The Lake Ontario District Council of the United Brotherhood of Carpenters and Joiners of America v. Spanway Building Systems Ltd., 1980 CanLII 851

[1980] OLRB Rep. June 906

2434-79-R; 2435-79-R The Lake Ontario District Council of the United Brotherhood of Carpenters and Joiners of America, Applicant, v. Spanway Building Systems Ltd.; Amorico Associates Ltd., and Spanway Buildings Limited, Respondents.

BEFORE: N. B. Satterfield, Vice-Chairman and Board Members C. G. Bourne and O. Hodges.

APPEARANCES: Douglas J. Wray and Quintin Begg for the applicant; no one appearing for the respondents Spanway Building Systems Ltd. and Amorico Associates Ltd.; R. M. Parry, J. Allan Broatch and Thomas C. Kavanagh for the respondent Spanway Buildings Limited.

DECISION OF THE BOARD; June 17, 1980

1. The name "Spanway Buildings Ltd." appearing in the style of cause of the applica­tion in File No. 2435-79-R as the name of the respondents is amended to read 'Spanway Build­ings Limited".

2. These are two applications in which the same applicant is seeking relief under the successor rights and related employer provisions of The Labour Relations Act. At the hearing into the applications, the Board directed that they be consolidated.

3. File No. 2434-79-R is an application under section 1(4) of the Act in which the appli­cant 15 seeking a declaration from the Board that the two respondents be treated as one em­ployer for purposes of the Act. On the evidence before it, the Board finds that Spanway Build­ing Systems Ltd. ("Spanway Systems") and the applicant are bound to the provincial collec­tive agreement between the Carpenters Employer Bargaining Agency and the Ontario Pro­vincial Council of the United Brotherhood of Carpenters and Joiners of America ("the provin­cial agreement") which expired April 30~ 1980. These bargaining rights apply within Board Areas No. 9, 10, 11 and 12 pertaining to the construction industry. Effective September 12, 1979, by Articles of Amendment issued pursuant to The Business Corporations Act, R.S.O. 1970, c. 53, Spanway Systems changed its name to Amorico Associates Ltd. ("Amorico"). As of the same date, Amorico changed its address to 79 Wilkinson Avenue, Oshawa, Ontario from P.O. Box 1194, Peterborough, Ontario. Since this is the only evidence before the Board as to the relationship between Spanway Systems and Amorico, the Board finds that they are not two associated or related businesses within the meaning of section 1(4) of the Act and this application is dismissed. The change of name of itself, however, did not destroy or alter the applicant's bargaining rights existing under the provincial agreement for Spanway Systems employees. In this respect the Board also takes note of section 9 of The Business Corporations Act, supra, which provides that "A change in the name of a corporation does not affect its rights or obligations."

4. File No. 2435-79-R is an application under section 55 of the Act in which the appli­cant is seeking, amongst other things, a declaration of the Board that there has been a sale of a business from Spanway Systems to Spanway Buildings Limited ("Spanway Buildings"). While the applicant alternatively sought in its application to have the Board declare under section 1(4) of the Act that the two entities be treated as constituting one employer for the purposes of the Act, if did not pursue this Branch of its application. The application is dis­missed, therefore, insofar as it pertains to section 1(4).

5. The applicant alleges that Spanway Buildings is the successor employer to Spanway Systems by reason of a sale of a business between them within the meaning of section 55 of the Act and is thereby bound to the provincial agreement, as it applies to Board Areas No. 9, 10, 11 and 12, in the same manner as Spanway Systems is bound. The findings of fact herein are de­rived from the evidence of the witnesses of the respondent Spanway Buildings pursuant to its onus under section 55(13) of the Act. No one appeared for Spanway Systems and the applicant adduced evidence only in respect of its bargaining rights under the provincial agreement.

6. Spanway Buildings was incorporated under The Business Corporations Act, supra, on August 31, 1979 and its articles of incorporation show its objects to include the object "to carry on business as a building contractor". It is owned equally by J. Allan Broatch, its pre­sident and Thomas C. Kavanagh, its secretary-treasurer, each of whom testified at the hearing. Broatch's initial investment in the corporation was in the form of certain assets which he pur­chased from Spanway Systems plus his personal vehicle, while Kavanagh's was cash. Spanway Buildings engages in two kinds of construction work. It is agent in the counties of Peter-borough, Victoria and Haliburton for Armso pre-engineered steel buildings and supplies and constructs these buildings, usually functioning as a general contractor. In addition, it acts as project manager for purchasers of conventional construction. Since incorporation and up to the time of the hearing into these applications, Spanway Buildings has completed two Armco projects, was working on a third one and was performing its first project management con­tract. The gross value of the three Armco jobs was estimated by Broatch to be $350,000 to $400,000 and the fee for the project management contract approximately $50,000.

7. Broatch had been employed by Spanway Systems before starting his venture with Kavanagh from February 1975, a month after the company started in business, until June or July 1979 when it ceased doing business in the Peterborough area. During this entire period his primary job was that of estimator and apart from the president of the firm, Broatch was the only full-time employee continuously associated with it. He had no financial interest in it beyond his employment. The president (and, according to Broatch the principal owner) of Spanway Systems, Aubrey Morrison, had other business interests which he wished to consoli­date and move to Oshawa. Spanway Systems held the franchise for Armco buildings which Spanway Buildings now holds. The last Armco building which Spanway Systems had built in the Peterborough area was in May 1978 and the last work it had performed in the area was May 1979. Around April 1979 Morrison told Broatch that he planned to wind down the busi­ness and surrender the Armco franchise and asked him if he had any interest in buying the assets. This was the beginning of three to four months of activity by Broatch which culminated with the launching in business of Spanway Buildings.

8. He contacted Armco about obtaining a franchise for the Peterborough area. In May or June he told Kavanagh of Morrison's intention to give up the Armco business and asked if Kavanagh was interested in going into business with him. Spanway Systems surren­dered the Armco franchise on July 31, 1979. This was essential before Broatch or anyone else could get an Armco franchise. They are not transferable and are exclusive for the territory. As long as Spanway Systems held the franchise, Armco would not issue another. By mid-August Broatch had received oral assurances that Armco would make him its dealer for the same territory. On August 22nd Broatch and Morrison agreed that Broatch would buy the assets of Spanway Systems and Morrison would consent to the use of the name Spanway Buildings Limited. At about the same time Kavanagh agreed to join in business with Broatch and Span-way Buildings Limited was incorporated on August 31st as previously noted. The former assets of Spanway Systems which Broatch contributed to the new company were purchased by him under a bulk purchase agreement executed September 10, 1979 for a total of $11,138, none of which was in consideration of Morrison's consent to the use of the same Spanway Buildings Limited or in respect of any other goodwill. These were all of the assets of Spanway Systems and included office furnishings and equipment. They also were all of the assets which Spanway Systems employed for its Armco business during the time Broatch worked for the firm and were all that Spanway Buildings required to begin itsArmco business and the new firm could not have started its business without the same kinds of assets. These assets, accord­ing to Broatch, were only a small part of what would be needed for a conventional construc­tion business. Spanway Buildings has since obtained a second and larger construction trailer (for use in its project management contract) and a second Suter level.

9. Sometime in September, the exact date not being in evidence, Broatch and Morri­son, who was acting for Spanway Systems, entered into a separate covenant that Morrison would not compete with Broatch within Peterborough or within an area 35 miles from the boundary of Peterborough, except for one specified building complex. No restrictions were place on Broatch.

10. Spanway Buildings occupies the same premises that Spanway Systems had used on the same monthly rental basis without a formal lease. September 1979 was the first month that Spanway Buildings paid rent. During the two prior months neither respondent rented the premises, but Broatch had use of them and periodically used the office while getting organized in business. This location did not serve as the postal address for either respondent. Both use post office boxes, but different ones and Spanway Buildings has a different telephone number, different company logo and different letterhead than Spanway Systems.

11. While Broatch and Kavanagh were organizing themselves to start up in business and before Spanway Buildings was incorporated, they actively considered alternative ways of starting out. Through Kavanagh they had the opportunity to get a franchise for another type of pre-engineered steel building, but he also admitted that Armco was their preference from the start because he viewed it as the best of the "component systems" buildings on the market. Both believed that the name Spanway, having been indentified in the Peterborough area with Armco buildings, would be an asset if they obtained that dealership. In fact Broatch said acquisition of the use of the name was a top priority. On the other hand, it is evident that they would not have used Spanway if they had not got the Armco franchise.

12. From its incorporation August 31, 1979, Spanway Buildings performed its first Armco project in September and October 1979. On this project the client was his own general contractor, on the other two Spanway Buildings was the general conractor. While there is some variation in the work performed according to the particular contract and Spanway Building's role, the nature of the work done by Spanway Buildings is identical to that which Spanway Systems did on Armco building projects. The work at various stages is of the type usually performed by carpenters, ironworkers and labourers. On the first Armco project, Spanway Buildings hired one of the persons who had formerly worked for Spanway Systems and had last worked for it in May 1979. Broatch considered him to be the best Armco building man in the area. Spanway Buildings also hired a former labourer of Spanway Systems in March 1980. Except for Broatch himself, these are the only former Spanway Systems em­ployees who have worked for Spanway Buildings.

13. Where a business, or part of it, is sold, leases, transferred or otherwise disposed of, section 55 of The Labour Relations Act provides that the purchaser is subject to the same collective bargaining obligations as was the vendor in respect of the business which changed hands between them until the Board declares otherwise. That provision operates to preserve established bargaining rights and to give them a degree of permanence. See for example the Board's decision in Marvel Jewelry Limited and Danbury Sales (1977) Ltd., [1975] OLRB Rep. Sept. 733 and 735. Before a transaction is captured by section 55 affirmative answers to two related questions must be found in the facts of the transaction. The Board's decision in Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193 at paragraph 28 puts the questions in the following manner:

..... has there been a 'sale' within the extended statutory definition of that term; and does what has been 'sold', 'transferred' or 'disposed of constitute a 'business' or 'part of a business'."

The Board's numerous decisions in section 55 applications show that deciding those two ques­tions is essentially a factual matter to be determined by the particular facts in each case as re­vealed by examining the entire transaction and not just its outward legal form. While the Board has considered a wide variety of factors, its decisions indicate the realization that the absence or presence of a particular factor is not decisive. See for example, the Board's decision in Culverhouse Foods Ltd., [1976] OLRB Rep. Nov. 691 at paragraph 16. At the same time, the Board has recognized two factors to be of general relevance, the importance of which being such that their presence supports a strong inference that there has been a section 55 sale of a business. (See Dennis Moran Limited, [1977] OLRB Rep. Apr. 237.) These are:

(a) the nature of the work performed after the transaction being sub­stantially similar to the work performed before; and

(b) the transfer of goodwill, whether specified or not in the terms of the transaction.

14. The facts in this case reveal that Spanway Buildings was formed by the partnership of Broatch, who was the only continuous employee presence in Spanway Systems other than Morrison its principal owner and Kavanagh who had no prior association with Spanway Systems. Spanway Buildings took over the same premises that Spanway Systems had occu­pied under the same terms and conditions. While there was a two-month hiatus between Spanway Systems vacating the premises and Spanway Buildings occupying them, Broatch continued to occupy and use the office on the premises and the office equipment during that time while organizing to start up Spanway Buildings. Through Broatch, the new company acquired all of the assets which the old one used for supplying and erecting Armco buildings, the same Armco dealership held by the old company and the "no competition" covenant. The assets were all that Spanway Buildings needed for its Armco business and, except for a second Suter level, it has not had to add to these assets for that part of its business. There was no trans­fer of employees from the old company to the new one nor was there any significant hiring by Spanway Buildings of former Spanway Systems employees.

15. Spanway System's surrender of the Armco dealership was obviously the triggering event in a series of events over the ensuring eight-week period at the end of which Spanway Buildings had:

(a) replaced Spanway Systems as Armco dealer in the identical terri­tory;

(b) acquired the right to use the "Spanway" name and exercised that right in incorporating Spanway Buildings;

(c) acquired all of the old company's assets, these being all that the new company needed to carry on business as the Armco dealer;

(d) acquired and exercised the right to conduct its business from the same premises as the old company had used and under the same terms;

(e) obtained the commitment that the old company would not compete with it; and

(1) started its first Armco project (within four weeks of incorporating Spanway Buildings) performing the same work using work crews composed of the same skills and hiring a former employee of the old company whom Broatch deemed to be the best skilled Armco man he had seen.

Thus the transaction has resulted in a transfer of substantial goodwill from the old company to the new one: the exclusive territorial representation of Armco, which Kavanagh considers to have the best product; the right to use the name Spanway which for four years had been iden­tified with Armco buildings and freedom from competition from the old company. There can be no doubting the importance to the new company of the consent for it to use the name Spanway in association with Armco buildings. Obtaining this consent was top priority for Broatch and its desirability was acknowledged by Kavanagh if they were to get the Armco dealership, all of this in spite of the good name of Armco itself. Furthermore, after the trans­action the new company was performing the same kind of work requiring use of the same kind of skills as was the case with the old company before the transaction. In addition, Spanway Buildings was employing the same assets and operating out of the same premises on the same terms as Spanway Systems. The only visible elements of the old company which are not pres­ent in the new one are Morrison (the owner), the telephone number, post office box mailing address and company logo and letterhead. While the exclusion of a specified building complex from the "no competition" agreement infers that the old company may have retained a part of its former business, everything else of substance in the business of Spanway Systems has been transferred to Spanway Buildings by the transaction between them; there was little else that could have been transferred and was not.

16. While Spanway Buildings has added project management of conventional con­struction projects to its business, this neither detracts from the fact that it is carrying on sub­stantially the same business in substantially the same way that Spanway Systems was before the transaction nor represents a change in the character of the business so that it is (in the words of section 55(5) of the Act) "substantially different from the predecessor employer". Moreover, the Board is not persuaded by the argument that Spanway Buildings is a new, "parallel" business to Spanway Systems which incidentally has acquired its assets. Spanway Buildings has acquired much more than assets as noted above and has done so behind the shield of the "no competition" agreement, circumstances which are quite different from those in Ralph Ford Electrical Contractors Limited, [1974] OLRB Rep. June 388, in which case the Board found that there had not been a transfer of a business, but rather that a new, parallel business had been created.

17. Having regard to all of the foregoing, the Board finds that there has been a sale of part of the business of Spanway Systems to Spanway Buildings and, therefore, a sale of a business within the meaning of section 55 of the Act has occurred. Consequently, the Board declares that Spanway Buildings Limited is bound to the provincial agreement between the Carpenters Employer Bargaining Agency and the Ontario Provincial Council of the United Brotherhood of Carpenters and Joiners of America which was in effect from September 6, 1978 to April 30, 1980, to the same extent that Spanway Building Systems Ltd. was bound and is subject to the rights, obligations and duties that flow from it. In this respect, the Board draws the attention of the parties to section 125(2) of the Act which came into force effective May 1, 1980 and which is set out below:

"Where an employer is represented by a designated or accredited employer bargaining agency, the employer shall be deemed to have recog­nized all of the affiliated bargaining agents represented by a designated or certified employee bargaining agency that bargains with the employer bargaining agency as the bargaining agents for the purpose of collective bargaining in their respective geographic jurisdictions in respect of the employees of the employer employed in the industrial, commercial or in­stitutional sector of the construction industry referred to in clause 3 of section 106, except those employees for whom a trade union other than one of the affiliated bargaining agents holds bargaining rights."