Bonner,
T.C.J.:—At
issue
in
these
appeals
is
the
proper
characterization
of
a
payment
made
by
the
appellant
Len’s
Clothing
and
Furniture
Ltd.
(hereinafter
called
“the
company”)
to
Esther
Broitman,
the
former
spouse
of
the
appellant
Leon
Broitman.
Mr.
Broitman
at
all
relevant
times
owned
all
of
the
issued
shares
of
the
company.
During
part
of
the
marriage
Mrs.
Broitman
assisted
in
the
operation
of
a
retail
business
founded
by
her
husband.
The
marriage
ended
in
divorce
following
which
Mrs.
Broitman
brought
action
in
the
Supreme
Court
of
Ontario
against
her
former
husband
under
section
8
of
the
Family
Law
Reform
Act,
1978
(Ont.),
c.
2,
which
provides
as
follows:
8.
Where
one
spouse
or
former
spouse
has
contributed
work,
money
or
money's
worth
in
respect
of
the
acquisition,
management,
maintenance,
operation
or
improvement
of
property,
other
than
family
assets,
in
which
the
other
has
or
had
an
interest,
upon
application,
the
court
may
by
order
(a)
direct
the
payment
of
an
amount
in
compensation
therefor;
or
(b)
award
a
share
of
the
interest
of
the
other
spouse
or
former
spouse
in
the
property
appropriate
to
the
contribution,
and
the
court
shall
determine
and
assess
the
contribution
without
regard
to
the
relationship
of
husband
and
wife
or
the
fact
that
the
acts
constituting
the
contribution
are
those
of
a
reasonable
spouse
of
that
sex
in
the
circumstances.
Mrs.
Broitman's
claim
rested
on
the
contribution
which
she
had
made
by
her
labour
to
her
husband's
business.
Her
action
was
successful
and
resulted
in
a
judgment
which
directed
that
Mr.
Broitman
pay
to
Mrs.
Broit-
man
the
sum
of
$30,000
together
with
her
costs
which
were
fixed
in
the
amount
of
$3,500.
Mr.
Broitman
caused
the
company
to
pay
to
Mrs.
Broitman
the
full
$33,500
called
for
by
the
judgment.
The
company
sought
to
deduct
the
amount
of
the
payment
in
the
computation
of
its
income
for
the
1982
taxation
year.
The
respondent
in
assessing
the
company's
income
tax
liability
for
the
year
disallowed
the
deduction.
Further,
in
assessing
tax
for
Mr.
Broitman's
1982
taxation
year
the
respondent
included
the
amount
in
the
computation
of
income.
The
assessments
were
made
on
the
basis
of
a
finding
or
assumption
that,
in
making
the
payment
to
Mrs.
Broitman,
funds
of
the
corporation
were
appropriated
for
the
benefit
of
Mr.
Broitman
as
shareholder
within
the
meaning
of
paragraph
15(1
)(b)
of
the
Income
Tax
Act
and
the
outlay
made
by
the
company
was
one
caught
by
the
prohibition
in
paragraph
18(1
)(a)
of
the
Act.
The
position
of
the
appellants
is
set
out
in
the
notices
of
appeal
as
follows:
.
.
.
she
(Mrs.
Broitman)
claimed
and
the
judge
awarded
payment
in
compensation
for
her
services
to
the
corporation
over
a
period
of
years
preceding
the
action.
The
claim
in
question
was
not
a
claim
for
division
of
property
or
for
maintenance
or
for
compensation
for
services
rendered
indirectly
to
Mr.
Broitman.
Rather,
the
claim
was
for
remuneration
for
services
rendered
to
the
company
in
the
course
of
its
normal
business
activities.
Thus,
it
was
said,
.
.
.
the
payment
directed
to
be
made
under
the
said
order
is
in
respect
of
an
outlay
made
by
(the
company)
(compensation
payable
to
an
employee
and
legal
fees
payable
in
defending
the
claim
for
compensation)
properly
deductible
under
paragraph
18(1)(a)
of
the
Act.
Paragraph
15(1
)(b)
of
the
Income
Tax
Act
reads:
15
(1)
Where
in
a
taxation
year
(b)
funds
or
property
of
a
corporation
have
been
appropriated
in
any
manner
whatever
to,
or
for
the
benefit
of,
a
shareholder,
or
the
amount
or
value
thereof
shall,
except
to
the
extent
that
it
is
deemed
to
be
a
dividend
by
section
84,
be
included
in
computing
the
income
of
the
shareholder
for
the
year.
In
M.N.R.
v.
Pillsbury
Holdings
Limited,
[1964]
C.T.C.
294
at
298-99;
64
D.T.C.
5184
at
5186-87,
Catttanach,
J.
considered
the
scope
of
subsection
8(1)
of
the
former
Income
Tax
Act,
predecessor
of
the
present
subsection
15(1).
He
said:
It
is
not
possible,
by
an
analysis
of
the
language
and
function
of
subsection
(1)
of
section
8,
to
find
a
simple
formula
for
determining
in
advance
the
answer
to
all
the
questions
that
will
arise
under
that
subsection.
Each
question
will
have
to
be
solved
as
it
arises.
Nevertheless,
some
consideration
must
be
given
to
the
function
of
this
provision
in
the
Income
Tax
Act
and
to
the
wording
of
the
provision
as
a
whole
in
considering
the
ambit
of
paragraph
(c)
in
relation
to
the
facts
of
this
case.
The
normal
payments
and
distributions
by
a
corporation
to
a
shareholder
qua
shareholder
are
(a)
dividends
during
the
lifetime
of
the
corporation,
(b)
payments
and
distributions
in
respect
of
reductions
in
capital
during
the
lifetime
of
the
corporation,
and
(c)
payments
and
distributions
on
the
occasion
of
the
winding-up
of
the
corporation.
Provisions
in
the
Income
Tax
Act,
other
than
section
8,
govern
the
taxability
of
such
payments
and
distributions
when
made
in
the
orthodox
way.
In
the
remainder
of
this
judgment,
when
referring
to
dividends,
I
intend
to
refer
to
any
of
these
payments
or
distributions
referred
to
in
this
paragraph.
Subsection
(1)
of
section
8
is
aimed
at
payments,
distributions,
benefits
and
advantages
flowing
from
a
corporation
to
a
shareholder
other
than
those
referred
to
in
the
immediately
preceding
paragraph.
While
the
subsection
does
not
say
so
explicitly,
it
is
fair
to
infer
that
parliament
intended,
by
section
8,
to
sweep
in
payments,
distributions,
benefits
and
advantages
that
flow
from
a
corporation
to
a
shareholder
by
some
route
other
than
the
dividend
route
and
that
might
be
expected
to
reach
the
shareholder
by
the
more
orthodox
dividend
route
if
the
corporation
and
the
shareholder
were
dealing
at
arm’s
length.
This
is
true
of
paragraph
(a)
of
subsection
(1).
A
corporation
normally
makes
payments
to
its
shareholders
as
dividends
unless
the
payment
is
pursuant
to
a
bona
fide
business
transaction,
in
which
event
it
is
not
a
payment
accruing
to
the
shareholder
qua
shareholder.
If
a
payment
is
made
to
a
shareholder
qua
shareholder,
paragraph
(a)
requires
that
it
be
brought
into
the
shareholder’s
income
whether
or
not
it
is
made
as
a
dividend.
Similarly,
as
far
as
paragraph
(b)
of
subsection
(1)
is
concerned,
the
normal
method
whereby
a
corporation
appropriates
funds
or
property
to,
or
for
the
benefit
of,
its
shareholders
is
by
a
declaration
of
dividend
payable
in
cash
or
in
kind.
If
funds
or
property
are
appropriated
to
or
for
the
benefit
of
a
shareholder
qua
shareholder
in
any
other
way,
paragraph
(b)
requires
that
they
be
brought
into
his
income.
Thus,
I
must
consider
whether
the
payment
by
the
company
was
in
substance
an
ordinary
business
expense
viz.,
the
cost
of
services
rendered
to
it
in
prior
years,
or
whether
what
was
paid
was
a
personal
obligation
which
rested
on
Mr.
Broitman
as
former
spouse
in
which
case
funds
were
appropriated
within
the
ambit
of
paragraph
15(1)(b)
of
the
Act
as
just
outlined.
The
following
passages
from
the
reasons
for
judgment
of
the
Supreme
Court
of
Ontario
in
the
section
8
action
outline
the
basis
for
the
award
and
thus
assist
in
determining
how
the
payment
should
be
regarded
for
present
purposes.
It
should
be
noted
that
Mrs.
Broitman’s
evidence
was
accepted
by
the
Court
and
that
Mr.
Broitman,
who
gave
evidence
at
the
hearing
of
the
present
appeals,
substantially
confirmed
the
facts
as
set
forth
in
the
passages
which
now
follow.
In
applying
Section
8
of
the
Act,
I
have
in
mind
the
following.
The
onus
is
on
Mrs.
Broitman
to
prove
her
claim
to
distribution
of
a
non-family
asset,
that
is,
her
husband’s
interest
in
the
business
in
this
case,
on
the
balance
of
probabilities;
she
must
prove
that
she
contributed
work
to
the
management,
maintenance,
operation
or
improvement
of
the
business.
I
turn
to
the
first
issue
to
be
decided,
whether
and
to
what
extent
Mrs.
Broit-
man
contributed
“services,
money
or
money's
worth
in
respect
of
the
acquisition,
management,
maintenance,
operation
or
improvement
of
property
in
which
(her
husband)
has
an
interest,"
that
is,
his
interest
in
the
business
of
Len’s
Clothing
and
Furniture
Limited.
Mrs.
Broitman
testified
that
commencing
with
the
marriage
in
1957
it
was
her
practice,
at
the
request
of
her
husband,
to
relieve
him
during
the
lunch
hour
to
permit
him
to
enjoy
a
period
of
relaxation.
She
said
that
she
went
to
the
store
daily,
except
Wednesday
afternoons
when
the
store
was
closed.
On
busy
days
she
went
to
the
store
for
longer
periods
—
Friday,
Saturday,
holidays
and
fall
fair
days.
Her
primary
role
was
to
supervise
the
cash
register,
and
she
also
served
customers,
dressed
the
windows
and
laid
out
merchandise.
As
to
the
first
issue,
the
extent
of
Mrs.
Broitman’s
contribution
to
the
business,
I
find,
on
all
the
evidence
that
she
contributed
her
services
on
a
reasonably
regular
basis
over
the
period
1957
to
1964,
except
for
her
periods
of
pregnancy.
These
services
were
such
as
might
be
performed
by
a
part-time
employee,
not
a
partner
or
manager.
They
consisted
principally
of
relieving
her
husband
during
his
lunch
hour,
and
she
also
helped
at
particularly
busy
periods
on
weekends,
at
Christmas
and
Easter,
and
at
the
fall
festival.
Mrs.
Broitman,
having
made
a
prima
facie
case
that
she
has
not
been
paid
for
her
services,
the
onus
is
on
Mr.
Broitman
to
satisfy
the
court
on
the
balance
of
probabilities
that
he
or
his
company
has
compensated
Mrs.
Broitman
for
her
services.
He
has
not
satisfied
me
that
she
has
been
paid
or
compensated.
One
approach
to
valuing
compensation
is
to
determine
the
extent
to
which
Mrs.
Broitman’s
services
have
contributed
to
the
present
value
of
Mr.
Broitman’s
shares.
On
the
evidence,
I
am
unable
to
determine
that
she
has
made
any
significant
contribution
to
that
value.
.
.
.
the
value
of
Mrs.
Broitman’s
contribution
to
the
business
and
her
husband’s
interest
in
it
is
best
measured
in
this
case
by
reference
to
what
the
company
would
pay
her
for
services
she
performed.
As
to
this
criterion,
the
evidence
is
insufficient
to
enable
me
to
determine
the
wages
that,
over
the
relevant
years,
would
be
appropriate
for
an
employee
who
performed
services
similar
to
those
rendered
by
Mrs.
Broitman.
I
intend,
therefore,
to
allow
the
value
that
Mr.
Broitman,
as
the
principal
of
the
company,
placed
on
those
services
for
income
tax
purposes.
The
company
is
not
a
party
to
these
proceedings.
Mr.
Broitman
is
the
sole
shareholder
and
is
the
directing
mind
of
the
company.
In
a
very
real
sense,
he
owns
and
controls
the
company.
The
business
of
the
company
as
a
going
concern
is
a
marketable
asset.
It
is
a
property
in
which
Mr.
Broitman
has
an
interest
within
the
meaning
of
Section
8
of
the
Act.
In
my
opinion,
that
provision
permits
the
court,
in
the
circumstances
of
this
case,
to
order
him
to
pay
compensation
to
her,
and
I
intend
to
do
so.
Counsel
for
the
appellants
submitted
that
this
is
a
case
of
a
shareholder
being
made
liable
for
an
obligation
which
would
have
fallen
on
the
corporation
had
it
been
a
party
and
had
the
Limitations
Act,
R.S.O.
1980,
c.
240,
not
afforded
the
corporation
a
complete
defence.
He
submitted
that
this
case
should
be
decided
on
the
basis
of
“the
underlying
reality”.
In
reality,
he
said,
work
was
done
for
the
corporation
by
Mrs.
Broitman.
She
was
not
paid
for
it
and
in
consequence
she
recovered
judgment
on
what
was
in
effect
a
quantum
meruit
basis.
The
litigation,
counsel
argued,
was
con-
cerned
not
with
the
division
of
property
between
spouses
or
former
spouses
but,
rather,
with
the
obligation
of
the
company
to
pay
for
services
rendered
to
it.
A
few
features
of
the
reasons
for
judgment
should
be
highlighted
in
order
to
analyse
the
award
for
present
purposes.
Firstly,
the
issue
was
seen
by
the
Court
to
be
the
extent
of
the
contribution
made
by
Mrs.
Broitman
to
property
in
which
her
husband
had
an
interest.
Next,
the
corporate
veil
was
pierced
in
order
to
identify
that
property
as
Mr.
Broitman’s
interest
in
a
business
which,
technically
speaking,
belonged
to
and
was
operated
by
the
appellant
company.
Finally,
the
amount
which
the
company
might
have
paid
to
Mrs.
Broitman
for
her
services
served
as
a
yardstick
only
in
the
measurement
of
the
value
of
Mrs.
Broitman’s
contribution
to
what
was
seen
to
be
her
husband’s
property,
namely,
his
interest
in
the
business.
The
award
made
was
not
a
direction
to
the
company
to
pay
Mrs.
Broitman
for
her
services.
Mrs.
Broitman’s
cause
of
action
can
be
placed
in
context
by
further
reference
to
the
Family
Law
Reform
Act,
1978.
The
preamble
to
the
statute
is
as
follows:
WHEREAS,
it
is
desirable
to
encourage
and
strengthen
the
role
of
the
family
in
society;
AND
WHEREAS
for
that
purpose
it
is
necessary
to
recognize
the
equal
position
of
spouses
as
individuals
within
marriage
and
to
recognize
marriage
as
a
form
of
partnership;
AND
WHEREAS
in
support
of
such
recognition
it
is
necessary
to
provide
in
law
for
the
orderly
and
equitable
settlement
of
the
affairs
of
the
spouses
upon
the
breakdown
of
the
partnership;
.
.
.
The
origin
of
section
8,
the
provision
invoked
by
Mrs.
Broitman,
is
described
in
Fisher
v.
Fisher,
(1978)
21
O.R.
(2d)
105
at
110-11,
by
Grange,
J.
as
follows:
This
section
had
its
origins
in
s.
1(3)(c)
of
the
Family
Law
Reform
Act,
1975,
(Ont.),
c.
41,
repealed
by
s.
78
of
the
1978
Act.
The
1975
section
reads
as
follows:
1(3)
Without
limiting
the
generality
of
subsections
1
and
2
(c)
except
as
agreed
between
them,
where
a
husband
or
wife
contributes
work,
money
or
money’s
worth
in
respect
of
the
acquisition,
management,
maintenance,
operation
or
improvement
of
a
property
in
which
the
other
has
or
had
a
property
interest,
the
husband
or
wife
shall
not
be
disentitled
to
any
right
to
compensation
or
other
interest
flowing
from
such
contribution
by
reason
only
of
the
relationship
of
husband
and
wife
or
that
the
acts
constituting
the
contribution
are
those
of
a
reasonable
spouse
of
that
sex
in
the
circumstances;
The
section
was
prompted
by
the
decision
of
the
Supreme
Court
of
Canada
in
Murdoch
v.
Murdoch,
[1975]
1
S.C.R.
423,
41
D.L.R.
(3d)
367,
13
R.F.L.
185.
There
the
majority
held
that
although
the
wife
had
made
contribution
in
work
to
her
husband’s
ranch
there
was
no
common
intention
that
she
was
to
have
a
beneficial
interest
therein
and
accordingly
her
claim
thereto
had
to
be
dismissed.
In
so
doing
they
relied
upon
the
finding
of
the
trial
Judge
that
the
work
of
the
wife
was
“the
work
done
by
any
ranch
wife”.
Laskin,
J.,
dissented.
He
found
the
work
of
the
wife
to
have
been
substantial
and
he
found
also
some
indirect
financial
contributions.
He
summed
up
his
views
at
pp.
456-7
S.C.R.,
p.
389
D.L.R.,
as
follows:
In
making
the
substantial
contribution
of
physical
labour,
as
well
as
a
financial
contribution,
to
the
acquisition
of
successive
properties
culminating
in
the
acquisition
of
the
Brockway
land,
the
wife
has,
in
my
view,
established
a
right
to
an
interest
which
it
would
be
inequitable
to
deny
and
which,
if
denied,
would
result
in
the
unjust
enrichment
of
her
husband.
He
would,
therefore,
have
declared
the
wife
entitled
to
an
interest
in
the
ranch.
The
differing
decisions
in
Murdoch
seem
to
me
to
have
been
largely
the
result
of
differing
views
of
the
facts,
but
nevertheless
I
believe
the
intention
of
the
Legislature
in
both
the
Acts
of
1975
and
1978
was
twofold;
first,
to
renounce
the
“ordinary
ranch
wife”
test
espoused
by
the
majority
in
Murdoch
so
that
a
spouse
does
not
become
disentitled
to
any
right
or
interest
solely
because
of
the
marriage
relationship
and,
secondly,
to
adopt
the
above-quoted
proposition
of
Las-
kin,
J.,
that
contributions
including
those
which
are
not
direct
financial
contributions
(i.e.,
“work”,
or
“money’s
worth”)
may,
in
certain
circumstances,
create
an
interest
in
property.
The
relationship
of
section
8
to
the
rest
of
the
statute
was
considered
by
Laskin,
C.J.C.
in
Barbara
Anne
Leatherdale
v.
Douglas
Gordon
Leatherdale,
[1982]
2
S.C.R.
743
at
759-760;
142
D.L.R.
(3d)
193
at
205-6,
as
follows:
Section
8
has
a
separate
purpose
from
that
of
s.
4.
It
deals
with
non-family
assets
or
with
the
residuum
thereof
should
any
order
be
made
under
subs.
6
and
provides
a
means
for
the
determination
of
the
relative
proprietary
interests
of
the
spouses
in
assets
classed
as
non-family
assets.
The
relative
interests
must
be
determined
on
the
basis
of
degree
of
contribution
made
in
work,
money,
or
money’s
worth
in
respect
of
the
acquisition,
management,
maintenance,
operation
or
improvement
attributable
to
the
respective
spouses.
Such
contribution
may
not
be
based
upon
the
considerations
mentioned
in
s.
4(6)(b)(ii)
which
are
subsumed
in
the
determination
of
the
equitable
division
under
s.
4.
Section
8
may
be
invoked
at
any
time,
not
only
on
dissolution
or
break-up
of
marriage,
and
can
settle
the
ownership
of,
or
title
to,
assets,
not
on
the
basis
of
the
marriage
relationship
but
on
the
simple
basis
of
contribution
of
the
parties
without
regard
to
the
fact
of
marriage.
[Emphasis
added.]
In
light
of
the
foregoing
the
award
to
Mrs.
Broitman
should
in
my
view
be
regarded
as
an
award
directed
to
be
made
by
one
member
of
a
“matrimonial
partnership”
to
another
in
the
course
of
“the
determination
of
the
relative
proprietary
interests
of
the
spouses”
to
certain
assets.
The
Court
did
not
award
payment
for
services
rendered
but,
rather,
used
the
value
of
those
services
in
order
to
measure
the
share
of
non-family
assets
which
Mrs.
Broitman
might
recover
from
her
husband
as
spouse.
The
payment
cannot
therefore
be
viewed
as
an
amount
laid
out
for
the
purpose
of
gaining
or
producing
income
from
the
business
of
the
company.
It
must
be
viewed
as
involving
an
appropriation
to
Mr.
Broitman
of
the
assets
of
the
company
to
discharge
a
liability
imposed
on
him
as
former
spouse.
For
the
foregoing
reasons
I
cannot
find
that
the
assessments
are
wrong.
The
appeals
will
therefore
be
dismissed.
Appeals
dismissed.
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