Because of the reputation and the prior personal contacts of the taxpayer's shareholder ("Miller") with officials of the Kuwait Oil Company, in February 28, 1991 the Kuwaiti government entered into an agreement with the taxpayer for it to extinguish oil well fires which were expected to be ignited by the retreating Iraqi troops. On June 28, 1991 a Bermuda company ("SBIL") was incorporated and capitalized by the taxpayer and on August 2, 1991 Miller departed Canada and became a Bermuda resident. On August 30, 1991 the taxpayer declared (and subsequently paid) a $3 million bonus to Miller. Miller included 155/185 of this amount in his Canadian income based on the proportion of the days between February 28 and August 30 when he was resident in Canada. Effective September 1, 1991 the taxpayer commenced paying SBIL a monthly services fee of $800,000 for the duration of the work in Kuwait. The Minister disallowed pursuant to s. 69(2) the deduction of the fees paid to SBIL and of the portion of the bonus attributable to the period when Miller was not resident in Canada, in each case, to the extent that the amount exceeded $2,250 per day while Miller was in Kuwait and $750 per day when he was not ($2,250 being the $1,500 per day paid to another employee plus an additional $750). The Minister also assessed under Part XIII tax on the basis that the disallowed amount represented a benefit conferred on Miller.
In allowing the taxpayer's appeal, Bowman TCJ. noted that it was Miller who predominantly contributed to the taxpayer's profit and that Miller had accepted no or reduced remuneration in the previous lean years to keep the taxpayer afloat. After comparing the wording of ss.69(2) and 67, he stated (at p. 1770) that "if there is a difference between the concepts in the two provisions it is not readily apparent".