I’d like to begin this post with the caveat that I feel lost about 99% of the time that I’m doing my readings. I’m one of the people that breathed in a GIANT sigh of relief when someone asked what the difference between profit and revenue was last week. Shout out to whoever that was…
SO, what the heck is the difference between Haughton and Nordile? In both cases, the general partner (GP) for the limited partnership (LP) was a corporation (aka – corporate general partner?)… And in both cases the limited partners in the LP were also corporate execs/officers of the corporation (AKA a separate person). So limited partners of the LP were managing the corporation that was the GP of the LP but the limited partners were trying to say that they weren’t in control of the LP. Good grief…..
In Haughton (Alberta) the court found the two limited partners liable for the debt of LP because they were, in fact, taking part “in the control of the business” (APA s63). BUT in Nordile, under s64 of the BCPA (take part “in the management of the business”) the two limited partners were NOT liable. WHY?
Besides the language – “control” vs. “management” – the only difference that I can tell from the casebook is that in Haughton, the limited partners presented themselves as being in control of the LP. The court notes that “it is clear on the evidence that… Zivot was known to suppliers as “the president” of Printcast” (the LP). He used business cards stating that and introduced himself in that way. It seemed to make a big difference to the court that the plaintiff “gained the impression that Zivot was the man at the top with complete and ultimate responsibility” for Printcast. In contrast, in Nordile, the court accepts that the “agreed statement of facts states unequivocally that when Breckenridge and Rebiffe (the limited partners/corporate execs) participated in the management as directors they did so solely in their capacities as directors and officers of the GP.” So in Haughton, the limited partners/corporate execs blurred the line between their distinct roles, and in Nordile the two dudes at the top were just really good at switching hats? Isn’t that just semantics though?
On the one hand I can see that, if you rep yourself as being directly in control, you should be held liable. After all, that may have been one of the main factors why Nash entered into the deal with Zivot and Printcast. However functionally, the two scenarios are the same… “Breckenridge and Rebiffe managed Arbutus and Arbutus managed Arman”… A controls B controls C… so really…. A controls C … I dunno, sometimes it looks the same and sometimes it doesn’t. It’s like one of those crazy patterns that, if you stare at it for a really long time, an image appears, but if you blink, it disappears just as quickly.
Anyways, I’m writing this in the hopes that someone with far greater wisdom and insight than I have responds and tells me I’ve missed something here… what the heck is the difference?!?!
I unfortunately don’t have a good answer for distinguishing these cases, but I just wanted to chime in to express my appreciation for the optical illusion metaphor. So often, my reaction to cases in BizOrgs is to just take on faith that, in this pattern, it works like X, and that there’s no rhyme or reason to it.
I too remain thoroughly confused about the distinction between these cases. I thought perhaps the phrasing in the Alberta legislation, “unless, in addition to exercising the limited partner’s rights and powers as a limited partner”, had something to do with it; it would imply that in Alberta one must act as a limited partner as well as taking part in the control of the business in order to become liable as a general partner. Compare the BCPA where this “in addition…” qualification is not present: the limited partner could be taking a break from their limited partner duties, but if they took part in management would be liable. Now that I reconsider what I thought was a brilliant idea, though, I’m not sure how salient this distinction is (never mind the fact it also doesn’t seem all that helpful for us to distinguish the courts’ reasoning in these cases).
Now that I see everyone else’s confusion, I am second guessing my interpretation…here’s what I thought:
In Haughton, Zivot and Marshall were acting BOTH as employees or officers of Lifestyle (the corporate GP), AND as limited partners of Printcast. Because they were extensively involved in the management of Printcast, they lost the limited liability status afforded to limited partners. In other words it was their actions as limited partners that made them personally liable.
(See halfway down page 54: “the fact that both defendants were or may have also been acting as employees or officers of Lifestyle, all unknown to Nash, does not take the defendants outside the ambit of s.63 [of the Partnership Act]”) Read: they were still within the ambit of s.63 because they were overstepping their ‘passive’ role as limited partners.
By contrast, in Nordile, the agreed statement of facts explicitly says that Breckenridge and Rebiffe were SOLELY involved in the management of Arman Properties as ‘directors and officers of Arbutus’. Unlike in Haughton, they couldn’t have been liable as limited partners, because they weren’t acting as limited partners. They were acting solely as individuals within a corporation, and it is the corporation itself (not its directors) that is the GP of Arman Properties.
The way I read it, counsel in Nordile really screwed up. Breckenridge slipped that little sentence into the statement of facts and Nordile’s counsel missed it. You snooze you lose!
I actually thought the difference was in the representation of Zivot as being fully associated with Printcast. Introducing yourself as president and printing it on business cards seemed to seal the deal on this one.