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Partnerships - Standing to Sue. Binscarth Holdings LP v. Grant Anthony
In Binscarth Holdings LP v. Grant Anthony (Ont CA, 2024) the Ontario Court of Appeal allowed 'derivative action' appeals, which are actions brought by (typically, shareholders but here) limited partners against principles of the (typically, corporations but here) a limited partnership and third parties. The case is useful to get a feel for limited partnerships structuring in modern practice.
Here the court reviews the lawsuit standing of partnerships, both general and limited:Lawsuits Involving a Limited Partnership
[54] Although not a separate legal entity, a limited partnership can nonetheless sue and be sued.
[55] At common law, the process by which ordinary partnerships could sue and be sued ignored the firm and looked to the partners composing it. As this court noted in Kucor, at p. 593, partnerships lacked the “capacity to sue or be sued, with the result that [at common law] proceedings [had to] be brought by or against all members of the partnership individually.” This problem was overcome by r. 8.01(1) of the Rules of Civil Procedure, which provides that a proceeding by or against two or more persons as partners may be commenced using the firm name of the partnership. Given that r. 8.01(1) applies to partnerships generally, it also applies to limited partnerships. Thus, as we have seen, the law permits a limited partnership to act as a distinct legal entity for certain limited purposes, such as bringing and defending actions: Extreme Venture, at para. 98; Guthrie, at pp. 148-49.
[56] Nonetheless, it is still the general partner who is responsible for proceedings by and against the limited partnership. Again, from Lehndorff, at para. 18:A general partner is responsible to defend proceedings against the limited partnership in the firm name, so in procedural law and in practical effect, a proceeding against a limited partnership is a proceeding against the general partner. [57] See also Hudson’s Bay Company v. OMERS Realty Corporation, 2016 ONCA 113, 346 O.A.C. 14, at paras. 17-21, and YG Limited Partnership and YSL Residences Inc. (Re), 2023 ONCA 505, 168 O.R. (3d) 153, as well as Belzberg Technologies Inc. v. ITG Canada Corp., 2005 CanLII 35788 (Ont. S.C.), at para. 20, where Harvison Young J. (as she then was) stated:[T]here is no legal distinction between actions taken in the name of a limited partnership and the actions of the general partner…. [W]here action is taken in the name of a limited partnership, it is the general partner or its agents that is in fact acting. [58] Thus, it is the general partner that asserts or defends a claim by or against a limited partnership. However, what if the wrongdoer is the general partner? It seems self-evident that general partners are not going to sue themselves, either in their own name or in the name of the limited partnership. This brings us to the subject of derivative actions.
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