HUMAN RIGHTS TRIBUNAL OF ONTARIO
B E T W E E N:
Virginia Barter
Applicant
-and-
Bata Limited (now known as Athletes World Limited) and Sonja Bata
Respondents
CASE RESOLUTION CONFERENCE DECISION
Adjudicator: Mark Hart
Indexed as: Barter v. Bata
APPEARANCES BY
Virginia Barter, Applicant ) G. James Fyshe, Counsel
Bata Limited (now known as ) Connie Reeve, Counsel
Athletes World Limited), Respondent ) )
Sonja Bata, Respondent ) Ronald J. McCloskey, Counsel;
) Sara Beheshti, Co-Counsel )
Bata Limited (Canada ) Leslie Tennenbaum, Counsel
Corporation No. 678234-5) )
1This is an Application dated July 30, 2008, under section 53(3) of Part VI of the Human Rights Code, R.S.O. 1990, c. H.19, as amended (the “Code”). The underlying complaint was filed with the Ontario Human Rights Commission on March 31, 2005.
2This Case Resolution Conference Decision addresses the following preliminary issues: (1) the disposition of this matter as against the corporate respondent Athletes World Limited (formerly Bata Limited) (“AWL”) as a result of a settlement; (2) the applicant’s request to add Bata Limited (Canada Corporation No. 678234-5) (“New Bata”) as a party respondent to this proceeding; and (3) the personal respondent Sonja Bata’s request that the Application be dismissed as against her as a result of the settlement with AWL.
3Written submissions were received from the parties in relation to these issues, and a preliminary hearing was held on December 11, 2009, to hear the parties’ oral submissions.
4Before proceeding to address the preliminary issues, I will set out the factual background to this matter. This factual background was described in my prior Interim Decision dated July 8, 2009, 2009 HRTO 995, but will be repeated here for convenience.
Factual Background
5The preliminary issues raised in this case arise in the context of a complex set of issues relating to the impact on this proceeding of: a corporate re-structuring that occurred in or about June 2007 which included the purchase of certain assets of the corporate respondent AWL by New Bata and whereby certain employees were transferred from AWL to New Bata; proceedings that were commenced by AWL under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA proceedings”); and certain Minutes of Settlement entered into by the applicant and AWL.
The Human Rights Complaint
6The applicant was hired by the respondent Bata Limited (which is now Athletes World Limited) (“Old Bata”) in September 1998 to be the executive assistant to the personal respondent Sonja Bata. In November 2003, the applicant went off work for an extended medical leave, initially receiving short-term sick benefits and then qualifying for and receiving long-term disability (“LTD”) benefits.
7In the fall of 2004, Old Bata’s LTD insurer, Sun Life, developed a graduated return to work plan that was presented to Old Bata. In response, Old Bata states that it asked Sun Life to determine if the applicant would be agreeable to return to work on a full-time basis in January 2005, with her disability benefits continued until then. However, the applicant’s physician did not approve of the applicant’s return to work on a full-time basis and instead recommended half-time work for the first three weeks.
8In the meantime, Old Bata had hired a replacement for the applicant in September 2004. Old Bata states that it was the respondents’ hope that if and when the applicant was able to return to work, there would be an alternative suitable position available to her. However, Old Bata states that there no such position existed as of late January 2005 when it understood that the applicant was able to return to work, and as a result, Old Bata terminated the applicant effective February 1, 2005.
9The applicant was offered a six-month severance package, which she declined in consultation with counsel. There appears to be no dispute that Old Bata nonetheless continued the applicant’s salary for the six-month period. Following attempts by the applicant’s counsel to negotiate a settlement, the complaint was filed with the Commission on March 31, 2005, alleging discrimination in employment because of disability and a failure to accommodate the applicant’s medical condition. The remedy sought is reinstatement to the applicant’s position with the necessary accommodation, together with compensation for all lost wages and benefits.
The Corporate Re-Structuring in June 2007
10In June 2007, New Bata was incorporated and Old Bata formally changed its name to Athletes World Limited (“AWL”). Also in June 2007, AWL sold certain assets which formed part of Old Bata’s business (the “International Services business assets”) to New Bata. As part of the sale transaction, New Bata offered employment to certain identified AWL employees without change to their compensation and benefit arrangements, working conditions or seniority. New Bata then commenced its business operations on July 1, 2007 with the employees it had hired from AWL.
11Counsel for New Bata submits that as a result of this re-structuring, as of July 1, 2007, AWL and New Bata co-existed as separate and distinct corporations, each carrying on its own respective businesses. It is submitted that New Bata did not assume any liabilities relating to the applicant or her human rights complaint, and that any responsibility for past and present employees of Old Bata remained with AWL, with the sole exception of those employees hired by New Bata as part of the asset sale transaction relating to the International Services business.
The CCAA Proceeding
12On October 31, 2007, AWL sought and obtained relief under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”) pursuant to an order of the Ontario Superior Court of Justice. As part of this proceeding, on December 20, 2007, the Court granted a further order approving a procedure for submission of any claims against AWL and also setting a “claims bar date” of January 31, 2008, following which any claims which had not been submitted in accordance with the established procedure would be barred. There appears to be no dispute that the applicant did not file a claim under the approved procedure by the claims bar date.
13As a result, in November 2008, after the applicant’s human rights complaint had been effectively transferred to this Tribunal, AWL made a request that the Application be dismissed as barred and extinguished by the terms of the Court’s order in the CCAA proceeding.
The Minutes of Settlement
14Before the Tribunal was able to consider AWL’s request that the Application be dismissed, the Tribunal was notified in February 2009 that the applicant and AWL had entered into Minutes of Settlement, whereby the applicant agreed to withdraw the Application against AWL.
15The Minutes of Settlement expressly state that such withdrawal “is without prejudice to any rights [the applicant] may have to bring or continue any complaint or application against [New Bata]”.
16As part of the settlement, the applicant also signed a Release and Indemnity whereby she released AWL and all of its “employees, officers, directors, agents… .” The Release and Indemnity also includes standard language whereby the applicant agrees “not to make any claim or take any proceeding against any person, partnership or corporation who might claim, pursuant to the provisions of any applicable statute or otherwise, contribution or indemnity from the Releasee”. Both of these terms are significant in the context of the personal respondent Sonja Bata’s continuing status in this proceeding.
The Preliminary Issues
(1) Disposition of Application as against AWL
17As indicated above, as part of the settlement, the applicant agreed to withdraw her Application as against AWL. Also as part of the settlement, the applicant acknowledges that the “Bata Limited” against whom she commenced this Application “was a corporation incorporated under the laws of Canada as corporation no. 417592-1 . . . which is the corporation that changed its name to Athlete’s World Limited”.
18As directed in the Interim Decision, the respondent AWL filed the fully executed Minutes of Settlement signed by all parties to the settlement. As a result and in accordance with the terms of the settlement, the Application is hereby withdrawn as against AWL.
(2) The Applicant’s request to add New Bata as a party respondent
19As stated in my Interim Decision, the mere fact that New Bata has the same name as the applicant’s former employer is not a sufficient basis upon which to make New Bata a party respondent to this proceeding. The “Bata Limited” that was named as the corporate respondent to this Application is not the “Bata Limited” that was created in June 2007. As stated above, the “Bata Limited” that was the only corporate respondent to the original human rights complaint – and hence to this Application – was the “Bata Limited” that was the applicant’s former employer and that subsequently changed its name to Athletes World Limited.
20As a result, the potential involvement of New Bata in this proceeding was addressed by me as a request by the applicant to add New Bata as an additional party respondent to her Application.
21The applicant relies primarily upon what is known as the “common employer doctrine” and in particular the authority of the Ontario Court of Appeal in Downtown Eatery (1993) v. Ontario, 54 O.R. (2d) 161. In that case, the Court cited with approval the decision in Sinclair v. Dover Engineering Services Ltd., 1987 CanLII 2692 (BC SC), 11 B.C.L.R. (2d) 176 (B.C.S.C.) aff’d (1988) 1988 CanLII 3358 (BC CA), 49 D.L.R.(4th) 297 (B.C.C.A.). In Sinclair, the plaintiff held himself out to the public as an employee of Dover Engineering Services Ltd. (“Dover”). He was paid by Cyril Management Limited (“Cyril”). When the plaintiff was dismissed, he sued both corporations. Wood J. held that both companies were jointly and severally liable for damages for wrongful dismissal. The Ontario Court of Appeal found the following statement by the trial judge particularly persuasive (at para. 30):
The first serious issue raised may be simply stated as one of determining with whom the plaintiff contracted for employment in January of 1973. The defendants argue that an employee can only contract for employment with a single employer and that, in this case, that single entity was obviously Dover.
I see no reason why such an inflexible notion of contract must necessarily be imposed upon the modern employment relationship. Recognizing the situation for what it was, I see no reason, in fact or in law, why both Dover and Cyril should not be regarded jointly as the plaintiff’s employer. The old-fashioned notion that no man can serve two masters fails to recognize the realities of modern-day business, accounting and tax considerations.
There is nothing sinister or irregular about the apparently complex intercorporate relationship existing between Cyril and Dover. It is, in fact, a perfectly normal arrangement frequently encountered in the business world in one form or another. Similar arrangements may result from corporate take-overs, from tax planning considerations, or from other legitimate business motives too numerous to catalogue.
As long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract. What will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings, and interlocking directorships. The essence of that relationship will be the element of common control. (emphasis added)
22In Downtown Eatery, the Ontario Court of Appeal stated (at para. 36):
. . . although an employer is entitled to establish complex corporate structures and relationships, the law should be vigilant to ensure that permissible complexity in corporate arrangements does not work an injustice in the realm of employment law. At the end of the day, [the plaintiff’s] situation is a simple, common and important one – he is a man who had a job, with a salary, benefits and duties. He was fired – wrongfully. His employer must meet its legal responsibility to compensate him for its unlawful conduct. The definition of “employer” in this simple and common scenario should be one that recognizes the complexity of modern corporate structures, but does not permit that complexity to defeat the legitimate entitlements of wrongfully dismissed employees. (emphasis added)
23The distinction, of course, between the factual scenarios dealt with in the Sinclair and Downtown Eatery cases, as contrasted with the instant case, is that those two decisions both dealt with factual situations where two or more corporate entities were in existence at the time of the plaintiff’s employment and were found to have exercised sufficient “common control” over the plaintiff’s employment to be recognized as a common employer. In the instant case, New Bata did not exist until more than two years after the termination of the applicant’s employment. Applicant’s counsel was not able to point me to any case where the common employer doctrine had been applied to impose liability on a corporation that was created after the termination of a plaintiff’s employment.
24The case that was cited to me by the respondents which comes closest to the factual scenario in the instant case is the decision of the British Columbia Supreme Court in Carmanah Pacific International Industries Corp. v. Westex Timber Mills Ltd., [2009] B.C.J. No. 1651. That case involved a claim for unpaid commissions in relation to lumber trading services provided by the plaintiff to the defendant Westex. By late 2003 or early 2004, Westex had dissolved and had liquidated its assets. A new corporation, Canasia, was then created to carry on the lumber trading business so that the former principal of Westex (“Sull”) could continue to trade. Canasia hired some of Westex’s employees and used Westex’s former premises and office equipment. The sole shareholder of Canasia was Sull’s sister, and the trial judge was satisfied that Sull’s sister did not have lumber trading experience and that Sull provided that knowledge and services to the new company.
25The trial judge considered Downtown Eatery but held that the facts in the case before him did not make Canasia a common or successor employer, primarily on the basis of the sister’s financial investment in the new corporation and her status as shareholder and director. Applicant’s counsel distinguishes the Carmanah case on this basis, and notes that it does not rule out the possibility of applying the common employer doctrine to a successor employer.
26Applicant’s counsel encourages me to look past the corporate structure of the transaction that led to the creation of New Bata, and to consider the underlying factual reality. At the time of the applicant’s employment, Old Bata (which became AWL as a result of the June 2007 re-structuring) operated in two distinct lines of business: it operated a retail shoe business and it operated an international business. The applicant was employed on the international business side. In June 2007, Old Bata effectively split its two businesses, with the retail business being retained by AWL and with the international business being sold to New Bata. While this transaction was structured as an asset sale, the signatories to the agreement for both Old Bata and New Bata were the same. The international side of the business continued to operate in the same manner, with the same employees and out of the same premises as before, and even used the same Bata name as before. To the person on the street, it would appear as if nothing had changed.
27But there were, in fact, significant changes from a corporate and legal perspective. Old Bata had decided that it wanted to sell its retail business and was positioning itself in order to effect this sale. Old Bata had signed a letter of intent with a prospective purchaser of the retail business. The driving force behind the letter of intent was the attractiveness to the prospective purchaser of certain unused capital cost allowances and a pool of tax losses from operations, which had to remain with the company that had incurred those losses. As a result, the only way for the deal to happen was for Old Bata to retain the retail business, together with the unused capital cost allowances and tax losses, and sell the international business to a newly created corporation.
28In argument, I posited that it seemed somewhat perverse that if the deal had been structured such that Old Bata retained the international business and sold the retail business to a newly created corporation, the applicant would be able to continue her claim as against Old Bata. However, it was explained to me that this was not an option, as the unused capital cost allowances and tax losses which were driving the prospective sale of the retail business needed to stay with the corporation where they had been incurred.
29At the end of the day, in my view, this case is a situation where New Bata is a successor employer rather than a common employer. I say this on the basis that New Bata was only created more than two years after the termination of the applicant’s employment as part of a legitimate business transaction, where New Bata paid substantial consideration to purchase the assets of the international business, and where the shareholders of Old Bata and New Bata, while part of a broad web of Bata companies, where nonetheless distinct corporate entities.
30I accept the submission by applicant’s counsel that the Carmanah decision does not preclude the application of the “common employer doctrine” to a successor company. I also accept the submission that the “common employer doctrine” applies in the context of legitimate corporate structures, and refer to the legitimacy of the transaction in the instant case only to differentiate it from a situation where a successor employer has been created for the purpose of defeating an applicant’s rights under the Code.
31While I acknowledge that other provincial legislation, including the Employment Standards Act, contains successor employer provisions that allow statutory liability to flow through to a successor corporation, no such provision exists under the Code. In Great Atlantic & Pacific Co. of Canada v. Ontario (Human Rights Commission), (1993) 1993 CanLII 8616 (ON CTGD), 13 O.R.(3d) 824, the Divisional Court held that in the absence of a successor employer provision in the Code, this Tribunal has no jurisdiction to add a successor employer as a party to a proceeding under the Code. While the Divisional Court recognized that it may be good public policy to add such a provision to the Code, this is a matter for the Legislature and is not within this Tribunal’s jurisdiction.
32The applicant also seeks to rely upon various provisions of the sale agreement between Old Bata and New Bata as a basis for imposing liability on New Bata. In particular, the applicant relies upon Article 2(a) of the agreement to argue that New Bata agreed to assume certain specific liabilities of Old Bata, that include “current liabilities” and “wages, benefits and vacation pay accrued to June 30, 2007”. The applicant further relies upon Article 2(b) of the agreement, by which New Bata continued to be responsible for any liability incurred to provide a shared service to Old Bata prior to the closing date of the agreement.
33There are two problems with this argument. First, I accept the respondents’ submission that “current liabilities” are distinct from contingent liabilities, and that the applicant’s claim in this proceeding is a contingent liability as it depends upon a determination by this Tribunal that the applicant’s rights under the Code have been infringed. No such determination has yet been made, nor was any such determination made at the time of the sale agreement in June 2007. Similarly, no determination had been made as of June 2007 or to date that any wages, benefits or vacation pay were accrued or owing to the applicant. In addition, there is no evidence before me to support that any potential liability to the applicant would fall within the scope of Article 2(b) as a liability to provide a shared service, which relates to such things as the use of software licences, a telephone system and head office facility management and operations.
34More significantly, however, while the sale agreement may provide in certain circumstances for Old Bata to assert a claim as against New Bata in relation to liabilities it agreed to assume, this does not mean that the applicant is entitled to rely upon the provisions of this agreement to bypass Old Bata and assert a claim through and under the agreement directly against New Bata. Rather, the applicant’s claim would still be against Old Bata, and Old Bata may in turn have a right to assert a claim over against New Bata under the terms of the sale agreement.
35The applicant had a claim under the Code as against Old Bata or AWL, which was her employer at the time she was terminated and during the relevant time when she alleges that her rights under the Code were infringed. Unfortunately, AWL was required to seek protection under the CCAA, which is not an uncommon experience for many applicants in human rights proceedings and claimants in a variety of other legal proceedings. The unfortunate result of this is that the applicant’s claim may have been barred by the Court order in the CCAA proceeding. In any event, the applicant resolved her claim as against AWL through a settlement. While the settlement preserved her right to pursue her claim as against New Bata, I have found that I have no jurisdiction to add New Bata as a party to this proceeding.
36While I have some sympathy for the position that the applicant finds herself in, her situation is not unlike the situation of many unfortunate applicants whose claims under the Code are barred as a result of the bankruptcy or insolvency of respondent companies.
(3) The claim as against Sonja Bata
37Counsel for Ms. Bata takes the position that the Application as against her is barred as a consequence of the Minutes of Settlement and Release and Indemnity signed by the applicant with AWL.
38Counsel for Ms. Bata submits that continuing the Application against her is barred by the provision in the Release and Indemnity that bars claims or proceedings against a person who may claim contribution or indemnity against AWL. Ms. Bata made a written claim for indemnification against AWL by letter from her counsel dated June 15, 2009.
39The applicant takes the position that the claim for indemnity asserted by Ms. Bata is not a valid claim, as it is barred either by the order in the CCAA proceeding or by the applicable limitation period. With regard to the order in the CCAA proceeding, I note that the applicant’s claim as against AWL may similarly have been barred, but this did not prevent the applicant from seeking and obtaining a settlement with AWL. With regard to any limitation period, it appears to me that there would be an issue as to whether or when any cause of action for indemnity arose. In this regard, I note that the evidence before me indicates that by letter dated September 4, 2008, AWL took the position that it would not be responsible for any damages awarded against Ms. Bata in the human rights proceeding, yet continued to agree to pay the defence costs of representing Ms. Bata in connection with this matter.
40In my view, it is not for me to determine whether Ms. Bata’s claim for indemnity will prevail at the end of the day. In my view, it is sufficient for me to find that there is at least some legitimate basis for the claim. I find that there is, given that Ms. Bata was employed by Old Bata (now AWL) at the time of the events at issue in this proceeding and it is not obvious to me that her claim has no validity.
41The applicant also argued that Ms. Bata is not a party to the settlement agreement and therefore cannot seek to take advantage of its terms. However, on the basis of the authorities submitted by the respondents, I am satisfied that a third party is entitled to rely upon the provisions of a release or settlement for the purpose of barring a claim: see Marble (Litigation Guardian of) v. Saskatchewan, 2003 SKQB 282.
42Finally, the applicant argued that it was not the intention of the parties that her claim as against Ms. Bata would be barred by the settlement. In considering this argument, I find that there is no basis to circumvent the parol evidence rule, whereby an agreement is to be interpreted on the basis of its provisions and a court or tribunal will not entertain ancillary evidence about the parties’ intentions. In this regard, I note that the terms of the Release and Indemnity attached to the settlement agreement include the following statement: “I acknowledge that other than the consideration set out in the Minutes of Settlement, no representation of fact or opinion, threat or inducement has been made or given by the Releasee to induce the signing of this Release”.
43The fact is that the Minutes of Settlement expressly preserve the applicant’s right to bring or continue any complaint or application against New Bata, but do not similarly preserve her right to continue this proceeding as against Ms. Bata. In the absence of any such express provision in the settlement agreement, I find that the provision in the Release whereby the applicant agrees not to make any claim or take any proceeding against a person who might claim contribution or indemnity from AWL applies to Ms. Bata and that Ms. Bata can rely upon this provision to bar the Application as against her.
44Ms. Bata also took the position that she was released from any and all claims as one of the “employees, officers, directors, agents” of AWL who were released pursuant to the Release and Indemnity signed by the applicant, as she was an employee and a former director of Old Bata and continued to be an employee of AWL for a brief period of time following the sale of the international business to New Bata. In light of my finding above, it is not necessary for me to deal with this argument.
Order
45For all of the reasons given, I make the following order:
the Application is withdrawn as against the corporate respondent Athletes World Limited in accordance with the terms of the Minutes of Settlement;
the applicant’s request to add Bata Limited (Canada Corporation No. 678234-5) as a respondent is denied; and
the Application as against the personal respondent Sonja Bata is dismissed.
Dated at Toronto, this 11th day of February, 2010.
“Signed by”
Mark Hart
Vice-chair