COURT FILE NO.: 11-51366
DATE: 2012/04/13
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Gebrehiwet Tecle
Applicant
– and –
Idris Hassan A.
Respondent
Hank Witteveen, for the Applicant
Marcus J. Boire, for the Respondent
HEARD: April 11, 2012
REASONS FOR DECISION ON MOTION
FOR DISSOLUTION OF PARTNERSHIP
LALONDE J.
Introduction
[1] This is an Application by Gebrehiwet Tecle (“Mr. Tecle”) for a declaration that his partnership with the Respondent Idris Hassan A. (“Mr. Hassan”) is dissolved and for an accounting of and distribution of partnership assets. The main asset is a City of Ottawa taxi plate having a value of between $150,000 and $300,000. There is a written partnership agreement between the parties which was entered into August 27, 2003, for a term of five years. The agreement contemplates that they will be equal partners. Despite the efforts made to date, Mr. Tecle has been unable to recover his share of the partnership assets.
Issues
[2] The parties purchased Ottawa Taxi Plate #413 from Blue Line Taxi and entered into a general partnership agreement dated August 27, 2003.
[3] Mr. Tecle acquired Ottawa Taxi Plate #3041 in the spring of 2007. Thereafter he was obligated under the partnership agreement to supply drivers for his shifts for Ottawa Taxi Plate #413.
[4] I accept that the letter written by Mr. Tecle to Hassan found at Tab 2, Exhibit D of the Application Record is notice that Mr. Tecle was not going to renew the partnership agreement. That letter is dated June 3, 2008.
[5] I further accept that Tecle did not “walk away” from the partnership agreement as argued by Mr. Hassan. Mr. Tecle continued to meet his obligations under the partnership agreement until November 1, 2011. Moreover the written partnership agreement spells out how the partnership was to end and provided two exceptions to the five-year term. The exceptions do not apply here as the parties did not voluntarily agree to a dissolution and no dissolution came about as a result of the operation of a law.
[6] The letter referred to above does not qualify to terminate the partnership as the parties’ agreement provided that 60 days’ notice was needed to be given to the other partner, and this did not happen.
[7] I believe Mr. Tecle when he declared that by August 2008 Mr. Hassan requested six months to raise funds to purchase Mr. Tecle’s 50% interest in Ottawa Taxi Plate #413.
[8] I find that Mr. Tecle’s purchase of Ottawa Taxi Plate #3041 won in a lottery organized by the City of Ottawa, made it credible that by July 31, 2010 he would offer Mr. Hassan to purchase or sell his 50% in Taxi Plate #413 for $142,500.00. Despite the fact that the partnership agreement called for the partners to alternate day shift and night shift, Mr. Hassan insisted on working day shifts only. This caused Mr. Tecle to lose two prospective buyers. Meanwhile Mr. Tecle continued to supply drivers for his shifts. The implied term that Mr. Hassan advanced, that allowed him to claim day shifts only, does not stand up to the clear terms of a written agreement to the contrary.
[9] I accept that, since Mr. Tecle has commenced his procedure under the Partnership Act, R.S.O. 1990, c. P.5, a difference in price between what each partner thinks the plate is worth is what drives this litigation.
Analysis and Decision
[10] Section 35(f) of the Partnership Act provides that the court may order the dissolution of a partnership where the court considers that it is just and equitable to do so. It is apparent that at least one of the two partners is unwilling to continue the partnership and has been attempting for more than three years to extricate himself from the partnership. Mr. Hassan now has the exclusive benefit of the main partnership asset (Ottawa Taxi Plate #413) and Mr. Tecle is no longer receiving any benefit from it. I find that it would be unjust and inequitable to in effect force Mr. Tecle to continue in this partnership and I order the dissolution of the partnership.
[11] In the case at bar the Taxi Plate #413 can be sold under the provisions of both parties’ agreement and also under s. 39 of the Partnership Act.
[12] Paragraph 17 of the partnership agreement states that on dissolution the partners shall cause the assets to be realized and after deducting reasonable expenses of disposition the net amount is to be divided among the partners according to their partnership interest. Paragraph 4 of the agreement states that each partner has a 50% partnership interest. Consequently the agreement provides that upon dissolution of the partnership its assets, including Ottawa Taxi Plate #413, are to be sold and that the net proceeds of sale are to be divided equally between the partners. The remaining partnership assets have little monetary value. The main asset is the taxi plate.
[13] If there were no partnership agreement the Partnership Act provides that upon dissolution of a partnership every partner is entitled to have the partnership property applied in payment of the debts and liabilities of the partnership and the balance applied to the amount due to partners. As one of the partners Mr. Tecle is entitled to have the partnership assets sold (including Ottawa Taxi Plate #413) and to receipt of 50% of the net proceeds after payment of any debts and after adjusting any accounts as may be necessary between the partners.
[14] Pursuant to s. 42(1) of the Partnership Act where a partner continues to carry on the business of the partnership with its capital or assets without any final settlement of accounts between the partners, the outgoing partner is entitled to a share of the profits since dissolution which the court finds to be attributable to the use of the outgoing partner’s share of the partnership assets.
[15] I find that the partnership came to an end on August 27, 2008 without any accounting between the partners. Mr. Tecle continued to have the use of his share of the taxi plate (and other partnership assets) until October 24, 2011 and as a result he makes no claim in this regard. However, after October 24, 2011 Mr. Hassan had the use of the entire taxi plate (and other partnership assets) and he is therefore liable to account to Mr. Tecle for any profit associated with his use of partnership property. Since 50% of a taxi plate can be rented for $750 per month this is an appropriate measure of Mr. Tecle’s entitlement from October 24, 2011 forward. Alternatively Mr. Hassan is obligated to account for his exclusive use of the partnership property from October 24, 2011 and to payment of 50% of the net income to Mr. Tecle.
[16] Mr. Tecle has not been in exclusive possession of any partnership assets and since October 24, 2011 has not been in possession of any partnership assets. Consequently Mr. Tecle has had nothing for which he needs to account. Mr. Hassan suggested that Mr. Tecle is indebted to him in the sum of $13,094 for repair of a partnership vehicle. However upon examination of the evidence supplied in support of this contention this sum represents 100% of the purchase price of a vehicle sold to Mr. Hassan on October 19, 2011 which asset is and has always been in Mr. Hassan’s possession or control. Mr. Tecle did not agree to acquire this asset nor did he have any obligation to contribute to its acquisition since the partnership was at an end when this vehicle was acquired. Further Mr. Tecle has derived no benefit from this asset since he has never used it. In the result this could only be an obligation on Mr. Tecle if there was a continuing partnership in which he would obtain the use of this vehicle 50% of the time.
[17] Mr. Hassan suggested that the evidence given by Mr. Tecle concerning the value of the taxi plate is inadequate. He urged the Court to accept the historical price for a taxi plate established by taking the average of taxi plate sales for the past three years as given by City Hall.
[18] In Warren v. Warren, [2003] O.J. No. 992, Weekes J. of the Ontario Superior Court of Justice determined that it was not necessary to agree upon the value of assets upon the winding up of a partnership since that value could be determined in a more efficient manner by effecting their sale. That decision was upheld on appeal to the Ontario Court of Appeal (Warren v. Warren, [2003] O.J. No. 3729). If Mr. Hassan contends that the plate is worth more than the amount offered by Mr. Tecle it should be exposed for sale to the public (perhaps with a reserve bid). If the plate is sold publically its value will be determined by the sale price.
[19] Pursuant to rule 55.06(1) of the Ontario Rules of Practice I order that a reference be directed to a Master of this Court, at Ottawa and he will be the referee to bring this matter to a conclusion. It is obvious that the parties cannot agree on a value of the taxi plate. The referee will supervise a sale of Taxi Plate #413 and he will make all the necessary inquiries, have the accounts taken and the costs assessed. The costs of this hearing are costs to the Applicant in the cause. Counsel for the Applicant has negotiated $1,300 in costs for the aborted procedures taken prior to this Application and those costs will have to be deducted from any entitlement found to be due to Mr. Tecle and credited to Mr. Hassan. The Applicant will have carriage of the reference. The referee will follow rule 55.06(2) to (14) in handling the sale.
Mr. Justice Paul F. Lalonde
Released: April 13, 2012
COURT FILE NO.: 11-51366
DATE: 2012/04/13
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Gebrehiwet Tecle
Applicant
– and –
Idris Hassan A.
Respondent
REASONS FOR DECISION ON MOTION
FOR DISSOLUTION OF PARTNERSHIP
Mr. Justice Paul F. Lalonde
Released: April 13, 2012