This case involved the Atlantic Groundfish Retirement Program, (the "AGLRP") under which the Federal Government purchased fishing licences for the purpose of reducing the number of persons participating in the ground fish fishery. The Appellant was a fish harvester who sold his fishing licences to the AGLRP and agreed to permanently leave the commercial fishery for a total payment of $120,000. $60,000 of this money was allocated to the fishing licences. Following the disposition of the licences, the fish harvester filed an income tax return which included one half of the amount allocated to the licences ($30,000) in income pursuant to s. 14(1) of the Income Tax Act, which deals with eligible capital property.
The issues in this case were whether the funds received from the disposition of these licences should be:
1) Included in income pursuant to s. 14(1) as a sale of eligible capital property;
2) Included in income pursuant to s. 38 as taxable capital gain; or
3) Not included in income at all.
With respect to the first issue, the court embarked upon a complicated review of the mirror image rule and concluded that "since the Federal Government was acquiring these licences for a non-commercial purpose no part of the amount received by the Appellant for his fishing licences would be included in determining E in the definition of “cumulative eligible capital” and hence no amount would be included in the Appellant’s income under section 14 of the Act in relation to the amount received by the Appellant for his fishing licences" [para. 12]
With respect to the second issue (s. 38), the court concluded that in order to treat the proceeds of sale of a fishing licence as a capital gain, it would first be necessary to determine whether a fishing licence was "property" for the purposes of the Income Tax Act. After a review of some of the more recent non tax cases on the subject (including Royal Bank of Canada v. Saulnier, which has an appeal pending before the S.C.C.) the court concluded that a fishing licence was "property" for the purposes of the Act. Since the licence could not be treated as eligible capital property pursuant to s. 14, and since the licence could be treated as property, the court ruled that the disposition should be treated as a capital gain.
Editor’s note: For a case which ruled that the costs of acquiring a fishing licence should be characterized as being on capital account see F.A.S. Seafood Producers Ltd. v. Canada (Tax Court of Canada) (Bowie T.C.J.)  T.C.J. No. 664, 52 D.T.C. 2034 [link] digested herein
Post script: See also Hache v. Her Majesty The Queen (digested here) where this case is not followed because it relies upon a decision of RBC v. Saulnier that was overturned by the SCC.