Source: http://isthatlegal.ca/index.php?name=Partnerships
Timestamp: 2019-04-19 14:20:03+00:00

Document:
Partnerships, while having a common law component, are basically now creatures of statute as most features of partnership are now codified by provincial Partnerships Acts.
Ontario's Partnerships Act is linked here.
 This brings us to partnerships generally. British Columbia’s Partnership Act is modeled on the U.K. Partnership Act 1890 (Alison R. Manzer, A Practical Guide to Canadian Partnership Law (loose-leaf), at p. 1-2). Section 1 states that “‘firm’ is the collective term for persons who have entered into partnership with one another”. Section 2 defines a partnership as “the relation which subsists between persons carrying on business in common with a view of profit”. Accordingly, a partnership is by its nature an entrepreneurial relationship among individuals agreeing to do business together.
31 Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his or her legal representatives.
2 Partnership is the relation that subsists between persons carrying on a business in common with a view to profit, but the relation between the members of a company or association that is incorporated by or under the authority of any special or general Act in force in Ontario or elsewhere, or registered as a corporation under any such Act, is not a partnership within the meaning of this Act.
 The application judge’s reasoning, which we adopt, can be summarized as follows.
 A limited partnership is not a legal entity. It is required by law to have a general partner through which it normally acts: Kucor Construction & Developments & Associates v. Canada Life Assurance Co. (1998), 41 O.R. (3d) 577, 1998 CanLII 4236 (ON CA), 1998 CanLII 4236 (C.A.). A limited partnership cannot hold title to real property. It can hold title to real property only through its general partner.
• Because an expulsion from a partnership is expropriatory in nature, depriving the partner of future profits, an expulsion provision in a partnership agreement will be construed strictly: para. 10-123.
• Partners are fiduciaries among themselves and the utmost good faith is owed from every member of a partnership towards every other member: para. 16-01.
• Where a discretion is conferred on the management of the firm or on a majority of partners, a partner will normally be entitled to expect that it will be exercised rationally and in good faith and not arbitrarily or capriciously: at para. 16-09.
 This court considered the interplay between the Partnerships Act and the common law in Rochwerg v. Truster (2002), 2002 CanLII 41715 (ON CA), 58 O.R. (3d) 687 (C.A.). Rochwerg involved a partner in an accounting partnership who disclosed to his partners that he was a director of a corporate client of the firm and remitted his director’s fees to the firm, but did not disclose that he was entitled as director to shares and stock options in the company. When he left the partnership, an issue arose as to whether he was required to account to his partners for his shares and stock options.
[I]f fiduciary relation means anything I cannot conceive a stronger case of fiduciary relation than that which exists between partners. Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first instance; it is because they continue to trust each other that the business goes on.
 In the result, partners owe each other a duty of utmost good faith at common law and the traditional rules governing partnerships discussed in Lindley & Banks continue to apply in Ontario: see DiPoce v. DeCicco, 2013 ONSC 6409 (CanLII),  O.J. No. 4741, at para. 18; and Springer v. Aird & Berlis LLP (2009), 2009 CanLII 15661 (ON SC), 96 O.R. (3d) 325 (S.C.), at paras. 167-168, aff’d, 2010 ONCA 287 (CanLII), 100 O.R. (3d) 575.
 I pause to note that caution must be exercised when directly applying the rules governing intangible damages in the employment context to partners. Courts have held that partners are typically not employees and are governed by a separate legal regime at common law and have specialized legislation, particularly the Partnerships Act: see SMI Sales Inc. v. Ontario (Minister of Finance), 2007 ONCA 451 (CanLII), 226 O.A.C. 169; Weibe Door Services Ltd. v. Minister of National Revenue,  3 F.C. 553 (C.A.); and McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39 (CanLII),  2 S.C.R. 108.
 However, the reasoning of the court in Keays, in combination with the principles of partnerships law discussed above, suggests that damages for intangible harm are available in the partnerships context on the Hadley v. Baxendale principle where the harm was in the reasonable contemplation of the parties when they made their contract.
 In other words, part of what the parties agree to when they enter into the partnership agreement is that they must treat each other with utmost good faith. The intangible harm resulting from a bad faith expulsion is reasonably foreseeable and flows from the breach of the duty of good faith, which is an implied term of the partnership agreement.
 In summary, Article 17.4 of the Partnership Agreement must be interpreted in light of the partners’ duty of utmost good faith towards each other. The expropriatory nature of expulsion and the loss of profits that it entails requires that the provision be construed strictly in favour of the expelled partner.
 Placing the emphasis on control and dependency in determining whether there is an employment relationship is consistent with approaches taken to the definition of employment in the context of protective legislation both in Canada and internationally: Davidov, at pp. 365-71. The Ontario Labour Relations Board, for example, uses a seven-factor test for determining if an employment relationship exists, based on indicia that relate mainly to control and economic dependency. Among other criteria, the Board asks whether the alleged employer exercises direction and control over the performance of work; imposes discipline; has the authority to dismiss employees; bears the burden of remuneration; and is perceived to be the employer (York Condominium Corp.,  OLRB Rep. 645; Adams, at p. 6-36). That said, while significant underlying similarities may exist across different statutory schemes dealing with employment, it must always be assessed in the context of the particular scheme being scrutinized.
 Control and dependency, in other words, are a function not only of whether the worker receives immediate direction from, or is affected by the decisions of others, but also whether he or she has the ability to influence decisions that critically affect his or her working life. The answers to these questions represent the compass for determining the true nature of the relationship.
 While control and dependency define the essence of an employment relationship for purposes of human rights legislation, this does not mean that other indicia that courts and tribunals have developed, such as the Crane factors, are unhelpful in assessing the extent to which control and dependency are present. But such factors are unweighted taxonomies, a checklist that helps explore different aspects of the relationship. While helpful in framing the inquiry, they should not be applied formulaically. What is more defining than any particular facts or factors is the extent to which they illuminate the essential character of the relationship and the underlying control and dependency. Ultimately, the key is the degree of control, that is, the extent to which the worker is subject and subordinate to someone else’s decision-making over working conditions and remuneration: Geoffrey England, Individual Employment Law (2nd ed. 2008), at p. 19.
 I appreciate that the Tribunal sought, through the application of the Crane factors, to assess Mr. McCormick’s relationship with his firm, but in so doing, it paid insufficient attention to whether he was actually subject to the control of others and dependent on them. It assessed “control”, for example, in terms of some administrative restrictions on partners rather than examining the underlying power dynamics of the relationship. And it found that Mr. McCormick was “utilized” and “remunerated” by Fasken, while disregarding the fact that the firm was run for the benefit of, and by, its equity partners, including Mr. McCormick.
 In the absence of any genuine control over Mr. McCormick in the significant decisions affecting the workplace, there cannot, under the Code, be said to be an employment relationship with the partnership. Far from being subject to the control of Fasken, Mr. McCormick was among the partners who controlled it from 1979, when he became an equity partner, until he left in 2012. The Tribunal therefore erred in concluding that it had jurisdiction over his relationship with the partnership.

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