The co-owners disputed the building's status as a partnership asset
The Ontario Superior Court of Justice ordered the sale of a Toronto medical office building, resolving a dispute between co-owners over whether it was a partnership asset.
The plaintiffs, Earl Schwartz and Rosie Schwartz sought to characterize the building as a partnership asset and aimed to compel the defendants to sell their shares at an appraised value. The defendants, Marty Schwartz and Susan Schwartz denied the existence of a partnership and sought a sale under the Partition Act.
The court concluded that the parties were not in a partnership under the Partnerships Act but were co-owners. The court ordered the sale of the property, siding with the defendants.
The owners used the building primarily for their medical practices, except for Susan Schwartz, who never worked there. The owners shared expenses and occasionally rented out space, but the property operated at a loss. This arrangement persisted until 2006 when Marty Schwartz moved his practice out and stopped contributing to the property's expenses, leading to disputes over financial contributions.
The Superior Court analyzed whether the parties' relationship constituted a partnership. Under the Partnerships Act, a partnership requires a business carried on in common and with a view to profit. The court found no evidence of a business being carried on in common with a view to profit. The building primarily served the owners' practices and operated at a loss, undermining the plaintiffs' partnership argument.
The court noted that the plaintiffs' desire to buy out the defendants' shares at a 2021 appraised value was problematic. It ignored that the plaintiffs had been using the property since then, effectively benefiting from full occupancy while owning only 75 percent. The court also highlighted the lack of evidence showing the property was acquired as a partnership asset through pooled funds.
Ultimately, the court dismissed the plaintiffs' claim for a declaration of partnership and ordered the sale of the property. The defendants were granted the first opportunity to sell the property at its highest market value, with the plaintiffs' consent dispensed for 90 days.
