Birmount Holdings Ltd. v. The Queen, 78 DTC 6254, [1978] CTC 358 (FCA)

Heald, J (concurred in by Ryan, J and Kelly DJ):—This is an appeal from a judgment of the Trial Division dismissing the appeal of the appellant from an income tax assessment for the taxation year 1972, wherein income tax in the sum of some $644,000 was assessed on the gain from the sale of 74.43 acres of land located in Scarborough Township and acquired by the appellant in 1960. The property was held for approximately 11 /2 years and then sold by the company in 1972.

The issues in the appeal are twofold:

1. Is the profit realized on the sale of subject land income from an adventure or concern in the nature of trade or does it represent the proceeds of an investment resulting in a capital gain?

2. Was the appellant resident in Canada or did it carry on business in Canada at the material time thereby being deemed to be resident here under the provisions of the Income Tax Act?

From the date of appellant’s incorporation to the present, the only person beneficially and financially interested in the company was and is Mr André Mentzelopoulos who is 61 years old and a Greek citizen. Mr Mentzelopoulos’ native language is Greek and his primary working language is French although he spoke in English at the trial. The majority of the evidence given at the trial was given by Mr Mentzelopoulos. At all times, all of the company’s issued stock was held in trust for Mr Mentzelopoulos, although he was never an officer or director.

Mr Mentzelopoulos is a highly successful industrialist of substantial means with investments in Pakistan, Greece, USA, France and Canada. He impressed the learned trial judge as “. . . ambitious, mentally very energetic, of great business acumen,'shrewd and with nothing about him of the naive” (see trial judgment, Appeal Book, vol II, p 252).

In 1960 Mr Mentzelopoulos came to Canada for a one week visit to see his sister and brother-in-law. This was his first visit to Canada. He had been born and raised in Greece and from the end of World War Il up to 1959-60 he was engaged in working for an international firm of bankers and industrialists in India and Pakistan. He is the president of and has a controlling interest in Felix Potin, a large French food marketing organization. He maintains an office in Karachi, Pakistan, where he has a factory that makes synthetic paints, he is a partner in the National Bank of Greece, he is involved in the fertilizer and petrochemical business, he is involved in Saint Gobain, the biggest glass makers in Europe and holds securities in companies like General Motors, Imperial Oil, Aluminum Company of Canada and International Nickel. He has a city home in Paris, a country home in France and a summer place in Greece.

While he was visiting in Canada, Mr Mentzelopoulos contacted Mr Hobson, the General Manager of the Bank of Montreal at Toronto, advising him of his desire to make a permanent investment in Canada, “. . . so my children and grandchildren would find something in a solid country which I considered may be one of the two countries in the world to-day offering geographical and political security” (Evidence, vol I, p 40). He explained to Mr Hobson that he had lived most of his life in a state of insecurity by reason of the War, the problems rotating to partition in India, the Civil War in Greece and the concerns in France that were prevalent at the time of the Berlin airlift. He also said it was his intention to commence sending his children to summer camps in Ontario. This, in fact, he subsequently did and his children attended camps in Ontario for the next ten years. He also made the statement in his evidence that people in Europe distrust currencies, that they believe only in real estate and gold and that he has the same opinion.

Mr Hobson then introduced Mr Mentzelopoulos to a Mr Scott of the Royal Trust Company who suggested to him that he purchase a piece of land about 20 miles away from Toronto consisting of approximately 74 acres. An offer was prepared and delivered to Mr Mentzelopoulos in Montreal for acceptance and he signed it prior to his departure from Canada. The purchase price of the land was $5,250 per acre for a total of $393,665. He saw the land when he took a taxi to the Toronto Airport for his departure to Montreal and at that time he saw that it was located in an area consisting of hundreds of acres of barren land. The offer to purchase signed by Mr Mentzelopoulos is dated August 20, 1960.

While Mr Mentzelopoulos was still in Montreal, either the Bank of Montreal or Royal Trust telephoned him to advise him that he required solicitors to complete subject land purchase, and recommended the firm of Lang, Michener, Cranston, in Toronto whom he retained to handle the matter for him. Mr Mentzelopoulos spoke to Mr Robert A Cranston, QC of that firm by telephone who advised him of the necessary legal arrangements. Mr Mentzelopoulos informed Mr Cranston that he wanted to keep this property for his children and consequently Mr Cranston recommended to him the incorporation of a company since this would enable the shares of the company to be divided among his children upon his death rather than attempting to divide the property (Evidence, vol Il, p 224).

The company was incorporated on September 16, 1960. The head office is in Toronto. Three common shares in the capital stock of the company were issued to three Toronto directors, namely, Mr Cranston and two officers of the Royal Trust Company. These directors signed declarations of trust stating that they held all beneficial interest in such shares for Banque La Roche.

Banque La Roche is a bank established and located in Switzerland since 1775. It has had dealings with Mr Mentzelopoulos’ family for the last 75 years. All of Mr Mentzelopoulos’ investments, other than his personal residences, are held for him by Banque La Roche who act as his financial advisers and paying agents. With respect to his various business dealings, Mr Mentzelopoulos meets with the representatives of Banque La Roche regularly for approximately two days of the first week of every second month.

Subject land transaction was completed by deed dated September 26, 1960. The purchase agreement contained the following clause:

The real property is represented as being of a level nature and suitable for Subdivision and residential development, after the provision of services as required by the Municipal Authorities and the real property contains no land which is waste land or unsuitable for such purposes.

The agreement also contained clauses providing for partial discharges of the mortgages on the property on a pro rata basis, thus facilitating the sale of portions of the property. At the time of purchase, the land was unimproved farm land except for a house occupied by a tenant who was grazing cattle on the land and paying a total rental of $50 per month. The tenant vacated on October 6, 1960. In a letter to appellant’s solicitor, on October 24, 1960, Mr Mentzelopoulos Stated, inter alia:

I have no objection to the Royal Trust’s finding another tenant, provided it does not create any fiscal or other complications and it being clearly understood the tenant is a temporary one, ready to vacate the property on a maximum 6-month notice.

Royal Trust re-rented the property. for grazing purposes at a reduced rental—in 1962 for $300, and in 1963 and for several years thereafter for $100 per year.

The letters patent state that appellant’s sole object is to acquire by purchase subject property in the Township of Scarborough.

On October 11, 1960 the Toronto solicitors sent to Mr Mentzelopoulos a statement for each mortgage on the property showing the due dates for each payment. Mr Mentzelopoulos replied to the solicitors on October 24, 1960 advising that he had instructed Banque La Roche to make the mortgage payments on the due dates. As a result of further correspondence, it was agreed that the Royal Trust Company would administer the company, and that the Royal’Trust Company would maintain a trust account for the appellant. It was arranged that when they had prior approval of Mr Mentzelopoulos for an account they would pay such account and draw funds on deposit from Banque La Roche. Upon drawing funds from Banque La Roche, preference shares would be issued in the name.of Banque La Roche who then acknowledged that such shares were held in trust for Mr Mentzelopoulos. On those matters for which the Royal Trust did not have, prior approval, bills were forwarded to Mr Mentzelopoulos who would approve them and then forward for payment to Banque La Roche. It seems clear from the evidence of Mr Mentzelopoulos that Royal Trust was managing the property, paying the taxes, collecting the rents, making the mortgage payments, paying. the solicitors’ fees, making inspections of the property, and arranging for the filing of the proper corporation tax returns through the company auditors, Clarkson, Gordon & Company. There was also evidence to the effect that the annual financial statements were approved by Mr Mentzelopoulos prior to formal approval by the company. Mr Mentzelopoulos also testified to the effect that all monies required by the company, including the funds for the purchase of the land and for the payments on the mortgages, were provided from his own personal funds.

Between 1960 and 1972, the period during which the appellant owned subject property, the appellant expended over $148,000 to carry the property including mortgage interest, municipal taxes and administration expenses. By the end of 1970, the rental income from the property had amounted to only $2,000.

The company did not maintain a physical office or a. bank account. The financial statements were however prepared in Canada and such income tax returns as were filed, were prepared in this country. Likewise, the seal and books of the company were kept here.

In evidence, Mr: Mentzelopoulos conceded that he had no intention, at the time of purchase, to build anything on the property. such as an apartment:or factory or something similar. He also said that he had returned to Canada only twice since the 1960 visit, once in 1970 to again visit his sister and to exchange information with Canadian groceteria interests and again in 1976 for the trial of this action.

Mr Mentzelopoulos testified that in 1971 he began to receive telephone calls from Canada with inquiries as to whether or not he was interested in selling the land and that on each occasion he advised he was not interested. However, in October or November of 1971, William Allen, a Toronto real estate agent visited Mr Mentzelopoulos in Paris, stating that he acted for an undisclosed principal who wished to purchase subject land. Mr Allen also advised him that Scarborough Township was in the process of planning for the future of the area in which subject property was situated and suggested to Mr Mentzelopoulos that if he did not sell the property, it would be well for him to make plans and submissions to Scarborough in order to make certain that the Township designated the best possible uses for the land.

Mr Mentzelopoulos had his Toronto solicitors check Mr Allen’s credentials and also asked them to determine whether any steps should be taken to protect the property. The law firm ascertained that Scarborough was about to release a draft secondary plan and that affected landowners would be given an opportunity to make submissions before the official secondary plan was passed. They recommended that preliminary work be undertaken so that a submission could be made to the Township. Quotes on estimated fees from a firm of consulting engineers were obtained for Mr Mentzelopoulos’ consideration. A member of the Toronto law firm attended on Mr Mentzelopoulos in Zurich to explain matters to him. Mr Mentzelopoulos said that he was concerned at the likelihood of becoming involved in Canada with complicated problems necessitating trips to Canada to make plans and instruct architects as to how to deal-with the property when this had not been his original objective, which was to acquire a property and to simply hold it without further complications. These planning problems were, he said, an important factor in his decision to sell the property.

Mr Mentzelopoulos testified further that since the summer of 1971 an international monetary upheaval was occurring and the American and Canadian dollar were falling in value compared to European currencies such as the Swiss franc. Thus, he said that this currency crisis represented an additional factor which influenced his decision to sell the Scarborough property. It was his view that, accordingly, the property should be sold before the currency devaluation became worse. He therefore advised his solicitor that he would consider Mr Alien’s offer which offer was brought to him in Zurich, the said offer to purchase being dated January 26, 1972. On January 28, 1972 transfers of one share each of the capital stock of the appellant were signed purporting to transfer these shares from the three Canadian shareholders to three Swiss residents, two of these being representatives of a Swiss trust company which provided Mr Mentzelopoulos with legal and accounting services, the other being H B La Roche, the senior partner of Banque La Roche. These Swiss shareholders also became the sole directors of the appellant and executed declarations of trust that they held all beneficial interest in such shares for Banque La Roche. Mr Mentzelopoulos said that he spent about a day and a half at meetings in Switzerland considering whether or not to sell the property, that he took advice from his Swiss advisors as well as from his Toronto solicitors. He said that Mr La Roche advised him to accept Mr Alien’s offer because of the monetary and currency problems. As a result, acting on Mr Mentzelopoulos’ instructions, the Swiss directors passed a resolution on January 31, 1972, accepting the offer from Mr Alien’s clients which offer was in excess of $2,300,000. the net profit on the sale being in excess of $1,700,000.

Mr Mentzelopoulos’ Toronto solicitor testified that he had been instructed by Mr Mentzelopoulos to complete the sale as soon as possible and that the purchase price would have to be payable in cash before any further devaluation of the dollar occurred. As a result of financial arrangements made, partly in Toronto and partly in Switzerland, the total purchase price was paid in cash on closing.

The learned trial judge, after reviewing at some length the evidence before him, both oral and documentary, concluded that subject realty was acquired with the intention of selling it when that could advantageously be done, thus making the transaction one in the nature of trade rather than an investment.* [1]

In reaching this conclusion, the trial judge purported to consider the statements made by Mr Mentzelopoulos as to the appellant’s intention at the time of acquisition along with all of the objective facts and circumstances. After such consideration, he concluded that those objective facts and circumstances were to a large extent, inconsistent with and contradictory of Mr Mentzelopoulos’ statements of intention concerning the holding of the land. The evidence adduced establishes, inter alia, in my opinion, the following relevant objective facts and circumstances:

1. The clause in the purchase agreement referred to supra, stipulating that the subject property be suitable for subdivision and residential development and that it contains no waste land unsuitable for such purposes.

2. The clause in the same agreement permitting partial discharges of mortgages on a pro rata basis and referred to earlier herein.

3. The letter written by Mr Mentzelopoulos on October 24, 1960 to appellant’s Toronto solicitors stating that any new lease for the property must contain a provision that any tenancy be temporary, terminable on a maximum of six months notice.

4. The land was unimproved land in proximity to the City of Toronto and within the limits of the Metropolitan area.

5. The purchase price of the land was in excess of $5,000 per acre, the income therefrom when used as a farm was negligible.

6. Mr Mentzelopoulos only glimpsed the property on the way to the airport, observing hundreds of acres of barren land which did not appear to disturb him in any way.

7. No effort was made to develop the property so as to produce income and the. possibility of doing so was never investigated.

The authorities make it clear that the Court was required to consider the relevant facts as of the time of purchase together with subsequent events together with the statement by Mr Mentzelopoulos as to the intention of the appellant at the time of acquisition. If, after considering all these matters, the Court concludes that the possibility of turning the property to account for profit in any way which might present itself as convenient or expedient, including resale, was a major motivating factor, or that an investment intention was not the only motivating factor at time of acquisition, then the Court must find any profit ensuing from a resulting sale to be taxable as an adventure in the nature of trade.* [2]

A perusal of the reasons for judgment satisfies me that the learned trial judge did consider the relevant objective facts and circumstances surrounding the transaction and that he also considered carefully the two reasons given by Mr Mentzelopoulos for selling the property, thereby correctly applying to the facts of the case, the pertinent jurisprudence referred to supra.

Dealing with the first reason, ie, the planning problems with Scarborough, the trial judge concluded that a prudent man like Mr Mentzelopoulos would have anticipated further planning of land use by Scarborough, because of its proximity to Toronto, and he did not accept his evidence in this regard, nor did he accept his statement that the Scarborough planning problems would necessitate numerous trips from Europe to Toronto, observing that he had available to him the services of his Toronto solicitors and the Royal Trust Company and such other professionals as may have been necessary in the circumstances. Counsel for the appellant argued most strenuously that such inferences and conclusions were unjustified on the evidence and that the trial judge should have accepted the testimony of Mr Mentzelopoulos in this regard. I cannot accept this submission. Looking at the totality of the evidence and the objective facts and circumstances, the learned trial judge could, in my view, reasonably and logically, decide, as he did, that this reason, as stated by Mr Mentzel- opoulos was not credible and in so doing, he committed no ‘‘palpable or overriding error which affected his assessment of the facts.* [3] It is not a part of the function of an appellate court to substitute its assessment of the balance of probability for the findings of the judge who presided at the trial.

Furthermore, an initial appellate court must take into consideration well-established precedents, namely: (1) where the credibility of witnesses Is involved, except in extraordinary cases, the findings of the trial judge must not be set aside; (2) the interpretation of the evidence is left to the discretion of the judge who sees and hears the witnesses, and it is the duty of a court of appeal to respect the judgment of the judge who has these privileges unless it is satisfied that the latter was plainly wrong.! [4] In refusing to accept the first reason given by Mr Mentzelopoulos, I am not prepared to say that he was plainly wrong.

Turning now to the second reason for selling given by Mr Mentzelopoulos, ie, the international monetary crisis, appellant’s counsel was critical of the reasons given by the learned trial judge for failing to accept Mr Mentzelopoulos’ evidence in this regard and submitted that these reasons indicated a failure on the part of the trial judge to appreciate the significance of the evidence led at trial dealing with the international monetary crisis of 1971. Counsel submitted that the trial judge was wrong in relating Mr Mentzelopoulos’ situation to that of a Canadian owner to whom Canadian real estate would have a constant value. Mr Mentzelopoulos was not a Canadian owner, he was a European owner dealing mainly in European currencies. Thus, when both US and Canadian currencies declined in value in relation to European currencies such as the Swiss franc, for example, his Scarborough land, as reflected in currency usable by him, was going down in value. Thus, in the submission of appellant’s counsel, this expressed reason for selling was not “specious’’ as: found by the trial judge but rather a valid and bona fide reason when properly understood. I must confess that I find some substance in these submissions of counsel for the appellant. I think it possible that another judge hearing this evidence might well have accepted it. However, the assessment of the credibility of the witness and the interpretation of his evidence must be left to the trial judge unless the appellate court is satisfied that he was plainly wrong. I am not prepared to say that he was plainly wrong in refusing to accept Mr Mentzelopoulos’ second reason for selling. However, even assuming that the trial judge may have been wrong in failing to accept this reason as bona fide, it is my view as stated supra, that taking all of the relevant facts and circumstances into consideration, including the evidence of Mr Mentzelopoulos, the trial judge was entitled to conclude as he did, that subject transaction was an adventure in the nature of trade.

Turning now to the second issue in this appeal, that is, the question of residence, the governing section of the Income Tax Act, SC 1970- 71-72, c 63, as amended, in paragraph 250(4)(c), the relevant portions of which read as follows:

250. (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 . . . 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.

It seems clear from a perusal of the reasons of the learned trial judge,* [5] that while he made no finding as to whether or not, in fact, the appellant was resident in Canada, he did find that, the appellant’s activities in connection with the Scarborough realty constituted carrying on business in Canada, which, by virtue of the provisions of paragraph 250(4)(c), deems the appellant to be a resident of Canada for income tax purposes.

I will deal initially with the question as to whether, on the evidence adduced in this case, the appellant could be said to be resident in Canada in fact. The established rule at common law so far as the residence of a company is concerned was clearly enunciated by Lord Loreburn in the De Beers caset [6] where he stated that a company resides for income tax purposes where its real business is carried on and the real business is carried on where . . the central management and control . . actually abides. Lord Loreburn added that the answer is in each case “. . . a pure question of fact to be determined, not according to the construction of this or that regulation or by-law, but upon a scrutiny of the course of business and trading”. Earlier on, also on page 458 of the report, the learned Lord Chancellor stated: “A company cannot eat or sleep, but it can keep house and do business. We ought, therefore, to see where it really keeps house and does business.”

A perusal of the uncontradicted evidence, both oral and documentary, has convinced me that the appellant was, at all relevant times, resident in Canada. I cite the following facts in support of this conclusion:

1. The appellant company was incorporated in Canada, and had Canadian shareholders and directors, from incorporation until the end of January 1972 in the taxation year under review.

2. The appellant company did not have very much business but all the business it did have was in Canada. It purchased land in Canada, it paid taxes on its property in Canada for some 11 years, it paid insurance on the buildings on its property, it leased its Canadian property to Canadian tenants through leases prepared in Canada and executed by its Canadian agents. It had Canadian auditors, Canadian solicitors and a Canadian agent, The Royal Trust Company, whom it engaged to manage its affairs. (Appeal Book, p 77). Its head office was in Toronto. Its sole incorporating object was to purchase the Scarborough property.

3. Its agent, the Royal Trust in Toronto, maintained a trust account for the appellant. Royal Trust in Toronto, on behalf of the appellant, managed the Scarborough property, paid the taxes, collected the rents, made the mortgage payments, paid the solicitors’ fees, made periodic inspections of the property (resulting in recommendations re covering of an old well and that the old farm house on the land be demolished—Appeal Book, p 89). For these management services, it was paid an annual fee.

4. The seal and the minute books of the company were kept in Canada.

5. Ontario corporation tax returns were filed by the company’s representative in Toronto without consulting Mr Mentzelopoulos (Evidence, p 163).

6. The appellant filed income tax returns in Canada for the fiscal and calendar years 1968, 1969 and 1970. It filed no income tax returns in any other country.

7. The two directors from the Royal Trust would change from time to time and were changed without reference to Mr Mentzelopoulos (Evidence, p 158, lines 15-19).

8. Mr Mentzelopoulos relied on his Canadian representatives for advice in dealing with the company’s affairs. For example, he informed the Toronto solicitors that he did not wish to see the by-laws, resolutions and minutes of meetings unless the solicitors felt he should have them (AB, p 82).

9. Mr Mentzelopoulos admitted that . . in all my fifteen years of my relationship with Canada I did not overrule anybody as far as I know I conversed with them whether something better. cannot be done. But I don’t think that I overruled anybody” (Evidence, p 185). He also stated (Evidence, p 186): . . I have not the power to overrule the Royal Trust Company, nor to overrule Lang and Mich- ener.”

On the basis of this evidence, I have concluded that the ‘‘real business” and the ‘‘only business” of the appellant was carried on in Canada and that it ‘‘kept house” in Canada during the relevant period and the ‘‘central management and control” of the appellant was in Canada.

A decision of the Exchequer Court in the case of Bedford Overseas Freighters Ltd v MNR, [1970] CTC 69; 70 DTC 6072, is remarkably similar on its facts to the case at bar. In that case, the appellant was also incorporated in Canada but largely owned by a non-resident. Its ships were operated and chartered by a non-resident. Although all the directors of the appellant were Canadian, all major decisions were made by the non-resident owner. However, the Canadian directors opened bank accounts, signed cheques and negotiated and signed agreements on behalf of the appellant corporation. At 83 [6079] of the judgment, Kerr, J put the appellant’s position (which is the same as the position of the appellant in the case at bar) as follows:

The foundation of Bedford’s case, which was ably presented by its counsel, was that it was Marchessini who made the major decisions for the company, that he was never resident in Canada, that the Canadian. directors unquestioningly carried out his instructions to them, and that the vessels were operated and managed by his London company; and it was therefore submitted that Mathers’ activities were merely formal, procedural and clerical and that no substantial element of management and control of the company was actually exercised in Canada.

What I have to determine is whether Bedford was residing in Canada during its 1964 taxation year within the meaning of subsection 2(1) of the Income Tax Act. I do not have to determine whether the company was resident elsewhere also.

Then at 83 [6080] he went on to state:

As I understand the law, the residence of a company is not determined by or dependent upon the residence of one or more of its shareholders; nor, despite the influence that shareholders may have over the affairs of a company by virtue of their share ownership and power to remove directors and put persons in their place who agree to their policy, do the powers of shareholders as such invest them with the management: and control of the company’s business, for the directors are not the agents of the shareholders or bound to comply with directions given by them and the responsibility of the directors and officers of the company is to the company itself and their duties are controlled by the rules and constitution of the company.

However, the management and control of a company can. be actually exercised otherwise than by its directors and otherwise than under or according to the authority of its constitution, as, for example, in Unit Construction Co Ltd v Bullock (supra), where African companies which, it was admitted, had residence in Africa and whose directors resided there, were held by the House of Lords to be resident in England as well, because they were actually managed and controlled from England by the directors of their parent company, and such management and control was a fact affecting their residence even although it was exercised irregularly and was not authorized by the constitution of the companies.

In Bedford’s case the management of the business of the company and the controlling power and authority over its affairs were vested in its Canadian directors and they exercised that power and authority in Canada, albeit in large measure to carry out Marchessini’s instructions and policy decisions made elsewhere by him. In Canada they executed agreements and attended to business and legal affairs of the company which were required in connection with and were essential to the company’s business venture of owning and operating the vessels. In my view, the evidence that I have outlined and the facts that have been admitted show that management and control of the company and attention to its interests and affairs were exercised and given to a substantial degree, de jure and de facto, within Canada, by its Canadian directors from the incorporation of the company up to and including its 1964 taxation year.

I adopt the rationale of the above quoted reasons of the learned Exchequer Court judge as having equal application to the facts in this case. The responsibility of the directors of the appellant corporation is to the company itself. Their duties are, to a large extent, controlled and regulated by the provisions of The Corporations Act of Ontario, by the provisions of the letters patent of Incorporation and ‘by the provisions of the company by-laws. As in Bedford’s case (supra), the management of the appellant’s business and the controlling power and authority over its affairs were vested in the three Canadian directors who exercised that power and authority in Canada. The directors, through their manager, Royal Trust, leased the property, collected the rents, inspected the property, paid the taxes and made the mortgage payments. Through their auditors, they caused the proper returns to be filed with provincial and federal authorities. Many of these functions were performed without reference to Mr Mentzelopoulos. When it came to substantial monetary outlays, Mr Mentzelopoulos was consulted but in myriad other matters, he was not consulted. Thus, as in Bedford (Supra), substantial management and control vested in the Canadian directors.* [7]

Accordingly, it is my opinion that on the basis of the uncontradicted evidence presented in this case, Canadian residence for the appellant has been established in actual fact, without reference to the deeming provisionof paragraph 250(4)(c) which deems residency where business is, carried on in Canada.

‘In. his submissions to us, learned counsel for the appellant placed considerable reliance on the Tara caset [8] and on the Unit Construction case. [9] î: The Tara case (supra) is, in my view, distinguishable from the present case on its facts.

In Tara (supra), the sole business of the appellant company which had been incorporated in Ontario was exploring for minerals in Southern Ireland, and it had raised capital on the Canadian market for this purpose. In 1964 the appellant used some of this capital to purchase, in Canada, shares of a new company incorporated to develop ap. Irish mining property adjoining the appellant’s properties. These shares were sold at a profit. The general manager and other active officers of the company resided in Ireland and had their offices there. The directors and corporate officers of the company lived there or in Northern Ireland. Its “head office’’ was described as being in Toronto where the corporate books were situate, it received and made payments in Canada and had a bank account in Canada. Its directors and officers came occasionally to Canada on the business of the company and of other companies in which they were interested. It also used the services of a Canadian solicitor and Canadian auditors. On these facts, President Jackett (as he then was) found as a fact that the “central management and control” of the appellant was in Ireland and not in Canada.

It seems to me that the Tara case (supra) is distinguishable from the case at bar in that there appear to be a number of factual differences in the two cases. In Tara (supra) the general. manager, other active officers and the directors all lived in Ireland. Its sole business was exploring for minerals in Southern Ireland whereas, in the case at bar, the sole business of the appellant was the acquisition, Supervision, maintenance and ultimate sale of property situated in Canada. To conduct that business, the appellant engaged Canadian managers. In Tara (supra) there seems to be no indication that any income tax returns were filed in Canada before the assessments in question. In Tara (supra) it appears that all of the company’^ decisions were made in Ireland. In the case at bar, such is not the situation as noted supra. I am therefore of the view that the Tara case (supra) does not assist the appellant.

I turn now to the Unit Construction case (supra). In that case, three companies which were wholly-owned subsidiaries of a company resident in the United Kingdom, were registered in Kenya. The boards of the three subsidiaries, situate in Kenya, were entirely distinct from the board of the parent company, but none of those boards ever either took any decisions as a board or were summoned to: meet as a board. The facts in that case were found by the Special Commissioners to be as follows:

We find that the boards of directors of the African subsidiaries (who are the people one would have expected to find exercising control and management) were standing aside in all matters of real importance and in many matters of minor importance affecting the central management and control, and we find that the real control and management was being exercised by the board of directors of Alfred Booth & Co Ltd in London [the parent company].

On these facts, it was held by the House of Lords that the subsidiary companies were resident in London.

In my view, the facts of the Unit Construction case (supra) as summarized supra, are quite different from those in the case at bar. In this case, there was no “standing aside” on the part of the Canadian directors. On the evidence, as summarized earlier herein, these directors, in my view, exercised substantial management and control. It is for this reason that I find the Union Corporation decision referred to supra to be more helpful than either the Tara case (supra) or the Unit Construction case (supra). In that case, the three taxpayer companies were admittedly resident in the United Kingdom but each of them also claimed concurrent residence in another country outside the United Kingdom. In discussing the proper test to be applied,; Sir Raymond Evershed, MR at page 657 of the report stated:

The company may be properly found to reside in a country where it “really does business”, that is to say, where the controlling power and authority which, according to the ordinary constitution of a limited liability company, IS vested in its board of directors, and the exercise of that power and authority, is to some substantial degree to be found. In our judgment, the formula “where the central power and authority abides’’ does not demand that the Court, should look and look only to the place where is found the final and supreme authority.

Applying that test to the facts in this case, the requirements of the test are met since the directors, at least until January 31, 1972, resided in Canada and exercised to a substantial degree, in Canada, the powers vested in them under The Corporations Act of Ontario and the by-laws of the company.

Since I have concluded that Canadian residence for the appellant has been established in actual fact, it becomes unnecessary to determine whether the appellant “carried on business in Canada” as decided by the learned trial judge. In this regard, the learned trial judge

deals with his reasons for so concluding at pages 265 to 267 of the Appeal Book, vol Il, and makes a number of findings of fact in support of his conclusion. The question as to whether a business

is Or was being carried on must be solved as a question of fact having regard to the circumstances of a particular case.* [10] The fact that, as distinguished from an investment, certain activities have been found to constitute an adventure in the nature of trade, does not, of itself, preclude a finding that those activities amount to carrying on business. The activities of this appellant are carefully considered and analyzed in that portion of his reasons referred to supra. Were it necessary for me to decide this question, I would see no basis for interfering with that finding since, in my view, such a conclusion was reasonably open to him on the evidence.

I would, accordingly, and for the foregoing reasons, dismiss the appeal with costs.