





CITATION:
Partners
          in Psychiatry v. Canadian Psychiatric Association, 2011 ONCA
          109



DATE: 20110209



DOCKET: C52722



COURT OF APPEAL FOR
          ONTARIO



Armstrong, Epstein and Karakatsanis JJ.A.



BETWEEN



Partners in Psychiatry



Applicant
          (Appellant)



and



Canadian Psychiatric Association



Respondent
          (Respondent in Appeal)



Brendan Van Niejenhuis 
          and Justin Safayeni, for the appellant



Terry D. McEwan, for
          the respondent



Heard:  January 24, 2011



On appeal from the
          judgment of Justice Kevin W. Whitaker of the Superior Court of Justice, dated
          August 26, 2010.



ENDORSEMENT



[1]

This is an appeal from a decision on a Rule 14 application
    declaring that a partnership did not exist between the parties under the
Partnerships Act
, R.S.O. 1990,
c.P.5
. The appellant seeks a declaration that a partnership
    existed and an order that it is entitled to distribution of the partnership
    assets of goodwill and intellectual property.

[2]

The parties agree that the definition of a legal partnership
    is a (i) business, (ii) carried on in common, (iii) with a view to a profit:
    see the
Partnerships Act
, s. 2;
Backman v. Canada
, [2001] 1 S.C.R. 367,
    at para. 18;
Continental Bank Leasing
    Corp. v. Canada
, [1998] 2 S.C.R. 298, at para. 22. The parties concede that
    the project was a business.  There was no
    dispute that they intended that revenue exceed expenses. At issue in the
    application was whether the business was conducted in common and with a view to
    sharing profits.

[3]

As the Supreme Court of Canada stated in
Backman
, at para. 25: [T]o ascertain the existence of a
    partnership the courts must inquire into whether the objective, documentary
    evidence and the surrounding facts, including what the parties actually did,
    are consistent with a subjective intention to carry on business in common with
    a view to profit.

[4]

The application judge referred to the leading cases for the
    proposition that he was required to consider the express language of the
    partnership agreement in the context of all of the circumstances. However, he
    did not advert to the legal definition of partnership and he did not analyze
    the provisions of the agreements and the circumstances in relation to the legal
    elements of the test for partnership.  By
    failing to do so, he erred in law.

[5]

Instead of considering whether the evidence established a
    business carried on in common with a view to profit, the application judge
    listed partnership indicia that he found were absent in this case. Relying upon
    the absence of those indicia, and evidence that the appellants invoices to the
    project for labour and costs included some margin for profit and GST, which was
    typically not part of a partnership arrangement, he concluded there was no
    partnership. Instead, he found that the relationship between the parties was
    one of independent contractors.

[6]

Given the application judges failure to consider the
    provisions of the agreement and all the circumstances in relation to the legal
    elements of the test for partnership, his findings of mixed fact and law do not
    attract deference. This court is in a position to reach its own conclusion
    applying the correct legal test.

[7]

The respondents executive director testified that the
    respondent conducted business with the appellant to develop and deliver
    continuing professional development programs, under the name CPA CPD
    Institute with a view to a profit. The partnership agreements provided for
    shared responsibilities for program fund-raising, content development, program
    materials and on-site execution of all programming for the CPA CPD Institute.
    The revenue was to be collected by the respondent and kept in a separate
    account entitled the CPA CPD Institute. Expenses paid by each party were to be
    invoiced to the CPA CPD Institute. Both parties were required to approve any
    changes to the estimated revenues and costs and each party was entitled to an
    equal sharing of profits as management fees after expenses were paid. The
    parties course of conduct was consistent with the terms of the agreements. A
    reconciliation for the special account showed that each party submitted
    expenses and received half the profits as management fees.

[8]

We are satisfied, on this
record, that
the parties were carrying on a business, in common, with a view to profit. Both
    parties contributed money, knowledge and skill to the CPA CPD Institute; they
    exercised mutual control of various aspects of the CPA CPD Institutes business
    and operations; and they shared the profits: see
Backman
, at para. 21 and
Continental
    Bank
, at para. 24.

[9]

We are satisfied that the absence of some common partnership
    indicia and the other circumstances relied upon by the respondent are not
    determinative given the totality of the circumstances. While the CPA CPD
    Institutes account was operated by the respondent, the respondent was the
    accredited party for providing the continuing professional development and the
    account was subject to the partnership agreement. While the respondent did not
    submit a formal invoice to the account, the reconciliation of the account
    recorded all expenses paid by the respondent and all management fees paid out
    to the respondent as well as to the appellant. While half the profits were paid
    out as a management fee, both parties took their share of the profit by way
    of management fee, a defined term in the agreement. With respect to the
    testimony that the appellants invoices for expenses included a margin for
    overhead and profit, it appears that both parties were entitled to invoice
    for costs that reflected their contribution, which often included time and
    overhead. The failure to address the issue of liability for losses in the
    agreement did not arise given that most of the significant revenue from
    sponsors was known when the individual agreements were signed. In any event,
    the failure to address the issue of liability for losses and the mark-up for
    GST are not sufficiently compelling given the relationship as a whole - the
    express terms of the agreement, the admissions of the respondent, and the
    conduct reflected in the reconciliation of the special account for the CPA
    CPD Institute.

[10]

As a result, the appellant is entitled to a declaration that
    the parties were in a partnership. However, further evidence is required for a
    determination on the issue of the partnership assets and their value.

[11]

The appeal is allowed, the decision is set aside, including
    the costs award, and there shall be a declaration of a partnership between the
    parties. The partnership dissolved as of December 31, 2009.

[12]

The matter is remitted to the Superior Court of Justice for a
    trial of an issue, to determine the value of the goodwill and whether the name
    CPA CPD Institute and the logo were assets of the partnership, and if so their
    value. Depending on the result of the aforesaid the appropriate order shall be
    made by the trial judge concerning the payment of the value to the relevant
    party or parties. The trial judge shall determine the costs for the proceedings
    below.

[13]

Costs of this appeal to the appellant, fixed in the amount of
    $20,000, inclusive of disbursements and applicable taxes.

Armstrong J.A.

Epstein J.A.

Karakatsanis J.A.


