Accidental Partnerships: be careful when sharing office space!

In Tiago v. Meisels, 2011 ONSC 5914 the Ontario Superior Court of Justice dismissed a motion seeking a partial dismissal of a lawyer’s negligence action where it found that there was evidence to support the allegation that the defendants Parsons, Reznick and Taberner, though practicing as sole practitioners, held themselves out as partners of Meisels and therefore shared liability for his negligence. The court set out a three-part test to determine when lawyers are liable as partners under section 10 of the Partnership Act, R.S.O. 1990, c. P.5, which extends liability to “[e]very person, who by words spoken or written or by conduct represents himself or herself or who knowingly suffers himself or herself to be represented as a partner in a particular firm”. First, the court must determine whether the lawyers were in fact partners. If they were not, the court must consider whether the lawyers are precluded from denying liability on the basis that they held themselves out as partners. If so, the plaintiff must establish that they altered their conduct in reliance on the representation of a partnership. The plaintiffs conceded that the defendants were not in fact partners. The defendants identified themselves to the Law Society as sole practitioners in their annual reportings and maintained separate books and accounts, bank accounts and client trust accounts. However, the court found that there was evidence capable of supporting a finding that the defendants held themselves out as partners. The defendants shared office space and used a joint letterhead and business cards bearing a common name that incorporated all of their surnames. Moreover, although sharing confidential client information among sole practitioners is prohibited, confidential information passed through a shared receptionist and fax machine. The court concluded that viewed collectively, these elements would give the ordinary client the impression of a partnership. The court further held that the defendants failed to dispel the impression of a partnership despite including the words “practicing in association” on their letterhead and even though the plaintiffs entered into a retainer agreement with Meisels alone and provided a deposit cheque payable to “Meisels in trust”. For the purpose of the motion, the court accepted the plaintiffs’ evidence that they relied on the existence of a partnership when they chose to retain Meisels, and concluded that this was not an appropriate case for summary judgment.