[1980] OLRB Rep. March 366

0486-79-R; 0491-79-R International Union of Operating Engineers, Local 793, Applicant, v. The Tatham Company Limited, Magnus Construction Limited, Respondents, v. Magnus Engineering and Construction Limited, Intervener.

BEFORE: R.O. MacDowell, Vice-Chairman and Board Members C.A. Ballentine and F.W. Murray

APPEARANCES: S.B.D. Wahl and P. Gauthier for the applicant; George K. Murray for the respondents; S. C. Bernardo for the intervener.

DECISION OF R. O. MACDOWELL, VICE CHAIRMAN AND BOARD MEMBER C. A. BALLENTINE; March 13, 1980

1These are two applications under sections 55 and 1(4) of The Labour Relations Act. The applicant trade union contends that there has been a "transfer of a business" within the meaning of section 55 from The Tatham Company Limited to Magnus Engineering and Construction Limited ("Magnus"). Alternatively, it is argued that the two companies are engaged in related activities, under common control and direction, and that the Board should, pursuant to section 1(4), consider them one employer for the purposes of the Act.

I

2J.G. and W.C. Tatham have been engaged in business in and around the City of Belleville for more than thirty years. The Tatham Company Limited is their creation, and until recently the company has had two distinct functions: it was used as a holding company for certain undeveloped land that the two brothers had purchased for investment purposes; and, it was the vehicle through which they carried on an active construction business. Originally the company was engaged in residential and commercial building, but by the 1970's the building facet of the business had been phased out and the company continued to carry on business as an excavating, gravel, sewer and water-main (and occasionally road building) contractor. It is this aspect of the Tatham company's business which is most relevant to the present applications; and in view of the issues raised herein, it is interesting to note that the Tatham company became engaged in excavating and grading work after acquiring J.D. Van Alstine Construction — an excavating firm in the Trenton area. William Tatham testified that he and his brother had bought J.D. Van Alstine Construction (i.e., the corporate vehicle) in order to obtain that company's equipment — which Mr. Tatham described as a crucial requirement for this kind of business. Suitable equipment could have been leased, but by owning its own equipment and employing a competent mechanic, the company could minimize "down time" which resulted in idle employees and lost business. Tatham was unwilling to rely upon the repair services supplied by equipment leasing companies. It was more advantageous, from a business point of view, to invest in the necessary equipment.

3Over the years, the Tatham company performed a variety of contracts involving underground services, sub-division and site servicing, excavating and grading. The bulk of the work was obtained by public tender, through advertisements in the local press and the Daily Commercial News. The value of the contracts usually varied from $50,000.00 to half-a-million dollars, however, the company was not very competitive on the smaller jobs since there was active competition from non-union subcontractors. The work force varied with the level of construction activity, ranging from as low as six or seven employees to as high as forty employees when the company was busy.

4Mr. Tatham testified that neither the company name nor the "goodwill" were very important. Business was obtained not by being well known, but by being the low bidder in the competitive tendering process. Personal contacts were occasionally helpful but, for the most part, work was allocated in accordance with the price bid. And obtaining the contract was only the beginning. As Mr. Tatham pointedly remarked: "Any fool can get a contract, and lose his shirt . . ." The company had to meet the price competition, but it also had to operate efficiently and keep its own costs below the contract price. Business success and profitability depended upon an efficient management team which, in recent years, consisted of: Douglas Davidson and William Tatham, who prepared the bids and estimates; Donald Smith, the Secretary Treasurer who kept the company's financial affairs in order; and Gordon Ferrill, who was The Tatham Company's site superintendent. Smith and Ferrill had been employees for over twenty years, as had Gordon Bain, the company's mechanic, whose responsibility was to keep the equipment operating.

5Originally, the Tatham company was entirely owned and managed by the Brothers Tatham. The two brothers retained control through their ownership of virtually all of the outstanding stock. Over the years, however, as the brothers got older, and some of the company's key employees became more trusted and experienced, these employees began to assume a more prominent role in the management of the company. Donald I. Smith had joined the company after leaving high school in 1956 and eventually became Secretary Treasurer and a director. Douglas Davidson — a professional engineer, and William Tatham's son-in-law — joined the company in 1969 and eventually rose to the position of vice-president, after working for a time as field superintendent. He later became involved in estimating the project costs and preparing bids, and by 1977 he was sufficiently skilled, and trusted, that either he or William Tatham were signing the bids. Davidson also owns four-hundred shares of the company's stock.

6J. G. Tatham retired in 1973. After his brother's retirement William Tatham retained ultimate authority in the company; but he was content to delegate this authority to others as advancing years and illness made it more difficult for him to participate actively in the company's day-to-day activities. Mr. Smith testified that by 1977 Mr. Tatham was only coming in to work half days.

7Smith, Davidson, Bain and Ferrill are the owners, officers, directors and management of Magnus, the alleged successor of the Tatham company. Smith is the new company's Secretary Treasurer. Ferrill is its Vice-President and Site Superintendent. Bain is a Vice-President and also the new company's Equipment Mechanic. Davidson is its President and Estimator. We are satisfied that the jobs performed by these four individuals, on behalf of Magnus, are identical to those which they performed when they were employees of the Tatham company. The only difference (and it is an important one, for their point of view) is that they are now working for their own company rather than someone else's.

8In 1976-1977 the Tatham company suffered substantial financial losses. In the summer of 1977 its bonding company became concerned about the low level of the Tatham company's working capital and, in October of 1977, following receipt of the Tatham company's annual financial statement for fiscal 1977, the bonding company indicated that it would not post the required bonds to support the company's tenders unless there was a further infusion of working capital. As a result, the company was no longer able to bid on new projects. Attempts were made to secure bonding elsewhere, but these proved unsuccessful. The company completed ongoing projects and made some minor effort to bid on small, "non bonded" projects under fifty-thousand dollars in value; but this was not a viable alternative since, as has already been pointed out, the company was not competitive in this market. William Tatham concluded that he must either wind up the company and dispose of its assets or go bankrupt. He was unwilling, at his age, to deplete his savings and put further capital into the business.

9By November, 1977 Tatham had decided that he no longer wished to carry on in the construction business, and he directed Smith and Davidson to paint the equipment and sell it for cash, so that he could "wind down" the business and pay off any outstanding accounts payable. It was anticipated that the equipment could be sold at auction (either piecemeal or in block) and sufficient cash could be realized to settle outstanding obligations. Bain's employment was terminated at the end of December. Ferrill was paid until the end of February, but had little to do after December. Davidson, likewise, was paid until the end of February. Smith was paid until the end of March, as he was actively engaged in settling the financial affairs of the company. Indeed, Smith remained a director and officer of the Tatham company until August 15th, 1979 (i.e., after the filing of the present application); however, his involvement with the ongoing affairs of the company was sporadic, and restricted to periodic updating of records, reconciling books and paying out monies owing as a result of past activities. The company had no new business activities or revenue after December, 1977.

10Long before October, 1977 the four key employees of the Tatham company had discussed the possibility of setting up their own business. They felt that they were contributing considerably to the company's success, but were still on salary and did not share in the profits. They had even, on one occasion, put money into the company, receiving, in return, preference shares which gave them little control over the organization's economic destiny. The idea of striking out on their own was not a new one, but the idea became a necessity when, in the fall of 1977, it became clear that William Tatham did not wish to continue the construction business. If the four key employees did not continue in business together they would forfeit the potential advantage of their combined skills and would remain "mere employees" of other enterprises.

11The prime movers, behind what was to become Magnus Engineering and Construction Limited, were Davidson and Smith. They began to discuss the formation of a new business of sufficient size to be both viable and provide them with an adequate income. They had the accumulated expertise. What they needed was capital. Ferrill and Bain were drawn into the proposition later.

12There followed a long, and largely disappointing, quest for money. The new venture would require bonding, financial backing for the purchase of equipment, and a sufficient line of credit. All of these were difficult to obtain. The decision of each financial institution seemed to be contingent upon suitable arrangements having previously been made with others. The Industrial Development Bank was unwilling to provide support unless two banks had already refused to assist the new venture. These refusals, at least, were not difficult to obtain. The bank with whom the Tatham Company dealt was non-committal. Other banks were equally wary. The bonding companies were unwilling to provide suitable bonds unless a significant sum was "locked in" to the company; but, if the money was "locked in", it could not be used as a down payment on the equipment required to carry on business. This, in turn, meant that bank financing would assume a more important role in supplying funds for the acquisition of equipment and the initial start-up expenses of the new company. Eventually, after considerable negotiation with various banks and the bonding company, the four principals assembled the financial super-structure of the new company. This financial super-structure is based, essentially, on the private assets (mortgages, personal guarantees, etc.) of the four principals. In the search for adequate financing the Tatham Company provided no assistance to Magnus — directly or indirectly.

13While Smith, Davidson, Bain and Ferrill were negotiating with various banks and the bonding company they were also trying to determine the assets which they would require to carry on a successful business. This determination, of course, was not unrelated to their financial negotiations since, without bank funds, they would be unable to purchase equipment at all (much of their capital being "locked in" in the new company at the insistence of the bonding company.) It was decided at an early stage that they could not afford to purchase the entire assets of the Tatham company. (There was no real thought given to buying assets elsewhere.) Accordingly, they drew up a list setting out those items which were essential to the new venture. The objective was to create a new organization which was both viable and would generate sufficient income to provide adequate compensation for the four key employees. By a selective purchase of the most important, and serviceable, equipment, the four principals hoped to acquire sufficient machinery to carry on business, and enough flexibility to perform more than one job at a time. After some negotiations with Tatham, the four principals agreed to purchase about two-thirds of the total equipment previously owned by the Tatham company. Because Dennis Bain, the equipment mechanic, was well acquainted with this particular machinery, it can be reasonably inferred that the equipment which the new company acquired was "the best of the lot."

14The new venture acquired a substantial portion of the Tatham company's operating equipment. In addition it acquired all of the Tatham company's office equipment, all of the Tatham company's engineering equipment and all of the Tatham company's repair shop equipment. We are satisfied that with the sale of this equipment the Tatham company had eliminated itself as a potential competitor for the new venture. Even if the brothers Tatham had wanted to revive their business, they would have had to assemble an entirely new configuration of assets and technical expertise in order to do so. If the Tatham company were to "rise" again, it would be as a significantly different business organization. While some of the equipment not purchased by the new company was sold to third parties, much of it remains, rusting, in the field adjacent to Magnus's business premises — which are still owned by the Tatham company, and are now rented to Magnus. The evidence indicates that the principals of Magnus made no real attempt to secure equipment elsewhere, nor was there more than a cursory search for an alternative location. As a result, save for the change in name, the tangible assets and physical layout of the new company are virtually identical to that of the Tatham company. Magnus has maintained the same construction machinery, the same office location and equipment, the same "yard", the same shop facilities, the same managerial and operating structures and the same telephone number. Many of the employees who worked for the Tatham company now work for Magnus. Apart from the four "key" employees already mentioned, the two longest term equipment operators in the Tatham organization are employed as equipment operators by Magnus. The employee who did the wage administration and bookkeeping for the Tatham company is now employed by Magnus. As has already been pointed out, the four officers of Magnus perform precisely the same functions for Magnus which they previously performed for the Tatham company. Save for the absence of William Tatham and the company name, the assets, corporate organization, personnel and character of the business are identical to that of the Tatham company.

15Mr. Smith testified that no effort was made ab initio to recruit the employees of the Tatham company, but that a number of such employees had left their names at the Magnus offices (which were the same as the Tatham offices) or had made telephone enquiries. Likewise a number of such employees had been hired "on site." The site supervisor for Magnus was, of course, Carl Ferrill, who was previously the site supervisor for the Tatham company. It is not surprising that he would give preference to employees with whom he was familiar, and who had also worked previously for the Tatham company. From the perspective of the employees, or an outside observer, the business appeared to be substantially the same as it had always been — except now it had new owners and a new name.

16While nothing really turns on this matter, it might be noted that the name "Magnus" originated with the Tatham company. The Tatham company had, some years ago, incorporated a company named Magnus Construction which had never become active. The four principals, with the permission of the Tatham company, (and without financial payment) incorporated the Magnus name in the style of their new venture. They also developed a new logo and colour scheme. Since there was little or no goodwill attaching to the Tatham name there was no reason to maintain any connection, or identity with, their previous employer. There was no transfer of customer lists, no non-competition covenant and no referral of business from the Tatham company to Magnus. There has been no transfer of contracts, and William Tatham has played no role in the running of Magnus. Tatham viewed the transaction with Magnus as a convenient way of disposing of much of his company's assets, which avoided the 20% auctioneer's fee which might otherwise have been payable if the Tatham company had sold the assets through this medium. Nevertheless, it is clear that all of the tangible assets of Magnus were purchased from the Tatham company. These assets were essential to Magnus' ability to carry on business and, by the same token, the transfer of these assets to Magnus effectively prevented the Tatham company from continuing in business. The location, office, equipment and management are the same; as are many of the employees — especially the "core" employees who were largely regular employees of the Tatham company. There has been no real change in the character of the business, although it appears that Magnus is involved in somewhat smaller projects, and has acquired certain customers and some repeat business that the Tatham company was unable to acquire. By actively soliciting business ("beating with bushes"), becoming more active in the local community and construction associations, and approaching potential customers who were unwilling to deal with William Tatham the principals of Magnus have been able to promote their enterprise, and develop their business opportunities. In this regard, it may also have been an advantage that Magnus was operating as a "non-union" company, and accordingly could afford to bid on projects from which the Tatham company would have been excluded.

17The union contends that in the circumstances there has been a transfer of the Tatham company's "business" to Magnus. The union argues that Magnus has acquired "the business" by acquiring virtually all of the Tatham company's business organization, including: its excavating and grading machinery, its key employees and their accumulated expertise, its office staff, its office equipment, its engineering equipment, its business location and equipment and its service facilities. The union submits that nothing really turns on the change of name or the incorporation of a new corporate vehicle. Neither are critical to this business. The union urges the following proposition upon the Board:

"A business has been transferred and section 55 applies where the successor acquires an established configuration of assets, a developed system of managerial expertise and a particular modus operandi, which generates work opportunities for employers and profit for the company."

The union submits that all of the essential elements of the Tatham business were transferred to Magnus, directly or indirectly. Magnus is virtually identical to Tatham, save for the new owners and name — which, in the circumstances, is irrelevant. It was common ground among the witnesses that little or no goodwill attached to the company name. What else could Tatham sell? Such goodwill as there might be remained largely with the key employees. Magnus, on the other hand, contends that what it purchased was not Tatham's "business" but merely some of its assets. It has established a new, similar business; it has not purchased "the business" of The Tatham Company Limited. The Tatham company, because of its financial difficulties, did not exist as a viable commercial entity. There was no intention to acquire it, and it was not, in fact, acquired. Magnus contends that there has not been a "sale" of a "business" within the meaning of section 55 of the Act.

II

18Before addressing the particular issues raised in this case, it may be useful to briefly review the purpose of section 55 and the Board's approach to its interpretation. The relevant parts of the section itself are as follows:

"55. —(1) In this section,

(a) 'business' includes a part of parts thereof;

(b) 'sells' includes leases, transfers and any other manner of disposition, and 'sold' and 'sale' have corresponding meanings.

(2) Where an employer who is bound by or is party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.

(3) Where an employer on behalf of whose employees a trade union or council of trade unions, as the case may be, has been certified as bargaining agent or has given or is entitled to give notice under section 13 or 45, sells his business, the trade union, or council of trade unions continues, until the Board otherwise declares, to be the bargaining agent for the employees of the person to whom the business was sold in the like bargaining unit in that business, and the trade union or council of trade unions is entitled to give to the person to whom the business was sold a written notice of its desire to bargain with a view to making a collective agreement or the renewal, with or without modifications, of the agreement then in operation and such notice has the same effect as a notice under section 13 or 45, as the case requires."

19When a business (or part thereof) is transferred, or disposed of, the union retains bargaining rights for the employees in a "like unit" to that which existed prior to the transfer, and the transferee must continue to apply the collective agreement to the unit until the Board otherwise declares. The purpose of the section was succinctly summarized by the Board in Aircraft Metal Specialists Ltd., [1970] OLRB Rep. Sept. 703:

"The purpose of section 47a [now section 55] becomes important in assessing the various fact situations that arise. Section 47a operates on a number of levels. The first level, of course, is to prevent the subversion of bargaining rights by transactions which are designed to get rid of the union. We have encountered situations where there are transactions between various corporate entities which are in effect 'paper transactions', and are a form of corporate charade engaged in for the purpose of eliminating the trade union. In this type of case the Board has liberally interpreted section 47a to preserve the bargaining rights and has attempted to look beyong 'paper transactions' to achieve that purpose. See, e.g. Kem's Masonry, [1964] OLRB Rep. Dec. 382 and Trenton Riverside Dairy, September 1964(1964)2 C.L.S. 76-1005.

A further and important purpose of section 47a is to preserve the bargaining rights with respect to work which has accrued to the benefit of the employees as a result of their union becoming the bargaining agent through certification or voluntary recognition. Once the union has been recognized with respect to a particular business the union then obtains a right to bargain with respect to wages, hours and other conditions of employment in that business. The right to participate in the business and its functions in that manner is in the nature of a vested right and section 47a allows the union to pursue that bargaining right when all or part of the business is sold. In making determinations under section 47a therefore, the Board is interested in maintaining the bargaining rights where the sale involves a continuum of the business."

20Section 55 prevents the destruction of bargaining rights or a dislocation of the collective bargaining status quo, by transforming the institutional rights of the union and the collectively bargained rights of the employees into a form of "vested interest" which becomes rooted in the business entity, and like a charge on property, "runs with the business”. To accomplish this objective, the statute gives a very special meaning to the word "sale", envisages that bargaining rights can be continued in a severable "part" of a business, abrogates the notion of privity of contract, and eliminates the significance of the separate legal identity of the new employer.

21In keeping with the broad language of the statute and its remedial thrust, the Board has been disposed to give section 55 a liberal, rather than a narrow, interpretation. Little reliance is placed upon the legal form which the business disposition happens to take as between the old employer and its successor. The important factor, as far as collective bargaining law is concerned, is the relationship between the successor, the employees and the undertaking. Of course, the nature of the commercial transaction by which the business may have been transferred cannot be ignored, but it is equally important to consider the intention of the Legislature in drafting section 55, whether the subject transaction creates the mischief to which the statute was directed, and whether the language of the statute can be reasonably said to apply.

22A section 55 application really involves two related questions: 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." There is seldom any problem with respect to the first question. The real difficulty, as in the present case, is to decide whether what has been "transferred" or "sold" constitutes all, or part, of the predecessor's "business"; or, whether, there has merely been a transfer of assets or other "incidental" elements of the business. This is not to say that a sale of assets only cannot constitute the sale of business. As Mr. Scace in his book The Income Tax Law of Canada (3rd ed. L.S.U.C. 1976) points out in the chapter entitled "Buying and Selling a Business":

"Although businesses may be consolidated in a number of different ways e.g. by an amalgamation or a winding up, there are only two methods by which a business can be bought or sold, namely, the purchase or sale, of assets or shares."

A commercial lawyer could hardly consider it a novel proposition if one suggested that a "sale of a business" could be accomplished by an asset transaction. We cannot accept the submission that since only assets were transferred, ipso facto, there cannot be a transfer of part of the business. The issue before the Board is whether this particular asset transaction can be considered a "sale" of "part of a business" within the meaning of section 55 of The Labour Relations Act. This requires an appreciation of the labour relations context, as well as some consideration of what a business is, and how one might determine whether it is "the business" which has been transferred.

23A business is a combination of physical assets and human initiative. It is an economic organization which, in a sense, is more than the sum of its parts. In Raymond Cots, [1968] OLRB Rep. Mar. 1211, the Board put it this way:

"The meaning to be attached to the word 'business' depends to a great extent on the facts and circumstances in each particular case. It cannot be said that any one facet of an enterprise taken by itself necessarily comprises a business. It has been expressed that a business is 'the totality of the undertaking.' The physical assets of buildings, tools and equipment used in a business are not necessarily the undertaking per se but are, along with management and operating personnel and their skills, necessary in the operations to fulfill the obligations undertaken with a hope of producing profit to assume its success. The total of these things along with certain intangibles such as goodwill constitutes a business." [Emphasis added]

A business is a commercial vehicle which has been rationally constructed to produce certain goods or services for a defined market — profitably, in the case of private sector enterprises but, in any event, efficiently. It is one harmonious whole consisting of many interrelated parts. From a labour relations perspective, however, the employer-employee relationships take on a special significance. From this viewpoint, the importance of the business is that it generates work for employees. The entrepreneurial activities of the business require it to enter the labour market as an employer and, this in turn, may give rise to the collective bargaining relationships to which The Labour Relations Act is directed. Section 55 preserves the stability of those established collective bargaining relationships if the business, or a coherent part of it, are transferred to a new owner.

24As might be expected in a labour relations statute, the Board pays particular attention to the character of the business and the characteristics of the employer-employee relationship. In determining whether there has been a "sale" within the meaning of section 55, the Board attaches a special significance to the nature of the work performed in, and by, the business, before and after the alleged transfer. If the nature of the work performed subsequent to the transaction is substantially similar to the work performed prior to the transaction, this would support an inference that there has been a transfer of a business within the meaning of section 55. This approach was considered by the British Columbia Supreme Court in R. v. B. C. Labour Relations Board ex parte Lodum Holdings Ltd., (1969), 1968 CanLII 586 (BC SC), 3 D.L.R. (3d) 41 — an application for certiorari in respect of the then existing successor rights section of the British Columbia Labour Relations Act (it has since been amended.) At page 52 Dryer, J., observed:

"On must keep in mind that the problem before the Labour Relations Board was one of labour relations and consequently, though as pointed out above the whole law must be considered, the weight to be assigned various factors and the inferences to be drawn from certain evidentiary facts are not necessarily the same as would be the case if the problem were one of, say, taxation or control of assets. The importance of the 'business' in its labour relations aspect is the jobs it provides for the employees. One factor to be considered therefore, is whether the same or substantially the same jobs are being performed. That depends on a number of factors such as whether the jobs are being performed at the same or substantially the same times and places, in respect of the same or substantially the same goods or services, and for the same or substantially the same customers or patrons, etc. These matters are, in my opinion, more important than the form of transfer." [Emphasis added]

Unless there is a continuation of the work and jobs it would make little sense to preserve the collective bargaining relationship or the collective agreement — particularly in a case like the present one, where the trade union itself is organized on the basis of certain established craft skills.

25In determining whether there has been a sale of the predecessor's business, the Board has also found it useful to consider the extent to which the various elements of the predecessor's business can be traced into the hands of the alleged successor; that is, whether there has been an apparent continuation of the business — albeit with a change in the nominal owner. This was the approach taken by the Board in Culverhouse Foods Ltd., [1976] OLRB Rep. Nov. 691 (application for judicial review dismissed 18 Jan. 1979) where the Board listed some of the factors which might be significant in deciding if there had been a transfer of the predecessor's business:

"In each case the decisive question is whether or not there is a continuation of the business ... the cases offer a countless variety of factors which might assist the Board in its analysis; among other possibilities the presence or absence of the sale or actual transfer of goodwill, a logo or trademark, customer lists, accounts receivable, existing contracts, inventory, covenants not to compete, covenants to maintain a good name until closing or any other obligations to assist the successor in being able to effectively carry on the business may fruitfully be considered by the Board in deciding whether there is a continuation of the business. Additionally, the Board has found it helpful to look at whether or not a number of the same employees have continued to work for the successor and whether or not they are performing the same skills. The existence of non-existence of a hiatus in production as well as the service or lack of service of the customers of the predecessor have also been given weight. No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of utmost importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aids the Board in deciding whether the nature of the business after the transfer is the same as it was before ..

This was also the approach adopted by Widjery, J. in Kenmir v. Frizzel, et al, [1968] 1 All E.R. 414 — a case arising out of legislation similar to section 55. At page 418 the learned judge commented:

"In deciding whether a transaction amounted to the transfer of a business, regard must be had to its substance rather than its form, and consideration must be given to the whole of the circumstances, weighing the factors which point in one direction against those which point in another. In the end, the vital consideration is whether the effect of the transaction was to put the transferee in possession of a going concern, the activities of which he would carry on without interruption. Many factors may be relevant to this decision though few will be conclusive in themselves. Thus, if the new employer carries on business in the same manner as before, this will point to the existence of a transfer, but the converse is not necessarily true, because a transfer may be complete even though the transferee does not choose to avail himself of all the rights which he acquires thereunder. Similarly, an express assignment of goodwill is strong evidence of a transfer of the business, but the absence of such an assignment is not conclusive if the transferee has effectively deprived himself of the power to compete. The absence of an assignment of premises, stock-in-trade or outstanding contracts will likewise not be conclusive, if the particular circumstances of the transferee nevertheless enable him to carry on substantially the same business as before. [Emphasis added]

If most of the elements that made up the predecessor's business organization can be found in the hands of the successor, and are used for the same business purposes, there is usually a strong inference that there has been a "sale of a business" to which section 55 applies.

26All of the cases to which we have referred recognize that there are no easily administered mechanical tests which permit the Board to readily distinguish between a "mere sale of assets" and a sale of "part of a business." As the Board commented in Metropolitan Parking, Inc., [1979] OLRB Rep. Dec. 1194 at paragraph 34:

"This distinction is easily stated, but the problem is, and always has been, to draw the line between a transfer of a 'business' or 'a part of a business' and the transfer of 'incidental' assets or items. In case after case the line has been drawn, but no single litmus test has ever emerged. Essentially the decision is a factual one, and it is impossible to abstract from the cases any single factor which is always decisive, or any principle so clear and explicit that it provides an unequivocal guideline for the way in which the issue will be decided."

The issue of employer successorship arises out of a seemingly endless variety of factual settings, with each new case presenting some of the factors considered relevant to the resolution of prior cases while raising other materially altered, entirely omitted, or newly-added facts which arguably should affect the decision on the merits. Much of the confusion which attends successorship results from the facility with which each case can be distinguished on its facts from all former cases; but to dismiss the confusion so lightly would be to disregard the fundamental differences inherent in the various business contexts in which the successorship issue arises. Factors which may be sufficient to support a "sale of business" finding in one sector of the economy may be insufficient in another. In some industries, particular configuration of assets — physical plant machinery and equipment — may be of paramount importance; while in others it may be patents, "know-how", technological expertise or managerial skills which will be significant. Some businesses will rely heavily on the goodwill associated with a particular location, company name, product name or logo; while for other businesses, these factors will be insignificant. The Labour Relations Act applies equally to primary resource industries, manufacturing, the retail and service sector, the construction industry and certain public services provided by municipalities and local authorities. In each of these sectors the nature of the business organization is different, yet in each case section 55 must be applied in a manner which is sensitive to both the business context and the purpose which the section is intended to accomplish.

III

27The evidence in the present case indicates that Magnus has acquired, in block, virtually all of its assets from the Tatham company, and that those assets comprise approximately two-thirds of the assets formerly used by the Tatham company in its grading business. We are satisfied that the transfer of those assets effectively deprived Tatham of its ability to compete. The configuration of assets, know-how, managerial and employee skills which formerly carried on excavating business as the Tatham company is now, in substance, carrying on business as Magnus, and supplying precisely the same service to the same general market. There was very little which Tatham had, which has not been transferred, directly or indirectly, to Magnus; and much of this residue remains idle and rusting on the premises adjacent to the Magnus business office. If one considers the factors to which the Board referred in Raymond Cots, supra, (i.e., physical assets, buildings, tools, equipment, management and operating personnel and their skills) it is clear that virtually all of them were transferred to Magnus, and, paraphrasing the observations of Dryer, J. in Lodum Holdings Ltd. ,supra, it is equally clear that substantially the same jobs are being performed in substantially the same place in respect of substantially the same services, for substantially the same market.

28It is true that certain elements mentioned by the Board in Culverhouse , sup ra , and Kenmir v. Frizzel, supra, were not transferred, but these are either of little significance in the construction industry, or irrelevant on the facts of this case. There is no "inventory" or "stock-in-trade" of the kind that a manufacturing concern might have; and, on the evidence, goodwill, customer lists, the company name, and its logo were not very significant parts of the predecessor's business. In any event, much of the goodwill that there may have been is personal to the individuals concerned or has been retained by virtue of a continuation of the same premises, phone number and operating management. Of course, the new owners had to arrange their own financing to purchase this part of the Tatham organization; and, having done so, undertook some new initiatives, and acquired some customers not previously served by the Tatham company. This is not insignificant, but section 55 is triggered by a change of ownership, and it would be a most unusual "sale of a business" transaction in which the new owner did not put his own imprint on the organization by undertaking new business initiatives or introducing at least some new directions in management. Likewise, the new owner will almost always have his own sources of funds to finance the purchase. More important, in the present case, is the fact that there has been no significant change in the character of the business from which it operated as The Tatham Company Limited. Magnus is carrying on substantially the same business in substantially the same manner as before.

29We have carefully considered the cases cited to us by counsel for the respondent and, in particular, Woodway Structural Components, [1971] OLRB Rep. Nov. 732, Canada Cement Lafarge Ltd., [1975] OLRB Rep. Dec. 905 and Dufferin Steel, [1976] OLRB Rep. Mar. 81. However, in each of these cases there was a significant change in the character of the work, produce or market so that the Board could conclude that what had been transferred was not the predecessor's business. The successor had merely incorporated incidental elements of that business into his own economic organization. Even though each of the elements acquired could previously be found in the predecessor's business organization (and, in that sense, were "part" of the predecessor's business) the evidence viewed in its totality indicated that these were not transactions to which section 55 applied. Similarly, in Ralph Ford Electrical, [1974] OLRB Rep. June 388 several key employees of the alleged predecessor became dissatisfied and struck out on their own in competition with their former employer and the Board found that there was not a transfer of a business but, rather, the creation of a new "parallel" business which only incidentally made use of some of the tangible elements of the predecessor's business organization. In none of those cases was there the degree of identity with the predecessor which is to be found in the present case, and in all of them there were factors indicating that it was not the predecessor's business which had been sold. Often the alleged successor already existed as a going concern prior to the asset purchase, and the predecessor's "business" continued to function independently, notwithstanding the alleged sale.

30We have not ignored the fact that the owners of Magnus may not have considered themselves to be purchasing Tatham's "business" when they bought the bulk of its assets and continued to carry on business from the same location, with the same management and many of the same employees. However, this again is not determinative of the effect of the transaction, and the application of section 55. Since the Tatham company had little or no goodwill the four principals acquired almost as much as Tatham could sell and, having done so, they were immediately able to carry on the business of a grading and excavating contractor. In fact, the evidence indicates that the sale transaction did not close until one month after the closing date originally planned, and during this period Magnus became engaged in its first project, using the Tatham company's equipment, with that company's permission.

31Having regard to the totality of the evidence, we are satisfied that there has been a "sale" of a "part" of the "business" of the Tatham company to Magnus within the meaning of section 55 of the Act. In our view, to reach any other conclusion would be to give the term "business" a meaning, in this case, at variance with that established in the Board's jurisprudence, and would ignore the broad language and intention of section 55. It follows that Magnus must recognize the union's bargaining rights, and becomes bound by any outstanding collective agreements between the union and the Tatham company. We are also satisfied, on the basis of the evidence before us, that there has been no abandonment of those bargaining rights. As early as May, 1978, barely two months after Magnus was incorporated, the applicant advised the respondent Magnus that it considered Magnus to be bound by the predecessor's bargaining obligations. The applicant also engaged in picketing and other related activity consistent with its assertion that Magnus was the successor of the Tatham company. There remains only the question of what agreements, if any, are outstanding.

32The evidence indicates that the Tatham company was a "union company~~ in all of its operations. Exhibit 5 is a province-wide "Multi-sector" agreement recognizing the union as the exclusive bargaining agent for employees working as operating engineers anywhere in Ontario. This agreement was entered into by the Tatham company in 1974 and we are satisfied that it established the basis for the union's bargaining rights in all sectors in which the Tatham company operated. In 1976, by virtue of an agreement dated October 22, 1976 (Exhibit 7) the Tatham company agreed to be bound by the collective agreement between the Labour Bureau of the Ontario Road Builders Association and of the Ontario Sewer and Watermain Contractors Association and the T.E.L. Council of Trade Unions, save as expressly varied by the terms of Exhibit No. 7. A "No Board Report" was issued by the Minister of Labour in respect of the latter collective bargaining relationship on July 19, 1978. We note further that by virtue of The Labour Relations Amendment Act, 1977, S.O. 1977, c. 31, Magnus must, by operation of the statute, be bound in the industrial, commercial and institutional sectors of the construction industry by the province-wide collective agreement between the Operating Engineers and the relevant designated employer bargaining agency. We are satisfied, therefore, that the province-wide (ICI) agreement applies, insofar as Magnus has operated in the ICI sector and that, until at least August, 1978, Magnus was bound by the T.E.L. agreement insofar as it operated in other sectors to which that agreement applied (subject to the above mentioned "rider".) It is unnecessary, for the purposes of this decision, to consider the precise contractual relationships which "flow through" as a result of our section 55 determination. This issue was not a principal part of the parties' cases —being more appropriately dealt with in Board File 0557-79-M, which was the companion application under section 112a, which the parties have held in abeyance pending our section 55 determination. The applicability of the various agreements and the liability, if any, arising thereform, depends upon the nature of the company's activities and the sectors in which it operated during the relevant period. It is not entirely clear how an agreement (like the T.E.L. agreement) based on section 43 of the Act is affected by a section 55 sale, nor is it clear how a purported "rider" fits within the scheme; and doctrines, such as laches, may be available under section 112a which are not available under section 55.

33There remains the question of the union's application under section 1(4) of the Act. In view of our disposition of the section 55 application, we do not consider it necessary to pursue the section 1(4) issue, or determine whether, in the circumstances, the Board can, or should, exercise its discretion to make a section 1(4) declaration. The union's application in this respect is, therefore, dismissed.

DECISION OF BOARD MEMBER F.W. MURRAY

1I dissent.

2Based on the totality of the evidence I would not have found a "sale of a business" from the Tatham Company to Magnus within the meaning of Section 55 of The Labour Relations Act.

3In my view the evidence disclosed that by December, 1977, the Tatham Company had ceased to operate as a functional business organization in the construction industry. What was transferred several months later, therefore, was not "the business" of the Tatham Company but, rather certain of its assets. These assets were incorporated into a new business which, while similar in nature to the business carried on in part by the Tatham Company, and while indeed created by some of its former employees, was clearly a new company which established its own presence in the market and did not benefit from any connection with the Tatham Company. Moreover, the evidence suggests that the new company did not serve precisely the same market as the Tatham Company had served, but was in effect involved generally in somewhat similar projects.

4I am also concerned with the lapse of time between the creation of the new business and the date of the making of this application. There was a substantial delay before the Union sought to exert its rights under Section 55, and this delay makes the task of the Board in assessing the evidence much more difficult.

5Surely there is an onus on the party seeking to preserve its bargaining rights to move expeditiously under Section 55 when any question arises as to its status. This Board has consistently held that a delay operates as a bar to a related employer declaration under Section 1(4) of the Act, and in my view the principles enunciated by the Board in Section 1(4) cases are clearly applicable to cases such as the present one.

6I would not have made a Section 55 declaration in the circumstances of this case, and, even if I were satisfied that a "sale" within the meaning of Section 55 had taken place, having regard to the substantial and unnecessary delay, I would have ordered a representation vote, pursuant to section 55(8) of the Act.