Gibson,
J:—As
of
November
1,
1966
the
respondent,
Gordon
W
Pannell,
owned
about
31%
of
the
capital
stock
of
Roto-Tone
Gravure
Services
Limited,
the
balance
being
owned
by
three
other
persons.
Roto-Tone
Gravure
Services
Limited
is
a
private
company
incorporated
under
The
Corporations
Act
of
Ontario
and
apparently
there
was
no
agreement
among
the
shareholders
in
relation
to
the
shares
in
the
event
they
or
any
of
them
wished
to
sell
their
respective
shares
or
a
majority
of
the
shareholders
wished
the
minority
shareholders
to
retire
or
get
out
of
the
company.
Prior
to
that
date,
these
three
other
persons
had
decided
to
take
action
in
an
attempt
(in
which
they
were
successful)
to
force
the
respondent
out
of
the
company
for
reasons
that
are
irrelevant
to
this
appeal.
They
made
him
an
offer
to
purchase
his
shares
for
about
$106,000.
The
respondent
made
a
counter-offer
and,
after
negotiations,
the
contracts
dated
November
1,
1966
were
entered
into
whereby
the
respondent
received
$76,000
for
his
shares
in
the
company,
a
certain
cash
bonus
that
would
normally
have
been
due
him,
a
weekly
salary
to
the
end
of
1966
and
a
contract
for
consulting
services
for
a
fee
of
$15,000
per
year
for
five
years
commencing
with
the
year
1967.
It
is
the
payment
of
one
of
these
so-called
“fees”
of
$15,000
in
the
taxation
year
1967
of
the
respondent
that
is
the
subject
matter
of
the
issue
herein.
The
contracts
were
carried
out.
In
the
evidence,
there
was
some
suggestion
that
only
part
of
the
consulting
services
that
actually
were
rendered
during
the
taxation
year
1967
was
bona
fide.
(In
this
connection,
the
respondent
agrees
that
part
was
bona
fide.)
As
to
the
part
that
was
allegedly
not
bona
fide,
there
was
some
suggestion
that
letters
were
prepared
and
delivered
and
subsequently
answered
by
the
respondent
which
were
a
charade
in
the
sense
that
they
constituted
a
pretence
and
did
not
relate
to
consulting
services
earnestly
asked
for
and
received.
The
respondent
in
his
reply
pleaded
at
paragraphs
5(h)
and
(i)
as
follows:
(h)
The
said
two
agreements
do
not
reflect
the
true
nature
and
effect
of
the
agreement
between
the
Respondent
on
the
one
hand
and
Roberts,
Thorn
and
Raymond
on
the
other
hand,
nor
do
they
reflect
the
real
intention
of
the
parties
to
the
said
agreements.
(i)
It
was
never
the
real
intention
of
any
of
the
parties
to
the
said
agreements
that
the
Respondent
should
render
any
services
whatever
to
the
company
at
any
time
after
November
1,
1966
nor
that
he
should
receive
any
remuneration
for
services.
It
is
admitted
that
all
the
parties,
that
is,
the
Company
Roto-Tone
Gravure
Services
Limited
and
its
shareholders
including
the
respondent,
knew
they
were
executing
contracts
as
a
result
of
which
the
respondent
would
receive
payments
on
capital
account
and
five
payments
of
$15,000
on
income
account.
It
is
also
admitted
in
argument
that
the
contracts
which
were
entered
into
by
the
relevant
parties
hereinbefore
referred
to,
were
binding
on
all
the
parties
at
all
material
times
and
that
at
no
time
would
any
party
thereto
have
been
successful
in
setting
aside
or
amending
such
contracts
during
their
currency
or
now,
if
any
action
was
taken
in
the
ordinary
courts
for
such
purpose.
It
is,
however,
submitted
by
the
respondent,
among
other
things,
(and
as
the
least
desirable
alternative)
that,
notwithstanding
the
above,
for
income
tax
purposes
the
assessment
should
be
referred
back
for
reassessment
to
determine
the
quantum
of
the
$15,000
in
the
year
1967
that
should
be
ascribed
to
bona
fide
consulting
services,
the
respondent
submitting
that
the
total
should
not
be
so
ascribed,
in
conformance
with
his
said
pleas
in
his
reply
above
quoted.
After
a
careful
consideration
of
the
whole
of
the
evidence,
and
of
the
submissions
of
counsel,
I
am
of
the
view
that,
notwithstanding
the
said
charade
in
respect
to
certain
of
the
letters
of
request
and
reply
for
consulting
services,
this
is
not
a
case
where
the
evidence
establishes
that
the
Court
should
make
any
findings
of
fact
for
income
tax
purposes
different
or
contrary
to
the
expressed
intention
of
the
parties
in
the
said
contracts,
and
as
carried
out.
Accordingly,
the
appeal
is
allowed”,
but
under
the
circumstances
without
costs.
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