Date: 20100610
Docket: A-418-09
Citation: 2010 FCA 152
CORAM: LÉTOURNEAU
J.A.
PELLETIER
J.A.
STRATAS J.A.
BETWEEN:
RONALD H. LINGLE
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
[1]
The Tax
Court of Canada (Tax Court) was called upon to decide pursuant to the Canada-United
States Income Tax Convention (1980) (Convention) whether the appellant was
required to pay in Canada income tax on his business income. The taxation years
in issue were 2004 and 2005.
[2]
Article
IV(2) of the Convention sets out five tie-breaker rules to assist in
determining the jurisdiction in which the income tax is to be paid. The Article
reads:
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2. Where by reason of the provisions of
paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined
as follows:
(a) he shall be
deemed to be a resident of the Contracting State in which he has a permanent
home available to him; if he has a permanent home available to him in
both States or in neither State, he shall be deemed to be a resident of the
Contracting State with which his personal and economic relations are closer
(centre of vital interests);
(b) if the
Contracting State in which he has his centre
of vital interests cannot be determined, he shall be deemed to be a
resident of the Contracting State in which he has an
habitual abode;
(c) if he has an habitual
abode in both States or in neither State, he shall be deemed to be a
resident of the Contracting
State of which he is a citizen;
and
(d) if he is a
citizen of both States or of neither of them, the competent authorities of
the Contracting States shall settle the question by mutual agreement.
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2. Lorsque, selon les dispositions du
paragraphe 1, une personne physique est un résident des deux États
contractants, sa situation est réglée de la manière suivante:
a) Cette personne est
considérée comme un résident de l'État contractant où elle dispose d'un foyer
d'habitation permanent; si elle dispose d'un foyer d'habitation permanent
dans les deux États ou ne dispose d'un tel foyer dans aucun des États, elle
est considérée comme un résident de l'État contractant avec lequel ses liens
personnels et économiques sont les plus étroits (centre des intérêts vitaux);
b) Si l'État contractant où
cette personne a le centre de ses intérêts vitaux ne peut pas être
déterminé, elle est considérée comme un résident de l'État contractant où
elle séjourne de façon habituelle;
c) Si cette personne séjourne
de façon habituelle dans les deux États ou si elle ne séjourne de façon
habituelle dans aucun des États, elle est considérée comme un résident de
l'État contractant dont elle possède la citoyenneté; et
d) Si cette personne possède
la citoyenneté des deux États ou si elle ne possède la citoyenneté d'aucun
d'eux, les autorités compétentes des États contractants tranchent la question
d'un commun accord.
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(Emphasis added)
[3]
As the Tax
Court judge pointed out at paragraph 8 of her reasons for judgment, the parties
agreed that the appellant had a permanent home in both Canada and the United States during the relevant periods.
They also agreed that they could not use the second tie-breaker as it was not
possible to determine in which country the appellant had his centre of vital
interests. So the matter fell to be determined on the concept of ‘habitual
abode” found in the third tie-breaker. As the judge put it at paragraph 10 of
her reasons for judgment, the narrow issue “in this appeal is whether the
appellant under the tie-breaker rules also had an ‘habitual abode’ in the United States as well as in Canada”.
[4]
The Tax
Court found that the appellant did not have an “habitual abode” in the United States for the purposes of the
Convention: see paragraph 30 of the reasons for judgment. I am in substantial
agreement with the findings and conclusion of the Tax Court.
[5]
The
definition and interpretation of “habitual abode” involves a question of law
reviewable on the standard of correctness. However, the application of the
definition to the facts of the case to determine whether the appellant had an
“habitual abode” in both jurisdictions raises a question of mixed fact and law
which is immune from review by this Court unless there is an overriding and
palpable error: see Housen v. Nickolaisen, [2002] 2 S.C.R. 235. I see no
such error on the facts of this case.
[6]
It would
be unwise to attempt to set out a rule or a series of criteria which could fit
all situations. The determination in each case will depend on the facts and
circumstances of the case. The concept of “habitual abode”, as evidenced by the
clearer French version of the text (séjourne de façon habituelle) involves
notions of frequency, duration and regularity of stays of a quality which are
more than transient. To put it differently, the concept refers to a stay of
some substance in the jurisdiction as a matter of habit, so that the conclusion
can be drawn that this is where the taxpayer normally lives.
[7]
This is
consistent with the French definition of “habituelle” found in Le Petit Robert
2006:
1. Qui tient
à l’habitude par sa régularité, sa constance.
2. Qui est constant,
ou très fréquent.
[8]
This is also
consistent with the commentary on Article IV(2) of the OECD Model where it is
stated that in comparing the stays in two States to determine if and where the
individual has an “habitual abode”, “the comparison must cover a sufficient
length of time for it to be possible to determine whether the residence in the
two States is habitual and to determine also the intervals at which the stays
take place”: see Model Tax Convention on Income and on Capital, OECD
Committee on Fiscal Affairs, vol. 1, July 2008, at page C(4)-6.
[9]
In paragraph 52 of
his memorandum of fact and law and at the hearing, the appellant submitted that
the Tax Court judge applied the wrong test in that she went on to examine the
social and economic ties which he had in Canada and the United States during the relevant periods. In doing so
she confused the second and the third tie-breaker. He finds evidence of the
judge’s error in the following sentence at paragraph 30 of the judge’s reasons
for judgment:
Considering all the facts
before me, his connections with the United States were weak when compared to his settled
routine in Canada.
[10]
This sentence is
taken out of context and read in isolation. When the sentence is replaced in
its proper context, the appellant’s argument simply has no merit. What the
judge was saying in that sentence is that the appellant did not have a settled
routine in the United States while he had one in Canada
which showed that he did regularly, customarily or normally live in Canada.
[11]
The judge’s impugned
sentence came at the end of paragraph 30 of her reasons for judgment which I
reproduce:
[30] It follows that
the proper approach to determining whether the Appellant had an habitual abode
in the United States is to enquire whether he resided there habitually, in the
sense that he regularly, customarily or usually lived in the United States. Paragraphs 27 to 32 of
the Agreed Statement of Facts and Issue contain pertinent statements which
assist in the determination of whether the Appellant “normally lived” in the United States. It was agreed between
the parties that the Appellant “consistently and repeatedly returned to his
home in Canada for the majority of the
days in this period.” In the settled routine of his life “he regularly,
normally and customarily lived in Canada.” He “did not have any other contracts clients
or business in the USA.” In addition, he spent
only 69 days out of 623 days in the relevant period at his home in the United States. It is interesting that
these agreed statements explicitly state that the Appellant “normally … lived
in Canada” – which answers the
definition that the Avery Jones article suggested for the expression
“habitual”. The Appellant’s stays at the Ransom House were in the nature of
periodic visits with his “normal” place of residence being in Canada throughout the period. He
did not have an habitual abode in the United States for the purposes of the
Treaty because he did not regularly, customarily or normally live in the United
States. Considering all the facts before me, his connections with the United States were weak when compared
to his settled routine in Canada. Accordingly, the Appellant was a resident in Canada during this period and
as such he is taxable on his business income earned as a consultant.
[12]
To the extent that
the sentence per se could be found to be ambiguous, it is, however,
clear from a reading of the reasons as a whole and paragraph 30 that, at the
point where the sentence occurs, the judge had already concluded that the appellant
did not have an “habitual abode” in the United States “because he did not
regularly, customarily or normally live in the United States”: see paragraph
30.
[13]
The appellant argued
that the proper test to be applied for determining where a taxpayer has his
“habitual abode” is to look at where he or she “is habitually present”. He
relies upon a tentative conclusion of Dr. J.F. Avery Jones who, the appellant
says, is currently a judge on the United Kingdom First Tier Tax Tribunal. In a
paper presented at the Fifth Annual International Taxation Symposium in the United States, Dr. Avery Jones reviewed the elusive
concept of “habitual abode” and concluded:
Perhaps an habitual
abode really means ‘is habitually present”, which would be much clearer.
[14]
The Tax Court
found that the appellant “regularly, normally and customarily lived in Canada”: see paragraph 30 of the
reasons for judgment. By the appellant’s proposed test, the Tax Court found
that he was habitually present in Canada, but not in the United States.
[15]
For these
reasons, I would dismiss the appeal with costs.
“Gilles
Létourneau”
“I
agree.
J.D. Denis Pelletier J.A.”
“I
agree.
David Stratas J.A.”
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