1062484 Ontario Inc. v. Williams McEnery et al. 1770650 Ontario Inc. v. Williams McEnery et al.
[Indexed as: 1062484 Ontario Inc. v. Williams McEnery]
Ontario Reports
Ontario Superior Court of Justice
R. Bell J.
February 7, 2020
149 O.R. (3d) 209 | 2020 ONSC 825
Case Summary
Civil procedure — Summary judgment — Availability — Plaintiffs bringing action in debt against lawyer — Plaintiffs moving for summary judgment against lawyer and law firm based on partnership in fact or on holding out as partnership — Plaintiffs proving debt and entitlement to summary judgment against lawyer — Plaintiffs failing to prove partnership so law firm entitled to summary judgment dismissing claims against it.
Partnership — Holding out — Indicia — Plaintiffs bringing action in debt against lawyer — Plaintiffs moving for summary judgment against lawyer and law firm based on partnership in fact or on holding out as partnership — Plaintiffs proving debt and entitlement to summary judgment against lawyer — Partnership agreement, Law Society filings and method of carrying on business establishing no partnership — Plaintiffs not extending credit based on any holding out of partnership — Law firm entitled to summary judgment dismissing claims against it.
Professions — Barristers and solicitors — Partnership — Holding out — Plaintiffs bringing action in debt against lawyer — Plaintiffs moving for summary judgment against lawyer and law firm based on partnership in fact or on holding out as partnership — Plaintiffs proving debt and entitlement to summary judgment against lawyer — Partnership agreement, Law Society filings and method of carrying on business establishing no partnership — Plaintiffs not extending credit based on any holding out of partnership — Law firm entitled to summary judgment dismissing claims against it.
Two lawyers practised under the banner "Williams McEnery". McEnery carried on a corporate, commercial, real estate and estates practice. Williams had a partnership agreement with three other lawyers in a civil litigation practice. McEnery was not a party to that agreement. Two plaintiffs in separate actions claimed amounts as repayment of loans to McEnery. The plaintiffs also named the firm Williams McEnery as a defendant, claiming that McEnery was a partner in the firm or held out to be so. Both plaintiffs moved for summary judgment against McEnery and the firm.
Held, the motion should be allowed against McEnery and dismissed against the firm.
Summary judgment was appropriate on the evidentiary record and was a timely, affordable and proportionate procedure. The plaintiffs had established that McEnery made the loans and that they were entitled to judgment against him.
The law firm was not liable for the plaintiffs' claims. The partnership agreement described two separate businesses: that of the firm and that of McEnery. McEnery was not a party to the partnership agreement, nor was he listed as a partner. Law [page210] Society filings described McEnery as a sole practitioner sharing office space with the firm. McEnery and the firm had separate offices, separate trust accounts at different financial institutions, separate employees and separate filing and computer systems. There was no common undertaking to which they both contributed. They did not intend to carry on business in common and did not intend to create a partnership. McEnery was not, in law, a partner in the firm.
A finding that McEnery was represented or held out as a partner was insufficient to find the firm liable to the plaintiffs. The plaintiffs had to establish that the credit they extended to McEnery was in reliance on his being held out as a partner. That they failed to do.
The firm was granted summary judgment dismissing the claims against it without having served a notice of cross-motion. The court had the authority to grant such a "boomerang" order and in the circumstances it was not unfair to do so.
Continental Bank Leasing Corp. v. Canada, 1998 794 (SCC), [1998] 2 S.C.R. 298, [1998] S.C.J. No. 63, 163 D.L.R. (4th) 385, 229 N.R. 58, [1998] 4 C.T.C. 119, 98 D.T.C. 6505, 82 A.C.W.S. (3d) 196, 1998 SOACQ para. 10,014; Dawson v. Halpenny Insurance Brokers Ltd., [2017] O.J. No. 3974, 2017 ONSC 4487 (S.C.J.), apld
Wallbridge v. Brunning, [2018] O.J. No. 1980, 2018 ONCA 363, 422 D.L.R. (4th) 305, 290 A.C.W.S. (3d) 652, distd
Other cases referred to
Allen v. Aspen Group Resources Corp., [2012] O.J. No. 2924, 2012 ONSC 3498, [2012] I.L.R. G-2458, 2012 SOACQ para. 10,167 (S.C.J.); Bercovitz Estate v. Avigdor, [1961] O.J. No. 20, [1961] O.W.N. 59 (C.A.); Bet-Mur Investments Ltd. v. Spring (1999), 1999 2802 (ON CA), 41 O.R. (3d) 799, [1999] O.J. No. 342, 86 A.C.W.S. (3d) 208 (C.A.), affg (1994), 1994 7312 (ON SC), 20 O.R. (3d) 417, [1994] O.J. No. 1980, 17 B.L.R. (2d) 55, 50 A.C.W.S. (3d) 138 (Gen. Div.); Diguilo v. Boland, 1958 92 (ON CA), [1958] O.R. 384, [1958] O.J. No. 602, 13 D.L.R. (2d) 510 (C.A.); Drummond v. Cadillac Fairview Corp., [2019] O.J. No. 2802, 2019 ONCA 447; Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc., [2012] A.J. No. 1155, 2012 ABCA 328, 69 Alta. L.R. (5th) 22, 1 B.L.R. (5th) 292, 539 A.R. 68, revg on other grounds [2012] A.J. No. 460, 2012 ABQB 277, 62 Alta. L.R. (5th) 359, 538 A.R. 145, 1 B.L.R. (5th) 223, 2012 SOACQ para. 10,122, 2012 CCSG para. 51,318, 2012 BCLG para. 78,881, 2012 OCLG para. 51,694, 2012 CCLR para. 201,038, 2012 ACLG para. 79,457, 214 A.C.W.S. (3d) 77; Gentra Canada Investments Inc. v. Lipson (2011), 106 O.R. (3d) 261, [2011] O.J. No. 1920, 2011 ONCA 331, 281 O.A.C. 134, 333 D.L.R. (4th) 666, 84 C.C.L.T. (3d) 74, 5 R.P.R. (5th) 222, 201 A.C.W.S. (3d) 333; Harman v. Johnson (1853), 2 El. & B. 61; Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, 366 D.L.R. (4th) 641, 453 N.R. 51, J.E. 2014-162, 314 O.A.C. 1, 21 B.L.R. (5th) 248, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 46 C.P.C. (7th) 217, 95 E.T.R. (3d) 1, 37 R.P.R. (5th) 1, EYB 2014-231951, 2014EXP-319; Kassburg v. Sun Life Assurance Co. of Canada (2014), 124 O.R. (3d) 171, [2014] O.J. No. 6222, 2014 ONCA 922, 379 D.L.R. (4th) 665, 43 C.C.L.I. (5th) 1, 328 O.A.C. 244, 248 A.C.W.S. (3d) 196; King Lofts Toronto I Ltd. v. Emmons, [2014] O.J. No. 1333, 2014 ONCA 215, 40 R.P.R. (5th) 26; Mantik v. Brotman, 1984 3807 (MB QB), [1984] M.J. No. 410, 29 Man. R. (2d) 134, 28 A.C.W.S. (2d) 134 (Q.B.); McDonic v. Hetherington (Litigation Guardian of) (1997), 1997 1019 (ON CA), 31 O.R. (3d) 577, [1997] O.J. No. 51, 142 D.L.R. (4th) 648, 96 O.A.C. 289, 29 B.L.R. (2d) 1, 68 A.C.W.S. (3d) 182 (C.A.) [Leave to appeal to S.C.C. refused [1997] S.C.C.A. No. 119]; Meridian Credit Union Ltd. v. Baig, [2016] O.J. No. 947, 2016 ONCA 150, 346 O.A.C. 57, 35 C.B.R. (6th) 158, 262 A.C.W.S. (3d) 934, 63 R.P.R. (5th) 179, 394 D.L.R. (4th) 601; Office Centre (Kingston) Ltd. v. Salshir Properties Ltd., [2019] O.J. No. 3687, 2019 ONSC 4135 (S.C.J.); Peters v. Klassen, 1994 16637 (MB CA), [1994] M.J. No. 149, [1994] 5 W.W.R. 264, [page211] 1994 16906 (MB CA), 92 Man. R. (2d) 245, 47 A.C.W.S. (3d) 175 (C.A.); Robert Porter & Sons Ltd. v. Armstrong, 1926 23 (SCC), [1926] S.C.R. 328, [1926] S.C.J. No. 18, [1926] 2 D.L.R. 340; Schultz v. Canada, 1995 3545 (FCA), [1995] F.C.J. No. 1470, [1996] 1 F.C. 423, 189 N.R. 284, [1996] 2 C.T.C. 127, 95 D.T.C. 5657, 58 A.C.W.S. (3d) 1195 (C.A.); Singh v. Trump, [2016] O.J. No. 5285, 2016 ONCA 747, 408 D.L.R. (4th) 235, 62 B.L.R. (5th) 216, [2017] I.L.R. para. G-2755, 76 R.P.R. (5th) 177, 271 A.C.W.S. (3d) 503, 2016 OREG para. 59,189, 2016 CSLR para. 900-661 [Leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 548]; The Cash Store Inc. v. Cathy Jean Garvagh, unreported, December 16, 2013 (Small Claims Court); Tiago v. Meisels, [2011] O.J. No. 4525, 2011 ONSC 5914 (S.C.J.); Victoria & Grey Trust Co. v. Crawford (1986), 1986 2638 (ON SC), 57 O.R. (2d) 484, [1986] O.J. No. 1284, 3 A.C.W.S. (3d) 30 (H.C.J.)
Statutes referred to
Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, s. 53(1)
Partnerships Act, R.S.O. 1990, c. P.5, ss. 1(1) [as am.], 2, 5, 11, 12, (a), (b), 15(1)
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1), 5.03(3), (6), 8, 8.02, 8.03, 8.06(2)
Authorities referred to
Banks, Roderick l'Anson, Lindley & Banks on Partnership, 17th ed. (London: Sweet & Maxwell, 1995)
Banks, Roderick l'Anson, Lindley & Banks on Partnership, 19th ed. (London: Sweet & Maxwell, 2010)
Manzer, Alison R., A Practical Guide to Canadian Partnership Law, looseleaf (Aurora, Ont.: Canada Law Book, 1994-(October 2011 release consulted))
MOTION for summary judgment against an individual lawyer and a law firm.
Christine G. Carter, for plaintiff.
Stephen Cavanagh and Robin Brown, for defendants Williams McEnery and Williams Litigation Lawyers.
Craig O'Brien, for defendant Paul McEnery.
BELL J.: —
Overview
[1] For close to 40 years, Paul McEnery and Eric Williams practised law under the banner "Williams McEnery". I must determine whether they practised in partnership.
[2] These actions arise as a result of dealings Mr. McEnery had with clients in 2015, before he ceased practising law in November of that year.[^1] Mr. McEnery had a solicitor's practice: [page212] corporate/commercial, real estate and estates. With others, Mr. Williams practised and continues to practise exclusively in the field of civil litigation.
[3] In the first action, 1062484 Ontario Inc. ("106 Ontario") alleges that as a result of requests by Mr. McEnery, Davtair Industries Inc. loaned the defendants $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 as the assignee of the outstanding debt.
[4] In the second action, 1770650 Ontario Inc. ("177 Ontario") alleges that in September 2015, it provided $241,000 to the defendants 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 the additional costs it says it incurred to maintain the mortgage in good standing.
[5] Both plaintiffs move for summary judgment against Mr. McEnery and the defendant law firm Williams McEnery, now known as Williams Litigation Lawyers (the "law firm"). The plaintiffs also seek summary judgment against Mr. Williams, Paul Muirhead, Kelly Hart and Christopher Reil.
[6] The plaintiffs say that in addition to Mr. McEnery, the law firm is liable because (i) Mr. McEnery was a partner in the firm, and (ii) Mr. McEnery was "held out" as a partner in the firm. The law firm denies that Mr. McEnery was a partner and says that the plaintiffs have not established they gave credit to Mr. McEnery in reliance on a representation by the firm that Mr. McEnery was a partner. The law firm also maintains that 106 Ontario's action is a nullity because the defendants were not provided with notice of the assignment of the alleged debt to 106 Ontario and Davtair is not a party to the claim.
[7] The law firm does not dispute that this is an appropriate case for summary judgment: it says summary judgment should be granted in its favour and the claims against it dismissed.
[8] For the following reasons, I grant the plaintiffs' motions for summary judgment as against Mr. McEnery. I grant summary judgment to the law firm and dismiss the plaintiffs' claims against it.
The Claims and the Evidence
(i) 106 Ontario's claim
[9] David Woodruff is the president and sole director of 106 Ontario. Until May 2016, he was the president and a director of Davtair. In his affidavit, Mr. Woodruff stated that Davtair became a corporate client of the law firm in 1988 when it was incorporated, [page213] and that over the years, the legal services were performed "in large part, but not exclusively by Mr. McEnery". His testimony on his examination[^2] was different: he was unsure whether Mr. McEnery provided any legal services to Davtair apart from assisting with its incorporation, and he could not recall Davtair dealing with any lawyer at the law firm other than Mr. McEnery.
[10] According to Mr. Woodruff, in March 2015, Mr. McEnery approached him and requested that Davtair make a loan to the defendants in the amount of $420,000. The bank draft was made payable to "Williams McEnery In Trust". Four hundred thousand dollars was repaid in August 2015. In September 2015, Mr. McEnery approached Mr. Woodruff and requested another loan from Davtair, this time in the amount of $360,000. The second bank draft was also made payable to "Williams McEnery In Trust". The entirety of the second loan remains outstanding. Mr. Woodruff has no documents from the law firm related to these transactions. Mr. Woodruff did not discuss the loans with anyone at the law firm other than Mr. McEnery.
[11] In May 2016, Davtair was sold. The outstanding debt was assigned to Mr. Woodruff's holding company, Davtair Holdings Inc. Davtair Holdings then changed its name to 106 Ontario.
(ii) 177 Ontario's claim
[12] Pierre Bouchard is the president and sole director of 177 Ontario. Mr. Bouchard's evidence is that in January 2014, 177 Ontario retained the law firm to provide legal services in connection with the purchase of a property on McLeod St. in Ottawa, and that those services were performed "in large part, but not exclusively, by the defendant Paul McEnery". In March 2014, Mr. Bouchard (in trust) entered into an agreement to purchase the property, with the vendor taking back a mortgage. Mr. McEnery provided a reporting letter in respect of the transaction, written on the letterhead of "Williams McEnery -- Barristers & Solicitors".
[13] Under the terms of a negotiated lease, the vendor of the property was permitted to remain in the premises until the mortgage was discharged or the vendor chose to vacate the premises. In May 2015, the vendor vacated the premises but left her possessions behind. In September 2015, 177 Ontario provided a money order in the amount of $241,000 payable to "Paul T. McEnery 'In Trust'" with instructions that the funds were to be released to the vendor and the mortgage discharged after the vendor's [page214] possessions had been removed from the property. In November 2015, 177 Ontario e-mailed Mr. McEnery to advise that the vendor's possessions had been removed. The $241,000 was not transferred to the vendor, and the mortgage remains on title to the property.
(iii) The law firm's evidence
[14] In response to each motion, the law firm filed affidavits of Mr. Williams, David Bertschi, Jaye Hooper and Mark Charron. Mr. Williams, previously a partner in the law firm, became counsel to the firm in May 2015. Mr. Bertschi was a partner in the law firm when he left in September 1993. Ms. Hooper became an equity partner in the firm in January 2011. She retired from the partnership in October 2015. Mr. Charron was a partner in the law firm from December 1998 until his departure in February 2010.
[15] Plaintiffs' counsel contends that because none of these individuals is currently a partner in the law firm, there has been "no response from Williams McEnery". Counsel urges me to draw an adverse inference against the law firm.
[16] I decline to do so. The plaintiffs' submission that there has been no response from the law firm is without merit. The law firm has provided a response to the motions that consists of evidence from four former partners of the firm, including Mr. Williams, who is counsel to the law firm that continues to bear his name.
[17] Mr. Bertschi stated in his affidavit that while he was at the law firm, Mr. McEnery was a sole practitioner who carried on a corporate, commercial, real estate and estates practice that was "completely independent and separate from the litigation portion of the firm". Mr. Bertschi's evidence is that there was no sharing of profits and losses between the litigation group and Mr. McEnery, that Mr. McEnery had his own chartered accountant, and that he dealt with the Royal Bank of Canada. The litigation group dealt with the Bank of Nova Scotia. Ms. Hooper and Mr. Charron agree with and adopt Mr. Bertschi's evidence.
[18] According to Mr. Williams, Mr. McEnery was a sole practitioner, carrying on "a completely different practice -- corporate/ commercial, real estate and estates", who shared space with the litigation group and nothing more. Mr. Williams' evidence is that the Williams litigation group carried on a civil litigation practice and did not do any corporate/ commercial or real estate work. Mr. Williams stated that the litigation group developed "its own separate partnership" of which Mr. Williams was the managing partner, and that Mr. McEnery had no participation in the partnership.
[19] The evidentiary record includes the partnership agreement made January 1, 2011 (operative in 2015) among Mr. Williams, [page215] Mr. Reil, Mr. Muirhead and Ms. Hooper. The 2014 Annual Lawyer Reports filed with the Law Society of Upper Canada[^3] by Mr. McEnery and Mr. Williams are also in the record.
[20] Mr. Williams' evidence is that Davtair was never a client of the law firm. Mr. Williams knew Mr. Woodruff and his wife to be clients of Mr. McEnery. The moneys alleged to have been advanced by Davtair did not come to the law firm's trust account. The law firm had no knowledge at the time that the alleged loan transactions had occurred.
[21] According to Mr. Williams, 177 Ontario was never a client of the law firm; neither Mr. Williams nor the other lawyers in the litigation group ever acted on real estate transactions, or prepared or negotiated mortgages and leases. The $241,000 did not come to the law firm's trust account. The law firm did not have notice or any knowledge of the real estate transactions and negotiations relating to the McLeod St. property until after the events described by Mr. Bouchard.
(iv) Mr. McEnery
[22] Mr. McEnery did not file responding materials and he took no position on the motions.
Summary Judgment
[23] The plaintiffs and the law firm agree that there is no genuine issue requiring a trial with respect to the plaintiffs' claims. They do disagree on the outcome: the plaintiffs say they are entitled to judgment against all the defendants, while the law firm argues it is entitled to judgment dismissing the claims against it.
[24] The plaintiffs strenuously object to the law firm's ability to seek what is colloquially known as a "boomerang" order for summary judgment when the law firm did not serve a notice of cross-motion. They maintain that it would be unfair in the circumstances of this case for the court to grant summary judgment and to dismiss the plaintiffs' claims against the law firm. In support of their position, the plaintiffs rely on Drummond v. Cadillac Fairview Corp., [2019] O.J. No. 2802, 2019 ONCA 447 and Office Centre (Kingston) Ltd. v. Salshir Properties Ltd., [2019] O.J. No. 3687, 2019 ONSC 4135 (S.C.J.). The plaintiffs argue that the unfairness would be compounded by the fact that there are six other plaintiffs with actions against Mr. McEnery [page216] and the law firm who did not have notice that the law firm intended to seek boomerang orders. The plaintiffs here raise the potential for inconsistent findings and the possibility that a dismissal order could act as a bar to recovery by the plaintiffs in the other actions.
[25] The Court of Appeal for Ontario has confirmed that the court has the authority to grant boomerang orders and that this authority does not depend on the bringing of a cross-motion: Meridian Credit Union Ltd. v. Baig, [2016] O.J. No. 947, 2016 ONCA 150, 394 D.L.R. (4th) 601, at para. 17; King Lofts Toronto I Ltd. v. Emmons, [2014] O.J. No. 1333, 2014 ONCA 215, 40 R.P.R. (5th) 26, at paras. 14-15; Kassburg v. Sun Life Assurance Co. of Canada (2014), 124 O.R. (3d) 171, [2014] O.J. No. 6222, 2014 ONCA 922, at paras. 50-52; Singh v. Trump, [2016] O.J. No. 5285, 2016 ONCA 747, 408 D.L.R. (4th) 235, at para. 147, leave to appeal to S.C.C. refused [2016] S.C.C.A No. 548. In Kassburg, the Court of Appeal concluded it was in the interests of justice, and consistent with the decision of the Supreme Court of Canada in Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7 and the clear wording and purpose of the summary judgment rule, that a limitations issue be determined on a final basis in the absence of a motion for summary judgment by the respondent. A boomerang summary judgment order may support the principles of proportionality and sensible management of the court process (King Lofts, at para. 15).
[26] In Drummond, the Court of Appeal concluded that the motion judge's grant of judgment in favour of Mr. Drummond was not a fair and just determination on the merits of the motion based on a combination of factors:
-- Mr. Drummond's failure to bring a cross-motion for judgment, with his main position before the motion judge being that the case was not an appropriate one to be determined by summary judgment;
-- Mr. Drummond's position before the motion judge that there was the need for further evidence from additional witnesses;
-- the motion judge's failure to consider the material defence of contributory negligence raised by the defendant; and
-- the motion judge's failure to put the defendant on notice that he might grant judgment against it and his failure to afford the defendant an opportunity to address that litigation risk.
[27] None of these factors is present in this case. The law firm agrees with the plaintiffs that these are appropriate cases for [page217] summary judgment. They agree that there is no need for further evidence from additional witnesses.
[28] The motions have been outstanding for a considerable period of time. The plaintiffs have had notice since November 2018 that the law firm was seeking summary judgment dismissing the plaintiffs' claims as against it. In its written submissions, the law firm cited the Court of Appeal's decision in Singh in support of the proposition that on a motion for summary judgment, the motion judge may grant judgment in favour of a responding party even in the absence of a cross-motion for such relief. Counsel confirmed the law firm's intention to seek a boomerang order at the outset of his submissions on October 25, 2019.
[29] The plaintiffs filed reply submissions. The issue of a boomerang order was not addressed. In her reply submissions at the hearing, counsel for the plaintiffs did not provide the court with any responding case law on the availability of boomerang orders. As a result, I invited counsel to make written submissions on the issue.
[30] The decision in The Office Centre does not assist the plaintiffs. In that case, the defendants had not only failed to bring a cross-motion, they also did not request a boomerang order until the delivery of their supplementary factum shortly before the hearing. In those circumstances, Hurley J. found that justice required the plaintiff be afforded the opportunity to adduce further evidence to demonstrate that there was a genuine issue for trial.
[31] There is no unfairness to the plaintiffs in the other actions against Mr. McEnery and the law 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 law firm's favour. As the law 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 defendant firm's request for a boomerang order". There is no risk of contrary findings regarding the issue of whether the law 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.
[32] I am satisfied that the evidentiary record allows me to make the necessary findings of fact and allows me to apply the law to the facts. I am also satisfied that summary judgment is [page218] a timely, affordable and proportionate procedure. I find there is no genuine issue requiring a trial because I am able to reach a fair and just determination on the merits of the motions for summary judgment (Hryniak, at paras. 4 and 49).
The Plaintiffs' Request for Judgment Against Non-Parties
[33] The plaintiffs served a "notice to alleged partner" on Mr. Williams, Mr. Muirhead, Mr. Hart, Mr. Reil and Mr. McEnery. Mr. McEnery is a named defendant in these proceedings. Mr. McEnery's statement of defence includes a denial that he has ever been a partner with Mr. Williams.
[34] Mr. Williams, Mr. Muirhead, Mr. Hart and Mr. Reil are not named defendants. However, the plaintiffs assert that because Mr. Williams, Mr. Muirhead, Mr. Hart and Mr. Reil did not separately defend the proceedings denying that they were partners at the material time, they are deemed to be partners pursuant to rule 8.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and the plaintiffs are entitled to summary judgment against them.
[35] I disagree. Where a proceeding is commenced against a partnership using the firm name, the partnership's defence is to be delivered in the firm name; no person who admits having been a partner at any material time is entitled to defend the proceeding separately, except with leave of the court (rule 8.02). Rule 8.03 provides for notice to alleged partners for purposes of enforcement. Rule 8.03 provides:
8.03(1) In a proceeding against a partnership using the firm name, where a plaintiff or applicant seeks an order that will be enforceable personally against a person as a partner, the plaintiff or applicant may serve the person with the originating process, together with a notice to alleged partner (Form 8A) stating that the person was a partner at a material time specified in the notice.
(2) A person served as provided in subrule (1) shall be deemed to have been a partner at the material time, unless the person defends the proceeding separately denying that he or she was a partner at the material time.
[36] Rule 8.06(2) specifically addresses the circumstances in which an order against a partnership using the firm name may be enforced against a person who was served with a rule 8.03 notice.
[37] The plaintiffs commenced a proceeding against the law firm using the firm name. Any judgment obtained would be against the law firm, and enforceable, including as against a person served as an alleged partner, in accordance with the provisions of Rule 8 of the Rules of Civil Procedure. [page219]
The Assignment from Davtair Industries to 106 Ontario
[38] The law firm submits that 106 Ontario, the assignee of the alleged debt, has no status to bring the action because the defendants were not given "express notice in writing" of the assignment as required by s. 53(1) of the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34. Rule 5.03(3) of the Rules of Civil Procedure provides that unless the assignment is absolute and notice in writing of the assignment has been given to the person liable in respect of the debt, the assignor shall be joined as a party to a proceeding by the assignee. The purpose behind the requirement that the assignor be a party is to bind the assignor so as to save the debtor from the possibility of another action against it and from the possibility of conflicting decisions in respect of the same debt (Gentra Canada Investments Inc. v. Lipson (2011), 106 O.R. (3d) 261, [2011] O.J. No. 1920, 2011 ONCA 331, at para. 61; Bercovitz Estate v. Avigdor, [1961] O.J. No. 20, [1961] O.W.N. 59 (C.A.), at para. 22; DiGuilo v. Boland, 1958 92 (ON CA), [1958] O.R. 384, [1958] O.J. No. 602, 13 D.L.R. (2d) 510 (C.A.), at pp. 513-14 D.L.R.).
[39] On his examination, Mr. Woodruff confirmed that he has no knowledge of notice of the assignment of the alleged debt having been given to any of the defendants. Davtair, the assignor, is not a party to the action.
[40] 106 Ontario submits that the defendants have had sufficient notice of the assignment because they were served with the statement of claim in May 2016. The law firm relies on The Cash Store Inc. v. Cathy Jean Garvagh (unreported decision of the Small Claims Court, December 16, 2013) in which the deputy judge rejected a similar argument on the basis that the requirements set out in what is now s. 53(1) of the Conveyancing and Law of Property Act are matters of substantive law, and notice gives the alleged debtor a reason to accept that the party claiming under the assigned debt has a legal basis to do so: "[t]o hold that eventual issuance of a claim is sufficient notice would drain [s. 53(1)] of any real meaning".
[41] It is not always necessary for the assignor to be joined as a party. In DiGuilo, Morden J.A. for the court identified two situations as examples where the assignor did not need to be a party to the action: "where the defendant does not raise the point as a matter of defence . . . or where it is clear that the assignor, a company, had no interest in the chose and had ceased to exist" (at p. 516 D.L.R.). When the limitation period has clearly run on any claim by the assignor, there can be no conceivable interest remaining in the assignor; in that case, the [page220] assignor need not be a party to the action (Gentra Canada, at para. 63; Bercovitz Estate, at para. 25).
[42] In keeping with the general principle of interpretation in rule 1.04(1) that the Rules of Civil Procedure are to be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits, this court has discretion under rule 5.03(6) to relieve against the requirement of joinder (Gentra Canada, at para. 65).
[43] In its statement of defence, the law firm raised as a defence the absence of notice of the assignment of the alleged debt. However, there can be no conceivable interest remaining in Davtair because the limitation period has clearly run on any possible claim by it, and no possibility of conflicting decisions in respect of the same debt. In my view, 106 Ontario is entitled to maintain the action in its own name.
The Plaintiffs are Entitled to Judgment Against Mr. McEnery
[44] I am satisfied based on the record before me that Davtair made loans to Mr. McEnery in March and September 2015 that have not been repaid in full. I find that the amount outstanding on the loans is $380,000. 106 Ontario is entitled to judgment in this amount as against Mr. McEnery.
[45] I am also satisfied that in September 2015, 177 Ontario advanced $241,000 to Mr. McEnery in order to repay and discharge the mortgage on the McLeod St. property. I find that Mr. McEnery did not use the funds as intended: the mortgage remains on title. In his affidavit, Mr. Bouchard stated that 177 Ontario has had to make additional payments to the vendor of the property in order "not to lose the property". The amount is said to be in excess of $100,000; however, apart from Mr. Bouchard's statement, 177 Ontario has not provided evidence of the amount allegedly paid to maintain the mortgage in good standing. Because the additional amount has not been proved, I award 177 Ontario judgment against Mr. McEnery in the amount of $241,000.
[46] I turn to consider the law firm's potential liability for the plaintiffs' claims.
Liability Under the Partnerships Act
[47] Section 11 of the Partnerships Act provides for the liability of a firm for a wrongful act or omission of a partner. Section 12 deals with the liability of a firm for misapplication of money or property received for or in the custody of the firm. These sections provide as follows: [page221]
Where by any wrongful act or omission of a partner acting in the ordinary course of the business of the firm, or with the authority of the co-partners, loss or injury is caused to a person not being a partner of the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act.
In the following cases, namely,
(a) where one partner, acting within the scope of the partner's apparent authority, receives the money or property of a third person and misapplies it; and
(b) where a firm in the course of its business receives money or property of a third person, and the money or property so received is mis-applied by one or more of the partners while it is in the custody of the firm,
the firm is liable to make good the loss.
[48] In Allen v. Aspen Group Resources Corp., [2012] O.J. No. 2924, 2012 ONSC 3498 (S.C.J.), at para. 48, Strathy J., as he then was, described the underlying rationale of s. 11 as similar to that behind the vicarious liability of an employer for the actions of an employee acting in the course of business: "based on a combination of policy factors that are rooted in fairness, equitable compensation for injuries, loss spreading and risk control". These observations apply equally to s. 12.
[49] Liability under s. 11 or s. 12 requires Mr. McEnery to have been a partner in the law firm at the time of the transactions. So, for example, in Victoria & Grey Trust Co. v. Crawford (1986), 1986 2638 (ON SC), 57 O.R. (2d) 484, [1986] O.J. No. 1284 (H.C.J.), a decision on which the plaintiffs rely, the firm of solicitors was found liable under both sections on the basis that the firm admitted that Mr. Farr was a partner, Mr. Farr had acted in the ordinary course of the firm's business in receiving estate funds, and a loss had occurred.
[50] The plaintiffs advance the argument that because Mr. McEnery was referred to in public documents as a member of the law firm, he was a partner in the law firm for purposes of the Partnerships Act. The plaintiffs rely on s. 5 of the Partnerships Act. Section 5 provides:
- Persons who have entered into partnership with one another are, for the purposes of this Act, called collectively a firm, and the name under which their business is carried on is called the firm name.
[51] I do not accept this argument. Section 5 makes clear that the word "firm" as used in the Partnerships Act applies only to "persons who have entered into partnership with one another". Whether Mr. McEnery was practising in partnership with Mr. Williams is the very question I must determine in this case. [page222]
[52] In asserting that the law firm is liable, the plaintiffs also rely on s. 15(1) of the Partnerships Act. Section 15(1) provides:
15(1) 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.
[53] The threshold issue under s. 15(1) is whether the person was represented as or held out to be a partner in a particular firm. Holding out affects liability as against third parties, not the essential validity of the arrangement (Continental Bank Leasing Corp. v. Canada,1998 794 (SCC), [1998] 2 S.C.R. 298, [1998] S.C.J. No. 63, at para. 36).
Was Mr. McEnery a Partner in the Law Firm?
[54] Section 2 of the Partnerships Act defines partnership as the relationship that exists between persons carrying on a business in common with a view to profit. The wording of s. 2 discloses three essential ingredients: (i) a business, (ii) carried on in common and (iii) with a view to profit. The existence of a partnership is dependent upon the facts and circumstances of the particular case; it is also determined by what the parties actually intended determined on an objective basis: "regard must be paid to the true contract and intention of the parties as appearing from the whole facts of the case" (Continental Bank, at paras. 22-23, citing Lindley & Banks on Partnership, 17th ed. 1995, at p. 73).
[55] There are a number of judicially-recognized criteria that indicate the existence of a partnership. They include (Continental Bank, at para. 24):
the contribution by the parties of money, property, effort, knowledge, skill or other assets to a common undertaking, a joint property interest in the subject-matter of the adventure, the sharing of profits and losses, a mutual right of control or management of the enterprise, the filing of income tax returns as a partnership and joint bank accounts.
(i) Was there a business?
[56] "Business" is defined broadly in s. 1(1) of the Partnerships Act to include "every trade, occupation and profession". The question here is not whether there was a business, but rather whether there was more than one business. The plaintiffs say that Mr. McEnery, together with Mr. Williams and the other members of the litigation group, carried on a single business as an Ottawa law firm specializing in civil litigation and real estate [page223] law. The plaintiffs rely on the description of the "business" that appeared on the Williams McEnery Facebook page.
[57] The law firm maintains that Mr. McEnery and the law firm operated two separate law practices or businesses. The law firm describes Mr. McEnery as a sole practitioner, who practised law in the areas of real estate, corporate/commercial and estates law. By contrast, the law firm was and is a partnership of lawyers practising exclusively in the area of civil litigation.
[58] I find that Mr. McEnery's legal practice was separate from that of the law firm and that the defendants conducted two distinct businesses. I have reached this conclusion based on the wording of the January 2011 partnership agreement, the Law Society filings and the evidence as to how the two legal practices were conducted.
[59] In the January 2011 partnership agreement, Mr. Williams, Mr. Reil, Mr. Muirhead and Ms. Hooper are referred to as the "Parties" or the "Partners". Mr. Williams is referred to as the "Founding Partner". Mr. McEnery was not a party to the partnership agreement, nor is he listed as a partner. In setting out Mr. Williams' agreement to the continued use of his name as part of the name of the law firm, the partnership agreement specifically states: "[t]he word 'Founder' does not include Paul McEnery".
[60] Section 1 of the partnership agreement describes two separate businesses:
The Firm, which has existed continuously without termination since 1978 will continue to carry on the business of barristers, solicitors, notaries public under the firm name and style of Williams McEnery. The Parties shall carry on this business solely related to this Civil Litigation side of the business and not the business of Paul T. McEnery.
[61] In an effort to discredit the partnership agreement, the plaintiffs ask me to infer that the parties to the partnership agreement entered the agreement because "the partners of the firm were trying to distance themselves from the actions of Paul McEnery that were causing them concern". This contention -- one of a most serious nature -- is advanced without any evidentiary foundation whatsoever.[^4]
[62] The Law Society filings support the conclusion that Mr. McEnery and the law firm were carrying on two separate legal businesses. In his 2014 Annual Report, Mr. McEnery confirmed, repeatedly, his status as "[a] sole practitioner, practising in Ontario [page224] with one or more lawyers in shared facilities". His law practice was wills, estates, trusts law (15 per cent), corporate/commercial law (15 per cent) and real estate law (70 per cent). Mr. McEnery identified the Royal Bank of Canada as his financial institution.
[63] By contrast, Mr. Williams' status according to his 2014 Annual Report was "Partner -- Prof. Bus". His practice was civil litigation (70 per cent plaintiff and 30 per cent defendant). Mr. Williams was the designated financial filing licensee for the lawyers and paralegals listed in the financial filing declaration. Mr. McEnery's name does not appear on that list. Scotiabank was identified as the law firm's financial institution.
[64] Plaintiffs' counsel asks me to draw an inference that the law firm was "aware that Paul McEnery was providing false information to the Law Society". I draw no such inference. Like the plaintiffs' effort to discredit the partnership agreement, this allegation is utterly without foundation.
[65] That Mr. McEnery's business was separate and distinct from that of the law firm is also evident from the manner in which the parties conducted, operated and managed their respective businesses. This leads to a consideration of the second essential ingredient of a partnership: the "in common" element.
(ii) Was the business carried on in common?
[66] For a partnership to exist, it is fundamental that the business be carried on in common (Continental Bank, at para. 29). If each supposed partner is carrying on a separate business wholly independently of the other(s), there is in law no partnership between them (Roderick l'Anson Banks, Lindley & Banks on Partnership, 19th ed. (London: Sweet & Maxwell, 2010), at para. 2-06). "Partnership arises from contract, evidenced either by express declaration or by conduct signifying the same thing. It is not sufficient there should be community of interest; there must be [a] contract" (Schultz v. Canada, 1995 3545 (FCA), [1995] F.C.J. No. 1470, [1996] 1 F.C. 423 (C.A), at para. 26, citing Robert Porter & Sons Ltd. v. Armstrong, 1926 23 (SCC), [1926] S.C.R. 328, [1926] S.C.J. No. 18). The very wording of the statutory definition of partnership -- "in common" -- creates the need for an agreement (written, oral or implied), between the parties (Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc., [2012] A.J. No. 460, 2012 ABQB 277, 62 Alta. L.R. (5th) 359, at para. 76, revd on other grounds [2012] A.J. No. 1155, 2012 ABCA 328, 69 Alta. L.R. (5th) 22).
[67] There is compelling evidence that the defendants were not carrying on a business in common. Mr. McEnery and the law firm shared office space for many years in an office building owned by [page225] Mr. McEnery and Mr. Williams personally. Mr. McEnery paid his share of the common overhead expenses. However, Mr. McEnery and the law 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 law firm. The law firm and Mr. McEnery maintained their respective trust accounts at different financial institutions.
[68] There is no evidence to support the plaintiffs' assertion that the parties derived a "financial benefit" from "continuing to practise under the firm name Williams McEnery", or that they contributed to a common undertaking.
[69] Mr. Williams' evidence is that Mr. McEnery had no participation rights in the partnership and did not share in the revenues of the law firm. Mr. Williams never had any involvement in, nor did he ever see, Mr. McEnery's financial results or billings.
[70] Mr. Williams' evidence is consistent with the provisions of the partnership agreement among himself, Mr. Reil, Mr. Muirhead and Ms. Hooper. Section 19 of the partnership agreement provides that the "Partners" shall participate in the profits of the firm as determined by the "Partners", and the "Partners" shall participate in the losses of the firm pro rata to their existing interest. "Partners" does not include Mr. McEnery. Section 20 deals with the amount to be drawn by each "Party", with the amounts to be determined by the Partnership representing a vote by 80 per cent of the interests of the "Partners". "Party" does not include Mr. McEnery.
[71] Contrary to the plaintiffs' contention, the partnership agreement does not describe Mr. McEnery as a partner in the law firm. The second recital expressly states that "[s]ince 1978 Eric Williams and Paul McEnery were not true partners but rather moral partners, Eric Williams carrying on the practice of civil litigation, Paul McEnery carrying on the practice of corporate commercial and real estate".
[72] I also reject the plaintiffs' submission that Mr. McEnery's consent was required to "allow the firm to move". The partnership agreement provided only that the Partners would attempt to obtain Mr. McEnery's consent to a move, but if his consent was not forthcoming, the Partners could move on and carry on their practice under a different name.[^5]
[73] In support of their allegation that Mr. McEnery shared in the profits and received draws from the law firm, the plaintiffs [page226] rely on three cancelled cheques, each payable to Mr. McEnery. Although each cheque bears the name and address of Williams McEnery, Barristers and Solicitors, the cheques are drawn on an account at the Royal Bank of Canada, identified by Mr. McEnery in his Law Society filing as his financial institution, and not Scotiabank, the law firm's financial institution. The plaintiffs' reliance is misplaced: these cheques are not evidence that Mr. McEnery shared in the revenues of the law firm. The uncontradicted evidence is that he did not.
[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 (Q.B.), at para. 86, citing Alison R. Manzer, A Practical Guide to Canadian Partnership Law, looseleaf (Aurora: Canada Law Book, 1994- (October 2011 release consulted), at para. 2.340).
[75] As between Mr. McEnery and the law firm, none of the common indicia of partnership as set out in para. 24 of Continental Bank existed. There was no common undertaking to which Mr. McEnery and the law firm contributed. Mr. McEnery and the law firm did not have a joint property interest in the office building or otherwise. Mr. McEnery did not share in the profits and losses of the law firm. Only Mr. Williams managed the law firm's business of litigation. Mr. McEnery and the law firm maintained their own financial statements. They did not have joint bank accounts. Because none of the indicia of partnership were present in the relationship between Mr. McEnery and the law firm, I need not consider at this stage, their dealings with third parties. Those dealings, while relevant to the analysis under s. 15(1) of the Partnerships Act cannot, by themselves, validate the existence of a partnership.
[76] Having regard to all the facts and circumstances, I find that Mr. McEnery and the law firm did not intend to and did not carry on a business in common.
(iii) Was the business carried on in common with a view to profit?
[77] The intention to make a profit, and that the profit be shared by the parties to the agreement, is the "grand characteristic" of every partnership (Schultz, at para. 33; Lindley, at para. 2-07). I have reviewed the provisions in the January 2011 partnership [page227] agreement regarding the sharing of the law firm's profits and losses. They disclose a specific intention among the signatories to the agreement -- not Mr. McEnery -- that the profits and losses be shared among only Mr. Williams, Mr. Reil, Mr. Muirhead and Ms. Hooper. There is no evidence of any expectation to the contrary, nor is there evidence that the profits were in fact shared with Mr. McEnery.
(iv) Mr. McEnery was not a partner in the law firm
[78] Assessing the parties' intentions objectively, I conclude that Mr. McEnery and the law firm did not intend to create a partnership within the meaning of the Partnerships Act. I find that Mr. McEnery was not, in law, a partner in the law firm.
Additional Arguments in Relation to ss. 11 and 12 of the Partnerships Act
[79] The law firm advances two additional arguments in relation to ss. 11 and 12 of the Partnerships Act. Although my finding that Mr. McEnery was not a partner in the law firm disposes of the plaintiffs' claims of liability against the firm based on "actual partnership", I address the additional arguments briefly.
(i) Not in the ordinary course of the law firm's business
[80] The law firm submits that ss. 11 and 12 have no application in this case because the wrongful conduct complained of did not occur "in the ordinary course of the business of the firm". I agree that both sections require the misconduct to have occurred "in the ordinary course of the business of the firm". These words are used expressly in s. 11. Similar wording is used is s. 12(b): "where a firm in the course of its business receives money or property of a third person".
[81] The applicability of s. 12(a) of the Partnerships Act depends on showing that one partner was "acting within the scope of the partner's apparent authority". A partner's activities are within the scope of her implied authority "if they f[a]ll within the ordinary course of the business of the law firm". The determination is a factual one, based on an assessment of the specific transactions in issue and the nature of the business carried on by the partnership (McDonic Estate v. Hetherington (Litigation Guardian of) (1997), 1997 1019 (ON CA), 31 O.R. (3d) 577, [1997] O.J. No. 51 (C.A.), at para. 21, leave to appeal to S.C.C. refused [1997] S.C.C.A. No. 119).
[82] The nature of the underlying transaction and the activities that are carried out are of "critical importance" to the analysis (Lindley, at paras. 12-16). There is conflicting evidence from Mr. [page228] Woodruff as to the purpose for which the funds advanced by Davtair were to be used. In his affidavit, Mr. Woodruff described the advances as loans "to the defendants" and stated that "he did not know what they were planning to do with the money". Mr. Woodruff testified on his examination that Mr. McEnery had told him that the funds were to be lent to clients of the defendants.
[83] Neither purpose would bring the transactions within the law firm's ordinary course of business. First, borrowing money from clients is prohibited by the Law Society of Ontario (Rules of Professional Conduct, 3.4-28.1). Second, I find that brokering loans for clients was not within the ordinary course of business of the law firm, which practised exclusively in the area of civil litigation. The facts before me are entirely different than those that were before the Court of Appeal in McDonic Estate, where the court found that Mr. Watt, a partner, had invested money for clients of the law firm using the facilities of the law firm, the services of the law firm's employees and the law firm's trust account. The Court of Appeal concluded in that case that "[h]is activity is indistinguishable from the law firm's substantial mortgage business described by Mr. Carriere" (McDonic Estate, at para. 31). None of the factors identified by the Court of Appeal as relevant to its determination that investing on behalf of clients was within the ordinary course of the law firm's business are present in the case before me.
[84] In the case of 177 Ontario, the law firm makes a similar argument: because the law firm's business was (and is) exclusively in civil litigation and the funds at issue were advanced in relation to a real estate transaction, the funds cannot be said to have been received in the ordinary course of the law firm's business. I agree. The evidence in the record is that Mr. Williams and the other lawyers in the litigation group never acted on real estate transactions in any capacity. I find that in the ordinary course of its business, the law firm would not have received funds intended to be used to pay off a mortgage negotiated in the context of a real estate transaction.
[85] These observations and findings reinforce my conclusion that Mr. McEnery and the law firm were conducting their respective legal practices as two separate and distinct legal businesses.
(ii) Funds not received by the law firm
[86] Liability under s. 12 of the Partnerships Act for the mis-application of money or property requires that the money or property be received by or in the custody of the firm (McDonic Estate, at para. 23, referring to Harman v. Johnson (1853), 2 El. & B. 61). As stated in Lindley, at para. 12-115: [page229]
The principle . . . is that the firm has, in the ordinary course of its business, obtained possession of the property of other people, and has then parted with it without their authority. Under such circumstances the firm is responsible: and the fact that the property has been improperly procured and placed in the custody of the firm by one of the partners does not lessen the liability of the firm.
[87] Mr. Williams' evidence is that the law firm did not receive the funds advanced by Davtair, nor did it receive the funds provided by 177 Ontario to discharge the mortgage.
[88] 106 Ontario points out that the second bank draft in the amount of $360,000 is marked "for deposit only to the credit of Williams McEnery Trust Account", and that the account referenced is different than that on Mr. McEnery's Law Society filing. It is also, however, different than that listed on Mr. Williams' Law Society filing. The cancelled bank draft does not serve as evidence that the law firm received the funds into its trust account. Mr. Williams' evidence on this issue was not challenged. I accept his evidence and I find that the law firm did not receive the funds advanced by Davtair.
[89] 177 Ontario says that its cheque payable to "Paul T. McEnery 'In Trust'" was deposited at Scotiabank, the law firm's financial institution. The record shows that the cheque was deposited at the Royal Bank of Canada. Mr. Williams was not cross-examined on his evidence that the law firm did not receive funds from 177 Ontario, and I accept his evidence in this regard. I find that the funds advanced by 177 Ontario were never received by the law firm.
The Holding Out/Detrimental Reliance Claim
[90] The plaintiffs also allege that the law firm is liable based on s. 15(1) of the Partnerships Act. In his affidavit, Mr. Woodruff stated that he met Mr. Williams around the same time he met Mr. McEnery, almost 30 years ago, and that he always understood them to be partners. Mr. Williams' evidence is that he met Mr. Woodruff through Mr. McEnery. Mr. Woodruff and Mr. McEnery were friends. Mr. Woodruff was a client of Mr. McEnery and in that capacity, Mr. Woodruff attended the annual Williams McEnery client event.
[91] Mr. Bouchard stated he first met Mr. Williams and Mr. McEnery together in the 1980s at an Ottawa business club where Mr. Williams was speaking. According to Mr. Bouchard, Mr. Williams and Mr. McEnery held themselves out to be partners and he always understood them to be partners in Williams McEnery. Mr. Williams acknowledges that he may have met Mr. Bouchard many [page230] years ago but maintains that he never had a business or personal relationship with Mr. Bouchard or 177 Ontario.
[92] Both plaintiffs highlight the following in support of their position that Mr. McEnery was held out to be a partner in the law firm:
-- At the shared office premises on Gilmour St., the name of the firm was "prominently displayed" as "Williams McEnery"; there was no indication that anyone was sharing space or not a member of the firm. There was one reception area with a single receptionist.
-- The Williams McEnery website listed the firm name as "Williams McEnery" and described Mr. McEnery as a "founding partner". The website did not state that Mr. McEnery was not a partner in the law firm.
-- The Williams McEnery Facebook page stated that "Williams McEnery is an Ottawa law firm specializing in civil litigation and real estate law." That page also stated that the firm was "founded by senior partners Eric Williams and Paul McEnery in 1979". The Facebook page did not state that Mr. McEnery was not a partner in the law firm.
-- Mr. McEnery's e-mail address was similar to those of other members of the firm with the domain
illiamsmcenery.com.
-- The Williams McEnery annual holiday party was attended by both litigation and real estate clients.
-- The letterhead was that of "Williams McEnery, Barristers and Solicitors". It contained no indication that Mr. Williams and Mr. McEnery were not partners. 177 received a reporting letter signed by Mr. McEnery on the letterhead of Williams McEnery.
[93] In addition, 177 Ontario was directed to make cheques payable to "Williams McEnery".
[94] In support of their position that Mr. McEnery was held out as a partner of the law firm, the plaintiffs rely on Tiago v. Meisels, [2011] O.J. No. 4525, 2011 ONSC 5914 (S.C.J.), Mantik v. Brotman, 1984 3807 (MB QB), [1984] M.J. No. 410, 29 Man. R. (2d) 134 (Q.B.) and Wallbridge v. Brunning, [2018] O.J. No. 1980, 2018 ONCA 363, 422 D.L.R. (4th) 305. Because of the analytical approach I have adopted, it is not necessary for me to address in detail the decisions in Tiago and Mantik. In Tiago, Stinson J. found that the defendants held themselves out as partners and failed to dispel that notion. In Mantik, the court expressed the view that [page231] there was "not a shred of evidence" to displace a finding that Ms. Cramer and her father had held themselves out to the public as partners (Mantik, at para. 57).
[95] Williams Litigation Lawyers ("WLL") was a defendant in Wallbridge. WLL successfully moved for summary judgment dismissing Wallbridge's claim that WLL was vicariously liable for the defamatory comments and misrepresentations alleged to have been made by the defendant Brunning about Wallbridge's representation of former Indian Residential School students. The evidence clearly established that Ms. Brunning, a lawyer, practised law "in association with" WLL. WLL's letterhead referenced Ms. Brunning as "Practicing in Association, not in Partnership". Plaintiffs' counsel here highlights that no comparable language was used on the Williams McEnery letterhead in relation to Mr. McEnery. The Court of Appeal allowed Wallbridge's appeal. It did so on the strength of the evidence that could support a finding of liability on the part of WLL for Ms. Brunning's allegedly defamatory correspondence and the "novelty and importance" of the question of WLL's liability.
[96] In my view, Wallbridge is of little assistance to the plaintiffs. Ms. Brunning was not a partner and there was no reliance placed on s. 15(1) of the Partnerships Act.
[97] A finding that Mr. McEnery was represented as or held out to be a partner in the law firm is not sufficient to find the firm liable to the plaintiffs. Pursuant to s. 15(1) of the Partnerships Act, a plaintiff is required to prove that she relied on the representation of partnership; any reasonable evidence of reliance by the plaintiff would satisfy this requirement. The plaintiff must also prove that on the faith of the representation, she gave credit to the firm (Bet-Mur Investments Ltd. v. Spring (1994), 1994 7312 (ON SC), 20 O.R. (3d) 417, [1994] O.J. No. 1980 (Gen. Div.), at para. 37, affd (1999), 1999 2802 (ON CA), 41 O.R. (3d) 799, [1999] O.J. No. 342 (C.A.)). As the Manitoba Court of Appeal put it in dealing with the corresponding section in that province's statute: "[a] holding out envisaged by the statutory provision contemplates a false representation which induces the injured plaintiff to bargain where, absent the representation, no business would have been transacted" (Peters v. Klassen, 1994 16906 (MB CA), [1994] M.J. No. 149, 92 Man. R. (2d) 245 (C.A.), at para. 18).
[98] In Dawson v. Halpenny Insurance Brokers Ltd., [2017] O.J. No. 3974, 2017 ONSC 4487 (S.C.J.), Corthorn J. set out the applicable three-step analysis in determining liability under s. 15(1) of the Partnerships Act. In this case:
(i) The plaintiffs have the onus of establishing that, by the manner in which they conducted business, Mr. McEnery and the law firm held themselves out to the public as partners. [page232]
(ii) If the plaintiffs establish that Mr. McEnery and the law firm held themselves out as operating in partnership, the onus shifts to the law firm to establish that it and Mr. McEnery clearly conveyed to the public that they were not partners.
(iii) Even if the plaintiffs establish that Mr. McEnery and the law firm held themselves out as partners, and the law firm fails to establish clear communication to the contrary, the plaintiffs are still required to establish that credit was given to Mr. McEnery based on the partnership, as held out to the public. This step requires consideration of the subjective beliefs of Davtair and 177 Ontario, and the extent to which they relied on these beliefs in their respective dealings with Mr. McEnery (Dawson, at paras. 62-64).
[99] In Dawson, Corthorn J. found that the plaintiff was unable to satisfy his onus with respect to the subjective portion of the test for holding out. As a result, Corthorn J. was not required to con-sider the first two steps in the analysis (Dawson, at paras. 65-66).
[100] I adopt the analytical approach followed by Corthorn J. in Dawson and turn to a consideration of whether the plaintiffs have established that credit was given to Mr. McEnery in reliance on his being held out to the public as a partner in the law firm.
(i) The reliance evidence -- 106 Ontario
[101] The law firm submits that 106 Ontario has failed to provide any evidence of Davtair's subjective belief of Mr. McEnery's relationship with the firm because Mr. Woodruff's affidavits were sworn after he ceased to be the president and a director of Davtair. Without deciding this issue, I consider Mr. Woodruff's evidence.
[102] Mr. Woodruff and Mr. McEnery were close friends for many years. Over the years, Mr. Woodruff had personally retained Mr. McEnery for several real estate transactions and to prepare wills. The 2015 loans were not the first loans made to Mr. McEnery: prior to the 2015 loans, there had been smaller loans, also with "no paper" and with an "appropriate added fee". Mr. Woodruff characterized the $20,000 outstanding from the first loan made in 2015 as a "premium" the client had agreed to pay.
[103] Mr. Woodruff stated in his affidavit that he always understood Mr. McEnery and Mr. Williams to be law partners and that he advanced funds to a person he believed to be a partner in the law firm. On his examination, Mr. Woodruff testified that he and his wife took comfort in the fact that the loans were made to "the firm" and not to an individual. However, when asked if he had any support for his statement, Mr. Woodruff responded: "just my saying that was my feeling". [page233]
[104] Mr. Woodruff's assertion that Davtair would not have made the loans to Mr. McEnery but for his belief that Mr. McEnery was a partner in the law firm is not supported by the evidence. The evidence suggests that the 2015 loans were grounded in the friendship between Mr. Woodruff and Mr. McEnery, and their prior dealings. Absent any credible explanation from Mr. Woodruff as to why it was important or relevant to him that Mr. McEnery was a partner in the law firm, Mr. Woodruff's assertion is little more than a bare allegation. I am not satisfied that Davtair gave credit to Mr. McEnery in reliance on Mr. McEnery being held out as a partner in the law firm. Accordingly, 106 Ontario's claim against the law firm in reliance on s. 15(1) of the Partnerships Act fails.
(ii) The reliance evidence -- 177 Ontario
[105] Like Mr. Woodruff, Mr. Bouchard stated in his affidavit that he always understood Mr. McEnery and Mr. Williams to be partners in the law firm. Mr. Bouchard's evidence in this regard did not withstand cross-examination. On his examination, Mr. Bouchard testified that at no time prior to retaining Mr. McEnery or during the course of the retainer, did he give any thought to the business relationship among the various lawyers at the law firm, nor did he make any inquiries about Mr. McEnery. Mr. Bouchard conceded that he did not understand how partnerships in legal firms work.
[106] Mr. Bouchard confirmed on his examination that prior to the purchase of the McLeod St. property, he was looking for "someone who was competent in real estate". Mr. McEnery "was the lawyer of a good friend of mine [Mr. Woodruff] who spoke highly of him all the time". He saw this as an "opportunity to give business to someone we knew, a friend of a friend, who met . . . our requirements at the time". I find that this was the real reason 177 Ontario retained Mr. McEnery; it had nothing to do with him being a partner in a law firm.
[107] Although Mr. Bouchard stated in his affidavit that he did not use and likely would not use the services of a sole practitioner, the fact that Mr. Bouchard made no inquiries with respect to Mr. McEnery belies this statement. Counsel for the law firm described Mr. Bouchard's statement as after the fact, "bootstrapping evidence". I agree. It is certainly not evidence that persuades me that 177 Ontario gave credit to Mr. McEnery based on Mr. McEnery being held out as a partner in the law firm.
[108] 177 Ontario is unable to satisfy the third part of the three-step analysis under s. 15(1) of the Partnerships Act. Therefore, its claim against the law firm on this basis fails. [page234]
Summary
[109] The plaintiffs are entitled to judgment against Mr. McEnery: as against Mr. McEnery, 106 Ontario is entitled to judgment in the amount of $380,000 and 177 Ontario is entitled to judgment in the amount of $241,000.
[110] The law firm is not, however, liable for the losses suffered by the plaintiffs. Mr. McEnery was not a partner in the law firm and the plaintiffs' claims under s. 15(1) of the Partnerships Act also fail. The law firm is entitled to summary judgment. The claims against it are dismissed.
[111] If the parties are unable to agree on costs of the motions and the actions, they may make written submissions limited to a maximum of three pages. The law firm shall deliver its costs submissions by February 21, 2020. The plaintiffs shall deliver their responding costs submissions by March 6, 2020. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as amongst themselves.
Motion against lawyer allowed and against law firm
dismissed.
Notes
[^1]: Mr. McEnery's licence to practise law was later suspended and has since been revoked.
[^2]: A combined examination for discovery and cross-examination.
[^3]: Now the Law Society of Ontario.
[^4]: In her oral submissions, plaintiffs' counsel suggested that Mr. Williams "acted wrongfully" because he did not approach the Law Society in relation to Mr. McEnery in June 2015. This allegation, too, is baseless.
[^5]: Section 2 of the January 2011 Partnership Agreement.