The number of limited liability partnerships has grown quickly in Ontario since the necessary changes in the Partnerships Act and By-Law 26 of the Law Society Act came into force in 1999.
A limited liability partnership has the characteristics of a general partnership, but with specific limitations on the liability of partners. Unlike in a general partnership, a partner in a limited liability partnership is not jointly liable for the debts, obligations and liabilities of the partnership arising from the negligent acts or omissions of another partner or of an employee, agent or representative of the partnership, committed in the course of partnership business.
In fact, other partners are not a proper party to such proceedings. Instead, a lawyer is only personally liable for his or her own negligence, and for the negligence of any person under his or her direct supervision or control. Of course, claimants may seek to make others in the LLP personally liable, alleging that other partners ought to have exercised some measure of supervision or control, or perhaps should have implemented procedures to avoid the negligence of others.
Clearly, these limitations on the lawyer’s personal liability are a very important benefit as lawyers look to manage the risk exposure associated with their practice. However, the limited liability partnership itself continues to be fully exposed for the acts of all of its partners, employees and agents.
If the liability does not arise out of negligence, all partners in a limited liability partnership continue to be fully exposed. So all partners remain fully liable for any non-negligent breach of firm obligations, including failure of the firm to meet its lease and payroll obligations, as well as for any wrongful acts or omissions, or misapplications of money or property placed in the custody of the firm in the ordinary course.
Even for limited liability partnerships, insurance remains an important consideration. Clients are anxious to know that there is ample insurance protection backstopping the firm’s services, appreciating the restricted access to partners’ personal assets and this is covered by our law firm’s insurance.