ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CARNWATH, MACDONALD & CAMERON JJ.
APPLICATION UNDER the Judicial Review Procedure Act, R.S.O. 1990, c. J. 1
IN THE MATTER OF an Award of Arbitrator issued by a Board of Arbitration
Chaired by Elaine Newman dated August 20, 2004
B E T W E E N:
542/04
VALLEYCROFT TEXTILES INC. (MINTZ & PARTNERS LIMITED, TRUSTEE)
Applicant
- and -
UNION OF NEEDLETRADES, INDUSTRIAL & TEXTILE EMPLOYEES (UNITE), LOCAL 219
Respondent
Robert W. Little, for the Applicant
Chris G. Paliare & Caroline Jones, for the Respondent
APPLICATION UNDER the Judicial Review Procedure Act, R.S.O. 1990, c. J. 1
IN THE MATTER OF an Award of Arbitrator issued by a Board of Arbitration
Chaired by Elaine Newman dated March 31, 2004
AND B E T W E E N:
298/05
SOLIDWARE ENTERPRISES LIMITED
Applicant
(Responding Party)
- and -
UNION OF NEEDLETRADES, INDUSTRIAL & TEXTILE EMPLOYEES (UNITE), LOCAL 219
Respondent
(Moving Party)
David A. Broad & Elizabeth M. Traynor, for the Applicant (Responding Party)
Chris G. Paliare & Caroline Jones, for the Respondent (Moving Party)
HEARD at Toronto: May 8 & 9, 2006
THE COURT:
INTRODUCTION
1The above two matters were heard consecutively, pursuant to judicial order. Each of Valleycroft Textiles Inc. (Mintz & Partners Limited, Trustee) (“Valleycroft”) and Solidwear Enterprises Limited (“Solidwear”) seek judicial review of two separate Awards of Arbitrator affecting its standing before the Board of Arbitration, chaired by Elaine Newman.
2Briefly put, the Arbitrator refused to grant party standing to Solidwear in a grievance filed by UNITE against Valleycroft. Subsequently, Valleycroft sought standing in the arbitration and was refused. The Arbitrator found it had lost its rights to argue lack of jurisdiction in the Arbitrator to hear the matter, by failing to appear at the first hearing where Solidwear sought party standing.
3In addition, UNITE subsequently brought a motion before Chapnik J. seeking to quash Solidwear’s application for judicial review, alleging delay. Chapnik J. denied the motion and ordered the two separate judicial reviews to be heard together or consecutively as the panel would decide.
4As a preliminary matter in the Solidwear application for judicial review, UNITE now moves by way of preliminary motion for an order setting aside and/or varying the decision of Chapnik J.
5These reasons address:
a) the preliminary motion to set aside and/or vary the order of Chapnik J.;
b) the merits of Solidwear’s application for judicial review; and,
c) the merits of Valleycroft’s application for judicial review.
BACKGROUND
6Valleycroft operated a textile manufacturing plant located in Cambridge, Ontario.
7Valleycroft filed an Assignment into Bankruptcy on June 28, 2001. Mintz & Partners Limited (“Mintz”) was named as Trustee of Valleycroft. Mintz was appointed by Solidwear to act as Receiver and Manager of Valleycroft. Mintz brings Valleycroft’s application for judicial review in its capacity as Trustee and on behalf of Valleycroft’s Estate. Arthur Lee was the President and majority shareholder of Valleycroft. Mr. Lee was also the Director, President and sole shareholder of Solidwear.
8With the exception of salaried employees, all other Valleycroft employees were represented by the respondent, Union of Needletrades, Industrial and Textile Employees (UNITE), Local 219 (“UNITE”). The terms and conditions of the employees’ employment were governed by the Collective Agreement between Valleycroft and UNITE in force at the time of the Assignment in Bankruptcy (“the Collective Agreement”).
9Valleycroft assigned into bankruptcy on June 28, 2001. On that date, Mintz attended at the plant to make arrangements in respect of the bankruptcy and to meet with the UNITE representatives and the employees. Both UNITE and the employees were informed that the employment of all Valleycroft employees terminated upon the Assignment in Bankrtupcy.
10Mintz informed both UNITE and the employees that they had the right to file proofs of claim with Mintz if they believed Valleycroft owed them money other than wages and vacation pay. All employees were paid their wages up to and including June 28, 2001. All vacation pay outstanding was subsequently paid for personally by Mr. Arthur Lee, President of Solidwear.
11Upon filing the Assignment into Bankruptcy, all actions as against the bankrupt Valleycroft were stayed by operation of s. 69.3 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 69.3. In general terms, the section provides that no creditor of a bankrupt has any remedy against a bankrupt nor can the creditor commence or continue any action or other proceeding for the recovery of a claim provable in bankruptcy, until the Trustee has been discharged.
12On December 20, 2001, UNITE filed a grievance on behalf of the bargaining unit employees of Valleycroft claiming severance and termination pay. The grievance was filed almost five months after the date of the bankruptcy, June 28, 2001.
13The grievance procedure and time lines are set out in Article VIII to the Collective Agreement:
8:01 The grievance procedure within Article VIII is among the most important matters in the successful Administration of this agreement. The Company and the Union therefore agree that the grievance procedures set forth in sub-sections 8.05 and/or 8.12 shall be utilized by the griever for the prompt disposition, decision and final settlement of a grievance arising in respect of the interpretation or alleged violation of this agreement, and the specifically designated grievance procedure shall be strictly followed.
Wherever the term ‘grievance procedure’ is used in this agreement, it shall be considered as including the Arbitration Procedure.
8:04 Failure to submit a written grievance in accordance with the requirements of the applicable sub-section 8.05 or 8.11 shall be deemed a complete waiver and abandonment of the grievance by the griever …
8:08 The time limits and other requirements set out in the Article VIII are mandatory and not merely directory, and no matter may be submitted to arbitration which has not properly been carried through all specified previous steps of the grievance procedure within the time limits specified at each step. The provisions of this clause shall not be considered to have been waived by the parties or either of them unless they expressly provide a waiver thereof in writing signed by both parties, whereupon such waiver shall take effect.
8:11 A Union policy grievance of a Company grievance may be submitted to the Company or the Union, as the case may be, in writing within ten (10) working days from the time the circumstances upon which the grievance is based were known or could have been known by the grieving party. Arrangements for a meeting between the Company and the Union shall be made within five (5) working days of the presentation of the written grievance, and the meeting shall take place within the framework of Step No. 2 of clause 8:05 above. The Company or the Union, as the case may be, shall give its written decision within three (3) working days of such meeting. If the decision is unsatisfactory to the grieving party, the grievance may be submitted to arbitration within thirty (30) calendar days of the delivery of such written decision and the arbitration sections of this agreement shall be followed …
14UNITE also filed a claim under the ESA for severance and termination pay in the amount of $327,790.50. The Employment Standards Branch confirmed by letter January 9, 2002 that the employees to which a Collective Agreement applied were not entitled to file a complaint under the ESA. The Employment Standards Branch also confirmed that there appeared to be no assets of Valleycroft and no further steps would be taken in respect of claims for termination and severance pay.
15The salaried employees of Valleycroft filed claims under the ESA for termination and severance pay. They claimed that Valleycroft and another company, Solidwear, were related employers, as defined in the ESA, and that Solidwear was liable to pay the termination and severance pay owing to the salaried employees. The Employment Standards Branch agreed and issued an Order to Pay against Solidwear in July, 2002. Solidwear appealed the Order to Pay, but subsequently entered into a settlement with the salaried employees before a decision on the appeal.
16On March 10, 2003, UNITE contacted the Employment Standards Branch of the Ministry of Labour and asked for its December 21, 2001 claim to be re-opened and an investigation commenced. It did so because UNITE realized that the Employment Standards Branch had concluded that Solidwear and Valleycroft were related employers under the ESA.
17Solidwear responded to the Employment Standards Branch on March 21, 2003, objecting to an investigation on a number of grounds. Solidwear noted that a grievance had been filed, but that all time limits for taking steps on the grievance had long since expired.
18The Union responded and stated that its failure to pursue the grievance was because of the stay which applied by operation of s. 69 of the Bankruptcy and Insolvency Act.
19The Employment Standards Branch concluded that the matter ought to have been pursued by way of a grievance and declined to take any further steps regarding the ESA claim.
20By letter dated August 27, 2003, UNITE wrote Mintz and stated it intended to proceed with the December, 2001 grievance. Mintz informed UNITE that the grievance against Valleycroft was subject to a stay of proceedings under s. 69.3 of the Bankruptcy and Insolvency Act.
21UNITE wrote to the Ministry of Labour requesting the appointment of an Arbitrator, pursuant to s. 49 of the Labour Relations Act, 1995, S.O. 1995, c. 1, on September 29, 2003.
22After hearing submissions from both UNITE and Mintz, on October 10, 2003, the Minister of Labour decided to appoint an Arbitrator in accordance with s. 49 of the Labour Relations Act.
23Mintz wrote to UNITE and the Arbitrator providing notice that it remained of the view that the grievance proceedings were stayed by operation of s. 69.3 of the Bankruptcy and Insolvency Act and it would not attend the hearing of the grievance.
THE FIRST PRELIMINARY AWARD
24The arbitration hearing commenced on February 6, 2004. Mintz, in its capacity as Trustee for Valleycroft, did not appear.
25UNITE’s position was and remains that Solidwear was a related employer to Valleycroft and was jointly and severally liable for any severance and termination payment owed by the bankrupt Valleycroft. UNITE wanted a decision from the Arbitrator that Valleycroft was liable for termination and severance payments and a calculation of the amounts alleged to be owing. Pursuant to the ESA, the Arbitrator would then refer to the Ontario Labour Relations Board the question of whether Solidwear was a related employer.
26Solidwear appeared at the first day of hearing to seek full party status before the Arbitrator. Solidwear asserted that, as a potential related employer under the ESA, natural justice entitled it to raise all defences to the grievance that Valleycroft had available under the Collective Agreement. In particular, Solidwear sought the right to raise a preliminary objection based on the timeliness of the grievance.
27The Arbitrator issued her decision on March 31, 2004. She found that Solidwear, as a potential related employer, enjoyed only limited participation rights in the arbitration process. The Arbitrator concluded that as an intervenor, Solidwear had no right to raise defences that only Valleycroft could make under the Collective Agreement, including the timeliness objection.
28As a result of the Arbitrator’s Award, Mintz decided to participate at the hearing on behalf of Valleycroft. UNITE was advised in advance of the hearing that Mintz would attend the second day of hearing and that it would argue that the stay precluded the grievance from proceeding; alternatively, it would argue that the grievance was untimely and inarbitrable.
THE SECOND PRELIMINARY AWARD
29The hearing before the Arbitrator reconvened on July 16, 2004. Mintz attended and raised objections to the Arbitrator’s jurisdiction. It did not pursue the statutory stay argument, but relied instead on its alternate position that the grievance and the referral to arbitration were untimely.
30UNITE challenged the ability of Mintz to raise the timeliness objections to jurisdiction since Mintz did not attend the first day of hearing.
31The Arbitrator issued her second preliminary Award on August 20, 2004. She held that a party may not assert a preliminary objection after opening statements are completed. Any objections must be raised either prior to, or during, the opening of the arbitration hearing. The Arbitrator dismissed Mintz’s objection that the Arbitrator lacked jurisdiction to hear the grievance because of the Union’s failure to comply with the time limitations in the Collective Agreement.
THE MOTION TO SET ASIDE OR VARY THE ORDER OF CHAPNIK J.
32As noted above, on March 31, 2004, the Arbitrator released her first preliminary Award denying the request of Solidwear for an order that it had standing as a substitute for the employer under the Collective Agreement.
33On August 29, 2005, seventeen months after the Solidwear Award was released, Solidwear served UNITE with its notice of application for judicial review.
34On November 16, 2005, approximately four months after the filing of the notice of application for judicial review and almost twenty months after the Solidwear Award was issued, Solidwear served its completed application record and factum. Solidwear filed its certificate of perfection on January 10, 2006, more than twenty-one months after the Solidwear Award was released.
35UNITE submits there is no reasonable explanation for Solidwear’s delay in commencing and then perfecting its application for judicial review, a delay of more than twenty-one months after the Solidwear Award was released. In response, Solidwear asserts that it decided not to pursue a judicial review for “business reasons”. It also claims that it changed its mind for strategic reasons relating to the application for judicial review brought by Valleycroft.
36UNITE further submits that its members have suffered presumed and actual prejudice as a result of Solidwear’s delay. UNITE asserts that Chapnik J. erred in considering and applying the factors relevant to delay, particularly in failing to consider the extraordinary length of the delay and the inadequate explanation provided for the delay.
JUSTICE CHAPNIK’S ENDORSEMENT
37Chapnik J. first noted that no statutory limitation period exists within which an application for judicial review must be issued; nevertheless, she also noted that undue delay may constitute a reason for the Court to decline to exercise its discretion to grant a remedy.
38Chapnik J. then turned to identify the three tests to be applied as set out in Gigliotti v. Conseil d’Administration du Collège des Grands Lacs (2005), 76 O.R. (3d) 561 (Div. Ct.):
The length of the delay, whether there is a reasonable explanation for the delay, and whether any prejudice has been suffered by the respondent as a result of the delay.
39Chapnik J. then acknowledged that in a labour relations context, due to the importance of resolving labour disputes in an expeditious manner, the principles in Gigliotti have resulted in dismissal of applications for judicial review where there has been a delay of more than six months in commencing the application and twelve months in perfecting it.
40In considering the length of delay, Chapnik J. noted that Solidwear admitted the delay was substantial.
41Chapnik J. then set out Solidwear’s explanation for the delay and concluded by noting that the Divisional Court exercised its discretion to hear an application for judicial review of a labour relations Award after a delay of fifteen months without reference to any reason for the delay, citing International Union of Elevator Constructors, Local 50 v. Otis Canada Inc., [2000] O.J. No. 1140 (Div. Ct.). She also referred to Ascott v. Ontario (Ministry of Finance), [2002] O. J. No. 4213 (Div. Ct.).
42In considering the issue of prejudice, Chapnik J. found there to be no subsisting employment relationship for four-and-a-half years. The issue in Solidwear’s application was not related to working conditions, seniority or collective bargaining. She thus found that the rationale for imposing rigorous standards for timeliness did not apply to the relationship between Solidwear and UNITE. Moreover, she found that Valleycroft’s application for judicial review was to be heard in any event prior to the resumption of the arbitration hearing. She found no actual prejudice to the Union as a result of the delay.
43She concluded by balancing the various factors and found that the prejudice incurred was not such that a dismissal of the application was warranted.
DISPOSITION OF THE MOTION
44We all agree the motion to set aside and/or vary the order of Chapnik J. must be denied. Appellate review of the exercise of judicial discretion is based on whether the judge at first instance has given sufficient weight to all relevant considerations. We find Chapnik J. to have applied the correct test as set out in Gigliotti. Her balancing of the three factors, particularly the lack of prejudice to UNITE, led her to conclude that a dismissal of the application for judicial review was not warranted. This was a conclusion to which she was entitled to come on the facts before her.
45The motion to set aside and/or vary Chapnik J.’s order is denied.
SOLIDWEAR’S APPLICATION FOR JUDICIAL REVIEW
46Solidwear obtained limited standing because it may turn out to be a related party in proceedings under the Employment Standards Act (“ESA”) which have not yet started. The Arbitrator denied party standing for the following reasons.
47First, she found no presumption of relatedness. Solidwear is a different legal entity from Valleycroft. Only the Ontario Labour Relations Board (“OLRB”) has the authority to determine whether it is related and this has not yet been decided.
48Second, the ESA does not provide for deemed substitution, if a finding of relatedness is made. The separate and distinct nature of Solidwear and Valleycroft is fundamental. The ESA stipulates in s. 12(1) that where a finding of relatedness is made under that Act, the entities “shall be treated as one employer for the purposes of the Act”. Section 12(2) provides that where treated as one employer, the corporation shall be jointly and severally liable for any contravention of the Act and the regulations. There is no deemed employer or substitution provision. There is no evidence of legislative intent that an entity found to be a related employer has a valid claim to the substituted status of a party under the collective agreement.
49Third, there is no privity of contract between UNITE and Solidwear. It cannot stand as a substitute for Valleycroft.
50Finally, the requirements of natural justice ought not to prevail over a clear statutory scheme. Solidwear pressed the timeliness argument. However, access to a timeliness defence dissolved on the bankruptcy of the employer, Valleycroft. The application of natural justice does not apply so far as to create substitution rights where the specific statute that creates the liabilities of relatedness has omitted those rights.
51The defence of timeliness is not available to Solidwear but the defence on the merits of the severance pay and termination pay would be available.
STANDARD OF REVIEW
52In order to determine the standard of review one must perform a pragmatic and functional analysis as outlined in Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, paras. 27-38, Voice Construction Ltd. v. Construction and General Workers Union, Local 92, [2004] 1 S.C.R. 621, paras. 22-30, Lakeport Beverages v. Teamsters Local Union 938 (2005), 77 O.R. (3d) 543, paras. 27-31, and Ontario Public Service Employees Union v. Seneca College of Applied Arts and Technology et al., Ontario Court of Appeal, May 4, 2006, Docket C43274, at paras. 28, 30, 31. The pragmatic and functional analysis centres on four factors:
Presence or absence of a privative clause or a statutory right of appeal.
Purposes of the legislation and the provision in particular.
Nature of the question: i.e. is it a question of law, of fact or of mixed fact and law, and the precedential value of the question.
The expertise of the tribunal compared to the court on the question in issue.
53Historically, the standard of review for an Arbitrator’s decision has been patent unreasonableness. Following the Supreme Court’s decision in Voice Construction, above, there was reason to believe that the standard may have changed to reasonableness simpliciter. Any such suggestion in Ontario has been foreclosed by Laskin J.A.’s judgment in Lakeport v. OPSEU v. Seneca:
Overall, in my opinion, all four contextual factors weigh heavily in favour of deference. They indicate that the Legislature intended the Board of Arbitration to decide whether these parties, through their collective agreement, gave it the authority to award aggravated and punitive damages. Therefore, the courts should review the Board’s decision against a standard of patent unreasonableness.
OPSEU v. Seneca, [para. 69]
We conclude the standard of review for an Arbitrator’s decision, absent a denial of natural justice or procedural fairness, is patent unreasonableness.
54We view the Arbitrator’s decision in the Solidwear matter to be one in which her expertise was engaged. She was required to construe the Collective Agreement and the ESA, and to interpret and apply the relevant statutory and contractual principles within the framework of labour relations. The question regarding the participation right of Solidwear at the arbitration hearing fell entirely within her area of expertise.
55We find no denial of natural justice nor of procedural fairness. Solidwear was given notice of the arbitration hearing, attended both days, and was granted the right to intervene and participate in the hearing. We agree with the Arbitrator’s statement at p. 19 of the First Preliminary Award:
But, application of natural justice does not, in my view, take Solidwear as far as it seeks to go. It does not apply so far as to create substitution rights where the specific statute that creates the liability of relatedness, has omitted those rights.
56The Arbitrator’s decision was not patently unreasonable. Solidwear’s application for judicial review is denied.
VALLEYCROFT’S APPLICATION FOR JUDICIAL REVIEW
57Valleycroft became bankrupt on June 28, 2001. The Collective Agreement required a grievance be filed by July 9, 2001. It was filed December 20, 2001. The appointment of an Arbitrator was required to be made within fifty-three days after UNITE became aware of the bankruptcy. The Arbitrator was not appointed until October 10, 2003, over two years past the time for such an appointment.
58At first blush, the application for judicial review by Valleycroft could be viewed as premature. After all, the two preliminary hearings have dealt only with the ability of Solidwear to stand in the shoes of Valleycroft and the latter’s ability to argue the bankruptcy stay issue and the alleged failure of UNITE to observe the time limits in the Collective Agreement. Normally, judicial review can only be invoked after completion of the Tribunal’s function. In this matter, the arbitration proper has not yet started.
59However, the Arbitrator herself has stated in her reasons that no consideration will be given to the time limits in the Collective Agreement when the hearing reconvenes. At p. 5 of her reasons, she is reported:
If the Trustee’s position is correct, and jurisdiction can not be waived under any circumstances, at what point may the board of arbitration consider jurisdiction to be properly assumed or conferred, and itself properly seized of a dispute? Perhaps an obligation would then fall upon the board itself to make inquiry into the timeliness of the grievance, and other elements of jurisdiction. This, in my view, is a proposition that is consistent with the Trustee’s position, and is untenable.
60We have two observations. We do not understand the Trustee to have argued that “jurisdiction can not be waived under any circumstances”. We, rather, understand the Trustee wanted an opportunity to argue that the time limits in the Collective Agreement could not be waived by either party unless and until both parties had signed in writing to that effect, pursuant to s. 8:08 of the Collective Agreement.
61Moreover, the Arbitrator considers and then rejects the possibility that an obligation would then fall on her “to make inquiry into the timeliness of the grievance, and other elements of jurisdiction”. We understand this to mean that, on resumption of the hearing, her mind would be closed to the application of s. 8:08 of the Collective Agreement. Thus, it appears she may be “alive” to the contractual provisions of s. 8:08, but the provisions will not be “alive” to her. Having taken such a position, prematurity does not come into play. The outcome of the issue the Trustee wants to argue is foreordained.
62Indeed, other than noting the existence of s. 8:08 of the Collective Agreement, the Arbitrator makes no further reference to it, other than to neutralize it by finding the Trustee to have waived its provisions.
63Where the parties have turned their minds to what shall constitute waiver of time limits in a Collective Agreement, we find it patently unreasonable for an Arbitrator to ignore their agreement and to conclude that waiver has occurred in some other fashion.
64Moreover, the decision of the Arbitrator cannot withstand the scrutiny of due process and procedural fairness. Given the prior result in the Solidwear matter, the effect of the Arbitrator’s decision in Valleycroft forecloses any argument based on s. 8:08 in subsequent proceedings.
65In considering the Arbitrator’s concern “for the directional change of the arbitration process, caused by the failure to raise objection at an early point in the process”, it is instructive to analyze just where the process sat at the time of the Valleycroft participation.
66The hearing had opened with Solidwear seeking party standing. That issue occupied the day. When the Solidwear decision issued on March 31, 2004, Mintz decided to appear at the resumption of the hearing to argue timeliness. Mintz notified UNITE to this effect eleven days before the July 16, 2004 resumption of the hearing. At this point, no evidence had been called before the Arbitrator on the questions she had to decide – liability for payment of severance and termination monies. For the Arbitrator to conclude that the decision of the Trustee not to attend “caused this proceeding to take a direction that it would otherwise not have taken” misdescribes what actually took place. The Arbitrator continues in her reasons – “the arbitration proceeded down the path that the Trustee’s absence generated”. The only step on the path was the denial to Solidwear of party standing.
67This refusal to hear argument from Valleycroft on the timeliness of UNITE’s actions under the Collective Agreement we find to be a denial of natural justice and procedural fairness to Valleycroft. No one suggests that Valleycroft’s arguments on timeliness will necessarily prevail. Procedural fairness requires that the arguments be permitted to be made.
68Valleycroft’s application for judicial review is granted. The matter is remitted to a Board of Arbitration differently constituted. On the resumption of the hearing, Valleycroft, through its trustee Mintz, may argue lack of jurisdiction based on the alleged failure of UNITE to comply with the time limits in the Collective Agreement.
69Costs may be the subject of brief written submissions to be filed within thirty days of issue of these reasons.
CARNWATH J.
MACDONALD J.
CAMERON J.
Released: 200606
COURT FILE NO.: 542/04 & 298/05
DATE: 20060626
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CARNWATH, MACDONALD & CAMERON JJ.
B E T W E E N:
542/04
VALLEYCROFT TEXTILES INC. (MINTZ & PARTNERS LIMITED, TRUSTEE)
Applicant
- and -
UNION OF NEEDLETRADES, INDUSTRIAL & TEXTILE EMPLOYEES (UNITE), LOCAL 219
Respondent
AND B E T W E E N
298/05
SOLIDWARE ENTERPRISES LIMITED
Applicant
(Responding Party)
- and -
UNION OF NEEDLETRADES, INDUSTRIAL & TEXTILE EMPLOYEES (UNITE), LOCAL 219
Respondent
(Moving Party)
JUDGMENT
THE COURT
Released: 20060626