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Placer Dome Canada Limited (the "Respondent") is a wholly-owned subsidiary of Placer Dome International ("PDI") involved in the exploration, production and sale of gold. The Respondent operated five gold mines in Canada during the years in question, and owned all the shares of another company engaged in operating a sixth mine in Quebec. All gold produced by the Respondent in the relevant taxation years were sold to bullion dealers at, or near the spot market price at the time of the sales, and no part of it was the subject of a forward sale or futures contract. None of it was dealt with or delivered pursuant to certain derivative transactions (the "Transactions") which were effected by the employees of PDI under a "hedging program" to protect the output of the PDI Group from fluctuations in the spot price of gold.

By notices of assessment dated January 20, 2000, the Minister of Finance (Ontario) (the "Appellant") assessed the Respondent for tax pursuant to the Mining Tax Act R.S.O., 1990, c. M. 15 (the "Act") in respect of the taxation years 1995 and 1996. After notices of objection were filed, the reassessments were confirmed, and notices of appeal were filed with the Ontario Superior Court of Justice. The issue under appeal was whether net gains that the Respondent realized from Transactions allocated to it in those two years, were properly included by the Appellant in the amount subject to mining tax. The Appellant's position was that the net gains from the Transactions were derived from "hedging" within the definition of that term and should therefore fall within the words "all consideration received or receivable from hedging" in the definition of "proceeds" under the Act.

The Respondent's position was that the statutory definitions should be interpreted more narrowly and that the net gains from the Transactions were not "proceeds...from the mines". It argued that decisions with respect to the quantities of gold to be hedged as well as details of the Transactions were made on a global basis. As well none of the Transactions resulted in delivery of gold produced by the Respondent. The Respondent argued this fact militated against the net gains from the Transactions falling withing the definition of "hedging" and "proceeds" under the Act. That definition required a direct link between the Transactions and a delivery of output from the mine or the consideration received for it.

The Superior Court of Justice held that, on the proper reading of the legislative provision, the net gains from the Transactions were properly included in the amount subject to the mining tax, and the appeals were dismissed. On an appeal to the Court of Appeal for Ontario, the majority allowed the appeal and ordered that the assessment be referred back to the Appellant for reconsideration and reassessment on the basis that the gains from the Transactions were not subject to tax under the Act. Gillese J.A., dissenting, would have dismissed the appeal.