Ontario Labour Relations Board

[1980] OLRB Rep. June 873

0318-80-R International Beverage Dispensers' and Bartenders' Union, Local 280, Applicant, v. The New Gregory House Inc., Respondent.

BEFORE: R. D. Howe, Vice-Chairman, and Board Members E. C. Went and W. F. Rutherford.

APPEARANCES: Beth Symes, Frank Cortese and John Doyle for the applicant; L. Spodek, Moishe Nahum and Wendy Wright for the respondent.

DECISION OF THE BOARD; June 19, 1980

1. The names: "The New Gregory House, also known as The New Gregory, The Gregory Tavern, Ye Olde Gregory and New Gregory House, Inc." appearing in the style of cause of this application as the names of the respondent are amended to read: "The New Gregory House Inc."

2. This is an application under section 55 of The Labour Relations Act. The applicant contends that the respondent is the successor of 401755 Ontario Limited.

3. This matter was originally scheduled for hearing on June 4, 1980 before another panel of the Board but was adjourned at the request of a representative of the respondent. The decision of that panel of the Board (dated June 6, 1980) reads as follows:

"1. This is an application under section 55 of The Labour Relations Act.

2. The respondent appeared by representative at the hearing and requested an adjournment. The Board was advised that the principal of the respondent, Mr. Moishe Neuham, had been required to leave the country on an urgent business matter in Israel, and had arranged to be back for the Board hearing which he mistakenly believed to be June 6th. Upon learning in Israel that the hearing was June 4th, Mr. Neuham attempted to book a flight back, but was not expected to arrive before the evening of the hearing date.

3. The Board does not accept a simple error over a hearing date as grounds for an adjournment, but hereby confirms its oral ruling that in the circumstances of this case the matter be adjourned to 9:30 a.m. Tuesday, June 10, 1980, without costs. In view, however, of the absence of direct evidence of the reasons for Mr. Neuham's failure to attend on the original hearing date, this order is made without prejudice to the applicant's right to raise the issue of costs for this hearing before the panel to which this case is assigned on June 10th.

4. The Board further directs that both parties attend at the Board's offices at 9:00 a.m. on June 10th for the purpose of discussing this application with a Labour Relations Officer to be designated by the Senior Labour Relations Officer of the Board.

5. The Board further directs that the respondent file its reply in writing with the Board at the earliest possible time, but not later than 9:00 a.m. on June 10th."

4. At the commencement of the hearing before the present panel of the Board on June 10, 1980, counsel for the applicant requested that the Board order the respondent to pay its costs for the June 4th hearing. This request was not based upon the absence of direct evidence of the reasons for the failure of Mr. Moishe Nahum (referred to in the decision of June 6, 1980 as "Mr. Neuham") to attend on the original hearing date. Counsel for the applicant accepted the veracity of the reasons given at that time for Nahum's absence. Moreover, those reasons were subsequently substantiated by the testimony of Nahum who, upon becoming aware that Miss Wendy Wright, the Manager of the respondent, had misinformed him concerning the date of the hearing, paid an extra $375.00 in an attempt to obtain an airline ticket for a flight which would bring him to Toronto in time for the hearing. The basis for the requested award of costs was the failure of the respondent to comply with the direction set forth in paragraph 5 of the decision quoted above. The only explanation offered for the failure by the respondent to file a reply was that counsel for the respondent had not been retained concerning this application until 7:00 p.m. on June 9, 1980 and was unaware of the direction that a reply be filed. No explanation was provided by Nahum for his failure following his return to Canada from Israel on the evening of June 4, 1980, to arrange for a reply to be filed on behalf of the respondent in accordance with the aforementioned direction.

5. The Board's practice in relation to costs is summarized in Repac Construction & Materials Limited, [1976] OLRB Rep. Oct. 610, at paragraph 10:

"10. The request for costs also goes against the grain of this Board's previous practice. Previous decisions not only indicate that the Board has no general practice of awarding costs, but also raise the question of whether the Board has any procedural jurisdiction to make an order for costs. See Dow Jones Ltd., [1970] OLRB Rep. June 382; Joffre Lapointe & Sons Ltd., [1971] OLRB Rep. Sept. 621. On some occasions, however, the Board has made the payment of costs a condition for the granting of an adjournment. See Metropolitan Toronto Apartment Builders' Association et al, [1979] OLRB Rep. Nov. 846; R. T. Construction, [1971] OLRB Rep. June 342. From these case, it can be seen that the Board has not attempted to exercise any general power to award costs. This approach might be attributed to the fact that the Board has not been given any express power to award costs. It should be noted, however, that the general procedural jurisdiction, conferred by both section 9 1(2) of The Labour Relations Act and section 23 of The Statutory Powers Procedure Act, may be wide enough to encompass the power to award costs. Jurisdictional uncertainty, therefore, is not a particularly compelling explanation of the Board's reluctance to award costs. In our opinion, there is a much better reason for adopting a general practice of not awarding costs.

The underlying purpose of The Labour Relations Act, as set out in its preamble, is to further harmonious relations between employers and employees through the collective bargaining process. The purpose is not well served by a procedure that usually requires the identification of a winner and a loser. The application of such a procedure, moreover, would be time-consuming, distracting the Board from its primary task of facilitating collective bargaining. The awarding of costs, therefore, should not be extended beyond the situation where a party is being compensated for the expenses that would result from an adjournment to convenience another party. To extend this procedure any further would introduce an unnecessarily punitive element into the Board's procedures."

The Board is of the view that it would not be appropriate in the circumstances of the present. case to award costs against the respondent as a penalty for contravening the direction of the Board. The Act provides a specific procedure under which punitive action can be taken in appropriate cases against a party which contravenes such a direction; under section 85 of the Act, contravention of any direction made under the Act is an offence punishable by fine on summary conviction. If the applicant wishes to further pursue this matter, it is open to it to apply to the Board under section 90 of the Act for consent to institute prosecution of the respondent. (See A.A.S. Telecommunications Ltd. and Zipcall Ltd., [1976] OLRB Rep. Dec. 751, paragraphs 39-41, for a discussion of criteria considered by the Board in the exercise of its discretion under section 90(1)).

6. Nahum is the President and sole owner of the respondent company. In 1974 Nahum arranged for the respondent to purchase the tavern which is the subject of this application and the building in which that business is operated at 17-19 Adelaide Street West, Toronto. In 1977 that building was sold by the respondent to a bank but the respondent continued to operate the tavern by leasing the tavern premises from the bank. The respondent and the applicant trade union subsequently entered into a collective agreement covering all full-time and part-time male and female employees employed in the beverage departments in the tavern as tapmen, bartenders, beverage waiters, bar boys and improvers, and any other new classifications relating to the serving of alcoholic beverages.

7. On November 27, 1978 the respondent entered into an agreement (hereinafter referred to as the "Agreement") with 401755 Ontario Limited and with Gerald Baxter, Frank Bryan and Sharon Caruso under which it was agreed that 401755 Ontario Limited would immediately assume the management of the tavern. Under the terms of the Agreement, 401755 Ontario Limited agreed, inter alia, to pay a specified sum to the respondent monthly "[d]uring the management period" and to pay specified sums on April 17, 1979 and December 13, 1979. Article 5 of the Agreement provides as follows:

"The parties agree that should [401755 Ontario Limited] be late in making the monthly payment to [The New Gregory House Inc.] may at his [sic] option terminate this agreement and resume his own management of the tavern."

401755 Ontario Limited also undertook "to abide by the terms of the union agreement which binds [the respondent] in its relations with its employees". The Agreement also contained a provision by which Baxter, Bryan and Caruso personally guaranteed to the respondent the performance of the terms and conditions of the Agreement by 401755 Ontario Limited. The Agreement also gave 401755 Ontario Limited an option to purchase the goodwill and other assets (subject to certain immaterial exceptions) of the tavern on April 17, 1979.

8. After the Agreement was executed, Baxter and Bryan assumed control of the tavern. The applicant, through Mr. Frank Cortese (Secretary-Treasurer and Business Agent) and his assistant, engaged in collective bargaining with Baxter and Bryan which resulted in the signing of a new collective agreement in early May of 1979 for a term commencing on May 1, 1979 and continuing until April 30, 1980 and from year to year thereafter in the absence of notice to amend (Article 18). Although this collective agreement purported to be between the respondent and the applicant, it bears the corporate seal of 401755 Ontario Limited and is signed by Bryan. While it appears that it may also have been signed by Nahum, there is no evidence concerning the capacity, if any, in which he signed and counsel for the applicant stated that the applicant is not taking the position that Nahum was a signatory to that collective agreement.

9. Although the option to purchase was not exercised, it is common ground between the parties to this application that the respondent "sold" the tavern in 1978 to 401755 Ontario Limited and to Baxter and Bryan within the meaning of section 55 of The Labour Relations A ct. Nahum testified: "I sold the business to the numbered company [401755 Ontario Limited] in October of 1978". Baxter and Bryan assumed total direction and control of the tavern and its employees as confirmed by the evidence of the employees who testified at the hearing and by the evidence of Cortese who stated: "As far we were concerned, Baxter was the owner. He and Frank Bryan were the men in charge. They told us that they had leased the place from Moishe [Nahum]."

10. After a series of substantial defaults by the other parties to the Agreement, the respondent resumed the management and operation of the tavern. It is not clear from the evidence exactly when this resumption of control occurred since there was a period of approximately one week in mid-April of 1980 during which Nahum, Baxter and Bryan were all present in the tavern. As a result, there was great confusion concerning who was in control of the tavern -during that period. On Thursday, April 24. 1980, Nahum arranged for the locks on the tavern to be changed by a bailiff. He also collected the proceeds from the tavern's sales that day and deposited the funds on behalf of Baxter and Bryan. On the following day, Nahum, who had discovered that the employees were threatening to quit since they had not been remunerated for the previous two weeks, paid each of the employees their wages for the previous week by cheques drawn on the account of the respondent.

11. On Sunday, April 27, 1980, Nahum called a staff meeting at which he told the employees about the aforementioned substantial defaults, advised them that he was going to carry on the business, invited them to continue to work at the tavern and appointed Miss Wendy Wright as the new manager of the tavern.

12. Following this meeting, each of the employees continued to work at the tavern under the direction and control of Nahum and Wright. The tavern, which had remained open during its normal business hours throughout the period of transition of management and control, continued to operate in the same manner as it had previously operated. Thus, there is no suggestion that the character of the business was changed in any way. Furthermore, the respondent continued to deduct union dues from the wages of the employees and to remit them to the applicant in accordance with the provisions of the collective agreement.

13. The recent Board decision in Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193, contains a detailed discussion of the history, purposes and application of section 55. At paragraph 19 of that decision, the Board stated:

"In the absence of a successor rights provision any change in the legal entity constituting the employer would destroy subsisting bargaining rights, whether they flow from certification or derive from a collective agreement with the predecessor employer. Incorporation of the business, its transfer to other individuals, or a change in a partnership, would all effect a change in 'the employer' even where the plant equipment, products and work force remain substantially the same. The employees might find themselves working at the same plant, at the same machine, under the same conditions, with the same supervision, doing exactly the same job as before, but as a result of a transfer (of which they may not even be aware) their collective bargaining rights and their collective agreement would disappear. Section 55 avoids this destruction of bargaining rights and prevents a dislocation of the collective bargaining status quo by transforming the institutional rights of the union and the individual rights of the employees, (both of which are grounded upon the statute) into a form of 'vested interest' which becomes rooted in the business entity, and like a charge on property, 'runs with the business.' In Marvel Jewelry, [1975] OLRB Rep. Sept. 733 the Board described the effect of section 55 as follows:

'Section 55 recognizes that collective bargaining rights, once attained, should have some permanence. Rights created either by the Act, or under collective agreements, are not allowed to evaporate with a change of employer. To provide permanence, the obligations flowing from these rights are not confined to a particular employer, but become attached to a business. So long as the business continues to function, the obligations run with that business, regardless of any change of ownership."'

The Board has always construed the term "sale" broadly in view of the collective bargaining purpose which the concept of successorship was designed to achieve. For example, in Thorco Manufacturing (1965), 65 CLLC ¶ 16,052, the Board observed:

"According to its strict signification, the term sells is usually taken to describe a transaction involving the disposal of property by one to another in consideration of a sum paid or agreed to be paid by the recipient in money or its equivalent. As used in section [55], however, the word sells had been given a wide definition which includes lease, transfers and any other manner of disposition of the business or part thereof. In legal parlance the word lease generally denotes a specific kind of contract by which one party, called the lessor, for consideration in money or its equivalent, confers to another, called the lessee, the exclusive possession of certain property for a period of time. The word transfers, however, is obviously a term of wide signification and unless restricted by the context is capable of describing a multitude of transactions whether by sale, exchange, gift, trust or otherwise by which property, rights, or interests, etc. are transmitted absolutely, conditionally etc. or by operation of law from one person to another. We are unable to find anything in the language of the section to denote any legislative intention to restrict the meaning of the word transfers to any particular kind of transfer. Also, having regard to the particular language used and the remedial object sought to be attained by and the wide meaning which must be attributed to the preceding word transfers, it is our opinion that the generality of the words any other manner of disposition is not intended to be in any way limited by or interpreted ejusdem generis with the words leases, or transfers. In our opinion, it is more in harmony with the language of and the remedy envisaged by the enactment to interpret the words and any other manner of disposition as an omnibus or saving provision intended to include dispositions of the business or a part or parts thereof by any mode or means whatever which are not appropriately described by the preceding words which state that sells includes leases or transfers.

It is rudimentary principle applicable to the construction of remedial legislation that, consistent with the language of the enactment, the interpretation which must be adopted is the one which best serves to advance the remedy and to suppress the mischief contemplated by the legislation.

(See also section 10 of The Interpretation Act R.S.O. 160 c. 191). Having regard to this principle and to the fact that the language of the section is entirely susceptible of and in agreement with such a meaning, we are impelled to give the section a large and liberal rather than a narrow or restrictive construction."

In determining whether there has been a "sale" of a business within the meaning of section 55, the Board takes into account the totality of the transaction and places little reliance on its outward legal form (see Hughes Boat Works Incorporated, [1977] OLRB Rep. Dec. 815; application for judicial review dismissed, (1979), 1979 CanLII 1853 (ON HCJ), 26 OR. (2d) 420 (Div. Ct.)).

14. In the present case, the respondent, faced with a series of defaults by the other parties to the agreement, exercised its option to resume the management and control of the tavern under Article 5 of the Agreement. This resumption of operation and control of the tavern by the respondent is somewhat analogous to the entry into possession of the premises of a business by a mortgagee under the terms of a mortgage, a situation which has been held by the Board to constitute a sale of a business within the meaning of section 55 (see Bancorp Capital Limited, Board file 2080-79-R, dated March 17, 1980, as yet unreported). Having regard to all the evidence, the Board finds that the resumption of operation and control of the tavern by the respondent under Article 5 of the Agreement falls within the ambit of the phrase "any other manner of disposition" in section 55(l)(b) of the Act. Accordingly, we find and declare that a sale within the meaning of section 55 of the Act took place between the respondent, as successor employer, and the other parties to the agreement of November 27, 1978, as predecessor employer.

15. A sale cannot be considered to have taken place until the successor employer assumes actual control of the business (see International Beverage Dispensers' and Bartenders Union, Local 280 and 389135 Ontario Limited, operating as the Drake Hotel (De Marco-Grievance), an arbitration award dated September 5, 1979, not yet reported (Adams)). In the present case, the precise date of the sale is rather problematic because of the aforementioned period of dual management and control by the predecessor and successor. However, it is clear on the evidence that the respondent through Nahum had resumed exclusive control of the tavern by April 27, 1980 at the latest. Accordingly, the Board finds that the sale occurred on April 27, 1980 and the Board further finds and declares that as of April 27, 1980, the respondent was bound by the collective agreement referred to in paragraph 7 hereof, by virtue of section 55(2) of the Act.