IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Mandrusiak v. Canada (National Revenue),

 

2007 BCSC 1418

Date: 20060531
Docket: L051824
L051825
L051826
Registry: Vancouver

Between:

John Mandrusiak

Appellant

And

Her Majesty the Queen in Right of the Province of British Columbia

Respondent


Before: The Honourable Mr. Justice Sigurdson

Oral Reasons for Judgment
May 31, 2007

Counsel for the Appellant:

J.A. Nitikman

Counsel for the Respondent:

E. Douglas
J. Gibb-Carsley

Date and Place of Trial:

March 22-23, 2007

May 14, 2007

 

Vancouver, B.C.

[1]                THE COURT:

INTRODUCTION

[2]                The Minister of National Revenue concedes that for the tax years 2000, 2001 and 2002, the appellant, John Mandrusiak, was resident in Alberta.  The Minister contends that Mr. Mandrusiak was also resident in British Columbia, something Mr. Mandrusiak disputes.  If he was resident in both provinces, which I find to be the case, the issue in this appeal becomes whether, pursuant to the federal Income Tax Regulations, C.R.C., c. 945, s. 2607 (“Regulation 2607”), he was principally resident in British Columbia or in Alberta.

[3]                The Minister assessed Mr. Mandrusiak as if he was principally resident in British Columbia, and this case is an appeal of those assessments.

[4]                The statutory framework for this case is as follows.  Section 2(1) of the Alberta Income Tax Act, R.S.A. 2000, c. A-26 (“AITA”):

2(1)      An income tax shall be paid as hereinafter required for each taxation year by every individual,

(a)        who was resident in Alberta on the last day of the taxation year….

[5]                Similarly, s. 2(1) of the British Columbia Income Tax Act, R.S.B.C. 1996, c. 215 (“BCITA”) provides:

2(1)      An income tax must be paid as required in this Act for each taxation year by every individual

(a)        who was resident in British Columbia on the last day of the taxation year….

[6]                Regulation 2607 contemplates the possibility of a person being resident in both British Columbia and Alberta on the last day of the year.  The parties agree that in those circumstances, by reason of operation of s. 1(4) and 1(5) of the BCITA, Regulation 2607 applies, which reads:

2607.   Where an individual was resident in more than one province on the last day of the taxation year, for the purposes of this Part, he shall be deemed to have resided on that day only in that province which may reasonably be regarded as his principal place of residence.

[7]                The first question is whether Mr. Mandrusiak was resident at all in British Columbia on the last day of the tax year for each of years 2000, 2001 and 2002.  If he was not, then the appeal must succeed as there is no need to resort to Regulation 2607 to determine his principal place of residence.

[8]                The test for ordinary residency has been described in Thomson v. Minister of National Revenue (1946), 2 D.T.C. 812 (S.C.C.).  In Thomson at 815, Justice Rand held that “ordinarily resident” means “residence in the course of the customary mode of life of the person concerned”.  He said:

… in common parlance 'residing' is not a term of invariable elements, all of which must be satisfied in each instance.  It is quite impossible to give it a precise and inclusive definition.  It is highly flexible, and its many shades of meaning vary not only in the contexts of different matters, but also in different aspects of the same matter.  In one case it is satisfied by certain elements, in another by others, some common, some new.

[9]                In that same case, Justice Estey commented on the meaning of “ordinarily resident” at 813:

… one is 'ordinarily resident' in the place where in the settled routine of his life he regularly, normally or customarily lives.  One 'sojourns' at a place where he unusually, casually or intermittently visits or stays.  In the former the element of permanence; in the latter that of the temporary predominates.  The difference cannot be stated in precise and definite terms, but each case must be determined after all of the relevant factors are taken into consideration….

[10]            If the issue gets to the question of principal place of residence, the parties do not dispute the test of principal residence.  It was stated this way by the appellant in his argument:  “Principal” (as in principal residence) means “chief, primary, most important.”  This is a qualitative test based on all of the relevant factors.

[11]            Therefore, I must determine if Mr. Mandrusiak was resident in British Columbia on the last day of each of the years 2000-2002, and if so, whether British Columbia or Alberta was his principal residence.  With that background, let me set out some of the basic facts.

FACTS

[12]            Mr. Mandrusiak married his wife Susan in 1958.   He is 75 years old, was born in Alberta, grew up there, was educated in Alberta, and raised his family there.  They have two sons, Robert born in 1961 and Dale born in 1959.

[13]            On August 27, 1980, Mr. Mandrusiak and his wife jointly purchased the land on which they have a home and presently run a 1,000 acre farm near Chipman, Alberta.  Mr. Mandrusiak’s two sons and extended family reside in Alberta. 

[14]            Mr. Mandrusiak is a chartered accountant by profession.  He has worked for many years for Ledcor Corporation, initially in Alberta.  In 1987 after Mr. Mandrusiak had worked for Ledcor for twenty-five years in Alberta, Ledcor asked him to work in British Columbia as an employee for its new office which was opening in British Columbia.  In December 1987, he and his wife purchased a house in West Vancouver, which they continue to own to this day.  I find that Mr. Mandrusiak expected to live in the Vancouver area and work for two or three years, but his work has continued beyond that original anticipated timeframe.

[15]            Since 1987, Mr. Mandrusiak has maintained the home in British Columbia and a home at the farm in Chipman, Alberta.  Mr. Mandrusiak retired as an employee of Ledcor at the end of 1997, and subsequently worked as a consultant to Ledcor and its affiliated company, later known as 360 Networks.  His consulting duties required him to work in British Columbia and also to travel extensively outside British Columbia.  In 2000 he consulted for 130 days (110 days in BC), in 2001 4.5 days, and no days in 2002. 

[16]            In the years in question (2000-2002), Mr. Mandrusiak lived in both houses, in Alberta and British Columbia.  The evidence is clear that invariably Mr. and Mrs. Mandrusiak, together with their extended family, spent Christmas and New Year’s Eve at the farm in Chipman.  This is a fact that Mr. Nitikman says is particularly significant on the first issue of where Mr. Mandrusiak was resident on the last day of each year. 

[17]            Starting in 1978, Mr. Mandrusiak owned and operated his own farm in Alberta.  From 1993 to 1999 he was assessed as being a restricted farmer, that is that Mr. Mandrusiak was a bona fide farmer, but that his chief source of income was not farming or some combination of farming and some other income.  This restricted the deductions he could make against losses from his farm.  From 2000 onwards, the Minister assessed Mr. Mandrusiak as an unrestricted farmer, that is that his chief source of income was farming, or some combination of farming and some other income, and as a result from 2000 onwards Mr. Mandrusiak could deduct the total loss from his farm. 

[18]            Although the evidence is not precise, I find as a fact that in the years in question, Mr. Mandrusiak spent slightly more time in British Columbia than in Alberta.  Some of the evidence on this question was as follows.  Mr. Mandrusiak’s evidence was that he spent four months in Alberta plus three weeks at Christmas and New Years, plus a few other weeks.  His son Robert at some point said that he thought it was six months or more in Alberta, although he did not keep any records.  Mrs. Mandrusiak did not give evidence on this point but she herself spent about seven months in each of the years in question in Alberta.  I have examined the evidence of the credit card use and the other evidence, and taken with the evidence of the witnesses, I think it is fair to say that in the years in question, Mr. Mandrusiak spent in the range of five months in Alberta and about seven months, less holidays outside the country, in British Columbia.  In other words, Mr. Mandrusiak spent slightly more time in British Columbia than in Alberta.  I note that neither counsel suggested that the number of days spent in either location was determinative on the issue of principal place of residence, although it is a factor to take into consideration.

[19]            Mr. Mandrusiak had access to motor vehicles in both British Columbia and Alberta, but he never registered a vehicle in British Columbia or held a British Columbia driver’s licence, and had at all relevant times several vehicles registered to him in Alberta and held an Alberta driver’s licence. 

[20]            Mr. Mandrusiak had a British Columbia Care Card for healthcare since 1988.  He and his wife attended churches in both Alberta and British Columbia.  They made charitable donations in both places.  They received bills and financial documents at both locations, although more in BC. 

[21]            In 1996 the appellant and his wife purchased burial plots in Alberta

[22]            The first issue is whether Mr. Mandrusiak, acknowledged to be an Alberta resident, is also a resident in British Columbia.  The law is clear that a person can be resident in more than one place.  For example, in Thomson at 813, Justice Estey said:

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.

[23]            I think the issue in this case is, irrespective of Mr. Mandrusiak’s ties to a second jurisdiction, whether on December 31 of the years 2000, 2001 and 2002 he was resident in British Columbia.  I think that he was.  Each year he spent a good deal of time in British Columbia.  He worked as a consultant in British Columbia; owned a home in the Lower Mainland that was available and used for his occupancy; was using that address for receiving and organizing his financial documentation; had use of a vehicle in the Lower Mainland; he was medically insured in British Columbia; he attended church in British Columbia; and made day to day purchases and charitable donations in British Columbia.  I accept the submission of the Minister that Mr. Mandrusiak, even if he spent the last day of the years in question in Alberta, as he did, he nevertheless had a connection with British Columbia sufficient also to be a resident of British Columbia.  However, the more difficult question, and the real issue in this trial, I think, is where was Mr. Mandrusiak’s principal place of residence.

[24]            The issue is what is reasonably regarded as Mr Mandrusiak’s principal place of residence.

[25]            I accept the submission that the test for principal residence is a qualitative test based on all of the relevant factors and in this context means:  “chief, primary, most important”.  This involves a consideration of the appellant’s social and economic ties to the two jurisdictions.  The parties were ad idem that there were many facts and factors to be considered in reaching the proper conclusion on principal place of residence. 

[26]            The Crown argues that the appellant chose to spend most of his time in British Columbia and carrying on with his daily living and regular mode of life in British Columbia was the appellant’s norm, and when coupled with his significant income in 2000 from head office in Vancouver, that his financial documents were sent to Vancouver, his bills were paid from here and he was medically insured here makes it clear, the Crown argues,  that the appellant’s principal place of residence was British Columbia during the years in question, or at least the first of the three years. 

[27]            I agree that the fact that Mr. Mandrusiak spent more time in British Columbia each year is important and the fact that he worked for 110 days in British Columbia in 2000 is also important but I think that evidence must be considered in light of all of the evidence, particularly the history of his connection to each province and the context in which he came to British Columbia and resided there in 2000 and the following two years.  I think that background is important in understanding where his principal place of residence was in those particular years in question.

[28]            Mr. Mandrusiak, now 75, was born and raised in Alberta and always had a home there.  He was educated there, he raised his family there and he worked there for many years.  His reason to go to BC was work related and he ended up being there longer and springing more roots than I find that he originally expected but his connection with Alberta as a place of residence remained strong and always continued. 

[29]            Although he bought a home in BC in 1987, he had a home in Alberta for much longer, since 1980, and that has continued.

[30]            I think that the residence of one’s dependents and extended family is some indication of where a person’s principal residence may be when he is a resident in two places.  Mrs. Mandrusiak, importantly, is an Alberta resident and spends about seven months of each year in Alberta.  The appellant’s family is all in Alberta:  his sons lived there as did his mother and his grandchildren at the relevant time.  His son Robert lived on the farm and received an allowance.  I think that this points to Alberta as his principal place of residence and supports the argument of the appellant that even if he worked in BC and had a residence in BC, he never gave up his principal residence in Alberta.

[31]            I agree with Mr. Nitikman that in determining the question of principal place of residence, the existence of a home, the usual residence of a taxpayer’s spouse and the residence of children and extended family are important factors and in this case I think that they point to Alberta.

[32]            There are many other factors, perhaps not as significant, which must be considered as part of the overall consideration. 

[33]            Mr. Mandrusiak attended church in both provinces but the evidence I find shows that his social contacts were stronger in Alberta than in British Columbia.

[34]            I think that the fact that the appellant had his mail with bills to be paid monthly sent to his British Columbia address is a factor but in all of the circumstances I do not find that that in itself is a factor of significant weight. 

[35]            There was evidence lead of the appellant’s financial connection with the two provinces.  There are a number of aspects to this evidence.  Mr. Mandrusiak owns real property in each province.  Although he received significant income from his employment in British Columbia in 2000, he became assessed as a full time or unrestricted farmer on a substantial farm, which suggests a greater and growing attachment to Alberta since his retirement as an employee from Ledcor.  He continues to operate that farm in Alberta with his son. The appellant was the beneficiary of the Sherwood Trust which was created in Barbados and on December 29, 2000 was imported to Alberta and had assets of just under $29 million.  There is another trust as well and the records of it are in Alberta.  Mr. Mandrusiak continued to be a director of companies, some registered in Alberta and some in British Columbia.  As Mr. Nitikman noted, Mr. Mandrusiak’s RRSP, his pension plan, his family holding company and the trust are located in Alberta, although the assets are largely shares of Ledcor, the head office of which is in British Columbia. 

[36]            From my review of the evidence, it is clear that there are factors that point in each direction.  Having considered all of the factors that I have set out and having considered all of the evidence as a whole, I have concluded that of the two places of residence, Alberta was his chief or more important place of residence and that Alberta was his principal place of residence for the years 2000, 2001 and 2002.  In other words, I conclude that Alberta may reasonably be regarded as Mr. Mandrusiak’s principal place of residence for those years. 

[37]            Accordingly, for these reasons, the appeal is allowed. 

[38]            I wish to thank both counsel for their thorough and helpful submissions.

“J.S. Sigurdson J.”
The Honourable Mr. Justice J.S. Sigurdson