Judgment of the Court
Bowlby rested his case on the decision of this Court in The Minister of National Revenue v. The Dominion Natural Gas Company, Limited (3).
That decision was concerned with a deduction claimed by the respondents in respect of the costs of litigation which in its result affirmed the right of the pnet respondents under certain by-laws of the Township of Barton to sell gas in certain localities in the City of Hamilton, Ontario. The boundaries of Hamilton having been extended to include parts of the Township, the United Company, which had certain exclusive rights Duc under by-laws of the city, advanced the claim that under these by-laws it had the exclusive right to sell gas in the whole area embraced within the extended boundaries of Hamilton, including the localities in question. This claim was disputed and, in the course of the litigation, there was an appeal to the Judicial Committee of the Privy Council and in the result the right of the respondent company under the by-laws of the Township was sustained.
It was held by this Court that the payment of these costs was not an expenditure "laid out as part of the process of profit earning," but was an expenditure made "with a view of preserving an asset or advantage for the enduring benefit of the trade," and, therefore, capital expenditure.
The present appeal concerns expenditures made by the respondent company in payment of the costs of litigation between that company and the Canadian Shredded Wheat Company.
To quote from the judgment of the Privy Council, delivered by Lord Russell of Killowen in Canadian Shredded Wheat Co. Ltd. v. Kellogg Co. of Canada, Ltd. (1), the Canadian Shredded Wheat Company claimed
As regards this payment, the question in issue was whether or not the registered trade marks of the plaintiffs in the action were valid trade marks, or, in other words, whether or not the present respondents, The Kellogg Company, and all other members of the public were excluded from the use of the words in respect of which the complaint was made.
The right upon which