Section 2

The taxpayer, who left Canada in 2004 and returned in January 2010, filed a voluntary disclosure application in July 2015 covering the period from 2004 to 2014, but did not file returns for 2005 to 2009, taking the position that for those years he was a non-resident. On April 25, 2018, CRA issued a letter confirming a position taken two years earlier that the taxpayer continued his residency throughout this period.

McVeigh J confirmed the decision of the Prothonotary to strike the taxpayer’s application for judicial review of this letter on the grounds that it was premature (as the voluntary disclosure application was still outstanding, no determination had been made under s. 220(3.1)), and the Minister’s factual determination of residency could be challenged by filing tax returns for those years (which had not yet been done) and appealing assessments thereof to the Tax Court. She stated (at para. 27):

[H]e cannot judicially review this particular tax process when there has been no assessment and no discretionary decision.

The taxpayer, who was a British citizen aged 23 and had been residing at her family home in Bexleyheath, Kent, came to Australia on a “working visa” on 20 August 2015, and (following extension of her visa) returned to Kent on 1 May 2017 after having stayed most of her time with a friend in a house in Sydney (other than a two-month stint at a horse farm, as required in order to secure her visa extension).

In finding that the taxpayer was “resident” in Australia during this period, Logan J stated (at para. 54):

With respect to the ordinary meaning of the term, I observed in Stockton, at [23], that “both the nature, duration and quality of physical presence in a particular place as well as intention are relevant to determining whether and where an individual is a ‘resident’”. In relation to Ms Addy and in respect of the 2017 income year, she was settled in Sydney at the Earlwood house. It was from there that she ventured to follow her chosen employment. It was her home base for employment, living and social purposes. All of this occurred as a matter of habit and intent. There was nothing itinerant about her life.

The taxpayer was a US citizen who, in her “gap year” after high school, came to Australia for the nine months from 1 September 2016 to 23 June 2017 on a “working holiday visa.” She stayed at numerous different houses in various locales in Australia, mostly secured through AirBnB, and had had two periods of employment, from 1 October 2016 to 25 December 2016 in Brisbane and from 13 February 2017 to 27 May 2017 in Melbourne. She had no prior association with Australia. At the time she left Florida for Australia, she had her own room in the family home, which was retained for her while she visited Australia, and she returned to it after her travels.

The definition of “resident” or “resident of Australia” as found in s 6(1) of the Income Tax Assessment Act 1936 (Cth) (1936 Act) provided:

resident or resident of Australia means:

1. a person, other than a company, who resides in Australia and includes a person:

…

2. who has actually been in Australia, continuously or intermittently, during more than one half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia;

Before finding that the taxpayer was not specifically deemed to be resident in Australia under the (ii) branch of the definition above, Logan J found that she did not reside in Australia under the general wording in the preamble of the definition, stating (at paras 31 and 34):

… Ms Stockton was a paradigm unsettled itinerant during her time in Australia in the 2017 income year. As a matter of deliberate choice, she had no settled employment or place of abode in Australia. …

… Here, the only habit or pattern in Ms Stockton’s choice of accommodation was that of opportunism antithetical not just to settling in any one locale but to settling anywhere at all in Australia while she was here. The type of visa which Ms Stockton sought and obtained gave her the freedom to do this. Ms Stockton’s association with Australia during the 2017 income year was only ever casual.

A U.K. tax avoidance scheme, entailed Jersey subsidiaries acquiring assets from their UK parent (DS Plc) or its U.K. subsidiaries at prices corresponding to the assets’ historical cost plus an inflation-indexation adjustment and then, after the Jersey-resident directors had resigned, selling those assets back to the DS group at their much lower fair market value, thereby triggering a tax loss that could be used in the DS group. The scheme depended on considering that such subsidiaries had their central management and control in Jersey at the time of the acquisitions. The subsidiaries’ directors consisted of three Jersey-resident “professional directors” (working for a Jersey firm associated with a Jersey law firm) and the UK-resident company secretary of DS Plc (Mr. Lanes). This board met five times (e.g., a 5-hour meeting including a lunch to address matters relating to the transactions), before the resignations occurred.

As to the tests of residence of a subsidiary. the Tribunal stated (at paras. 17-18):

The mere fact that a 100% owned subsidiary carries out the purpose for which it was set up, in accordance with the intentions, desires and even instructions of its parent does not mean that central management and control [CMC] vests in the parent.

… Where a parent company merely “influences” the subsidiary, CMC remains with the board of the subsidiary. It is only where the parent company “controls” the subsidiary, i.e. by taking the decisions which should properly be taken by the subsidiary’s board of directors, that CMC vests in the parent.

In finding that the Jersey subsidiaries were resident in Jersey rather than the U.K. until the time of the resignations, the Tribunal stated (at para 50(8)):

[W]hatever the position as regards Mr Lanes (who may have been prepared to carry out the transactions no matter what), the Jersey directors (i) knew exactly what they were being asked to decide; (ii) did so understanding their duties; and (iii) complied with those duties. The FTT found that Mr Lanes did not influence the Jersey directors … .

The taxpayer, described (at para. 126) as “a wealthy CEO of an international energy company,” maintained a 600 square foot apartment within three blocks of the Calgary headquarters of his employer, but spent over half of his Canadian time in B.C., where there was a 10,000 square foot home (near his parents’ home) held in the name of his wife and where their social life was centered. Gaul J found that although the taxpayer was resident both in B.C. and Alberta, B.C. was the taxpayer’s “principal place of residence” under the tie-breaker rule in Reg. 2607, so that he was subject to B.C. income tax. Not only did he spend somewhat more time there, but he also “had a much closer and profound personal tie” with B.C. (para. 123).

The taxpayer, who had become a resident of Quebec in 1995, got a job as an auditor in Ottawa in September 2007 and rented an apartment there, which he occupied until November 30, 2010. He made weekly visits between Ottawa and Quebec sites (mostly in the Montreal area). He maintained his Montreal bank accounts, his Quebec vehicle registration, his interests (through his corporation) in two Quebec rental properties, his membership in the order of Quebec CPAs. It was unnecessary to determine whether Judith, his significant other, was a common law partner (para. 93). Judith remained largely in Quebec (where she was employed) until some time after the acquisition on July 15, 2010 by her and the taxpayer of an Ottawa home in co-ownership. She gave birth to two children of the taxpayer in 2010 and 2015. Pokomàndy JCQ discounted (at para. 85) testimony that their relationship was “stormy and punctuated by ruptures.”

Before finding that the taxpayer continued to reside in Quebec for his 2009 and 2010 taxation years, Pokomàndy JCQ stated (at paras. 69-70, TaxInterpretations translation):

The Court is convinced … that since 2011 this project of going to work in Ontario in order to perfect his English has become a life project that materialized with the residence transfer to this location.

However, the presence of various important and secondary residence links confirmed residence for tax purpose in Quebec until 2010 inclusive.

The taxpayer, who had worked in Quebec until 1988 operating heavy machinery, moved to new employment in Fort McMurry in Alberta in 1999 while his wife (a stay-at-home mother) and their two children remained in his house in Longueuil, Quebec. In the taxation years in question (2003 to 2011, which were assessed by the ARQ on October 24, 2013) he worked for various employers at pipeline sites in Quebec but also other provinces west of Quebec. He was a member of the local Edmonton chapter of the Pipefitters union. Although he had a room in Edmonton, when on vacation, or on leave for s sufficient period, he would return to his home in Quebec.

In finding that the taxpayer was resident in Quebec, Allen JCQ stated (at paras. 51-54, TaxInterpretations translation):

The residency links with Quebec were numerous. He was the sole owner of the family residence located in Longueuil since1992 and bore all of the costs and expenses. This house was occupied by his wife and their two children during essentially all of the period under litigation, and their daughter occupied it from 2010 on. The children … were declared as dependents of Mr. Rousseau for all the taxation years under litigation.

During his stays in Quebec, Mr. Rousseau occupied the house in Longueuil and used one of the two automobiles registered in the name of Mrs. Crépeau. He also had a trailer with a Quebec registration.

He received all his mail at the Longueuil residence address and explained that this choice was made for reasons of practicality. His bank account was at a CIBC branch located in Quebec.

The entirety of the evidence demonstrates that Mr. Rousseau left Quebec solely for work purposes and that he never had the intention to sever his connections with Quebec, which was the place with which he maintained his strongest links between 2003 and 2011.

A Netherlands couple (the “Backxes”) incorporated the taxpayer as a Netherlands limited liability company, but prior to their immigration to Canada in 1998, they resigned as directors (while remaining as shareholders, and appointed the wife’s sister (“Ms. Van Gorp”), also a Netherlands resident, as the sole director. The Backxes purchased a dairy farm in Strathroy, Ontario, in which the Backxes owned a 51% interest and the taxpayer owned the remaining 49% interest.

In 2009, the Backxes and the taxpayer disposed of their respective interests in the farm to a new corporation formed by the Backxes. They took the position that the taxpayer’s gain was exempt from tax under the Canada-Netherlands Treaty as being from the disposition of a substantial interest in a partnership holding a property (the farm) in which its business was carried on.

In finding that the central management and control of the taxpayer was in Canada, so that its gain instead was subject to Part I tax as a Canadian resident, Smith J stated (at paras 42, 43 and 46):

[I]t is apparent that cogent evidence is required to displace the well-established notion that de jure directors hold primary responsibility for the management and control of a company. Such evidence must clearly establish that the “outsider” … has “effective” or “independent” management and control.

… Ms. Van Gorp admitted that she had no experience in farming and no prior business experience. She accepted the title of director to assist the Backxes and received remuneration of 500 Euros per year from 2007 to 2011, increasing to 1500 Euros thereafter.

…[I]t was the Backxes who assumed effective and independent control of the Appellant. In most if not all instances, Ms. Van Gorp was not even copied with the correspondence. This quite clearly suggests that she was a mere nominee who carried out clerical and administrative functions on behalf of the Backxes.

The Haifa Trust was settled in 2000 by a tax advisor (Mr. Marcinski) to Mr. Zaffir, a Quebec resident. Its sole trustee was an Alberta corporation (“Alberta Ltd.”) of which Mr. Zaffir was the sole shareholder and whose initial sole director was an Alberta-resident acquaintance of Mr. Marcinski whom Mr. Zaffir had not met. The beneficiaries of the Trust were Mr. Zaffir, his wife and their two children. The Trust invested in real estate, all of it situate in Quebec excepting one Ottawa property. The real estate was managed by a corporation (“Gestion Amcor”) whose sole director was Mr. Zaffir and whose sole shareholder was a holding company of which Mr. Zaffir was the sole director and shareholder. Mr. Zaffir was, under the Trust deed, the “protector” of the Trust, so that he could replace the sole trustee at any time.

In connection with finding (at para. 49, TaxInterpretations translation) that “the real control of the Haifa Trust was exercised by Mr. Zaffir in Quebec,” Lavigne JCQ stated (paras.50, 52):

By way of illustration of the passiveness of the trustee, Alberta Ltd, in the management and effective control of the Haifa Trust … Mr. Patterson, who was the director of the trustee Alberta Ltd. for 10 years, never sent an invoice for his services or those of Alberta Ltd. …

That Mr. Zaffir was the sole shareholder of Alberta Ltd. and in that capacity he had the power to name or dismiss the director of Alberta Ltd., coupled with the fact that Mr. Zaffir was also the “protector” of the Haifa Trust, is sufficient to conclude that the effective control of the Haifa Trust was in the hands of Mr. Zaffir, a resident of Quebec and on that basis, the taxes of the Haifa Trust were required to be paid in Quebec.

She further stated (at para. 85):

Alberta Ltd. and its director, Mr. Gartaganis [a retired Alberta government employee without real estate expertise who was a friend of Mr. Zaffir and was appointed as Mr. Patterson’s replacement following the latter’s death] did not have the real management and control of the Haifa Trust. It is Mr. Zaffir who controls all the real estate activities that generate the income of the Haifa Trust.

An Alberta trust was found by the Court of Quebec below to be resident in Quebec. The settlor and beneficiary (his wife) were unfamiliar with the sole trustee (an Alberta lawyer), who instead was a contact of the Montreal law firm (and who could be removed by the settlor at any time). The most significant act of the trustee was something he was directed to do under the trust deed and thereafter there was essentially nothing for him to do other than send in the trust tax return along with payment. Lavigne J stated (at para. 82, TaxInterpretations translation): "The role of the Trustee was not to manage and grow the assets of the NS Trust but rather to hold them passively and follow the detailed steps in the Plan dictated by the [professional advisors]." See the more detailed summary of this decision.

St-Pierre JCA found no reversible error (and, in fact, appeared to agree with all the significant findings, except respecting any relevance of the tax avoidance motive, as discussed below). After referring to the Duke of Westminster and before finding that Lavigne J’s references to the tax motivation for the trust did not vitiate her finding that it was resident in Quebec, St-Pierre JCA stated (at paras. 53, 55-56, TaxInterpretations translation):

If the Judge decided that the residence of the trust was in Quebec, this was not by reason of the underlying tax motivation for its establishment, but because the established facts demonstrated that the control of its actual activities and that the management of its affairs rested practically (in reality) in the hands of its settlor, and not in those of the trustee who, in fact, acted only as the implementer ["exécutant"]. …

The tax motivation is a fact.

This fact constitutes a backdrop to take into account respecting the trust and its actual activities. [emphasis in original]

The appellants (the “Jersey companies”) were incorporated in Jersey as subsidiaries of a U.K.-resident property development and investment company (“DS Plc”) for the purpose of permitting the DSG group to crystallise latent capital losses on assets on a basis that permitted the losses to be increased by indexation for inflation. The board of directors of each Jersey company comprised three Jersey-resident directors (all of them providing their services as director to numerous other non-DSG companies as well) and one U.K.-resident director from the DSG group.

Under the scheme, the DSG UK member companies granted call options to the Jersey companies to acquire the subject property, with those options then being exercised (funded with contributions from DS plc). The price payable on exercise, which equalled to the relevant DSG company’s historic base cost in the relevant asset for capital gains purposes plus indexation accrued to that time, was considerably in excess of the then market value. The Jersey directors then resigned and U.K. directors were appointed with a view to the Jersey companies becoming UK tax resident from that time. Shortly after, steps were taken for the Jersey companies to sell or dispose of the relevant assets thereby triggering a capital loss. The only issue was whether the Jersey companies were UK tax resident prior to the resignation of their Jersey directors.

Morgan J first noted (at paras 406, 412):

…In reality, … the [Jersey] companies’ real business was to undertake the parent’s plan for the realisation of enhanced capital losses through the acquisition of assets at an overvalue under call option arrangements.

… It is inherent in the uncommercial nature of what was proposed or, in other words, that lack of any commercial benefit … that the board were undertaking to implement the necessary steps from the outset on the “say so” of the parent (subject to the legality issue). …

In finding that the Jersey companies had their central management and control in the U.K. at all relevant times, so that the appeal was dismissed, she concluded (at paras 426 and 430):

Unlike Wood v Holden… this was not a case where the board considered a proposal and, having taken appropriate advice, decided that it was in the best interests of the companies to enter into it. Given that the transaction was clearly not in the interests of the companies and indeed could only take place with parental approval, the inescapable conclusion is that the board was simply doing what the parent, DS Plc, wanted it to do and in effect instructed it to do. In the circumstances, the line was crossed from the parent influencing and giving strategic or policy direction to the parent giving an instruction. The Jersey board were simply administering a decision they were instructed to undertake by DS Plc, in checking the legality of the plan and then administering the other consequent actions prior to handing over completely to the UK group.

… In effect, the Jersey board merely rubber stamped the decision to move control back to the UK, having fulfilled the terms of their engagement.

The taxpayer was born in Québec and worked and studied there until 2007, when she left to work in Alberta in thermal insulation systems. The taxpayer was separated from her spouse, and initially her son came with her, but after a few months her son returned to live with the taxpayer’s mother in Québec for his remaining secondary-school years in premises which the taxpayer co-leased. The taxpayer initially rented an apartment in Alberta, but only kept it for a few months, and thereafter stayed at employer-provided lodges at the various work sites. The taxpayer returned to Québec for several weeks each winter (for her son’s birthday) as well as several weeks each summer.

In finding that the taxpayer resided in Québec on December 31 of each of the 2007, 2008, 2009 and 2010 taxation years, Bourgeois JCQ found that the taxpayer failed to demonstrate that she had established a residence, other than in Québec, during the period in issue, and that she maintained significant ties with Québec as summarized above (and also noting that in 2013, she had purchased a condo in Québec and had used a Québec address for various third-party communications including for purposes of maintaining her Québec health card).

All but one of the directors of three appellants were resident in Switzerland, with all the directors’ meeting being held in Switzerland. The directors of the fourth appellant (Hua Wang Bank Berhad), a Samoa company, were employees of a Samoan international trustee and corporate service provider. The appellants traded shares on the Australian Stock Exchange. An individual resident in Australia (Mr Gould) had been found by the primary judge (Perram J) to be the indirect beneficial owner of the appellants, although Mr Gould had gone to considerable lengths to disguise this fact.

Gordon J in the High Court stated (at para 89):

All deliberative decisions by each appellant company to buy and sell Australian shares on the Australian Securities Exchange ("the ASX") were made by Mr Vanda Gould, who was based in Sydney. The companies' officers were outside Australia, but they did no more than "rubber-stamp" the decisions made by Mr Gould in Australia.

Perram J had further found that “’the directors of the taxpayers exercised no independent judgment in the discharge of their offices but instead merely carried into effect Mr Gould’s wishes in a mechanical fashion.’” (This finding was "subject only to the slight and relvantly inconsequential difference that Bywater [one of the appellants] was incorporated in the Bahamas and did not purport to hold any directors' meeting [as that as not required under Baahamaian corporate law] (para. 27).")

The High Court affirmed the findings at both levels below that each appellant was a “resident of Australia” as defined in s 6 of the Income Tax Assessment Act 1936 (Cth), which included:

a company…which, not being incorporated in Australia, carries on business in Australia, and has…its central management and control in Australia… .

Before so concluding, the Court stated (at paras 41, 84):

Ordinarily, the board of directors of a company makes the higher-level decisions which set the policy and determine the direction of operations and transactions of the company. Ordinarily, therefore, it will be found that a company is resident where the meetings of its board are conducted. But, contrary to the appellants' submissions, it does not follow that the result should be the same where a board of directors abrogates its decision-making power in favour of an outsider and operates as a puppet or cypher, effectively doing no more than noting and implementing decisions made by the outsider as if they were in truth decisions of the board. Accordingly, the question in this case is whether, in view of Perram J's findings concerning the role which Gould played and the absence of substantive decision-making by the boards of the appellants, the fact that the boards of the appellants were located abroad was sufficient to locate the residence of the appellants abroad.

…[T]he rejection of the appellants' formalistic approach, in favour of the test of fact and degree adopted in Bullock [Bullock v Unit Construction Co Ltd [1959] Ch 315 ] and Esquire Nominees [Esquire Nominees [1973] HCA 67; (1972) 129 CLR 177], is fortified by the approaches adopted in other common law jurisdictions. In Fundy Settlement v Canada [[2012] 1 S.C.R. 520 at 526 [15]] the Supreme Court of Canada applied the same test of residence to a trust as to a company, namely "where the central management and control of the trust actually takes place". Accordingly, because the non-resident corporate trustee in that case deferred to the recommendations of Canadian resident beneficiaries in the substantive decisions made regarding the trusts, it was held that the trusts were resident in Canada. Similarly, in Hertz Corp v Friend [(2010) 559 US 77], the Supreme Court of the United States held that, in determining whether a corporation is a "citizen" for federal jurisdictional purposes, the statutory criterion of "principal place of business" is …"best read as referring to the place where [the] corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's 'nerve center' … and not simply an office where the corporation holds its board meetings… .”

The first taxpayer was a discretionary family trust (the “Family Trust”) whose beneficiaries were the three daughters of Mr. Grad (“Grad” - an Ontario resident and the CEO and sole director of the Grad group of companies) and his wife (“Marya”). The second taxpayer was a trust settled by Grad for the benefit of Marya (the “Spousal Trust”.) At most of the relevant time, the trustees of both trusts (the “Trusts”) were two Alberta-resident lawyers. The Trusts held investment assets, mostly comprising securities, short-term cash instruments, shares of group companies and, as discussed below, a partnership interest. In August 2006, the trustees of the Family Trust transferred a directly held portfolio on a rollover basis to a limited partnership (“CAL Equities”) in consideration for a limited partnership interest. Both before and after this transfer, day-to-day management of the portfolio was delegated to professional discretionary investment managers.

Before finding that the Trusts were managed and controlled by Grad and the CFO of the Grad group of companies (“Handelsman” – also an Ontario resident), so that the Trusts were resident in Ontario rather than Alberta, Wilton-Siegel J noted (at para. 93) that the in the context of an investment trust “the principal decisions taken by trustees pertain to the investment of the assets of the trust and distributions to beneficiaries,” and stated (at paras 94, 96, 103):

… [T]he Trustees were not skilled in investment matters and did not profess any skill in this regard. …

[M]anagement and control of a trust may rest with a trustee who has little investment experience provided that the trustee has the power to retain others for advice and remains the ultimate decision-maker. …

In my view, the mere retention by trustees of the ability to retract a prior delegation of investment decision-making authority is not sufficient to establish that management and control of the investments of the trust is exercised by the trustees where investment decisions are actually taken on a day-to-day basis by, or are otherwise subject to the control of, the delegee.

Wilton-Siegel J found that Grad had effective control over investments of the Trusts stating, for instance, respecting the Cal Equities arrangement (para 125):

… [T]he effect of the Cal Equities transaction was to place oversight responsibility for the investment managers firmly in the hands of Grad. He was the sole shareholder, director, and officer of 126 which, as the general partner of CAL Equities, controlled CAL Equities and made all decisions on behalf of the limited partnership, including all decisions with respect to its assets. ...

Wilton-Siegel J found (at para. 192) that “the decisions regarding the investment of the liquid funds of the Trusts were taken by Grad, or by Handelsman on behalf of Grad, rather than by the Trustees during the 2007, 2008, and 2009 taxation years,” stating (at para 186):

The [Trustees'] letters of authorization represented a “rubber-stamping” of decisions taken by Handelsman and were no more than a necessary formality required by the T-D rather than evidence of the exercise of management and control by the Trustees over these investment decisions.

As to the closely-held investments, Wilton-Siegel J found (at para 196):

… By appointing Grad the sole director of Markham and Herrad, the Trustees effectively gave Grad the power to control the payment of any distributions from Markham Suites and Herrad and, therefore, the power to control the principal sources of income of the Family Trust and the Spousal Trust, respectively.

Although the board meetings of the taxpayers were held outside Australia (in London, Switzerland or Samoa), the Court accepted that each taxpayer’s central management and control was in Sydney, where an accountant (Mr. Gould, who appeared to be the ultimate owner, notwithstanding false testimony to the contrary) was contended by the Commissioners to be “pulling all of the strings” (para. 10). Accordingly, each taxpayer was a “resident of Australia” as defined in s 6 of the Income Tax Assessment Act 1936 (Cth), which included:

a company…which, not being incorporated in Australia, carries on business in Australia, and has…its central management and control in Australia… .

The Court referred (at paras. 7-9) inter alia to the central management and control test enunciated in De Beers Consolidated Mines Limited v Howe [1906] AC 455, at 458, the statement in Koitaki Para Rubber Estates Limited v. Federal Commissioner of Taxation (1941) 64 CLR 241; [1941] HCA 13, 248–9 (CLR) that “’the crucial test is to ascertain where the real business of the company is carried on, not in the sense of where it trades but in the sense of from where its operations are controlled and directed,’” the distinction drawn in Unit Construction Co Ltd v Bullock [1960] AC 351 “between those with an ability to influence others who make the decisions of the company and those who may be usurping that function or who are directing those appearing to act for the company” and to the “critical finding” of the trial judge in Wood v Holden [2006] 1 WLR 1393; [2006] EWCA Civ 26 “that the effective decisions had been made by the directors and…their participation was not ‘merely going through the motions of passing and signing documents.’”

The Court then accepted (at paras. 11) the findings of the primary judge that “the real business of each taxpayer was conducted from Sydney by Mr Gould,” and that “’the directors of the taxpayers exercised no independent judgment in the discharge of their offices but instead merely carried into effect Mr Gould’s wishes in a mechanical fashion.’”

A Quebec-resident individual ("Gibeault"), who was the sole shareholder of a Quebec corporation ("Cetco"), exchanged a portion of his common shares for non-voting non-cumulative redeemable retractable Class B preferred shares of Cetco, and settled an Alberta spousal trust for his wife (the "NS Trust") with a portion of the preferred shares. The trustee ("Boettger") was unknown to Gibeault and was an Alberta lawyer contact of Gibeault's Montreal law firm ("BCF"). The NS Trust, Cetco and Gibeault then engaged in various transactions which resulted in the receipt of a deemed dividend by the NS Trust (and the generation of a dividend refund to Cetco) as a result of a redemption in its hand of preferred shares, and with the NS Trust ending up holding a residual holding of preferred shares of Cetco and a non-interest bearing demand promissory note of Cetco. The NS Trust subsequently demanded payment of the promissory note, in order to fund the payment of income tax on the deemed dividend received by it.

After quoting Fundy Settlement and in finding that the NS Trust was resident in Quebec rather than Alberta, Lavigne J stated (Tax Interpretations translation, paras. 73-85):

The NS Trust did not engage in any economic activity in Alberta, did not carry on any business and had no employees.

…Despite the presence of articles according ample powers to the Trustee, all the acts which the Trustee had the power to effect were guided by the Trust Deed. Articles 2.2, 2.3 and 2.4 are telling.

Article 2.2 provided for the payment of the expenses of the NS Trust.

Article 2.3 provided the net income of the NS Trust must be paid to the Beneficiary, during her lifetime, in annual payments "or more frequently in the discretion of the Trustee."

Article 2.4…provided that the proceeds of the redemption of the Class B shares of Cetco…must be distributed to the Beneficiary, net of taxes, within 30 days.

…. Gibeault could, qua "Protector" remove the Trustee and replace him… . These [Protector] articles testify to the de facto control that… Gibeault exercised over the Trustee.

…[R]especting the Class B shares which were the principal asset of the NS Trust, Cetco, controlled by … Gibeault, always had the right to retract these shares… .

…Mr. Boettger was certainly not chosen to "manage" the NS Trust as his powers to manage were …limited.

…The acts…of the Trustee were predetermined by the lawyers BCF and the accountants RCGT who were acting for Cetco, the settlor… Gibeault and the Beneficiary Nancy Smith.

…The role of the Trustee was not to manage and grow the assets of the NS Trust but rather to hold them passively and follow the detailed steps in the Plan dictated by the BCF lawyers and the RCGT accountants… .

All these facts establish that the real control of the NS Trust is in the hands of … Gibeault and of Cetco, two residents of Quebec, who acted through their agents, BCF, RCGT and Roy D. Boettger.

Charles Dobbin, the founder of CHC Helicopter Corporation ("CHC"), settled a trust, whose trustees and beneficiaries were his children. The trust was issued non-voting common shares of the holding company ("DHI") for CHC in a 2002 estate freeze transaction. In 2006 (shortly before the death of Charles Dobbin), it moved its assets to Alberta at the same time as the Royal Trust Corporation of Canada was appointed as the successor trustee (which performed its obligations through its Calgary branch). In 2008, the trust received (in the form of preferred share redemption proceeds and dividends) proceeds from the sale by DHI of CHC.

The trust was resident in Alberta in 2008. Essentially all aspects of the participation of the trust in various transactions (e.g., a pipeline transaction, a continuance of DHI to Alberta and its amalgamation and amendments to its articles, and various transactions consequent on the CHC sale) were implemented on the recommendation of the children (often acting through legal counsel ("Osler") or through a friend of Charles Dobbin ("Stanford") residing in Newfoundland, who was appointed as a board member or officer to various group entitles following Charles Dobbin's death). However, in each case,

Royal Trust…reviewed the Trust document to ensure that the proposed approval was within its authority and then considered whether there were any negative consequences for the beneficiaries" (para. 34).

Thompson J stated (at para. 41):

These did not suggest delegation of authority. Independence of the Trustee is maintained by its review of the transaction, acquiring explanation sufficient that an informed decision can be made, ensuring the decision has no negative consequence and is in the best interests of the beneficiaries.

Accordingly, the beneficiaries did not have management and control of the trust.

Bocock J found that the taxpayer was ineligible for the Canada child tax benefits as he was no longer a Canadian resident. He only visited Canada four times since moving to Indonesia, for no more than eight weeks each time, which Bocock J characterized more as vacations than maintaining ties to Canada. Bocock J also noted that, although the taxpayer maintained Canadian bank accounts, he admitted that he did so to assist him with daily living in Indonesia, where the banking system was inadequate.

The taxpayers were middle-aged "all American" certified cost estimate professionals, with no significant previous exposure to Canada, who came to Alberta under two-year contracts (later extended by two years) to work on the Syncrude project. Although they acquired and modestly furnished apartments in Alberta, they maintained their substantial homes in the U.S. where their families stayed (other than short visits to Alberta) and otherwise maintained their social ties and financial assets in the U.S. In finding that the taxpayers were not ordinarily resident in Canada, Boyle J. stated (at para. 33):

Further, they virtually only took on such ties to Canada as were reasonably needed to fulfill the CCG business contract with Syncrude in an economically reasonable and commonsensical, practical manner such as (i) rented apartments with early termination provisions (ii) locally leased cars (iii) modest furnishings most all of which were donated to neighbourhood charitable thrift shops before leaving Canada; and (iv) single local chequing account used for local living expenses.

VA Miller J found that the taxpayer, who spent an equal amount of time in Canada and the UK, was a Canadian resident based on her personal ties to her daughter who, due to a custody assessment, lived in Edmonton. VA Miller J stated that "her settled routine was that she worked in the UK and she returned to Canada where she resided with her daughter" (para. 23).

The taxpayer was reassessed in respect of income from stock options exercised in 1997, 1999, and in 2001. He argued that he was not a Canadian resident in those years.

V.A. Miller J. accepted the taxpayer's argument only in respect of 1997, when he was employed in China, sold his house in Canada (but kept his cottage in Belleville, Ontario), and maintained a lease in a Chinese hotel suite, where he lived with his wife during his employment period. (The taxpayer's appeal for 1997 was nevertheless dismissed pursuant to 115(1)(a)(i) because he received the stock options in the course of employment in Canada.) The taxpayer's employment in China was terminated and the taxpayer moved back to his Belleville estate for over a year.

The taxpayer was a Canadian resident in 1999 and 2001, and V.A. Miller J. found that his assertions to the contrary amounted to willful neglect, for which he was liable for 50% penalties under s. 163(2). The taxpayer's severing of his ties to Canada was superficial - he ostensibly sold the Belleville estate to his children in exchange for a mortgage, but never actually requested payment from them. The core of his social and family life, as well as his finances, remained in Canada, and his personal investment in China, and subsequently Thailand, was only enough to maintain a particular lifestyle during his periodic sojourns there.

Woods J. stated (at paras. 25-26):

The term "residence" has a flexible meaning which is dependant on the context in which it is used. ...

The term "residence" as used in the context of Thomson applies in determining the liability of an individual to income tax. The focus in this context is on the individual rather than on a property and a myriad of personal factors involving the person's customary mode of living are looked at. This include things such as social and economic ties. It does not make any sense to apply this test in the context of s. 191(1) [of the Excise Tax Act].

The context of s. 191(1) was to make the builder of a substantially completed complex liable for GST if it arranged to lease or license the complex to an individual as a place of residence.

Boyle J. found that the taxpayer ceased to be a Canadian resident in 2000 when he moved to China to teach English - a stay in which he met and married his wife, had two sons, and which lasted seven years. He had few ties to Canada at the time of departure, being single and unattached, and there was little evidence to suggest an intention to return. While he continued to keep an eye on Canadian politics, it was clear that the taxpayer was developing substantial ties to China, including stable employment. The taxpayer's testimony to the contrary was inconsistent with documentary evidence of his employment, which threw his credibility into question. The taxpayer was therefore denied Canada child tax benefits in respect of the time he was in China.

Woods J. found that the taxpayer's stay in New Zealand, which she intend to be only transitory while her husband completed his master's degree, ceased to be of a transitory nature when he decided to continue in New Zealand as a doctoral student. At that point, they ceased to be Canadian residents and became New Zealand residents. Referring to the "customary mode of life" component of Thomson, Woods J. stated (at para. 23) that this "longer term commitment, coming after the family was in New Zealand for three years, suggests that the family was likely settled into life in New Zealand as their customary mode of living."

The taxpayer moved to Canada in August 2005, joining her husband who had moved from Pakistan to Canada in 1997. In February 2006 she moved back to Pakistan until May 2008 with her children and her husband, who had accepted a two-year work contract. She then returned to Canada.

Woods J. found that the taxpayer was a resident of Canada at all times after August 2005, notwithstanding that her initial stay in Canada was only six months. She stated (at paras. 21-22):

The CRA concluded that [the taxpayer's husband] was subject to tax in Canada on his worldwide income during this period. Although this is not determinative of Mrs. Fatima's residence status, one would generally expect spouses to reside in the same country for tax purposes unless they lived apart for some reason.

The Crown referred in support of its position to a residency questionnaire signed by Mrs. Fatima which failed to reveal any ties to Canada. ... Such forms often do not present a complete picture. In reality, Mrs. Fatima had established significant ties to Canada before the family went to Pakistan for a limited period.

The taxpayer was therefore entitled to the child tax benefit.

The first group of taxpayers (Davies and others) were successful English property developers who decided to extend their property development activities to Belgium, which they began to conduct through a newly-incorporated Belgian company of which they were equal shareholders. Although they began to work full-time for the Belgian company and resided at furnished apartments in Brussels, they did not sell their homes in England where their wives (and, in one case, daughter) continued to stay, they returned to England frequently and they continued their duties as non-administrative directors of their English property development company and with the Swansea Rugby Football Club. The residency facts respecting the second taxpayer (Gaines-Cooper) were different but raised the same issues.

The taxpayers' primary submission was that the Inland Revenue administrative position on individual residence (contained in booklet IR20) contained a more favourable interpretation of the test of when an individual ceases to be resident and ordinarily resident in the UK than was reflected in the ordinary law, and that the court should give effect to their legitimate expectation that this more favourable interpretation should be applied to them.

The taxpayers' submissions were rejected, on the grounds that the booklet communicated a requirement for "a distinct break" from the UK (para. 45), which the taxpayers had not satisfied. Before so concluding, Lord Wilson SCJ discussed whether the taxpayers had ceased to be ordinarily resident in the UK under the ordinary law - or, to be more precise, whether they had ceased to be resident in the UK and, if so, whether they were deemed to continue to be resident in the UK under a statutory provision that applied when a taxpayer, who had been ordinarily resident in the UK, has left the UK for the purpose only of occasional residence abroad. After considering the "settled or usual abode" test in Levene, he stated (at para. 20) that although the ordinary law required that, in order to become non-resident in the UK or, at any rate, to avoid being deemed by the statutory provision to still be resident in the UK, "the ordinary law requires the United Kingdom resident to effect a distinct break in the pattern of his life in the United Kingdom." However, a reference in the decision under appeal

to the need in law for 'severance of social and family ties' pitch[ed] the requirement, at any rate by implication, at too high a level.

He then stated (at para. 21):

It became clear from decisions like IRC v. Combe [(1932) 17 TC 405] that, if a taxpayer left the United Kingdom in order to pursue employment abroad which was full-time, it was likely not only that he would cease to be a United Kingdom resident but also that he would escape being deemed still to be a United Kingdom resident under the statutory provision. For, from the fact that the employment was full-time, it was likely to follow that he had made a distinct break in the pattern of his life in the United Kingdom.

Tardif J. found that the taxpayer ceased to be resident in Canada following his departure from Canada for Qatar in 2007. His Qatar work permit expired in August 2010, after which he had to leave Qatar. Indications that he had severed his ties with Canada included that he did not apply for a new Canadian driver's licence when it was suspended, he relinquished his health card, disposed of his Canadian property, was separated from from his wife, and in general appeared to make a definite decision to leave Canada after much reflection. Other factors including his several visits per year back to Canada (each for a stay of up to about two week) to see friends and family did not establish Canadian residence.

In determining whether the taxpayer was eligible for a Canada child tax benefit, Boyle J. found that the taxpayer was resident in Canada for the 16 years he spent in full-time rabbinical studies in Israel. The taxpayer's family had Israeli health insurance, the children went to school in Israel, and taxpayer's wife occasionally worked in Israel during the study period. However, the taxpayer remained a Canadian citizen with a Canadian passport. He intended to accept a faculty position, offered by a Canadian school, upon his return. He voted in Canadian elections, filed Canadian tax returns, and maintained personal relationships, financial accounts, drop-boxes, and an apartment in Canada.

While the taxpayer's studies in Israel were very extended, Boyle J. found at paras. 32-33 that it would be inappropriate for the court to set a specific time limit on studies abroad. Therefore, the taxpayer could not lose Canadian residency on the basis of time alone.

The taxpayer's children were abducted by her husband in Lebannon, and were being held there while the taxpayer tried to effect their return to Canada. At issue was whether the children "resided" with the taxpayer in Canada and whether the taxpayer was the one who "primarily [fulfilled] the responsibility for [their] care and upbringing", as per s. 122.6. Sheridan J. concluded that both criteria were met: "There is something fundamentally flawed with the notion that children wrongfully detained in a foreign country can be 'settled' there."

On similar reasoning, Sheridan J. concluded that the children and the taxpayer resided together in Canada for the year the taxpayer spent in Lebannon trying to recover her Children.

The taxpayer, who had been a resident of Canada for six years, moved to a job in Saudi Arabia for the three taxation years in question, with most of his salary being remitted to his family who stayed in Canada and with the taxpayer returning to Canada for 30 vacation days a year and maintaining various other connections with Canada. He continued to be resident in Canada (and was liable for gross negligence penalties for not reporting his income from his job in Saudi Arabia).

The central management and control of a Barbados corporation was in Barbados rather than Canada, notwithstanding that its directors in Barbados were described as being inactive, given that there was no evidence that these directors did not, in fact, manage the corporation and it was consistent with the very limited functions of the Barbados corporation that what they did was not much more than the bare minimum.

The taxpayer, who was a U.S. citizen, was found to have a centre of vital interest in Canada rather than the United States given that it was admitted that he normally lived in Canada.

The taxpayer, who was working on a succession of small jobs in the United States and whose children continued to live with his mother and his separated wife in Canada, was found to continue to reside in Canada given that his intention would have been to remain as a resident of Canada because this would be important to him to be able to sponsor his mother under Canadian immigration laws.

The taxpayer, an Air Canada pilot who spent approximately two months a year in the Turks and Caicos primarily on recreation, and approximately 100 days per year in the Vancouver area (including in the Point Roberts Peninsula in the State of Washington, where he claimed to be spending a large portion of those 100 days camping) was found to be ordinarily resident in Canada given that his work routine as a pilot was centered in Vancouver and given that he had ready access to his in-laws' home in British Columbia a short distance from Point Roberts.

The taxpayer, who spent most of the taxation years in question in the Far East, was found nonetheless to be ordinarily resident in Canada in light inter alia of the fact that he had a considerable emotional and economic investment in a house in Belleville title to which had remained in the family.

The taxpayer was ordinarily resident in Canada in the year within the meaning of s. 250(3) given that his Canadian employer was obligated to return him to Canada when his assignment in Dubai was concluded and given that, during the years in question, the taxpayer had no substantial ties with any location other than Canada.

The taxpayer was found to be resident in Canada for a four-year period during which he was working in the United States given that the evidence indicated he was in the United States for work only and that he did not have any other ties there, whereas his wife and daughter remained in Canada with him visiting them there at least once a month.

An Air Canada pilot who had shared accommodation with other pilots, and had financial investments in the Turks and Caicos Islands and a mailing address, driver's licence and financial links to Florida, was able to establish that he was not a Canadian resident given that he had broken up with his Canadian girlfriend, gotten rid of his house, cars, licences and health insurance there and that when he came to Canada he stayed with friends. Bowman C.J. stated (at p. 242) "residual friendships and employment connections do not create residency".

An Air Canada pilot who took up residence in the Bahamas continued to be resident in Canada given that his work routine (which was centred on Pearson Airport) and family connections caused him to spend more than one-third of his time in Canada (during which time he would stay at his mother-in-law's apartment in Canada) and that he used a Canadian bank account for most of his banking.

The taxpayer was resident in South Korea rather than Canada in her 2001 taxation year. Although she had a residence in British Columbia available to her, she spent more time in South Korea, her social, cultural and religious ties in South Korea were much more extensive than those in Canada, and she had a two-year work contracting commencing in January 2001 that obliged her to perform her services in South Korea.

A corporation was found to be resident in the Netherlands, under the central management and control test, given that the only acts of management and control of the corporation (being the making of various board resolutions and the signing and execution of documents) all took place in the Netherlands. Park J. stated (at p. 764) that:

"Price Waterhouse, or indeed virtually any professional firm, would resist strongly any suggestion that, because a client is relying on them for, and is following, professional guidance which they are providing on a sophisticated scheme which extents over several months, therefore their offices are a place of effective management of the client."

The taxpayer, who was a Canadian citizen with a Canadian passport, began working in the United States as a computer systems analyst on January 1, 2001, but with his employment being terminated in October 2001 at which point he returned to Canada. His wife remained at their jointly owned house in Mississauga throughout the period.

He was found to have remained an ordinary resident of Canada.

The taxpayer, who left with his wife to work in Egypt for 48 months, while maintaining various ties including their home in Ontario while in Egypt, was found to be ordinarily resident in Canada during that period given that his "ties were all with Canada, save only those ties, undertaken during the term of his absence, which were necessary to permit him and his wife to enjoy an acceptable and expected lifestyle while in Egypt" (pp. 72-73).

After the taxpayer took an assignment (initially scheduled for two years) to work in Belize she maintained her home in Vancouver where her son and family resided, maintained her banking and financial interests in Canada, visited her connections in Vancouver approximately once per year, had no intention to reside on any permanent basis in Belize and considered Vancouver as a place where she could reconnect if need be. She had not ceased to be in resident in Canada.

The taxpayer, who had moved with his wife to Florida in September 1992, had thereupon ceased to be a resident of Canada notwithstanding that he retained a number of minor ties with Canada including maintaining two bank accounts there for the purpose of processing pension payments, visits to Canadian family members and the holding of some Canadian assets on behalf of his son. Rip J. stated (at p. 2737) that "the fact that he reported only his United States income in his United States income tax return is a matter for the Internal Revenue Service and not for me or the Canadian Revenue Agency".

When the taxpayer moved from Canada to the United Kingdom following a promotion, the settled nature of his life was now there, notwithstanding that he retained some ties with Canada relating to the continued presence there of his two children and separated wife, although not of his girlfriend. His return to Canada 21 months later was due to an unexpected acquisition of control of his employer. He was not a resident of Canada during the 21 month period.

The taxpayer, a registered nurse who previously had been a resident of Canada and who was employed in the taxation years in question in the U.S., was found to continue to be a resident of Canada in those years given the connections that she has maintained with Canada (including maintaining her Ontario driver's licence, OHIP coverage, the utilization of the services of a Windsor doctor and dentist, membership in a yacht club and her ties with her husband and two children in the Windsor family home including the provision of support to the children) and the temporary nature of her connections to the U.S. including not entering into a lease or purchasing a home and instead sharing room with a relative or friend.

The taxpayer was not ordinarily resident in Canada in the taxation years in question given that his family was in Canada only because his wife was prohibited (as a result of a law passed by the Kuwaiti authorities following the Gulf war that Jordanian residents were not permitted to return to the country) from returning to Kuwait, his visits to Canada were brief, he owned no home in Canada, his economic focus was in Kuwait and he expected that he would ultimately be successful in obtaining a special dispensation to permit his wife to return to Kuwait.

The central management and control of a company, for purposes of assessing the degree of connection of employment income and dividends generated for native employees and a native shareholder, was found not to be situate on the reserve, notwithstanding the maintenance of a small office there, given that the shareholder and officer managed the company from wherever he was with the assistance of his accountant, who was situate off the reserve.

The taxpayer, who was a pharmacist permanently employed in Taiwan, was found not to have become a resident of Canada notwithstanding that he had entered Canada and applied for permanent residence under the entrepreneurship program and had bought a house in Regina at which his wife and children resided. The taxpayer did not change his life pattern with respect to his continuous employment and social connections in Taiwan (including caring for his parents there and spending over ¾ of his time there); and Mogan TCJ accepted the taxpayer's explanation that the Regina connection had been established in order to have his children educated in North America.

The taxpayer, who was transferred by Exxon from Canada to Malaysia in 1988, and served (and lived in a rented house) there until his retirement in 1995, was found to be resident in Malaysia rather than Canada in his 1989 to 1992 taxation years. Other than two 14-day visits to Edmonton, where his wife continued to stay, he spent the whole time in Malaysia. His wife (with whom he had strained relations) made eight different trips to Malaysia in the years in question. More than half of his salary was deposited on a monthly basis into a bank account he maintained in Canada. However, he took all the steps that one would expect of a person moving to the other side of the world for three years (the minimum length of his posting).

In the summer of 1985, the taxpayer started spending significant time at Elizabeth City in North Carolina in order to manage one of his businesses there, and in October he and his wife bought a house there. They retained their house in Nova Scotia, and spent their summers there during which he was engaged in the affairs of his Canadian businesses. They did not sell their Canadian investments, they kept their Canadian bank accounts and credit cards, did not change their Nova Scotia address for various purposes, and retained their membership in the Nova Scotia medical plan. The taxpayer and his wife were found to be resident in the United States in their 1988 and 1989 years given their permanent home was in Elizabeth City whereas their house in Nova Scotia was leased for the major part of the year, and given that their children were educated in North Carolina and their social and household life was centered on Elizabeth City.

The taxpayer, who was actively involved in selling European art to Japanese clients and spent much of his time travelling between Europe and Japan, was found to be ordinarily resident in Canada in 1987 and 1988 in light inter alia of the following factors: he had strong family ties to Canada; he had an apartment and other personal-use real estate in Canada; he returned to Canada frequently and regularly, and had a right to come to Canada whenever he chose; and it (unlike Japan) was a country whose language he spoke and of which he was a citizen by birth.

The taxpayer, who worked abroad (primarily in Scotland) as a deep-sea diver but who frequently returned to Canada where he had friends and relatives and a relationship that ultimately culminated in a common-law union, was found to be ordinarily resident in Canada.

In finding that the appellant, who was physically present in Canada for 232 days during the four-year period preceding his application for citizenship, did not fulfil the requirement in s. 5(1) of the Citizenship Act of having accumulated "at least three years of residence in Canada" in that four-year period, Reed J. stated (p. 300):

"Some of the appellant's extended family is here, but it is not possible to say that Canada is the main focus of the appellant's family life. The pattern of physical presences in Canada is more consistent with visits to this country rather than demonstrating a return to a place where one regularly, normally and customarily lives."

The taxpayer, who was resident in the U.K., was one of over 100 U.K. resident individuals (primarily members of firms of patent agents) who were partners in a firm which carried on a business of providing a world-wide renewals service for patents, trade marks etc. The day to day business of the partnership was carried on by two managing partners who were resident in Jersey, and general meetings of the partnership were held in Jersey only.

After finding that the partnership was a "body of persons" for purposes of the relevant provisions, the Court went on to find that the partnership was resident in Jersey for purposes of the U.K./Jersey double taxation arrangement. "[T]he correct test of residence for a partnership is the location of management and control."

A trust, of which two of the three trustees were non-residents of the United Kingdom, was held not to be subject to tax under s. 108 of the Income and Corporation Taxes Act 1970, which levied tax "in respect of (a) the annual profits or gains arising or accruing - (i) to any person residing in the United Kingdom from any kind of property whatever".

"In the situation which prevails here, namely that one of the trustees is resident in the U.K. but the other two are resident abroad, the income likewise arises or accrues to all three, but all three cannot be jointly assessed to tax. There can be no justification for assessing to tax the respondent above, on the ground he is resident in the U.K., because the income does not arise or accrue to him personally. He has no right of control over the income."

An English musician, who was advised to protract his intended visit to the U.S.A. to cover an entire fiscal year in order to avoid U.K. tax, and who accordingly departed for the U.S.A. on April 3, 1978 and did not return until May 2, 1979, was held not to be "a person residing in the U.K." for his 1978-1979 fiscal year.

Relying on the Oxford Dictionary's definition of "reside," Lord Chancellor Cave found that the taxpayer's place of residence is the place of the taxpayer's "settled or usual abode." In order to terminate residence in the U.K., the taxpayer must undergo a "distinct break" such that the taxpayer's settled or usual abode is no longer in the United Kingdom (para. 14).

The taxpayer was found to be resident in the U.K., as he spent five months each summer in the U.K., where he received medical attention and engaged in religious and social pursuits.