Criminal Liability of Partnerships: Constitutional and Practical ...

The purpose of separate legal personality in this context is to ensure that a partnership has the ability to possess
property. Yet, it is clear that the provinces have the legislative competence to determine who may own property in
the province in the civil context. Furthermore, it is clear that the provinces have spoken on this issue in the civil
context.
However, once the criminal law applies (because a crime has been committed), the doctrine of federal
paramountcy applies because: (i) a fine is the predominate way to sentence organizations under the provisions of Bill
C-45; (ii) if the partnership could not own property, a valid federal purpose would be frustrated, because the
partnership would have no ability to pay any fine so levied; and (iii) since a valid federal purpose would be frustrated,
the provincial Partnership Acts must give way to that federal purpose. However, paramountcy only applies to the
extent of the inconsistency. Therefore, the separate legal personality of the partnership must be only for the purposes
of the criminal law.
Imbuing the “Organization” with Separate Legal Personality for Limited Purposes – Practical Considerations
This approach is most consistent with the intention of Parliament, in that it treats corporate and non-corporate
entities in the same way. Case-law supports the idea that separate legal personality need not necessarily be given for
all purposes and is instead determined by the intention of Parliament. Nonetheless, there are certain practical
concerns with this approach. The issues to be considered in this section are not meant to be an exhaustive list.
While Bill C-45 attempts to treat corporate and non-corporate entities alike, there are differences between the
corporation and the partnership that make a simple analogy difficult. These differences include:
Differences in organizational formation
A corporation must be created on purpose; a partnership can be created by accident, even against the express
wishes of the partners. This means that the “common fund” of the partnership may not even be known to the
partners, making it difficult for the state to prove which assets constitute the fund. For larger partnerships (such as
large legal or accounting practices), there is more likely to be a clear common fund for the partnership, because the
parties will clearly have intended to create a partnership. This means that issues of property ownership are more
easily resolved for larger partnerships than for smaller ones.
Avoidance of liability as a going concern
In larger partnerships, partners can take steps to reduce the asset pool that is potentially at risk to pay
partnership civil liabilities. While this may be acceptable in civil law, there is a serious question as to whether it
should be acceptable in criminal law. The criminal law is designed to reflect basic morality. Should basic morality be
thwarted by a well-informed partner?
Corporate law has certain provisions that ensure that there is at least a minimal level of assets available to pay
creditors. Partnership law does not have similar provisions, because the assets of the partners are fully exigible to pay
the civil debts of the partnership. Therefore, partnership law provides more expansive opportunities for the
manipulation of the size of the common fund than does corporate law, and therefore, may make it easier for the
partners to avoid criminal liability against the organization.
When does separate legal personality attach to the partnership?
1. At the time of the offence
If the common fund becomes depleted in the ordinary course of business, then: (i) the court cannot trace the
assets because the government had no legal interest in the assets at the time that they were disposed of; (ii) the
partners at the time of the offence cannot be called upon to make good on the loss, nor can the partners of the
partnership at the time of sentencing.
2. At the time of sentencing
This creates a further incentive for the partner to remove assets from the common fund at regular intervals. This
could raise issues when there has been a change in the composition of the partnership between the time of the
offence and the time of sentencing. Has the original partnership ceased to exist, and been replaced by a new and
separate partnership, composed of new partners? The new partnership did not exist at the time of the offence. If the
partnership does not automatically cease to exist on a change of membership, the partners could write such a
provision into the partnership agreement indicating that a new partnership is being created to end the existing one.