Machen v. Collins & Aikman Automotive Canada, 2010 HRTO 1541

HUMAN RIGHTS TRIBUNAL OF ONTARIO

B E T W E E N:

Judy Machen

Applicant

-and-

Collins & Aikman Automotive Canada Inc.

Respondent

DECISION

Adjudicator: Andrew M. Diamond

Date: July 21, 2010

Citation: 2010 HRTO 1541

Indexed as: Machen v. Collins & Aikman Automotive Canada

WRITTEN SUBMISSIONS BY

Judy Machen, Applicant ) On her own behalf

Collins & Aikman Automotive Canada, Respondent ) Katherine Chevalier, Counsel

Introduction

1These reasons deal with the applicant’s Request for Order During Proceedings dated March 23, 2010 seeking to change the name of the respondent from Collins & Aikman Automotive Canada Inc. (“C & A”) to CpK Interior Products Inc. (“CpK”). The reason the applicant gives for her request is: “because the company is changing its name”.

2However, while this may appear to the applicant to simply be a name change of her previous employer, the legal reality is very different. CpK purchased some of the assets of C & A as part of an attempted restructuring of C & A which was undertaken under the protection of the Companies’ Creditors Arrangement Act R.S.C. 1985, c. C-36, as amended (the “CCAA”) and pursuant to an “Approval and Vesting Order” issued by the Honourable Mr. Justice Wilton-Siegel on March 30, 2010 approving the asset purchase agreement between C & A and CpK dated March 17, 2010.

3For the reasons set out in detail below, the Request for Order During Proceedings to change the name of the respondent is denied.

Background

4This is one of those matters that finds itself at the complex intersection of Human Rights Law, in this case under the Ontario Human Rights Code R.S.O. 1990, c. H.19, as amended (the “Code”), and insolvency law. A brief overview of the chronology of the events of this case is useful to understand how it arrived at this crossroads:

• The applicant commenced employment with C & A in approximately 1988.

• On June 19, 2007, C & A sought and obtained an initial order under the CCAA. C & A continued to operate during its attempts to restructure.

• On October 22, 2008 the applicant injured her knee.

• January 20, 2009 the applicant injured her back. The applicant was on modified duties as a result of these injuries.

• The applicant’s employment was terminated on March 11, 2009. C & A has always maintained that this was done as part of its restructuring.

• March 26, 2009, the applicant’s Application against C & A was received by the Human Rights Tribunal of Ontario (the “Tribunal”).

• March 17, 2010, C & A and CpK enter into an asset purchase agreement to purchase some of the assets of C & A.

• On March 20, 2010 the monitor of C & A obtained a Vesting Order approving the sale of the assets of C & A free and clear of all but certain listed liabilities.

• March 26, 2010 the applicant made her Request for Order During Proceedings to change the name of respondent to CpK Interior Products Inc.

• March 31, 2010 the asset sale to CpK closed.

• April 9, 2010 C & A was assigned into Bankruptcy. As part of the bankruptcy proceeding, the applicant is listed as a contingent creditor of the estate of C & A.

• June 15, 2010 CCAA Discharge Order was issued by the Ontario Superior Court of Justice.

• June 29, 2010 the Tribunal received a second Application from the applicant naming CpK as respondent.

Discussion

5The chronology clearly demonstrates two things, the first is that the applicant’s employment was terminated a year prior to the asset purchase agreement and second the assets were purchased pursuant to an order of the Superior Court. CpK simply bought some of the assets of C & A; it did not buy the shares. C & A continued to exist as a corporate entity with all of its liabilities and with the cash it received from its sale of its assets until it made its assignment into bankruptcy. CpK is a separate legal entity which did not, on the purchase of the assets of C & A, assume its liabilities.

6From the chronology it would appear that, in fact, the applicant was under the terms of the Initial CCAA Order stayed from bringing the Application in the first place. This was pointed out to the Tribunal in correspondence from counsel for C & A dated April 8, 2009. Specifically the Initial Order provided in Paragraph 15 that:

NO PROCEEDING or enforcement process in any court or tribunal shall be COMMENCED or continued against or in respect of C & A except with written consent of C & A or with leave of the Court. (emphasis added)

7The ability of a third party to purchase the assets of a company as part of a restructuring which have had any liabilities removed is a necessary element of Canada’s insolvency and restructuring law. The purpose is to maximize the value for all stakeholders of the insolvent company. That value can then be shared amongst all creditors in accordance with their relative priorities and preferences as established by law.

8Subsequent to the sale of the assets C & A made an assignment into bankruptcy under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 Consolidated Statutes of Canada (“BIA”).

9The applicant has been given notice of the assignment and was listed in the statement of affairs as a contingent creditor. It is unclear what, if anything, the applicant has done to prove her claim in the bankruptcy; however, it would appear from the materials filed by counsel for the respondent, that there were insufficient proceeds to satisfy the claim of the secured creditor meaning that if the applicant had proven her claim in the bankruptcy the applicant would not have received a dividend.

10The applicant has filed a second Application which names CpK as respondent. As part of the asset purchase CpK hired a number of individuals who were employed by C & A. The applicant was not amongst them.

DECISION

11The Application must fail for two reasons. First, there is in fact no proper Application before the Tribunal. The Application was commenced in the face of a court order prohibiting any such application without the consent of the respondent or leave of the Court. As a result the Application is void ab initio and must be dismissed as outside the Tribunal’s jurisdiction given the Court’s order preventing the applicant from commencing her Application without first obtaining the requisite consent.

12Second, as explained above, this is not a case of a party changing its name. CpK is a separate legal entity, and from the information provided to the Tribunal, it did not inherit the liabilities of C & A. As a result, the Request for Order During Proceedings is denied.

13I would also note that regardless of the insolvency proceedings, the Tribunal’s case law on subsequent employers is also consistent with this approach. In Hoffmeyer v. Great Lakes Specialty Meats, 2010 HRTO 271, the Tribunal found that the applicant could not proceed against the purchaser of the business where the purchaser was an arms length company.

14Lastly, as referenced above, the Tribunal has received a separate Application naming CpK as a respondent. This Decision is without prejudice to any independent claim that the applicant may have against CpK for any actions undertaken by CpK, but not action taken by C & A prior to the purchase of the business by CpK.