ONTARIO – Partnership Agreement – The existence of a partnership is fact specific. The indicia of a partnership include contributions of money, property, effort, knowledge, skill or other assets to a common undertaking, a joint property interest in the subject-matter of the adventure, the sharing of profits and losses, a mutual right of control or management of the enterprise, the filing of income tax returns as a partnership and joint bank accounts. If sufficient indicia of a partnership are present, a partnership may exist based on an oral agreement.

ONTARIO – Pre-Judgement Interest – Under s. 130(1) of the Courts of Justice Act, a trial judge has wide discretion to allow pre-judgment interest as they see fit, including allowing interest for a period other than under s. 128.

Alyousef v. Alyousef, 2026 ONCA 78
 2026 ONCA 78 (February 6, 2026)
Ontario Court of Appeal (Roberts, Trotter and Dawe JJ.A.)

This appeal involved a challenge to the trial judge’s finding that the parties had entered into an oral partnership agreement to pursue a business opportunity and to the award of damages as an oppression remedy under s. 248 of the Ontario Business Corporations Act (OBCA). The Appellants also disputed the trial judge’s calculation of prejudgment interest and costs.

While not delivering a notice of cross-appeal, the Respondent challenged some of the trial judge’s liability and damages findings in its factum and sought leave to raise these issues at the hearing.

The Court of Appeal dismissed the appeal and the cross-appeal except for one issue related to the calculation of the Respondent’s damages. The Court required the parties to address whether income taxes should have been deducted from the amounts that the trial judge ordered be included in the corporations’ net incomes. (para. 2)

Background

The parties were brothers who agreed to jointly pursue a business opportunity to deliver milk for a large dairy distributor. Each brother had an equal one-half interest in the business (“the Milkman”) and agreed to share equally the net profits and losses after taxes that were earned by the corporation. They agreed to manage the corporation by consensus. The parties agreed to contribute their respective pre-existing businesses into the corporation. (para. 4)

Following an argument in November 2013, Anes locked his brother out of the business premises and carried on the business without him through the numbered company appellants. He also paid his wife and sons large salaries out of the business and took profits from the business for personal expenses like travel, jewelry and sports equipment. (para. 6)

The trial judge determined damages based on the expert report prepared by the inspector the court appointed under s. 161 of the OBCA (see Alyousef v. Alyousef, 2017 ONSC 2106 at para. 38). (para. 7)

The trial judge held that the Respondent was entitled to 50% of the net after tax profits and losses that the corporation earned between the inception of the business and the end of the Milkman contract (October 2013-December 2017). (para. 8)

Analysis

Oral Partnership Agreement

The Court found that the trial judge properly applied the governing principles for the formation of a partnership. The trial judge applied the meaning of section 2 of the Partnerships Act discussed in the Supreme Court of Canada’s judgement in Continental Bank Leasing Corp. v. Canada, 1998 CanLII 794 (SCC) in which the SCC held that the existence of a partnership is fact specific and held that, “The indicia of a partnership include the contribution by the parties of money, property, effort, knowledge, skill or other assets to a common undertaking, a joint property interest in the subject-matter of the adventure, the sharing of profits and losses, a mutual right of control or management of the enterprise, the filing of income tax returns as a partnership and joint bank accounts.” (para. 17)

The Court of Appeal held that when those indicia were applied, the trial judge had ample grounds to find that a partnership agreement existed between the two brothers, including that they contributed to a common undertaking of the Milkman opportunity, they shared beneficial ownership of the corporation, shared profits and losses and had a mutual right of control or management of the corporation. The fact that there was no finding that tax returns were filed as a partnership or joint bank account did not undermine the other findings that substantiated the existence of a partnership agreement. The Court dismissed this ground of appeal. (paras. 18-19)

Prejudgment Interest

The Court found no error in the trial judge’s calculation of prejudgment interest (“PJI”). Under s. 130(1) of the Courts of Justice Act, the trial judge had wide discretion to allow PJI as they saw fit, including to allow interest for a period other than under s. 128. (paras. 20-22)

The Court held that it was clear the trial judge did not make a final determination on the PJI issue but indicated in his endorsements that further submissions were required. It was also fair and reasonable for the trial judge to determine that PJI would run from the date the action commenced. The trial judge stated that they were not calculating damages for each successful claim but making an award of damages for all the successful claims by looking at the net resulting amount owed to the Respondent after deductions for the corporation’s loss in 2017. Accordingly, it would not be reasonable to calculate PJI for each year of the contract period. (paras. 23-25)

Judicial Bias and Trial Costs

The Court of Appeal found no evidence of judicial bias in the record and that the Appellants failed to meet the high threshold required to displace the presumption of judicial integrity and impartiality. (para. 29)

The Appellants sought leave to appeal the trial costs that had been awarded to the Respondent, arguing, as they did at trial, that the Respondent came to court with unclean hands. The Court of Appeal held that the trial judge did not commit an error exercising their discretion to award costs. (paras. 30-32)

Cross-Appeal

The Respondent was not permitted to rely on the first two grounds of cross-appeal because he had not raised them by way of a cross-appeal and thus had to obtain an extension of time in which to assert one. The following factors inform the Court’s consideration as to whether the justice of the case warrants the extension: “1) a timely intention to cross-appeal within the deadline prescribed by the rules; 2) the length of and explanation for the delay; 3) any prejudice by the delay to the appellants; 4) the merits of the cross-appeal.” (paras. 36-37)

The Court held that the extension request failed with respect to the first two grounds of the cross-appeal due to prejudice and lack of merit. The Appellants did not have the opportunity to respond to the cross-appeal in writing and, most importantly, there was no appeal record for the cross-appeal. The Court also found that these two grounds appeared “doomed to failure”. The Court thus held that it was not in the interests of justice at the late date to allow the Respondent to raise the two grounds of appeal. (paras. 40-43)

The third ground of cross-appeal was allowed to go ahead. The Court found that the trial judge had canvassed in detail the damages figures in their reasons and in the appeal record that was filed. In the Court’s view, the question of whether the trial judge erred in calculating damages was a discrete issue that had merit and could thus be addressed. (para. 44)

The Respondent argued that the trial judge erred by amending the damages calculation 17 months after release of judgment. The Court of Appeal did not agree, except in relation to an error in not accounting for income taxes paid and instead using net profit figures, not after-tax profit figures in respect of certain amounts of income. The amounts paid for income taxes should have been considered in determining the corporation’s net after tax profit. (paras. 45-46 and 49-52) The Court required further submissions from the parties to properly determine the amount of damages payable to the Respondent. (para. 53)

The appeal and cross-appeal were dismissed, except without respect to the one damage issue in the cross-appeal. (paras. 54-55)