Garth is the managing partner of Garth, Wayne and Alice, a partnership law firm in downtown Vancouver. The firm has three partners (Garth, Wayne and Alice), and about 10 other lawyers that work at the firm as employees.

For many years, Garth has been the “face” of the firm. He (Garth) has recruited the majority of the other lawyers working at the firm, brought in the new clients, and made the financial decisions for the firm.

Recently, Garth had run into big financial trouble following his 4^th divorce. Garth felt that he was making most of the firm’s money but had to split partnership profits with the other two partners under the terms of their Partnership Agreement. Garth therefore decided that he would do the next big law project that came along by himself out of his own home- and not involve the partnership of Garth, Wayne and Alice in the project.

A week later, Majestic Bank approached Garth about the partnership doing a big project that would pay $500,000 in legal fees. Garth told the bank management team “I can do this by myself- I will do the work and bill you privately- not on behalf of the firm”. Since the bank liked the work Garth did, they agreed to this arrangement.

Garth worked at home on weekends, and completed the work for Majestic Bank, and received a $500,000 payment, which he used to finance his divorce settlement.

Three months later, Wayne and Alice learned what Garth had done, and asked Garth to pay each of them 1/3 of the $500,000. Garth says the money is his, and he doesn’t have to share- he says the work was done by him, and has nothing to do with the law partnership.

Wayne and Alice decide to sue Garth for their share of the $500,000. Will they be successful? In answering this question, be sure to use the IRAC case analysis method.

Answer rating: 100% (QA)

Solution Issues Whether or not Garth should share 13 of the 500000 earned from the work given to him ... View the full answer