REPORT ON THE LEGAL NATURE OF PARTNERSHIPS: COMPARATIVE LAW STUDY

Author: Charlaine Bouchard

TABLE OF CONTENTS
Introduction
1. General partnership law
A. Partnership Contract
a. Civil law
i. Combining of contributions
ii. Sharing of pecuniary profits
iii. Spirit of cooperation
b. Common law
i. Existence of a business
ii. Business carried on in common
iii. A view to profit
B. Types of partnerships
a. Under the Civil Code of Quebec
i. Registered partnerships
ii. Unregistered partnerships: the polymorphism of undeclared partnerships
b. Partnerships Acts
i. General partnerships
ii. Limited partnerships
iii. Limited liability partnerships
C. Joint ventures
a. Common law provinces
b. Quebec law
2. Legal individuality of partnerships
A. The debate on the legal personality of partnerships in the civil law
a. The C.C.L.C. and the concept of legal personality
i. Origin of the controversy
ii. Judicial evolution
b. The C.C.Q. and the concept of patrimony by appropriation
i. The paradox of the new legislation
ii. The courts' interpretation
iii. The patrimonial autonomy of partnerships
B. Denial of legal person status to common law partnerships
a. The firm and the concept of ownership
b. How the legal autonomy of partnerships is expressed
Conclusion


Introduction
In 1994, the Quebec legislature reorganised the law of partnerships with the idea of
transforming it to better suit current reality. In so doing, the outdated distinction between
particular and universal partnerships as well as the distinction between civil and commercial
partnerships was abolished. The conditions for the formation of the contract of partnership were
clearly established and the rules of publication were completely revised with concern for the
protection of third parties.
The question of juridical personality of partnerships was also redefined: the partnership is not a
legal person, but its juridical attributes are more significant than under the previous Code. How
is one to resolve this paradox using traditional analysis when even the Court of Appeal[1] in a
splintered decision reinforced the controversy.
Reference to the common law concept of partnership is interesting. A partnership at common
law is no more a legal person than an indivision. Nevertheless, the courts have given it a legal
individuality different than that of a corporate body because the partners remain personally liable
for the debts of the partnership.
Therefore, it becomes necessary to conduct a comparative analysis of civil law and common
law partnerships. To do this, it will be appropriate to firstly present the law of partnerships (1.),
before turning secondly to the issue of its legal individuality (2.).
1. General partnership law
Each Canadian province has its own legislation on partnerships.[2] The nine common law
provinces and the territories have similar legislation, which is modeled on the British
Partnership Act of 1890.[3] As for Quebec law, although similar to that of the English
provinces in several respects, it is also different in a number of fundamental areas.
It will thus be appropriate, from a comparative law perspective, to set out the conditions for the
creation of a partnership in civil law and common law (A). An overview of the various types of
partnerships recognized in civil law and common law will then be given (B), followed by the
conditions for the creation of a joint venture and its status in the various legal systems (C).
A. Partnership Contract
In both civil law and common law, a partnership is a contractual association of persons in which
autonomy of will is fundamental. Beyond this common core, there are significant distinctions
between the elements of contract formation. The emphasis is not placed upon the same elements
in the two legal systems. This part will compare how civil law (a) and common law (b) define a
contract of partnership.
a. Civil law
Contract – Under the Civil Code, a partnership is above all a contract and, as such, is subject
to the general conditions for the validity of contracts[4] and the rules concerning public order.[5]
A partnership is also a contract formed by the sole consent of the parties. No formalities are
associated to it. It may be oral, and the partnership begins operating upon the formation of the
contract if no other date is indicated therein.[6] Finally, a partnership is a nominate contract for
which the legal rules are set out in articles 2186 et seq.


Definition – «Contract of partnership» is defined in the first paragraph of article 2186:
2186.A contract of partnership is a contract by which the parties, in a spirit of cooperation,
agree to carry on an activity, including the operation of an enterprise, to contribute thereto by
combining property, knowledge or activities and to share any resulting pecuniary profits.
Three conditions emerge from this definition: the combining of contributions (i), the sharing of
pecuniary profits (ii) and the spirit of cooperation (iii).
i. Combining of contributions
Characteristics of contributions – Contributions of property are essential to the formation of
a partnership. Without such injections of money, property or resources, the partnership will not
be able to carry on its activities. Although this obligation applies to each partner, the type and
extent of the contributions may vary given that the only condition is that a contribution actually
be made, however minimal it may be. In civil law, the obligation to contribute is closely related
to the establishment of an autonomous patrimony to achieve the partners' common goal. The
contribution thus transfers ownership;[7] in return, the contributor obtains the status of partner,
embodied in a share in the partnership – a personal right – with the rights and obligations
associated therewith: financial rights, on the one hand, that involve [translation] «the right to
realisable benefits, whether they are distributed at the end of financial year or allocated to
reserves, the right to the reimbursement of capital during the course of the partnership’s
existence or in the event of its liquidation and to eventual surpluses realised on its various
assets[8]»; partnership rights, on the other hand, which include the right to be informed of the
business of the partnership[9], and the right to participate in the major decisions which concern
the partnership[10].
Accordingly, the Civil Code provides very flexible legal rules to govern partnership shares[11].
There can be as many categories of partnership shares as there can be classes of shares in a
corporation. However, unlike a corporation, where the trading of shares is not subject to
formality, the assignment of a partnership share is dependent upon the agreement of all the
partners. In effect, given that the obligation for the liability is joint and solidary, it makes sense
that each partner can assure himself of the interest and the solvency of anyone wishing to join
the partnership. To be set up against third parties, the publication of the assignment has to be
carried out in accordance with the Act respecting the legal publicity of sole proprietorships,
partnerships and legal persons[12]. Moreover, a partnership – unlike a corporation – may
not make a distribution of securities to the public[13].
Types of contributions – There are three separate types of contributions to a partnership:
money, property and knowledge or activities.
A contribution of money or cash is certainly the simplest and easiest type for the partnership to
quantify. The partner pays a sum of money immediately or eventually or promises to pay it at a
later date.[14]
A contribution of property may be made in three different ways, namely through ownership,
usufruct or enjoyment. A contribution consisting of the ownership of property involves a transfer
of the partner's rights of ownership to the partnership. In general and limited partnerships, such a
transfer presupposes that the partnership has an autonomous patrimony. The situation is
different for undeclared partnerships, to which contributions are made by placing property at
the disposal of the partnership[15] since such groups do not have an autonomous patrimony.
A contribution that transfers ownership of property is likened to a sale, which means that the
partner is bound by the warranties against eviction and latent defects.
A contribution consisting of a usufruct is similar to one consisting of the ownership of property.
The partnership receives a real right in the thing contributed, and the same warranties apply.
Where the contribution consists of the enjoyment of property, ownership of the property is not
transferred to the partnership. Although the property is placed at the partnership's disposal, the
partner remains the owner thereof. The contributor is therefore a warrantor in the same manner
as a lessor towards a lessee.[16]
Finally, the contributor may well pledge to assist the partnership on a regular basis by putting his
or her experience, technical or professional knowledge, talent or fame at its disposal. Since such
a contribution is a continuing one, the partner is liable for any profit realized on a continuous
basis while he or she remains a member of the partnership.
ii. Sharing of pecuniary profits
Nature of the profits – As with the combining of property, it is of the essence of a partnership
that it be for the partners' benefit, and none of them may be excluded from participating in the
profits. Partnerships are profit-oriented groups. The primary objective of the partners
embarking on such a venture is to acquire a patrimonial benefit as opposed to a moral benefit,
which is the raison d'être of non-profit organizations. The profits derived from the partnership
must therefore be pecuniary in nature, that is, they must contribute towards the positive
enrichment of each party's patrimony. This characterization of the nature of the profits, made in
1994, puts an end to the debate on extending the concept of profit to include savings.[17]
Partnership vs. association – The making of pecuniary profits is the Civil Code's criterion for
distinguishing partnerships from associations. Likening the concept of savings to that of profits
would have wrongly led to these two types of groups, which have differing roles, being placed in
a single category. In practice, confusing the concepts of savings and profits would have had the
effect of imposing the rules applicable to partnerships on a substantial number of associations,
unjustifiably weighing down their simple, flexible and inexpensive structure. In addition, such an
outcome would no doubt have limited the freedom of persons to form an association without
any authorization or specific declaration.[18]
Participation in the profits – Although participation in the profits is of the essence of a
partnership – and any stipulation excluding it is without effect[19] – equal sharing is not of public
order:
2202, first para. The share of each partner in the assets, profits and losses is equal if it is not
fixed in the contract.
The partners may thus divide the profits as they see fit. If there is no provision on this question,
the law provides that the rules for the sharing of one component (profits, for example) also
applies to the other components (losses and assets).[20]
Losses – Article 2201 provides that «[p]articipation in the profits of a partnership entails the
obligation to share in the losses». Thus, unless the contract of partnership provides otherwise,
the losses are shared equally among the partners.[21] A partner could even be completely
excluded from having to share in the losses. However, such a clause could not be set up against
third persons,[22] since all the partners are jointly or solidarily liable for the partnership's
debts.[23]
iii. Spirit of cooperation
The combining of contributions and the sharing of profits are not always enough to distinguish a
contract of partnership from other juridical acts, such as association[24] and indivision.[25] The
courts and legal authors have therefore added an indispensable subjective criterion: the intention
to be involved in a partnership or affectio societatis, which is enshrined in the new Civil Code
by the expression «spirit of cooperation».
The spirit of cooperation may thus be described as the partners' intention to cooperate in a
common enterprise. A partnership is a collective contract characterized by a will to unite or a
convergence of interests. The smooth functioning of the partnership is therefore in every
partner's interest, whereas, in theory, in synallagmatic contracts, the interests of the contracting
parties are often opposed.
The spirit of cooperation is a variable and utilitarian element. It is variable because the extent of
the intention will differ from one partnership to another and from one category of partners to
another within the same partnership. It is utilitarian because the courts are led to examine the
intention to determine whether the parties are partners when the contract between them must be
characterized or interpreted:
[T]o determine whether there was an affectio societatis, [the Court] had to establish whether
from the facts it could be said that there was [translation] «a collection of presumptions
precluding any serious objection, even though each one of them taken separately might give rise
to some doubt».
. . . . And I agree with respondent that if the contribution of one partner is out of proportion to
that of the other, the trial judge must take it into account and consider that this fact weighs
greatly against the existence of the affectio societatis.[26]
The Superior Court recently reaffirmed this position in a decision rendered under the C.C.Q.:
[TRANSLATION]
The intention emerging from the parties' acts and attitudes is what is important in concluding that
there is a contract of partnership. . . .
The parties must have a common intention to be in partnership. The new Civil Code talks about
a «spirit of cooperation». This is the main thing that cements the contract of partnership:
affectio societatis, from the oldest and most settled cases on partnership.[27]
b. Common law
Definition – General partnerships are defined as follows in the nine Canadian common law
provinces and in the territories:
2. Partnership is the relation that subsists between persons carrying on a business in common
with a view to profit, but the relation between the members of a company or association that is
incorporated by or under the authority of any special or general Act in force in Ontario or
elsewhere, or registered as a corporation under any such Act, is not a partnership within the
meaning of this Act.[28]
Contract – Although there is no express reference to the contractual nature of partnerships in
the definition, there is no doubt that, as in civil law, the relation between the partners is based on
the existence of an express or implied contract.[29]
Case law – The definition of partnership was analysed by the Supreme Court of Canada in
1998[30]. Continental Bank Leasing (hereinafter Leasing) was a wholly-owned subsidiary of
the Continental Bank of Canada whose activities involved leasing. In 1986, the Bank liquidated
its business relating to these activities and solicited offers for the assets or the shares of Leasing.
The corporation Central proved to be interested in the shares of Leasing, but expressed its
concerns pertaining to certain tax liabilities of the enterprise and the solvency of seven lessees.
To resolve the impass – and accordingly to exclude the leases and the eventual tax liabilities –
Central proposed that Leasing form a general partnership with certain subsidiaries of Central,
which would carry on the same activities as Leasing. The various assets of Leasing were to be
transferred to this partnership by electing for the rollover in s. 97(2) of the Income Tax Act. An
interest in the partnership was granted to the Bank, for base proceeds, according to s. 88 of the
Income Tax Act, and the bank in turn was to sell its interest to Central or its subsidiaries.
Leasing filed its income tax return for the year 1987 on the basis of these transfers. Revenue
Canada issued a notice of reassessment on the basis that the operation creating the general
partnership was invalid and that in reality it constituted a disposition by Leasing of its various
leasing assets in favour of Central, making the s. 97(2) election invalid. The Tax Court of
Canada granted the appeal of Leasing against the reassessment, however the Federal Court of
Appeal reversed this judgment. Hence, the present appeal and the necessity to verify if the
parties formed a valid general partnership.
On that occasion, the highest court in the land affirmed the previous case law on the
question[31]. From the outset, the Supreme Court, per Bastarache J. – who, although
dissenting in the case, spoke for the majority on this point – noted that «[t]he existence of a
partnership is dependent on the facts and circumstances of each particular case. It is also
determined by what the parties actually intended».[32]
To make this determination easier, the partnerships legislation sets out a number of rules from
which it can be inferred whether or not a partnership exists:[33]
3. In determining whether a partnership does or does not exist, regard shall be had to the
following rules:
1. Joint tenancy, tenancy in common, joint property, common property, or part ownership does
not of itself create a partnership as to anything so held or owned, whether the tenants or owners
do or do not share any profits made by the use thereof.
2. The sharing of gross returns does not of itself create a partnership, whether the persons
sharing such returns have or have not a joint or common right or interest in any property from
which or from the use of which the returns are derived.
3. The receipt by a person of a share of the profits of a business is proof, in the absence of
evidence to the contrary, that the person is a partner in the business, but the receipt of such a
share or payment, contingent on or varying with the profits of a business, does not of itself make
him or her a partner in the business, and in particular,
(a) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out
of the accruing profits of a business does not of itself make him or her a partner in the business
or liable as such;
(b) a contract for the remuneration of a servant or agent or a person engaged in a business by a
share of the profits of the business does not of itself make the servant or agent a partner in the
business or liable as such;
(c) a person who,
(i) was married to a deceased partner immediately before the deceased partner died,
(ii) was living with a deceased partner of the opposite sex in a conjugal relationship outside
marriage immediately before the deceased partner died, or
(iii) is a child of a deceased partner,
and who receives by way of annuity a portion of the profits made in the business in which the
deceased partner was a partner is not by reason only of such receipt a partner in the business or
liable as such;
(d) the advance of money by way of loan to a person engaged or about to engage in a business
on a contract with that person that the lender is to receive a rate of interest varying with the
profits, or is to receive a share of the profits arising from carrying on the business, does not of
itself make the lender a partner with the person or persons carrying on the business or liable as
such, provided that the contract is in writing and signed by or on behalf of all parties thereto;
(e) a person receiving by way of annuity or otherwise a portion of the profits of a business in
consideration of the sale by him or her of the goodwill of the business, is not by reason only of
such receipt a partner in the business or liable as such.
Thus, according to these provisions, co-ownership and the sharing of gross returns are not
enough in themselves to create a partnership, whereas the receipt of a share of the profits of the
business is, subject to the exceptions, prima facie proof of partner status.
To the same effect, the Supreme Court referred to a number of criteria that have been judicially
recognized over time as indicating the existence of a partnership:
The indicia of a partnership include 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.[34]
Conditions – Three conditions must be satisfied to form a partnership: the existence of a
business (i), carried on in common by the partners (ii), with a view to profit (iii). Each of these
elements will be examined in light of the Supreme Court's decision[35].
i. Existence of a business
In common law, in order to conclude that a partnership exists, one must find that a business is
carried on. Under the partnerships legislation, business «includes every trade, occupation and
profession[36]». This definition is much broader than that found in the third paragraph of
article 1525 C.C.Q., where a minimum level of organization is essential to find that an enterprise
is being carried on. As noted by Lindley & Banks, «virtually any commercial activity or
adventure amounts to a business for the purposes of the Act[37]».
This requirement is significantly different from that found in the Civil Code, where the operation
of an enterprise is not necessary to form a partnership. Under article 2186, an activity other than
the operation of an enterprise – investment, for example – may be carried on under a contract
of partnership. In civil law, the extent of the partners’ liability is dependant upon the way the
activity is set out, as being part of an enterprise or not: liability is joint when the obligations in
question have not been contracted for the operation of an enterprise and solidary when they
have.[38]
The question of whether or not a partnership is carrying on a business was examined by the
Supreme Court of Canada in Continental Bank Leasing v. Canada.[39] In that case, the
Minister of National Revenue argued that no business was actively carried on between
December 24 and 29, the period during which Leasing and then the Bank were partners.
Bastarache J. could not accept that argument:
In the present instance, it is true that between December 24 and December 27, 1986, no
meetings were held, no new transactions were entered into by the parties and no decisions were
made. However, that is not determinative of the fact that no business was carried on by the
Partnership. Prior to its entering the Partnership, Leasing carried on business. This business and
its assets were transferred to the Partnership on December 24, 1986. There was no termination
of Leasing's contracts with its customers and the contracts continued during the period of
December 24 to December 27.
Evidence that the business previously carried on by Leasing was carried on by the Partnership is
contained in a letter dated December 24, 1986 from Air Canada, one of the Bank's customers.
In the letter, Air Canada acknowledges that «[Leasing] intends to sell and assign its interest in
the Purchase Agreements, the Aircraft and the Leases to an Ontario partnership . . ».. Air
Canada consented to the «sale and assignment of the Purchase Agreements, the Aircraft and the
Leases» from the Bank to Leasing and consented «to the sale and assignment of the Purchase
Agreements, the Aircraft and the Leases by [Leasing] to the Partnership».
The fact that no new business was created during the period of Leasing and the Bank's
involvement in the Partnership does not negate the effect of the existing business that was
continued during this time. The existence of a valid partnership does not depend on the creation
of a new business. It is common that partnerships are formed when two parties agree to carry
on the existing business of one of them, while the other contributes capital.[40]
Thus, although no new transactions were entered into by the parties during the period in
question, the business' production capacity was not dismantled. The purpose and nature of the
activities remained unchanged. This is what enabled the Court to find that a business existed.
ii. Business carried on in common
Unlike a corporation, which may be formed by a single shareholder, at least two persons are
needed for a partnership to carry on a business. Moreover, it is essential that the business be
carried on in common, which means that «there can be no partnership unless the common
business is conducted for a common profit, i.e., unless there is a community of interest in the
benefits accruing from the joint activity of the partners».[41]
In Continental Bank Leasing, , the Supreme Court found that a business was being carried on
in common based on the following factors:
In addition, I am satisfied that the business that was carried on was carried on by the partners in
common. Under the Partnership Agreement, the Partners «delegate to the Managing Partner full
power and authority to manage, control, administer and operate the business and affairs of the
Partnership and to represent and enter into transactions which bind the Partnership» (Art. 4.01).
The fact that the management of the Partnership was given to the Managing Partner does not
mandate a conclusion that the business was not carried on in common. Nor does the fact that
Central, acting alone, was negotiating transactions relating to the lease portfolios prior to
December 29, 1986. The respondent argues that the exclusion of Leasing and the Bank from
any of those activities negates any claim that the Central entities and the Continental entities
were actually carrying on business in common during that period. As Lindley & Banks on
Partnership . . . point out, . . . one or more parties may in fact run the business on behalf of
themselves and the others without jeopardizing the legal status of the arrangement.
. . .
It is also relevant that during the brief term that Leasing and the Bank were parties to the
Partnership Agreement, they held themselves out as partners. Various supporting documents,
including correspondence with third parties, tax returns, financial statements and assignments of
leases effected during this period, are consistent with the carrying on of a business in common.
While this alone would not have the effect of validating the Partnership, because holding out
affects liability as against third parties and not the essential validity of the arrangement (s. 15,
Partnerships Act), it is nonetheless evidence of the parties' intention to carry on business in
common under the Partnership.
. . .
The Bank and Leasing conducted themselves as partners for the duration of their memberships
in the Partnership. Throughout that period, they were subject to all of the rights and obligations
of partners and carried on the business of leasing in common with the other partners. There is no
evidence to show that the leasing business carried on as defined in Hickman, supra, was not
carried on by Leasing and the Central subsidiaries.[42]
Accordingly, the common objective necessary to form a partnership will sometimes be present
once the parties have concluded a valid partnership contract listing their rights and obligations as
partners. More recently, the Supreme Court, in the case of Backman c. Canada, added the
following kinds of evidence to those which support an intention to operate an enterprise in
common:
[translation]
the contribution of skill, knowledge or assets to a common undertaking, a joint property interest
in the subject-matter of the adventure, the sharing of profits and losses, the filing of income tax
returns as a partnership, financial statement and joint bank accounts, as well as correspondence
with third parties[43].
The criterion of carrying on a business in common is nothing other than the Civil Code's spirit of
cooperation. One must ascertain that each partner genuinely intends to cooperate in the
business. However, the identification of this element is more difficult in common law because the
partners are not required to make contributions and because the statutory definition of
«business» is very broad.
iii. A view to profit
The concept of profit, although present in both civil law and common law definitions, does not
have the same importance in the two legal systems.
Two differences are particularly evident when the definitions are compared. First, the Civil
Code refers to the «sharing» of profits, while in common law, an intention to make («with a view
to») a profit is apparently sufficient. Second, in civil law, the legislator has specified that the
profits derived from the partnership must be pecuniary in nature, that is, a positive gain that adds
to each partner's patrimony[44]. This description is important, since it is the criterion for
distinguishing between partnerships and associations.
In Continental Bank Leasing, after concluding that the documents were legally valid and that
the partners were carrying on a business in common, the Supreme Court analysed the facts to
determine whether the business was being carried on with a view to profit:
The Court of Appeal held that the parties intended to conduct a sale of assets through a device
they chose to call a partnership. This intention did not include a view to profit and in fact «the
idea to share profits was an afterthought when the parties originally put the deal together» (p.
731). This characterization by the Court of Appeal ignores the fact that the Partnership
Agreement provided for the distribution of the profits from the leasing business being operated
by the Partnership and that the Partnership continued to carry on the business operated for
profit by Leasing. There is no evidence of any expectation other than that profits would continue
to be generated during the predetermined term of Leasing's involvement in the Partnership. The
Court of Appeal also relied heavily on the fact that Leasing was not legally entitled to a share of
the profits of the first fiscal year because its partnership interest had already been transferred to
the Bank by the time the year end was triggered on December 27, 1986. This, however, is
irrelevant to the determination of the issue.
To determine whether the business was carried on with a view to profit, it is necessary to look
to the provisions of the Partnership Agreement governing the distribution of profits.
. . .
These provisions clearly contemplate the distribution of profits in accordance with a partner's
interest in the Partnership. Profit was accumulated by the Partnership during the period of
Leasing's membership in that partnership and that profit was distributed.[45]
A few paragraphs later, Bastarache J., quoting from Lindley & Banks, concluded that although
tax avoidance was the main factor that had led to the partnership's formation, that motivation did
not preclude profit-making as a potential ancillary purpose. This was sufficient to satisfy the
conditions for the formation of a partnership:
. . . if a partnership is formed with some other predominant motive [other than the acquisition of
profit], e.g., tax avoidance, but there is also a real, albeit ancillary, profit element, it may be
permissible to infer that the business is being carried on «with a view of profit». If, however, it
could be shown that the sole reason for the creation of a partnership was to give a particular
partner the «benefit» of, say, a tax loss, when there was no contemplation in the parties' minds
that a profit . . . would be derived from carrying on the relevant business, the partnership could
not in any real sense be said to have been formed «with a view of profit».
This is not a case where the disentitlement of one partner to a share of the profits was agreed to
by the parties; nor is it a case where no profits were anticipated during the term of a partner's
involvement. During the period in which Leasing and the Bank were partners in the business, the
Partnership earned a profit from its leasing operations and that profit was distributed at year
end.[46]
Accordingly, as reiterated by the Supreme Court in the recent decisions Backman et Spire
Freezers Ltd, to determine if an enterprise is operated «with a view to profit», it is important
«to distinguish between motivation and intention. Motivation is that which stimulates a person to
act, while intention is a person’s objective or purpose in acting. […] It will be sufficient for a
taxpayer to show that there was an ancillary profit-making purpose. […] The law of partnership
does not require a net gain over a determined period in order to establish that an activity is with
a view to profit[47]».
In summary, although partnerships are profit-oriented groups and it is in their nature to distribute
profits, the courts have adopted a broad interpretation of the profit concept that is based on
economic reality. Accordingly, it is not only profit-seeking activities that are accepted in finding
that a partnership exists, but also all activities the ancillary purpose of which is to make a profit.
Furthermore, it may be possible to make a finding of partnership even where no profits are
made or shared.
B. Types of partnerships
In both Quebec civil law and common law provinces, there are a variety of partnerships through
which an activity, business or enterprise may be carried on. However, the criterion for
distinguishing among the various types of partnerships is not the same in the two systems. We
will therefore first explain how partnerships are categorized under the Civil Code of Quebec (a)
and then look at the classification used in the other Canadian provinces (b).
a. Under the Civil Code of Quebec
There are two main categories of partnerships under the C.C.Q.: those that are bound to make
declarations under the Act respecting the legal publicity of sole proprietorships,
partnerships and legal persons[48] (i) and those that are not subject to that obligation (ii).
i. Registered partnerships
There are two types of registered partnerships: general partnerships and limited partnerships.

– General partnerships
Usefulness – General partnerships are the standard model of partnerships. The partners are
generally not very numerous, they know one another and there is an atmosphere of trust within
the partnership. The intuitu personae aspect is predominant.
The organization of general partnerships is simple compared with that of joint-stock companies:
few mandatory rules exist, and broad scope is left for the partners' initiative. A general
partnership combines the benefits of autonomous patrimony and separate legal capacity without
the inflexibility associated with being organized as a legal person[49]. The other side of the coin,
however, is that the partners are jointly or solidarily liable for the partnership's obligations out of
their personal patrimonies. While general partnerships are a privileged vehicle for professionals,
they are also often used for business combinations.
General law – The general partnership is the ordinary partnership under the Civil Code In the
absence of specific provisions for limited[50] or undeclared partnerships[51], the general
partnerships rules apply to them.
Publicity – The general partnership is formed under a name that is common to the
partners.[52] It is bound to file a declaration in accordance with the Act respecting legal
publicity of sole proprietorships, partnerships and legal persons[53] – that is, not later than
60 days after the date it is established – failing that, it is deemed to be an undeclared
partnership. The result of being «deemed to be undeclared» is that the partnership loses the
benefits associated with being a general partnership (capacity to sue and be sued, separate
patrimony, etc.). However, the expression «subject to the rights of third persons in good faith»
should allow third persons to retain the same rights as in the case of a general partnership.
Although the change in the applicable legal rules has little effect on the rights of third persons, it
does affect the partnership’s and the partners’ rights. They run the risk of civil[54] and
penal[55] sanctions for failing to comply with the registration requirement.
Juridical form – In carrying on the business, the general partnership must indicate itsjuridical
form in or after their name. If there is no such indication in legal documents signed by the
partnership, the court, in ruling on a suit by a third person (whom is acting in good faith), may
decide that the partnership and its partners are liable in respect of that contract in the same
manner as an undeclared partnership and its partners. Such a sanction would make it possible to
hold liable only the partner who contracted[56] or to avoid prior discussion of the partnership's
patrimony and thus sue the partners directly.[57]
Operation of the partnership – The organization of general partnerships is flexible and
governed by the will of its partners. If there is no stipulation regarding the partnership's mode of
management, the Code provides that the partners are deemed to have conferred management
power on one another.[58] Thus, any act performed personally by a partner in connection with
the partnership's affairs will bind the other partners, subject, however, to their right to object to
the act before it is performed.
Dissolution – One of the Civil Code's main innovations as regards partnerships is the
distinction it draws between the end of a partnership and the departure of one of its members.
Thus, the former causes of dissolution related to a partner's person (death, incapacity and
bankruptcy) now result simply in a loss of partner status.[59] Only circumstances affecting the
state of the partnership itself[60] may now justify dissolution.

– Limited partnerships
«Limited partnership» has been defined as follows:
[translation]
A partnership entered into by a merchant with an individual for a business that will be carried on
in the merchant's name alone and to which the other contracting party contributes only a sum of
money to make up the partnership's stock, it being agreed that he will have a certain share of
any profits and that, in the opposite case, he will bear the same share of the losses, for which he
can nevertheless not be held liable except to the limit of the stock he has contributed to the
partnership[61].
This definition has the advantage of emphasizing the distinctive nature of limited partnerships, in
which there are two types of partners:
· special partners, who contribute money and have limited liability in the same way as
company shareholders; and
· general partners, who contribute ideas, knowledge and management and whose liability
is solidary in the same way as partners in a general partnership.
Limited partnerships have been used as tax shelter vehicles for some years now. They are the
only type of organization through which investors can have both the benefits of the fiscal
transparency of partnerships and the limited liability of company shareholders while avoiding the
main drawback of companies, namely the capital tax.
Creation – Like a general partnership, a limited partnership is created upon the formation of
the contract.[62] It is bound to make declarations within the required time, failing which it is
deemed to be an undeclared partnership.[63]
ii. Unregistered partnerships: the polymorphism of undeclared
partnerships
Undeclared partnerships make up the residual category of partnerships under the Civil Code.
Since they are not subject to any publicity rules, they are multifaceted. This type can encompass
any partnership, whether secret or open, regular or irregular, since the only criterion is the
absence of registration in accordance with the law's provisions.[64] As a result, undeclared
partnerships do not, in principle, have any legal individuality: no patrimony,[65] no name, no
domicile and, of course, no capacity to sue or be sued.[66]
Anonymous partnerships – Undeclared partnerships will most often be secret partnerships. In
other words, they will exist only in the partners' dealings among themselves. This means that
there will seemingly be no partnership, but only a manager with whom third persons will contract
without knowing about the partnership, which is the true reality. Such cases therefore involve a
legal structure deliberately adopted by the parties to carry out a specific project.
Joint ventures – Undeclared partnerships are also used as a way for enterprises to
cooperate[67]. In such cases, the partners choose an undeclared partnership because of the
flexibility it offers and not, as in the previous situation, because of its secret nature, since the
partnership generally makes itself known to third persons. At both the national and international
levels, the contractual freedom inherent in this structure enables enterprises to deal with various
realities.
Implied partnership – In other situations, undeclared partnerships will be quite different in
nature. The parties will behave as partners without otherwise asserting their wills. They will not
know at the time they do so that they are carrying on an activity in the context of a partnership.
It will not be until after the fact – generally to make up for some inequity – that a court will find
in their conduct the elements making up a contract of partnership.[68]
Irregular partnership – Finally, an undeclared partnership may take the form of a general or
limited partnership that has failed to register. In such a case, the partnership will therefore have a
real existence with respect to third persons but will not be what it appears to be. It will have
been established to become a general partnership but, for a variety of reasons, will not have
been registered. It will therefore be «deemed» to be an undeclared partnership[69] or will have
«become» an undeclared partnership on January 1st, 1995.[70]
These few examples will have shown the extent to which undeclared partnerships have an
exceptional profile. To support such a multifaceted category, specific legal rules were needed.
Creation – The setting up of an undeclared partnership is not subject to any particular
formalities provided that public order is complied with. Such a partnership may arise from mere
verbal agreements or from an overt act indicating the intention to form an undeclared
partnership:[71] [translation] «for a partnership to exist in the absence of an express contract,
there must be acts clearly showing that each of the alleged partners intended to form a contract
of partnership and not some other contract that may be more or less analogous to a
partnership».[72] Mere indivision of property between several persons does not create a
presumption of their intention to form an undeclared partnership.[73]
Partnership or indivision – To distinguish undivided co-ownership and partnerships, legal
authors initially used objective criteria, such as the origin, stability and management of the group
in question and especially whether or not it had legal personality. With the organization of
indivision in 1994 and the denial of legal personality to partnerships, these criteria stopped being
sufficient to properly characterize a group. An effort must now be made to determine the
parties' intention. Since a partnership is a contract, it presupposes that there is an agreement of
wills. What must be sought is an agreement of wills that takes the form of an intention to create a
partnership. On the other hand, undivided co-ownership does not presuppose such an
agreement of wills. It may arise accidentally. An intention to create it deliberately is therefore not
a characteristic feature.[74]
Contributions – The combining of contributions is essential to the partnership’s contract. Since
undeclared partnerships have no legal individuality, and hence no patrimony, the question of the
transfer of contributions takes on special importance here. The situation differs depending on
whether the partnership is secret or open.
Secret partnership – In a secret undeclared partnership, contributions of property must be
looked upon as a «placing at the disposal» of the partnership rather than as a real transfer. This
is the expression used by the legislator in article 2199. The partners do not transfer ownership
of the property to the partnership, but rather confer enjoyment thereof on the manager.[75] As
a result, each partner alone assumes the risk of the thing being lost and may, even though the
contribution is a real one, dispose of or charge his or her property. The partner's personal
creditors may also seize the property, in which case the other partners' only alternative will be to
sue for damages to make up for the harm suffered. When the partnership is dissolved, the
partners will retrieve their property in kind, subject, however, to possible compensation of the
other partners for the property's increase in value.
Although this is the most usual scenario in a secret undeclared partnership, there seems to be
nothing to prevent the partners from transferring ownership of the property to the manager:
[translation] «[This] is particularly [suited] to cases in which, in a secret partnership, the partners
make contributions of money that are used by the manager to acquire property in respect of
which the manager acts like the sole owner in dealing with third persons».[76]
Open partnership – The second paragraph of article 2252 provides that partners may agree
that some property will be undivided in respect of the partners. This technique is often used in
open partnerships. We need only think of indivision by agreement in respect of an immovable,
which must be published if it is to be set up against third persons.[77] However, whether the
indivision is by agreement or not, disputes may arise concerning the possible application of both
the rules of indivision and the rules of partnership. For example, in the case of indivision, death
does not put an end to undivided co-owner status,[78] but under partnership law, it entails -
subject to an agreement to the contrary - the dissolution of the undeclared parnership.[79] Will
preference be given to the law of indivision rather than partnership law such a case?[80]
Operation – Internally, two situations are possible: either the partners have entered into a
contract and settled, with complete freedom, how the partnership will operate, or nothing has
been provided for. In the latter case, the law[81] refers to the provisions governing the relations
of general partners between themselves and with the partnership,[82] as adapted where
required.
As far as third persons are concerned, two regimes are possible: either the partnership is secret
and has no existence for third persons, or it is open and its operation is strangely like that of a
general partnership.
Secret partnership – In a secret partnership, «[e]ach partner contracts in his own name and is
alone liable towards third persons».[83] In practice, third persons will therefore deal only with
the manager acting in his or her own name. This means that they will have no direct recourse
against the partners, and the same will be true of the partners themselves. Only an oblique
action[84] will remain possible, in so far, of course, as a partner is himself or herself a creditor
of the manager.
Open partnership – The dynamics will be very different if the partnership's existence is
revealed. [translation] «Where, to the knowledge of third persons, the partners act in the quality
of partners, each partner is liable towards the third persons for the obligations resulting from
acts performed in that quality by any of the other partners[85]». By imposing this sanction, the
legislator [translation] «wanted to prohibit the participants from behaving towards the public as if
they were ordinary partners, that is, as if they had a true power of representation».[86] In so far
as the partners disregard this rule and make the partnership's existence known to third persons,
they become jointly or solidarily liable, depending on whether or not the debt was incurred for
the use or operation of an enterprise.[87]
Dissolution – In addition to the causes of dissolution common to all forms of partnerships, are
causes of dissolution for undeclared partnerships. (These same causes would result in a loss of
partner status for the partners of a general or limited partnership).[88] However, there is nothing
to prevent the partners from excluding this provision by agreement and providing that, if a
partner dies, the partnership will continue to exist with the partner's legal representatives or
among the surviving partners.[89]
b. Partnerships Acts
In common law provinces, the registration of partnerships has no impact on their legal form of
organization. The main types of partnerships are: (i) general partnerships (ii) limited partnerships
and, a recent new type appeared in two Canadian provinces, (iii) the limited liability
partnerships.
In this section, we will focus on the legal rules applicable to this new type of partnership, since
the overview of general and limited partnerships given above is, for the most part, applicable in
both civil law and common law.
i. General partnerships
Registration – No formalities are required to create a general partnership, aside from the
requirement that names of businesses and partnerships be registered. This registration
requirement is not imposed on all types of general partnerships. The rules vary from one
province to another. Thus, some jurisdictions[90] require all types of partnerships to register,
whereas others[91] require only certain specific types of businesses to register.
The consequences of failing to register also vary from one province to another. In some
provinces, a partnership that does not register cannot bring a legal action,[92] whereas in other
jurisdictions the only sanction is a civil penalty.[93]
Partners’ Liability – The liability of the partners of a general partnership in common law is
different in many aspects to that imposed under the Civil Code. Whereas common law rules are
based on a number of distinctions – legal authors recognize that this is one of the most
contentious areas of partnership law[94] – the Quebec system is based on a single criterion:
whether or not the obligations have been contracted for the service or operation of an enterprise
of the partnership.[95] The following table shows the main differences between the two legal
systems.




Liability of partners for the partnership's debts and obligations

Common law partnership
Civil Code partnership*
Contractual liability
Joint liability among the partners for all the firm's debts and obligations incurred while they are
partners (s. 10(1)).
Joint and several liability of the estate for debts and obligations that remain unsatisfied, subject
to prior payment of separate debts (s. 10(1)).
Joint or solidary liability among the partners depending on whether the obligations have been
contracted for the service or operation of an enterprise of the partnership, but subject to:
Ø Discussion of the partnership's property;
Ø payment of the partner's personal creditors (art. 2221).
Liability for wrongful acts (s. 11) and misapplication of money or property (s. 12)
Joint and several liability among the partners for everything for which the firm, while they are
partners therein, becomes liable under section 11 or 12 (s. 13).
Joint or solidary liability among the partners depending on whether the obligations have been
contracted for the service or operation of an enterprise of the partnership, but subject to:
Ø discussion of the partnership's property;
Ø payment of the partner's personal creditors (art. 2221).
Liability of apparent partner
Liability as a partner to anyone who has given credit to the firm on the faith of a representation
that the person in question is a partner (ss. 15, 36(1)).
Ø Liability as a partner towards third persons in good faith.
Ø The partnership may exclude its liability by showing that it did not give reason to believe
that the person was a partner and that it was unable to prevent third persons from being
mistaken (art. 2222).
Liability of new partner
Joint or joint and several liability for debts and obligations incurred following admission to the
partnership (s. 18(1)).
Joint or solidary liability for all the partnership's liabilities, even those prior to the partner's
admission to the partnership (art. 2221).
Liability of retiring partner
Joint or joint and several liability for debts and obligations incurred before the publication of
the partner's retirement (ss. 18(2), 36(1)), unless otherwise agreed (s. 18(3)).
Joint or solidary liability for all liabilities incurred before the publication of the partner's
retirement (art. 2196, s. 62 A.L.P.).
Waiver or limitation of liability
Ø Valid among the partners (ss. 20, 24(1)).
Ø May not be set up against third persons (ss. 9-10).
Ø Valid among the partners (art. 2203).
Ø May not be set up against third persons (art. 2221).
* By virtue of the civil Code, the liability of partners for the debts of the partnership will
be joint when the obligations have not been contracted in the service or operation of an
enterprise and will be solidary when the converse is true.
Dissolution – In common law, unless otherwise provided by agreement, the existence of a
general partnership is jeopardized where a partner dies or becomes insolvent[96] or where a
partner's share is charged for that partner's separate debt.[97] Thus, that which results merely in
a loss of partner status under civil law is a cause of dissolution in common law.
ii. Limited partnerships
Formation – Unlike general and limited liability partnerships, limited partnerships are formed
by filing a declaration with the Registrar.[98] The registration expires after a certain time and
may be renewed on its expiry.[99] In some provinces, such as Ontario[100] and New
Brunswick,[101] the expiry of a declaration does not result in the partnership's dissolution but
merely necessitates the payment of additional fees. However, in other provinces, such as
Manitoba,[102] failure to register means that the limited partner loses the benefits of limited
liability and the partnership is deemed to be a general partnership. This is the same situation that
used to exist under the C.C.L.C.[103]
iii. Limited liability partnerships
Purpose – Inspired by the American experience,[104] the Ontario and Alberta legislatures
amended their Partnership Acts[105] in 1998 to include limited liability partnerships[106]. The
main purpose of the legislation is to enable certain professions to be practised through a vehicle
that excludes the professional liability of firm members in any malpractice suits brought against
the firm.
The two provincial legislatures could very well have chosen corporations to completely exclude
the liability of professionals. However, they took a partial approach because practically
speaking, the real problem involves vulnerability to malpractice suits much more than to suits
resulting from ordinary contractual obligations. On this last point, it should be noted that
members of a general partnership can already considerably reduce their liability by forming a
management company.
Formation – Like a general partnership, a limited liability partnership (hereinafter L.L.P.) may
arise from the mere consent of the partners. No registration is necessary to confer L.L.P.
status.[107] After being created, an L.L.P. may not carry on business unless it has registered its
name in accordance with the Business Names Act.[108]
Limited liability – An L.L.P. is not a legal person any more than an ordinary general
partnership. This means that limited liability should protect only the partners' personal
assets.[109] The partnership’s assets should normally be subject to all claims made against it.
The partners would therefore remain implicitly liable for the partnership's obligations in
proportion to their interests in the partnership's property. However, neither the Ontario nor the
Alberta legislation expressly sets out this rule. The Alberta Law Reform Institute[110] has
recommended that the uniform L.L.P. law specify that a partner's interest in the L.L.P.'s
property is subject to proceedings brought against the firm even though the partner is not
personally liable.
Interprovincial liability – An important question arises with respect to the law that should
govern the liability of partners in an L.L.P. that is formed in one jurisdiction but that incurs
liability in another. The question is not without relevance, since major Quebec law and
accounting firms regularly cross the Ontario border to register as limited liability partnerships. A
number of questions are raised by this phenomenon. For example:
[translation]
What would happen if an Ontario court rendered judgment against professionals working in an
Ontario L.L.P. and the judgment were enforced against partners not at fault in Quebec, where
limited liability partnerships do not exist?
What would happen if a Quebec court rendered judgment against Quebec partners and
enforcement of the judgment were sought in Ontario, if the limited liability partnership were
Ontarian?[111]
In the former case, some people would certainly try to argue that the Quebec partners should
be liable out of their personal property, while in the latter, the Ontario partners who are not at
fault would surely argue that there is a legislative prohibition against enforcing the judgment
against their personal property. The solutions are uncertain and unfair in both cases.
All that is certain at this time is that Quebec professionals are able to carry on their activities in
Quebec through limited liability partnerships formed in Ontario. The Act respecting legal
publicity of sole proprietorships, partnerships and legal persons[112] expressly provides
for this possibility, which is necessary for the development of business plans, and there are no
obstacles to this practice in codes of ethics or professional legislation. However, it is absolutely
impossible for such professionals to limit their personal civil liability under a mandate entrusted
to them. Their code of ethics expressly forbids it.[113] Finally, under Civil Code, the solidary
liability of partners towards third persons is of public order.
C. Joint ventures
Definition – A joint venture is a cooperation agreement between businesses in order to carry
out a common project.[114] Such agreements may be short-term or extend over several years.
There are a number of reasons why businesses cooperate in this way: the sharing of risks and
expertise, government requirements in certain countries, cost rationalization, better financing
terms and so on. However, whatever the reasons that lead them to join forces, the businesses
wish to retain their own identities and complete freedom in all areas outside the agreement. This
is one of the fundamental characteristics of such unions or associations.
Joint ventures are a creature of the American courts and were imported, with some variations,
into most civil law and common law countries. A characteristic recognized by all is that a joint
venture is neither a nominate contract nor a separate legal entity. It is necessary to draw from
the various legal systems to characterize the relationship. Businesses have a choice of three legal
options. They may incorporate a jointly owned subsidiary, form a partnership or simply tailor-
make an innominate contract. Each of these options has advantages and disadvantages.
The advantages of contractual joint ventures are confidentiality, flexibility and a lack of
formalism. However, such ventures pose a risk of legal insecurity for large-scale projects:
[translation] «Since few countries have passed legislation on joint ventures . . . their status
generally remains unclear as regards tax law, security interests, property interests, the parties'
rights and obligations, the parties' relations with third persons, etc».[115] To resolve disputes
not provided for in the agreement, the courts must therefore try to determine what the parties
intended. They will then attempt to characterize the contract based on known models. It is
generally at this stage that a parallel with partnerships is drawn, which explains the resulting
problems.
In this part, we will look at the status given to contractual joint ventures in the two main
Canadian legal systems and ascertain whether the formation conditions differ from those
applicable to partnerships.
a. Common law provinces
English law – Traditional English common law refuses to see more than a difference of
duration and purpose between partnerships and joint ventures. The Canadian provinces’ view
of joint ventures is similar to the American’s and they both tend to distinguish the two concepts,
although the courts still waver on this question.[116]
Considering a joint venture to be a special or particular partnership means that the reciprocal
power of management that partners have also exists among the businesses involved. Each
member of the joint venture will thus be bound by the acts performed by one of them within his
or her powers, and liability towards third persons will be joint or joint and several. These
obligations, which exist for the partners in a partnership, may have far-reaching consequences in
cases where businesses sign a cooperation agreement. This is one of the fundamental reasons
why the American courts have tried to distinguish the two types of unions or associations.
American law – The mental gymnastics are not easy, and there is no unanimity about it. The
following characteristics have been held to be decisive in finding that a joint venture
exists:[117] an association of several persons created for a single purpose; a pooling of
contributions;[118] a community of interest among the parties;[119] control exercised by each
party over the undertaking;[120] profit-seeking;[121] and sharing in the profits and losses.[122]
Based on an analysis of academic commentary,[123] only one of these factors is truly decisive:
whereas a partnership is formed to carry on a business, a joint venture is formed for a single
transaction only. Although this distinction has not been approved by all authors, its influence can
clearly be seen in the rules developed by the American courts.[124]
However, it is surprising to find that, even after an attempt is made to distinguish between the
two entities, the majority of courts favour the application of partnership’s rules, especially the
power of mutual representation, to joint ventures:
[TRANSLATION]
The result of this position is that the members of a joint venture are liable in respect of acts
performed by any of them that are necessary to carry out the venture. Agreements between the
members limiting these powers may not be set up against third persons who are unaware of
them. The liability of the members of a joint venture is also, as in a partnership, joint and
several.[125]
Canadian provinces – The situation is very similar in the nine Canadian provinces. The
Canadian courts[126] generally agree on the same criteria for finding that a joint venture exists
and distinguishing it from a partnership:
– the existence of a contract between the parties;[127]
– the limited nature of the project;
– an obligation to contribute and a property interest;[128]
– a community of interests[129] among the parties to achieve a common objective;
– a right of mutual management;
– profit-seeking;
– a right to share in the profits.[130]
Three of these criteria are said to be characteristic of a joint venture, although they may also be
present in a partnership:
(1) a joint property interest in the subject matter of the venture;
(2) a right of mutual control and management of the enterprise; and
(3) most usually, a limitation of the objective to a single undertaking or a limited number of
undertakings (it is recognized that the question of what constitutes a single undertaking will be
susceptible to widely differing interpretations).[131]
Joint property interest in the subject matter of the venture – In common law, partners do
not have to make contributions to a partnership, although in practice they generally contribute
resources to the business' operation. Conversely, a joint venture cannot exist without property
being pooled. However, such contributions do not transfer ownership. Each participant retains
ownership of the property contributed while having a direct and separate interest in the joint
venture's assets, from which the participants receive their profits directly. Thus, while profits in a
partnership belong first and foremost to the firm, in a joint venture they belong first of all to the
participants: [translation] «As a result, an important tax-based distinction emerged between joint
ventures and partnerships. These two institutions were subject to different rules, inter alia as
regards the computation of income».[132]
Right of mutual control – There is no structural representation of a joint venture's interests the
way there is for partnership's interests. Individual interests do not give way to the collective
interest of the group. Each participant wants to exercise personal control over the group's fate.
As a result, delegations of authority are extremely rare and important decisions are generally
made by unanimous agreement. The situation is completely different in a partnership. Although
the firm does not have any legal recognition, it does exist as far as third persons are
concerned.[133] Thus, management of the firm is either entrusted to a manager – who is to the
partnership what a board of directors is to a corporation – or no one is appointed and the law
provides that the partners have reciprocal management powers.[134]
Limited nature of the project – Finally, while the carrying on of a business is a condition for
the formation of a partnership, a joint venture is created for a specific project. The distinction is
tenuous given how broadly «business» is defined, with no minimum level of operation being
established. As a result, there is no reason why a partnership could not be formed for a single
purpose. This was confirmed by the Supreme Court in 1998.[135]
b. Quebec law
In Quebec, joint ventures have long been associated with contracts of partnership.[136]
Historically, the the Civil Code partnership was a juridical form provided by the legislator to
enable natural persons to join their efforts to form a profit-oriented economic enterprise and
share the earnings and losses therefrom, as set out in article 2186. Over time, however, the
concept of partnership was used for different purposes. Thus, it was found that married or
common-law spouses living together could develop a partnership-like relationship. It was also
found that enterprises, companies or partnerships could form partnerships. These developments
were facilitated by the extreme flexibility of North American law on business associations.
Confronted with this extended use of the partnership concept, the courts initially labelled these
new entities using superfluous legal terms such as de facto partnership or sui generis
partnership.[137] The Supreme Court clarified the situation by stating that all such groups that
satisfy the legal definition of partnership are partnerships and that only such groups are
partnerships. Quebec law does not have an intermediate legal category. There are no sui
generis partnerships in Quebec. All partnerships are de jure partnerships. In this case, as in the
case of jointly owned subsidiaries, the term «joint venture» has no legal content. The most
recent court decisions reflect this interpretation and are beginning to treat joint ventures as
particular undeclared partnerships.[138]
The participants in a joint venture will have to be extremely clear and precise in drafting their
agreement to express their intention not to form an undeclared partnership. This is because joint
ventures draw upon the criteria for the creation of such a partnership.[139] First of all, under
article 2186 C.C.Q., a partnership may be created to carry on a single activity; the distinction
based on carrying on a business is therefore not conclusive here. As well, contributions are
necessary to form a partnership and, in an undeclared partnership, the partners do not transfer
ownership of the property,[140] which adds to the confusion with joint ventures.
In practice, only the reasoning concerning the right of mutual control remains valid, and even
then, only in the case of an open undeclared partnership in which the group's existence is
revealed to third persons and the partners become reciprocally liable.[141] Undeclared
partnerships are by definition secret, and the law provides that each partner contracts in his or
her own name and is alone liable towards third persons.[142] In the latter case, the similarities
with joint ventures are obvious.
2. Legal individuality of partnerships
The contract of partnership is distinctive because, in addition to creating obligations among the
partners, it is personified by third persons.
In Quebec, under the C.C.L.C., most judges and legal authors agreed that this personification
could be explained through legal personality. Today, with the C.C.Q., the debate no longer
occurs in the same terms. Legal individuality is maintained, but legal personality is denied.
In the other Canadian provinces, this question has not received as much attention. The courts
have long agreed that partnerships are not legal entities.
It must be understood that the concept of ownership, at the root of the civil law debate, is
fundamentally different in the two legal systems. In the next part, the issues surrounding the legal
nature of partnerships in the civil law (A) will therefore be summarized in order to understand, in
light of the Anglo-Saxon experience (B), that such a question is specific to the Romano-
Germanic family.
A. The debate on the legal personality of partnerships in the civil law
The discussion surrounding the legal nature of partnerships actually comes down to a single
question: are entities that are expressly granted legal personality by the legislator the only ones
that have such personality, or do groups have a natural right to legal personality under certain
conditions?
The answer is important, since a review of different sources of law shows that there is a
contradiction between the legislative trend and the position taken by the courts.
We will thus turn our attention first to the dual definition of legal personality that prevailed under
the C.C.L.C. (a) in order to understand why that division can no longer be accepted under the
C.C.Q. (b).
a. The C.C.L.C. and the concept of legal personality
There have been two definitions of legal personality from the outset, namely a statutory definition
and a judicial definition. It is this split that has given rise to the controversy about the legal nature
of the concept in the civil law tradition (i).
Quebec law is no exception to the rule. The same duality used to exist on this side of the
Atlantic. A review of court decisions will make this apparent (ii).
i. Origin of the controversy
The definition of legal personality that is proposed depends on whether the person proposing it
is in the fiction camp or the reality camp.
Fiction – According to the fiction doctrine, legal personality is granted by law. This
corresponds to the original concept of legal personality in old French law (17th century), when
the only way for a legal person to come into being was through incorporation. It should be
pointed out that the «corporation» in question was not at all the same as the one described in
articles 352 et seq. C.C.L.C..[143] At that time, this term was used to designate what is now
referred to as a legal person. A corporation was therefore characterized by the limited liability of
its members as well as a formal organization.
Reality – According to the reality doctrine, legal personality is implicitly granted by law. This
idea originated with the French Revolution (19th century) when all corporations under the old
law were disbanded.
French jurisconsults of the time were confronted with a strange situation: on the one hand, the
breakup of existing legal persons (corporations); on the other, the enactment of the Code
Napoleon and its title on partnerships with very specific legal rules. The civil and commercial
partnerships of the French Code, without being expressly characterized as legal persons, had a
number of legal attributes identical to those of «corporations» under the old law. One example
can be found in article 529,[144] which declared shares in a partnership to be movables by
determination of law even if the partnership owned immovable property.
Correlation between patrimony and personality – At the time, the most plausible basis for
this legal individuality seemed to be the legislator's implicit recognition of legal personality. Since
every right presupposed a subject according to civil law concept of patrimonial unity, it was
impossible to provide any other explanation for the fact that a plurality of persons had rights and
obligations. If a partnership has a patrimony, it must necessarily have legal personality.
The reasoning is simple: if a partner becomes the owner of a security in exchange for
contributing to the partnership, the partnership's patrimony must be entirely separate from that of
the partners. It was thus «logically», through the unitary doctrine of patrimony, that the classical
legal scholars were able to find that partnerships had legal personality.
Entrenching the fiction in the legal system – In this way, legal personality gradually moved
away from the original «corporation» framework to become, in civil law, a shared ability to have
rights and be subject to obligations under the aegis of an artificial person. This was therefore a
fundamental change in the doctrine of ownership in civil law, which – unlike under Anglo-Saxon
and Germanic law – could no longer be conceived of without a subject. As a result, as long as
this patrimonial concept had currency, acting collectively for a group would necessarily
presuppose legal personality.
This historical evolution is fundamental to the understanding of the concept of legal personality.
During the 19th century another type of legal person besides the corporation was recognized,
i.e. the partnership, which was not entirely the same – especially because of the partners'
subsidiary liability – but which was no less an autonomous subject of rights at that time.
ii. Judicial evolution
The Civil Code of Lower Canada was enacted in 1866, and the same duality found its way to
this side of the Atlantic: the fiction doctrine (pursuant to which the legislator expressly grants the
legal personality to corporations alone (articles 352 et seq.)) and the judge-made reality or
implicit recognition doctrine (which explains the legal attributes granted by the law to civil and
commercial partnerships and unincorporated associations).
Commercial partnerships – The Court of Appeal found that general partnerships had legal
personality as early as 1896.[145] Although the courts were never very explicit on this question,
in the majority of cases [146] there was a finding that commercial partnerships had legal
personality.
Civil partnerships – The legal personality of civil partnerships[147] was the subject of more
discussion than that of commercial partnerships. Some legal authors[148] tried to draw a
distinction between the groups because of the fact that certain provisions from which it was
concluded that commercial partnerships had personality – including article 387, which deemed
partnership shares to be moveable – did not apply to civil partnerships. However, the debate
was purposeless, since most of the articles relied on to support the position that commercial
partnerships had legal personality also applied to civil partnerships. Furthermore, it was rapidly
demonstrated that there was no connection between the nature of the activity carried on (civil or
commercial) and the recognition of legal personality. Thus, the Court of Appeal made the
following statement in 1987: [translation] «This civil partnership, which was given the name of
Somec Lambert, obviously had a juridical personality different from that of its members».[149]
The same principle was reaffirmed in 1996 in Menuiserie Denla.[150]
Unincorporated associations – Finally, in a unanimous 1991 decision, the Court of Appeal
even found that an unincorporated association had some of the attributes of legal
personality.[151]
Ville de Quebec v. Cie d’Immeubles Allard Ltée[152] – In June 1996, after more than a
century of decisions finding that partnerships had legal personality, the Court of Appeal
rendered its first decision on this question – with ample reasons – that took issue with the
majority line of authority.
After an impressive historical review of the concepts of legal personality and patrimony, the two
majority judges expressed the view that the Court of Quebec's judgment was wrong because,
[translation] «although a partnership may seem to have some of the attributes of juridical
personality, it does not own a patrimony separate from that of its partners».[153] The majority
strictly applied the fiction doctrine and set aside the implicit recognition doctrine favoured by
authors and judges for nearly a century. Brossard J.A.'s comments in this regard are
unambiguous:
[TRANSLATION]
Moreover, no one is disputing the fact that the C.C. does not directly confer juridical personality
on partnerships. However, as I stated in the historical section of this opinion, the fiction doctrine,
while considering the legislature's intervention necessary to confer legal personality, does not
require that this occur expressly. The implicit recognition method is also accepted. However, the
considerations that have just been set out, especially the decisive ones relating to article 399,
seem to me to be an insurmountable obstacle to such implicit recognition.[154]
The dissenting judge, following the prevailing trend under the C.C.L.C., could not go along with
the suggestion that a partnership could not own property:
[TRANSLATION]
The first paragraph of art. 2199 of the Civil Code of Quebec reads as follows:
2199. A contribution of property is made by transferring rights of ownership or of enjoyment
and by placing the property at the disposal of the partnership.
In volume II of his comments, the Minister states that the second paragraph of art. 1839 and
art. 1846 C.C.L.C. are among the sources. There is no reference to this being new law.
I cannot persuade myself that, in the articles of the Civil Code of Lower Canada where the
legislature refers to the property of the partnership, the things belonging to the partnership, the
immoveable property of the partnership, «les biens de la société», it is not giving these words
and expressions their usual meaning.[155]
Reasons for the judgment – The majority judges adopted the following position based on a
detailed review of the C.C.L.C.'s provisions:
[TRANSLATION]
1. partnerships are not considered by the C.C.L.C. to be subjects of rights; only natural
persons and corporations are expressly given that status (arts. 18 and 352);
2. that Code requires that every right have a subject (art. 399);[156]
3. accordingly, since a partnership is not a subject of rights expressly recognized by the
Code, it has no juridical personality and therefore cannot have a separate patrimony.
Through this syllogistic reasoning, the majority judges supported the classical theory of
patrimonial unity stated by French authors Aubry and Rau:
[TRANSLATION]
Based on the above considerations, what must be understood is that the question of the
partnership's patrimony is difficult to address without addressing that of its personality. They are
interrelated. That is why, to deal with the former question, our analysis will consider the latter as
a correlative.[157]
The judges also commented on the proposition that article 387 supported the position that
partnerships have legal personality. According to the majority’s opinion, that provision in no
way proved that partnerships had personality, and its only effect was to deem a partnership’s
shares to be movable property under certain conditions. This led them to give the term
«partnership» a special meaning irrespective of the question of legal personality or autonomous
patrimony.
If we go along with the court’s interpretation that a partnership under the C.C.L.C. had no
separate patrimony, property should have been said to be held undivided by the partners, yet
that was not at all the case. Comparing the two institutions would have enabled the judges to
understand the distinctive characteristics of partnerships. The partners are not mere «undivided
co-owners» and, in this regard, the Court's definition of shares in a partnership cannot be
accepted.
A contribution effects a transfer – The process of contributing to a partnership has the effect
of transforming rights that does not exist in the case of indivision. The combining of property, in
the context of a partnership, transforms the partners' individual rights, be they rights of
ownership or enjoyment, into personal rights. Those personal rights, the shares in the
partnership, entitle the partners to both the profits and the assets of the partnership. This
position is the one taken by the same Court of Appeal in 1896 and is consistent with our civil
law understanding of ownership.[158]
If the position of the majority judges in Allard is accepted, there will no longer be any distinction
between indivision and partnership as far as the holding of property is concerned. Moreover,
why would the legislator have established a specific legal regime for shares in a partnership –
namely mobilization – if the partnership did not have an autonomous patrimony? According to
the majority judges, the answer can be found in the special meaning to be given to the term
«partnership».
Special meaning of the term «partnership» – The judges speaking for the majority admitted
that the partnership’s actions are separate from those performed by the partners on their own
behalf:
[TRANSLATION]
It must be recognized that actions taken by the partnership may differ from those taken
personally by its partners. So it is not incorrect, in a descriptive sense, to talk about the
partnership's activities. However, the legal impact of such activities can be felt only by the
partners.[159]
Relying on a legal thesis accepted by a minority of academics,,[160] they concluded that, in the
context of the C.C.L.C., the term «partnership» was synonymous to [translation] «the partners
as a group». Thus, when the Code used the expression «the immoveable property of the
partnership», this implied ownership not by the partnership but rather by the partners as a
group, [translation] «true undivided co-owners».[161]
Collective ownership – This collective method of holding rights, referred to in the majority
decision, implies a change in the way of looking at patrimony. This question was never raised
under the C.C.L.C. The unitary concept of patrimony did not allow for a type of ownership
midway between indivision and legal personality under the C.C.L.C. The collective ownership
referred to by the Court of Appeal does not create a state of indivision between the partners,
and this is where the judges would have been well advised to pursue their analysis. What is
actually created is a form of co-ownership «without shares», in which all the partners are
collective owners and subjects of rights without, however, personally owning the appropriated
property in whole or in part. This, of course, explains the need to make shares in partnerships
movable. However, such an approach is possible only in so far as the division of patrimony is
authorized by law.
Accordingly, as long as the concept of patrimonial unity prevailed in Quebec law, it was
impossible to integrate the collective ownership proposed by the majority in Allard. It is
therefore not surprising to find contradictions in the justices’ decisions. Their main argument is
based on Aubry and Rau’s theory (patrimony as a corollary of personality) but they also
adhered to another theory the basis of which is entirely different (autonomous patrimony outside
the context of legal personality). This led, of course, to the inconsistencies set out in this section.
Conclusion – What can be concluded from such a decision – which is fundamental since it was
the first to consider the question in such depth, but which is nevertheless of relative value since it
was rendered more than two years after the new Code came into effect – when the issues have
been completely transformed?
Allard constituted a minority position under the C.C.L.C. For a hundred years, the courts had
found that partnerships had legal personality. Such a steady line of authority cannot be brushed
aside by a split decision, no matter how ample the support provided for it.
Given this premise, what effect should the decision be given under the C.C.Q. now that the
dynamics have completely changed? While it is possible to agree with the majority opinion in
Allard and deny partnerships legal personality under the C.C.Q., it is impossible to be in favour
of the conclusion it draws, namely that partnerships have no patrimonial autonomy.
b. The C.C.Q. and the concept of patrimony by appropriation
There is a paradox in the new Code that calls into question the very nature of partnerships. The
legislator expressly confers legal personality only to joint-stock companies while significantly
enhancing the legal individuality of partnerships (i).
How can legal personality be denied to an entity that has an abundance of new legal attributes?
How can the autonomous patrimony and legal individuality that partnerships are acknowledged
to have by law be reconciled with an absence of legal personality? A review of recent decisions
will shed light on this question (ii).
i. The paradox of the new legislation
Since 1994, the ways by which legal persons may be constituted and organized have been
strictly regulated by the legislator:
298. Legal persons are endowed with juridical personality. Legal persons are established in the
public interest or for a private interest.
299. Legal persons are constituted in accordance with the juridical forms provided by law, and
sometimes directly by law. Legal persons exist from the coming into force of the Act or from the
time prescribed therein if they are established in the public interest or if they are constituted
directly by law or through the effect of law; otherwise, they exist from the time provided for in
the Acts that are applicable to them.
300. Legal persons established in the public interest are primarily governed by the special Acts
by which they are constituted and by those which are applicable to them; legal persons
established for a private interest are primarily governed by the Acts applicable to their particular
type. Both kinds of legal persons are also governed by this Code where the provisions of such
Acts require to be complemented, particularly with regard to their status as legal persons, their
property or their relations with other persons.
Forms of legal persons – There are no legal persons except in accordance with the juridical
forms provided by law or as constituted directly by law. The first type involves legal persons
constituted pursuant to the procedure set out in a law of general application, such as the
Companies Act[162] or the Canada Business Corporations Act.[163] The second type
involves legal persons created directly by a special Act. This is the method chosen for most
Crown corporations and for exclusive-practice professional corporations.
Each of these legal persons is primarily governed by the Acts applicable to it. On a subsidiary
basis, they are also governed by the Code[164] where the provisions of such Acts are not
complete. The legal framework applicable to legal persons is therefore clearly defined in the
Civil Code, and there seems to be no ambiguity about the domination of the fiction doctrine.
Upon reading the chapter on partnerships, the controversy seems to reappear. Only joint-stock
companies are characterized as legal persons by the legislator:
2188. Partnerships are either general partnerships, limited partnerships or undeclared
partnerships.
Partnerships may also be joint-stock companies, in which case they are legal persons.
(Emphasis added)
As paradoxical as it may seem, however, the legal attributes of partnerships are also enhanced
so as to give them the greater independence and longevity that «normally» characterize legal
persons. Under the C.C.L.C., partnerships were viewed by the majority of academics and
justices as having a number of legal attributes, and their legal capacity was justified through legal
personality. However, as was often noted, that personality was incomplete, imperfect or
embryonic: the partnership could not sue or be sued except in association with its members, and
partners’ liability was not limited to their contributions and could thus extend to all of the
partnership's debts, which was what put partnerships at the greatest disadvantage when
compared with corporations. Others argued that the partnership's existence was far too
connected with the fate or will of the partners for the partnership to be a legal person. Almost all
of these «imperfections» have been remedied by the new Code.
Since 1994, general and limited partnerships may:
· sue and be sued;[165]
· buy back their members' shares in the partnership;[166]
· have just one member;[167]
· have an existence separate from that of their members;[168]
· be liquidated in accordance with the same rules as legal persons.[169]
As for partners, they may now:
· transfer[170] and hypothecate[171] their shares in the partnership's assets and profits.
Partnerships are not legal persons within the meaning of the C.C.Q., but that legislation
undoubtedly confers on them a number of the legal attributes that, according to the traditional
analysis, characterize the legal persons. If the courts were able to find that the C.C.L.C.'s civil
and commercial partnerships were legal persons, how can they deny such status to the new
partnerships?
ii. The courts' interpretation
Since 1994, about 15 decisions have, with varying degrees of eloquence, dealt with the question
of the legal personality of partnerships. Only a few of them are consistent. Most of them
recognize the legal attributes of partnerships – they may sue and be sued, and they have an
autonomous patrimony – without exploring the rationale therefor any further. Unfortunately,
other decisions rely on Allard and deny partnerships patrimonial autonomy on the contention
that they are not legal persons.[172]
Capacity to sue and be sued – Since early 1994, three decisions have found that general
partnerships may sue and be sued. Given the clear and precise wording of article 2225, it is
difficult to see how a court could refuse to acknowledge that partnerships have that right:
2225. A partnership may sue and be sued in a civil action under the name it declares.
The problem lies, of course, with the basis for this legal attribute: the majority preferred to
remain silent on this question,[173] while the minority became confused trying to explain it.[174]
Separate patrimony – Four decisions have been rendered concerning the separate patrimony
of general partnerships. Two of them simply acknowledge, without further comment, that
partnerships have patrimonial autonomy.[175] The third decision is based on Allard and the
connection between patrimony and personality, in which the court states that: [translation] «that
partnerships have no juridical personality and therefore: (1) cannot own property; (2) are merely
mandataries of their partners; and (3) cannot be subject to obligations».[176] Finally, the fourth
judgment draws a subtle distinction between the concepts of separate patrimony and patrimony
by appropriation. According to the Court, there thus exists [translation] «a patrimony by
appropriation, which, in Quebec law, does not correspond to the concept of separate
patrimony».[177] Given the patrimonial doctrine, the decisions in the latter two cases are
unfounded in law.
Denial of legal person status – One of the most consistent decisions is certainly Lévesque v.
MFQ-Vie, which does not begin its analysis with the question of separate patrimony but deals
directly with the legal status of partnerships.
Section 10 of the Interest Act[178] was at issue in that case:
10. When no further interest payable.
(1) Whenever any principal money or interest secured by mortgage on real property is not,
under the terms of the mortgage, payable until a time more than five years after the date of the
mortgage, then, if at any time after the expiration of the five years, any person liable to pay or
entitled to redeem the mortgage tenders or pays, to the person entitled to receive the money, the
amount due for principal money and interest to the time of payment, as calculated under sections
6 to 9, together with three months further interest in lieu of notice, no further interest shall be
chargeable, payable or recoverable at any time thereafter on the principal money or interest due
under the mortgage.
(2) When section not to apply. Nothing in this section applies to any mortgage on real property
given by a joint stock company or other corporation, nor to any debenture issued by any such
company or corporation, for the payment of which security has been given by way of mortgage
on real property. (Emphasis added)
The applicants sought to show that Gestion Gilm s.e.n.c., a general partnership, was not a legal
person or «personne morale» (the French equivalent of «corporation» in section 10), while the
respondent argued that the section did not apply because a partnership is a legal person.
The Court began by noting that, [translation] «if we confine ourselves to the comments made by
the Minister of Justice, the legislature did not want to confer juridical personality on general
partnerships».[179] It also pointed out that the legislator had intended to grant juridical
personality to partnerships before the C.C.Q. came into force, and it explained why that
approach had been abandoned.[180] As far as the Superior Court was concerned, there was
therefore no doubt that general partnerships are not legal persons, although they are very similar
thereto in terms of their legal attributes.[181] However, the Court noted that, unlike in the case
of a legal person, partners remain personally liable for the partnership's debts and – that it must
not be forgotten that legal personality was not conferred on general partnerships by the
legislature:[182]
[TRANSLATION]
The Court does not share the respondent's opinion that the Civil Code of Quebec can, on a
suppletive basis, aid in determining whether or not an entity is a legal person; rather, its view is
that the Civil Code of Quebec is suppletive in so far as it refers to provisions that subject legal
persons already constituted to operational rules mentioned therein.
Those rules do not have the effect of creating juridical personality.
The legislature did not want to adopt the reality doctrine; it adopted the fiction doctrine.
Article 299 C.C.Q. clearly shows that the laws under which legal persons are constituted must
grant legal personality for the entities created thereunder to have legal personality without having
to infer it by interpretation. . . .
The legislature does not confer legal personality on general partnerships anywhere in the Civil
Code of Quebec.[183]
From the standpoint of the traditional analysis, the paradox is striking: on the one hand, the
Court accepted the fiction doctrine, and only joint-stock companies are legal persons; on the
other hand, the legal individuality of partnerships was also recognized, which is why it was
necessary to explain how they can have patrimonial autonomy without being legal persons. This
is where the only true problem lies: not falling back into the same trap and using the reality
doctrine to justify the legal autonomy of partnerships.
Along the same lines, the Superior Court rendered another important decision in 1999, Société
en nom collectif Vausko v. Ameublement et décoration Côté-Sud (St-Denis),[184] which
rejected the majority opinion of the Court of Appeal in Allard[185] and recognized the legal
attributes of general partnerships without giving them the status of legal persons:
[TRANSLATION]
With the greatest respect, the Court cannot go along with that suggestion. As Brossard J.A.
himself noted, the majority trend in Quebec among both scholars and justices is to find that
partnerships have a separate patrimony and legal personality, although the latter has sometimes
been called incomplete.[186]
Relying instead on Biron J.A.'s dissent in Allard, the Court felt that, given the new legal
attributes conferred on partnerships – even in the absence of an express provision and even if
general partnerships are not legal persons under article 2188 C.C.Q. – the legislator certainly
did not want to eliminate the legal individuality of partnerships under the new Code: [translation]
«[i]n short, even though general partnerships do not have all the attributes of legal persons, they
do have the main ones».[187]
Limited partnerships – The question of the legal individuality of limited partnerships has also
been discussed. Two decisions have acknowledged that such partnerships may sue and be
sued,[188] while two others have looked more specifically at the question of autonomous
patrimony.[189] The most interesting decision is unquestionably Servomation Internationale
and Co., a bankruptcy case, where the Court, relying on the Court of Appeal's decision in
Lalumière v. Moquin,[190] concluded that a limited partnership has a patrimony separate from
that of its partners and that the group's bankruptcy therefore does not automatically lead to that
of the general partner:
[TRANSLATION]
A limited partnership is a legal entity with the same characteristics as a joint-stock company
having its own patrimony, the effect of which is to limit its shareholders' liability.
In a limited partnership, it is the general partner who is the sole person authorized to administer
and bind the partnership (article 2236 C.C.Q.).
After reviewing the various aspects of the «contractual enterprise» in Collection de Droit 1995-
1996, Michelle Thériault takes the view that, in addition to having its own name, a limited
partnership has a separate patrimony and the capacity to contract. . . .
Based on her review, Ms. Thériault concludes that, although limited partnerships are not legal
persons, they obviously have juridical personality.
Our Court of Appeal does not go that far but does recognize that a limited partnership has a
patrimony separate from that of its partners.[191]
In conclusion, what can be said about these first few decisions is that, inasmuch as the justices
noted that Allard was decided in a context totally different from that of the C.C.Q., a majority
trend among judges is emerging in favour of recognizing the legal attributes of general and limited
partnerships without conferring them legal personality. This is a fundamental first step in the
evolution of Quebec law: the lack of connection between the autonomous patrimony of
partnerships and juridical personality. The second step to be taken will be to understand the
justification for this. An initial decision heads in that direction:
[TRANSLATION]
A limited partnership has a patrimony by appropriation: the partnership's property does not
really belong to it but is owned by its special or general partners. However, that property, which
is specifically identified as being the limited partnership's patrimony by appropriation, remains
the prior pledge of the partnership's creditors.
That being the case, is a limited partnership a legal person?
Article 2188 C.C.Q. answers this question:
2188. Partnerships are either general partnerships, limited partnerships or undeclared
partnerships.
Partnerships may also be joint-stock companies, in which case they are legal persons.
Only joint-stock companies are legal persons.[192]
iii. The patrimonial autonomy of partnerships
Once one becomes aware of the new Code’s philosophy, it becomes much easier to explain the
patrimonial autonomy of partnerships outside the framework of legal personality.
The C.C.Q. favours a patrimonial concept that is no longer solely based on the person but
rather on the joint appropriation of property to a purpose. This means that there are now no
obstacles to the establishment of patrimonial compartments within a person's general patrimony.
Basis – Articles 2 and 2645 are the key provisions behind this new concept:
2. Every person has a patrimony.
The patrimony may be divided or appropriated to a purpose, but only to the extent provided by
law.
2645. Any person under a personal obligation charges, for its performance, all his property,
movable and immovable, present and future, except property which is exempt from seizure or
property which is the object of a division of patrimony permitted by law.
Thus, every natural and legal person has a patrimony that is the common pledge of that person's
creditors. This is the classic definition, a concept that prevailed under the C.C.L.C. However,
unlike the situation under the former Code, a person's general patrimony may now include one
or more separate patrimonies. This is what the legislator means when it states that «[t]he
patrimony may be divided or appropriated to a purpose, but only to the extent provided by
law».
Appropriation of patrimony to a purpose – Autonomous patrimonies by appropriation are
patrimonies with no subject, for which the rules of ownership and administration are completely
autonomous and separate from those applicable to the settlor, trustee or beneficiary. There are
only two types under the Code: the foundation and the trust.
Division of patrimony – Some of a person's assets may be appropriated to a purpose and
make up an exclusive pledge for certain creditors. This is what is meant by the division of a
person's general patrimony. Unlike patrimonies by appropriation, such divisions are not subject
to autonomous rules of ownership and administration, which means that the connection with the
owner of the patrimony is maintained. The appropriation of the property must therefore be seen
in such cases not as a true disposition, such as occurs with trusts, but rather as a charge or
restriction on the right of ownership, such as occurs with partnerships. Thus, the main difference
between partnerships and trusts or legal persons is the permeability of the patrimonial
compartment: after "discussing" the partnership’s property, the partnership's creditors can take
legal action against the partners' personal property, although they rank after the partners'
personal creditors.
B. Denial of legal person status to common law partnerships
In common law, the question of the juridical personality of partnerships has not given rise to the
same debate as in civil law. The courts are unanimous that partnerships are not legal persons.
The flexibility of common law concept of ownership, unlike the civil law concept, has simplified
the matter (a). Anglo-Saxon law, the solutions of which are more pragmatic, accepted very
early on that regardless the absence of legal personality, some autonomy could be given to
partnerships to ensure that they could carry on a business efficiently (b).
a. The firm and the concept of ownership
Firm – In common law provinces, partnerships are not entities separate from their
members.[193] Thus, although the partners are collectively called the «firm» for the purposes of
the legislation,[194] the firm is not a «corporate body». It is simply a characterization of their
relationship.[195] Accordingly, since the law does not recognize the partnership as a legal
person, the partnership's rights and duties are the rights and duties of its partners:
. . . but speaking generally, the firm as such no legal recognition. The law, ignoring the firm,
looks to the partners composing it; any change amongst them destroys the identity of the firm;
what is called the property of the firm is their property, and what are called the debts and
liabilities of the firm are their debts and their liabilities.[196]
This explains the fact that the partners’ liability is unlimited vis-à-vis their personal assets
«simply because they are the partners’ obligations in the first place».[197]
Contribution – It is important to remember that, in common law, the contribution of property
to a partnership is not an essential element and, when it occurs, it does not transfer ownership:
«Because the firm has no distinct legal personality, however, a partner cannot be considered the
firm’s debtor if he fails to make his promised contribution».[198] However, this does not mean
that partners are assimilated to undivided co-owners. It hardly needs to be pointed out that,
under the legislation on general partnerships, joint property, common property or part
ownership is not sufficient to find that a partnership exists[199]?
Nature of a partner's right – As long as the partnership exists, a partner's right is therefore
not an undivided share in each piece of the partnership's property but rather a proportional right
to share in the business’ profits and in the residue when the partnership is dissolved. This was
the interpretation adopted by the Supreme Court of Canada in 1926:
The real question is whether, from the evidence before us, one ought to infer an agreement in the
juridical sense that the property these two persons intended dealing with was to be held jointly
as partnership property, and sold as such. Is this what they contemplated? Had they in their
minds a binding agreement which would disable either of them from dealing with his share – that
is to say, with his share in the land itself – as his own separate property? A common intention
that each should be at liberty to deal with his undivided interest in the land as his own would
obviously be incompatible with an intention that both should be bound to treat the corpus as the
joint property, the property of a partnership. English law does not regard a partnership as a
persona in the legal sense. Nevertheless, the property of the partnership is not divisible among
the partners in specie. The partner's right is a right to a division of profits according to the
special arrangement, and as regards the corpus, to a sale and division of the proceeds on
dissolution after the discharge of liabilities. This right, a partner may assign, but he cannot
transfer to another an undivided interest in the partnership property in specie.[200]


It is also clear from the wording of the Act:
24. Rules as to interests and duties of partners
24. The interests of partners in the partnership property and their rights and duties in relation to
the partnership shall be determined, subject to any agreement express or implied between the
partners, by the following rules:
1.All the partners are entitled to share equally in the capital and profits of the business, and must
contribute equally towards the losses, whether of capital or otherwise, sustained by the firm. . . .
Similarly, Ontario's Limited Partnerships Act[201] expressly provides that a limited partner's
interest in the limited partnership is personal property. Thus, in common law – whether
English[202] or Canadian – a share in a partnership is a chose in action, which means
[translation] «a right to obtain something as opposed to a right in property».[203]
Dual meaning of the term «property» – In common law, the term «property» has a dual
meaning. Its primary and more general or concrete meaning is [translation] «any material thing
that can be appropriated».[204] The second meaning, which is much more specialized and
abstract, [translation] «puts the emphasis no longer on the identity of the thing itself but rather on
the nature of the rights that persons may exercise in respect thereof. In this literal sense,
property is no longer this land that I occupy but the interest I have in this piece of land».[205]
«Property» is thus separated from the material thing and may be used to designate sets of rights
that potentially may enrich a person, without necessarily corresponding to a material thing.[206]
This is why shares in a partnership, like shares in a company, are categorized as incorporeal
property.


b. How the legal autonomy of partnerships is expressed
Lindley has splendidly captured the duality of partnerships:
Merchants and lawyers have different notions respecting the nature of a firm. Commercial men
and accountants are apt to look upon a firm in the light in which lawyers look upon a
corporation, i.e. as a body distinct from the members composing it, and having rights and
obligations distinct from those of its members. Hence, in keeping partnership accounts, the firm
is made debtor to each partner for what he brings into the common stock, and each partner is
made debtor to the firm for all that he takes out of that stock. In the mercantile view, partners
are never indebted to each other in respect of partnership transactions; but are always either
debtors to or creditors of the firm.[207]
In common law, as in civil law, the firm's specific existence is thus expressed in various ways.
Firm name – General partnerships carry on their business under a firm name,[208] which must
be registered in accordance with the Business Names Act.[209]
Organization – A partnership is an organized group. It may be represented by a manager, or
else each partner, as its agent, can bind it through acts done for carrying on its business.[210]
Partnership property – The partnership may acquire rights and obligations in its own
name.[211] While the partnership exists, its property must be used for the business:
21.(1) Partnership property
21.(1) All property and rights and interests in property originally brought into the partnership
stock or acquired, whether by purchase or otherwise, on account of the firm, or for the
purposes and in the course of the partnership business, are called in this Act «partnership
property», and must be held and applied by the partners exclusively for the purposes of the
partnership and in accordance with the partnership agreement.
21.(2) Devolution of land
21.(2) The legal estate or interest in land that belongs to a partnership devolves according to the
nature and tenure thereof and the general rules of law thereto applicable, but in trust, so far as
necessary, for the persons beneficially interested in the land under this section.
22. Property bought with partnership money
22. Unless the contrary intention appears, property bought with money belonging to the firm
shall be deemed to have been bought on the account of the firm. R.S.O. 1980, c. 370, s. 22.
23. Conversion of land bought with partnership money into personalty
23. Where land or any heritable interest therein becomes partnership property, unless the
contrary intention appears, it is to be treated as between the partners, including the
representatives of a deceased partner, and also as between the heirs of a deceased partner and
his or her executors or administrators as personal or movable and not real or heritable estate.
Moreover, a number of provisions clearly show that partnerships have some legal autonomy:
– the firm is liable to make good a partner’s loss;[212]
– the firm must indemnify the partners in respect of payments made;[213]
– every partner must account to the firm;[214]
– a partner may not compete with the firm;[215]
– at the time of dissolution, a partner may have the partnership property applied in
payment of the firm's debts and liabilities.[216]
Partnership shares as personal property – The fact that partnership shares are personal
property is also clear from the wording of the Act.[217]
Suing and being sued – A partnership may sue and be sued under its firm name[218].
An admission or representation made by a partner may even be evidence against the firm.[219]
Unlimited liability – However, since partnerships are not legal persons, each partner is liable
for the partnership's obligations in proportion to his or her interest in the partnership property.
Conclusion
Under the C.C.L.C., Quebec law recognized that general and limited partnerships were legal
persons because of the necessary connection – according to classic academic analysis –
between patrimony and person: only a natural or legal person could have a patrimony, and
every natural and legal person had to have a patrimony but could have only one.
Thus, while the C.C.L.C. considered juridical personality and indivision to be the only ways for
a patrimony to be collectively enjoyed, the new Civil Code introduces an intermediate concept:
collective ownership entailing a division of patrimony with regard to third parties. This concept
enables a group of persons to enjoy an autonomous patrimony, separate from their own, which
is appropriated to the purpose being pursued by the group. Collective ownership differs from
ordinary co-ownership in that the partners do not have a theoretical share in a fraction of the
patrimony and can neither dispose of their shares alone nor demand partition.
Collective ownership is another special mode of ownership that is midway between indivision
and legal personality. A special mode of ownership is a way for the right of ownership to exist
or behave that implies that it remains whole. This means that the whole array of prerogatives of
the right of ownership is never divided among the co-owners. Special modes therefore contrast
with dismemberments.[220] In a partnership the partners co-own property «without shares»
and they are all collective owners and subjects of rights without individually being owners of the
appropriated property in whole or in part.
Anglo-Saxon law, including the approach taken in the common law provinces, recognizes –
without resorting to the complex notions of ownership of the Romano-Germanic legal family –
the existence of legal entities with varying degrees of autonomy that are nonetheless not legal
persons. Canadian partnerships legislation as well as federal statutes have been drafted in
accordance with the following two tenets:
(1)A partnership is not a legal person, although
(2)a partner's right while the partnership exists is not an undivided right but a chose in action,
entitling the partner to share in the profits of the business and in the residue when the partnership
is dissolved[221].
Thus, a partnership is not a separate taxpayer within the meaning of the Income Tax Act.
However, the law requires partnerships to establish their income, earnings and losses «as if»
they were separate entities.[222] It is not until the second stage that the income is attributed to
the partners, who are taxed on a pro rata basis according to their share in the partnership.
The same is true of the legal rules under the Bankruptcy and Insolvency Act,[223] where it is
clear that partnerships have no juridical personality. For example, a creditor whose claim against
a partnership is sufficient to entitle the creditor to present a bankruptcy petition may present a
petition against any one or more partners.[224] As well, where a partner goes bankrupt, the
Act[225] establishes an order of priority among the partnership's creditors and the personal
creditors that is reminiscent of the one set out in the Civil Code.[226]
Several other examples could be given that all take the same approach: partnerships have no
juridical personality.
Today, Quebec law is no longer an exception to the rule. When Quebec’s legislator settled the
debate on the legal personality of partnerships once and for all in 1994, it moved the Civil Code
partnership closer to the common law provinces’ partnerships and reduced the differences in
how these entities are treated:
[TRANSLATION]
Although the authors and the courts have often found that partnerships under the current law
have a certain legal personality, affirming that personality in the Civil Code would not be
advisable. First of all, the personality thus recognized does not correspond entirely to that of a
corporation, since the partners remain personally liable for the partnership's debts; as well, such
an affirmation could cause problems, especially in tax terms, for Quebec partnerships in
comparison with those established in other provinces. In Canadian law, non-liability for debts is
an integral part of the concept of legal person or corporation. I would therefore propose not
granting juridical personality to general and limited partnerships.[227]
Following the example of Germanic and Anglo-Saxon law, general and limited partnerships
under the Civil Code of Quebec have an autonomous patrimony and a legal individuality without
being legal persons. While such an assertion is difficult to conceive of in the civil law tradition, it
is nonetheless a reality that must be explained. For partnerships, the concept of patrimony by
appropriation reconciles the consequences generally attributed to legal personality with certain
situations that derogated from such personality. This structure thus makes it possible to rid
partnerships of all artifice and substitute a mechanism that better accounts for the coexistence of
two realities: collective activity and individual interests.



[1] Québec (Ville de) v. Cie d’immeules Allard Ltée, [1996] R.J.Q. 1566 (C.A.).
[2] C.C.Q., arts 2186 et seq. (Quebec); Partnerships Act, R.S.O. 1990, c. P.5 (Ontario);
Partnership Act, R.S.M. 1987, c. P.30 (Manitoba); Partnership Act, R.S.N.B. 1998, c. P-4
(New Brunswick); Partnership Act, R.S.Y. 1986, c. 127 (Yukon); Partnership Act, R.S.
1990, c. P-1 (Northwest Territories); Partnership Act, R.S.B.C. 1996, c. 348 (British
Columbia); Partnership Act, R.S.P.E.I. 1988, c. P-1 (Prince Edward Island); Partnership
Act, R.S.N.S. 1989, c. 334 (Nova Scotia); The Partnership Act, R.S.S. 1978, c. P-3
(Saskatchewan); An Act respecting Partnership, R.S.N. 1990, c. P-3 (Newfoundland and
Labrador); Partnerships Act, R.S.A. 1980. c. P-2 (Alberta).
For the purposes of this paper, the Ontario legislation will be used as the model legislation
(hereinafter R.S.O.)
[3] Partnership Act, 1890, 53 & 54 Vict., c. 39.
[4] C.C.Q., arts. 1385 et seq.
[5] Id., arts. 8, 9, 1373 and 1413.
[6] Id., art. 2187.
[7] Id., art. 2199, first para.
[8] P. DESMOTES, «Part sociale», (1971) Répertoire Dalloz des Sociétés, n° 17.
[9] C.C.Q., art. 2218.
[10] Id., art. 2216.
[11] Id., art. 2209.
[12] Act respecting the legal publicity of sole proprietorships, partnerships and legal
persons, R.S.Q., c. P-45,art. 33-34, 62 (hereinafter A.L.P).
[13] Id., art. 2224.
[14] Id., art. 2198.
[15] Id., art. 2199, first para.
[16] Id., art. 2199, second para.
[17] N. ANTAKI and C. BOUCHARD, Droit et pratique de l’entreprise, vol. I
(Cowansville: Éditions Yvon Blais Inc., 1999), pp. 344 et seq.
[18] G. SOUSI, Les associations (Paris: Dalloz, 1985), p. 20.
[19] C.C.Q., art. 2203, first para.
[20] Id., art. 2202, second para.
[21] Id., art. 2202, first para.
[22] Id., art. 2203, second para.
[23] Id., art. 2221.
[24] Id., art. 2186, second para.
[25] Id., arts. 1012 et seq.
[26] Beaudoin-Daigneault v. Richard, [1984] 1 S.C.R. 2.
[27] Placements Tanguay (1979) ltée (Syndic de) v. 2958-3838 Quebec Inc., [1997]
R.J.Q. 565, at p. 572 (Sup. Ct.).
[28] R.S.O., supra, note 2, s. 2.
[29] Porter & Sons Ltd. v. Armstrong et al., [1926] S.C.R. 328; Sproule v. McConnel,
[1925] 1 W.W.R. 609 (Sask. C.A.).
[30] Continental Bank Leasing v. Canada, [1998] 2 S.C.R. 298.
[31] A.E. Lepage Ltd. v. Kamex Developments (1977), 78 D.L.R. (3d) 223, 16 O.R. (2d)
193 (C.A.); [1979] 2 S.C.R. 155.
[32] Continental Bank Leasing v. Canada, supra, note 30, pp. 317-18.
[33] R.S.O, supra, note 2, s. 3.
[34] Continental Bank Leasing v. Canada, supra, note 30, p. 318; Canada Deposit
Insurance Corp. v. Canadian Commercial Bank, [1992] 3 S.C.R. 558, 5 Alta. L.R. (3d)
193, 7 B.L.R. (2d) 113, at p. 10; Volzke Construction Ltd. v. Westlock Foods Ltd. (1986),
45 Alta. L.R. (2d) 97, 70 A.R. 300, [1986] 4 W.W.R. 668 (C.A.), at pp. 5-6; Pooley v.
Driver (1876), 5 Ch.D. 458, 46 L.J. Ch. 466, at p. 6; Cox and Wheatcroft v. Hickman
(1860), 8 H.L. Cas. 268, 11 E.R. 431, at p. 10.
[35] Continental Bank Leasing v. Canada, supra, note 30.
[36] R.S.O., supra, note 2, s. 1(1).
[37] R.C.I. BANKS, Lindley & Banks on the Law of Partnership (London: Sweet &
Maxwell, 1995), p. 11.
[38] C.C.Q., art. 2221, first para.
[39] Continental Bank Leasing v. Canada, supra, note 30, pp. 320 et seq.
[40] Id., pp. 321-22. Emphasis added. Along the same lines, see the following recent
decisions: Canada v. Robinson, [1998] 2 F.C. 569 (C.A.), under appeal; Canada v. Central
Supply Co. (1972) Ltd., [1997] 3 F.C. 674 (C.A.), under appeal; Schultz v. Canada, [1996]
1 F.C. 423 (C.A.).
[41] Canadian Encyclopedic Digest, «Partnership», 3rd edition, vol. 24, Title 106 (1993),
No. 9, and see the decisions referred to in note 20.
[42] Continental Bank Leasing v. Canada, supra, note 30, pp. 322-23. Emphasis added.
[43] Backman v. Canada, 2001 CSC 10, no 21; Spire Freezers Ltd. v. Canada, 2001
CSC 11 ; McEwen Brothers Ltd. v. Canada, [1999] 4 C.F. 225 (C.F.A.) (AZ-50069751, p.
14).
[44] For example, see McKeown v. Canada, [2001] A.C.I. n° 236. The Garon J. conclued
that the sole reason for the creation of a partnership was to give a particular partner the
«benefit» of, say, tax loss, the partnership could not in any real sense be said to have been
formed «to share any resulting pecuniary profits».
[45] Continental Bank Leasing v. Canada, supra, note 30, pp. 323-24.
[46] Ibid. Emphasis added. Along the same lines, see Backman v. Canada, supra, note 43;
Spire Freezers Ltd. v. Canada, supra, note 43; Schultz v. Canada, supra, note 40.
[47] Backman v. Canada, supra, note 43, n° 22-24; Spire Freezers Ltd. v. Canada,
supra, note 43, no 17; Schultz v. Canada, supra, note 40 (p. 12, AZ-96112026).
[48] A.L.P., supra, note 12.
[49] On this question, see, infra, b.The C.C.Q. and the concept of patrimony by
appropriation, pp. 42 et seq.
[50] C.C.Q., art. 2238, 2249
[51] Id., art. 2251
[52] Id., art. 2189; P. VACHON and P. MARTEL, «Les cabinets d’avocats doivent-ils
changer de nom?» (1994), Repères 61.
[53] C.C.Q., art. 2189, second para.; A.L.P., supra, note 12, s. 2(2) and s. 9, first para.
[54] A.L.P., supra, note 12, s. 100.
[55] Id., ss. 106, 107, 110.
[56] C.C.Q., art. 2253, first para.
[57] Id., art. 2254.
[58] Id., art. 2215, first para.
[59] Id., art. 2226.
[60] Id., art. 2230.
[61] R.J. POTHIER, Oeuvres complètes de Pothier, new edition, vol. 7 (Paris: Chez
Thomine et Fortic, 1821), p. 190.
[62] C.C.Q., art. 2187.
[63] Id., art. 2189, second para.
[64] Id., art. 2189; A.L.P., supra, note 12, ss. 1, first para. and 2.
[65] C.C.Q., arts. 2252-53.
[66] Id., art. 2257.
[67] On this question, see, infra, Joint ventures in b. Quebec Law, pp. 30 et seq.
[68] Beaudoin-Daigneault v. Richard, supra, note 26; Droit de la famille-720, [1989]
R.D.F. 694 (C.A.); Droit de la famille-2503, [1996] R.D.F. 718 (C.A.); Rodier v. Gagnon,
[1996] R.D.I. 82 (Sup. Ct.); Droit de la famille-904, [1990] R.J.Q. 2844 (Sup. Ct.); Savoy
v. Quebec (Sous-ministre du revenu), [1996] R.D.F.Q. 316 (C.Q.).
[69] C.C.Q., art. 2189, second para.
[70] Act respecting the implementation of the reform of the Civil Code, 1992, c. 57, ss.
115 et seq. (hereinafter A.I.R.C.C.).
[71] C.C.Q., art. 2250.
[72] Gestion Pierre Dumas Inc. v. Price, Sup. Ct. Montreal, No. 500-05-010476-933,
February 27, 1996, 20 p., Justice Y.A. Macerola, J.E. 96-1194; Girouard v. Moreau, C.Q.
St-François, No. 450-02-001170-946, June 16, 1995, 21 p., Judge D. Côté, J.E. 95-1534;
Bourboin v. Savard (1926), 40 B.R. 68.
[73] C.C.Q., art. 2250, second para. On this question, see C. BOUCHARD and L.
LAFLAMME, «La dérive de l’indivision vers la société: quand l’indivision se conjugue avec la
société» (2000), 30 R.D.U.S. 317.
[74] C.C.Q., art. 1012; C. BOUCHARD and L. LAFLAMME, loc. cit., note 73.
[75] N. DECOOPMAN, «La notion de mise à disposition» (1981), Rev. trim. dr. civ. 300,
at pp. 312 et seq.
[76] G. RIPERT, R. ROBLOT and M. GERMAIN, Droit commercial, vol. I, 16th ed.
(Paris: L.G.D.J., 1996), No. 897.
[77] C.C.Q., art. 1014.
[78] Id., art. 625.
[79] Id., art. 2258.
[80] C. BOUCHARD and L. LAFLAMME, loc. cit., note 73.
[81] C.C.Q., art. 2251, second para.
[82] Id., arts. 2198-2218.
[83] Id., art. 2253.
[84] Id., arts. 1627-30.
[85] Id., art. 2253, first para.
[86] X. BLANC-JOUVAN, «La révélation aux tiers de la société en participation» (1959),
Rev. trim. dr. com. 649. Emphasis added.
[87] C.C.Q., art. 2254.
[88] Id., art. 2258.
[89] Id., art. 2259.
[90] This is true of Ontario, Saskatchewan, Prince Edward Island and Manitoba.
[91] Alberta (trading, manufacturing, contracting or mining purposes); British Columbia and
New Brunswick (trading, mining or manufacturing purposes); Nova Scotia (all partnerships
except «farming, fishing or operation of grist or saw mills as tenants in common").
[92] Ontario, Nova Scotia, New Brunswick and Alberta.
[93] British Columbia, Manitoba, Saskatchewan and Prince Edward Island.
[94] J.S. ZIEGEL, Cases and Materials on Partnerships and Canadian Business
Corporations, 3rd ed., vol. 2 (Scarborough: Carswell, 1994), p. 55.
[95] C.C.Q., art. 2221, first para.
[96] R.S.O., note 2, s. 33(1).
[97] Id., s. 33(2).
[98] Limited Partnerships Act, R.S.O., c. L.16, s. 3(1).
[99] Id., s. 3(3).
[100] Id., s. 3(4).
[101] R.S.N.B., supra, note 2, s. 3(4).
[102] R.S.M., supra, note 2, ss. 55-56.
[103] C.C.L.C., arts. 1878-80.
[104] The limited liability partnership was created in Texas in 1991. On this question, see R.H.
BOWES, «Limited Liability Partnership», in Uniform Law Conference of Canada (Winnipeg,
Manitoba, August 15-19, 1999).
[105] Partnerships Act, R.S.O. 1990, c. P.5, as amended by S.O. 1998, c. 2; Partnership
Act, R.S.A. 1980, c. P-2, as amended by Bill 34, 1999.
[106] In Quebec province see, An Act to amend the Professional Code and other
legislative provisions as regards the carrying on of professional activities within a
partnership or company, Bill 169, 2000.
[107] R.S.O., supra, note 2, s. 44.1.
[108] Id., s. 44.3.
[109] Id., s. 10(2).
[110] Alberta Law Reform Institute, Limited Liability Partnerships, Final Report, No. 77
(Edmonton: A.L.R.I., April 1999).
[111] Groupe de travail sur l’exercice de professions en société, Vers de nombreux modes
d’exercices professionnels, summary report, vol. I (Quebec City, June 2000).
[112] A.L.P., supra, note 12, ss. 2(3) and 11(3).
[113] Code of ethics of advocates, R.R.Q. 1981, c. B-1, r.1, s. 3.04.01.
[114] P.-A. COSSETTE, «Les groupements momentanés d’entreprises (joint ventures):
nature juridique en droit civil et en common law» (1984), 44 R. du B. 463.
[115] N. LACASSE, «La réalisation d’une coentreprise à l’étranger: le choix de la forme
juridique», in N. Lacasse and L. Perret, eds., La coentreprise à l’étranger, «Bleue» collection
(Montreal: Wilson & Lafleur, 1989), pp. 46, 50.
[116] Ibid.
[117] P.-A. COSSETTE, loc. cit., note 114, p. 473.
[118] 30 Am. Jur. 10, 63 A.L.R. 909 n; 138 A.L.R. 968 n.
[119] Carbonneau v. Peterson, 1 Wash. 2d 347, 95 p. 2d 1043 (1939); Steinbeck v.
Gerosa, 4 N.Y. 2d 302, 151 N.E. 2d 170, 175 N.Y.S. 2d 1 (1958).
[120] Balestrieri and Co. v. Commissioners, 117 F. 2d 867 (1950); Soulek v. City of
Omaha, 140 Neb. 151, 279 N.W. 368 (1941); Eagle Star Co. v. Bean, 134 F. 2d 755
(1943).
[121] Sappenfield v. Mead, 338 Ill. App. 236, 87 N.E. 2d 220 (1949); Pierce v.
MacDonald, 168 A.D. 47, 153 N.Y.S. 810 (1915).
[122] Carmer v. J. Leo Johnson Inc., (Del) A2d 499; Mariani v. Summers, 3 Misc. 2d
534, 52 N.Y.S. 2d 750, 269 A.D. 830, 56 N.Y.S. 2d 537 (1944).
[123] "A Partnership and a Joint Venture Distinguished» (1920), 33 Harv. L. Rev. 852;
MECHEM, «The Law of Joint Adventure» (1930-31), 15 Minn. L. Rev. 644; Comment: «The
Joint Venture: Problem Child of Partnership» (1950), 38 Calif. L. Rev. 860; Comments: «Joint
Venture or Partnership» (1949), 18 Ford L. Rev. 114.
[124] Thus, the courts have found that, unlike partnerships, joint ventures do not have to be
registered when they are formed; a corporation may become a member of a joint venture even
when it may not join a partnership; a member of a joint venture may sue another member
without first rendering accounts; the obligation not to compete with the joint venture has been
enforced less strictly than for partnerships. On all these points, see P.-A. COSSETTE, loc. cit.,
note 114, pp. 474-78.
[125] Id., p. 478.
[126] Canadian Pacific Ltd. v. Telesat Canada (1982), 133 D.L.R. (3d) 321 (Ont. C.A.);
Canada Dry Ltd. v. Nova Scotia Recreation Development Ltd. (1983), 56 N.S.R. (2d) 167
(S.C.); Central Mortgage and Housing Corporation v. Graham (1974), 43 D.L.R. (3d)
686; Nova Scotia Drydock Ltd. v. Rijn Schelde-Verolme Machinnfabriecken En
Scheepswerven n.v. (1982), 56 N.S.R.; Marcel A. GUILBAULT, «Le nouveau Code civil et
son impact fiscal: fiducie et société de personnes», in Association de planification fiscale et
financière – Congrès (1993 Congress), 15:6-15:7.
[127] Central Mortgage and Housing Corporation v. Graham, supra, note 126, p. 705.
[128] Id., p. 709; Canadian National Railway Company v. Norsk Pacific Steamship Co.,
[1992] 1 S.C.R. 1021; Canadian Pacific Ltd. v. Telesat Canada, supra, note 126.
[129] In Canada Dry Ltd. v. Nova Scotia Recreation Development Ltd., supra, note 126,
the Court found that there was no joint venture because the specific interests of each company
did not correspond to the common objective of the group.
[130] Central Mortgage and Housing Corporation v. Graham, supra, note 126, p. 710.
[131] J. McKEE, «The Distinction between Joint Ventures and Partnerships» (1985), 17:1
C.C.T., pp. C98-C99.
[132] C. PERRON and H.H. MAI, «Quelques réflexions sur la notion et l’application du joint
venture au Quebec», in D.-C. Lamontagne, ed., Droit spécialisé des contrats, vol. 2
(Cowansville: Les Éditions Yvon Blais, 1999), pp. 344, 363; REVENUE Canada,
«Distinguishing Between a Joint Venture and a Partnership for the Purpose of the Section 273
Joint Venture Election», in Draft Policy Paper, February 21, 1995.
[133] On this point, see, infra, b. How the legal autonomy of partnerships is expressed.
[134] R.S.O., supra, note 2, s. 6.
[135] Continental Bank Leasing v. Canada, supra, note 30, p. 327: «The Partnerships
Act does not limit the ability of a person to enter into a partnership for a single transaction».
[136] Imprégilo Canada Ltée v. Le sous-minisre du Revenu du Quebec, [1992] R.D.F.Q.
264, at p. 268; Royal Bank of Canada v. Meyers, [1989] R.J.Q. 514 (C.A.); Winner &
Chazonoff (Ontario) Ltd. v. Thomas Fuller Construction Co. (1958) Ltd., [1980] C.S.
570; Productions Réjean Lefrançois Inc. v. Les Entreprises M.P. Inc., Sup. Ct. Montreal,
Nos. 500-09-000835-827, 500-05-011217-799, June 20, 1985, Kaufman, Jacques and
LeBel JJ., 14 p.
[137] Invernizzi v. Du Crest, [1982] C.S. 418; Giguère v. Rolco Metal Inc., Sup. Ct.
Montreal, No. 500-05-002586-822, August 17, 1982, 8 p., J.E. 82-934; Laflamme v.
Laplante, [1981] C.S. 1031; Russo v. Brault, Sup. Ct. Montreal, October 2, 1980, No. 500-
05-815984-719 (appeal allowed C.A.M. No. 500-09-001220-805, April 26, 1985), J.E. 80-
974.
[138] Royal Bank of Canada v. Meyers, supra, note 136; Hôtel de la Grande Allée Inc. v.
Canada Permanent Trust Co., Sup. Ct. Quebec City, No. 200-05-002490-840, October
16, 1984, 17 p., J.E. 84-934; Tilly Manufacturing (1973) Ltd. v. Horne, [1978] C.S. 655;
Pavage des moulins inc. v. Ville de Lachenaie, Sup. Ct. Joliette, No. 705-05-002113-978,
September 29, 1997, 17 p., Justice C. Trudel; Placements Tanguay (1979) Ltée (Syndic de),
supra, note 20.
[139] C. PERRON and H.H. MAI, loc. cit., note 132, p. 359.
[140] C.C.Q., art. 2252.
[141] Id., art. 2253, second para. On this point, see, supra, the section ii. on unregistered
partnerships.
[142] Id., art. 2253, first para.
[143] C.C.L.C., art. 352: «Every corporation legally constituted is an artificial or ideal person,
whose existence and succession are perpetual, or sometimes for a fixed period only, and which
is capable of enjoying certain rights and liable to certain obligations».
[144] French Civil Code, art. 529: [translation] «All obligations and actions with respect to
amounts payable or moveable effects, and all shares or interests in financial, commercial or
manufacturing companies – although such companies, for the purposes of their business, should
own immoveables – are moveable by determination of law. These shares or interests are
deemed to be moveables with respect to each partner only so long as the company lasts».
C.C.L.C., art. 387: «Those immoveables are moveable by determination of law, of which
the law for certain purposes authorizes the mobilization, so are all obligations and actions
respecting moveable effects, including debts created or guaranteed by the province or by
corporations, also all shares or interests in financial, commercial or manufacturing companies,
although such companies, for the purposes of their business, should own immoveables. These
immoveables are deemed to be moveables with respect to each partner, only so long as the
company lasts».
[145] Damien v. Société de prêts et placements du Quebec (1896), 4 R. de J. 32 (Q.B.),
pp. 42 et seq.; Montréal Girard v. Rousseau (1887), 31 L.C.J. 112; 3 M.L.R. 293; 11 L.N.
60; 16 R.L. 533; Block v. Carrier et The North Shore Power Railway & Navigation Co.
(1906), 30 C.S., p. 37. See also: Donohue v. Corporation paroissiale de St-Etienne (1923),
31 R.P. 103; [1924] S.C.R. 510; Fortin v. Cimon (1931), 50 B.R. 242; Caisse populaire
Pontmain v. Couture, [1983] C.P. 149. For limited partnerships, see the following recent
decisions: Lalumière v. Moquin, [1995] R.D.J. 440 (C.A.); Société en commandite 2858-
9893 Quebec Inc v. 2420-3242 Quebec Inc., Sup. Ct. Chicoutimi, No. 150-05-000490-955,
April 10, 1996, Justice F. Thibault, 15 p.
[146] In 1949, in Gareau v. Laboissière, [1949] C.S. 51, it was stated that a partnership's
property could not be seized to pay the partners' personal debts. In 1967, another decision
(Noël v. Petites franciscaines de Marie, [1967] C.S. 1) found that a partnership could incur
delictual liability when contracting with its own partners. In 1971 (Sous-ministre du Revenu v.
Jobin, [1971] C.S. 565), the Superior Court again recognized that the making of tax
deductions and remittances was within the partnership's authority alone and that the partners
could not be sued personally in this regard. More recently, in Lalumière v. Moquin, [1995]
R.D.J. 440, the Court of Appeal noted that special partners are not entitled to make direct,
personal claims for the losses incurred by limited partnerships, which have a patrimony separate
from that of the special partners. Along the same lines, see Société en commandite 2858-9893
Quebec Inc. v. 2420-3242 Quebec Inc., supra, note 145.
[147] P.-B. MIGNAULT, Le droit civil canadien, vol. 8 (Montreal: Wilson & Lafleur,
1909), p. 92. Under the C.C.L.C., partnerships were civil when they did not have a commercial
purpose. That was why a partnership among farmers, notaries or artists was generally a civil
partnership.
[148] On this point, see R. GOLDWATER, «La société civile est-elle une personne morale?»
(1960), 34 Thémis 91.
[149] Somec Inc. v. Procureur général du Quebec, C.A. Quebec City, No. 200-09-
000496-858, June 4, 1987, Beauregard, Chouinard and Galipeau JJ.A., 7 p., J.E. 87-667.
[150] Menuiserie Denla Inc. v. Condos Jonquière Inc., [1996] R.D.I. 18, at p. 20 (C.A.)
[151] Prince Consort Foundation v. Blanchard, [1991] R.J.Q. 1547, at pp. 1558-59.
[152] Quebec (Ville de) v. Cie d’immeubles Allard Ltée, supra, note 1.
[153] Id., p. 1581.
[154] Id., p. 1578.
[155] Id., p. 1583.
[156] C.C.L.C., art. 18: «Every human being possesses juridical personality. Whether citizen
or alien, he has the full enjoyment of civil rights, except as otherwise expressly provided by
law». Art. 352: «Every corporation legally constituted is an artificial or ideal person, whose
existence and succession are perpetual, or sometimes for a fixed period only, and which is
capable of enjoying certain rights and liable to certain obligations». Art. 399: «Property belongs
either to the crown, or to municipalities or other corporations, or to individuals. That of the first
kind is governed by public or administrative law. That of the second is subject, in certain
respects as to its administration, its acquisition and its alienation, to certain rules and formalities
which are peculiar to it. As to individuals, they have the free disposal of the things belonging to
them, under the modifications established by law».
[157] Quebec (Ville de) v. Cie d’immeubles Allard Ltée, supra, note 1, p. 1571.
[158] Damien v. Société de prêts et placements du Quebec (1896), 4 R. de J. 32 (Q.B.),
at pp. 42 et seq.
[159] Quebec (Ville de) v. Cie d’immeubles Allard Ltée, supra, note 1, p. 1579.
[160] E.-C. MONK, «Partnership: The Theory of the Legal Entity», in Le droit civil
français: livre-souvenir des journées du droit civil français (Montreal: Barreau de
Montréal, 1936), p. 506; G. TRUDEL, Traité de droit civil du Quebec, vol. 2 (Montreal:
Wilson & Lafleur, 1942), p. 456; M. FILION, «Droit des associations», in Chambre des
notaires, ed., Répertoire de droit, Associations – Doctrine – Document (Montreal: SOQUIJ,
1989), p. 319.
[161] Quebec (Ville de) v. Cie d’immeubles Allard Ltée, supra, note 1, p. 1580.
[162] Companies Act, R.S.Q., c. C-38.
[163] Canada Business Corporations Act, R.S.C. 1985, c. C-44.
[164] The suppletive law is found only in Chapter One, that is, articles 298 to 333 (art. 300,
second para.). Chapter Two applies only to certain legal persons, namely the ones described in
article 334.
[165] C.C.Q., art. 2225.
[166] Id., art. 2209, first para.
[167] Id., art. 2232.
[168] Id., arts. 2226-29.
[169] Id., art. 2235.
[170] Id., art. 2209.
[171] Id., art. 2211.
[172] Caisse populaire Laurier v. 2959-6673 Quebec Inc., Sup. Ct. Quebec City, No.
200-05-004938-960, November 28, 1996, Justice F. Barakett, 15 p., BDI 97-107; Quebec
(sous-ministre du revenu) v. Paul, [1997] R.D.F.Q. 175 (Sup. Ct.), under appeal.
[173] Quebec (sous-ministre du Revenu) v. Lacasse, [2000] R.D.F.Q. (C.Q.), J.E. 2000-
1376, under appeal; Sumabus Inc. v. Daoust, Sup. Ct. Montreal, No. 500-05-012277-883,
January 10, 1994, Justice Lesyk, 12 p., J.E. 94-195; Denem Ltée v. Greenshields Inc., Sup.
Ct. Montreal, No. 500-05-01718-929, March 18, 1994, Justice Gratton, 13 p., J.E. 94-655.
[174] Dufour v. Savard, [1995] R.L. 327 (C.Q.), at p. 328.
[175] Duval Hesler v. Lalande, C.Q. Montreal, No. 500-02-005017-954, October 9,
1996, Judge Boissonneault, 9 p., J.E. 97-8; Côté v. Ouellet, Sup. Ct. Chicoutimi, No. 150-
05-000131-930, June 15, 1995, Justice A. Gervais, 11 p., J.E. 95-1491.
[176] Quebec (sous-ministre du revenu) v. Paul, supra, note 172.
[177] Caisse populaire Laurier v. 2959-6673 Quebec Inc. et al., supra, note 172.
[178] Interest Act, R.S.C. 1985, c. T-15.
[179] Lévesque v. Mutuelle-vie des fonctionnaires du Quebec, [1996] R.J.Q. 1701 (Sup.
Ct.), at p. 1703.
[180] Ibid.
[181] Id., p. 1705.
[182] Ibid.
[183] Id.,p. 1704.
[184] Société en nom collectif Vausko v. Ameublement et décoration Côté-Sud (St-
Denis), Sup. Ct. Montreal, No. 500-17-006552-999, October 28, 1999, Justice G.B.
Maughan, J.E. 99-2330, Q.L. [1999] J.Q. No. 5036.
[185] Ville de Quebec v. Cie d’immeubles Allard Ltée, supra, note 1.
[186] Société en nom collectif Vausko v. Ameublement et décoration Côté-Sud (St-
Denis), supra, note 184, para. 16.
[187] Id., para. 18.
[188] Dupré v. Société en commandite Le Saint-Laurent, C.Q. Montreal, No. 500-02-
005096-958, November 9, 1995, Judge R. Beaulac, 7 p., J.E. 96-106; 2964-7922 Quebec
Inc. (Syndic de), Sup. Ct. Longueuil, No. 505-11-001796-973, November 17, 1998, 31 p.,
Justice J. Verrier, under appeal.
[189] Société en commandite 2858-9843 Quebec Inc. v. 2420-3242 Quebec Inc. «In
Trust», Sup. Ct. Chicoutimi, No. 150-05-000490-955, April 10, 1996, Justice F. Thibault, 14
p.; Servomation International and Co. (Syndic de), Sup. Ct. Longueuil, No. 505-11-
000859-962, November 3, 1997, 10 p., Justice M. Laberge.
[190] Lalumière v. Moquin, supra, note 145.
[191] Servomation International and Co. (Syndic de), supra, note 176, pp. 6-7.
[192] Corporation des maîtres électriciens du Quebec v. Clément Jodoin électrique Inc.,
Sup. Ct. Joliette, No. 7705-05-001282, February 10, 2000, Justice S. Corteau, 27 p., J.E.
2000-548, under appeal. Emphasis added.
[193] Huffman v. Ross, [1926] S.C.R. 5; Re Gillespi (1913), 3 W.W.R. 791 (Man. K.-G.);
Thorne v. New Brunswick (Workmen’s Compensation Board), 48 M.P.R. 56, [1962]
S.C.R. viii [N.B.].
[194] R.S.O., supra, note 2, s. 5.
[195] ALBERTA LAW REFORM INSTITUTE, op. cit., note 110, p. 13.
[196] Lindley & Banks on the Law of Partnership, op. cit., note 37, p. 207.
[197] ALBERTA LAW REFORM INSTITUTE, op. cit., note 110, p. 14.
[198] International Encyclopaedia of Laws, vol. 2 (Deventer-Boston: Kluwer Law and
Taxation Publishers, Supp. 7, July 1993), No. 441.
[199] R.S.O., supra, note 2, s. 3.
[200] Porter & Sons Ltd v. Armstrong et al., supra, note 29, at p. 330 (emphasis added);
A.E. LePage Ltd v. Kamex Developments Ltd et al., supra, note 31.
[201] Limited Partnerships Act, supra, note 98, c. L.16, s. 7(2).
[202] Halsbury’s Laws of England, 4th ed., vol. 6, «choses in action», para. 8(4), p. 6.
[203] L. PAYETTE, «Les sociétés en commandite, le Code civil du Quebec et l’arrêt La
ville de Quebec v. La Cie d’immeubles Allard Ltée» (Canadian Bar Association, March 19,
1997).
[204] G. SNOW, Les biens, «Common law en poche» collection, vol. 11 (Cowansville: Les
Éditions Yvon Blais Inc., 1998), p. 5.
[205] Ibid.
[206] Ibid.
[207] Lindley & Banks on the Law of Partnership, op. cit., note 37, p. 33 (206-07).
[208] R.S.O., supra, note 2, s. 5.
[209] Business Names Act, R.S.O., c. B.17, s. 2(3).
[210] R.S.O, supra, note 2, s. 6.
[211] Id., s. 7.
[212] Id., s. 12.
[213] Id., s. 24(2).
[214] Id., s. 29.
[215] Id., s. 30.
[216] Id., s. 39.
[217] Id., ss. 31, 33(2), 42(2); Limited Partnerships Act, supra, note 98, s. 7(2).
[218] Rules of Civil Procedure, R.8.
[219] R.S.O., supra, note 2, s. 16.
[220] C.C.Q., arts. 1009-10.
[221] L. PAYETTE, loc. cit., note 203, p. 14.
[222] Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c. 1, s. 96(1)(a).
[223] Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.
[224] Id., s. 43(15).
[225] Id., s. 142(1).
[226] C.C.Q., art. 2221.
[227] GOVERNMENT OF QUEBEC, Ministère de la Justice, Document de travail –
Projet de loi 125 – Code civil du Quebec, p. 34. (Emphasis added)