The taxpayer's business was a franchised restaurant. Boyle J found that it was required to share the small business deduction with corporations controlled de jure by the husband ("Robert") of its 76% shareholder on the basis that Robert had de facto control of it as described in s. 256(5.1): Robert as officer and director made all the important decisions; it was dependent on one of his companies for the provision of administrative services as well as for the leasing to it of the premises; and she could not have sold her controlling interest without the consent of the franchisor.
After referring to the Silicon Graphics statements that, to have de facto control of a corporation, a person or persons must have the clear ability to effect a significant change in the board or directly influence the shareholders, Boyle J stated (para. 44) that more recently it had been found to be appropriate to rely on "who controlled day‑to‑day operations, who made all the decisions, who signed all the business agreements, invoices and cheques, and who was in a position to exert economic pressure in order to have its will prevail with respect to the business and… the corporation," and then stated (at paras. 46-7):
[T]he issue appears to have been very clearly addressed and settled by the Federal Court of Appeal… . I will therefore be considering such broader manners of influence in applying the Silicon Graphics meaning of de facto control to the particular facts of this case. …[I]n…applying the de facto control test…this Court should be attempting to determine who is, in fact, in effective control of the affairs and fortunes of the corporation.