The taxpayer was a Canadian-controlled private corporation in the business of printing customized circuits, held 75% by a holding company for Mr. Bamber and his wife and 25% by Mr. McMuldroch. Mr. McMuldroch left his employment with the taxpayer to incorporate a Barbados company ("ACPI"), of which he initially was the sole director, and the CEO and president, on the understanding that two thirds of the profits from ACPI would go to Mr. Bamber or his family. Mr. McMuldroch also sold his shares of the taxpayer to the Bamber holding company. ACPI sold set-up services and software to the taxpayer, who was its only customer. Mr. McMuldroch transferred his ACPI shares to a holding corporation in the Channel Islands ("Morville"), which initially was to be owned by two discretionary trusts for the two families, but which ultimately was held by an insurance company for two insurance plans whose beneficiaries could be designated to be members of the McGoldrick family (in the case of the plan for which 10 shares were held) and the Bamber famiy (in the case of the plan for which 20 shares were held).
Pizzitelli J. found that the taxpayer and ACPI were not dealing at arm's length. In finding that the two companies' principals (Messrs. Bamber and McMuldroch) were acting in concert, he stated (at para. 75):
[T]hey not only sought the same legal and accounting advice together, but directed the implementation of the tax planning jointly as well, corresponding with the same contacts in doing so.
He also stated (at para. 76) that they acted "without separate interests...their interest being the movement of money off-shore for their mutual benefit."
Furthermore, a party has de facto control of a company if it has "the clear right and ability... to influence in a very direct way the shareholders who would otherwise have the ability to elect the board of directors," (para. 91) and here, although the shares of ACPI were nominally owned by the insurance company, "the insurance company was no better than a trustee acting on their behalf" (para. 93).