter of some concern to you?

A. Yes, it was. I would have shared it with Mr. Shapiro and said, “You know we are having a little difficulty”.

Q. Well, we are talking about a little difficulty concerning the title too, I guess the way you are looking at it, close to $20,000,000 of seismic data?

A. That's correct.

Q. So it was something considerably more than a little difficulty?

A. I presume we could somehow clear the matter up, that was my hope.

Q. What instructions were you issuing to whom to get this thing sorted out?

A. I believe, as I've said, contacted Mr. Kondrat and indicated to him that he had a deal and we would request that he do what he could to resolve the title issue and honour his agreement.

Q. Are you aware that between PESL and Karon there had to be a licensing agreement before their deal was effective?

A. I found out about that after the fact through Mr. Parken.

Q. Are you aware that there were various assignments that had to be executed between the parties concerning the portions of the income stream on the seismic data?

A. In terms of the brokerage contract, Mr. Gibson?

Q. Well, I will come to the brokerage contract but just who is supposed to end up with what percentage of the revenue received from the licensed copies of the data?

A. I was aware of that after the fact, Mr. Parken handled all of that transaction and including the negotiation of the referenced brokerage agreement that you refer to.

16 The Court does not believe Mr. McMullen's professions of ignorance. Karon's proposed purchase from Petroseis on the 28th of August was crucial. If Karon did not own and possess the seismic data on the 28th of August, it had nothing to transfer. The Court has no doubt that Messrs. Shapiro, McMullen and Parken knew and know full well that Karon had neither title nor possession of the seismic data for the period before September 1, 1991, and that it was a major concern. This view is confirmed by the wording of Exhibits A-4 and A-6 which follow.

17 Assumptions 8(dd), (ee) and (ff) of the Reply in respect to 1992 were admitted by Mr. Kondrat, the officer of Karon. They read:

(dd) Karon reported the transaction referred to above in (t)(i) on the basis that its proceeds for the seismic were $1,807,958;

(ee) At no time did Karon receive any payment on the promissory notes referred to above in (t);

(ff) In November 1992, Karon sold the two promissory notes (face value $16,102,654) described above in (t) to WCP, a special purchaser, for $100,000;

18 The TDHL cheque endorsed by Karon for Mr. Parken is dated August 29, 1991, not August 28, 1991. It was certified on September 16, 1991 and cleared the Canadian Imperial Bank of Commerce on September 16, 1991 (Exhibit R-46).

19 On August 28, 1991 Karon did not own the seismic data which it purported to sell to TDHL and TDHL knew it. Nor did TDHL have the money to pay Karon; its cheque was an empty piece of paper which never left the possession of its lawyer. The limited recourse promissory note made in consideration of it, which was similar in terms to that attached to Exhibit A-4, was a nullity in August, 1991. Each knew that the other did not provide the consideration which it purported to transfer. The expression for this used by one text book is that the consideration was “illusory”. (Chitty on Contracts. Sweet & Maxwell, 27th Ed. 1994, paragraphs 3-020 and 3-021.) Their alleged deal was a nullity.

3. TDHL to Global

20 By a “Seismic Purchase and Sale Agreement” styled “This Agreement made as of the 29th day of August, 1991” TDHL sold the Appellant a 100% proprietary interest in part of the seismic data allegedly purchased from Karon (Exhibit A-4). This part, hereafter called the “seismic data” or “seismic”, is the property in question in this appeal. The closing date was described “‘Closing date’ shall mean August 29, 1991.”

21 Mr. Parken testified that Exhibit A-4 was executed on August 29, 1991. It contains some unusual clauses which read:

WHEREAS the Purchaser wishes to purchase certain seismic data as listed and shown on Schedule “A” hereto for the purpose of exploring for and developing petroleum and natural gas reserves and the Vendor is willing to sell same to the Purchaser;

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises, covenants and agreements hereinafter set forth and contained, the parties hereto agree as follows:

2.00 Agreement to Purchase Assets

2.01 The Vendor hereby sells, assigns, transfers, conveys to the Purchaser and the Purchaser hereby agrees to purchase and accept directly from the Vendor all of the Vendor's right, title, estate and interest in and to the Seismic Data, being the data as set out in Schedule A hereto. The aggregate Purchase Price of the Seismic Data is $15,066,316 payable as follows:

$1,807,958 —	cash or cheque upon closing;
$13,258,358 —	by limited recourse Promissory Note in the form attached as Schedule "B".
$15,066,316 —	TOTAL

2.02 This transfer shall be effective as of the hour of 12:01 a.m., Calgary time, on the Closing Date.

2.03 All benefits and obligations of every kind and nature accruing, payable or paid and received or receivable in respect of the Assets shall be apportioned between the Vendor and the Purchaser as of and after the effective time as provided in Clause 2.02 hereof.

3.00 Representations and Warranties of the Vendor

3.01 The Vendor does not represent and warrant that it has title to the Assets, nor does it make any representation as to the quality or marketability of the Assets, however does represent and warrant that there are no liens, charges or encumbrances relating to the Assets created by, through or under the Vendor except as provided for in the Original Purchase Agreement.

3.05 The representations and warranties contained in this Article 3.00 hereof shall be deemed to apply to and be contained in all conveyances, assignments, transfers and other documents delivered by the Vendor in connection with the transactions contemplated by this agreement.

5.00 Covenants of the Vendor

5.01 The Vendor hereby agrees and covenants that the Promissory Note is accepted by the Vendor hereunder, as absolute final payment for the Assets and shall in no way be construed as conditional payment or a mere promise to pay for the Assets at a time subsequent to this agreement.

7.00 Survival of Representations and Warranties

7.01 The representations and warranties of the Vendor and the Purchaser contained in this agreement and contained in certificates or documents submitted pursuant to or in connection with the transactions contemplated hereby shall continue and remain in full force and effect for the benefit of the parties until August 28, 1992.

8.00 Terms Regarding Payment

8.03 No demand may be made for payment under the Promissory Note until August 29, 1998 or until August 29, 2001, as the case may be, and then only for the purposes of an action to realize upon the Purchaser's interest in the Assets as contemplated in Clause 8.04, and no such action shall lie in connection with the Promissory Note or under this agreement if not commenced prior to August 29, 1999 or August 29, 2002, as the case may be.

8.04 The right of the Vendor in respect of payment of the principal amount of the Promissory Note and interest as provided therein shall be restricted to the right to appoint, or request that a court of competent jurisdiction appoint, a third party as a receiver of all or any of the interest of the Purchaser in the Assets, such receiver being a person other than the Vendor or a person related to the Vendor under the provisions of the Income Tax Act (Canada). Such receiver shall have the right to liquidate the Purchaser's interest in the Assets by sale to any bona fide third party purchaser, unrelated to the Vendor or a person related to the Vendor under the provisions of the Income Tax Act (Canada), and shall apply the proceeds of such liquidation, after payment of all costs incurred in connection with such liquidation, to the outstanding indebtedness under the Promissory Note to the extent of the balance thereof. The Vendor shall have no recourse against the Purchaser or any successors or assignees of the Purchaser in respect of any balance which continues to be outstanding in respect of the Promissory Note and, following application of the proceeds realized by such receiver from the liquidation of the Purchaser's interest in the Assets, no further action shall lie on the covenant to pay contained in the Promissory Note or under this agreement or otherwise.

10.00 Subrogation

10.01 The assignment, transfer and conveyance effected by this Agreement is made with full right of substitution and subrogation of the Purchaser in and to all covenants, warranties and representations by others heretofore given or made in respect of the Assets or any part thereof to the Vendor or, to the extent permissible, to a predecessor in interest to the Vendor.

12.00 Assignment

12.01 Except as provided below, neither this agreement nor the Promissory Note shall be assignable by the Vendor except with the written consent of the Purchaser which consent may be withheld in the Purchaser's absolute discretion, whether reasonable or not. Notwithstanding the foregoing the Vendor shall be entitled to assign, from time to time, its rights under Clause 6.03 to any third party.

12.02 This agreement and the rights and obligations of the Purchaser hereunder and in respect of the Assets shall not be assigned without the prior written consent of the Vendor....

(underlining supplied)

22 The “promissory note” for $13,258,358 is expressly subject to this agreement. It was called a limited recourse promissory note in testimony. However, realization of the note was limited to the proceeds of sale of the seismic data. Thus, the value of the note equals the value of the seismic data upon its recovery. If no seismic data is transferred, the “note” itself has no value. In view of this, the description of the “note” as a promissory note is a misnomer. The Bills of Exchange Act, Statutes of Canada, Chapter B-4, defines a promissory note as follows:

176.(1) A promissory note is an unconditional promise in writing made by one person to another person, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person or to bearer.

23 Exhibit A-6, the Bill of Sale, executed by the same parties, respecting the same seismic data, and dated the same day, reads:

Bill of Sale

THIS Indenture, made the 29th day of August, A.D., 1991.

• BETWEEN:

TECHNICAL DATA HOLDINGS LTD., a body corporate with offices at the City of Calgary, in the Province of Alberta (hereinafter called the “Grantor”

• OF THE FIRST PART

• AND

GLOBAL COMMUNICATIONS LIMITED, a body corporate with offices at the City of Toronto, in the Province of Ontario, (hereinafter called the “Grantee”)

• OF THE SECOND PART

WHEREAS the Grantor is possessed of the goods and chattels hereinafter set forth, described and enumerated and has contracted and agreed with the Grantee for the absolute sale to it of the same for the sum of Fifteen Million Sixty Six Thousand Three Hundred and Sixteen ($15,066,316) Dollars.

NOW THIS INDENTURE WITNESSETH, that in consideration of the sum of Fifteen Million Sixty Six Thousand Three Hundred and Sixteen ($15,066,316) Dollars, paid by the Grantee to the Grantor, at or before the sealing and delivery of these presents (the receipt of which is hereby acknowledged) the Grantor doth bargain, sell and assign to the Grantee ALL THOSE the said goods and chattels identified in Schedule “A” hereto, all of which goods and chattels are now in possession of the Grantor and are situate in or upon the premises described as:

i. 7260-12th Street S.E., Calgary, Alberta

ii 4221 23B Street, N.E. Calgary, Alberta

AND all the right, title, interest, property, claim and demand whatsoever, both at law and equity, or otherwise howsoever, of the Grantor in and to the same, and every part thereof.

TO HAVE AND TO HOLD the said hereby assi gned goods and chattels, and everyone of them and every part thereof, with the appurtenances and all the right, title and interest of the Grantor thereto and therein, as aforesaid, unto and to the use of the Grantee.

AND the Grantor doth hereby COVENANT, with the Grantee, its successors and assigns THAT the Grantor is now rightfully and absolutely possessed of and entitled to the said hereby assigned goods and chattels, and every one of them and every part thereof provided that the Grantor shall not be liable to the Grantee in any manner with respect to title to any of such goods and chattels following delivery to the Grantee, or in accordance with the instructions of the Grantee, of such of the goods and chattels capable of physical delivery.

AND that the Grantor now has in itself good right to assign the same unto the Grantee, in the manner aforesaid, and according to the true intent and meaning of these presents.

AND that the Grantee, its successors and assigns, shall and may from time to time, and at all times hereafter peaceably and quietly have, hold, possess and enjoy the said hereby assigned goods and chattels, and every one of them and every part thereof, to and for its own use and benefit, without any manner of hindrance, interruption, molestation, claim or demand whatsoever, of, from or by the Grantor or any person whomsoever claiming by, through or under the Grantor except as specifically provided in the Seismic Purchase and Sale Agreement dated August 29, 1991 made between the Grantor and the Grantee.

AND THAT the hereby assigned goods and chattels are acknowledged by the Grantee to be acquired on an “as is” basis with no representations or warranties by the Grantor as to merchantability.

AND MOREOVER, that the Grantor shall and will from time to time and at all times hereafter, upon every reasonable request of the Grantee but at the cost and charge of the Grantee, make, do and execute or cause or procure to be made, done and executed, all of such further acts, deeds and assurances for more effectually assigning and assuring the said hereby assigned goods and chattels unto the Grantee, in the manner aforesaid, according to the true intent and meaning of these presents as by the Grantee, or its Counsel in the law shall be reasonably advise or require.

IN WITNESS WHEREOF the said parties to these presents have hereunto set their hands the day and year first above written.

• TECHNICAL DATA HOLDINGS LTD.

• Per: “L. Shapiro”

• GLOBAL COMMUNICATIONS LIMITED

• Per: “J.H. Burgis”

• V.P. Finance & Administration

(underlining supplied)

24 TDHL had only $3,000 in the bank on August 29, 1991. TDHL's cheque, endorsed by Karon, was not certified until September 16, 1991. Mr. Hills testified that all three of these deals were financed with the Appellant's money. The first evidence that TDHL had any funds for its purchase from Karon is the certification of its cheque (Exhibit R-46) on September 16, 1991 after August 31, 1991, the Appellant's year end. Therefore, the Court finds that Global's money was not paid to TDHL on August 29, 1991 due to the manner in which the typed dates were styled on all of the agreements except the Bill of Sale (Exhibit A-6); the certification of September 16, 1991; and on the basis of Mr. Hills' testimony which, was not refuted. Mr. Shapiro did not testify. Nor did anyone from the Appellant corporation itself testify. On the evidence before the Court, the first payment of money by Global to purchase the seismic data was on September 23, 1991, the date of Mr. Parken's trust cheque to Cook Snowden. Transfer from Petroseis to TDHL followed on October 2, 1991.

25 The Alberta Sale of Goods Act, R.S.A. 1980, c. S-2, reads, in part:

8(1) The goods that form the subject of a contract of sale may be either existing goods owned or possessed by the seller or future goods.

1 In this Act,

• (g) “future goods” means goods to be manufactured or acquired by the seller after the making of the contract of sale; ...

15 In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is

• (a) an implied condition on the part of the seller

  • (i) that in the case of a sale he has a right to sell the goods, and

  • (ii) that in the case of an agreement to sell he will have a right to sell the goods at the time when the property is to pass,

• (b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods, and

• (c) an implied warranty that the goods are free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

24(1) Subject to this Act, if goods are sold by a person who is not the owner of them and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.

26 Mr. Hills testified that all of the transactions were financed with Global's money. The first evidence that the Appellant's money paid for the seismic data in question is Mr. Parken's letter of September 23, 1991 containing his trust cheque referenced “Global”.

27 The Appellant's documents of August 29, 1991 were very carefully drafted by Mr. Parken. His evidence is that they were carefully reviewed by the Appellant's solicitor. They were planned by the Appellant's Toronto solicitor. No one who might know of the circumstances of these agreements testified on behalf of the Appellant. Mr. McMullen specifically said that he did not know anything respecting the financial arrangements between TDHL and the Appellant. He was not present when the agreements were signed and his function was to take orders from Mr. Shapiro. Therefore, the Court makes an adverse inference in respect to the transaction between the Appellant and TDHL which is purported to have occurred on August 29, 1991: the evidence of the Appellant's officers or employees would not have supported the Appellant's case. (See Murray v. Saskatoon (City) (No. 2) (1951), [1952] 2 D.L.R. 499 (Sask. C.A.)at 505 and 506.)

28 The Court reads Exhibit A-4, the alleged promissory note, and Exhibit A-6 strictly in accordance with their wording. No money, consideration or goods passed from either party to the other on the 29th day of August, 1991. TDHL did not have the goods it purported to sell and the Appellant did not pay anything to TDHL. Neither party to the alleged transaction of August 29, 1991 presented a representative to testify as to the consideration or knowledge of the consideration allegedly passing between the parties on August 29, 1991. The inference to be drawn from the evidence before the Court, the lack of witnesses, the assumptions, and the onus upon the Appellant to disprove the assumptions, is that the alleged consideration by each party was illusory to the knowledge of both TDHL and the Appellant.

29 The Court finds that the documents and the purported agreements between the Appellant and TDHL dated the 29th day of August, 1991 are a nullity.

1991 - File 96-1598(IT)G

30 On August 29, 1991 TDHL had to be careful. It did not have title, it did not have possession and it did not have any money. Yet it purported to be buying and selling seismic data for millions of dollars. Mr. Parken testified that Exhibit A-4 was executed on August 29, 1991. However, he did not say whether one or both parties executed it. Len Shapiro, who Mr. McMullen stated was chief financial officer of TDHL, SRL and the Shapco group of companies, signed all of the documents for TDHL. Mr. McMullen stated that Mr. Shapiro knew everything concerning financial matters and Mr. McMullen did not.

31 The clauses in Exhibit A-4 between the Appellant and TDHL did not warrant that TDHL had title or commit it to transfer more than it had that day. The Bill of Sale transferred possession which TDHL did not have. Both sides of these agreements were represented by lawyers and the agreements were planned very carefully. They were drawn by TDHL's lawyer so as to protect TDHL as much as possible. They dealt only with what TDHL had on that day and TDHL, quite specifically, did not warrant that it had title to the seismic data. It did not have possession.

32 The Court finds that the Appellant did not pay for, acquire, own or possess the seismic data in its 1991 fiscal year. Its agreements with TDHL of August 29, 1991 were a nullity.

33 Appeal 96-1598(IT)G for the Appellant's 1991 taxation year is dismissed.

1992 - File 96-718(IT)G

34 Assumptions 8(jj), (kk), (II), and (mm) read as follows:

(jj) No part of the $15,066,316 referred to above in (u) was incurred by the Appellant for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas in Canada;

(kk) No part of the $15,066,316 referred to above in (u) was CEE;

(ll) Any expense incurred by the Appellant in excess of $1,807,958 to acquire the seismic was not reasonable in the circumstances; and

(mm) Any deduction for CEE in Excess of $1,807,958 by the Appellant was not reasonable in the circumstances.

35 With respect to the Appellant's 1992 taxation year, the Court finds that Petroseis transferred the seismic data to TDHL on October 2, 1991 by means of a letter to Dyad. The money Petroseis was paid for this was the Appellant's money which was sent to Petroseis' lawyer by Mr. Parken on September 23, 1991 (Exhibit R-18). Thus, in consideration of $1,807,958 paid by the Appellant's trustee's lawyer on September 23, 1991 to Petroseis' lawyer, Petroseis transferred the seismic data in question to TDHL as trustee for the Appellant on October 2, 1991. When title was delivered and payment was made the transaction closed. (See Minister of National Revenue v. Tip Top Tailors Ltd. (1957), 57 D.T.C. 1232 (S.C.C.), Rand J.)

36 This finding is confirmed by two other items of evidence before the Court. The first is Mr. Kondrat's testimony at the beginning of his cross-examination when he testified that Karon considered the money it received from TDHL and kept for its activities in the series of transactions as a commission. The second arises from TDHL's payment of G.S.T. on its transaction with the Appellant. Peter Hills, the auditor for Revenue Canada, testified that his investigation revealed that the money TDHL paid to Petroseis was Global's money. He stated that when Global transferred the necessary cash to TDHL, it also paid TDHL 1.06 million dollars to pay the G.S.T. on Global's transaction. But TDHL used that money to pay Petroseis. Thereupon, in November, 1991, TDHL paid $126,577 G.S.T. on this transaction to Revenue Canada. The $126,577 paid by TDHL was exactly 7% of the $1,807,958. The evidence is that TDHL is a one-purpose corporation used solely to conduct this deal. There is no evidence that it is registered under the Excise Tax Act for G.S.T. purposes. Therefore, its report in November coincides with its duty to report an October transaction as that duty is set out in the Excise Tax Act.

37 Mr. Hills testified that Revenue Canada's investigation of TDHL and all of the other parties in respect to these transactions began in August or September of 1993. By 1995 all of the participants had been interviewed. In 1995, almost four years after paying the $126,577 and just before the reassessments were issued, TDHL paid G.S.T. of $928,000, which was almost exactly 7% of the remaining balance which the Appellant alleges was the purchase price of the seismic data.

38 It remains for the Court to find whether the $1,807,958 spent by the Appellant in its 1992 fiscal year for geophysical data was for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas in Canada pursuant to paragraph 66.1(6)(a) of the Income Tax Act.

39 The Appellant's chief witness was its vice president, Mr. McMullen. James McMullen is middle-aged. He began working with aero magnetic surveys, moved to Calgary where he worked with Pan Canadian Petroleum which owns and manages the Canadian Pacific Railway's mineral rights in western Canada. He worked in a variety of departments there for seven and one-half years, then had his own firm and worked for Remington. He joined SRL eight and one-half years ago. He has the primary responsibility for SRL's seismic and exploration activity in Saskatchewan and Alberta. He testified that SRL is essentially engaged in the exploration for and production of oil and gas. SRL has limited partners and manages interests through various corporations. SRL also manages the licensing of seismic data which it, the limited partners and firms like the Appellant own.

40 Since Mr. McMullen joined SRL it has participated in 220 oil and gas wells. 1996 was its best year; it participated in drilling or drilled 21 wells and had only one dry hole. Since Mr. McMullen joined SRL, its success in drilling is 72%. Its prior record was considerably worse. Mr. McMullen stated that he relies heavily on seismic in choosing to drill or to join in a drilling venture. SRL participates in or drills wells with and for limited partners including the Appellant. The Appellant has participated in seismic, wells and pipeline investments managed by SRL since 1985. Prior to the purchase in 1991 the Appellant joined and has remained in three other investments in seismic, oil and gas exploration and distribution which are managed by SRL. The Appellant was a participant in 67 wells in the Kidney development in northern Alberta in which it has about a 1% interest. On the evidence before the Court, the Appellant, after having been involved with SRL for over ten years and spending many millions of dollars by promissory notes and cash, now has oil and gas interests which, in total, amount to about two wells.

41 The seismic data purchased by the Appellant in 1992 is concentrated in 18 regions. Two are in northeast British Columbia and two are in southern Saskatchewan. The remainder are all over Alberta. The data purchased totals over 6,400 kilometres of seismic recordings. It is in SRL's library in Calgary. Some overlap other seismic data in SRL's library which currently totals over 200,000 kilometres of seismic data. This is a very large library, even by major oil company standards. For a small company such as SRL, it is overwhelming. But the various sets of data are owned by various investors. SRL uses it as a trustee for the investors.

42 At the time that the Appellant allegedly signed the agreements with TDHL it also signed an agreement with Four Star International Inc. (“Four Star”) whereby Four Star was to manage the seismic data purchased from TDHL for the Appellant. However, the evidence is that Four Star had no employees, did nothing, and that the Appellant stopped paying management fees to Four Star before its contractual duty expired. Mr. McMullen stated that SRL did whatever managing was done of the seismic data in question for exploration purposes. TDHL licensed the seismic data itself. It only informed the Appellant as to the use of the money from seismic licensing as a result of the Respondent's inquiries. These practices repeated the previous conduct of SRL and Global in respect to other transactions.

43 The 6,400 kilometres of seismic data which the Appellant purchased is licensed to users. Mr. McMullen stated that at least two sets of the Appellant's regional data have been used by SRL in deciding whether or not to drill wells. One such set was the Amber III set. Another was the Stettler Wimborne set in Alberta which he stated SRL used to drill two wells in which Global participated. In the purchase and sale agreement's (Exhibit A-4) schedule there are two sets which constitute Stettler Wimborne, “Stetler Basin I” and “Stetler Basin 2.” Together they total approximately 1,089 kilometres of seismic data. Of this, 120 kilometres are in the area of the two wells that Global has participated in drilling.

44 About 16 kilometres is near other seismic allegedly used by SRL preparatory to drilling one site in the Stettler Wimborne area which fits within the time frame in which SRL began referring to the Appellant's seismic. This well was discussed extensively by Mr. McMullen. It is located on Section 36, Township 34, Range 24, west of the 4th meridian (“Section 36”). Mr. Osadetz stated that from his review of SRL's usage of the Appellant's seismic, this well constitutes the first possible use of the Appellant's seismic by SRL for the Appellant's own exploration; his testimony to this effect is accepted by the Court. Mr. McMullen's testimony as to the use of the 6,400 kilometres of seismic in respect to any other drilling program fails to fit the time perimeters of the usage of the seismic in respect to drilling in which the Appellant participated.

45 These numbers highlight the division between the Appellant and the Respondent. The Respondent takes the position that 6,400 kilometres of seismic was not necessary for the Appellant's exploration. The 16 kilometres of 1,089 in Stettler Wimborne were allegedly used in 1993 when SRL had to decide whether to drill on Section 36 to comply with Alberta's regulations. The resulting well produced a good flow of gas which was first shut in due to low prices and then shut in because of limited plant capacity, for a total of about a year and a half. It is only now producing income.

46 The Appellant's position starts from the premise that you can never have too much seismic. Mr. McMullen testified, “Regional seismic is what brings us into an area.” He stated that it is used to “pick” prospects and to eliminate areas entirely. Even if you own or shoot seismic, you will license others' seismic to confirm what you think you have found. Geologists study well logs in the area close to the “pick” areas of seismic to confirm strata and anomalies indicated by the seismic. After that, new seismic is usually shot to determine exactly where the pool is indicated and where in the pool to drill. The Appellant's expert, Lawrence Herd, emphasized that in the western basin of Canada the big pools have been found. As a result, the exploration effort is to find discrete pools and to drill them exactly so as to realize the most production out of them. While not every firm does it the same way, it is a consultative process between the geophysicist using seismic primarily, the geologist using existing well logs and surface geology, and the manager like Mr. McMullen. Together, they decide where to drill.

47 The Respondent called Dr. Michael Hriskevich, a geologist who qualified as an expert explorationist in the oil and gas industry. Dr. Hriskevich discovered a number of oil and gas fields in Alberta including the famous Rainbow Field which he named, and for which he received the Stanley Slipper Award for Oil Finding in 1990. He outlined the order of stages which would constitute the appropriate program for a small company which could not afford deep drilling. They are: first, conduct a geological appraisal to find competitive economic reserves of oil and gas; second, conduct a detailed geological study to select appropriate areas; third, acquire licensed seismic data and reprocess it in respect to the chosen areas — this might require two or three lines of seismic data from brokers for a total of three miles of data; fourth, search land respecting possible leases and the possibility of forming partnerships — this could be done simultaneously with stage 3 and might include acquiring a lease; fifth, if you drill a well at this stage, bid on other land; sixth, in the alternative to stage 5, shoot seismic to in-fill and define the possible pool — he stated that seismic is something like insurance and far cheaper than drilling; seventh, do developmental drilling. Dr. Hriskevich suggested that the order could change. Larry Herd testified in rebuttal evidence that in his experience 90% of exploration programs in Alberta are conducted along the order outlined by Dr. Hriskevich. However, 10% are not. Mr. Herd has seen SRL's procedures and stated that its order of procedure is among the 10%.

48 Mr. McMullen testified that SRL's procedure in conducting exploratory work for the Appellant is to review the contents of the 6,400 kilometres of seismic purchased by the Appellant from Petroseis, then to select appropriate areas, and from that to proceed to geological work and thereafter, more or less, to adopt the order described by Dr. Hriskevich. Thus, Dr. Hriskevich's procedure is to review the geology first whereas Mr. McMullen testified that he reviews his available seismic first.

49 Mr. McMullen went on to describe his system once a drilling area has been chosen. None of the limited partnerships managed by SRL have allocation agreements or any other agreements as to their entitlement to an interest in drilling a well or an entitlement to production from that well. Rather, Mr. McMullen makes a personal decision based upon his idea of the contribution of each to the proposed selection of the well, drilling, or production. Mr. McMullen stated that a major factor in his decision is whether the proposed investor can afford to support the drilling. Kirk Osadetz, who qualified as an expert in respect to seismic data for exploration, reviewed SRL's seismic and usage of seismic with Mr. McMullen at SRL's premises. He concluded that Mr. McMullen's personal choices seemed to him to benefit SRL over the investors for whom it supposedly acted as trustee. Certainly, in the Court's view, with no written agreements as to participation and no governance of SRL by means of agreements entered into on behalf of investors such as the Appellant, the opportunities for abuse by SRL are rampant. The Appellant has invested in various proposals by SRL since 1985 and its financial returns are minimal.

50 In 1994, after the assessment process of Revenue Canada began, SRL instructed Ralph Lundberg to conduct a survey of the 6,400 kilometres acquired by the Appellant. Mr. Lundberg's survey was not posted on up-to-date maps showing wells already drilled in the area; it was very hurried; and there is no evidence that Mr. Lundberg had decided on the strata he was interested in in the various areas of seismic he studied. Mr. Lundberg advised Mr. Osadetz that the Appellant's seismic did not require processing to bring out the strata he was interested in and Mr. Osadetz agreed that the seismic, while old by seismic standards, was of good quality. However, Dr. Hriskevich pointed out that processing is normal, even on licensed seismic, to bring out the discrete anomalies that a geophysicist is looking for when developing an exploration program. The evidence is that SRL had not picked out any area or areas to concentrate on when it instructed Mr. Lundberg to do the survey. The Court has no doubt from the totality of evidence before it respecting the usage of seismic data, that Mr. Lundberg's survey of the Appellant's seismic data was proceeded with in order to impress the Court that it was being used for exploration purposes.

51 The history of the Appellant's previous transactions with SRL is that it netted no money on exploration. With respect to the seismic purchased by the Appellant in 1992, only one report was ever provided to Global respecting alleged exploration. The Appellant did not exercise any control over SRL, Four Star, or any of the corporate bodies which were supposed to conduct exploration for the Appellant.

52 All of the correspondence and memoranda by the Appellant, its lawyers, and its bank preparatory to the purchase of the seismic data deal with the question of a tax write-off. This review includes Exhibits R-53, 54, 55, 56, 57, 58, 67, 86, 87, 88, 89, 90 and 91. Some also describe the use of the seismic data in respect to licensing and exploration, the projected revenues and losses from both, the risk factors associated with oil and gas exploration, and the net after taxes. Corporations were inserted to alleviate oil and gas risk factors. What made the projections profitable was the net value of the tax deduction. But that is the reason for the provisions of the Income Tax Act related to oil and gas exploration, which involves high risk. Over the years to 1998 the actual net, including taxes, was projected to be between $5,000,000 and $6,000,000 on the basis of the plan which was adopted in the documents that followed.

53 The Appellant has licensed the seismic data for fees since it was purchased. Mr. McMullen testified that any money earned by the Appellant from licensing seismic data was invested in exploration programs managed by SRL. On this basis, the Appellant puts forward the licensing of the seismic data as part of the exploration purpose in its purchase. A concrete example of exploratory use of the seismic data is the program to drill the Stettler Wimborne well on Section 36. The Respondent took strong exception to this allegation by the Appellant. In particular, the evidence is that the “swath” seismic shot by the Appellant immediately before drilling on Section 36 did not touch any of the Stettler Wimborne seismic lines purchased by the Appellant. However, even if the “swath” seismic did not touch the Stettler Wimborne seismic data, the Appellant, through Mr. McMullen, could have used the Stettler Wimborne seismic data to decide not to drill along that seismic line and instead to drill in the area where the successful well was drilled.

54 The successful well on Section 36 was not designated as an “exploration” well by the Alberta oil and gas authorities. Mr. McMullen stated that he considers every well an exploration well. However, Dr. Hriskevich stated that the kind of drilling that SRL either did or participated in is normally called “garbage picking”. That is, drilling is to pick the edges of the known limits of a recognized field. This would explain Mr. McMullen's success rate.

55 In Fulcrum Resources Ltd. v. Alberta (Minister of Energy & Natural Resources) (1986), 45 Alta. L.R. (2d) 315 (Alta. C.A.), the Alberta Court of Appeal considered a similar problem relating to similar words. Quoting from the judgment:

The scheme of the Act is to create a fund out of which the minister is to pay (by so-called P.I.P. grants) eligible expenses, which include (by s. 1(b)) eligible exploration expenses, which mean (by s. 1(d)) “prescribed expenses”. Regulation s. 4(1) prescribes, in the relevant portions:

...“eligible exploration expense” means an expense ... that complies with any of the following:

• (a) an expense including a ... geophysical ... expense ... for the purpose of determining the existence, location, extent or quality of an accumulation of oil or gas in Alberta...

Words in a statute must be given that meaning which they can reasonably bear and which is consistent with the object of the Act: see R. v. Jurtik, 38 Alta. L.R. (2d) 142, [1985] 5 W.W.R. 272, 20 C.C.C. (3d) 274, 60 A.R. 321 (C.A.). The obvious purpose of the Act is to encourage oil and gas exploration.

It is common ground that seismic investigation records information about subsurface conditions which, if correctly interpreted, can show (or deny) promise of the presence of the kind of rock formations where oil or gas is sometimes trapped, and is a standard research tool because it is much less expensive than actual drilling. Indeed, it is conceded that, if the seismic work here had been done in connection with a drilling program, its costs would be an eligible exploration expense. The claimant had no program: it ordered the work in speculation that it would either sell the results or negotiate an interest in minerals in reliance on them. Nevertheless, an encouraging report would stimulate a drilling program by the buyers of it just as it might encourage somebody who already has a drilling program.

I have no difficulty in coming to the conclusion that the claimant expended money “for the purpose of determining the existence” of oil and gas. Indeed, that was the immediate purpose of the work, notwithstanding that the secondary purpose was to speculate in the results. The dispute between the claimant and the minister is this simple: the minister says that the presence of the one purpose excludes the other. The claimant says that the two are not mutually exclusive. I agree with the claimant. That being so, the secondary purpose is irrelevant unless that statute deals with it. It did not.

It may be that the minister perceived some potential for mischief in the scheme of the claimant. This does not disentitle it if the original grant program was open to it, as it was, and it relied on it, as it did. With respect, the minister read something into s. 4(1)(a) of the regulations which is simply not there.

I would allow the appeal and return the matter to the minister with the direction that he process the claim in the light of these findings.

Appeal allowed.

56 In paragraph 66.1(6)(a) it is not necessary that the Appellant who incurred the expense did so for its own purposes. Nonetheless the Appellant's pattern was to license seismic or to negotiate an interest in minerals in reliance on them, just as Fulcrum Resources Ltd. (“Fulcrum”) did. On occasion, such as in the case of the well on Section 36, it might actually drill or be a major drilling participant.

57 Two things distinguish the Appellant from Fulcrum. First, the Appellant had previously participated in seismic licensing and drilling programs managed by SRL. This in fact happened again with the seismic data in question. Second, the Appellant's seismic data was purchased, whereas Fulcrum's was shot. However, if the Income Tax Act had intended to restrict paragraph 66.1(6)(a) to shot seismic, it could have specified that. It did not.

58 “Geophysical” pertains to geophysics; that is, to the study of the physics of the earth or its crust. In 1992 the Appellant purchased geophysical data when it purchased the seismic data. By doing so it incurred an expense which, on the evidence of its history and its actions both at the time of the purchase and thereafter, was for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas in Canada.

• (a) The Appellant is allowed the deduction of cumulative exploration expense of $1,807,958;

• (b) The “recovery of Canadian exploration expense” is to be reconsidered and reassessed in accordance with (a), above; and

• (c) $158,039 is to be added as business income from licensing seismic data.

Costs

60 Since success is divided, no costs are ordered. However, at the hearing it was agreed that the costs of various motions which were referred to the Judge conducting the hearing would be dealt with in a separate telephone conference. The Registrar will contact counsel within 15 days from the date of this Judgment and fix a date for a telephone conference in which the costs respecting those motions will be argued.