Court File and Parties

COURT FILE NO.: 14-20383 (Windsor) DATE: 2016/09/16 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Julie R. Daniel, Plaintiff – and – Miller, Canfield, Paddock and Stone LLP, Defendant

COUNSEL: Robert G. Matlack, for the plaintiff Suzanne M. Porter, for the defendant

HEARD: April 25, 26, 27, 28, 29, and May 6, 2016

Hockin J.

Introduction

[1] The plaintiff, Julie Daniel, graduated from the University of Windsor in 1986, from the University of Ottawa in 1989 with a Bachelor of Laws and in March, 1989, she was called to the bar of Ontario. Since, she has practised law in the City of Windsor in the specialty of commercial and financing transactions.

[2] The defendant Miller, Canfield, Paddock and Stone, LLP (“LLP”) at all times was a law firm which carried on business in the City of Windsor in partnership with Miller, Canfield, Paddock and Stone, PLC, an international firm based in Detroit, Michigan (“PLC”). The two firms joined forces in 2002 when PLC acquired a controlling interest in the Windsor firm of Wilson, Walker, Hochberg, Slopen. By agreement, the partners of Wilson, Walker became “principals” of PLC. Wilson, Walker at this point changed its name to Miller, Canfield LLP.

[3] The plaintiff, after practising with several Windsor lawyers after her call, joined the Wilson, Walker firm in March, 2000 as an associate. She was hired by Mr. Jeffrey Slopen, a partner of the firm, to assist him with his extensive and complex commercial transactions practice. In 2006, four years after the merger of the two firms, at the behest of Mr. Slopen, the plaintiff was accepted by the Managing Directors of PLC as a member of that firm as a “Salaried International Principal”, as defined by section 1 of PLC’s restated operating agreement of January, 2012. Thereafter, she continued to practice in her specialty with LLP until December 2013 when PLC withdrew from its partnership with LLP. The dissolution of LLP followed quickly and within the month or by early January, 2014, its lawyers and staff had relocated either to the Windsor firm of Shibley, Righton or to a reconstituted version of the firm organized by three members of the firm under its original name by a new arrangement with PLC.

[4] The plaintiff was not offered a comparable position or remuneration at the Shibley, Righton firm or any position at the reconstituted LLP firm nor was she offered a severance package by LLP before its dissolution. The plaintiff in this case takes the position that at LLP, she was an employee and that in these circumstances the termination of her employment at LLP amounted to a constructive dismissal, without notice. She pleads that in these circumstances, she is entitled to damages for wrongful dismissal.

[5] The position of LLP is that in 2006, when the plaintiff became a “salaried international principal” she became a partner of LLP and as a partner, of course, may not maintain an action against her firm.

The Evidence

The Plaintiff

[6] From the time of her hire in March, 2000, she worked exclusively on files assigned to her by Mr. Slopen. He would explain the “objective” of the file and check in with her as the matter progressed but she did the work on the file. If the client had to be contacted, that was done by Mr. Slopen. Likewise, he conducted the signing and closing meetings. In 2002, the firm hired Jennifer Shilson to work with Mr. Slopen. Ms. Shilson worked on the merger and acquisitions portion of Mr. Slopen’s practice and the plaintiff worked on his corporate finance matters. The accounts were prepared by the plaintiff after a review. Infrequently, adjustments may have been made by Mr. Slopen.

[7] From March 2000 to 2005, the plaintiff was paid a salary and a bonus. She started at $65,000 with a $5,000 bonus and in 2005 was paid a salary of $120,000 and a $20,000 bonus. Her compensation was determined by a three-member management committee made up from the firm’s equity partners.

[8] In 2006, on the recommendation of Mr. Slopen, the plaintiff was elevated from the status of an associate lawyer to a “Salaried International Principal” in PLC. She was not consulted on this beforehand by Mr. Slopen but afterward was assured by Mr. Goldenberg that she need not worry about her status change. It was a promotion and afforded security.

[9] Thereafter, she received the financial statements of PLC and was entitled to attend its annual general meeting of principals. However, she thought she was not entitled to a proxy or to vote on most matters. As well, she received the separate but complete financial statements of LLP each year. Her salary was set by the Executive Committee of the Windsor partners with advice from PLC. The Committee was made up of PLC’s chief executive and chief operating officer and a Windsor partner. The Windsor partnership was organized within the PLC as a “practice group”. The Windsor partner on the executive committee was the head of the Windsor group. After her elevation, under the PLC operating agreement, two percent of her salary was withheld and paid to the credit of her capital account in PLC. The year before her promotion, her salary was $120,000 plus bonus. This increased to $140,000 in 2006 and continued to rise until 2013 when she earned $170,000. She received a bonus in every year, save 2013.

[10] The merger of the two firms did not change the nature and extent of the work relationship between the plaintiff and Mr. Slopen. She continued to receive her files from him and he continued to rely on her to maintain the pace and financial return of his practice. The fee income on a file was, to her credit, subject to adjustment in the amount of the fee by Mr. Slopen, but as I say, infrequently a percentage, as the “originator” of the file, to him. In this event, the plaintiff’s fee credit on the file was reduced. This was occasionally a cause for disagreement with the accounting department, Mr. Slopen, and the plaintiff.

[11] After the plaintiff became a salaried principal, she attended the partnership meetings of the Windsor group. The meetings were held in the firm’s board room or, infrequently, elsewhere when combined with a social event. The partners were the original Wilson, Walker partners and in 2006, the plaintiff and John Jedlinski who had become a salaried principal at the time of the merger. In 2007, an associate lawyer, Jennifer Shilson, was elevated by PLC to salaried partner and was included in the meetings. In 2008, the firm hired Marco Dolphi and David McNevin. They were also brought into the firm as salaried principals and from the beginning participated in meetings of the partners.

[12] The plaintiff and her fellow salaried principals were given the firm’s financial statements and an agenda before each meeting. The meetings were presided over by Mr. Goldberg and later by the head of the practice group, John Leslie. Decisions were arrived at through discussion and consensus. There was an exchange of “general information” about the firm. All were free to speak and offer their views. From time to time, Mr. Leslie reported on the views of PLC of Windsor’s operations. The plaintiff stated that her views were not sought during or outside partner’s meetings. She said “I could always put my hand up and talk but my view would not be listened to”. She could recall only one vote when PLC encouraged Windsor to reduce its operating costs; this required the dismissal of a junior lawyer. There was no consensus and so a painful vote was taken. The plaintiff did not know the two lawyers who were under review and chose not to participate in the discussion. She did not vote. She understood that her position as a salaried principal did not include the right to vote in LLP or PLC. She received that advice from Mr. Goldberg in 2006 and it was confirmed by Mr. Jedlinski.

[13] The plaintiff’s salary was a guaranteed draw. Four-and-a-half percent of her salary was paid into an RRSP account in her name. This was not the case for an associate. Likewise, it was not the case that an associate enjoyed the extended health care benefit that she was entitled to, nor the life insurance purchased for her. There were no statutory deductions or payments to government from her salary. In particular, income tax was not withheld; she paid by quarterly instalment. Business cards were printed for her which described her as a “principal”. She was introduced to clients as a “partner”. She signed her tax return for CRA as a “partner” and as “self-employed”. She believed that others may have introduced her as a partner as a “marketing tool”.

[14] After 2006, the plaintiff was permitted to release letters of opinion under her signature for LLP. She signed firm cheques on its trust account. On the annual return to the Law Society of Upper Canada, she described her status as “a partner in a law partnership”. She thought the officer manager may have filled out the return for her.

[15] In June, 2013, PLC gave notice to LLP that its managing directors had approved a resolution to withdraw from its position as a Class B principal in LLP. There had been disagreements for several years between the two on staffing levels, overhead expenses and operating rules but attempts to reconcile by the two firms were unsuccessful. LLP’s decision to retreat from Canada triggered a frank discussion by the principals of LPP regarding its future. Meetings were organized by an exchange of memoranda by email. They were addressed in each case by their authors to the principals of LLP. The plaintiff was always included in the meetings which followed, save for a short period while she was on vacation. She explained that salaried principals were entitled to be included in the circulation of such memoranda. She agreed that she attended an important meeting of LLP partners July 16, 2013. This was organized by an email from Marco Dolphi, a salaried partner, to all LLP’s partners, including the plaintiff. Notes of the meeting were kept by Mr. Goldberg. The email and his notes are tabs 12 and 13 of Exhibit 4. Important matters were reviewed including the termination of the lease on LLP’s office. At one point, the plaintiff offered her opinion on the repayment of their capital accounts in LLP by memorandum to Mr. McNevin and Ms. Shilson. As well, the plaintiff received, by distribution to the “Windsor Partners”, Ms. Shilson’s June 28, 2011 summary of LLP’s operating agreement and the memorandum of agreement of January 14, 2002 which accomplished the merger of the firms.

[16] A number of the agenda and minutes of the monthly LLP partners’ meetings were referred to by the plaintiff. In some cases, the minutes show that the meetings were preceded by a meeting of the “equity principals” alone. The plaintiff points to this as evidence that the authority to manage the affairs of LLP did not rest with the general partnership but with the equity partners from the old firm, Wilson, Walker.

[17] The plaintiff, as well, pointed to her non-involvement in the determination of compensation within the firm. Compensation within LLP was decided by its executive committee. There was never a vote on compensation, nor who should sit on the committee.

[18] Some time was spent on the history of the plaintiff’s interaction regarding the future of the firm after LLP’s withdrawal. The interests of each were different. They were outlined by age and the nature and extent of their separate practices. The evidence of why and where the principals of LLP relocated does not, in my view, shed any light on the question of whether the plaintiff was an employee or partner of LLP.

[19] The plaintiff called two members of the Wilson Walker firm, Gerard Charette and John Jedlinski. Mr. Charette and Mr. Jedlinski were with Wilson, Walker in 2002 when it joined PLC and became LLP. Mr. Charette was an equity partner at Wilson, Walker, then became an “international Principal” of LLP, but at some point, he dropped to the level of a “salaried international principal”. At all times, he continued at LLP as a principal or partner. In the case of Mr. Jedlinski, he joined Wilson, Walker in 1992 as an associate, in 1996 was admitted as a non-equity partner, was a salaried international principal with PLC, and in 2010 returned to the position of an associate.

Gerard Charette

[20] The evidence of Mr. Charette was that the business of the LLP partnership was conducted not by vote but by consensus. He could not remember a single decision accomplished by a vote. The plaintiff attended partners’ meetings but “said as little as she could, she listened”. After his status changed to “salaried international principal”, he continued to attend the LLP partners’ meetings. The business was done by consensus and included the severance of LLP’s relationship with PLC. He had the right to speak at the meetings. All persons present were “treated equally”.

John Jedlinski

[21] The evidence of Mr. Jedlinski was that when he became a non-equity partner at Wilson, Walker, he received the financial statements of the firm, participated in partners’ meetings, and shared in the profit of the firm. At one point, he sat on the compensation committee. At meetings, he felt free to speak up. Matters were decided by consensus. He recalled the elevation of the plaintiff from associate to “salaried principal” but understood this was a change of status within LLP and not PLC. He remembered welcoming her to the partnership. He continued as a salaried principal of LLP until 2010 or 2011 when he was dropped from the partnership to associate status. This was communicated to him by Mr. Slopen or Mr. Leslie. He could no longer share in the bonus pool, lost his RRSP entitlement and could no longer attend partners’ meetings. He was a salaried principal with the plaintiff, Mr. McNevin, Ms. Shilson and Mr. Dolphi. They attended the partners’ meetings and participated in the business of the firm. Until, he dropped back to associate status, he always considered himself a partner of the firm.

[22] This was the sum of the plaintiff’s case.

[23] The evidence called on behalf of the defendant’s firm was the following.

David McNevin

[24] David McNevin was called in 1997 and joined the ranks of the salaried principals at LLP in 2008. He had a substantial lucrative practice in employment and labour law and was interested in joining LLP because “it was a true partnership, it had a collective view of coming together for the common good of the firm and its partners”. He considered the use of the word “principal” by PLC to be synonymous with “partner”. The two were, in LLP, interchangeable. The partnership group included the salaried principals. The Windsor partners made decisions “internally” on matters which involved the business of the Windsor group, including which staff to dismiss, staff pay levels, what marketing effort there ought to be, what charities to support, improvements to the office, and whether a lease should be renewed. Regardless of what distinctions were made in the agreements between equity and salaried partners, at a practical level, all partners had a full and equal voice.

[25] All partners, including the plaintiff, attended the partners’ meetings and whether the partner was a salaried or equity partner made no difference. All partners had a voice in the conduct of the business of the firm. The agenda for the meetings was set by the management committee but a partner was free to place an item on the agenda. Decisions were arrived at in almost every case by discussion, vigorous at times, to achieve a consensus. Only rarely was a vote necessary. He could only recall one when it was necessary to select an associate to terminate. There was a management committee which implemented the decisions or will of the partnership.

[26] Mr. McNevin was asked about PLC’s mention in its draft term sheet of June 24, 2013 that PLC had been engaged in discussions over several years only with the “Class A Partners” of LLP. He disagreed. His evidence was to this effect. For several years, all the LLP partners were kept abreast of PLC’s disagreements with LLP. Mr. McNevin was involved directly at times in discussions with PLC despite the fact that he was not an equity or Class A partner. Different LLP partners participated. These were matters which were reviewed by the partnership at its meetings.

[27] He told his clients he was a partner, represented to the Law Society that he was a partner, filed his tax return on the basis that his income was derived from a partnership and his bonus was paid from firm profits. Only partners at LLP saw the financial statements of LLP and the accounts of PLC. Only the partners of LLP had the authority to sign letters of opinion for the firm and to sign cheques. He believed he was a partner of LLP even though he had not signed a partnership agreement.

[28] On cross-examination, Mr. McNevin was questioned at some length on the liability of LLP to the LLP “equity principals” on their claim for payment of a “separation payment” under a 2011 agreement they entered into with PLC in relation to the value of two service companies they rolled into PLC in 2002. This is the subject matter of a dispute between the non-equity LLP partners and its equity partners, and while important to them, in my view, it adds nothing of evidential value to whether the plaintiff was a partner.

Jeffrey Slopen

[29] Mr. Slopen was a founding member of the Wilson, Walker, Hochberg and Slopen firm. He acted for important land developers and commercial interests in the Windsor/Essex business community. His practice was a busy and lucrative one and required a careful and industrious solicitor to assist. The plaintiff qualified and was hired by Mr. Slopen in 2000. He assigned files to her but she acted independently. Supervision was not necessary. She was capable. She prepared the accounts. Mr. Slopen reserved the right to adjust quantum.

[30] In 2006, Mr. Slopen recommended to the managing directors of PLC that the plaintiff be elevated from her position as an associate lawyer to that of the PLC position of a “salaried international principal”. He consulted the plaintiff first and indicated that this would produce a tax advantage and additional security. She was introduced by Mr. Slopen to PLC at its general meeting in Ypsilanti. Thereafter, he introduced her to business associates as a partner and she attended the partners’ meetings where the general business of LLP was conducted. She became a partner of LLP when she became a salaried principal of PLC. The meetings were “open”. Decisions were developed by consensus. Votes were not taken. Information was shared. She received its financial statements. He considered the plaintiff “a partner of the firm and relied on her as such”.

Patricia Mayea

[31] Patricia Mayea was LLP’s office manager from 2001 to 2009 or 2010. She was responsible for the electronic filing of the Annual Report of the Law Society to its members. The reports for the plaintiff before 2006 described her status as an “associate” but thereafter as “a partner in a law partnership in Ontario”.

Jennifer Shilson

[32] Ms. Shilson was called in 2000 and entered practice with the Wilson, Walker firm as an associate in the employ of Mr. Slopen. In 2006, she was recommended to PLC as a candidate for elevation to the ranks of its salaried principals and achieved that in 2007. With that, she became a partner in LLP. She attended partners’ meetings, enjoyed the benefit of extended health insurance and life insurance, signed cheques and opinion letters, and received the full financial statements of LLP and PLC. She paid into PLC’s capital account. She considered this a promotion; it was my “next step to advancement in the firm”. She was paid a base salary plus a bonus. The bonus depended on the performance of the Windsor group, LLP. She referred to herself as a partner and considered principal and partner as the same. The plaintiff was a close friend and they would compare notes.

[33] LLP partners’ meetings were held in the firm board room. They were informal, free-flowing discussions. Decisions were arrived at by consensus. The meetings were held regularly. An agenda was prepared. Routine matters were reviewed but from 2008 onward, the financial difficulties of PLC and its criticism of LLP’s staffing ratios occupied more time. LLP was told to “get its ratio in line” with PLC’s ratio. LLP tried to resist but eventually LLP terminated the employment of an associate to comply. This required a vote. It was well understood by all the partners the pressure LLP was under from PLC. This continued unabated until 2013 when PLC decided to leave. At this point, Ms. Shilson had become a senior principal in PLC. This occurred in early 2013.

[34] Ms. Shilson was often the secretary for meetings of the partners. Her minutes and agenda were reviewed. At times, the “equity partners” met separately before the general meeting. She explained that the topic of their discussion was their “notional capital” and the preservation of value for the service companies.

[35] Ms. Shilson, after the withdrawal of PLC, joined a reconstituted three partner firm under the Miller, Canfield banner in January, 2014. This was an association with Mr. McNevin and Mr. Dolphi.

Jerry Goldberg

[36] Mr. Goldberg was called to the bar in 1974 and that year joined Wilson, Walker. He restricted his practice to estate planning and real estate.

[37] Wilson, Walker operated with a number of equity partners and a small number of salaried partners. Although their compensation differed, they were all “equal partners”; equal in their vote, participation, contribution and ability to work together. This continued to be the case after the two firms combined.

[38] After the merger, the original equity partners occasionally met separately but only for the purpose of discussing the vexing problem of a return from the capital of PLC the value of two service companies rolled into PLC at the time of the merger.

[39] The partnership meetings of LLP included the plaintiff. Everyone got the financial statements.

[40] The evidence of Mr. Goldberg, as with the other witnesses called by the defence, included a history of the retreat of PLC and the positioning and formation of the McNevin and Shilson, Dolphi group and the Slopen, Goldberg group with Shibley, Righton. As I say, that evidence is unhelpful on the determination of the plaintiff’s status.

Discussion and Analysis

[41] It is the case that the plaintiff in 2006 accepted the offer of Miller, Canfield, PLC to become a “salaried international principal”. There is no significance to noting that she was an “international” principal; use of the word meant simply that she was from Windsor. In my view, there is no significance to describing her as a “principal” and not a “partner”; the words are interchangeable and in the context of the practice of law, they mean the same thing. The question in this case is whether the plaintiff, as a salaried principal at LLP, was an employee or partner. The answer lies in the substance of the relationship between the plaintiff and LLP from 2006 until 2013, when sadly it met its end.

[42] I am instructed on this approach by this statement by Madam Justice Abella in McCormick v. Fasken Martineau Du Moulin LLP, 2014 SCC 39, [2014] 2 S.C.R. 108 at p. 129, para. 38:

While the structure and protections normally associated with equity partnerships mean they will rarely be employment relationships for purposes of human rights legislation, this does not mean that form should trump substance. In this case, for example, the Court of Appeal appeared to focus exclusively on partnership as a legal concept, rather than examining the substance of the actual relationship and the extent to which control and dependency played a role.

[43] Especially helpful, are the reasons of Megarry, J. in the British case of Stekel v. Ellice, [1973] 1 W.L.R. 191 at pp. 198 D-F, 199 G-H:

Certain aspects of a salaried partnership were not disputed. The term “salaried partner” is not a term of art, and to some extent it may be said to be a contradiction in terms. However, it is a convenient expression which is widely used to denote a person who is held out to the world as a partner, with his name appearing as partner on the notepaper of the firm and so on. AT the same time, he receives a salary as remuneration, rather than a share of the profits, though he may, in addition to his salary, receive some bonus or other sum of money dependent upon the profits. Quoad the outside world it often will matter little whether a man is a full partner or a salaried partner; for a salaried partner is held out as being a partner, and the partners will be liable for his acts accordingly. But within the partnership it may be important to know whether a salaried partner is truly to be classified as a mere employee, or as a partner.

On this, there is little clear guidance to be obtained from the books. I was referred to various passages in Lindley on Partnership, 13th ed. (1971), pp. 13, 14, 18, 26 and 79, and in Pollock on Partnership, 15th ed. (1952), pp. 9 to 11. I was also referred to Ex parte Watson (1815 19 Ves. 459, Walker v. Hirsch (1884) 27 Ch.D. 460 and In re Hill [1934] Ch. 623. Mr. Buckley also mentioned in short form the three other cases cited in Lindley at pp. 17 and 18, namely, Burnell v. Hunt (1841) 5 Jur. 650, Price v. Groom (1848) 2 Ex. 542 and In re Young [1896] 2 Q.B. 484. At p. 13 of Lindley there is a somewhat inconclusive discussion as to whether a sharing in the profits is essential to the concept of partnership. The text seems to lean towards saying that a salaried partner is not a true partner, for although the division of profits is not a concept written into the statutory definition of partnership, the provisions of section 39 of the Act relating to dissolution import by implication some requirement of this sort. On the other hand, in a passage added by the editor of the 15th edition, Pollock says, at p. 11:

“… it is thought that a salaried partner is a true partner notwithstanding that he is paid a fixed salary irrespective of profits and that as between himself and his co-partner he is not liable for the partnership debts. The question will rarely be of importance, since he is clearly held out as a partner and will be liable accordingly (infra, section 14), but unless a true partner he would not be liable to a creditor who was aware of his position when the debt was contracted, so that the question is not purely academic.”

The first sentence of that statement is vouched by a reference to the first three authorities I have just cited. This passage, I may say, seems to assume that the only questions of importance in this field are those between the partnership and the outside world, whereas, as this case shows, there may be internal questions of importance between the partners.

I have looked at certain other authorities, including Marsh v. Stacey [1963] Bar Library Transcript No. 169 (briefly noted at (1963) 107 S.J. 512) and Ellis v. Joseph Ellis & Co. [1905] 1 K.B. 324. In the former case, A, by agreement with his sole co-partner B, reduced his activities, and instead of taking a fraction of the profits agreed to accept “a fixed salary of £ 1,200 per annum as a first charge on the profits.” The profits in one year fell far short of £ 1,200, and the Court of Appeal, in affirming Pennycuick J., held that the words “as a first charge on the profits” meant that A was not entitled to sue B for £ 1,200 for that year; a first charge on the profits for £ 1,200 was one thing, a firm agreement to pay him £ 1,200 another. In the course of his judgment (with which Ormerod L.J. and Davies L.J. simply agreed), Upjohn L.J. said, at p. 7 that A “really became a salaried partner, as it is called, that is to say, an employee of the partnership.” Yet the order made by Pennycuick J. included an order to wind up the partnership and directed the usual accounts and inquiries, which points to a true partnership and directed the usual accounts and inquiries, which points to a true partnership rather than a mere relationship of master and servant: and perhaps “salaried partner” is not really an apt term for someone who is entitled not to a fixed salary but to the profits (if any) up to a fixed limit. In In re Hill [1934] Ch. 623, I may say, the position seems to have been similar (see pp. 624, 628 and 630), despite the reference by Maugham L.J., at p. 632, to “a salary of £ 600 a year.” The Ellis case [1905] 1 K.B. 324 merely holds that a true partner who in addition is paid a fixed wage for doing specific work did not thereby become a workman for the purposes of the Workman’s Compensation Act 1897, for he could not for that purpose be both master and servant.

I have found it impossible to deduce any real rule from the authorities before me, and I think that, while paying due regard to those authorities, I must look at the matter on principle. It seems to me impossible to say that as a matter of law a salaried partner is or is not necessarily a partner in the true sense. He may or may not be a partner, depending on the facts. What must be done, I think, is to look at the substance of the relationship between the parties, and there is ample authority for saying that the question whether or not there is a partnership depends on what the true relationship is, and not on any mere label attached to that relationship. A relationship that is plainly not a partnership is no more made into a partnership by calling it one than a relationship that is plainly a partnership is prevented from being one by a clause negativing partnership: see, for example, Lindley on Partnership, 13th ed. (1971), p.66.

If, then, there is a plain contract of master and servant, and the only qualification of that relationship is that the servant is being held out as being a partner, the name ‘salaried partner’ seems perfectly apt for him, and yet he will be no partner in relation to the members of the firm. At the other extreme, there may be a full partnership deed under which all the partners save one take a share of the profits, with that one being paid a fixed salary not dependent on profits. Again, ‘salaried partner’ seems to me an apt description of that one: yet I do not see why he should not be a true partner at all events if he is entitled to share in the profits of a winding-up, thereby satisfying the point made on section 39 by Lindley ay p. 13. However, I do not think it could be said it would be impossible to exclude or vary section 39 by the terms of the partnership agreement, or even by subsequent variation (see section 19), and so I think that there could well be cases in which a salaried partner will be a true partner even though he would not benefit from section 39. It may be that most salaried partners are persons whose only title to partnership is that they are held out as being partners; but even if “salaried partners” who are true partners, though at a salary, are in a minority, that does not mean that they are non-existent.

[44] As well, there is this simple and useful statement by Hogg J. in Emerson v. Fisher [1943] 2 P.L.R. 152 at p. 156 as follows:

It is true that there never existed a formal partnership agreement between the parties, but the whole of the facts and the conduct of the parties as well as the agreements signed by the parties in 1926 and in 1933 with the Dominion Bank are evidence showing that the partnership existed with respect to the summer resort. A partnership may be proved to exist as a matter of fact by evidence of various circumstances which relate to the question at issue and which show the intention of the parties. Such evidence may be an admission made by anyone of that fact against himself, also evidence tending to show that a partnership exists, may consist of letters, documents, bills of exchange and things of like character. Cox v. Hickman, 8 H.L.C. 268, 11 E.R. 431; Electric Heat Control Co. v. McClennan, [1940] O.W.N. 49.

[45] For the reasons which follow, I conclude that from 2006 when the plaintiff was admitted to PLC as a salaried principal that she became coincidentally a partner in LLP and conducted herself there from that point forward to the fall of 2013 when sadly the firm dissolved, as a partner in LLP.

[46] In my view, this is not a case of conflict of evidence. There is no dispute with respect to the following matters.

[47] The plaintiff until 2006 was an associate, but her status changed when she was admitted to PLC as a salaried principal. Thereafter, she attended and participated in the regular meetings of the LLP partnership. On notices, agenda and minutes, she was included and noted as a partner. It could not have been lost on her that the firm’s associates were not present nor that the subject matter of meetings was the conduct and management of the firm. Decisions were taken on such matters as promotion, charitable donations, leases, billing and receivable problems and the firm’s reaction to PLC’s criticism of staffing and overhead issues. The partnership was moved by consensus, although once in the case of a choice between two associates for termination, a vote was taken. I do not accept the plaintiff’s evidence that she was told that she could not vote at an LLP partners’ meeting. That was the case at PLC. She must have misunderstood.

[48] I accept the plaintiff’s evidence that she may not have been a vocal or influential participant in LLP’s proceedings, but that was a matter of choice or personality and does not denature her status as a partner at its meetings.

[49] The plaintiff had full access to the business and financial affairs of PLC and LLP, including the billings and billable hours of its lawyers. This was not the case with associates. She received the annual financial statements of LLP from its Windsor accountant, including for CRA purposes, a Statement of Partnership Income (T5013). The payment of her salary was without deduction of tax or employment insurance.

[50] She acted as a partner within the firm. Beyond her attendance at meetings, she signed cheques on the general and trust accounts of the firm. She was introduced and held out as a partner to clients. She described herself to Canada Revenue and the Law Society as a partner. Her salary was a regular draw but her bonus was dependant on the profitability of the combined PLC and LLP firms. She enjoyed a medical benefits package above that of an associate, and the firms contributed to her RRSP.

[51] The plaintiff’s position is that for the following reasons she was not a partner.

[52] She did not share in the profits of the firm. That is not the case, however. Her bonus was drawn from the bonus pool for salaried principals, which was an allocation from profit.

[53] She was not responsible for losses. There was a risk that her contribution to capital could be lost. As well, without a partnership agreement at LLP, under s. 24.1 of the Partnerships Act, R.S.O. 1990, Chapter P. 5, her obligation was to contribute equally to losses. Likewise under this section, she was entitled to share equally in its assets.

[54] She did not participate in the management of the firm. For the reasons set out above, my view is that she did. Her evidence was that she had no files or clients of her own. It is true that most of her work was given to her by Mr. Slopen, however she had built up a not insignificant practice of her own. In any event, I do not consider this to be material to the issue of partnership.

[55] She was paid less than Ms. Shilson and Mr. McNevin who were salaried principals. Their level of remuneration exceeded hers not because she was not a partner but because their practices provided a greater return to the partnership.

[56] She was not involved in the decisions of LLP’s Class A equity partners. As indicated, I am satisfied on the evidence that when this group met by itself, it met only to protect its interest in the value of Meri and Arbor in PLC. This is not material to the issue.

[57] The plaintiff was not consulted on the decision of some of LLP’s partners to relocate to Shibley & Righton. The evidence is that she was aware of this possibility and could have put her name forward if she was prepared to accept a reduced level of compensation. In fairness to the plaintiff, an alliance with Shibley and Righton would have been difficult after an unfortunate bruising discussion with Mr. Slopen.

[58] She was not consulted on the 2014 settlement agreement with PLC. I do not consider this to be material to the question and when weighed against the weight of evidence of partnership, it is unimportant.

[59] The effect of the evidence of Ms. Shilson and Mr. McNevin was that they were partners. Their evidence was cogent and I accept it as factual. They were indeed partners. It could not be that the plaintiff who shared the board room table with them was not.

[60] Although the plaintiff takes the position that after 2006, she remained an employee, despite her attendance at the regular meetings of the partners of LLP, it perhaps need not be stated that she may not occupy the position of partner and employee. Ellis v. Joseph Ellis and Co., [1905] K.B. 324.

[61] Section 2 of the Partnerships Act defines partnership as follows: “a partnership is the relation that subsists between persons carrying on a business in common with a view to profit”. This was described as the “grand characteristic of every partnership” by Wilson L.J. in M. Young Legal Associates Ltd. v. Zahid (A Firm), [2006] 1 W.L.R. 2562 (2006) at para. 24. This describes the nature of the relationship of the plaintiff and LLP.

[62] In arriving at this conclusion, I do not find that the plaintiff was anything but truthful in her opinion that she was not a partner. It may have been honestly held, but based on all the evidence and the result, it was wrong.

[63] In the event that in this conclusion I am wrong and the plaintiff was an employee, it is the case that the decision of the firm to end its existence and to divide and relocate without her amounted to her constructive dismissal. In this event, she was entitled to notice of their intention or damages in lieu of notice. The measure of damages is based on what reasonable notice should be in this particular case.

[64] In this case, to the credit of the plaintiff, she found other employment with a Windsor firm, Bartlet and Richardes, on March 3, 2014, where she continues her practice.

[65] In my view, reasonable notice in this case is 12 months.

[66] The date and amount of the final payment by LLP to the plaintiff is known to the parties and the amount paid by the Bartlet firm. The arithmetic is straight forward. If the parties are unable to agree on a figure, I will fix one.

[67] I do not think this is a case which attracts Wallace damages.

Costs

[68] I will travel to Windsor to hear from counsel on costs. I will leave it to counsel to arrange a date with the trial coordinator at Windsor.

“Justice P. B. Hockin” Justice P. B. Hockin Released: September 16, 2016