Tax Treaty Case: Black v. The Queen, 2014 TCC 12

By Robert Robillard - 24 March 2015

This blogpost originally appeared on

In Black v. The Queen, 2014 TCC 12 (CanLII):

“[1] This a determination of the following question of law made pursuant to section 58 of the Tax Court of Canada Rules (General Procedure):

Whether, in view of the Canada-United Kingdom Income Tax Convention (1978) and the Canada-United Kingdom Income Tax Convention Act (1980) the Minister of National Revenue (“Minister”) may assess tax against the applicant on the basis that he was a resident of Canada for purposes of the Income Tax Act on any of the items described in subparagraphs 5(i) to (vi) and subparagraph 5(viii) of the Amended Amended Notice of Appeal.”

The analysis of Article 4 of the Canada‑U.K. Tax Convention is very interesting (reproduced in part below).

“[18] The Vienna Convention, at Article 31(1), provides that:

[a] treaty shall be contemplated in good faith in accordance with ordinary meaning to be given to the terms of the treaty in their content and in the light of its object and purpose.

[19] Iacobucci, J., speaking for the Supreme Court in The Queen v. Crown Forest Industries Limited et al. (“Crown Forest”),[6] declared that “in interpreting a treaty, the paramount goal is to find the meaning of the words in question. This process involves looking into the language used and the intention of the parties.” The Court, with approval, referred to Addy, J.’s comments in J.N. Gladden Estate v. The Queen:[7]

Contrary to an ordinary taxing statute a tax treaty must be given a liberal interpretation with a view to implementing the true intentions of the parties. A liberal or legalistic interpretation must be avoided when the basic object of the treaty might be defeated or frustrated insofar as the particular item under consideration is concerned.

[20] In Crown Forest, Iacobucci J. turned to extrinsic materials in order to help “illustrate and illuminate the intentions of the parties”[8]. Such materials include other international tax conventions, the OECD Model Convention and its commentaries, technical explanations that accompany treaties and academic commentary. Even commentaries adopted later may be relied on to interpret a tax treaty[9]. He also referred to Articles 31 and 32 of the Vienna Convention.

[21] In Swantje v. R.[10] the Federal Court of Appeal cautioned that the approach in interpreting a treaty and the Act cannot be a purely mechanical one but must be a functional one, where the scheme must be considered as a whole; one must take into account the intent of the legislation, its object and spirit and what it actually accomplishes. This is similar to the Supreme Court’s view in Stubart Investments Ltd. v. The Queen[11] where the Court approved E.A. Driedger’s succinct description of interpretation of statutes:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament[12].

[22] When interpreting the Convention and its interaction with the Act, I must adopt a liberal and purposive approach not a mechanical approach. I must look to the plain language of the treaty and to the intent of the parties.

Article 4

[23] The object and purpose of the Convention is what is announced in its title: to avoid double taxation[13]. But, as David Ward explains, over the years many countries, including Canada, have adopted in their internal law relieving provisions to eliminate or substantially reduce double taxation by credit, or exemption, or both. The result, according to Mr. Ward is that the principal purpose today of a tax treaty, at least from Canada’s perspective, would seem to be the allocation of the taxing power between the country of the income’s source and the taxpayer’s country of residence[14].

[24] Article 4 defines the term “resident of a Contracting State” for the purposes of the Convention. The parties agree that, in accordance with the “tie breaker” rule in Article 4(2)(a) of the Convention, in 2002 the applicant resided in the U.K. “for the purposes of the Convention”. At the same time, the respondent argues that, in 2002, the applicant was a resident of Canada for the purposes of Part I of the Act. The applicant claims that, if the respondent is correct, then there is an inconsistency between the applicant being a resident of Canada for the purposes of the Act and a resident of the U.K. for purposes of the Convention. It is the applicant’s position that, by virtue of subsection 30(2) of the Convention Act, the Convention prevails: the applicant was a non‑resident of Canada in 2002 for the purposes of the Act.

[25] The meaning of the word “purposes” in Article 4 may assist in understanding whether a conflict exists. The word “purpose” is defined, in part, in The Shorter Oxford English Dictionary[15]:

1. The object which one has in view … 3. The object from which anything is done or made, or for which it exists; end, aim …

In the French language, the word “sens” means:

2. Ce qu’un signe (notamment un signe de language) signifie … 3. Donner, fixer le sens d’un mot.[16]

[26] Whenever the term “resident of a Contracting State” is found in the Convention, it is the person defined as such in Article 4 who is “a resident of a Contracting State” as far as the Convention is concerned. The dictionary definitions of “purpose” and “sens” stress a particular object, in the case at bar, the object of the definition being the Convention itself, nothing else. There is no suggestion of inconsistency. The words “purpose” and “sens” in Article 4 conforms with the meaning that could only have been the intention of the parties who drafted the Convention.

[27] Article 4 determines whether or not a taxpayer who is resident of Canada and the U.K. is eligible for relief under the Convention as a resident of either the U.K. or Canada. On a plain language reading of Article 4, I cannot find any inconsistency between being a resident of Canada for the purposes of the Act and a resident of the U.K. for the purposes of the Convention.

[28] I know of no authority to the effect that once a person is deemed by the Convention to be a resident of the U.K. for the purposes of the Convention that person ceases to be a resident of Canada for the purposes of the Act. Whether a person is a resident of Canada for purposes of the Act is a question of fact. That a person deemed by the Convention to be resident of the U.K. is “ipso facto” a resident of the U.K. and a non‑resident of Canada for purposes of the Act, as argued by the applicant, is not only a non sequitur but also wrong. Such a conclusion reflects a mechanical approach to the interpretation of the Convention and goes far beyond the intention of the Convention.

[29] I cannot find an inconsistency between the Convention and the Act in the language used and the intention of the drafters of the Convention, the Convention Act. The provisions of the Convention and the Act can work side by side without conflict or contradiction. For example, it is clear that if an income or capital item is not provided for in the Convention, Canada’s authority to tax that item is not restricted by the Convention.”

The complete case is available here. Et en français sur ce lien.

Black v. The Queen, 2014 TCC 12 (CanLII)

Black c. La Reine, 2014 CCI 12 (CanLII)

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at”

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.