The taxpayer commenced in May 1976 to make preparations to conduct an insurance business in Bermuda, including the appointment and training of a Bermudan agent, and the solicitation of Bermudan residents, and at the end of December two policies were issued on the lives of two Bermudan residents.
The taxpayer was carrying on business in Bermuda in 1976: (1) the taxpayer made its contracts of insurance on Bermudan lives in Bermuda; (2) the "operations which the plaintiff carried on through its agent in Bermuda during 1976 were the beginning of a proposed or systematic type of operation out of which the plaintiff could reasonably expect to derive a profit"; and (3) "the inducement of persons to enter into contracts of insurance fairly describes the business of an insurance company".
Stone J.A. went on to find that in the event that the test in Smidth v. Greenwood, as to the place in which operations took place from which profits in substance arose, was applicable, that such test was satisfied:
"Although, as the appellant has demonstrated, many things had to be and were in fact done in Canada in order to bring insurance policies on the lives of residents of Bermuda into existence, it remains that other acts of overriding importance and significance had to be done and could only be done in Bermuda. The initial solicitation of business was but one of these. There must be added to it the other activities of the agents identified in the judgment below, the absence of at least two of which would have meant that no policies could have come into force in Bermuda. I have in mind that the requirement that policies be delivered there in order for them to be legally effective and the further requirement that the agents, in effect, make a subjective but fundamentally important assessment prior to such delivery that no changes had occurred in the insurability of the lives of the applicants ... ."