The taxpayer paid dividends to its shareholder, ("Prévost Holding"), a Netherlands holding company which, in turn, paid dividends in substantially the same amount to its two corporate shareholders, a Swedish and UK corporation. Prévost Holding was not party to a shareholders agreement that contemplated that dividends received by Prévost Holding would be paid to its shareholders and Prévost Holding was not otherwise obligated to pay those dividends to its shareholders.
The Court accepted (at para. 13) the finding of the Trial Judge that "the 'beneficial owner' of dividends is the person who receives the dividends for his or her own use and enjoyment and assumes the risk and control of the dividend he or she received" and (at para. 16) the finding of the Trial Judge that "the corporate veil should not be pierced because Prévost Holding is not 'a conduit for another person', cannot be said to have 'absolutely no discretion as to the use or application of funds put through it as a conduit' and has not 'agreed to act on someone else's behalf pursuant to that person's instructions without any right to do other than what that person instructs it ..."