William Murray Law Corporation v. Christ Date:, 2013 BCPC 188

Citation: William Murray Law Corporation v. Christ Date: 20130529 2013 BCPC 0188 File No: 14039 Registry: New Westminster IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: WILLIAM F. MURRAY PERSONAL LAW CORPORATION, BC INC. NO. 419136 CLAIMANT AND: MICHAEL ANDREW CHRIST DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE DYER Appearing in person: W. Murray Appearing in person: M. Christ Place of Hearing: North Vancouver , B.C. Date of Judgment: May 29, 2013 [ 1 ] THE COURT: The claimant, William F. Murray Law Corporation (hereinafter referred to as "MLC") commenced this action

against Michael Christ (hereinafter referred to as "Christ") on June 30th, 2009, seeking initially repayment of a loan amount of $6,500 and return of his share of certain draws which were alleged to have been wrongfully taken by Mr. Christ during the time he and Mr. Murray (hereinafter referred to as "Murray") practiced law together and with one Larry Routtenberg (hereinafter referred to as "Routtenberg") in a firm called Metro Law Office LLP or Metro Law LLP located at a mall in Burnaby, British Columbia.

The office was situate at 1141-4700 Kingsway Avenue in this municipality. [ 2 ] During the continuance of this matter and at trial, both parties amended and clarified their pleadings and claims and defences on a number of occasions. This is not a case where I can easily summarize the various claims advanced and defences pleaded in a very few introductory words, but I will try. [ 3 ] MLC's loan claim is straight forward.

It asserts, pursuant to clause 6, of the partnership agreement made between the three men that in every month after which the defendant Christ became a partner and his draw including car payments paid by the firm was equal to or exceeded $5,400 a month, Mr. Christ was required to pay $200 per month on the loan, but did not. After 33 months, the loan ought to have been paid in full, but nothing was ever paid.

MLC seeks judgment in this amount, namely, $6,500. [ 4 ] In addition, MLC seeks half of certain draws which it asserts the defendant was not entitled to take after March 31st, 2009, when it says he essentially left the partnership to set up his own firm.

These 11 draws or payments occurred from April 14th, 2009, to and inclusive October 23rd, 2009, and total some $24,302.04. [ 5 ] The claimant alleges Christ was not entitled to any of this money as he did not, on the dates the various draws were made, work the requisite number of hours or days pursuant to the "days-worked" formula found in clause 17 of their written partnership agreement. MLC also asserts that Christ was not entitled to certain draws that are really his car rental payments in certain months between the years 2005 to 2009.

The claimant also seeks to recover $6,535.26 being, it asserts, one-half of the car lease payments the firm paid after approximately August 2007, but not charged to Mr. Christ up to approximately August of 2009. [ 6 ] The defendant Christ has filed three replies in this action and has advanced a number of defences therein as follows: 1. All draws taken were proper. 2. This court has no jurisdiction to deal with all claims as the Supreme Court of British Columbia is considering a winding-up petition pursuant to s. 38(i)(

f) of the Partnership Act ; there is no such section. 3. The loan need not be repaid to the claimant because it is responsible for the winding up of the partnership or that he has elected to pay this on the winding up of the partnership which event has not yet occurred. 4. All partners' draws made after July 1st, 2007, were equal draws, in essence, by agreement or inferred consent due to the partners' course of conduct and reliance is placed on s. 21 of the Partnership Act in this regard.

Section 41 of the Partnership Act bars the claimant's action and requires that MLC proceed with arbitration; this

section is only triggered after the dissolution of a partnership. 6. The claimant's claim should be settled pursuant to s. 42 to 47 of the Partnership Act ; these sections to be operative require dissolution of the partnership. 8. He has a right to set off his withdrawal allowance due to him pursuant to s. 33 of the partnership agreement. [ 7 ] It is important to state at the outset that the defendant, Mr. Christ, has filed no counterclaim in this action, for example, seeking payment of a withdrawal allowance or return of his capital account, nor has he added Mr.

Routtenberg as a party to this litigation. [ 8 ] I intend to deal with the loan claim first after setting out some introductory facts, most of which are not in dispute and referring to certain relevant provisions in the parties' written partnership agreement. Clearly, at all material times, Murray was the principal of MLC which corporation together with Christ and Routtenberg entered into a written partnership agreement dated January 1st, 2005.

Background Facts [ 9 ] Murray was called to the bar in British Columbia in 1976 and, after time as in-house counsel with Canadian Pacific and a stint in a small Vancouver law firm, joined with Mr. Routtenberg in a small two-person partnership in July 1997 in a new firm called Metro Law Office carrying on business in a mall in Burnaby. In or about 2003, Christ became an employee, Murray said, of Mr.

Routtenberg working at a paralegal initially. [ 10 ] Christ was then a lawyer, but somehow not then currently licenced or a proper member of the Law Society of British Columbia, to which he was later admitted in the fall of 2004. At this time, Murray testified that Christ became an associate at the firm and was, for a short period of time, paid a salary drawn on the firm's general account, probably at the Bank of Montreal. [ 11 ] In the fall of 2004, the three men discussed both relocating their business premises and forming a new partnership to include Mr. Christ. All agreed and Mr.

Christ drew up a draft partnership agreement for discussion among the three men. He insisted on being the managing partner in the first three years and Murray and Routtenberg agreed. This agreement was finalized in June 2005 and then executed, but made effective January 1, 2005. It was Christ's draft that was eventually finalized. [ 12 ] There is no evidence that any substantial changes were made to it before it was finalized on execution by the three partners. Murray testified that Mr.

Christ continued to receive a salary as an associate to March 2005, but commencing in April 2005, for the first time, started to receive a draw as a partner. [ 13 ] Murray and Routtenberg did not keep timesheets when practicing together from 1997 to 2005, nor did the three men keep them

after Metro Law LLP was commenced. Murray said this was perhaps because set fees were charged for much of the work the firm did. Thus, there has never been any reliable way to assess the hours actually worked and billed by each lawyer from day 1 of their partnership together. [ 14 ] The new firm was open seven days a week with weekday and Saturday hours of work from 10:00 a.m. to 6:00 p.m. and Sunday hours from 11:30 a.m. to 6:00 p.m.

This new practice at all material times seemed to be reliant on drop-in traffic from the mall in which the business was located. [ 15 ] Somehow, an appointment diary was kept in the practice on which client appointments were made or set out with some indication as to what lawyer the client was to see. This document was not entered in evidence at trial. There may have been some notations of the daily hours each lawyer put in thereon. It was unclear on the evidence as to exactly what entries were set out in this appointment diary and by whom.

Without timesheets being kept, it seems that these three law partners at the outset relied on the good faith of each partner to work diligently for approximately seven hours a day each working day. [ 16 ] At the time the partnership agreement was being discussed, it was agreed that the partnership, Metro Law Office, would be wound up and would distribute its assets equally to each of the three new partners including Mr. Christ who was also to receive 100 shares or a third of the issued shares of Mr. Murray and Mr.

Routtenberg's existing managing company. [ 17 ] Apparently Christ had no money to pay for his third share of these assets which were all transferred to Metro Law LLP. So Mr. Murray and Mr.

Routtenberg each agreed to loan him $6,500 as a purchase loan to enable him to acquire his equal share of these assets or interest in the new firm. [ 18 ] It seems no promissory note was executed relating to these essentially personal loans, but they are referred in the partnership agreement at clause 6 which states as follows: The Founding Partners have agreed to loan Mike $6,500 each, without interest, (the "Purchase Loan"), to fund his acquisition of the Purchased Assets, and Mike has agreed to repay the Purchase Loan by paying each of the Founding Partners $200 whenever Mike's Partner's Draw is equal to or greater than $5,400, or when Mike receives a distribution from the sale or winding up of the assets of the Partnership equal to or greater than the unpaid balance of the Purchase Loan.

Mike hereby assigns and pledges his interest in the distribution from the sale or winding up of the assets of the Partnership to the extent of the unpaid balance of the Purchase Loan. [ 19 ] There is no dispute by Mr. Christ that he received the $6,500 from MLC. MLC's first claim in this lawsuit is that Mr. Christ has paid nothing to it on this loan and that he ought to have done so each month wherein his partner's draw equalled or exceeded $5,400 a month, which MLC says occurred for over 33 months. This fact, namely, the number of months his draw exceeded $5,400 is not disputed by Mr.

Christ. [ 20 ] MLC has made a written demand that Mr. Christ pay this personal loan, but he has refused to do so. Rather, Mr. Christ says, on its plain meaning, clause 6 in the partnership agreement gave him a discretion or, I suppose, an option to pay off this personal loan either over time or (

a) on the sale or (

b) winding up of Metro Law LLP, neither of which two events have yet occurred. [ 21 ] Christ says clause 6 secures this loan on his future share of the firm's assets and that MLC's proper course now is, in essence: 1. reach an overall settlement with him; I assume this would require participation by Mr. Routtenberg; or 2. seek arbitration of this dispute pursuant to s. 41 of the partnership agreement; or 3. make an application to the court for a partial dissolution of the partnership pursuant to s. 38(2) of the partnership agreement following the reasoning in the case of Brew v.

Rozano Holdings Ltd , 2006 BCCA 346 . I will return to these points later in these reasons. [ 22 ] Murray argues, in essence, that $200 ought to have been paid monthly in the 33 months referred to, particularized in paragraph 5 of his written argument, commencing January 2005 and the thirty-third month by my calculation would have been January 2009. Exhibit 1, tab 18, at page 2, does show three draws for Mr. Christ in January, February, and March 2005, but according to Mr. Murray, Mr.

Christ was then an associate and receiving a salary. [ 23 ] Murray's undisputed evidence is that Christ's $5,400 monthly draws began in April 2005. On this analysis, "wages paid" not being draws would I think be excluded and the thirty-third month would be shortly later in 2009, namely, March 2009. Mr. Christ drew $5,000 in each month, January to March 2009, which together with his car payments exceeded the $5,400 monthly amount. [ 24 ] On March 31st, 2009, Mr. Christ's appointment as managing partner of Metro Law LLP was terminated by letter from Mr. Murray and Mr.

Routtenberg (signing on behalf of Metro Law Office LLP) to Mr. Christ. This letter did not purport to terminate him as a partner. There is no provision in the written agreement that I have seen that would allow a majority of the partners to terminate or expel a partner and, without such a provision, s. 28 of the partnership agreement would prevent this from lawfully occurring. [ 25 ] I note Mr. Christ's evidence is that, in his view, this letter was tantamount to his giving notice of withdrawing from the partnership.

I have not overlooked the deemed withdrawal provision found in the partnership agreement when I make this statement. [ 26 ] On May the 13th, 2009, Mr. Routtenberg and Mr. Christ wrote to MLC re the Metro Law Office LLP partnership agreement of January 1st, 2005, as follows: Re: Metro Law Office LLP Partnership Agreement of January 1, 2005 (the Agreement)

Further to our discussion yesterday, the undersigned confirm that we are dissolving Metro Law Office LLP effective September 30th, 2009 (the dissolution date), because in our view the agreement no longer meets our needs or personal circumstances. From now until the dissolution date we are resolved to: 1. limit our draws to $5,000 per partner per month in order to pay down the RBC line of credit; and 2. work with you to formalize an office-sharing agreement under which we can function as three separate business entities doing business as an apparent partnership under the name of Metro Law Office.

We have worked together on good terms for many years and our confident a new form of association will allow the same to continue for many more to come (sic). [ 27 ] There is nothing in the partnership agreement that permits a majority of partners, these two, to dissolve the partnership effective September 30th, 2009.

Nowhere, in my view, is such a step referred to in s. 11 dealing with partnership decisions requiring the agreement of the majority of partners, nor is dissolution expressly referred to within s. 10 dealing with major partnership decisions. [ 28 ] The agreement expressly refers to withdrawal of partners in s. 33 to 36, and retirement from the partnership in s. 37 to 40, but is, save for clause 2, silent as to when and how the partnership can be dissolved. However, clause 2 of the agreement states as follows: 2.

The Partnership is formed as of the date hereof and will continue from that date until terminated by Major Partnership Decision and none of the withdrawal, retirement, death, incapacity or expulsion of any Partner shall dissolve the Partnership as between the remaining Partners and, on the withdrawal, retirement, death, or incapacity of all but one Partner the Partnership shall continue as a sole proprietorship of the remaining Partner. [ 29 ] In essence, as I read this clause, all three partners would have to agree and vote on some scheme possibly amending their agreement in order to dissolve or terminate their partnership agreement in the event they did not wish to involve a court pursuant to s. 38 of the partnership agreement and seek a decree of dissolution therefrom.

I find that the May 13th, 2009, joint letter from Mr. Christ and Routtenberg, notwithstanding its content, was not, in the face of the express language in clause 2 of their agreement, sufficient to either end or dissolve their partnership. [ 30 ] Mr. Murray testified that when he received the above notice of May 13, 2009, on his desk the next day, he also received a letter from Mr.

Routtenberg stating in part, "I wish to express to you my regret in having to take the decision to terminate the partnership" and, "The ability to operate successfully as a partnership had ended." It also states in part: I hope to continue in these premises with you for a full term and until retirement. I intend to operate with integrity and reliability, fairly to each of us, and to assist you everywhere I can. I will not let this stand in the way of our long-term friendship. [ 31 ] On May 14th, 2009, Mr.

Murray wrote to both men and stated, quoting clause 2 of their agreement, that in his view the two of them could not dissolve or terminate the partnership agreement and further advised them that their choice was to withdraw and asking them to confirm that as of September 30th, 2009, they were withdrawing. This same letter made demand for repayment of his $6,500 loan from Mr. Christ. [ 32 ] Having received no written response from either partner, Mr. Murray again wrote to both men on June 21st, 2009, noting in part that Mr.

Christ had not repaid the loan and stating that if he did not do so by June 24th, he would commence action. Christ did not and, true to form, Murray filed this lawsuit on June 30th, 2009. [ 33 ] There are certain provisions in the Partnership Act that may bear upon termination or dissolution of a partnership as follows: Ending the partnership 29(1)If no set term has been agreed on for the duration of the partnership, any partner may end the partnership at any time on giving notice to all the other partners of his or her intention to do so.

(2) If the partnership has originally been constituted by deed, a notice in writing, signed by the partner giving it, is sufficient for this purpose. ... Dissolution of partnership 35(1)Subject to any agreement between the partners, a partnership is dissolved

(

a) if entered into for a set term, by the expiration of that term, (

b) if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking, or (

c) if entered into for an undefined time, by any partner giving notice to the other or others of his or her intention to dissolve thepartnership.

(2) In a case referred to in subsection (1)(

c) the partnership is dissolved as from the date mentioned in the notice as the date ofdissolution or, if no [due] date is so mentioned, as from the date of the communication of the notice. [34] Finally, there is s. 38(1)(

f) in the Partnership Act which states as follows: Power of court to decree dissolution in certain cases 38(1)On application by a partner, the court may decree a dissolution of the partnership in any of the following cases: ... (

f) whenever circumstances have arisen that, in the opinion of the court, render it just and equitable that the partnership be dissolved. [35] It would appear that the overall scheme of this legislation is to respect the ability of partners to make their own contract as tohow they will do business together as a firm and I think, too, as to how they will end their business relationship. [36] In this case, all three partners agreed at the outset that notwithstanding the various provisions in the Partnership Act on point, ofwhich I think they are to be taken to have had actual knowledge of as lawyers, that failing a court order and in the event a partner chosenot to withdraw via clause 33 and 45 or was not deemed to have done so, that all three must agree to end their business arrangement.

Iam, therefore, not of the view that either s. 29 or 35 of the Act, in light of clause 2 of the agreement, should result in the letter of May13th, 2009, from Mr. Routtenberg and Mr. Christ having dissolved the partnership which I find continued after this date. [37] In my opinion, s. 29 of the Partnership Act must be interpreted having regard to s. 35(1) of the Act which makes it clear, I think,that a partner may only dissolve a partnership by notice subject to the agreement they have made.

I find their agreement precludes onepartner acting alone or even two from dissolving their agreement with a written notice as occurred here. There is no evidence that anypartner has ever withdrawn from it voluntarily with a proper written notice. [38] While clause 33 of their partnership agreement does not expressly require a written notice of withdrawal, clause 45 does. Despite being invited to do so by Mr. Murray, Mr. Christ never prepared and delivered a voluntary notice of withdrawal.

There has yetto be a sale of winding up of the assets of the law partnership in issue as referred to in clause 6 with respect to the loan claim. [39] I turn now to Mr. Murray's stated reasons for why he says the personal loan he made to Mr. Christ should be repaid to him: [40] Firstly, clause 6 contemplated Mr.

Christ making regular $200 payments to him each month when his monthly draw exceeded$5,400, and that event has occurred while the partnership continued on in excess of 33 months sufficient to require 33 loan payments or32 at $200 each and a final one of $100 for a total of $6,500. [41] Secondly, he refers to Mr. Christ's settlement of Mr. Routtenberg's $6,500 loan in his written submission suggesting this eventshould be taken, in essence, as a form of acknowledgement by Christ that both personal loans are now payable. In my view, the fact ofthis settlement is not relevant to MLC's claim for repayment of its loan.

In my view, it is a separate and distinct business transaction. [42] I have considered Mr. Murray's submission to the effect that pursuant to the law on elections, Mr. Christ is attempting to makean election between two inconsistent rights contrary to the common law principle referred to by Boyd J. in Commonwealth InvestorSyndicate Ltd. v. John Laxton et al (1992), (BC SC), 65 B.C.L.R. (2d) 370, BCSC at page 4. [43] I am of the view that Mr. Christ, at the outset of his joining the new partnership, made two personal loans to acquire funds heneeded to join the new partnership, but apparently did not have.

He might, I suppose, have borrowed the funds from two relatives,friends, or even banks or a bank. Had he done so, clearly, he could negotiate a settlement of the amount owed and outstanding with eachor both creditor on whatever terms he and they as creditors might agree to. The terms could be different. [44] How could, for example, bank A, assuming Christ borrowed the money from it, learning of a repayment to bank B, with its bankA loan still being outstanding, say to Mr. Christ that he must now repay it on the same terms?

The position in the case at bar might bedifferent if the loan was a joint loan or if the agreement provided that Christ must repay or settle with each lender at the same time in thesame amount and on the same terms thereby tying settlement of each debt together. In my view, it does not clearly so state. [45] Thirdly, Murray submits that the second half of clause 6 only relates to what would occur if the partnership were to be woundup or sold before the purchase loan was repaid in full and deals with the unpaid balance then outstanding. [46] Fourthly, in his reply submission, he argues that Mr.

Christ's position would lead to an absurd result in that if, on a winding up,including one that might be ordered by the court, nothing was payable to Mr. Christ and he asserts this will be the case, then on Mr.

Christ's

interpretation of clause 6, he would get nothing on his loan. I think there is some hindsight reasoning or

interpretation involved in this submission. Lawyers do not generally enter into partnerships thinking they will fail and in the result, on dissolution at the end of the day that they will leave the business with nothing. My task, however, is to construe this clause 6 in the context in which it was made. [ 47 ] Fifthly, Murray further submits if the partnership were to be wound up, Mr. Christ would then not be a partner and would not be entitled to a distribution, from which clause 6 says he is to repay the unpaid balance, and therefore nothing would be payable. [ 48 ] I think this submission overlooks the provisions of s. 41(1) and 42(1)(

a) and (

b) of the Partnership Act . These provisions, notwithstanding the dissolution of a partnership, would seem to permit someone, no doubt an accountant in the first instance, to determine what money Mr. Christ would entitled to on a dissolution or a winding-up of the partnership and, in my view, clause 6 of the agreement could easily be construed, notwithstanding the use of the noun "distribution," to permit MLC to recover any unpaid balance of its loan from Mr.

Christ in such scenario. [ 49 ] The issue I must resolve is simply need MLC wait that long, namely, for a dissolution or winding-up of the partnership or has Mr. Christ now breached the agreement by failing to pay money due and owing to MLC on a monthly basis when his draws exceeded $5,400? I find MLC is a founding partner within clause 6 of the agreement. [ 50 ] I also find, based on all the evidence in this case and applying my common sense, that the arrangement these three lawyers made at the outset was that the two more senior men, Mr. Murray and Mr. Routtenberg, in order to essentially smooth Mr.

Christ's entry into their firm, personally agreed to loan him $6,500 each so he could fund his acquisition of his third of its assets and a third of the shares of the existing management company. [ 51 ] This arrangement can readily be seen as a friendly, helpful, and supportive gesture for a new partner. In a way, it did not affect Mr. Christ's public credit rating as might have occurred had he been required to go to a chartered bank to borrow.

I find that, notwithstanding this supportive gesture, each man expected to be paid a monthly amount of $200 whenever the new firm's finances permitted their new partner to do so, that is to say, when his draw was equal to or exceeded $5,400 a month. [ 52 ] I am not of the view that either intended to wait until their new business essentially failed, oftentimes the usual reason for a winding-up, or was sold before they were repaid anything. Such a construction of this clause offends my common sense.

The early understanding was that they would all work equally hard and that each would receive a fair draw based on this commitment. [ 53 ] In my view gross monthly earnings of $5,400, was and is more than enough to have permitted Mr. Christ to have made the $200 monthly payments in the above-referred-to 33 months ending in March 2009. I find on all the evidence I prefer Mr. Murray's

interpretation of clause 6. [ 54 ] I find, having regard to the context in which it was initially made, that, on its plain wording, Clause 6 required Mr.

Christ to make these 33 payments described above each month when his finances permitted when his draw was equal to or exceeded $5,400 a month, and only in the event having done so for some period of time if there was then an unpaid balance outstanding and in the event the firm was then wound-up, dissolved, or sold, only then would the said unpaid balance come out of his final share of the partnership income and assets or his distribution, if any. [ 55 ] Had the arrangement been otherwise, logically the parties would not have used the term "unpaid balance of the purchase loan" at the end of the first sentence in clause 6.

Rather, they would have used a term such as the "principal amount of the purchase loan" or even the "purchase loan." I agree that the use of the term "unpaid balance" connotes and means that required payments on the initial amount of the loan are to be made first as required. [ 56 ] Further, I note that a sale or winding-up of the assets of this firm would not occur if s. 33 of the partnership agreement applied, and I find that it does, and a partner either voluntarily withdrew or the other partners deemed that he had withdrawn.

If a partner voluntarily withdrew, there would be no sale or winding-up of the assets as referred to in clause 6 relating to the loan. [ 57 ] In such case, namely, a voluntary withdrawal, Christ who had not repaid his personal loan ought not to be able to argue that he was absolved from doing so because he had an option at the outset to await a sale or winding-up which never occurred. [ 58 ] On a deemed withdrawal, the same situation, in my view, would apply. The withdrawing partner is entitled to a withdrawal allowance only. There is no sale or winding-up of the assets of the partnership.

Pursuant to clause 36 on the facts of this case, and if a deemed withdrawal occurred on December the 8th, 2009, effective January 1st, 2010, the withdrawal allowance is all Mr. Christ may be entitled to. I will return to this point. I do not find Mr. Christ is now entitled to such an allowance. [ 59 ] In the result, I accept Mr. Murray's proposed construction of clause 6. I find that by March 31, 2009, the $6,500, which I find to be a personal debt owed by Mr. Christ to MLC and not the firm, was owed and was payable subject always to the following matters. [ 60 ] Mr.

Christ alleges, as I understand his various replies and arguments, that he may be entitled to a setoff with respect to this amount against monies owed to him by the partnership. Because his position is the same with respect to the two claims advanced by MLC for unauthorized draws, I propose to deal with the evidence as to these two claims before considering the issue of setoff and whether it applies to some or all of the three claims in issue. [ 61 ] I should say that this loan claim is one for which this court would seem to have jurisdiction as it is a personal debt.

As well, there is legal authority to support the proposition that a partner may sue another partner for an obligation owed to him directly under the partnership agreement; see, for example, Grayland Management Ltd. v. Appleby , [1993] B.C.J. No. 2833 , BCSC paragraph 46 , followed and applied in Western Delta Lands Partnership v. 3557537 Canada Inc. , 2000 BCSC 1096 , at paragraph 105 , (B.C.S.C.) Allan J. [ 62 ] This personal debt cannot, in my view, be seen to be an amount owed by Christ to the partnership which continues, namely, Metro Law LLP.

[ 63 ] I turn now to the other claims advanced by MLC against Mr. Christ. These are, in my opinion, a different sort of claim than the loan claim. The loan claim was personal in nature in that MLC alleged that it was owed the money used by Mr.

Christ to capitalize or acquire entry into Metro Law LLP. [ 64 ] These other claims, as particularized in the notice of claim and referred to in MLC's argument, are twofold as follows: 1. one-half of $24,302.04, being draws taken from April 14, 2009, to October 23, 2009, which he was not entitled to as he had left the partnership and was, therefore, not in compliance with the "days-worked" formula in the partnership agreement; the amount would be $12,151.02; and 2. one-half of additional unauthorized draws being car lease payments made by the firm for Mr.

Christ, the exact amount is unclear. [ 65 ] The history of this claim is as follows: (

a) it was not part of the original notice of claim; (

b) on November 4, 2011, at trial, Mr. Murray proposed that MLC's notice of claim be amended to include these claims said to be $10,082.52 in amount; (

c) on December 20th, 2011, Mr. Murray filed a document being a

summary of his claims also including this amount. This became Exhibit 6 at trial in this case; (

d) at trial on May 31st, 2012, I granted an amendment to Mr. Murray's notice of claim relating to this car lease draw claim in the amount of $10,082.52. By then, the accountant, Mr. Bruce, had testified; (

e) on January 18th, 2013, Mr. Murray, on behalf of MLC, filed or provided to the court a document entitled, "Revised accounting of claim for one-half car payments," noting the original claim amount was in error and that the one-half amount claim should have been $10,204.60, and conceding that certain car lease payments alleged not to have been deducted from Mr.

Christ's draws had, in fact, been and agreeing to a reduction in the amount of the claim of $3,669.35, leaving the overall total of the second claim by my calculation to be $6,535.26 which, again, I understand is half the amount he alleges the firm paid in unauthorized car lease payments to Mr. Christ. This document was marked as Exhibit 8 at trial; (

f) in his written submission in argument, Mr. Murray makes reference at page 4 to $12,800.30 in car lease payments which he claims half of in paragraph 15 and the amount, therefore, would be $6,400.15. [ 66 ] I cannot reconcile this submission with either of the two above court exhibits and conclude his written submission must be in error. It certainly does not refer to Exhibit 5, 6, or 8, all on point. I find that this claim is advanced at $6,535.26. [ 67 ] I note that in Exhibit 10, Mr.

Christ's handwritten analysis of "car payments admitted," he acknowledges and admits that from August 2007 to August 2009, various Mazda and Honda lease related payments were, in effect, not charged to his draw and should have been in the total amount of $11,719.12. In his trial evidence, he gave as the start date August 2007, but said the end date was, variously (1) when he left the firm or,

(2) June 30th, 2009. [ 68 ] In Exhibit 8, MLC advances an amended claim for car payments to August 2009. That is the end date I propose to use for this claim as both parties seem to be agreed to it. [ 69 ] This amount of $11,719.12 is 100 percent of all unauthorized draws that Mr. Christ acknowledges that he has received. I have compared Exhibit 10 to Exhibit 8. The parties are in agreement that car lease payments on and after September 1st, 2007, were wrongly taken.

Where they disagree is as to car lease payments in August 2007. [ 70 ] Here, the defendant admits he received a draw in the amount of a car payment, but the claimant seems not to agree and says the August 2007 payment was deducted from the defendant's draw. Mr.

Christ does not admit he wrongfully received car lease payments, that is to say, ones not deducted from his draw prior to August 2007, whereas the claimant says he did for the four months, April, May, June, and July 2007. [ 71 ] I repeat, I have unsuccessfully spent considerable time trying to reconcile the claimant's written argument wherein he ought to have made his claim clear to me, for example, with a

schedule of individual dates with months and years and amounts and exhibit references as to why the claim he has advanced was justified with Exhibit 5, 6, and 10. The claimant bears the onus of proof. [ 72 ] I find he has proven only those car payments admitted to by Mr. Christ in Exhibit 10 to have been wrongly paid by Metro Law LLP and not deducted from the defendant's draw cheques. The amount is $11,719.12 and I assess MLC's claim being for one-half or $5,859.56. [ 73 ] Is the claimant entitled to recover this amount from Mr. Christ subject to Mr. Christ's claim for setoff raised in his various replies?

I will return to this setoff point later. [ 74 ] Mr. Murray's overall position on these unauthorized draws for car lease payments is set out at paragraph 15 of his argument where he lumps all alleged unauthorized draws together to get a total of $37,101.70 as follows, and I quote: 15. The plaintiff's claim is for one-half of the aggregate of such payments, that is, $18,550.85. If the money had not been misappropriated by Mr.

Christ, it would have been cash available for draws by the partnership, at least half of which belonged to the plaintiff. [ 75 ] Without the benefit of any accounting evidence on point, notwithstanding that Mr. Bruce was called, or accurate timesheets, on my analysis, I find that I should simply assume that each unauthorized draw is put back into the firm's general bank account on the day it

was taken over the period in issue. [76] In the result, in the year 2007, this account would have $1,352.10 more money to be divided between three partners, not two. MLC's share would only be a third, not one-half, and it therefore might have received $451.03 more in its third share of the firm's netearnings in this year. I note in both 2007 and 2008, this third shares was the division of net earnings actually made in the partnership. Hence, in 2008, the lease payment amount of $6,441.06 referred to in Exhibit 10 notionally would also have been divided three waysand not two.

MLC's share would, accordingly, be only $2,147.02. [77] In 2009, the situation is arguably different. Mr. Christ, according to the evidence, was working towards opening his own lawfirm in Surrey which he did on or about April 1st, 2009. Nonetheless, based on Mr. Murray's analysis referred to at page 4 of his letter tothe defendant and Mr. Routtenberg of May 14th, 2009, in the first three months of this year, Mr. Murray, based on entries in theappointment book, apparently, has calculated that the defendant worked 53.5 days of a total of days worked by all three partners in thesethree months of 156.5 days.

The defendant's percentage of this total number of days is, therefore, 34.2 percent, by my calculation, ormore than one-third. [78] Had the three lease payments in these months or $1,471.86 been in the firm bank account, Mr. Murray's own analysis, I think,supports that each partner from January to March 31, 2009, would notionally be entitled to one-third of this money. Hence MLC's sharewould be $490.62 in these three months of 2009. [79] I also understand that Mr.

Murray does not contest that the defendant is entitled to an equal draw in these three months to April1st, 2009, in so far as he alleges the defendant paid himself or took non-car-lease payment draws from the firm in this year. [80] Finally, after April 1st, 2009, the evidence is the defendant came into Metro Law LLP very little and had then opened his newfirm for legal business together with Metrocan Mortgage which continued its business operations in the new Surrey premises.

In thisyear, unlike the years 2007 and 2008, the firm's total net earnings at December 31, 2009, of $206,466 were not divided equally and Mr.Christ's share was set by MLC and Mr. Routtenberg at 11 percent resulting in an amount of $22,712. [81] I have no evidence as to the reasons why the two remaining partners instructed Mr. Bruce to make this division referred to inthe financial statements of their firm at December 31, 2009.

I am not persuaded, based on the evidence, as to what the defendant wasdoing on and after April 1st, 2009, that he is or was, even if the five lease payments from April to August 2009 totalling $2,453.10 hadremained in the firm account, entitled to any part of this amount. [82] I find, as MLC submits in argument, it could and should have been divided equally between the two remaining partners. Therefore, MLC's share would be $1,226.55 as would Mr. Routtenberg's.

On this analysis, I find that the amount of unauthorized carlease payment draws that MLC is entitled to in this action, subject always to the setoff argument advanced by the defendant Christ, is$4,315.22. [83] If legal authority is needed for the approach I have taken with respect to MLC's claim for unauthorized car lease draws, it maybe found in the case of Olson v.

Gullo (1994), (ON CA), 113 D.L.R. (4th) 42 (O.C.A.), referred to at page 5-6 and 5.7in Manzer's Practical Guide to Canadian Partnership Law. [84] I turn now to the further evidence that I heard relating to the claim advanced by MLC for one-half of the $24,302.04 drawsMLC says the defendant wrongfully received from April 14th, 2009, to October 23rd, 2009. Mr. Christ incorporated a mortgagebrokerage company called Metrocan Mortgage Ltd. on October 1st, 2007. MLC says it first learned of this in 2008, Mr.

Murray thought,in a restaurant meeting the three partners attended possibly called Sammy Pepper's. [85] Murray said he and Mr. Routtenberg told Mr. Christ they did not consent to this business. Murray also said Christ never reallysought their consent. Murray said he first saw the incorporation documents for this business in the year 2010. He said there never was amajor partnership decision made by the partners of Metro Law LLP permitting the defendant to incorporate and operate this businesswhile he remained a partner in this firm.

This evidence is not disputed. [86] I find that by virtue of paragraph 4 of the partnership agreement, a major partnership decision was required as a precondition tothe defendant incorporating and operating this business while a partner of Metro Law LLP. This would involve, at the least, a writtenmemorandum of the decision and the consent of all three partners pursuant to clause 10.

I find that no such decision was ever made ortaken by all three partners. [87] Even if their agreement had been silent on point, the common law, in my view, would require the defendant to have the clearconsent of his other two partners by virtue of the duty of utmost good faith owed by each partner to the other at least pursuant to s. 22 ofthe Partnership Act and, particularly, in light of the fact that this business was operated, at least in part, from Metro Law's premises fromthe date of incorporation in October 2007 to April 1st, 2009, when the defendant commenced operating it with his new firm in Guildford,and the further fact that, at all material times, the defendant intended to keep for himself and did keep all profits, including theapproximately $23,000 he says Metrocanada Mortgage made at yearend September 30th, 2009. [88] The defendant may have had some form of passive approval from Mr.

Routtenberg, but I reject his evidence that MLC at alltimes agreed to what he was doing or that he ever told MLC or Mr. Murray clearly what he was doing. The fact that it did not isevidenced in part by its letter signed by Mr. Routtenberg, as well, delivered to the defendant on March 31st, 2009, terminating hismanaging partner status. [89] Mr. Christ testified that Mr.

Murray consented to allowing him to operate the brokerage business so as to "not hold him back." Murray denies he ever said this or agreed to this and, in fact, testified he invited Christ to withdraw from Metro Law LLP if he wasdesirous of conducting such a business. This position is corroborated by his later letter to Mr. Christ dated May 14th, 2009, at page 1. [90] I prefer Mr. Murray's evidence to Mr. Christ's on this issue of whether or not he and Mr. Routtenberg consented to Mr. Christoperating this mortgage brokerage business. I find that MLC did not consent.

[91] It is established in this case that after this mortgage brokerage business was incorporated, at least some of its business wasconducted by the defendant while a partner of Metro Law LLP and in its offices at 1141-4700 Kingsway Avenue in Burnaby. Thedefendant has admitted this. The defendant suggested MLC knew this was occurring, for example, because Metrocan's files weresomehow coded in the firm's computer directory with an "M" as a prefix and Mr. Murray would or could have seen this.

Murray deniedthat he had done so. [92] One duty imposed on a partner is to make full disclosure of all matters affecting the partnership; see McKnight v. Hutchison(2002), 2002 BCSC 1373 , 28 B.L.R. (3d) 269 (B.C.S.C.), Grist J., and s. 31 to 33 of the Partnership Act. Manzer says this atpage 5-10.1 and 5-10.2 of her guide in discussing this issue: In considering the requirement to disclose, the court noted that disclosure is a positive obligation which cannot be satisfied by referenceto information that might otherwise have been discovered by inquiry on the part of the remaining partners.

The disclosure must be full,accurate, and must be positively made in circumstances where the conduct of a partner [in any matter --] in any manner touched upon thefiduciary obligations owed by the partner to the partnership. [93] At page 5-10.2, she states as follows: The court considered that the obligation of full disclosure is common to relationships characterized by the duty of utmost fairness andgood faith citing numerous cases which outline and extend this duty.

The court noted that in a case of partnerships, these duties areparticularly broad because of the requirement for trust arising from there being no limitation from firm liability on partners, eachpartners potentially having the power to expose the full worth of every other partner. [94] There is no evidence as to the magnitude of this Metrocan work done in the Metro Law offices.

Whatever it was, I am of theview that without MLC's consent given upfront at the outset, it was done in breach of the partnership agreement and the defendant's dutyof utmost good faith owed to MLC and Routtenberg and, as well, the requirement of s. 22 of the Partnership Act on point. I am far fromsatisfied, on all the evidence in this case, that the defendant Christ ever discharged his related duty as a partner of MLC by making fulldisclosure of this enterprise prior to its commencement.

He did not. [95] In 2008, if not earlier, it is clear that the defendant wanted to earn more money than he was making at Metro Law LLP. He toldboth of his partners they should all be making six figures and "not less than schoolteachers." He regularly lunched with Mr. Routtenbergand it would appear Mr. Routtenberg became onside with this view. [96] The defendant was also dissatisfied with the days-worked formula found in the partnership agreement at clauses 16 to 18.

Hetestified that this formula in essence resulted in each partner receiving the same draw and same year end distribution of profits so long astheir backside was in their chair in the office for full days throughout the month without any regard to what his productivity was orbillings. [97] Mr. Murray recalled a partners' meeting in or about November 2008 at a nearby restaurant where the defendant discussed achange in the Firm's way of paying partners and moving to an "eat what you kill" regime. Murray asked the defendant to put theproposed change in writing, but said he never did.

Murray said he never agreed to such a new formula or change to their writtenpartnership agreement and that the agreement was never orally amended. I accept this evidence as true. [98] Murray also testified that at a meeting in early 2009 in the defendant's office at the firm, the defendant and Mr. Routtenbergsuggested that the partnership agreement should be amended to an "eat what you kill" regime and Christ, in particular, was very insistent,but Murray said he refused to agree and again suggested the defendant could withdraw from the firm if he was unhappy with things, towhich he received no response from Mr.

Christ He again asked them to put their proposal in writing and said they never did. [99] The defendant essentially testified that Murray and Routtenberg did orally agree in July 2008 in a meeting in Mr. Routtenberg'soffice to a compromise when Mr. Murray would not agree to an "eat what you kill" regime and that compromise was to receive equaldraws which he said started on August 1st, 2008. I note there is a journal listing evidence or documents that show equal draws may havebeen ongoing between these partners as early as September 2007.

I also note the defendant's amended reply filed April 21st, 2010,states, and I quote: (

d) pursuant to a partnership agreement amendment all partnership draws made from and after July 1, 2007, were equal draws andwere not made in accordance with a "days-worked formula." (emphasis added) [100] In any event, Mr. Christ testified that as the managing partner, he instituted these agreed-upon equal draws in August 2008 andthat part and parcel of this new scheme was that no more monthly synopses were done after August 1st, 2008, as to the days worked foreach partner. He told the office manager to cease recording this information.

Christ said their agreement on equal draws, he felt,relieved them of the days-worked formula and rescinded clause 16 in their partnership agreement. I am not so sure. [101] He said he had this understanding as he had consulted s. 21 of the Partnership Act which states: Variation of rights and duties by consent 21 The mutual rights and duties of partners, whether ascertained by agreement or defined by this Part, may be varied by the consentof all the partners and the consent may be either express or inferred from a course of dealing.

[ 102 ] Christ felt and feels their partnership agreement could be amended by an agreement or course of dealing, namely, the oral agreement and payment of equal draws. Christ said prior to August 1st, 2008, the days-worked formula in their partnership agreement was used to divide up annual profit whereas after August 1st, 2008, it was divided equally. Christ also testified that had the partners agreed to his proposed "eat what you kill" concept, it would have replaced clause 16 in the partnership agreement and that Mr. Routtenberg favoured this occurring. Christ said he never met with Mr.

Murray to discuss a change to clause 16 as Mr. Routtenberg told him that he "would handle" Mr. Murray. [ 103 ] Equal draws were paid by the defendant in his role as managing partner on and after August 1st, 2008. I conclude he possessed the firm's general account chequebook and wrote the cheques. It is far from clear, however, that the claimant knew this was occurring.

He says he never agreed to equal draws and not to a change to the partnership agreement on point. [ 104 ] Christ said partners' equal draws cheques were put face-down on their office chairs twice a month and that the 2008 financial statements show partner drawings were roughly equally. When asked why he wanted equal draws, Christ said it was to credit Mr. Routtenberg for his greater efficiency. Under a days-worked formula, he might not have a seven-hour day nor would Mr.

Murray with his frequent long lunches and coffee breaks, but equal draws, in essence, overlooked simple unproductive chair time. [ 105 ] He agreed that payment of equal draws was a step on the way to achieving his goal of "eat what you kill" which he said, contrary to earlier evidence, the other two partners, especially Murray, would not agree to. [ 106 ] Mr. Routtenberg said in his reply evidence that he never agreed with Mr. Christ that each partner would have equal draws regardless of his days worked. [ 107 ] He said the March 31st, 2009, letter to Mr. Christ from he and Mr.

Murray was his idea and that the final line, namely, "We confirm that the partnership agreement requires the remuneration of partners as calculated pro rata upon days in the office and in pursuit of partnership purposes for each partner" was his idea and that Mr. Murray did not make him include it in the letter. This document, in my view, corroborates Mr. Routtenberg's evidence which is supportive of Mr. Murray's, in essence, that there was no oral agreement somehow amending the partnership agreement including by a course of dealing. [ 108 ] I find, based on all the evidence in this case, that Mr.

Christ's understanding of what he did, the payment of equal draws, was not done pursuant to an oral agreement involving all three partners and not the type of course of dealing that can, on the facts of this case, give rise to either consent on the claimant's part thereto and certainly not a replacement or amendment of clauses 16 to 18 of the partnership agreement or any part of them. [ 109 ] Strangely, this agreement seems not to contain that I can see a clause that all amendments to it must be in writing.

I do find that any change to the manner in which partners were to be paid and the days-worked formula would require (1) a major decision with all three partners in agreement and (2) an amendment to the agreement and, owing to the importance of such an amendment and like notices in clause 14, would (3) have to be in writing. None of this occurred. [ 110 ] I reject the defendant's evidence on point. Clause 16 was never properly amended and all that the defendant did was to start paying each partner equal draws because he likely sensed that Mr. Routtenberg would not notice or object and that Mr.

Murray would not, either. Again, he wrote the draw cheques and neither MLC nor Mr. Routtenberg co-signed them. [ 111 ] In late 2008 and early 2009, the evidence discloses that both Mr. Routtenberg and Mr. Christ were aware that certain offices once used by a firm called Norton Legal were available to lease in the Guildford Centre in Surrey. Metro Law, according to Mr. Routtenberg, was interested in them and he spoke to the property manager, one Mr. McCarthy, about them and the prospect of Metro Law leasing them in early January 2009. He told Mr.

McCarthy Metro Law was interested and that no one should destroy the leasehold improvements in place. [ 112 ] On January 16th, 2009, the defendant sent the property manager an email from Metro Law Office LLP concerning the same premises stating, "Our interest" in this tenancy and proposing that "we" would incorporate Metrocan Holdings Inc. to operate the office and stating: We would incorporate a law firm and mortgage centre which I own in the same place. [ 113 ] Mr. Routtenberg at trial said he had never seen this email marked as Exhibit 9 before. Mr. Murray, I believe, did not deal with it in his evidence.

The email was authored by the defendant. [ 114 ] Ultimately, Mr. Christ and not Metro Law LLP in January or February 2009, leased this space, however, not for Metro Law LLP in which firm he was still a partner, but in the name of Metrocan Mortgage Ltd. or a related company and for use by it and his new law firm.

The property was renovated and, on April 1st, 2009, he started to carry on a new law practice here called Metrocan Law and, as well, his mortgage brokerage business. [ 115 ] Murray testified that in early March 2009, likely at the Sammy Pepper's Restaurant, the three partners met and discussed concerns that Murray and Routtenberg then had as Routtenberg had earlier learned that Christ had leased the former Norton Legal Office in Guildford.

Murray said Christ told them, and I find also told Murray for the first time that he had done so for his brokerage business and was going to have lawyers there and call it Metrocan Legal. [ 116 ] Murray denied that he or Routtenberg consented to Christ doing this, including for a period of six months. Routtenberg denied in his evidence that he or Murray had ever in September or October 2008 or at any time consented to Mr. Christ opening a law office in Guildford. He was also very clear in recalling that at the Sammy Pepper's Restaurant on learning of Christ's news, Murray told Mr.

Christ that he could not do this. [ 117 ] On March 31st, 2009, Mr. Murray and Mr. Routtenberg delivered their joint letter to Mr. Christ terminating him as managing partner. This was Mr. Routtenberg's idea as he was angry that Mr. Christ was starting his own firm. Murray said both he and Mr.

Routtenberg then felt that Mr. Christ was in breach of the partnership agreement where each partner is an agent for all other partners and each must be able to rely on the integrity of all the others. [ 118 ] Mr. Christ testified that Murray knew all about the Guildford premises from the outset and, as proof, pointed to the first sentence in his March 31, 2009, managing partner termination letter. This hardly, in my view, corroborates Mr. Christ's assertion. [ 119 ] Christ also testified that neither Mr. Murray or Mr.

Routtenberg told him that, in their view, his new partnership and Metrocan Mortgage Ltd. amounted to a breach of the partnership agreement. I reject this evidence and prefer that of Mr. Murray and Routtenberg that, in essence, Mr.

Christ did not make full and open disclosure to them about his plans for Guildford and, when they learned what he was up to, they were annoyed and so much so they jointly agreed to immediately end his tenure as their firm's managing partner, the only one their firm had ever had. [ 120 ] It also seems clear to me that Christ's negotiation for the Norton Legal space for his own account, and I find without the knowledge and consent of his other two law partners, would be a clear breach of his duty of utmost good faith owed to them as was the establishment of his new law firm and continuation of his brokerage business while still a partner with them in Metro Law LLP. [ 121 ] Mr.

Christ gave some possibly contradictory evidence as to his reaction to the March 31st, 2009, managing partner termination letter. He said, at first, because of the last line therein set out above that he felt they were reneging on the equal draw system and later said he felt therein they were reinstating this days-worked formula. I find neither occurred as the days-worked formula remained in place in their agreement at all material times that Mr.

Christ remained a partner to January 1st, 2010. [ 122 ] Christ said on March 31st, 2009, their partnership was not functioning and he then felt they could seek a dissolution in the court, in essence, on an application under s. 38 of the Partnership Act . Be that as it may, none of the three law partners made such an application to a court having jurisdiction seeking an order of dissolution. This has never occurred. [ 123 ] What occurred in the six weeks after Mr. Routtenberg and Murray gave Mr. Christ the termination letter of March 31, 2009, is not made all that clear in the evidence at trial. Mr.

Christ testified that he came to the Metro Law Office in Burnaby usually in the mornings for half-days working at least three-and-a-half hours a day. This continued to the end of June 2009. [ 124 ] He said he worked on conveyancing files which were either Mr. Murray's or Mr. Routtenberg's and supervised their completion. Assumingly in the afternoon, he went to Guildford and conducted his new law practice where he said he was a sole practitioner save for a short period when he had a part-time associate working with him. [ 125 ] He also testified he had a visit in Guildford in late April 2009 from Mr.

Routtenberg who asked to join his new law firm, Metrocan Legal. He told Christ that Metro Law was then struggling to pay the rent. Christ says he refused this overture indicating to Routtenberg that he wanted to make a clean break. In reply, Mr. Routtenberg denied that he had asked for Christ for a job, however, agreed he had then gone to his office on a client-related matter with a document. [ 126 ] Mr. Murray's evidence is different from that of Mr. Christ as to the defendant's time at Metro Law in early 2009.

He reviewed the appointment book and calculated "days worked" as per the requirement of the partnership agreement for all three lawyers and set the results out in a letter dated May 14th, 2009, to both partners at page 4. I have referred to this above. Mr. Murray's working paper prepared at about the same time was also filed in evidence, Exhibit 3, as to the months of February 2009 to April 2009. [ 127 ] His calculation for days worked each month for Mr. Christ is as follows: January 2009, 19.5 days; February 2009, 18 days; March 2009, 16 days; April 2009, 8.5 days. Mr.

Christ did not really challenge this calculation in his evidence and submitted no documents himself at trial on point. [ 128 ] Murray further testified that by late March 2009, Mr. Christ was coming into Metro Law in Burnaby only a few hours a day and he believed only when he had an appointment. Mr. Routtenberg corroborated this evidence in his reply testimony stating generally that by April 2009 Christ's time at Metro Law was significantly reduced. He said he was in the office virtually every day.

On average, Christ's calculation is that he was present and completed a day of work about 20.5 days in each of these four months. [ 129 ] Murray further testified that this pattern of Christ coming in only for the odd appointment continued on Mr. Christ's part to December 8th, 2009. Mr. Christ more or less agreed with this evidence as to his work after June 2009 at Metro Law. He testified that June 30th, 2009, was the last day he worked as a partner at Metro Law and that he then left the partnership. [ 130 ] Thereafter, he said he came into Metro Law and worked on contractual basis. Mr.

Murray was on holidays and Mr. Routtenberg was swamped with conveyancing files and offered to pay him 40 percent, I understood, of his fees billed and possibly received on clients' files he worked on. He agreed and worked on this basis at least in July 2009. [ 131 ] In August, he said, on Murray's return from holidays, he received only a third of the fees billed. He did not recall receiving a September 2009 payment and gave no evidence as to an October 2009 cheque from Metro Law. [ 132 ] Murray testified that he was in the Metro Law office all of July 2009, but took three weeks' holidays in August 2009.

He felt neither Mr. Routtenberg nor he was swamped with work at the time and felt the two of them could have handled all the files. He said he never agreed that one-third of Mr. Christ's billing be paid to him by Metro Law and, when Mr. Routtenberg suggested this scheme to him, he said emphatically, "No way." [ 133 ] Mr. Routtenberg's evidence was that he paid a July 14th, 2009, cheque in the amount of $2,328.80 to Mr. Christ without Mr. Murray's approval and that he did not discuss this cheque with Murray because Murray and Christ were then at odds.

He said he had taken this action as he knew that their partnership was "coming into a severance" and felt it appropriate to deal with Mr. Christ's transfer of files. He said he was then trying to encourage a reasonable transfer of files. He appears to have signed this cheque number 6930, not Mr. Murray, and it is reference line states, "40 percent of July receipts."

[ 134 ] Routtenberg testified later in cross-examination, (following his giving reply evidence when called to testify by Mr. Murray) that after June 30th, 2009, he suggested to both Mr. Christ and Mr. Murray that they pass to Christ a percentage, I understood, of his billings' receipts. He recalled Christ wanted 40 percent, but Murray said 33 percent was tops and Christ agreed. He felt 33 percent was a reasonable rate and that this was the arrangement agreed on, in essence, for June and July 2009 on a limited number of files. [ 135 ] The evidence, Exhibit 1, Tab 6 and 21, is that Mr.

Christ received six cheques in 2009 from Metro Law all in the amount of $2,500 and each marked "draw," and I find each signed by the defendant only on

(1) April 14,

(2) April 29,

(3) May 13,

(4) May 27,

(5) June 12,

(6) June 25. They total some $15,000. [ 136 ] Further, the evidence shows he received the following cheques after July 1, 2009, the date he alleges he ceased to be a partner of Metro Law:

(7) July 14, $2,328.80 referred to above, signed only by Mr. Routtenberg;

(8) August 4, $2,861.14 marked "July 33%," signed only by Mr. Routtenberg;

(9) August 31, $1,106.64 marked "balance of August revenue." I find it was signed by Michael Christ;

(10) August 13, $1,500 without any reference as to what it was for, signed only by Mr. Routtenberg;

(11) October 23, $1,505.46 marked "September plus October 33%," signed only by Mr. Routtenberg. The total of these five additional cheques is some $9,302.04. The total of the 11 cheques all alleged to be improper draws again is some $24,302.04 [ 137 ] It can be seen, based on the evidence, that they relate to "draws" up to June 30, 2009, and arguably - this is Mr. Christ's view - contract wages after July 1, 2009, when it is not disputed that Mr.

Christ was coming into Metro Law on a very limited basis and doing some work on conveyancing files. [ 138 ] Before dealing with this claim, there are several other "milestone" events in the life of this small partnership that I think I should refer to. [ 139 ] As I have said, on May 13, 2009, following the defendant's termination as managing partner by Mr. Murray and Mr. Routtenberg, the defendant and Mr. Routtenberg realigned and delivered two letters to Mr.

Murray's desk, both dated May 13, 2009, one purporting to dissolve the partnership effective September 30, 2009, and signed by both, and one signed only by Mr. Routtenberg. I have dealt with these in more detail above. [ 140 ] Mr.

Murray responded to both the next day by letter dated May 14, 2009, indicating that their notice of dissolution was ineffective, in his view; asking them to confirm that they were withdrawing from the partnership as at September 30, 2009; and confirming, in essence, his view that the defendant was receiving more draws than the days worked formula entitled him to. [ 141 ] Lastly, he referred to

section 33 of their partnership agreement in this correspondence as follows: 33) Where a Partner voluntarily withdraws from the Partnership, or where all of the other Partners have deemed that a Partner has withdrawn from the Partnership on the grounds that the Partner has worked less than 60% of the days worked by full-time Partners in the same fiscal year, whether because of personal or health reasons (the "Withdrawing Partner"), the remaining Partners shall pay, in 36 equal monthly installments, to the Retiring Partner, a sum equal to 50% of the Withdrawing Partner's average annual Share of Earnings over the last three years before withdrawal (the "Withdrawal Allowance").

Notwithstanding the foregoing, no Withdrawal Allowance is payable to any Partner who withdraws before December 31, 2007. [ 142 ] It seems very clear to me that on receipt of this letter, there occurred yet again some regrouping of allegiances between these three men. The defendant cannot have truly believed thereafter that his and Mr. Routtenberg's May 13, 2009, notice of dissolution was tantamount to a notice of withdrawal because from April 1, 2009, to June 30, 2009, he created and signed six draw cheques for himself for a total of $15,000.

This is not the act of a man who believes he is no longer a partner of the firm into the general account of which he is dipping for $5,000 a month in draws. On this basis, I reject his evidence on point offered at trial and, as well, based on his inconsistent trial evidence, in essence, that he left the partnership on June 30, "the last day I worked as a partner," a later date. [ 143 ] Messrs.

Routtenberg and Murray were later able to regroup to the point that on December 8, 2009, they jointly issued a formal written notice as required by paragraph 45 of their partnership agreement and pursuant to clause 33 thereof to the defendant and deeming the defendant as at January 1, 2010, to be a "withdrawn partner." [ 144 ] The defendant in this action before me does not seriously contest that this notice was properly given nor does he really contest its factual underpinnings. Mr.

Christ testified that at year end, September 30, 2009, Metrocan Mortgage Ltd. made a profit of approximately $23,000 and also a profit in 2010, all of which was paid to him. I find that Murray has demanded that he produce financial statements, both for Metrocan Mortgage Ltd. and his law firm first commenced in Guilford/Surrey on or about April 1, 2009, and that the defendant has refused to produce these documents. His testimony that he gave some form of financial information with respect to one or other or both of these entities to Mr. Routtenberg is hardly an answer to Mr.

Murray's request for production. [ 145 ] It is further my view that while MLC has not, in the case at bar, advanced a claim for either damages for breach of the partnership agreement or an accounting of profit made either by the defendant's mortgage brokerage business or his law firm (or both) and on this basis, these documents might not now be seen to be relevant, but where the defendant seeks a set-off in his replies, that this allegation alone makes these documents both relevant and producible.

I will return to this point below. [ 146 ] Based on all the evidence, I make the following findings of fact relevant to this MLC claim for one half of $24,302.04: 1. The three partners comprising Metro Law LLP at no material time agreed to amend their partnership agreement in any way. 2. MLC never consented to receiving equal draws but merely acquiesced in receiving same for a period of months and with no intent or consent in doing so to any scheme or arrangement that would amend or bypass any provision in the written partnership agreement.

From April 1, 2009, to June 30, 2009, the three partners received equal draws of $5,000 per month, car allowances aside. 3. The defendant remained a partner in Metro Law LLP to and inclusive January 1, 2010, when the December 8, 2009, deemed withdrawal notice was legally effective.

4. The defendant, by his own admission, did not work any "days worked" on or after April 1, 2009, being defined by clause 19 of the agreement as a seven-hour day, Monday to Friday, or a five-hour day, Saturday or Sunday. 5. The defendant worked 17 half-days in April 2009 (see Exhibit 3). There is no reliable evidence as to what portions of days worked he was working at Metro Law thereafter. 6. In or about June 2009, the defendant and Mr.

Routtenberg agreed that if Christ continued to work at the Metro Law firm on client files, he would be paid 40 percent of his billings on this work and that, in essence, this stipend or amount would be in lieu of his draw. MLC was, as a partner of Mr. Routtenberg, bound by this agreement. These payments in the total amount of $9,302.04 were paid by Metro Law to the defendant for work he did from July 14 to August 23, 2009, or in this period of time. In the event MLC truly believes Mr. Routtenberg acted wrongly, I suppose it might seek an indemnity from him.

I make no finding as to whether such a potentially ill- conceived plan might be successful or not. I am of course mindful that Mr. Routtenberg and MLC continue in a partnership in the practice of law to date. 7. MLC later became aware of this arrangement in paragraph six and proposed, and all three partners agreed, the percentage should be reduced to 33 percent of billings, which occurred effectively July 2009 (see Exhibit 1, Tab 21, cheque number 6993). 8. The defendant worked on client files at Metro Law from on or about July 1, 2009, to in or about October 2009, and was paid the above amounts.

Discussion [ 147 ] I will first deal with the six draws totalling $15,000 paid to the defendant from April 14 to June 25, 2009, while he continued to be a partner. There is no evidence (1) that the defendant worked any "days worked" as defined by clause 19 of the partnership agreement in this period of time, yet he (2) received a draw against the firm's profit in 2009 as if he did, and (3) on the basis that his work contribution, if you will, was equal to that of the other two partners so that each would receive roughly a third of the total draw paid each month for the three months of April, May, and June 2009.

A half day is not a day worked. I find the defendant was not entitled to receive draws in this amount, namely, $15,000. [ 148 ] Was he entitled to receive something assuming the original partnership agreement remained unamended, as I have found to be the case? Mr. Murray's letter to the defendant and Routtenberg of May 14, 2009, at page 4, together with Exhibit 3, might suggest he was, namely, 30.8 percent of the draws January 1 to April 30, 2009, but not 33 percent. In my view, Mr.

Murray's construction of clause 19, seemingly to the effect that portions of days, for example, half days, can be totted up to somehow produce a day worked is not one I can make in the face of the language these three men agreed upon and as set out in their written partnership agreement. Had they intended that in a given month partial days worked, for example, which would have to be defined, could be somehow calculated and added up to produce a monthly total of "days worked" as per clause 19, they could and should have set this out in writing in the agreement.

That is what Murray did at page 4 of the May 14, 2009, letter, but he did so, in my view, without reliance on any contractual provision permitting him to do so. If the initial philosophy of Metro Law was that all partners would work more or less equally hard, save perhaps, Mr. Routtenberg, then clearly their expectation in their agreement was that they would each put in the reasonably full "days worked" defined in clause 19 of their agreement. [ 149 ] I find, notwithstanding Mr. Murray's

interpretation in his letter of May 14, 2009, that clause 17 and 19 required the defendant to work seven-hour days Monday to Friday or five-hour days on Saturday or Sunday to achieve, if you will, a single day worked. There is no evidence he did so on any day in April, May, or June 2009. I find he was not entitled to the $15,000 nor to any other proven amount. Again, he has not advanced a counterclaim and raised, for example, that he ought to have received some form of draw notwithstanding the provisions of the agreement he himself drew based for example on quantum meruit .

It is too late to do so now. [ 150 ] I accept MLC's submission that it is entitled to at least half of this amount. It claims only one half or $7,500. There is no suggestion by either remaining partner that its entitlement should somehow be different. [ 151 ] I turn now to the cheques totalling $9,302.04 which MLC also alleges were draws wrongly paid to Mr. Christ. I reject this analysis. I find that an agreement was made whereby both partners, MLC and Routtenberg, either agreed or must be found through agency and partnership principles to have agreed to pay Mr. Christ what he received for the work he did.

This aspect of the overall claim is therefore dismissed. It is clear I prefer Mr. Routtenberg's evidence to that of Mr. Murray on point. [ 152 ] I turn now to the matter of set-off and other potential claims not pleaded in the action before me but I think bear discussion. I will deal with potential claims first because they arise in both parties' positions. [ 153 ] The defendant says if he owes MLC money as a result of its claims in this action, that this amount, be it the loan amount or any draws he took to which he is found by the court not to be entitled, should be set-off against (

a) the balance in his capital account and/or (2) the withdrawal allowance he says he is entitled to under clause 33 of the partnership agreement. He has not suggested that he is entitled to a withdrawal bonus. [ 154 ] I have found that MLC and Routtenberg issued a proper notice on December 8, 2009, effective January 1, 2010, deeming Mr. Christ to have been a withdrawing partner and that the original partnership agreement has never been amended.

It follows that pursuant to clause 36, in my view, which reads: 36) It is agreed that the Withdrawal Allowance and the Withdrawal Bonus are full and sufficient payment for a Retiring Partner's interest in the Partnership and Management Company, he would seem not to be entitled to repayment of his capital account balance notwithstanding Mr. Bruce's evidence that his capital account balance appears in the firm's financial statements as a liability which the firm owes the defendant. Mr. Bruce was not referred to clause 36 by Mr.

Murray, and his evidence, I think, is to be considered without being given in the context of the partnership agreement which the defendant himself drafted and all three men signed. Christ's capital account balance remains with Metro Law, which I find

was and is a subsisting law partnership of MLC and Mr. Routtenberg at all material times after January 1, 2010. I find it is not available for set-off, and because I accept he is deemed to have been a withdrawing partner, I find he is not entitled to it. [ 155 ] That leaves the withdrawal allowance as the only amount possibly owing to the defendant and as yet to be ascertained that might qualify as an amount possibly owing to the defendant against which he could seek to set-off the claims herein successfully made by MLC. [ 156 ] Mr.

Christ did not file a counterclaim in the action before me seeking recovery of the withdrawal allowance as I noted at the outset of these reasons. I note even if it were to be found due and owing, and I make no such finding, it is payable in 36 instalments, and the partnership agreement is silent as to when they are to start and if they are to be 36 consecutive monthly payments. It may be that some future judge will have to construe clause 33 on these points and possibly others.

I note, however, in his last reply filed on June 15, 2012, during the course of the trial, he did raise the right to set-off the withdrawal allowance. No submission has been made by MLC that this is not a sufficient pleading. Set-off is thus raised as a defence in the case before me. [ 157 ] For its part, MLC has asserted since at least May 14, 2009, that the defendant may have a legal or equitable obligation to it and likely the firm pursuant to at least clause 4 and 8 of the partnership agreement, which reads as follows: 4.

No Partner shall carry on any practice as barrister, solicitor, notary public, trademark agent, trustee or estate administrator for fee, or immigration consultant for his own private advantage, but any such business shall be carried on for the benefit of the Partnership, provided however, that by Major Partnership Decision, a Partner may be permitted to be involved in businesses other than the practice of law. Each Partner shall devote substantially his full time, energy and ability to the business of the Partnership unless prevented by sickness or other reasonable cause. 8. A Partner is personally liable:

a) for the Partner's own negligent or wrongful act or omission, or

b) for the negligent or wrongful act or omission of another Partner or an employee of the Partnership if the Partner seeking relief knew of the act or omission, and did not take the actions that a reasonable person would take to prevent it,

c) for breaches of this Agreement or Partner's common law obligations to his Partners. [ 158 ] Mr. Murray, through MLC, has indicated that he may be seeking an accounting of profit from the two businesses run by the defendant which he alleges were operated in breach of this provision or, I suppose, arguably common law or equitable principles that bind all partners in business together, including the duty owed to each of the utmost good faith.

Section 33 of the Partnership Act is also relevant and on point with respect to such a potential claim. MLC has not advanced such a claim in the action before me for such an accounting, but it is clear to me that it feels it has such a claim. Reference is made to clause 33 in the December 8, 2009, notice, and Mr. Murray has demanded necessary documents to determine the potential scope of such a claim or arguably to properly meet the defence of set-off, and the defendant has refused to provide them.

I have found that he ought to have done so in the face, in essence, of his own competing claim (or defence) of set-off, especially where the defendant has admitted that his brokerage business was profitable in 2009 and 2010, and I have found he was in breach of his fiduciary duty to MLC in operating both his businesses without his partners' consent and at least prior to January 1, 2010. The defendant's claim for set-off must be determined with this background very much in mind. The Law of Set-Off [ 159 ] According to Canadian Partnership Law edited by A.

Manzer (October 1997 edition) at page 7-93: There is nothing in partnership law, either statutory or common law, which establishes specific to partnerships set-off rights between monies owing by the partnership to a partner and monies which the partnership claims to be owing by the partner as a debt or a reimbursement for expenses or damages. [ 160 ] Reference is made to s. 43 of the Ontario Partnership Act which is similar to s. 46 of the B.C.

Partnership Act as follows: Debts at date of dissolution or death 46 Subject to any agreement between the partners, the amount due from surviving or continuing partners to an outgoing partner, or the representatives of a deceased partner, in respect of the outgoing or deceased partner's share, is a debt accruing at the date of the dissolution or death. [ 161 ] While reference is made herein to an outgoing partner not defined in the Partnership Act itself, s. 46 is to be found in a group of sections in the Partnership Act dealing with th

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