residual assets of the limited partnership. Section 24 of the LPA
24. In settling accounts after the dissolution of a limited partnership, the
liabilities of the limited partnership to creditors, except to limited partners on
account of their contributions and to general partners, shall be paid first, and
then, unless the partnership agreement or a subsequent agreement provides
otherwise, shall be paid in the following order:
1. To limited partners in respect of their share of the profits and other
compensation by way of income on account of their contributions.
2. To limited partners in respect of their contributions.
3. To general partners other than for capital and profits.
4. To general partners in respect of profits.
5. To general partners in respect of capital.
[ 13] As a consequence, the application judge found that there
was a gap in the LPA. He turned to the Partnerships Act, R.S.O.
1990, c. P. 5 to fill that gap, since the Partnerships Act is applicable
to all partnerships, including limited partnerships. In particular,
the application judge referred to s. 44 of the Partnerships Act that
provides that the ultimate residue, if any, of a partnership is to be
divided among the partners in the proportion in which profits are
divisible. Section 44 reads:
44. In settling accounts between the partners after a dissolution of partnership, the following rules shall, subject to any agreement, be observed:
1. Losses, including losses and deficiencies of capital, are to be paid first
out of profits, next out of capital, and lastly, if necessary, by the partners
individually in the proportion in which they were entitled to share profits, but a partner is not required to pay any loss arising from a liability
for which the partner is not liable under subsection 10( 2).
2. The assets of the firm, including the sums, if any, contributed by
the partners to make up losses or deficiencies of capital, are to be
applied in the following manner and order,
(a) in paying the debts and liabilities of the firm to persons who
are not partners therein;
(b) in paying to each partner rateably what is due from the firm
to him or her for advances as distinguished from capital;
(c) in paying to each partner rateably what is due from the firm
to him or her in respect of capital.
3. After making the payments required by paragraph 2, the ultimate
residue, if any, is to be divided among the partners in the proportion
in which profits are divisible.