Brian Strachan (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Heald J.—Toronto, May 29;
Ottawa, June 27, 1973.
Income tax—Residence of employee of Crown corpora-
tion—Whether professional engineer employed by Atomic
Energy of Canada Ltd. an "officer or servant of Canada"—
Income Tax Act, s. 139(3)(c)(î); Atomic Energy Control Act,
R.S.C. 1970, c. A-19, s. 10.
Plaintiff resided in Canada until June 10, 1971, when he
left for India to perform his duties as a professional engineer
employed by Atomic Energy of Canada Ltd.
Held, he was an "officer or servant of Canada" within the
meaning of section 139(3)(c)(i) of the Income Tax Act, and
as such must be deemed to have been a resident of Canada
throughout 1971. Having regard to the provisions of section
10 of the Atomic Energy Control Act, R.S.C. 1970, c.
A-19, Atomic Energy of Canada Ltd. is an agent or servant
of the Crown and the plaintiff as its employee was an
employee of the Crown.
National Harbours Board v. Langelier [1969] 2 D.L.R.
(3rd) 81; Sociedad Transoceanica Canopus v. National
Harbours Board [1968] 2 Ex.C.R. 330, applied; Washer
v. B.C. Toll Highway & Bridges Authority (1966) 53
D.L.R. (2nd) 620, distinguished.
INCOME tax appeal.
COUNSEL:
Stuart Thom, Q.C., for plaintiff.
G. W. Ainslie, Q.C., and B. J. Wallace for
defendant.
SOLICITORS:
Osier, Hoskin and Harcourt, Toronto, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
HEALD J.—This is an appeal from the re
assessment of the plaintiff by the defendant for
the taxation year 1971 on the basis that the
plaintiff was an officer or servant of Canada
within the meaning of section 139(3)(c)(i) of the
Income Tax Act with the consequence that he is
deemed to be a resident of Canada throughout
the taxation year 1971.
The parties agreed that the question of the
plaintiff's residence be set down for hearing
upon an Agreed Statement of Facts pursuant to
section 173(1) of the Income Tax Act (Tax
Reform Edition 1972). The agreed facts may be
summarized as follows:
The plaintiff has been continuously employed
since 1963 as a professional engineer by Atomic
Energy of Canada Limited (hereafter the Com
pany). The plaintiff was resident in Canada until
1971. In April, 1971, the Company appointed
the plaintiff to the post of "Reactor Compo
nents Project/Design Engineer" in respect of
the Rajasthan Atomic Power Project in India.
Such appointment required that the plaintiff
should be located in Bombay and elsewhere in
India for the purpose of performing his duties as
Design Engineer. Accordingly, the plaintiff
departed from Canada on June 10, 1971 and has
not returned. The parties agree that the plaintiff
has not been resident in Canada for income tax
purposes subsequent to June 10, 1971, subject
to the application of section 139(3)(c)(î) of the
Income Tax Act (so far as the 1971 taxation
year is concerned).
Upon the plaintiff commencing said duties in
India, the Company has paid him the following
remuneration:
(a) his normal salary, in respect of which
income tax was deducted;
(b) a field allowance of 25% of his normal
salary, in respect of which no income tax was
deducted;
(c) during the period June 30, 1971 to June
30, 1972, an extra allowance of 9% of his
normal salary, in respect of which no income
tax was deducted; and
(d) a fixed overtime benefit at the rate of
$500.00 per annum, in respect of which
income tax was deducted.
By virtue of the definition of "Public Ser
vice" in section 2(1) of the Public Service Super-
annuation Act, S.C. 1952-53, c. 47 (now
R.S.C. 1970, c. P-36) and Part I of Schedule A
to the said Act, the plaintiff has been treated as
a person employed in the Public Service of
Canada for the purposes of the said Act. The
Company has contributed the required amounts
thereunder for the benefit of the plaintiff and
the plaintiff's contribution has been deducted
from his salary by the Company.
The Company was incorporated under the
provisions of Part I of the Companies Act,
1934, by Letters Patent dated February 14,
1952. The main activities of the Company are
nuclear research and development, the design
and development of nuclear power systems and
the production of radio isotopes and related
equipment. The parties have further agreed that
the plaintiff has at no time been an employee of
the Atomic Energy Control Board (hereafter the
Board).
The parties have agreed that the following
question of law shall be determined by the
Court (paragraph 15 of the Stated Case):
15. The question for the opinion of the Court is whether the
Plaintiff was throughout the taxation year 1971 deemed to
be resident in Canada by reason of the application of
Section 139(3)(c)(i) of the Income Tax Act as it applied to
that year.
The parties agree:
(i) THAT if the Court is of the opinion that the question is
to be answered in the negative the appeal is to be allowed
and the assessment referred back to the Minister of
National Revenue for re-assessment on the basis that the
Plaintiff was not resident in Canada, was not employed in
Canada and was not carrying on business in Canada
subsequent to June 10, 1971;
(ii) THAT if the Court is of the opinion that the question is
to be answered in the affirmative the appeal is to be
dismissed;
(iii) THAT under the provisions of subsection 178(2) of the
amended Income Tax Act and without regard to the
outcome of the appeal the Plaintiff shall be awarded all
his reasonable and proper costs in connection therewith.
The relevant portion of section 139(3)(c)(i) of
the Income Tax Act as it applied to the 1971
taxation year reads as follows:
139. (3) For the purposes of this Act, a person shall,
subject to subsection (3a), be deemed to have been resident
in Canada throughout a taxation year if
(c) he was, at any time in the year,
(i) an ambassador, minister, high commissioner, officer
or servant of Canada, .. .
and he was resident in Canada immediately prior to
appointment or employment by Canada ... or received
representation allowances in respect of the year,
The reference in subsection (3) above to sub
section (3a) has no application to the facts in
this case. The sole question for decision here is
whether the plaintiff is an "officer or servant of
Canada" within the meaning of the above
subsection.
Defendant's counsel, in submitting that said
question should be answered in the affirmative,
submits three basic propositions. His first
proposition is that on the facts of this case, I
should find that the Company is a servant or
agent of the Crown. I have no difficulty in
agreeing with this first submission of counsel, if
for no further reason, than that Parliament has
specifically so stated by section 10(4) of the
Atomic Energy Control Act (R.S.C. 1970, c.
A-19) which reads as follows:
10. (4) A company is for all its purposes an agent of Her
Majesty and its powers may be exercised only as an agent of
Her Majesty.
It is clear to me that the Company in this case is
the kind of Company contemplated in section
10(4) (supra). Mr. Justice Bull of the British
Columbia Court of Appeal considered a similar
situation in the case of Washer v. B.C. Toll
Highway & Bridges Authority (1966) 53 D.L.R.
(2nd) 620 at pp. 626 and 627.
In that case, the B.C. statute in question used
language identical to section 10(4). In that judg
ment, at page 627 thereof, Mr. Justice Bull
quoted with approval the statement. of Denning
L.J. in Tamlin y. Hannaford [1950] 1 K.B.18 at
p. 25 where he said:
When Parliament intends that a new corporation should
act on behalf of the Crown, it as a rule says so expressly....
Mr. Justice Bull thus concluded that the statu
tory body in question was clearly a Crown serv
ant or agent and I adopt his reasoning to reach
the same conclusion in the case at bar.
Defendant's counsel's second proposition is
that, once it has been established that the Com
pany is an agent or servant of the Crown, it
necessarily follows therefrom that the
employees of the Company, such as the plain
tiff, are in fact employees of the Crown. For
me, this is a far more difficult proposition than
the defendant's first proposition and the answer
is not nearly so apparent.
However, I do find support for this proposi
tion in the Supreme Court decision of National
Harbours Board v. Langelier [1969] 2 D.L.R.
(3rd) 81. In that case, Mr. Justice Martland at
page 90 of the judgment states the common law
position that a servant of the Crown cannot be
made liable vicariously for a tort committed by
a subordinate because the subordinate is not his
servant but is, like himself, a servant of the
Crown which, itself, cannot be made liable.
Then, after considering the statutory powers
given to the Board under the National Harbours
Board Act he says at page 93 of the judgment:
The Board was given capacity to contract, but, as it was
an agent of the Crown, it might have been considered,
therefore as contracting on behalf of the Crown.
A similar view of the status of the employees
of the National Harbours Board was expressed
by President Jackett (as he then was) in Socie-
dad Transoceanica Canopus v. National Har
bours Board [1968] 2 Ex.C.R. 330.
On page 331 of the judgment, in referring to
the National Harbours Board, the learned Presi
dent said:
It follows from its status as an agent of Her Majesty, that
when it employs an officer, clerk or employee, as it is
authorized to do by s. 4, the officer, clerk or employee
becomes an officer of Her Majesty.
In the note at the bottom of page 331, the
learned President goes on to say:
The defendant is a statutory corporation that has no
existence except for the \ purposes of the National Harbours
Board Act. By s. 3(2) it is, for all purposes of that Act, an
agent of Her Majesty. It follows that, when it exercises the
power conferred on it by s. 4 to employ officers, clerks and
employees, it does so in its capacity as agent of Her Majes
ty, and the persons so employed therefore become officers,
clerks or employees of Her Majesty. See National Harbours
Board v. Workmen's Compensation Commission (1937) 63
Que. K.B. 388 (per Barclay J. at pages 391-2).
Mr. Justice Gibson also expressed similar
views concerning the status of Air Canada
employees in the case of King v. The Queen
(unreported judgment—Court file No. T-2573-
71 dated November 17, 1971—see pages 5, 17
and 20 thereof).
Turning now to a consideration of the statute
in question in this case, the Atomic Energy
Control Act (R.S.C. 1970, c. A-19), it is neces
sary to refer specifically to section 10, subsec
tions (2), (3), (4), (5) and (6) thereof. Said sub
sections read as follows:
10. (2) The Minister may, with the approval of the Gover
nor in Council,
(a) procure the incorporation of any one or more compa
nies under Part I of the Canada Corporations Act for the
objects and purposes of exercising and performing on
behalf of the Minister such of the powers conferred on
the Minister by subsection (1) as the Minister may from
time to time direct,
(b) assume, by transfer of shares or otherwise, the direc
tion and control of any one or more companies incorpo
rated under Part I of the Canada Corporations Act since
the 15th day of September 1935, all the issued share
capital of which is owned by or held in trust for Her
Majesty in right of Canada except shares necessary to
qualify other persons as directors and may delegate to any
such company any of the powers conferred on the Minis
ter by subsection (1), and
(c) procure the incorporation of any one or more compa
nies under Part I of the Canada Corporations Act for the
purpose of acquiring, holding and exercising, by share
holding or otherwise, control of any one or more compa
nies incorporated pursuant to paragraph (a) or the control
of which is assumed by the Minister pursuant to para
graph (b).
(3) The shares, except shares necessary to qualify other
persons as directors, of the capital stock of a company
incorporated pursuant to paragraph (2)(a) or (c) or the
control of which is assumed by the Minister pursuant to
paragraph (2)(b) shall be owned or held by the Minister, or
by another company, in trust for Her Majesty in right of
Canada.
(4) A company is for all its purposes an agent of Her
Majesty and its powers may be exercised only as an agent of
Her Majesty.
(5) A company may on behalf of Her Majesty contract in
its corporate name without specific reference to Her
Majesty.
(6) Actions, suits or other legal proceedings in respect of
any right or obligation acquired or incurred by a company
on behalf of Her Majesty, whether in its name or in the
name of Her Majesty, may be brought or taken by or against
the company in the name of the company in any court that
would have jurisdiction if the company were not an agent of
Her Majesty.
This Company was incorporated under the
predecessor section to section 10(2)(a). By sub
section (4) of section 10, it is for all its purposes
an agent of Her Majesty and its powers may be
exercised only as an agent of Her Majesty. A
reading of the statute convinces me that it has
no existence except for the purposes of the
Atomic Energy Control Act and that the
rationale of the Sociedad case (supra) and the
Langelier case (supra) apply equally to the sit
uation and the statute here being considered.
Plaintiff's counsel relied on the B.C. Court of
Appeal case of Washer v. B.C. Toll Highways &
Bridges Authority referred to supra.
In that case, the statute being considered was
the British Columbia Toll Highways and Bridges
Authority Act. Said statute did contain (section
4) a section almost identical to section 10(4) of
this statute making the Company for all its
purposes an agent of Her Majesty and providing
that its powers may be exercised only as an
agent of Her Majesty. Said statute also had a
section (9) comparable to section 10(5) in this
statute giving the Company the right to contract
in its own name. However, in that statute the
Company was given additional powers not
present in the statute here being considered. I
refer to section 12 of the British Columbia
statute which empowered the authority to
employ and pay such officers and servants as it
deemed necessary for its purposes.
There is no such provision or authority in the
Atomic Energy Control Act. A careful reading
of the Washer judgment convinces me that the
presence of such a section in the B.C. statute
played an important part in the decision there
that the employees were not servants of the
Crown. At page 627 of the judgment, Bull J.A.
said, for the Court:
Argument was directed to us on this question in different
ways. It was urged that as the appellant was a Crown
servant or agent, its employees must of necessity have that
status inasmuch as their functions and duties must be in
pursuance of the purposes of the appellant which "exer-
cises" its powers "only as agent for Her Majesty" and is
such an agent "for all purposes": s. 4 of the Statute above.
To follow this proposition to its logical conclusion would
mean that the respondent was not the employee of the
appellant at all, but the employee of the Crown engaged by
its agent the appellant. This, of course, is not the case, it
being clear beyond doubt that by virtue of s. 12 of the
Statute the appellant employs and has its own servants as it
deems necessary to carry out its purposes, albeit such
purposes are for the Crown.
From the above paragraph, it is clear to me that
the very ratio of the conclusions of the learned
Justice is based on the presence in the statute of
an express power to hire employees and to pay
them.
In the case at bar, there is no such section. I
attach some significance to this omission as
being further evidence of the intention of Parlia
ment that the employees of this Company must
be considered servants of the Crown. I am
fortified in this view by the fact that it would
have been a very simple matter to include such
a section, having regard to the provisions of the
Government Companies Operation Act (R.S.C.
1970, c. G-7).
Said Act has a section (section 4) giving to a
Government company substantially the same
powers as those given by section 12 of the E.C.
statute.
However, section 6 of the Government Com
panies Operation Act reads as follows:
6. This Act applies to a Company only from the date of
the issue of a proclamation by the Governor in Council
declaring this Act to be applicable to such Company.
and such a proclamation has never been issued
with respect to Atomic Energy of Canada
Limited.
Thus, we have a situation where Parliament
has delegated to the Governor in Council the
power to enable the Company to hire its own
employees and that power has not been exer
cised. To me, this is further evidence of the
Parliamentary intention that these employees,
on the state of the present law, must be consid-
ered as servants of the Crown. This factual
difference, in my view, clearly distinguishes the
case at bar from the Washer case.
I have accordingly concluded that the ques
tion to be determined by the Court as set out in
paragraph 15 of the Stated Case must be
answered in the affirmative. The appeal is there
fore dismissed.
On the question of costs, and pursuant to
section 178(2) of the amended Income Tax Act,
I fix the sum of $1,200.00 to cover all the
plaintiff's reasonable and proper costs, inclusive
of all disbursements.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.