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Under s. 247(2)(a), the Minister must determine whether those who were responsible for the separate existence of the corporations had, as their sole purpose, the intention that the business of the corporations be carried out in what they considered to be the most effective manner. The judgment as to effectiveness is not the Minister's.

After first finding that because the taxpayers' evidence was credible, there was no requirement for corroboration by external facts, Simpson J. went on to find that he was satisfied both on the basis of the testimony and because of supportive objective evidence that the main purpose for the incorporations of the taxpayers was to provide for the succession to, and independence of, the next generation of the family.

Cullen, J. rejected the appellant's argument "that the language employed in subsection 247(2) ... is so vague and uncertain, and so subject to discretionary determination, that it cannot be regarded as a law, and secondly, 247(3) does not entitle a taxpayer to a full challenge as to the basis upon which the Minister of National Revenue may issue a direction under 247(2)".

"[T]he Minister, before issuing a direction under subsection [247(2)], must examine the reasons for the separate existence of the corporations in question during the taxation year at issue, not the reasons why those corporations had been created." "Subsection [247(2)] clearly requires that before making a direction, the Minister should be satisfied of the existence of certain facts; however, it does not require that he shall indicate that belief in writing or include it in the direction issued by him."

The two subparagraphs of subsection 247(2) require the Minister to make what is in substance one determination, and a direction of the Minister under s. 247(2) accordingly can be fully challenged under s. 247(3).