Lanester Sales Ltd. v. The Queen, 2003 DTC 997 (TCC), aff'd 2004 DTC 6461, 2004 FCA 217

After finding that the taxpayer (a franchisee) and the franchisor were dealing with each other at arm's length, Bowman A.C.J. stated (at p. 1002):

"To say that every time two independent business persons in pursuit of their own business interests work together to achieve a mutually beneficial commercial objective means that they are 'acting in concert' and are, therefore, not at arm's length would mean that no business relationships would ever be at arm's length."

Arrangements pursuant to a shareholders agreement under which the franchisor of the taxpayer (which owned 49.9% of the taxpayer's shares) was entitled to nominate one of the two directors to the board of directors, and arrangements for pooling the funds collected by the taxpayer with other franchisees in collectively managed bank accounts did not cause the taxpayer to be controlled by the franchisor. Furthermore, these arrangements were part of the extremely broad range of contractual and financial arrangements between franchisors and franchisees contemplated by s. 256(5.1). It was not necessary to deal with the suggestion of counsel for the Crown that the phrase "dealing at arm's length" should be interpreted as implicitly being qualified by the word "otherwise" although Bowman A.C.J. was inclined to agree with this interpretation.