The members of a limited partnership that operated a magazine were an individual who, decades earlier, had provided all the capital before the partnership became quite profitable, and the general partner corporation, whose shareholder was the ex-wife of the limited partner. She managed the magazine. Their relationship had become acrimonious. There was no written limited partnership agreement, but their oral agreement was that profits were to be shared on a 50-50 basis, but with there being no oral agreement on what would happen on a partnership dissolution.
It was agreed before the Court of Appeal that the partnership had dissolved on the death of the limited partner. At issue was whether his estate was entitled to 50% of the net residual partnership assets, or the much smaller sum representing a return of his capital contributions.
Nordheimer JA quoted s. 24 of the Limited Partnerships Act (Ontario), which provided that “unless the partnership agreement or a subsequent agreement provides otherwise,” on a partnership dissolution the residual assets were to go to the general partner excepting for the payment to the limited partner of its contributions and share of undistributed profits. In finding that the estate was not entitled to a 50% share of the residual assets, Nordheimer JA stated (at para. 25):
A limited partner enjoys protection from the liabilities of the limited partnership, unlike a partner in an ordinary partnership. In return for that protection, the limited partner is restricted to the receipt of two things under the LPA: one is their share of the profits and the other is the return of their contribution (see LPA, s. 11). A limited partner has no broader right to participate in the upside of the limited partnership, just as the limited partner has no broader obligation to suffer or contribute in the downside.