Criminal Liability of Partnerships: Constitutional and Practical ...

person. As discussed earlier, this raises constitutional issues with respect to the presumption of innocence. 181
Therefore, it is unlikely to be constitutional to demand that the partners at the time of the offence contribute to the
assets of the partnership.
The answer remains the same for forcing the new partners to use their personal assets to pay the fine. On the
facts presented, neither of the people who are the partners at the time of the verdict – and the imposition of
sentence – were members of the partnership at the time of the offence. Clearly, just as Brian has done nothing wrong
on the original facts, Derek and Ethan have done nothing wrong on the additional facts set out in this Part. To ask
them to pay the fine levied against the partnership raises (and exacerbates) the same constitutional issues referred in
Part V. The new partners were not members of the partnership when the offence took place. Therefore, the case in
favour of not requiring the new partners to contribute personal assets to ensure that the partnership has at least as
much property as on the date of the offence to pay the fine is even stronger on these facts than it is when the original
partners remain involved in the business of the partnership.
2. The time of sentencing
If Bill C-45 attaches separate legal personality to a partnership as of the date of sentencing, different issues arise.
Clearly, this avoids issues of forcing partners to provide their personal assets to the partnership to make up any
difference between the assets at the date of the offence and the date of sentencing. Whatever partnership property
exists at the time of sentence would be exigible to pay the fine levied against the partnership. Thus, the assets in the
partnership as at the date of the offence would be irrelevant for the purposes of the criminal law.
Take the facts of our example. At the time of sentencing, the partnership is comprised of partners who had
nothing to do with the wrongdoing being punished. Yet, it is the assets with which those people (in our example,
Derek and Ethan) seek to make their livelihood that are being removed on account of wrongdoing that occurred
before they became involved in the partnership.
Nonetheless, in civil law, the incoming partner is not personally liable for obligations arising prior to his or her
becoming a partner. 182 Notwithstanding this fact, the value of the interest purchased by the incoming partner may be
reduced by the need to pay the debt out of partnership property. 183 Thus, it is unclear whether Derek and Ethan have
any reason to think that the assets given by them will be used to pay debts arising prior to their arrival. As Manzer
puts it:
The admission of a new partner to a partnership may result in the creation of a new partnership and the dissolution of the old one.
184
Whether this occurs will depend upon the relevant provincial legislation and the terms of the specific partnership agreement.
Thus, whether the admission of a new partner (or the retirement of a current one) will dissolve the partnership
is highly fact-dependent. Anything fact-dependent creates uncertainty. This uncertainty could in turn generate a
desire to manage the risk that it creates. The tax system already creates a significant incentive for partners to remove
profit from the partnership on an ongoing basis, because it forces partners to pay tax on earnings, even if those
earnings remain in the business, and are not used for the personal purposes of the individual partner. Therefore, the
tax system causes the individual partner to take money from the common fund of the partnership, if only to pay the
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tax on the earnings.
The provisions of Bill C-45 may increase this incentive to remove profit from the partnership. Bill C-45 creates
the possibility that the partners may have property of the business taken away to pay criminal fines resulting from
events occurring prior to when they became partners. This seems likely to increase the perceived need to engage in
activities that lower the amount of partnership property that is exigible to pay debts at any given time. The civil law
186
allows such techniques to be employed. For reasons mentioned earlier, differences between the purposes of the
181
See the discussion of the importance of “true penal consequences”, Part V(B), above.
182
See Partnership Act (Manitoba), supra note 17, s. 20(1).
183
See VanDuzer, supra note 8 at 58, Figure 2.4.
184
Supra note 8 at para. 6.480.
185
The taxpayer is the individual partner. The amount of income or loss is calculated at the level of the partnership (see Income Tax Act, supra
note 18, s. 96(1)), and then each partner must pay tax on his or her share of the income so calculated, or to deduct the loss so calculated
from the partner’s other income, if any. See Backman, supra note 18.
186
See Part VII(B), above.