Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 2021-03-02 DOCKET: C68190 and C68191

Before: Roberts, Zarnett and Sossin JJ.A.

DOCKET: C68190 BETWEEN 1062484 Ontario Inc., Plaintiff (Appellant) and Williams McEnery, Williams Litigation Lawyers and Paul McEnery, by his litigation guardian, the Public Guardian and Trustee, Defendants (Respondents)

DOCKET: C68191 AND BETWEEN 1770650 Ontario Inc., Plaintiff (Appellant) and Williams McEnery, Williams Litigation Lawyers and Paul McEnery, by his litigation guardian, the Public Guardian and Trustee, Defendants (Respondents)

Counsel: Christine G. Carter, for the appellants Stephen Cavanagh and Robin S. Brown, for the respondents Williams McEnery and Williams Litigation Lawyers No one appearing for the respondent Paul McEnery

Heard: January 26, 2021, by video conference

On appeal from the judgments of Justice Robyn M. Ryan Bell of the Superior Court of Justice, dated February 7, 2020, with reasons reported at 2020 ONSC 825, 1 B.L.R. (6th) 120, and from the costs order, dated June 22, 2020, with reasons reported at 2020 ONSC 3861.

Reasons for Decision

Overview

[1] This is a consolidated appeal from two summary judgments, both dated February 7, 2020, with additional reasons on costs, dated June 22, 2020.

[2] The motion judge heard summary judgment motions in two actions against the respondents, one brought by the appellant 1062484 Ontario Inc. (“106 Ontario”) and one by the appellant 1770650 Ontario Inc. (“177 Ontario”). Both appellants were represented by the same counsel on the motions and the motion judge’s reasons dealt with both actions.

[3] The respondent Williams McEnery, now known as Williams Litigation Lawyers (the “Firm”), is a law firm located in Ottawa focusing on civil litigation.

[4] The respondent Paul McEnery (by his litigation guardian, the Public Guardian and Trustee) was a lawyer who shared space with the Firm. Mr. McEnery’s practice included corporate law, commercial law, real estate, and estates law.

[5] In the first action, the appellant 106 Ontario claimed that a related company dealt with Mr. McEnery and as a result loaned $420,000 in March 2015, of which $400,000 was repaid, and $360,000 in September 2015, none of which was repaid. 106 Ontario claims that the loans were made not just to Mr. McEnery but to the Firm because Mr. McEnery was dealing as, or was held out to be, a partner of the Firm. It sues for recovery as the assignee of the outstanding debt.

[6] In the second action, the appellant 177 Ontario alleged that, as a result of dealings with Mr. McEnery, in September 2015 it provided $241,000 to be used to pay off and discharge a mortgage. The mortgage remains registered on title. 177 Ontario seeks to recover the amount advanced as well as additional costs incurred to maintain the mortgage in good standing from both Mr. McEnery and the Firm because it alleges that he was dealing as, or was held out to be, a partner of the Firm.

[7] The motion judge granted summary judgment in favour of the appellants as against Mr. McEnery.

[8] However, the motion judge dismissed the appellants’ motion for summary judgment as against the Firm.

[9] The motion judge also granted summary judgment in favour of the Firm, dismissing the appellants’ actions as against the Firm.

[10] Each appellant appeals the motion judge’s disposition of its respective summary judgment motion on substantially the same grounds.

[11] For the reasons that follow, we dismiss the appeal.

The Motion Judge’s Decision

[12] The motion judge found there was no genuine issue requiring a trial with respect to Mr. McEnery’s liability, granting summary judgment against him in favour of the appellants for the outstanding debts.

[13] The motion judge also found no genuine issue requiring a trial with respect to the Firm’s liability and granted summary judgment in favour of the Firm.

[14] Specifically, the motion judge found that Mr. McEnery was not a partner of the Firm and that the respondents “conducted two distinct businesses.” As a result, the Firm was not liable for actions of Mr. McEnery under ss. 11 or 12 of the Partnerships Act, R.S.O. 1990, c. P.5.

[15] The motion judge based this finding on a close reading of the record, including: the Firm’s partnership agreement, which expressly stated that Mr. McEnery was not a partner of the Firm; law society filings; bank account and accountant’s records; and other documentary evidence. She stated, at para. 67:

There is compelling evidence that the [respondents] were not carrying on a business in common. Mr. McEnery and the [Firm] shared office space for many years in an office building owned by Mr. McEnery and Mr. Williams personally. Mr. McEnery paid his share of the common overhead expenses. However, Mr. McEnery and the [Firm] had separate offices, separate trust accounts, separate employees, and separate filing and computer systems. Mr. McEnery had his own chartered accountant. He had his own financial statements, separate from those of the [Firm]. The [Firm] and Mr. McEnery maintained their respective trust accounts at different financial institutions.

[16] Further, the motion judge found that, since no credit was given to Mr. McEnery in reliance of his being allegedly held out as a partner of the Firm, liability under s.15 of the Partnerships Act could not be established.

Analysis

[17] We begin with the standard of review. Absent an extricable error of law, which would be reviewable on a correctness standard, deference is owed to findings on a summary judgment motion. Decisions as to whether there are genuine issues for trial are questions of mixed fact and law which will not be disturbed absent a palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8; Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 81-84.

[18] We see no such errors.

The liability issue

[19] The motion judge considered two different pathways under the Partnerships Act for holding the Firm liable for the appellants’ losses.

[20] First, she considered whether Mr. McEnery was a partner of the Firm. Under s. 11 of the Partnerships Act, a firm may be held liable for the wrongful act or omission of a partner. Under s. 12, a firm may be liable for a partner’s misapplication of money or property received for or in custody of the firm.

[21] After a thorough assessment of the parties’ objective intentions, the motion judge found that Mr. McEnery was not a partner of the Firm, and that the Firm was not liable for the actions of Mr. McEnery.

[22] The appellants’ principal argument regarding this pathway is that the motion judge misconstrued the test for a “business in common” when she stated, at para. 74:

The fact that parties hold themselves out as partners may be evidence of their intention to carry on business in common under a partnership, but this alone would not have the effect of validating the existence of a partnership (Continental Bank, at para. 36). A court may find the existence of a partnership, notwithstanding express statements between the partners to the contrary, on the basis of the partnership’s dealings with third parties, but only if other partnership indicia are present (Elbow River, at para. 86, citing Alison R. Manzer, A Practical Guide to Canadian Partnership Law, loose-leaf (Aurora, Ont.: Canada Law Book, 1994- (October 2011 release consulted) at para. 2.340).

[23] The appellants submit that the motion judge erred in this statement of the principle. They argue that if individuals present to the world a common business enterprise with a view to profit, then this may be sufficient to constitute a partnership.

[24] We do not find any error in the motion judge’s statement of the law from Continental Bank Leasing Corp. v. Canada, [1998] 2 S.C.R. 298.

[25] The appellants also contend that the requisite indicia set out in Continental Bank were in fact present. They focus on the definition of a partnership in s. 2 of the Partnerships Act, which has three elements: (a) a business; (b) carried on in common; (c) with a view to profit.

[26] The indicia which the appellants say show that Mr. McEnery and the Firm carried on business in common with a view to profit largely involve how the Firm held out Mr. McEnery to third parties. Those alleged indicia include the following:

• the Firm name was “Williams McEnery”;
• the Firm’s Facebook page and website referred to Mr. McEnery as a “founding partner”;
• the Firm had a single reception area with a single receptionist;
• the Firm’s letterhead contained no indication that Mr. Williams and Mr. McEnery were not partners; and
• the appellant 177 Ontario was directed to make cheques payable to “Williams McEnery.”

[27] We would not give effect to this argument. We are satisfied that the motion judge committed no palpable and overriding error in her identification and application of the test as to whether Mr. McEnery was a partner of the Firm. Her finding that Mr. McEnery and the Firm were not carrying on a business in common is one of mixed fact and law and thus entitled to deference.

[28] The second pathway to liability considered by the motion judge concerned the Firm’s alleged holding out of Mr. McEnery as a partner within the meaning of s. 15(1) of the Partnerships Act.

[29] Section 15(1) of the Partnerships Act provides:

Every person, who by words spoken or written or by conduct represents himself or herself or who knowingly suffers himself or herself to be represented as a partner in a particular firm, is liable as a partner to any person who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the persons so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.

[30] In applying s. 15(1) to this case, the motion judge followed the approach taken by Corthorn J. in Dawson v. Halpenny Insurance Brokers Ltd., 2017 ONSC 4487. Under that approach, the appellants would first be required to establish that Mr. McEnery and the Firm held themselves out to the public as partners. Second, the onus would shift to the Firm to show that the Firm and Mr. McEnery clearly conveyed to the public that they were not partners. Third, even if the first two steps favoured the appellants, they would still need to show that they gave credit to Mr. McEnery based on his being held out as a partner of the Firm to the public.

[31] The motion judge focused her analysis on the third step in this framework, namely whether the appellants had subjectively relied on their belief that Mr. McEnery was a partner with the Firm in their respective dealings with him. Following the approach in Dawson, the motion judge reasoned that the first two steps in the framework would only be relevant if the appellants could meet the subjective portion of the test for holding out.

[32] As the motion judge acknowledged, there was evidence in the record that the decision-makers for the businesses involved in the impugned transactions relied on their belief that Mr. McEnery was a partner of the Firm. One of those decision-makers gave evidence that he and his wife “took comfort” in the fact Mr. McEnery was part of the Firm, while the other stated that he would not have given their business to Mr. McEnery had he realized Mr. McEnery was a sole practitioner.

[33] However, the motion judge did not accept this evidence. She referred to the former statement, at para. 104, as “little more than a bare allegation” and to the latter, at para. 107, as “bootstrapping evidence”.

[34] We see no basis on which to interfere with the motion judge’s findings of fact on this issue.

[35] For this reason, the appellants’ appeal of the motion judge’s finding that the Firm was not liable fails.

The “boomerang” order issue

[36] The appellants argue the motion judge erred by granting summary judgment in favour of the Firm when the Firm had not brought a cross-motion seeking such relief. This situation is commonly referred to as a “boomerang” order; the party that brought a motion for summary judgment ends up with a summary judgment order against itself.

[37] The motion judge relied on several cases in which this court has held that a motion judge has authority to grant summary judgment in a party’s favour where no cross-motion has been filed, including: Meridian Credit Union Limited v. Baig, 2016 ONCA 150, 394 D.L.R. (4th) 601, at para. 17, leave to appeal to S.C.C. refused, (2017) 46 C.B.R. (6th) 3; King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215, 40 R.P.R. (5th) 26, at paras. 14-15; and Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922, 124 O.R. (3d) 171, at paras. 50-52.

[38] The motion judge properly also considered Drummond v. Cadillac Fairview Corporation Limited, 2019 ONCA 447, where a boomerang order was found inappropriate. She found that the factors which made a boomerang order inappropriate in Drummond were not present in this case.

[39] Based on the record in this case, the motion judge held, at para. 31:

There is no unfairness to the plaintiffs in the other actions against Mr. McEnery and the [Firm]. None of those plaintiffs has moved for summary judgment. Some of their counsel have participated in case conferences dealing with the scheduling of these motions. Like the plaintiffs before me, the plaintiffs in the other actions were, effectively, on notice that the plaintiffs’ motions might be unsuccessful, and summary judgment could be ordered in the [Firm’s] favour. As the [Firm] put it in its written supplementary submissions on this issue, “[a]ny risk of contrary findings regarding the plaintiffs’ primary allegation of actual partnership is present regardless of the [Firm’s] request for a boomerang order.” There is no risk of contrary findings regarding the issue of whether the [Firm] is liable pursuant to s. 15(1) of the Partnerships Act, R.S.O. 1990, c. P.5 for holding Mr. McEnery out as a partner because that issue is factually specific to each plaintiff who has alleged detrimental reliance.

[40] We find no error in the motion judge’s application of the case law on summary judgment. The motion judge found that summary judgment was a “timely, affordable, and proportionate procedure” in this case. We see no basis on which to disturb that finding.

The costs issue

[41] The motion judge awarded the Firm its partial indemnity costs against the appellants in the respective amounts of $35,751.58 and $20,646.64. She granted the appellants each their partial indemnity costs against Mr. McEnery in the amount of $1,250. However, she declined to make a “Sanderson” costs award, which would have required Mr. McEnery to pay the Firm’s costs, concluding in her costs endorsement that such an award “would not be just or fair in the circumstances of this case.”

[42] The appellants seek leave to appeal the amount of the costs award against Mr. McEnery and submit the motion judge erred in failing to issue a Sanderson order. They say the motion judge erred in depriving them of their costs of the motion and the action against Mr. McEnery and argue it was “fair and reasonable” to hold Mr. McEnery responsible for the Firm’s costs because those costs were incurred as a result of Mr. McEnery’s misconduct and refusal to consent to judgment.

[43] While we would grant leave, we would not give effect to these submissions.

[44] There is no basis on which to interfere with the quantum of the motion judge’s costs order against Mr. McEnery. While low, we see no error in the motion judge’s exercise of her discretion in the circumstances of this case as detailed in her costs reasons.

[45] With respect to the appellants’ second argument, this court set out the circumstances which warrant a Sanderson or “Bullock” costs order in Moore v. Wienecke, 2008 ONCA 162, 90 O.R. (3d) 463. Unless “plainly wrong”, costs awards are not to be set aside: Moore, at para. 40. In Moore, MacPherson J.A. reiterated, at para. 45, that a court’s determination of whether to grant a Sanderson order is discretionary.

[46] The motion judge identified and applied the test for a Sanderson costs order as set out in Moore. The appellants’ submissions on appeal largely mirror those the motion judge considered and rejected in her costs endorsement.

[47] Accordingly, we find no basis on which to interfere with the motion judge’s exercise of discretion on the costs issue.

Conclusion

[48] For the reasons set out above, the appeal is dismissed.

[49] The respondent Firm is entitled to its costs. By agreement of the parties, costs are fixed at $11,500.00, all inclusive.

“L.B. Roberts J.A.”

“B. Zarnett J.A.”

“Sossin J.A.”