GIBSON,
J.:—The
appellants
in
these
two
appeals
tried
together
appeal
against
re-assessments
for
income
tax
for
the
taxation
year
1965,
whereby
$27,000
was
added
to
the
income
of
the
appellant
Campeau
and
$30,000
was
added
to
the
income
of
the
appellant
Petritz.
The
issue
is
the
same
in
each,
namely,
whether
these
amounts
are
income
of
the
appellants
respectively
or
their
incorporated
management
companies.
The
relevant
facts
are
as
follows
:
The
appellant
Campeau
was
employed
by
and
owned
shares
in
two
incorporated
companies
named
Depco
Metal
Products
Limited
(herein
called
“Depco”)
and
Hercules
Tool
&
Die
Limited
(herein
called
“Hercules”)
and
the
appellant
Petritz
was
employed
by
and
owned
shares
in
one
only
of
the
said
incorporated
companies,
namely,
Depco.
Depco
and
Hercules
(herein
also
referred
to
as
the
operating
companies)
carried
on
manufacturing
businesses
in
Ontario,
Depeo
making
rolled
metal
products,
auto
trim
and
mouldings,
grilles
and
so
forth,
and
Hercules
making
tools
and
dies,
for
sale
to
the
automobile
manufacturers.
Depco
was
incorporated
in
1963
and
Hercules
in
1949.
Both
were
and
are
financially
successful.
The
appellant
Campeau
caused
a
so-called
management
company
by
the
name
of
Alco
Management
Limited
(herein
called
“Alco”)
to
be
incorporated
on
October
27,
1964;
and
the
appellant
Petritz
also
caused
a
similar
type
of
company
to
be
incorporated
on
November
30,
1964.
Both
were
Ontario
companies
and
the
objects
in
each
were
identical,
namely,
“to
manage
businesses,
properties
and
investments’’.
By
two
agreements
dated
respectively
November
19,
1964
and
Deember
19,
1964
(see
Tabs
5
and
6
of
Exhibit
1),
Campeau
sold
his
shares
in
Depeo
and
Hercules
(along
with
other
assets)
to
his
management
company
Alco,
and
Petritz
sold
his
shares
in
Depeo
(also
along
with
other
assets)
to
his
management
company
Petritz.
The
fiscal
year
end
of
Alco
was
fixed
at
March
31
and
of
Petritz
at
June
30.
(The
fiscal
year
end
of
Depco
was
July
31
and
of
Hercules
April
30.)
Consultant
or
management
agreements
were
entered
into:
(1)
between
Depco
and
Petritz
dated
November
30,
1964,
(2)
between
Depco
and
Alco
dated
October
22,
1964
and
(3)
between
Hercules
and
Alco
dated’
November
19,
1964.
All
of
these
agreements,
however,
were
in
fact
executed
in
1966.
(See
respectively
Tabs
17,
18
and
19
of
Exhibit
1.)
Although
it
was
submitted
in
evidence
and
argument
that
orally
in
September
or
early
October,
1964
there
was
complete
agreement,
I
find
the
reason
these
so-called
consultant
or
management
agreements
were
not
executed
until
the
said
dates,
was
because
their
respective
terms
in
fact
were
not
settled
by
the
parties
until
at
least
June
1966
and
probably
not
until
after
July
28,
1966.
Some
of
the
documentary
evidence
establishing
this
is
set
out
in
the
correspondence
between
the
appellants’
accountant
and.
solicitors.
(Both
appellants
had
the
same
accountant
and
solicitors.)
(See
Tabs
8,
9,
12,
18,
14
and
15
of
Exhibit
1.)
(Only
when
the
terms
of
these
so-called
consultant
or
management
agreements
were
finally
settled
were
they
approved
and
authorized
for
execution
by
the
relevant
companies
and
individuals.)
(See
for
example
in
the
case
of
Depco,
Tab
20
of
Exhibit
1.)
The
admissible,
believable
and
acceptable
oral
evidence
given
at
trial
complements
the
documentary
evidence
establishing
this
and
the
oral
evidence
was
given
by
each
of
the
appellants
and
their
accountant.
This
evidence
establishes
that
the
appellants
did
not
know
what
terms
should
be
included
in
such
agreements
and
relied
on
and
waited
until
their
accountant
and
solicitors
had
settled
the
terms
of
them
and
completed
the
same
so
that
they
personally
could
and
did
execute
them.
Specifically,
this
evidence
establishes
that
no
oral
agreements
incorporating
their
respective
relevant
terms
existed
between
Depco
and
Petritz,
between
Depco
and
Alco
and
between
Hercules
and
Alco,
prior
to
the
dates
of
execution
of
the
said
respective
written
agreements.
The
series
of
adjusting
and
closing
journal
entries,
in
this
case,
made
after
the
ends
of
their
respective
fiscal
years
in
1965
and
1966
in
the
books
of
all
these
companies,
and
the
results
therefrom
carried
into
their
financial
statements
(see
Tabs
21,
22,
23,
24,
25,
26,
28,
29,
31
and
32)
recording,
inter
alia,
loans
made
and
repaid,
commissions
accrued
and
paid,
and
drawings
debited
and
credited,
do
nothing
to
change
the
three
matters
of
fact
which
obtain
as
a
result
of
the
above
finding,
namely,
that
in
the
calendar
year
1965,
(1)
that
there
were
no
oral
or
written
agreements
whereby
and
under
which
the
management
company
Alco
provided
any
service
to
the
operating
companies
Depco
or
Hercules,
or
the
management
company
Petritz
provided
any
service
to
the
operating
company
Depeo;
(2)
that
neither
management
company
otherwise
provided
any
service
to
the
said
respective
operating
companies
;
and
(3)
that
the
appellant
Campeau
never
ceased
to
be
employed
by
Depeo
and
Hercules,
and
the
appellant
Petritz
never
ceased
to
be
employed
by
Depco.
As
a
consequence,
it
is
not
necessary
to
consider
the
question
of
whether
or
not
the
Court,
for
income
tax
purposes,
may
and
should
look
through
the
corporate
entities
of
these
management
companies
for
various
reasons,
such
as
those
based
on
the
submissions
that
these
management
companies
did
not
actually
carry
on
their
own
respective
businesses
but
were
merely
agents
of
the
appellants,
or
that
they
were
shams,
simulacra
or
cloaks
not
intended
to
effect
any
real
relationships
between
and
among
the
relevant
parties.
Such
question
would
require
consideration
of
principles
of
law
that
do
not
arise
in
these
instant
appeals.
(Cf.
Aron
Salomon
v.
A.
Salomon
and
Company,
Ltd.,
[1897]
A.C.
22;
Ralph
J.
Sazio
v.
M.N.R.,
[1969]
1
Ex.C.R.
373;
[1968]
C.T.C.
579;
Snook
v.
London
&
West
Riding
Investments,
Lid.,
[1967]
1
All
E.R.
518
at
528;
Littlewoods
Mail
Order
Stores
Ltd.
v.
McGregor
(Inspector
of
Taxes),
[1968]
3
All
E.R.
685;
[1969]
1
W.L.R.
1241;
The
Palmolive
Manufacturing
Company
(Ontario)
Limited
v.
The
King,
[1933]
S.C.R.
131
;
Aluminum
Company
of
Canada
Limited
v.
The
Corporation
of
the
City
of
Toronto,
[1944]
S.C.R.
267;
C.I.R.
v.
Sansom,
[1921]
2
K.B.
492;
Coleman
C.
Abrahams
(No.
2)
v.
M.N.R.,
[1966]
C.T.C.
694;
Thomas
Lamb
v.
M.N.R.
(1963),
34
Tax
A.B.C.
79;
Reginald
William
Edwards
v.
M.N.R.,
[1969]
Tax
A.B.C.
1069.)
In
the
result,
therefore,
the
sum
of
$15,000
paid
by
Depco
to
Alco
and
the
sum
of
$12,000
paid
by
Hercules
to
Alco
were
income
of
the
appellant
Campeau
in
his
taxation
year
1965
from
an
office
or
employment
within
the
meaning
of
Sections
3
and
5
and
by
virtue
of
Section
16
of
the
Income
Tax
Act
and
were
not
income
of
Alco;
and
the
sum
of
$30,000
paid
by
Depco
to
Petritz
(the
management
company)
was
income
of
the
appellant
Petritz
in
his
taxation
year
1965,
for
similar
reasons,
and
was
not
income
of
Petritz
(the
management
company).
The
appeals
are
dismissed
with
costs.