The manager ("SIP") of a Swiss fund incorporated an Ontario company ("City Park") to serve as a vehicle for the investment of monies of the Fund in Canadian real estate. The two controlling shareholders of SIP made loans, in their capacity of trustees for the certificate holders in the fund, to City Park at commercial rates of interest.
Because City Park was "completely a captive to the interests of the certificate holders, acting through professional managers and fiduciaries," the certificate holders were not acting at arm's length with City Park, and the exemption under the predecessor to s.212(1)(b)(vii) was not available. The exemption in this provision was founded on the "assurance that the interest rate will reflect ordinary commercial dealings between parties acting in their separate interest," whereas, here, there were no such separate interests.