Ontario Labour Relations Board
[1982] OLRB Rep. August 1224
2714-81 -R International Beverage Dispensers' and Bartenders' Union, Local 280, Applicant, v. Vivace Tavern Inc., Respondent.
Before
N. B. Satterfield, Vice-Chairman and Board Members J. A. Ronson and S. Cooke.
Appearances
Elizabeth Mclntyre and Joe Leithwood for the applicant, D. B. Black,Q. C. for the respondent.
DECISION OF THE BOARD; August 11, 1982
- This is an application under section 63 of the Labour Relations Act in which the applicant alleges that the respondent is the successor employer as a result of an alleged sale of a business known as the New Hollywood Tavern from John Mitchell to the respondent. The applicant seeks a declaration that the respondent is bound, as a successor employer, by the collective agreement which it alleges was in existence between the applicant and the New Hollywood Tavern at the time of the sale. The respondent denies that it is the purchaser from John Mitchell in a sale of a business within the meaning of section 63. In the alternative, should the Board find that the respondent is the purchaser in a sale within the meaning of section 63, it seeks a declaration pursuant to sub-section 5 of section 63 terminating the bargaining rights of the applicant because the business has changed its character so as to be substantially different from the business of the predecessor employer. The relevant sections of the Act provide as follows:
63.-(l) In this section,
(a) "business" includes a part or parts thereof;
(b) "sells" includes leases, transfers and any other manner or disposition, and "sold and "sale" have corresponding
meanings.
(2) Where an employer who is bund 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 persons 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 14 or 53, 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 14 or 53, as the case requires.
(5) The Board may, upon the application of any person, trade union or council of trade unions concerned, made within sixty days after the successor employer referred to in subsection (2) becomes bound by the collective agreement, or within sixty days after the trade union or council of trade unions has given a notice under subsection (3), terminate the bargaining rights of the trade union or council of trade unions bound by the collective agreement or that has given notice, as the case may be, if, in the opinion of the Board, the person to whom the business was sold has changed its character so that it is substantially different from the business of the predecessor employer.
On February 12, 1982, the respondent acquired the real property and chattels of 689 The Queensway known as the Hollywood Tavern. The Board notes that the application refers to the premises as the New Hollywood Tavern. Many of the documents in evidence, however, used the term Hollywood Tavern as did most of the witnesses who testified at the Board's hearing. The Board will refer to the premises as the Hollywood Tavern for purposes of clarity. The respondent continued to operate the business in the name of the Hollywood Tavern from that date until the week prior to March 25th, at which time the business was closed, to be reopened on March 25 as the House of Lancaster. It has been operating under the name of House of Lancaster since the reopening. The parties are agreed that Mitsiou Holdings Limited ("Mitsiou") was the holder and operator of the premises and John Mitchell, a principal of Mitsiou, operated the business until the week before the respondent took over. According to Theodore Koumoudouros, the business was operating on February 12th when he acquired the real property and chattels and was being operated by Alek Korn whom Koumoudouros referred to as the mortgagee in default. The uncontradicted evidence of the applicant is that Korn had been operating the business for five days. The evidence with respect to the transfer of the two liquor licences was that they had been transferred to Korn for that interim period and then to the respondent on February 12th. It appears to the Board from this evidence and the evidence, infra, tracing the transfer of the real property at 689 The Queensway, that Korn either was mortgagee in possession or, as guarantor of the mortgage at issue, was acting on behalf of the mortgagee in possession when the respondent took possession of the premises.
The real property and chattels at 689 The Queensway were acquired in accordance with an Agreement of Purchase and Sale between the respondent as purchaser and Jerry Norman Birenbaum and Howard Steinberg as vendor, Birenbaum and Steinberg being solicitors in trust acting under the power of sale pursuant to a mortgage. At that time Mitsiou was the sole owner of the real property, subject to the power of sale held by Birenbaum and Steinberg. Mitsiou had first acquired an interest in the property in November 1979 together with a numbered Ontario company as partner. It became the sole owner in August 1981 when it bought out the partner. Sometime between August 1981 and February 11th, 1982, Mitsiou defaulted on its mortgage and Birenbaum and Steinberg acted under their power of sale to sell the property to the respondent. Title to the land and premises transferred to the respondent on February 11th, 1982 for the total consideration of $730,000.00, all of which was ascribed, for purpose of the land transfer tax, to the value of the land, building, fixtures and goodwill. While no value was attributed for that purpose to the chattels acquired, the Agreement of Purchase and Sale includes, in addition to title to the land and premises, any right that the vendor may have in, inter alia, all equipment, machinery, furniture, cutlery, glassware and generally all other items currently on the premises and necessary for the operation of the business. The Agreement included as well the right to use the name "Hollywood Tavern". Koumoudouros disclaimed any need for or interest in any of the chattels and fixtures, but his own evidence indicates that he in fact received, used and continues to use many of the items listed in the "Inventory of Chattels and Fixtures" which is Schedule "A" to the Agreement of Purchase and Sale. The respondent accepted, along with title to the property, the obligation to comply with a number of outstanding work orders from various departments of the Borough of Etobicoke. In a separate transaction, the respondent purchased the inventory of beer and spirits for $2,000.00 from Alek Korn.
The Hollywood Tavern held a dining lounge license, a lounge license and an adult entertainment license. The Agreement of Purchase and Sale was conditional on the respondent being able to acquire these licenses. It did acquire by transfer the dining lounge and lounge licenses, but the entertainment license was not transferable and in that case, the condition was that the respondent's application for an entertainment license be accepted by the appropriate municipal authority. According to Koumoudouros, that was the most important license of the three because, without it, he could not carry on the type of business that he planned for the newly acquired location.
When Mitsiou was the operator of the Hollywood Tavern, it employed two persons as bartender/waiter, one waiter, some part-time waitresses and a cleaner. The respondent continued to employ these persons, but the two who were bartender/waiter became bartenders only, the waiter worked for a while and quit and two of the part-time waitresses became full-time waitresses and it appears that two continued to work part-time. In addition the respondent hired one more full-time bartender and two new busboys. There is no doubt that the respondent sought to instill a higher quality of service to the customers by the bartenders, waiter and waitresses, but their work remained primarily that of preparing and serving alcoholic beverages.
The respondent has operated a restaurant and tavern business in the name of the House of Lancaster since 1972. In 1976, the House of Lancaster introduced a burlesque-type of entertainment, using female dancers who performed in the minimum costuming permitted by law and when they were not dancing, they served alcoholic beverages to the customers. When they were serving customers as waitresses, they were clothed or unclothed in the same manner as when they were dancing. The business closed in May of 1980 because it lost the right to occupy the premises. The respondent sought a new location for the business. The critical requirements of a new location were that it have appropriate, transferable liquor licenses and an adult entertainment license, the existence of which would allow the House of Lancaster to apply for a similar license. The respondent first looked at the Hollywood Tavern in March 1981, but no deal was concluded. It bought another location conditionally, but the sale was not finally concluded because of problems with respect to the entertainment license. Koumoudouros told the Board that, all this time, he was looking for premises in which he could continue the business of the House of Lancaster.
Counsel for the respondent asks the Board to pay close attention to the plain meaning of the words in subsection 2 and 3 of the section 63 "where an employer.., sells his business . These words, he contends, require that the business being sold be the business of an employer. Counsel argues that the facts concerning the transaction before the Board in the instant case, particularly those with respect to the conveyance of the real properly, cannot be brought within the requirements of the quoted words. Counsel takes the position that the "bus iness…" was operated by Mitsiou and that the vendors were two solicitors in trust, Birenbaum and Steinberg. He claims that the latter fact is demonstrated by the chain of events beginning with the transfer of interest in September 1972 from Korn Hotels (Queensway) Limited to Marvin Arnold Goldberg and, following that, Goldberg transferred an interest in November 1979 to Jerry Norman Birenbaum and Howard Steinberg, solicitors in trust who subsequently transferred their interest to the respondent as set out above. Alek Korn was a guarantor of the charge acquired by Goldberg. From that chain of events, which is supported by the evidence before the Board, counsel concludes that the real property transferred from Korn to Goldberg to Birenbaum and Steinberg and finally to the respondent. Therefore the sale of the real property, the principal asset and the only one which the respondent was interested, was between parties separate and apart from Mitsiou who was the employer of the employees affected and the operator of the business. It is contended that even the extended definition of sale in the Act is not enough to encompass this transaction.
Counsel does admit the presence of some of the indicia of a sale. The respondent acquired limited, or a bad title to chattels and accepted the risk of these being claimed by creditors of Mitsiou because they were of little worth to the respondent. There was a sale of whatever interest the mortgagees in default have in the name of the business, Hollywood Tavern, a name which the respondent was not intending to use and in fact ceased using on and after March 25th, 1982. There was a transfer to the respondent of two liquor licenses, but not the adult entertainment license which was not transferable. Finally, there was a transfer of some of the employees of the predecessor employer, but this was a voluntary action of the part of the respondent and it was, in counsel's view, under no obligation to continue to employ these persons. Counsel asserts, on the other hand, that a number of significant indicia of a sale were absent. There was no contractual transaction between Mitsiou and the respondent with respect to the transfer of the business, in other words the operation of the tavern and restaurant business. There is no sale of goodwill and no undertaking of the predecessor not to compete with the respondent. Nor was there any contractual provisions for the sale and purchase of the beverage inventory which the respondent acquired from Alek Korn.
Finally, counsel for the respondent points out that the total purchase price of $730,000.00 was attributed wholly to the real property for purposes of payment of the land transfer tax because the title to the chattels was uncertain and the vendors may or may not have owned them, besides which the chattels were of no worth or consequence to the respondent and it was immaterial whether he obtained them as part of the transaction for the real property.
Counsel asked the Board to conclude that these facts establish that the respondent got precisely what it was after from the start; that is a "location" to which he could transfer his pre-existing successful business, the House of Lancaster. In other words, out of the transaction the respondent obtained the land and buildings, the essential physical assets, together with the liquor licenses. Thus the respondent has bought a location for his business and that transaction does not constitute a sale of a business within the meaning of section 63.
Were the Board to agree with counsel's argument that there has been no sale within the meaning of section 63 of the Act between Mitsiou and the respondent; it would be closing its eyes to what has, in fact, taken place. On February 12th, 1982, the respondent stepped in and took over operation of the restaurant and tavern business of the Hollywood Tavern and continued to operate it for five weeks before closing it for a week and re-opening as House of Lancaster on March 25th, 1982. In so doing. the respondent employed most of the same persons who have been employed by Mitsiou, operating under the liquor licenses which had been transferred from Mitsiou to Korn Hotels (Queensway) Limited and on February 12th to the respondent. Under the terms of the Agreement of Purchase and Sale between the respondent and Birenbaum and Steinberg, the respondent was entitled to use and did use the name Hollywood Tavern and to make use of all of the chattels remaining in the premises. The chattels included such items as some 160 tables and 400 chairs, glassware, bar equipment and other fixtures and equipment associated with the operation of the business. The respondent was also entitled to use and did use the kitchen equipment necessary for the preparation and serving of food and retained the same food concessionaires who had been providing the essential food service when Mitsiou was operating the tavern and restaurant business. While the respondent acquired the beverage inventory in a separate transaction with Alek Korn, having regard to all of the facts before the Board, this transaction is clearly part and parcel of a type of transaction for which section 63 is designed. There can be no doubt in these circumstances that there has been a continuation of the business of the Hollywood Tavern on and after February 12th, 1982 until it closed the week prior to March 25th. The question is whether that continuation resulted from a sale of the business within the meaning of the Act from Mitsiou to the respondent.
While counsel for the respondent was careful to trace the conveyancing of the real property from Korn Hotels (Queensway) Limited through to the respondent to the exclusion of any part by Mitsiou and while this may be an accurate interpretation of the evidence from the standpoint of commercial law, it ignores at least one significant fact in terms of section 63. It was the respondent's own evidence that Mitsiou acquired an interest in the real property in November 1979 in partnership with a numbered Ontario company and in August 1981 acquired that partner's interest. The evidence is unequivocal that Mitsiou was at that time the sole owner of the real property, but subject to the power of sale held by Birenbaum and Steinberg pursuant to the charge which they acquired from Goldberg in November 1979. The parties are agreed that Mitsiou defaulted on its mortgage and it is common ground that, as a result of its default, Birenbaum and Steinberg were exercising their power of sale when they sold the real property to the respondent. Thus Mitsiou's interest in the property was conveyed to the respondent by the exercise of that power of sale. The inter-position of a third party in such a transaction previously has been found by the Board not to be relevant as long as a transfer takes place. (Marvel Jewelry' Ltd., [1975] OLRB Rep. Sept. 733). Thus the Board is satisfied that the transfer to the respondent from Birenbaum and Steinberg of the real property, together with whatever interest they had in the chattels and fixtures, constitutes a sale by Mitsiou to the respondent and the Board so finds.
While the respondent may choose to disavow any interest in or attach any importance to the chattels which had been made part of the sale, and to characterize the entire transaction as merely the acquisition of a real property and location for his existing business, the conveyance documents and other facts purport the transaction to be more than a sale of assets. Whether or not the respondent acquired clear title to the chattels, their acquisition and use allowed the uninterrupted operation of the business from the time he acquired it on February 12th until closed as aforesaid. Of even greater significance, the Agreement of Purchase and Sale purports to convey to the respondent "Any right the vendor may have to the use of the name Hollywood Tavern." and "Any right and interest the Vendor has or may have in the existing liquor licenses of the Hollywood Tavern." The respondent attached great importance to the licenses, particularly to the adult entertainment license, since no new entertainment licenses are being issued in Metropolitan Toronto and the respondent was dependant upon the predecessor's previously acquired rights in having an application for such a license accepted. The transfer of the two liquor licenses avoided the delay of the normal waiting period for new licenses and allowed continuity of the business without interruption. The right to use the name Hollywood Tavern meant that the respondent could continue the business "as is" without risking tarnishing the name House of Lancaster until he was ready to carry on the style of business he believes that name to represent. In addition, the respondent continued the same food operation with the same concessionaires, an operation essential to the dining lounge license. On these facts and all of the facts set out herein, the Board concludes that there has been a sale of a business from Mitsiou to the respondent within the meaning of section 63 of the Act and, therefore, the respondent is the successor employer within the meaning of that section.
It is necessary therefore to deal with the respondents' alternate position that it is entitled to the relief afforded by section 63(5) of the Act because the respondent has changed the character of the business acquired so that it is substantially different from the business of the predecessor employer. Section 63(5) allows the Board to terminate the bargaining rights of a trade union in circumstances where the business of the successor employer is substantially different from that of the predecessor. The Board's decision in Win co-Steak'n Burger, [1974] OLRB Rep. Nov. 788 describes the kind of situation for which section 63(5) of the Act was designed in the following terms:
"The implementation of subsection 5 of [section 63] involves the revocation of the remedial effects otherwise flowing from the provisions of [section 63] of the Act following the sale of a business. Having in mind the fact that subsection 5 runs against the flow of the general intent of the section, the Board takes the view that the words 'substantially different' must be viewed by the Board in the formulation of its opinion as involving a fundamental difference affecting the nature of the work requirements and skills involved in the business to the extent that continued representation by the trade union would be inadequate, inappropriate or unreasonable in all the circumstances of the particular case under review.".
The Hollywood Tavern, as operated by the predecessor, was in the business of selling hard spirits, draft beer and bottled beer under a dining lounge license and a liquor license. It did so in two rooms, a smaller one for men only with a capacity of approximately 150 persons and a larger one with a capacity for approximately 350 men and ladies. These rooms were serviced by the employees described in paragraph 5 above from two bars. Snack type food was available from a snack bar operated by the concessionaires. The predecessor held an adult entertainment license and provided entertainment in the form of burlesque type dancing and, from time to time, live musical entertainment. Cigarette vending machines and coin operated games were also available. The respondent continued the same type of business until it reopened as the House of Lancaster on March 25th. In the intervening period the respondent had substituted different suppliers for the cigarette vending machines and the coin-operated games, except for a shuffle board game which was one of the chattels acquired through the Agreement of Purchase and Sale. The respondent had also completed most of the repairs required by the various work orders against the premises, had redecorated the smaller of the two rooms and had built a new stage dividing the two rooms and which could be viewed from both of them. New stage lighting worth $30,000.00 was also installed. The two service bars remain essentially unchanged. The respondent also took steps to provide a higher quality of service to the customers as already noted in paragraph 5 above, by having the waiter and waitresses take the customers orders and supply them from the two service bars which were attended by full-time bartenders and, to assist them, hired two busboys. The major and by far the most significant change made by the respondent was the introduction of the practice of having the dancers serve the customers when they were not dancing and while wearing the minimum costuming required under the applicable by-law. In other words the respondent introduced the same entertainment and service policy which had made its business successful at its prior location. Whereas the predecessor had been engaging only five of six dancers prior to the sale and did not have them serving the patrons, the respondent engaged some two dozen dancers per week and when they were not dancing, had them serve drinks to the customers.
That is the essential difference between the operation of the Hollywood Tavern and the operation of the House of Lancaster, that plus the improved quality of service which the respondent is striving for. Be that as it may, the continuing focus of the business is the sale of alcoholic beverages and that has not changed, except that the application of the respondent's entertainment and service policy has multiplied the revenue compared with the predecessor operation by some four to five times. In labour relations terms, except for the entertainer/waitresses, the nature of the work has not changed from that of preparing and serving alcoholic beverages so there has been no change in the nature of the work requirements and skills involved in the business. The entertainer/waitresses, when serving drinks to the patrons employ the same skills as persons hired only for that purpose. There is no doubt that they employ different skills when they are entertaining the patrons. These entertainers are engaged through agencies and are under individual contracts which purport to pay them a fixed fee for the week, clear, out of which the contract also purports to require them to discharge their own statutory obligations for the payment of such things as income tax, unemployment insurance and Canada Pension Plan. Therefore, if there is going to be any problem with respect to the continued representation by the trade union, it would be with respect to these persons. Applicant counsel admits that there may be some difficulty in establishing that these persons are employees within the meaning of the Act when they are working as entertainers. In view of that admission, it would be up to the applicant whether it would seek to represent any of them in their capacity as entertainers and whether it would attempt to negotiate how much serving of customers they would do. As the Board has already noted, there is no difficulty with the applicant continuing to represent those employees who are engaged only in the serving of customers with alcoholic beverages. In those circumstances, the possibility of the problem just adverted to is insufficient to cause the Board, in the words of Winco-Steak'n Burger, supra, to revoke".., the remedial effects otherwise flowing from the provisions of [section 63].. ." and to grant the respondent the relief under subsection 5 of section 63 which it seeks.
The final issue then is whether the applicant has rights pursuant to either subsection 2 or 3 of section 63 as a result of the sale of the business. The applicant's collective bargaining relationship at the location began with the issuing of a certificate by the Ontario Labour Relations Board on August 6th, with respect to employees of the Hollywood Tavern. According to Joe Leithwood who testified at the hearing into the instant application, there have been a series of collective agreements since then. It was his evidence that the applicant's usual practice is to negotiate a master collective agreement with The Hotel Association of Metropolitan Toronto for those licensed establishments which are represented by that Association. The applicant will then sign separate short-form agreements with the proprietors of other licensed establishments by which they agree with the applicant to be bound by the terms of its collective agreement with the Association. This has been the consistent practice of the applicant over a substantial number of years and is frequently adverted to in Board decisions involving the applicant. For example, see the Board's decision in Cabbagetown Inn Limited, issued May 1, 1981, (unreported), at paragraph 10. It was Leithwoods's evidence that he and Frank Cortese, secretary/treasurer and business agent of the applicant, signed on October 30th, 1981 a short-form agreement with John Mitchell binding the Hollywood Tavern to the current collective agreement with the Association which is effective from May 1st, 1981 to April 30th, 1983. Prior to signing that document, the applicant had sent to Mitchell a letter asking whether he would agree to be bound by the applicant's agreement with the association. That document was produced in evidence before the Board and Leithwood testified that it had been signed by Mitchell. The signature on the latter document does appear to be different than that purported to be Mitchell's signature on the short-form agreement and counsel for the respondent challenged the credibility of both Leithwood's testimony on that point and the documents themselves. The Board is satisfied that the signature purported to be Mitchell's on the short-form agreement appears the same as the signature also purported to be that of Mitchell's on Schedule "A" to the Agreement of Purchase and Sale. The letter to Mitchell asking him whether he would agree to be bound by the Association agreement is irrelevant as to whether he did in fact bind himself to that agreement, except insofar as it raises the question of the credibility of Leithwood's testimony. His demeanor as a witness was entirely credible in all other respects and, in light of the evidence by which the Board is able to satisfy itself that Mitchell did sign the short-form agreement, the Board finds that the Hollywood Tavern was bound to the collective agreement between The Hotel Association of Metropolitan Toronto and the applicant at the time of the sale of the business.
The Board declares therefore that the respondent is bound by the collective agreement between the applicant and the Hollywood Tavern, the name under which Mitsiou Holdings Limited had been carrying on business, as though the respondent had been a party thereto.