In Bresse Syndics Inc. v. The Queen, 2021 FCA 115 (sub nom. CO2 Solution Technologies Inc.), the Federal Court of Appeal (“FCA”) considered the extent to which a public corporation (“Pubco”) held de facto control over a corporation (the Appellant) wholly owned by a trust the trustees of which were the prevailing directors of Pubco. As background, the Appellant claimed refundable tax credits associated with scientific research and experimental development (SR&ED) expenses that it incurred based on a research agreement with Pubco. The Canada Revenue Agency disallowed those credits on the basis that the Appellant did not qualify as a CCPC because it was directly or indirectly controlled by a public corporation (namely, Pubco).

Finding that Pubco had de facto control over the Appellant, the FCA noted that if a person ceased being a director of Pubco, they automatically ceased being a trustee of the trust. Consequently, Pubco had the power to terminate the trustees’ functions by revoking or not renewing their mandate as directors. The net result, according to the FCA, was that the “trustees’ freedom to decide was subject to the will of [Pubco]”.