Words and Phrases - "financial dependence"

Is financial dependence of one party on another sufficient in itself to create a non-arm’s length relationship?

CRA stated:

As noted … in Keybrand and Aeronautic, the financial dependence of one party on the other could, depending on the facts and circumstances of the situation, demonstrate that the parties are not dealing with each other at arm's length at a particular time in respect of a particular transaction.

As to what constituted financial dependence, CRA stated:

[T]he following factual elements have been considered by the courts in determining whether a party is financially dependent on another party: all or substantially all of the income earned by one party came from the other party; one party was the sole customer or supplier of the other party; the sole customer or supplier would be very difficult to replace; the integration of the activities of one party with those of the other party; the involvement or control of one party in the financing of the other party; and the contractual and commercial arrangements between the parties did not reflect terms and conditions normally agreed upon by independent parties according to commercial practices of the industry.

Where the concept of financial dependence is relevant in a specific case, the CRA generally relies on the relevant jurisprudence in the context of the issue under analysis to determine whether such dependence exists.

CRA concluded:

If the facts and circumstances of a specific case demonstrate that the financial dependence of one party on another is such that it is possible for the CRA to conclude that a transaction or series of transactions was entered into between persons not dealing with each other at arm's length under any of the criteria listed in … S1-F5-C1, [para. 1.38, respecting a common mind directing the bargaining, acting in concert or de facto control], then such dependence may be sufficient to conclude that the parties are not dealing at arm's length.