Urie, J (Heald, J concurring):—This appeal from a judgment of the Trial Division was heard together with appeal, Court File No A-367-81, Her Majesty the Queen v Grandson Holdings Inc. The appeals are from judgments of Mr Justice Addy which allowed with costs, the respondents' appeals from the decision of the Tax Review Board which had dismissed the appeals of each respondent from reassessments for tax. In this case, the respondent Gurd’s Products Company Limited ("Products") was reassessed for its 1971, 1972 and 1973 taxation years. The reassessments for the respondent Grandson Holdings Inc ("Crush USA") were in respect of its 1971 and 1972 taxation years. The sole issue to be determined in the appeals is whether Products was carrying on business in Canada at any time in the taxation years under appeal, or at any time subsequent to April 26, 1965 so that it would be deemed to have been resident in Canada by virtue of paragraph 250(4)(c) of the Income Tax Act, RSO 1952, c 148 as amended (the "Act") and thus subject to Canadian income tax pursuant to subsection 2(3) Act. If Products is found to be a Canadian resident for tax purposes, the parties have agreed that dividends paid by Products to Crush USA are properly subject to withholding tax pursuant to subsection 212(2) of the Act as "payments made by a resident to a non-resident". In other words, the judgment in this case in respect of the Products appeal will be determinative of the appeal relating to Crush USA.
The facts are complex and important in the final determination of the appeals so that it will be necessary to review them in considerable detail.
The companies involved may be conveniently described as the Crush Group. Great Pacific Industries Inc (formerly known as Crush International Ltd) has its head office in the City of Toronto, Ontario. It is the controlling shareholder of a number of subsidiaries. Crush Canada Inc (Crush Canada) is a wholly-owned subsidiary which owns and operates assets within Canada where it manufactures soft drink concentrates, syrups and finished drinks. It is also engaged in the bottling and selling of soft drinks as well as in the franchising of Canadian bottlers. At all material times its activities and business were confined to Canada.
The respondent Crush USA was incorporated in Ontario in 1964. Its operations, however, are managed and controlled in the United States. Its business consists of negotiating franchise agreements, manufacturing concentrates and selling concentrates to franchised soft-drink bottlers in the United States, Europe, Africa and the Middle East. Its board of directors always meets in the United States.
Products is a subsidiary of Crush USA and thus indirectly of Great Pacific. While it was incorporated in Ontario in 1932, it operated from Evanston, Illinois from its incorporation until 1946 although it retained its statutory head office in Toronto. From then until 1969 it was completely inactive. However, its directors and shareholders meetings for the years subsequent to 1965 were held in Evanston. Its statutory head office continued to be Toronto, Ontario at the same address as that of Great Pacific and Crush Canada.
The Crush Group has no bottling plants outside of Canada. It manufactures various concentrates which are sold to independent, franchised soft drink manufacturers and bottlers, a business which is carried on in over 60 countries throughout the world. No Canadian employees had at the time of the trial ever participated in obtaining, negotiating or carrying out the terms of any international franchise agreements. These were all handled by Crush USA.
The management of Crush USA and all of its subsidiaries at all material times, emanated from Evanston. The learned trial judge found that the evidence had established that the management personnel of Great Pacific and of Crush Canada were separate and distinct from that of the other corporations in the Crush Group, as were their boards of directors. All sales personnel engaged in franchising activities outside of the United States and Canada were employees of Crush USA. The entire export operations of the Crush Group were controlled and directed from Evanston until the incidents occurred to which I will now refer.
In 1968 the Crush Group learned that the Coca Cola Company, which had licensed bottlers in Iraq, had fallen into disfavour with the government of that country as a result of its trade with Israel. Given its choice as to where it would continue business, the Coca Cola Company chose Israel. This choice opened the way for the Crush Group to negotiate a franchise in Iraq. A franchise agreement was entered into with Eastern Industries Co, apparently an agency of the Iraqi government, for the purchase of concentrate. That agreement was signed in Evanston by Products which had been reactivated for the purpose. Reactivation was considered necessary to conceal United States involvement in the agreement. Its policies were set by a board of directors in Evanston and, of course, the operations of the company were generally conducted from that city. Products was chosen to be the licensor due to the fact that it had been incorporated in Ontario and had its statutory head office in Toronto. As well, because it was a shell company with few assets, the possibility of loss from the exposure of assets was minimized in the event of any unsuccessful litigation involving the lraqui licensee. All negotiations leading to the franchise agreement were conducted by employees of Crush USA.
Crush International Inc ("Beverages"), another subsidiary of Crush USA, owned the Crush trademarks in Iraq. It transferred those marks to Products so that the licensee could use them as contemplated by the agreement. All sales promotion as well as training, technical assistance and clerical services required by Eastern Industries Ltd, the licensee, were provided by Crush USA employees from Evanston, Beirut or Iraq and were paid for by that company. A portion of this expense was subsequently allocated to Products at the end of the taxation year.
Products had the concentrate manufactured in Canada by Crush Canada so that the source of the concentrate would be seen by the Iraqis to be outside the United States. All mail was directed to the Toronto office and forwarded from there to Evanston. Purchase orders from Iraqi bottlers were submitted to a Crush USA representative in Beirut, Lebanon. He would advise Evanston that an order was forthcoming. A pro-forma invoice was either prepared by him for the Iraqi bottler or it was prepared in Evanston by Crush USA personnel there. The bottler would then present the invoice to the Iraqi government so that an import permit might be obtained. With the permit in hand, the bottler would then approach a bank in Bagdad for a letter of credit in favour of Products at its Toronto address. On notification of the order from Iraq, a purchase order was issued in Evanston to Crush Canada. Upon receipt of the letter of credit by Products' Canadian banker, the concentrate was manufactured and packaged in Canada by Crush Canada.
The person designated by Crush Canada to process orders for concentrate was a Mr Dees. He resided in Toronto and was the secretary-treasurer to both Great Pacific and Crush Canada. Although he acted on behalf of Products by virtue of a resolution of its board of directors, he was not an employee of nor paid any fee or salary by Products. Additional relevant facts are derived from the following excerpts from the reasons for judgment of the learned trial judge. No findings of fact were challenged by either of the parties. The appellant does, however, dispute some of the inferences drawn from the findings. More specific reference wil be made thereto later herein:
Products, which operated from Evanston, acted strictly as a sales corporation. Because of its Toronto statutory address it was fairly easy to induce the Iraqis into believing that they were dealing with a corporation operating from Canada. All mail was directed to the Toronto address and forwarded from there to Evanston, although most communication and negotiations as well as orders were handled locally through the representatives of Crush USA. in Lebanon. The Iraqis were led to believe that these representatives were actually employed by a Canadian-based company. They were, in fact, always paid and employed by the United States Crush Group and received all their instructions from Evanston.
What mail was sent by the Iraqi bottlers was addressed to Toronto and forwarded from there to Evanston by the Toronto office. The replies to the Iraqi were mailed from Canada and bore a Canadian address. The replies, however, all originated from Evanston in the sense that they actually emanated from Evanston or their contents were fully authorized by Evanston. No person in Canada, including Mr Dees, was authorized to initiate or reply to any correspondence with Iraq without specific and detailed instructions from Evanston as to what was to be stated in each case. Mr Dees was forbidden to initiate correspondence or reply to correspondence from Iraq without specific instructions from Evanston. The evidence clearly establishes that Evanston exercised immediate, direct and detailed control over all correspondence and communications with Iraq and that the Toronto address was but a sham, decoy or camouflage to induce the Iraqi into believing that matters were under Canadian control. In point of fact, little correspondence took place between the Iraqi firms and Products as most details pertaining to the administration and performance of the franchise agreement, as well as the supplying of concentrate, was handled by agents of the US Group stationed in Lebanon. [Emphasis added.]
In order to meet the Iraqi ban on American imports, the concentrate for Iraq was purchased by Products from Crush Canada who sold same to Products at cost plus 20%; it was shipped from Canada to Iraq through New York. The mark-up between Products and the Iraqi purchasers was in the neighbourhood of 500% [sic]. Products, however had to furnish certain services provided for in the franchise agreement.
Products received a total of nine orders for concentrate pursuant to the Iraq franchise agreement. These were shipped from Canada in accordance with the above described arrangements. All of these orders were in fact shipped prior to the taxation years in issue and no goods emanating from Canada were sold during those years nor was there, during that period, any Canadian activity whatsoever with regard to business with Iraq.
The export documentation was generally prepared in Toronto because it had to accompany the trucks leaving Toronto for New York and had to contain such details as quantity, weight, number of packages, etc, which was only available at the point of shipping. At first, Evanston would prepare these documents and forward them to Toronto, leaving in blank the details of weight, number of pack- ages, etc. Subsequently, they were prepared in Toronto as a routine matter from the details of shipment oulined in each letter of credit.
The export documents consisted of the invoices, the bank draft, the truck bill of lading for shipment from Toronto to New York, a packaging list, a certificate of origin and a medical health certificate. These were standard export documents. The goods travelled in bond from Toronto to New York City. Arrangements for shipment from New York to Iraq via Beirut, Lebanon, were made by the personnel of Crush in Evanston.
Mr Dees, who had occupied various positions as an employee and as a senior officer of Great Pacific and of Crush Canada and who, at the relevant time, was the Vice-President and Secretary of Crush Canada, was used as the contact man in Toronto. In order to maintain the fiction that no US corporations were involved and to comply with the Iraqis’ requirements that an agent be appointed attorney for the suppliers, Mr Dees, who had no experience whatsoever in export transactions, was, by resolution of the Board of Directors of Products, appointed agent of that corporation for 'The sole purpose of executing documents pertaining to shipment of merchandise to the Country of Iraq.” He had no authority to participate in negotiations with Iraq and in fact never did so. He had no authority to quote prices, nor did any other person in Canada. He was forbidden from communicating with Iraq except on specific instructions from Evanston. No orders for concentrate came to Mr Dees from Iraq. The orders would be forwarded from Evanston to Mr Dees who would place them with Crush Canada and arrange for shipment in bond to New York for shipment overseas to Lebanon.
Mr Dees received no remuneration whatsoever from Products. He spent approximately 80% of his time on the Canadian operations of Crush Canada with the balance of his time working for the other Canadian company, Great Pacific, in various Capacities, including that of secretary of the company. His only other responsibilities, in any way related to the business of the United States companies, was to consolidate the various financing statements of the entire Crush Group of corporations.
All technical assistance and analysis of samples, etc were provided for and carried out by Evanston personnel either in Evanston or, later on, through an expert technician in Lebanon as a service for the Middle East bottlers; all training of employees of bottling plants in the Middle East was also handled by Evanston.
When the freight forwarder in New York received the export documents he would add the inland freight and ocean freight to the invoices and, after legalization and certification of same, would send the export documents with the onboard-bill of lading back to Mr Dees in Toronto who would present them to the Imperial Bank of Commerce there with the draft.
The Bank would, thereupon, notify Mr Dees that payment would be made to Products on a letter of credit. The bank would be instructed to wire a transfer of the funds to the American National Bank and Trust in Chicago to the account of Products. Mr Dees notified the bank in Toronto only on instructions from the Vice-President, the Secretary or the Treasurer of Products in Evanston. Mr Dees did not have any signing authority on behalf of Products on any bank account.
All payments were in US dollars. No funds were ever converted into Canadian dollars nor were any funds ever deposited into a Canadian bank. Products paid Crush Canada through an inter-company account at the end of each fiscal year.
All legal problems, credit arrangements, trade mark matters, sales records under the franchise agreements and the accounting therefor were handled exclusively from Evanston. When title to the concentrate produced by Crush Canada passed to Products it was a finished product. Crush Canada, when it packaged the concentrate, would label it and the packages with the name of Products. Products itself did nothing whatsoever to the packages of concentrate and merely purchased the finished matter from Crush Canada in a form ready and packaged for export shipment.
The issue requiring resolution by an appreciation of the foregoing facts is, as stated earlier, whether Products was carrying on business in Canada at any time in the taxation years under appeal, or at any time subsequent to April 26, 1965 so that it would be deemed to have been resident in Canada by virtue of paragraph 250(4)(c) of the Act and thus subject to Canadian income tax pursuant to subsection 2 [sic] of the Act. Paragraph 250(4)(c) reads as follows:
4. For the purposes of this Act, a corporation shall be deemed to have been resident in Canada throughout a taxation year if
(c) in the case of a corporation incorporated before April 27, 1965 (other than a corporation to which subparagraphs (b)(i) to (iv) apply), it was incorporated in Canada and, at any time in the taxation year or at any time in any preceding taxation year of the corporation ending after April 26, 1965, it was resident in Canada or carried on business in Canada.
Counsel for the parties agreed that a line of jurisprudence commencing with De Beers Consolidated Mines Limited v Howe (1905), 5 TC 198 (HL) gave rise to the common law principle that a corporation is deemed to reside where its central control and management is exercised. It was also common ground that in this case central control and management of Products was exercised in Evanston, Illinois.
The evidence also establishes that the respondent was incorporated in Canada before April 27, 1965. As such a corporation its residency is not determined solely by common law principles since such a company is "deemed to have been a resident” if "at any time in any preceding taxation year ... ending after April 26, 1965 ... it ... carried on business in Canada." There can be no doubt that Products did not engage in business in Canada during the 1971, 1972 and 1973 taxation years. The issue then becomes, did its activities in the 1969 and 1970 taxation years, following its reactivation, constitute carrying on business in Canada in those years? The learned trial judge found that they did not.
Counsel for the appellant, of course, disagreed and contended that the facts earlier set out were sufficient to enable the trial judge to conclude that the respondent, at all material times, was a resident of and carrying on business in, Canada within the meaning of the paragraph. In particular, he relied on the following activities in Canada as supportive of his contention, in addition to those performed in a normal export operation, such as:
(i) the execution of a plan of subterfuge, both to the bottlers in Iraq and to the Canadian authorities, by an appointed agent in Toronto;
(ii) the carrying out of banking operations through the CIBC in Toronto to which profits were originally remitted; and
(iii) the use of the Toronto address for the remittance and receipt of virtually all correspondence to and from Iraq; and
(iv) the execution of (and at times the preparation of) certain documentation in Toronto.
The first question for this Court, then, must be whether or not an intermediate appellate court ought to disturb this finding. The short answer to that question, as I see it, is that if this is a proper case the court may do so. What is a proper case? In Bemax v Austin Motor Co Ltd,  1 All ER 326 at 329, it was said that "Where the point in dispute is the proper inference to be drawn from proved facts" and where there is no question of the credibility or reliability of any witness, as here, an appeal court is in as good a position to evaluate the evidence as the trial judge "and ought not to shrink from that task, though it ought, of course, to give weight to his opinion."
This view of the role of an appellate court was affirmed by the Supreme Court of Canada in Lessard v Paquin et al,  1 S.C.R. 665 at 675. Since neither of the parties dispute the findings of fact made by the trial judge, I have no difficulty in concluding that this Court is entitled to disagree with the trial judge on the inferences to be drawn from such facts if the Court is of the opinion that these inferences cannot, in the circumstances, be supported.
The question, therefore, must be, was the inference drawn by the trial judge from the proven, undisputed facts outlined earlier herein, viz, that Products had not been carrying on business in Canada during its 1969 and 1970 taxation years, a proper one for him to draw in the circumstances? To answer that question it is desirable first to examine briefly the jurisprudence relating to the meaning of the phrase, “carrying on business”. The first in a long line of cases in that regard is Sulley v The Attorney General (1860), 2 TC 149. In that case Sulley, a resident in the United Kingdom, was a partner in a firm the other partners of which resided in New York. Sulley acting for the firm in England, purchased and shipped goods for export. The only money received in England was from New York. The profits were derived from sales in New York of goods purchased not only from England but from elsewhere in the world. At page 149 of the report Cockburn, CJ said:
Wherever a merchant is established, in the course of his operations his dealings must extend over various places; he buys in one place in which he may be said to trade, viz, where his profits come home to him. That is where he exercises his trade.
At page 150 he made this further finding:
The profits of the firm in America do not accrue in respect of any trade carried on in this country, but in respect of the trade carried on in New York, where the main business is conducted.
In Erichsen v Last (1881), 4 TC 422, the Master of the Rolls at page 423 had this to say:
Now the facts as I understand them are clear enough, and the question is whether what the Company do amounts to carrying on trade within the meaning of the Act. I do not think there is any principle of law which lays down what carrying on of trade is. There are a multitude of incidents which together make the carrying on a trade, but I know of no one distinguishing incident which makes a practice a carrying on of trade, and another practice not a carrying on of trade. If I may use the expression, it is a compound fact made up of a variety of incidents.
The Court of Exchequer (Scotland) in Crookston Bros v Furtado (Surveyor of Taxes) (1910), 5 TC 602 found that the appellants were commission agents who did not exercise a trade within the United Kingdom with regard to goods ordered from France. The Court held at page 628:
The firm for whom the Messrs Crookston acted as commission agents had its place of business in France, to which the proceeds of the business came direct. No goods of theirs were kept in this country. No business premises were occupied by them in this country. No personal action took place on their part in this country. To me it appears that they fall within the distinction expressed by Lord Herschell when he spoke of the difference between doing business “with a country” and doing business “within a country.” Here the French Company can only be reached through Messrs Crookston, on the footing as expressed by Chief Justice Cockburn in the case of Sully, that the person who carries on the business here and receives the profit shall be assessed. These last words test the question. Can it be said here that Messrs Crookston “receive the profit”? I do not think it can. They have no right to receive the profit and deal with it. Their interest, and their only interest, is to receive a commission according to the value of the sales for which the French Company have received the price, and this they have received from Paris.
In 1921 the English Court of Appeal decided the case of FL Smidth and Company v F Greenwood, (Surveyor of Taxes),  3 KB 583, Lord Atkin had this to say at 593:
I do not propose to restate the facts as found in the case. [His Lordship stated shortly the facts as above set out and continued:] The question is whether the profits brought into charge are “profits arising or accruing” to the respondents "from any trade . . . exercised within the United Kingdom” within the meaning of Sch D of the Income Tax Act, 1853. The question is not whether the respondents carry on business in this country. It is whether they exercise a trade in this country so that profits accrue to them from the trade so exercised.
We have the guidance of the House of Lords on this subject in Grainger v Gough. Lord Herschell, after pointing out that there is a difference between trading in a country and trading with a country, says: "How does a wine merchant exercise his trade? I take it, by making or buying wine and selling it again, with a view to profit.” Similarly a manufacturer of machinery exercises his trade by making the machinery and selling it again, with a view to a profit. There are indications in the case cited and other cases that it is sufficient to consider only where it is that the sale contracts are made which result in a profit. It is obviously a very important element in the inquiry, and if it is the only element the assessments are clearly bad. The contracts in this case were made abroad. But I am not prepared to hold that this test is decisive. I can imagine cases where the contract of resale is made abroad, and yet the manufacture of the goods, some negotiation of the terms, and complete execution of the contract take place here under such circumstances that the trade was in truth exercised here. I think that the question is, Where do the operations take place from which the profits in substance arise? ... [Emphasis added.]
11896] AC 325, 336.
In the speech of Lord Herschell in the House of Lords in the case of Grainger and Son v Gough (Surveyor of Taxes),  AC 325 at 329-35, he said this:
Taken in connexion with the facts stated, I think the finding that the Appellants "are agents in Great Britain for the sale” of Roederer’s wine means no more than this, that they are engaged by him to canvas for custom, to seek to obtain from persons in this country orders for his wine. The wine is sold to the customers as it lies in Rheims cellar, or “pris en cave.” The customer pays the cost of packing and carriage from the cellars and takes all risk. The delivery to the purchaser therefore takes place in France. The wine is invoiced to the purchaser in Roederer’s name as vendor, the invoice being sent to the Appellants, and by them transmitted to the purchaser. The amounts due in respect of the wines sold are sometimes collected by the Appellants on behalf of Roederer, and sometimes remitted direct to him. When the payments are made to the Appellants in cash or in cheques on London banks cashed by them, the moneys so received are credited to Roederer against the amount of the commission due to them, and charges incurred by them on his behalf.
Taking it to be the fact, as in my opinion it undoubtedly is, that contracts for the sale of wine are not made by Roederer in this country, and that the delivery by him to purchasers always takes place in France, it appears to me that the case differs widely from any that have hitherto been decided. In all previous cases contracts have been habitually made in this country. Indeed, this seems to have been regarded as the principal test, whether trade was being carried on in this country. Thus, in Erichsen v Last, the present Master of the Rolls said: "The only thing which we have to decide is "whether, upon the facts of this case, this Company carry on a profit-earning trade in this country. I should say that whenever profitable contracts are habitually made in England, by or for foreigners, with persons in England because they are in England to do something for or supply something to those persons, such foreigners are exercising a profitable trade in England, even though everything to be done by them, in order to fulfil the contracts is done abroad.”
All that the Appellants have done in this country on behalf of M Roederer has been to canvass for orders, to transmit to him those orders when obtained, and in some cases to receive payment on his behalf. Beyond this he has done nothing in this country, either personally or by agents. Does he then exercise his trade within the United Kingdom? It has been sometimes said that it is a question of fact whether a person so exercises his trade. In a sense this is true, but in order to determine the question in any particular case, it is essential to form an idea of the elements which constitute the exercise of a trade within the meaning of the Act of Parliament. In the first place, I think there is a broad distinction between trading with a country, and carrying on a trade within a country. Many merchants and manufacturers export their goods to all parts of the world, yet I do not suppose anyone would dream of saying that they exercise or carry on their trade in every country in which their goods find customers. When it is said, then, that in the present case England is the basis of the business, that the wine was to be consumed here, and that the business done would remain undone but for the existence of the customers in England, I cannot accept this as proof that M Roederer carries on his trade in this country. It would equally prove that every merchant carries on business in every country to which his goods are exported. Moreover, the proposition would be just as true if English customers gave their orders personally at Rheims. Something more must be necessary in order to constitute the exercise of a trade within this country. How does a wine merchant exercise his trade? I take it, by making or buying a wine and selling it again with a view to profit. If all that a merchant does in any particular country is to solicit orders, I do not think he can reasonably be said to exercise or carry on his trade in that country. What is done there is only ancillary to the exercise of his trade in the country where he buys or makes, stores and sells his goods. ...
The review of these cases is sufficient, I think, to express the view that one of the principles applicable in cases where it is alleged that income derived from transactions in which non-residents are involved is taxable, generally speaking, is in the jurisdiction where the operations take place from which the profits arise. The respondent alleges in this case that the operations giving rise to the profits arose outside of Canada — specifically, the contract for the sale of the concentrate was negotiated in Lebanon and executed in the United States. Added to this, counsel said, is the fact that all services related to Products' business with the Iraqis were provided by Products and Crush USA from Evanston. Counsel for the respondent on these oases supported the trial judge's finding that the mere purchase of the goods in Canada, the preparation of the export documentation, the collection of the moneys derived from the sale in Canada and remitting them immediately to Products in Evanston are insufficient to constitute carrying on business in Canada.
With great deference I am unable to agree with this submission or with the findings of the trial judge which were based on the inferences which he drew from the undisputed findings of fact. I say so because it is my opinion that he failed to give any, or at least, proper weight to the admitted fact that the whole operation was devised as an admitted facade created to deceive the Iraqis. It was a device which could almost be called a sham within the classic definition of that term.* That device required, as a sine qua non, that the Iraqi licensee be led to believe that its purchases of concentrate were from a bona fide manufacturing business carried on in Canada and not in the United States. That being so I cannot conceive how those who devised the deceit should now be entitled to say that really the operation of supplying the Iraqis had no real business connection with Canada and to rely on a series of well recognized cases as providing them, as a result of that allegation, with a defence to an assessment from income tax unless the defence is clearly and unmistakably available to them. I do not believe that it is. The defence is based on the notion that Products was not carrying on business in Canada but only pretending to do so in furtherance of its own business interests. While I might term this cynical display of commercial avarice in the guise of legitimate business ingenuity, as morally reprehensible, I will content myself with saying that in any event the defence does not wash because, in my view, the facts of this case do not bring it within the principles derived from the jurisprudence to which l have earlier referred.
I hold this view, firstly, because, as I have already said, the very nature of the activities envisaged to foster the scheme, of necessity required the carrying on of a business in Canada. They were indeed vital to the realization of the export sales. Without them, no business could have been done with the Iraqis.
Secondly, the establishment of a bank account by Products in Canada, primarily for the receipt of moneys derived from the outright sale of concentrates to a customer in a foreign country, manufactured by and purchased in Canada from Crush Canada, without deduction of commissions at the place of delivery, distinguishes this case from those of commission agents placing orders for goods in foreign countries for export, the proceeds of which orders, including the profit derived therefrom, remain in the foreign country.
Thirdly, substantial profits earned from the sale of the goods purchased in Canada, were at least momentarily in Canada before being diverted to the United States as the result of a reasoned business decision. That decision, which is unrelated to the question of where the business transaction was negotiated, ought not to be recognized as an element vindicating the claim that Products was not carrying on business in Canada. The ramifications of permitting it as a relevant fact in this case, are obvious in many other fact situations as a method of evading payment of taxes.
Fourthly, no matter what the nature of Mr Dees’ duties was, he was the official agent of Products in Canada, the head office of which was in this country. While he may have had limited authority, the fact is that the sham could not have been successfully achieved without his complete involvement in every facet thereof in this country. The limited scope of his authority has little or no effect in the determination of whether Products carried on business in Canada. What he did to effect the sale to Iraq is the important consideration.
Fifthly, the cases to which I earlier referred were influenced, as Addy, J properly observed, by “the very sound principle that, as every country stands to gain by the expansion of its foreign trade, it would be patently against public interest to discourage foreign purchasers from buying goods manufactured in that country by taxing them on the basis that they were carrying on business there.” Such a consideration is certainly not present in this case. In fact the opposite is true so that the applicability of the Sulley and subsequent judgments should be tempered to some extent for that reason. Furthermore, it should not be overlooked that while Products, Crush USA and Crush Canada are separate legal entities the evidence clearly establishes that they were not dealing at arm's length in the case at bar. I hasten to add that I am not suggesting that section 69 of the Act has any application on the facts of this case. My reason for the comment simply is that the principles derived from the Sulley line of cases may not be wholly apposite because of the nature of the relationship. In summary, logic dictates, it seems to me, that on the facts of this case the authorities should be applied with considerable caution.
For all of the foregoing reasons I am of the opinion that Products at all material times carried on business in Canada within the meaning of paragraph 250(4)(c) of the Act and the reassessments made by the Minister of National Revenue were, as a consequence, valid. In the circumstances it is unnecessary to deal with the appellant’s argument based on paragraph 253(b) of the Act.
I would, accordingly, allow the appeal with costs both here and below and would direct that the impugned reassessments be restored.
Stone, J:—I agree with the disposition of this appeal proposed by Mr Justice Urie for the reasons which he gives.