Malcolm Fisher v. Her Majesty the Queen, [1995] 1 CTC 2011, 95 DTC 840

Bowman J.T.C.C.:-These appeals are from assessments for the appellant’s 1987 and 1988 taxation years. The principal question is whether the appellant was a resident of Canada during those years. Since the appellant filed no returns during those years or indeed for the years prior or subsequent thereto the Minister of National Revenue issued what are known as "net worth" assessments. The appellant also alleged that the amount of the assessments was incorrect in any event but no satisfactory evidence was adduced on this point.

Facts

The appellant was born in Kenora, Ontario. In his teens he became interested in karate and attained the level of black belt. In 1979 he left Canada for the purpose of continuing his study of and training in this form of martial arts in Japan. He lived for five months in the dormitory of the Japan Karate Association in Tokyo, where he trained, and having been required, notwithstanding his black belt earned in Canada, to start again with a white belt, achieved again a first degree black belt.

His intention during this period was to be admitted to the instructors’ training program and, upon graduation from that program, to return to Canada and set up a similar instructors’ program.

In April 1980 he returned to Canada to compete in karate world tournaments and, as he put it, "to clean up his affairs". He stayed in Canada from April 1980 to February 1981, except for trips to Bremen and Madrid, where he again competed in tournaments.

In February 1981, he returned to Japan using the insurance proceeds arising from an accident in which his car was demolished. He worked as a labourer and trained and lived at a karate club owned by a Mr. Tanaka. After about a month Mr. Tanaka loaned him enough money to take an apartment. In October 1981, he started teaching English to Japanese persons in order to earn enough to live on, albeit rather meagerly, and this form of employment continued until the beginning of 1983. In October 1981 he started training at the university karate club and in June or July 1982 he entered the instructors’ training program.

One of his students, the president of a record company, agreed to pay him 100,000 yen per month (approximately $500 U.S.) for two years. He was to teach that person English when the latter was available and was to repay him when and if he opened a dojo, or karate club. From 1983 until 1985 he continued his training as an instructor.

During this period as well he made the acquaintance of one Michael van Rijn, a person who was, evidently, engaged in the international art trade, buying European paintings and selling them to Japanese purchasers. Shortly after meeting Mr. van Rijn he met another art dealer, a Mrs. Hendricks, whose business consisted of selling Japanese woodblocks in the United States and, occasionally, selling American prints in Japan. The appellant mentioned his acquaintanceship with Mr. van Rijn and she asked if he could supply French art for sale in Japan. The appellant telephoned Mr. van Rijn in Sardinia who, inexplicably, rebuffed him.

It was at this point that the appellant conceived the idea of going into the art business with Mrs. Hendricks. The understanding was that she would supply the money and he would develop Japanese clients to whom they would sell European art. To this end they held themselves out as art consultants and hired public relations firms to introduce them to potential customers.

In April 1985 the appellant decided that he would not go back to Canada to set up a dojo but rather would set up an instructor program. The only time that he spent in Canada in 1983 was two weeks in May, when he attended his grandfather’s funeral. At Christmas 1984 he spent three weeks in Kenora.

In June 1985 he came back to Canada, where he stayed until February 1986. He had no particular fixed abode and stayed with friends and relatives in Toronto and Kenora. He stated that his reasons for this lengthy stay in Canada at this time was that he was waiting for certain business developments in Japan. He had approached a potential purchaser of art in Tokyo, a large department store, whose representative stated that in 1986, the 100th anniversary of the store, he would be able to deal with him because the store would have a budget to buy art.

In June or July 1985 he approached a businessman in Toronto, Mr. Moog, and discussed with him the possibility of his sponsoring an instructors’ program in Canada. The idea was rejected by Mr. Moog who stated that he would work only with a Mr. Tsuruoka, a Japanese person living in Canada who was prominent in karate in this country. This seems to have put an end to the appellant’s hope of establishing any significant foothold in the field of karate in Canada except that before returning to Japan in February 1986 he retained a chartered accountant, Mr. Paul S. Hewitt, to prepare a detailed karate school business plan, which contemplated the establishment of a public company to open a karate school. The period covered by the projection was from February 22, 1986 to January 1988. Nothing came of this plan. It was never acted on or given to anyone, according to the appellant, but it does indicate that he had not, by February 1986 when he returned to Japan, abandoned the idea of opening a karate school in Canada.

On his return to Japan he took an apartment until August 1986 and in October of that year he sublet an apartment with a two-year lease from October 1986 to October 1988.

In 1986 he came back to Canada three times for two or three-day visits and also for a period of three weeks. In each case he stayed with his grandmother in Keewatin.

In January of 1987 following his grandmother’s death he bought his grandparents’ house in Keewatin to provide accommodation for his parents. The price was $33,000 of which $10,000 was paid in cash and the balance by way of mortgage. In June 1986 he purchased, for cash, an island in Lake-of-the-Woods for $32,000.

In 1987 he made 19 visits to Canada for a total of 136 days. No visit lasted longer than 13 days. He testified that at the beginning of 1987 he took a one-year lease on an apartment at 260 Queen’s Quay W., Toronto at a monthly rental of $950. His stated date of acquisition must be an error. In the deed of the island property dated June 1986 and in the affidavit under the Land Transfer Tax Act he gave his address for service as 260 Queen’s Quay West, Toronto. He stated that he did not furnish or use it as an apartment but he did stay there on his way to Keewatin and used it to store things that he intended to take to the cottage that he was constructing on the island in Lake-of-the-Woods. The cottage was not completed until 1989 and at the end of 1988 only the foundation was completed, although he was able to sleep there if he covered it with a tarpaulin. He also acquired a 19-foot boat which he kept at a marina on the lake.

In 1988 he bought two buildings on one lot in Kenora. One was a duplex in which his parents lived upstairs and his two teenage brothers lived downstairs. The other was a triplex which he rented out. The reason given for moving his parents to the duplex was his father’s deteriorating physical condition. The property in Kenora was purchased for $370,000 of which he paid 50 per cent in cash and 50 per cent by way of a mortgage. The Keewatin property was sold in 1991.

During this time he was actively involved in the art business and spent much of his time travelling between Europe and Japan. He was obviously successful, to judge by the amount of money he spent on properties in Canada. It should of course be acknowledged that paying taxes to no jurisdiction tends to increase one’s disposable income. He stated that he gave up his apartment in Toronto in early 1988.

He lived in Japan until October 1988 and some time in 1989 took an apartment in Monte Carlo where he lived until 1991 when he married an American and moved to the United States. He spent 79 days in Canada in 1988, no visit lasting more than 12 days.

His income in 1988 was derived, it appears, from his relationship with an art gallery in Europe, the Stuart Galleries Inc., which paid him commissions. There was some suggestion that the amounts paid to him were loans to be paid back out of future commissions. This was not established and I find that the appellant has not succeeded in showing any error in the amount determined by the Minister to be his income in 1987 and 1988.

In the course of Ms. Nott’s cross-examination of the appellant the following further points were established:

A. He never filed income tax returns in Canada, Japan, the United States or anywhere else.

B. He had two bank accounts in Canada, used for making mortgage payments, as well as one in Japan, which, except for one brief interval, had relatively small amounts in it. He also had a Swiss bank account the size of which was not put in evidence.

C. He had two Canadian credit cards-Visa and American Express. He paid the charges on the Visa card in Canada and the charges on the American Express card, generally, in Europe.

D. In Europe he stayed in hotels.

E. He carried only a Canadian passport.

F. He had an Ontario driver’s licence, and not a Japanese licence.

G. He had an automobile and a boat in Canada, but did not have an automobile in Japan.

H. He had cable television in his apartment in Toronto.

I. He sent a parcel of art works from Toronto to Japan.

J. He allowed his Japanese health insurance to lapse in 1986.

K. He received mail and magazines at his Queen’s Quay address in Canada.

L. He joined the Sharon Gun Club at Sharon, Ontario.

M. He purchased and licensed a pistol in Canada.

N. When he purchased an automobile in California he gave his Queen’s Quay address and when he brought it into Canada he gave as his address his grandparent’s house in Keewatin.

O. His address on the application for a licence for his boat was given as 260 Queen’s Quay West, Toronto.

P. When he bought a Ford Bronco and a Chevrolet 1/2 ton truck in Toronto he gave as his address 524 Sixth Street, Keewatin, Ontario.

Q. When he bought a small camera in Japan for his father in 1985, he gave his home address as 524 Sixth Street, Keewatin, Ontario.

R. When he bought the island in Lake-of-the-Woods in 1986 as well as the Keewatin property he gave as his address for service 260 Queen’s Quay West, Toronto.

S. When he bought the Kenora property he stated that he was a nonresident for the purposes of the Land Transfer Tax Act, but he did not do so with respect to the island or the Keewatin property.

T. He never learned to speak Japanese.

Counsel for the respondent called as a witness Mr. Peter Francis Blackmon, an officer of Revenue Canada, who investigated the appellant’s affairs for 1987 and 1988. Mr. Blackmon made the net worth assessment. As stated I have seen no evidence that the quantum is incorrect.

Counsel also called Mr. Lonnie Nicholson of the Department of National Revenue who analyzed the appellant’s credit card vouchers. He determined that in 1988 the appellant had 46 vouchers for airfare. Approximately 30 of these trips originated or terminated in Canada. There were eight to Japan, 17 to Switzerland, five to England, five to New York, one to New Orleans, 12 to Paris and one to Egypt.

There were 54 separate hotel charges for over $150 per night, as follows:

I in New York

11 in Paris

1 in Egypt

18 in Switzerland

1 in Montreal

1 in New Orleans

5 in London

7 in Japan

1 in Austria

2 in Toronto

1 in Ottawa

I have endeavoured to set out, albeit in a somewhat disjointed way, the evidence that was adduced at trial. The disjointedness may possibly be attributable to the appellant’s rather peripatetic lifestyle. Some of the facts may be more relevant than others. In a case of this type no single fact predominates. Some may be neutral, others may point more strongly in one direction or another. It is the overall picture that emerges from the evidence as a whole that is ultimately determinative. A simple listing of points may be a useful exercise but it cannot in itself be conclusive.

The appellant was not in Canada in 1987 or 1988 for more than 183 days in either year and accordingly the statutory test in paragraph 250(1 )(a) is not met. This does not conclude the matter, of course, because under subsection 250(3) a reference to a person "resident in Canada" includes a person who, at the relevant time, was "ordinarily resident" in Canada. On the evidence, therefore, can it be said that he was "ordinarily resident" in Canada in 1987 and 1988? One cannot look at these years in isolation. The pattern before and after may assist in determining his "ordinary residence".

The leading case on the meaning of "ordinarily resident" is Thomson v. M.N.R., [1946] S.C.R. 209, [1946] C.T.C. 51, 2 D.T.C. 812. The different reasons for judgment in the case illustrate the difficulty of assigning a precise meaning to this rather fluid and elusive term. Estey J. said at page 231-32 (C.T.C. 70, D.T.C. 813):

A reference to the dictionary and judicial comments upon the meaning of these terms indicates that one is "ordinarily resident" in the place where in the settled routine of his life he regularly, normally or customarily lives. One "sojourns" at a place where he unusually, casually or intermittently visit or stays. In the former the element of permanence; in the latter that of the temporary predominates. The difference cannot be stated in precise and definite terms, but each case must be determined after all of the relevant factors are taken into consideration, but the foregoing indicates in a general way the essential difference. It is not the length of the visit or stay that determines the question. Even in this statute under section 9(b) the time of 183 days does not determine whether the party sojourns or not but merely determines whether the tax shall be payable or not by one who sojourns.

The words of Viscount Summer in Inland Revenue Commissioners v. Lysaght (1928), A.C. 234, 13 T.C. 511 (H.L.) at page 243 (A.C.) are indicative:

I think the converse to "ordinarily" is "extraordinarily" and that part of the regular order of a man’s life, adopted voluntarily and for settled purposes, is not "extraordinarily".

Lord Buckmaster, with whom Lord Atkinson concurred, in the same case, at page 248:

if residence be once established ordinarily resident means in my opinion no more than that the residence is not casual and uncertain but that the person held to reside does so in the ordinary course of his life.

The appellant selected the location, built and furnished the residence for the purpose indicated, and has maintained it as one in his station of life is in a position to do. In successive years his residence there was in the regular routine of his life acting entirely upon his own choice, and when one takes into consideration these facts, particularly the purpose and object of his establishing that residence, the conclusion appear to be unavoidable that within the meaning of this statute he is one who is ordinarily resident at East Riverside, New Brunswick, and is therefore liable for income tax under section 9(a).

It is well established that a person may have more than one residence, and therefore the fact of his residence in Pinehurst or Belleair does not assist or in any way affect the determination of this issue.

At pages 224-25 (C.T.C. 63-64, D.T.C. 815-16) Rand J. stated:

The graduation 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 contexts 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.

For the purpose of income tax legislation, it must be assumed that every person has at all times a residence. It is not necessary to this that he should have a home or a particular place of abode or even a shelter. He may sleep in the open. It is important only to ascertain the spatial bounds within which he spends his life or to which his ordered or customary living is related. Ordinary residence can best be appreciated by considering its anthesis, occasional or casual or deviatory residence. The latter would seem clearly to be not only temporary in time and exceptional in circumstances, but also accompanied by a sense of transitoriness and of return.

But in the different situations of so-called "permanent residence", "temporary residence", "ordinary residence", "principal residence" and the like, the adjectives do not affect the fact that there is in all cases residence; and that quality is chiefly a matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question. It may be limited in time from the outset, or it may be indefinite, or so far as it is thought of, unlimited. On the lower level, the expressions involving residence should be distinguished, as I think they are in ordinary speech, from the field of "stay" or "visit".

Kerwin J. at pages 211-12 and 214 (C.T.C. 52-54, D.T.C. 817-19) said:

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 being “To dwell permanently or for a considerable time, 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 remain or reside for a time".

The appellant seeks to make himself a sojourner as he carefully remained in Canada for a period or periods amounting to less than 183 days during each year. This attempt fails. The family ties of his wife, if not to himself, the erection of a substantial house, the retention of the servants, together with all the surrounding circumstances, make it clear to me that his occupancy of the house and his activities in Canada comprised more than a mere temporary stay therein.

Kellock J. said at page 229 (C.T.C. 67, D.T.C. 819):

"Ordinarily" is defined as "in conformity with rule or established custom or practice", "as a matter of regular practice or occurrence", ‘in the ordinary or usual course of events", "usually", "commonly", "as is normal or usual".

As Cartwright J. said in Beament v. M.N.R., [1952] 2 S.C.R. 486, [1952] C.T.C. 327, 52 D.T.C. 1183, each case turns on its own facts. The principles set out in a number of other cases, in addition to Thomson, are, however, instructive. In The Queen v. Reeder, [1975] C.T.C. 256, 75 D.T.C. 5160 (F.C.T.D.), Mahoney J. said at pages 260-61 (D.T.C. 5163):

While the defendant here is far removed from the jet set, including any possible imputation of a preconceived effort to avoid taxation, the factors which have been found in those cases to be material in determining the pure question of fact of fiscal residence are as valid in his case as in theirs. While the list does not purport to be exhaustive, material factors include:

a. past and present habits of life;

b. regularity and length of visits in the jurisdiction asserting residence;

c. ties within that jurisdiction;

d. ties elsewhere;

e. permanence or otherwise of purposes of stay abroad.

The matter of ties within the jurisdiction asserting residence and elsewhere runs the gamut of an individual’s connections and commitments: property and investment, employment, family, business, cultural and social are examples, again not purporting to be exhaustive. Not all factors will necessarily be material to every case. They must be considered in the light of the basic premises that everyone must have a fiscal residence somewhere and that it is quite possible for an individual to be simultaneously resident in more than one place for tax purposes.

It is, I believe, apparent from the decision of Schujahn v. M.N.R.,

[1962] C.T.C. 364, 62 D.T.C. 1225 (Exch.), and the Thomson case that one should treat with some caution the decisions under the United Kingdom taxing statutes.

While ultimately the tests that have been developed by the courts follow a common pattern, it would seem that individual residency cases fall into three broad categories: [1]

A. cases where a person who has theretofore been ordinarily resident in Canada leaves, takes up residence elsewhere and alleges that he or she has so severed the relationship with Canada that he or she is no longer resident here;

B. cases where a person, ordinarily resident in another country, acquires a residence and other ties in Canada. There the question is whether that person has become "ordinarily resident" in Canada;

C. cases where a Canadian resident leaves Canada and severs his or her connection with this country so that he or she is not a Canadian resident, and then reacquires ties here. The question there is whether that person has resumed residence here.

The tests may ultimately be the same, but the type of evidence necessary to establish the relinquishment of Canadian residency would normally be somewhat different from that necessary to establish that the taxpayer has or has not acquired or resumed it.

This case appears to fall into the third category. I think the evidence has established that between February 1981 and June 1985 he was not a resident of Canada but of Japan. No evidence that I have seen supports the position that he was resident in Canada in that period. He spent two weeks in Canada in 1983 and three weeks in 1984.

He appears to have been resident in Canada in 1985 not necessarily because he was "ordinarily resident" here but because he sojourned here for more than 183 days, between June 1985 and December 31, 1985.

In 1986 I think the evidence is more consistent with the conclusion that he was not resident in Canada. According to the evidence he came back three times for two or three-day visits and a period of three weeks. He had a fixed abode in Japan at that time although he appears to have had an apartment in Toronto in 1986 as well.

The question then is whether in 1987 and 1988 he had resumed or- dinary residency in Canada-an ordinary residency which he had relinquished in February 1981, or whether, as the appellant alleges, he was resident in Japan and not in Canada.

Taking into account the guiding factors enunciated in other courts, and in light of the evidence as a whole, can it be said that the appellant was "ordinarily resident" in Canada in 1987 and 1988? To use the words of Rand J. in Thomson, can it be said that he had "in mind and fact settle[d] into or maintain[ed] or centralize[d] his ordinary mode of living with its accessories in social relations, interests and conveniences" in Canada to such a degree that his visits here went beyond mere "stays" or "visits" and became part of the normal and customary mode of life of a person who regarded and treated Canada as his true place of habitual abode? He had an apartment in Toronto in 1987 and for a period of 1988. He purchased three properties-one in Keewatin, which was for his parents’ use, one in Kenora, which was also used by his family, and an island on which he was in the process of building a cottage. He evidently had deep family roots here and strong sense of familial responsibility. Neither the ownership of property nor a sense of filial duty is in itself determinative. Non-residents frequently have strong family ties to Canada and often own substantial summer houses and other investments in Canada. Nonetheless they are factors to be taken into account as part of the overall picture.

There are unquestionably factors that would justify a conclusion that he was resident in Japan and not Canada. From 1981 until at least 1984 his connections with Canada were tenuous whereas his connection with Japan was strong. Up until about 1985 the appellant intended to return to Canada to start a dojo. By 1986, however, the focus of his life changed with his involvement in the art business between Europe and Japan. His business and economic ties were in Japan and Europe and he had a fixed address in Japan. His visits to Canada appear to have been prompted to some extent by a sense of responsibility to his family.

Notwithstanding these considerations, I think that the conclusion that is more consonant with the tests of ordinary residency enunciated in other cases is that by 1987 Canada had become again his place of ordinary residence. His family ties were here. He had in 1987 and at least in part of 1988 an apartment here. He owned substantial property in Canada. Canada was the country to which he returned with frequency and regularity. It was a country whose language he spoke and of which he was a citizen by birth. He had a right to come to Canada whenever he chose. That can be said of no other country. One is reminded of the passage in Robert Frost’s poem, "The Death of the Hired Man”:

Home is the place where, when you have to go there, They have to take you in.

This observation would apply to Canada.

It has been said on a number of occasions that for tax purposes everyone is assumed to be resident somewhere. This is, I think, less a statement of law than a recognition of a practical fact of life. Theoretically, it might conceivably be possible to be resident nowhere, if one kept constantly on the move, such as the captain of the legendary phantom ship, The Flying Dutchman, but in real life it really does not work that way. If one had to pick one place on earth where the appellant was resident in 1987 and 1988 that place would be, in my view, Canada.

I reach this conclusion with some regret. Mr. Fisher appears to have acted on the basis of flawed advice to the effect that if he stayed out of Canada for 183 days in any given year he was not resident here and needed to pay no tax. That cannot of course influence my decision. I should also mention that my conclusion as to his residency in Canada in 1987 and 1988 does not imply that I think he was resident here in 1989 and later years. Indeed, such evidence as I have seen would appear to indicate that he was not.

I do not exclude the possibility that he may also have been resident in Japan in 1987 and 1988. That is altogether possible. He certainly had ties there and the law recognizes dual residency. If that is so he may be able to invoke the competent authority procedures under the Canada-Japan Income Tax Convention (1986), as described in Information Circular 71-17R3. Paragraph 2 of the Protocol to the Canada-Japan Convention reads as follows:

2. With reference to paragraph 2 of Article 4 of the Convention, where an individual or a company is a resident of both Contracting States the question shall be settled by mutual agreement by applying the following rules:

(a) in the case of an individual,

(i) 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 Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests);

(ii) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

(iii) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;

(b) in the case of a company, it shall be deemed to be a resident of the Contracting State of which it is a national.

The determination under that provision is something that must be made by the competent authorities of the two Contracting States. It is not a matter for this Court.

For the purposes of this appeal my authority extends only to determining whether, under the law of Canada, he was or was not resident in Canada in 1987 and 1988. I have concluded that he was and accordingly the appeals are dismissed with costs.

Appeals dismissed with costs.