In order to make promissory notes that he had donated to a charitable foundation cease to be non-qualifying securities, the taxpayer arranged for the Foundation to sell those promissory notes to a corporation ("Sweet") owned as to 90% by his nephew, with Sweet issuing notes with identical terms to the Foundation as consideration for the purchase. In finding that this purchase by Sweet represented a purchase by a person with whom the Foundation dealt at arm's length for purposes of s.118.1(18), Evans, J.A. stated (at para. 48) that "the fact that it may seem that a transaction has been entered into largely as a favour by one party to the other does not necessarily mean that it cannot be at arm's length" and noted that while the taxpayer exercised a degree of influence over the nephew by virtue of their family relationship and business connections, Sweet was not entirely dependant on the taxpayer for its business, so that the Trial Judge did not commit any reversible error in this regard.
Before reaching this conclusion, the Court noted that the Trial Judge had committed a reversible error when he interpreted s.251(1)(c) as in effect deeming all persons to be dealing at arm's length who were not deemed by paragraphs (a) and (b) to not be dealing at arm's length.