[1980] OLRB Rep. January 29
0266-79-R Retail Clerks Union, Local 206, chartered by Retail Clerks International Union, A.F.L.-C.I.O.-C.L.C., Applicant, v. Darrigo Consolidated Holdings Inc., Respondent.
BEFORE: N. B. Satterfield, Vice-Chairman and Board Members H. J. F. Ade and C. Ballentine.
APPEARANCES: Ted Wohl and Charles McCormick for the applicant; Michael Gordon and John Darrigo for the respondent.
DECISION OF THE BOARD; January 15, 1980
This is an application brought under section 55 of The Labour Relations Act for a declaration that there has been a sale of a business from Dominion Stores Limited ("Dominion") to the respondent Darrigo Consolidated Holdings Inc. ("Darrigo") within the meaning of the Act. The applicant is seeking also a declaration from the Board that it is the bargaining agent for the employees of Darrigo in like bargaining units to those for which it was bargaining agent at Dominion and an order that Darrigo bargain with the applicant in accordance with notice given under section 55(3) of the Act. The application came on for hearing first on June 19, 1979 and following an adjournment granted to the applicant upon the consent of Darrigo, was continued for hearing on November 26, 1979.
The majority of the facts in this case are not in dispute. Dominion operated a retail food store in the K-Mart Plaza in Kitchener, Ontario from September 1963 until December 31, 1977 in premises which it held under lease from Cambridge Leaseholds Limited ("Cambridge"). Dominion was operating the store at the time of closing for K-Mart Canada Limited under the name of K-Foods. When the store closed, Dominion laid off all of the employees. Dominion surrendered its lease to trustees of Cambridge on October 31, 1978 and effective November 1, 1978 the premises were leased by Cambridge to Darrigo. Darrigo occupied the premises December 15, 1978 and opened the store for business in March 1979. The store was vacant at all times from December31, 1977 until December 15, 1978. All merchandise had been removed by Dominion upon closing and all signs which would identify the premises with either Dominion or K-Foods were removed at the time. There is no evidence as to when the store fixtures were removed but they had been removed by October31, 1978. There were no signs on the premises indicating that they were available for lease or purchase during the vacancy. Except for the store premises, Darrigo did not acquire anything which previously had belonged to or been used by Dominion, nor are any of Darrigo's employees former Dominion employees. Darrigo, Dominion and Cambridge are not linked corporately.
The Board is satisfied upon the evidence that, at the time the store was closed, the applicant held bargaining rights for employees of Dominion in two bargaining units, pursuant to the terms of the collective agreement which expired June 21, 1978. One unit consisted of full-time employees and the other of part-time employees. The applicant duly notified Dominion on April 22, 1978 of its desire to negotiate renewal of both agreements. New agreements were executed December 5, 1978 to have effect for the term November 20, 1978 to June 21, 1980. The renewal agreements like their predecessors cover several bargaining units and they use the same language as their predecessors to describe these units in terms of the employees employed in stores owned and operated by Dominion in separate bargaining units at Guelph, Kitchener, Waterloo and the K-Mart Plaza.
4.. Section 55 of the Act provides that when a business or part of a business is sold, leased, transferred or otherwise disposed of the successor in the transaction is, until the Board declares otherwise, bound by the same collective bargaining obligations by which the predecessor was bound. The provisions of the section relevant to this matter are:
"(1) In this section,
(a) 'business' includes a part or 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 a 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 trace 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.
An application under this section poses two questions. First, has there been a sale within the definition of subsection 1. Second, if there has been a sale, is the subject of that sale a business or part of a business of the vendor.
Counsel for Darrigo contends that there has not been a sale as defined by section 55(1), rather there has been a legal surrender by Dominion of its lease to Cambridge and the issuing of a lease by Cambridge to Darrigo. In the alternative, should the Board find that there has been a transfer of Dominion's lease to Darrigo, counsel argues that none of the other factors which the Board has considered to be useful in determining whether particular fact situations reveal a sale of a business are present in this case and the simple transfer of a lease standing by itself does not constitute a sale of a business. Counsel argued that to find otherwise would be to say that bargaining rights attached themselves to property (as opposed to a business as the Board's jurisprudence shows) and transfers with the property.
The Board has consistently looked to the substance and not the form of the transactions in a purported sale of a business to determine whether, in fact, a sale has taken place. In this respect, see the authorities cited by the Board at paragraph 28 of its decision issued December 18, 1979 in Metropolitan Parking Inc., Board File No. 0524-79-R, as yet unreported, and its statement contained therein that "The manner of disposition is irrelevant so long as a transfer has, in fact, taken place. The interposition of a third party, acting as an agent or conduit, does not affect the result." In the case at hand, having considered the evidence in respect to the nature of Cambridge's lease to Darrigo (notwithstanding some differences in its conditions compared with Dominion's lease), the timing of the lease transactions and Dominion's role in finding a tenant acceptable to Cambridge, the Board is satisfied that, in substance, Dominion has effected a transfer of its lease to Darrigo even though the commercial form of the transfer involves the surrender of Dominion's original lease and the signing, by Darrigo, of a new but similar lease. The essence of the transaction is as though Dominion's right to use the premises was transferred directly to Darrigo. We are satisfied that this commercial arrangement constitutes a "transfer" or "sale" of the leased premises within the extended meaning which the Board has given to the word "sale" in section 55 since its decision in Thorco Manufacturing Ltd. ,65 CLLC ¶16,052.
Since there has been a sale from Dominion to Darrigo, was it Dominion's business or a part thereof that was the subject of the sale? Darrigo has acquired, via the transfer of Dominion's lease, the exclusive right to use the premises previously operated by Dominion as a retail food store. The Board, over many years, in determining whether there has been a sale of a business in the retail food industry, has considered the occupation by the successor of the premises previously occupied by the predecessor to be a very significant factor. The Board's comments in Dominion Stores Limited, [1979] OLRB Rep. July 626, at paragraph 7, places the factor in perspective with some of the other factors considered indicative of any sale of a business.
"The Board has made certain observations about the nature of the retail food industry in its section 55 jurisprudence. The Board has noted that goodwill may consist in large measure 'in the habit of customers of the vendor continuing to patronize the food market located on the same premises' and therefore exemption of goodwill from the purchase price where the successor occupies the same premises has no real meaning. Similarly, the Board has commented that 'it is to be expected that one chain food store would not be interested in acquiring the foodstuffs and inventory of another chain food store' and accordingly, the failure to purchase foodstuffs and inventory is of no real significance when such a transaction occurs. Finally, the Board has commented that 'it is generally necessary to shut down operations at the time of a sale in order to give the new owner an opportunity to make renovations which are in accord with its particular method of merchandising' and to stock the premises and accordingly, the Board should not give undue weight to an hiatus of operation at the time of the alleged sale. (See Dutch Boy Food Markets 65 CLLC ¶16,051 and Gordons Markets supra and the cases referred to therein)."
While consideration of the Board's jurisprudence in section 55 cases is helpful in gaining perspective, in each case it remains to be determined on its own facts whether there has been a continuation of the predecessor's business; i.e. in this case, has Dominion's business continued in the hands of Darrigo. The continuation of the predecessor's business is important because the applicant's bargaining rights are attached to it and are dependent upon its continuation under Darrigo. What we have, in summary, in this case is Dominion closing a retail food store during its fifteenth year of operation by Dominion and disposing of the lease for the store to Darrigo via Cambridge. There is no corporate connection between Dominion and Darrigo or between either of them and Cambridge. The premises were closed for more than 14 months and vacant for 11 1/2 months with no visible signs that they would or would not be reopened as a food store. Nothing of tangible value passed from Dominion to Darrigo other than the lease. In these circumstances and in all the circumstances of this case the Board finds that the acquisition by Darrigo of Dominion's lease and the occupation of the premises vacated by Dominion for the purpose of operating a retail food store does not constitute a continuation of Dominion's business. Therefore there has not been a sale of a business within the meaning of section 55 of the Act and Darrigo is not the successor of Dominion with respect to the applicant's established bargaining rights with Dominion.
The application is dismissed.