William Chapman Smith v. Minister of National Revenue, [1973] CTC 2097, 73 DTC 85

The Chairman (orally):—This is an appeal by William C Smith against a reassessment by the Minister of National Revenue for the 1969 taxation year. The question is whether or not the taxpayer appellant was resident in Canada within the meaning of the Income Tax Act during that taxation year. The relevant provision, of course, is subsection 2(1) which specifies:

2. (1) An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year.

Subsection 139(4), which falls in the area of the Act that is labelled or misnomered “Interpretation”, specifies:

139. (4) In this Act, a reference to a person resident in Canada includes a person who was at the relevant time ordinarily resident in Canada.

In my view, this is defining “resident” by the term “ordinarily resident”.

Cases have been cited by both the parties but there is close to common agreement that each case must be determined upon its own facts. This may be “more true”, if there is such a thing, in this type of situation than in others. The facts are not in dispute and, briefly, they are as follows: The taxpayer appellant, William C Smith, who was not here to give evidence because he is again employed out of the country (in the Persian Gulf area), was born and raised in an orphanage and in foster homes in the Province of Ontario, and had really no permanent home of his own until some time subsequent to his marriage in 1959 to Norma Leah Smith, who gave evidence in this case.

The evidence of Mrs Smith was that they were married in 1959 and that in 1964 they purchased property on Thames Valley Avenue in the City of London. They purchased the property as joint tenants, and her evidence is that no specific discussion took place as to how title should be taken. I think those of us who have any recollection of practising in real estate during that period of time, and perhaps even at present, will realize that that was almost a universal practice in taking title by husband and wife.

Mr Smith, the appellant, is a man who has some special ability in a very restricted occupation. His talents are directed to pipeline construction and other constructions involving the X-raying of steel or steel products to ascertain the degree of completeness of welds that have been made in the pipelines or in various other constructions. He has had a long-standing arrangement with X-ray Engineering International, an American corporation, apparently, with its head office in the City of San Francisco in the State of California.

The evidence is that during the taxation year 1969 he was out of this country for the entire year except for a few days in January, which was the end of the Christmas holidays to which he was entitled by virtue of his employment, and the beginning of another such holiday in the latter three weeks of December 1969. For all intents and purposes he was outside the country, that is, he was physically outside this country, he was employed outside this country, and he earned all his income outside this country in the year 1969.

However, that does not in itself relieve him of the burden of taxation under the provisions of the Canadian Income Tax Act because section 3 of this Act provides that a resident is taxable on his world income, to paraphrase the meaning of the section. Also it is well-accepted law that it is easier to acquire additional residences, and one may indeed have more than one residence during a fiscal period, than it is to rid oneself of a residence.

So the question is whether or not this taxpayer in the year 1969 was ordinarily resident in Canada notwithstanding the fact that his entire income arose and his entire working period for that taxation year took place outside the boundaries of Canada.

Looking at the facts as presented by Mrs Smith, there are several things that one must consider. The first fact is that the house was a joint tenancy. As I have said, this in itself is inconclusive. There is also Exhibit A-1, which is a letter from the appellant’s employer at the material time indicating that the appellant was required to be a resident in Saudi Arabia at the material time. There is also evidence that he was taxed by the Saudi Arabian government on income earned by him and that the tax was deducted by his employer and paid to that foreign government.

There is also evidence that Mrs Smith, prior to their marriage and until the present day, was employed by London Life Insurance Company, a well-known Canadian institution with its head office in this city, as mortgage cashier, and has continued to be so employed up to the present time. From the time the house was acquired until now, she has been resident in the house and has made all the mortgage payments, as she says, from her own personal bank account at the Bank of Montreal.

There is a joint account at the Royal Bank in this city upon which Mrs Smith could draw in case of an emergency. The account increased in the year 1969 from a sum of approximately $3,000 to a sum of $12,000-odd by the end of 1969. This was explained by the fact that the appellant preferred to have his salary, or at least so much of it as was not required by him for his living expenses in his place of employment, deposited in Canada because apparently he felt there was a greater degree of safety in that course of action.

There is evidence, also, that during the taxation year 1969 a motor vehicle was purchased with funds from the joint bank account and registered in the name of the appellant. However, it was operated, naturally, almost entirely by his wife.

There is also evidence that the mortgage on the property, which had been taken out jointly, fell due and was renewed by a document executed by Mrs Smith alone, and also that the telephone in the residence on Thames Valley Avenue is still in the name of Mr Smith. Both of these aspects in my mind are neutral facts that have no real probative value in considering the problem at hand. I say this because the mortgagee was prepared to renew the mortgage on the strength of the signature of the wife, and if anyone had raised a question as to the validity of it, the mortgage company would have been in the position of having an overdue mortgage and it could have taken its right to the court on that basis.

The telephone listing is of no probative value because this woman had lived in this residence for some five years at the date of the taxation year in question and now it is almost ten years. There is little doubt that her circle of friends would know that it was her telephone number if they were trying to contact her by ’phone.

Another factor is that, between jobs in this rather specialized field in which the appellant earned his income, he would return to Canada and sometimes work in Canada. The evidence is that he spent some two months working in the heavy-water plant in Glace Bay, Nova Scotia, and I gather that he has done some work in Western Canada, although that may not be exactly right. In any case, most of his work was in the Middle East oil areas and he apparently held himself in readiness to accept these assignments from X-Ray Engineering International.

It is not denied by Mrs Smith that when he returned to Canada he cohabited with her. He never lived anywhere else after their marriage but in the residence occupied by her. On his return to this side of the Atlantic for his vacation in December 1969, they went together to the Bahamas for a week, I believe she said, and then returned to Canada, that is, to London, Ontario, and then he went off to his employment in the Middle East.

If one job finished simultaneously with the commencement of another job, he would go to the new country without returning to Canada, but if there was a break between two jobs, there is no question that he did return to his base of operations at London, Ontario.

What then is the situation according to these individual pieces of evidence? Taken individually, I do not think that one would be on very sound ground in relying on any particular one of them to establish residence for this individual within the meaning of the Income Tax Act. But we must not look at them individually; we must look at the whole set of circumstances to try to obtain the true facts that existed with respect to this appellant.

In reviewing these facts I find that I can come to no other conclusion but that, notwithstanding the fact that most of his working year, or many months of it, was spent in distant lands, he never at any time intended to abandon, nor did he in fact abandon, his residence in London with his wife.

There is evidence that the marriage was, at the very best, in a shaky position, and one can only wonder what else could be expected in view of the long absences of the husband. Nevertheless, on his return, they cohabited, they took vacations together, and in 1970, without any evidence of threat of legal action, he conveyed his interest in the joint tenancy to the wife. To this day he still maintains a joint bank account in a substantial amount which, at the material time, would have been a most imprudent course of action for an individual to follow if his marriage were really in such a rocky state as Mrs Smith would have me believe.

Taking the facts together, I think the actions of the appellant indicate that he never at any time, in fact or by inference, abandoned his residence in this country, and is therefore taxable on his earnings under the provisions of the sections previously mentioned. The appeal will therefore be dismissed.

Appeal dismissed.