Kurt Erickson v. Minister of National Revenue, [1980] CTC 2117, 80 DTC 1118

Delmer E Taylor:—This is an appeal heard in Vancouver, British Columbia, on December 4, 1979, against income tax assessments for the years 1976 and 1977 in which the Minister of National Revenue taxed the appellant on the basis that Erickson was a resident of Canada. The respondent relied, inter alia, upon sections 2, 3 and 250 of the Income Tax Act, RSC 1952, c 148 as amended by section 1 of c 63, SC 1970-71-72 as they stood for the 1976 and 1977 taxation years.

Background

The appellant is a mining consultant, employed during the time material by a Canadian company—Canadian Mines Services Ltd (the “Company”)—to work in Ireland. For the two taxation years in question he filed Canadian income tax returns showing an address of 11,692-98A Ave, Surrey, British Columbia. His 1976 return, filed as a resident, showed earnings from employment of $32,867, taken directly from the T4 wage form, and for 1977, filed as a non-resident, the amount of $1, whereas the T4 wage form showed $46,089. It should also be noted that these T4 forms also amounts of $159 and $2,034 respectively as “Taxable Allowances and Benefits”. It is of interest to note that the 1976 tax return filed by the appellant claimed a refund of $1,042 out of a total tax deducted at source of $11,461, and the amount of $1,042 was agreed to as a refund on the assessment notice in question; whereas the 1977 return claimed a refund of $16,434 (the total amount of the tax deducted at source), and the assessment indicated a total tax of $16,692, leaving a balance unpaid of some $267. The effect of the appeal before the Board is to correct the filing of the 1976 tax return to show a “non-resident” status, and to uphold the tax return filed by the appellant as a “non-resident” in 1977. The appellant is presently employed in Brazil, and has returned to Canada for this hearing.

Contentions

For the appellant:

— he was a non-resident of Canada during the years in question;

— he was a resident of Ireland during the same period, and is exempt from tax according to the Canada-Ireland Income Tax Agreement Act, 1967 (the “Agreement” or the “Convention”);

For the respondent:

—the appellant was not at any time material a resident of Ireland and the “Agreement” is of no assistance to him.

Evidence

The salient points brought out in examination and cross-examination of the appellant were:

— he lived in Canada from 1930 until 1973;

— in 1973, he accepted his first overseas engagement, which happened to be also in Ireland;

— he is married, with two children, the family address as shown on his tax returns is where his wife resides; one child is now grown up and at university, the other is still at home;

— he stayed in Ireland from August 1973 until late in 1974;

— he returned to Ireland with a separate contract in May of 1975, on a three-year working permit, and returned to Canada only once for a ten- day Christmas holiday between that date and May of 1978;

— his wife has her own career and remained in Canada, but visited him in Ireland frequently;

— his pay was deposited in a Canadian bank, on which both his wife and himself had signing authority. He received a slip in Ireland from the Company, notifying him of the bank deposit;

— he lived in rented accommodation in Ireland;

—after a short stay in Canada in 1978, he obtained his new contract with a different employer, to work in Brazil;

— he has a Canadian passport;

— he could not apply for an Irish passport unless and until he had lived there for five years;

— his contract with the Company was to get a new mine into operation, not to work after that in the mine;

— his wife sent him funds from the joint bank account when it was required;

—the family home is held in joint ownership with his wife;

— he has maintained a Canadian driver’s licence, but does not own a car;

— his medical insurance is carried on his wife’s policy;

— he had no house furnishings or other tangible assets in Ireland;

— he paid no income tax in Ireland;

—the Company had made the arrangements for his working visa in Ireland;

— he continued to pay Canadian union dues during the time material;

— he did not join a union in Ireland.

Counsel for the appellant filed with the Board a letter dealing with the matter at issue, to which counsel for the respondent took objection. This letter was indexed as Exhibit A-1; the Board only agreed to examine it in the context of the other evidence, and it read as follows:

I refer to our telephone conversation on November 22 from which I understand that Mr Erickson rented a house in Ireland during 1976 and 1977 and spent some time here in both years.

Our income tax year ends on April 5. An individual who maintains a house in Ireland available for his occupation is regarded as Irish resident for any tax year unless he is absent from the country for the whole of that year. As Mr Erickson resided in his house he is clearly Irish resident for tax purposes for 1976/77 and 1977/78. He is therefore chargeable to Irish tax on his income from all sources (including foreign sources).

However where an individual satisfies the Revenue Commissioners that he is not “domiciled” in this country the assessment to tax on income arising outside the United Kingdom and Ireland is confined to the amount remitted to this country. “Domicile” is a complex concept but as Mr Erickson was not born here and obviously had no intention of settling here permanently he would not be regarded as Irish domiciled.

Mr Erickson was, therefore, chargeable to Irish tax for 1976/77 and 1977/78 on the full amount of income which arose to him from sources within Ireland and the United Kingdom. While he was chargeable to Irish tax on his income from all other sources the assessment to tax would be confined to the amounts actually remitted to this country from those sources.

This letter confirms telex sent to you to-day.

Yours sincerely,

(Signature)

SEAN CLEARY.

Argument

Counsel for the appellant founded the appeal on two main points:

—the appellant did not live in Canada and only was here once for 10 days on a visit during a period of almost three years, two of which were the taxation years in question;

—the appellant was a resident of Ireland according to the “Agreement”, and therefore protected from the tax imposition by Canada, by virtue of that “Agreement”.

The position of counsel is summarized in the following quotations from his argument:

the facts are relatively straightforward in this matter, the years that we have under appeal are taxation years 1976 and 1977. The evidence has been that Mr Erickson was absent from Canada from the period May 1975 to May 1978, with the exception of a visit for nine days at Christmastime. The evidence is that he has maintained some ties with Canada. There is no denying that. He has a wife from whom he is not divorced or judicially separated, and he has a house here and there was money remitted to a joint bank account here in Canada. The evidence also is to the fact that he did establish a residence in Ireland in the sense that he rented a house and was physically present there for three years. Based on roughly those facts, the question before you is a simple one, relatively speaking, (until we get to the Treaty as to perhaps whether Mr Erickson was a resident in Canada (at all) for the purposes of Canadian tax for those years, ’76/’77), and Mr Erickson has two arguments, I would suggest, and that if you find favour with either argument, the decision would be in Mr Erickson’s favour. The first argument is to the effect that Mr Erickson is not resident in Canada within section 2 of the Income Tax Act, and the second is that even if he was ordinarily resident, he is exempt under the provision of Article X, Subsection 2 of the Ireland-Canada Treaty . . .

We have the definition of resident in the Income Tax Act and we have the definition of ordinarily resident, which, of course, most of the cases in Canada have been decided on, which is an extended definition of residence in my opinion, and it is a concept different than the word residence. We have the concept of domicile which is relevant for some purposes, it could perhaps be relevant in Ireland and is certainly relevant in Canada for the purpose of death duty legislation and, of course, we have the concept of citizenship.

The terms resident and ordinarily resident are further defined in the Income Tax Act. . . .

I would like to deal very briefly with the concept of resident per se, residence, in the absence of being specifically defined is to be given its ordinary meaning, it is to be given its dictionary meaning, and I would suggest that the concept of residence as opposed to ordinarily resident is a concept that very definitely deals with physical presence.

We are not talking about the question of intention in these definitions.

... I would submit on those definitions that clearly to be resident, leaving aside ordinarily resident for a moment, one has to be physically present in a place. The evidence is very clear in this case in terms of the physical presence there in the two taxation years that we are involved with, that Mr Erickson was a resident of Ireland and he was not a resident of Canada. That then leads us into the extended definition of ordinarily resident and I can see that being an extended definition of the Income Tax Act, that it means something more than a concept of residence. It means a place where an individual may ordinarily be found, but within the time framework that we are dealing with, which is 1976 and 1977, and I would submit that on the evidence Mr Erickson could not be found within that time framework to be ordinarily a resident in Canada in the sense that he is ordinarily here during that time frame. It is simply in conflict with the facts.

I would suggest that in this case the Crown is attempting to move past the concept of residence contained in the Income Tax Act to tax Mr Erickson on the basis of domicile.

. .. I cannot find a single case in Canadian history on the question of ordinary residence where we have this degree of physical absence from the country in the time work of the working period where an individual is found to have been an ordinary resident in the country by the court, and I submit that to attempt to find that someone such as this who is physically out of the country for an entire three-year period, legally out of the country on visa status and establishes residence else- where with a house and his family went to him as opposed to him coming to them, who was here for a ten-day period, and would be ordinarily resident in Canada for that time work would be to extend the concept of domicile, which has no place in Canadian taxation.

. . . it is central to my position throughout here that we have to look at the matter within a time framework, 1976 and 1977 are the years before you. Is someone’s ordinary mode of life centered in Canada if they do not appear here for one day except for that short visit? I submit, and it is the basis of my entire position in this matter, that within that framework clearly an individual who lived in a house in Ireland on a full time basis does not have his ordinary mode centered here. Sure, he has ties and is going to come back here one day, but that is a question of domicile, not a question of residence.

In support of his position, counsel made reference to several court judgments amoung which may be found:

Stuart Wesley Griffiths v Her Majesty the Queen, [1978] CTC 372; 78 DTC 6286;

Lloyd B Erikson v Her Majesty The Queen, [1975] CTC 624; 75 DTC 5429;

MNR v Ernest G Shekel, [1974] CTC 416; 74 DTC 6268.

Counsel for the respondent dealt extensively with the status of the appellant as “ordinary resident”, and that the agreement provided no basis in itself for the conclusion that the appellant was a resident of Ireland. The principal judicial references and the main points are summarized from his argument as follows:

Percy Walker Thomson v MNR, [1946] CTC 51; 2 DTC 812;

Her Majesty the Queen v Robert Maurice Sherwood, [1978] CTC 713; 78 DTC 6470;

Her Majesty the Queen v Kenneth F Reeder, [1975] CTC 256; 75 DIC 5160;

(Counsel also referred to Erikson (supra) and Shekel (supra) noted by counsel for the appellant)

Now, considering the facts at hand, I am going to suggest to you, Mr Chairman, that notwithstanding a somewhat lengthy physical absence from Canada, the ordinary mode of Mr Erickson’s life, his custom, his mode of life is centered in Canada.

Mr Erickson’s connection with Ireland is that he is there employed and obviously as a matter of necessity is required to have some shelter there. His connections with Ireland are, albeit not short, but essentially of a temporary nature and for a limited purpose.

Now, the evidence was that he was going for a three-year period on a work visa and that once this shaft was sunk and Irish miners were taught mining techniques, that that was it for him. The only connection with Ireland again is his employment and I believe he made reference to a bank account that was used as a matter of housekeeping.

Now, consider the Canadian connection. He resided here, I believe, not in dispute, from 1930 to 1973, a period of some 43 years. At all times material he used a Canadian passport. His wife is a resident of Canada. His children are residents of Canada and I believe the evidence is that his stepfather died in Canada, and he returned, and his bank accounts are in Canada and the bank account in which funds accumulated is in Canada, aside from a small Irish clearing account. His employer is a Canadian company on contract with an Irish company. He has a telephone listing, he owns real property here, and it is here that he returns. When the Irish work was over he came back here and subsequently got other employment.

I suggest that the time in Ireland, whether or not as a matter of Irish law or even Canadian law, would give rise to an Irish resident, and residence is not material. I believe it is settled in law that a man can have more than one residence, I believe that is the Thomson case. I do not think that proposition is open to dispute. Again, I suggest that in these circumstances, Mr Erickson, as a matter of fact, is ordinarily a resident in Canada.

. so-called permanent residence, temporary residence, ordinary residence, principal residence, and the like, the adjectives do not affect the fact there is in all case residence, that quality is chiefly a matter of degree in which a person in fact settles into or maintains, centralizes his ordinary mode of living with accessories and social relations, interests and conveniences at or in the place in question. I suggest the evidence is that the only connection Mr Erickson has with Ireland is his presence there. There is no evidence whatsoever that he has rearranged his life, he has maintained his marriage, his property here, he maintains his money here. He travels on a Canadian passport, etc, etc.

Mr Justice Collier (in Erikson (supra)) decided the case and he said the plaintiff had, to his mind, effectively severed the Canadian ties with one qualification and he makes reference to the children that he came to see. I suggest in a situation such as this we have the person that has residence in Canada for a long time, as Mr Erickson did (43 years), the way you must consider this case is by whether or not he has severed his residential ties.

In 1973 he had as many residential ties as you and I and he then removed himself from jurisdiction, but that is, I suggest, really all that has happened. He went to Ireland, not for the purpose of setting up his life in Ireland, centralizing his life in Ireland, rather he went to Ireland for a temporary, albeit independent purpose.

Mr Justice Mahoney (in Reeder (supra)) cites the Thomson case at 260 and 5162 respectively, and from it he propounds a number of tests on the following page:

‘‘a. past and present habits of life;”

(again, for our taxation years, physically in Ireland, the past habits, a very very strong Canadian connection)

“b. regularity and length of visits in the jurisdiction asserting residence;” (well, that is my learned friends’ strongest fact)

“c. ties within that jurisdiction;”

(temporary employment in Ireland. Presumably he would have made friends. He would have had occasion to attend social events, but nothing other than what you would expect from someone who is there for other than a temporary visit)

“d. ties elsewhere;”

(ties in Canada, I suggest, are very strong)

“e. permanence or otherwise of purposes of stay abroad.”

(This is not a trip of short duration but I suggest there is no element of permanence whatsoever.)

He then goes on to consider “The matter of ties within the jurisdiction asserting residence” and I guess in this context you can refer to Canada ‘and elsewhere runs the gamut of an individual’s connections and commitments:’ Again, the commitments are presumably to Canada. The family is here, albeit and the son is on a scholarship in Hawaii. ‘‘property and investment, ...” what little investment he had, Canadian mining stock long since acquired here. The property, his principal residence is here. “cultural and social”, no real evidence either way. ‘Not all factors will necessarily be material to every case. They must be considered . . .’ and it goes on to state that which is recognized by the Board as the proper test, and he says,

“That absence was temporary even though, strictly speaking, indeterminate in length. The ties in France were temporarily undertaken and abandoned on his return to Canada.”

Now, again, Mr Reeder was there admittedly for nine months and Mr Erickson was in Ireland for a substantially longer time, but I suggest that it is not material really that he is within a certain time range.

By way of summary. In the first part of my argument I suggest that clearly the facts when considered are such that Mr Erickson is ordinarily resident in Canada. I do not necessarily feel that the definition 250, sub (3) necessarily drags someone in who otherwise was caught. I suggest this is a definition section. Definition sections are broadly used in the statutes.

Now, dealing with the question of the Treaty, in essence I suggest my learned friend’s position really comes down to the suggestion that there must be some kind of relief in the Treaty for Mr Erickson.

Going back to Article Il, I suggest the phrase that gives my friend the most difficulty is this,

.. for the purposes of Irish tax . .	and	. . for the purposes of Canadian
tax . .

Now, the phrase I am concerned with is, “not resident in Canada for the purposes of Canadian tax.”

I suggest that there arises from that indication on the face of the Treaty that the test of residence to be applied is the test applied in Canada for the purposes of Canadian tax.

Findings

In appeals of this nature, the difficulty encountered by the appellant, in layman’s terms, is—“how can I be a resident of Canada, when I have not resided in Canada at the relevant time?” In that context, “reside”, as it applies to the term “resident” may be equated with physical presence in an appellant’s mind. I agree that it would facilitate decisions greatly if simple physical presence (or lack of it) could be determinative of the residency question. However, while physical presence is of some consequence, and may translate into residency for income tax purposes, I have seen no proof that it is not required at a// in order to reach a decision that a person was resident during a taxation period. In my view it is often in an effort to overcome this lack of physical presence that the Minister presumes that the term “ordinarily resident” (Subsection 250(3)) has parameters greater than the simple term “resident” (subsection 2(1)). As I read much of the case law where the term “ordinarily resident” (or its equivalent) is examined by the Courts, it may have some application in choosing between two or more sets of behavioural patterns of a taxpayer which compete for identification as the common, regular set of “spatial bounds” and this often involves the factor of physical presence within the taxation year in question. To the degree that the phrase “ordinarily resident” should have relevance under any other set of circumstances is not entirely clear to me, and I would refer to two interesting comments by Rand, J at 65 and 816 respectively of Thompson (Supra):

Giving to “residing” in paragraph (a) the fullest signification of which it is capable, “ordinarily resident” becomes superfluous.

I think the suggested meanings are quite artificial and that nothing in the context of the section or in the Act requires us to give to them the expressions used. This makes it unnecessary to consider whether “ordinary residence” must be capable of being extended in a fictional sense over the entire taxing year.

It is also well to remember that “residence” when referenced in the judicial decisions may, and often does, have two separate and distinct meanings, and the context within which it is used is vital to its interpretation. One definition of “residence” as a physical geographically locatable structure is dealt with at length in the decision of Walsh, J in The Queen v Sherwood (supra), at 714 and 6471 respectively:

A person may have and frequently does have several different residences at the same time. Frequently well to do people may have homes in several different countries, occupying each of them for varying periods of time each year. Depending on the duration of their stay they may by so doing make themselves liable to taxation for income tax in more than one country in the same year, or perhaps be fortunate enough to avoid payment of income tax altogether, . . .

Such a perspective is also treated by Estey, J in Thompson (supra) at 70 and 813 respectively:

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.

A second description of “residence” in tne circumstantial sense is given with some detail by Rand, J, the learned brother of Estey, J in the same Thompson judgment (supra) at 64 and 815 respectively:

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 spatial bounds within which he spends his life or to which his ordered or customary living is related.

One may gain from these comments of the learned justices that “residence” (in the structural sense) gives little or no illumination on the fundamental question of “residence” (in the circumstantial sense) for income tax purposes. It is this state, condition or set of circumstances—“the spatial bounds within which he spends his life or to which his ordered or customary living is related"’ (italics mine) that is the sometimes elusive but essential characteristic to be perceived in the determination of “residence” for income tax purposes.

Taken to its base, the one argument proposed by counsel for the appellant is that the three-year absence from Canada (a lack of physical presence in this country) virtually by itself should serve to sever the residential connections of this appellant to Canada. Obviously that is not a position for which I find any support in the Act or the jurisprudence.

While the view that a person may have more than one “residence’ (in the structural sense) at one time is clearly valid, it is not as clear to me that a person can have more than one “residence” (in the circumstantial sense) at one time. That is not to say that a person may not be resident of two different taxing jurisdictions within the same taxation period, but I have considerable difficulty in visualizing that required state of spatial bounds prevailing at one and the same point in time in that taxation year, at different places. I do not believe, however, that the determination of that specific question is crucial to the decision of this matter before the Board.

In my view the Stickel judgment (supra) is strong evidence for the view that when residency at the commencement of a period can be clearly established (in that case it was US residency), unless severance of a visible and virtually irreversible nature occurs, that original residency status is retained and maintained during a mere variance or change in the behavioural

living pattern—particularly when the absence involved is for a predetermined period of time. In that matter even though the United States authorities treated Stickel as a non-resident of the United States, the Canadian court for purposes of the application of our Act determined he was and remained a resident of the United States, and in that way was not subject to tax on income earned in Canada by virtue of the relevant tax treaty. I would interpret that to mean that, whatever the perspective held by authorities in Ireland, it would be the Canadian opinion with regard to residency (whatever that would be) that would govern Canada’s right to impose tax. There is considerable doubt on the basis of the only evidence availabale to the Board (Exhibit A-1) that this appellant would indeed be considered a “resident” of Ireland, but that determination would not in itself affect the outcome of this matter before the Board. The Convention does not of itself determine “residency”. In my opinion, it simply sets out the rules to apply to avoid double taxation once that determination of residency has been made. In this instant matter the Convention cannot be applied to make Erickson a “resident” of Ireland, and thereby a “non-resident” of Canada.

The task for any appellant to show that he was not a resident during a taxation year is onerous indeed, when the Griffiths case (supra) is read in its proper light. While that case (Griffiths (supra)), on the surface, may provide hope and comfort to many taxpayers seeking the same relief as was granted to Griffiths, it would be well to note that the learned justice therein carefully and deliberately weighed a// the factors impinging on that situation from both sides of the question, before reaching the conclusion that the many positive actions and the course of conduct taken by Griffiths over a long period of time to sever his status as a Canadian resident for the purpose of residing elsewhere outweighed the negative effect of the factors which linked him to this country. With the exception of physical absence with which I have already dealt and rejected as a major factor, I have no evidence before me of any positive actions taken by this appellant, the obvious purpose for which would be to establish residence elsewhere, or at least to sever residential connections here in Canada. The same view may be seen to hold true in circumstances of the Erikson case (supra) (incidentally also decided in the taxpayer’s favour by the same learned justice Collier who gave the decision in Griffiths (supra)). The facts of this Erikson appeal cannot be superimposed on the facts of that “Erikson” case (supra) with any prospect of the same beneficial result in the taxpayer’s eyes. The case law provides no basis upon which this appellant can claim destruction, abandonment, or collapse of the “spatial bounds” within which he was a resident of Canada and which he remained, in my opinion, during his stay in Ireland.

Summary

The appellant Erickson remained a resident of Canada as required under subsection 2(1) of the Act during the time material, and is subject to income tax accordingly. The Board is making no determination as to whether or not the term ordinarily resident (Subsection 250(3)) has any application in this appeal, such finding being unnecessary in these circumstances. Giving to the term “resident” its fullest signification, this appellant was and remained a resident of Canada during the taxation years in question.

Decision

The appeal is dismissed.

Appeal dismissed.