The Queen v. Bergelt, 86 DTC 6063, [1986] 1 CTC 212 (FCTD)

Collier, J. [ORALLY]:—This is an appeal from a decision of the Tax Review Board: see [1984] C.T.C. 2033; 84 D.T.C. 1042.

The issue is whether the defendant taxpayer was, or was not, resident in Canada from September 15, 1980 to the end of the 1980 taxation year.

The defendant filed his 1980 return on the basis he was resident in the United States during the period set out. The Minister of National Revenue disagreed. He assessed the defendant on the basis he was resident in Canada throughout the year. The taxpayer appealed.

In the Tax Review Board, as in this Court, the question at issue is essentially one of fact. Thomson v. M.N.R., [1945] Ex. C.R. 17 at 30-31; [1945] C.T.C. 63 at 78 per Thorson, P.

That decision was affirmed by the Supreme Court of Canada [1946] S.C.R. 209; [1946] C.T.C. 51.

In Beament v. M.N.R., [1952] 2 S.C.R. 486; [1952] C.T.C. 327, Cartwright, J. said at 494 (C.T.C. 333): "it has frequently been pointed out that the decision as to the place or places in which a person is resident must turn on the facts of the particular case?"

See also Schujahn v. M.N.R., [1962] Ex. C.R. 328 at 331: [1962] C.T.C. 364 at 367 per Noël, J.

The presiding member of the Tax Review Board decided the issue of fact in favour of the taxpayer. The Minister appealed to this Court.

I am told the evidence at the Tax Review Board level was substantially the same as the evidence before me. If anything, there was more evidence by the taxpayer at this hearing on certain points.

I am satisfied, on the evidence, the defendant was from September 15, 1980 to December 31, 1980, not resident in Canada as assumed by the Minister. I find the "assumptions" have been successfully demolished.

I do not propose to set out the facts in great detail.

The defendant is a chartered accountant. He was employed by a large firm of chartered accountants from 1969 until August 1980. He lived in a house in West Vancouver from 1977 until June 1,1980 with his wife and two children.

In August 1980 he was offered and accepted a senior, well-paid position as Group Controller with Daon Corporation. That was an American company carrying on business in the United States, with its home base there, in Newport, California. The U.S. company was a wholly owned subsidiary of Daon Development Corporation, a Canadian company. That company started from small beginnings in the 1960s to a public company with phenomenal growth and expansion in the 19705. It was a large and successful corporation by 1980. The position offered the defendant was a permanent one and required the defendant going to Newport and carrying out his duties from that base for an indefinite period of time.

He left for Newport on September 15, 1980. He took his car and as many personal belongings as he could pack. His wife and two children did not accompany him.

The reason was clear and understandable.

Before the Daon job offer came along, the defendant and his wife had decided to renovate their Vancouver house. It was a major undertaking, requiring a construction loan of eventually $130,000. The work required removing the roof and walls and expanding the premises. The house could not be lived in. As of June 1, 1980, the defendant and his family moved in with his mother-in-law.

The defendant intended to buy a home in the Newport area. He had made some investigations. The prices of equivalent homes in California were higher than what he could expect to realize on the sale of the Vancouver property.

Daon U.S. agreed to give him an interest-free $50,000 loan if he needed it. It agreed to pay all moving expenses, including the real estate commission on the ultimate sale of the West Vancouver home.

But, the Vancouver home was not (in September) put up for sale. It was under reconstruction. A real estate agent, engaged by the defendant, advised against listing the property until the work was completed. It was sensible advice.

When the defendant left for Newport, he did not have a house there to go to. He had not decided in what area he wanted to live; he did not have the financial ability to purchase in Newport until his home finances were in order. His wife remained to look after the completion of the reconstruction. The defendant had been his own contractor in respect of the various tradesmen.

The defendant testified there was another reason for his family not immediately following him. The new position was practically a seven day, 14 hour a day job.

The defendant moved into a furnished apartment, in Newport, owned by his employer. He did not pay rent. This arrangement was to continue until he found a house. He added some kitchen and other equipment on his own.

When he left Canada, he closed two of three bank accounts. The remaining one he kept open to pay his tradesmen. His pay cheque, in the Canadian equivalent of U.S. funds, was deposited to that account by Daon Canada. This was to be done until such time as he had a U.S. social security number, and payment could then be made by his U.S. employer.

The defendant cancelled his membership (in Canada) in the Board of Trade; went non-resident in his Yacht Club; changed the mailing address for his credit cards; closed his safety deposit box.

In Newport he joined a lunch club, and a racket ball sports club. He engaged in sailing races. He opened a bank account. Arrangements were made through a San Francisco attorney by his employer for the defendant to apply for and obtain a work permit. Steps were taken in that respect.

The defendant visited new housing sites in the Newport area. He narrowed the possibilities to certain sites, and certain homes. He kept his wife posted. She came to Newport in the latter part of November, 1980, to look at the potential home purchase.

In mid-November 1980, Daon Canada, the parent company, began exploring a possible change in its accounting set-up for both its Canadian and U.S. operations. This meant the creation of a new post headquartered in Canada, and the severance of the defendant's superior in Newport. The company looked on the defendant as a prime prospect for the new position back in Canada.

The company made the decision to effect the change. The defendant was asked to consider whether he wanted to make the move back. It was eventually put to him on a take it or leave the organization basis. In midDecember he took it.

It was suggested in argument that he made no effort, or perhaps should have looked for other employment in the United States. But it must be remembered that when he went to the United States, the job he was then offered was a permanent one, and was to last there indefinitely. When that job disappeared in the United States he was offered what, as I understand it, was a better job back in Canada, and he finally decided to take it. The defendant eventually returned to Canada in 1981, after completing projects for the United States company.

I have not, as I said earlier, enumerated every detail of the evidence. A good deal is set out in the agreed statement of facts, and in the testimony given by the defendant and Mr. Langrish.

The question of residence has been dealt with in the leading decision of Thomson v. M.N.R., [1946] S.C.R. 209; [1946] C.T.C. 51.

Kerwin, J. said at 211-12 (C.T.C. 52-53):

There is no definition in the Act of “resident” or “ordinarily resident” but they should receive the meaning ascribed to them by common usage. When one is considering a Revenue Act, it is true to state, I think, as it is put in the Standard Dictionary, that the words “reside” and “residence” are somewhat stately and not to be used indiscriminately for “live,” “house,” or “home.” The Shorter Oxford English Dictionary gives the meaning of “reside” as to being “to have one’s settled or usual abode, to live in or at a particular place.” By the same authority, “ordinarily” means “1. In conformity with rule: as a matter of regular occurrence.

2. In most cases, usually, commonly. 3. To the usual extent. 4. As is normal or usual.”. On the other hand, the meaning of the word “sojourn” is given as “to make a temporary stay in a place: to make or reside for a time.”.

Rand, J. said at 224-25 (C.T.C. 63-64):

The gradation of degrees of time, object, intention, continuity and other relevant circumstances shows, I think, that in common parlance “residing” is not a term of invariable elements all of which must be satisfied in each instance. It is quite impossible to give it a precise and inclusive definition. It is highly flexible, and its many shades of meaning vary not only in the context of different matters, but also in different aspects of the same matter. In one case it is satisfied by certain elements, in another by others, some common, some new.

The expression “ordinarily resident” carries a restricted signification, and although the first impression seems to be that of, preponderance in time, the decisions on the English Act reject that view. It is held to mean residence in the course of the customary mode of life of the person concerned, and it is contrasted with special or occasional or casual residence. The general mode of life is, therefore, relevant to a question of its application.

The evidence here, to my mind, clearly discloses that the defendant, from September 15, 1980, had severed his residence ties in Canada, and had centred them in the United States.

He made three business trips to Vancouver prior to mid-December 1980, when he made the decision to take the new Canadian position. On each trip he spent one or two days with his family. That was quite understandable. The facts of the family visits, the deliberate delay in listing the Vancouver house, and the method of payment of salary in the first few months do not, to my mind, indicate any retention of residence in Canada.

The appeal is dismissed. The parties agreed that subsection 178(2) of the Act, regardless of outcome, would apply. The defendant will therefore recover all reasonable and proper costs of this appeal: See, for example, The Queen v. Creamer, [1977] C.T.C. 20; 77 D.T.C. 5025 (F.C.T.D.).

Appeal dismissed.