Teamsters Local Union No. 879 v. 268121 Ontario Limited, 1983 CanLII 876

Ontario Labour Relations Board

[1983] OLRB Rep. June 886

1920-82-R Teamsters Local Union No. 879, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Applicant, v. 268121 Ontario Limited and Hamilton Cargo Transit Limited, and Peat Marwick Limited, Respondents, v. Labourers' International Union of North America, Local 1267, Intervener, v. A Group of Employees, Interveners.

BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members F. W. Murray and W.F.Rutherford.

APPEARANCES: Ken Petryshen, Joe Contardi and Dan Mcllravey for the applicant; Clifford Neal for 268121 Ontario Limited, Paul G. Fisher for Peat Marwick Limited; John R. McPherson, and Joseph MacDonald for the intervener union; Charles Corrigan for the employee interveners.

DECISION OF M. G. MITCHNICK, VICE-CHAIRMAN, AND BOARD MEMBER W. F. RUTHERFORD; June 9, 1983

1. This is an application under section 63 of the Labour Relations Act. The matter was before the Board on an earlier occasion, but the Board, by decision dated February 15, 1983, adjourned the application pending completion of a Proposal to be made to the creditors of Hamilton Cargo Transit Limited. That Proposal was accepted by the creditors, and the application has now been heard by the Board.

2. Hamilton Cargo Transit Limited has been in the business of providing local cartage service in the Hamilton area, principally the haulage of steel. The company operated under a number of licences granted by the Ontario Highway Transport Board, with its terminal most recently located on Woodward Avenue in Hamilton. As a result of growing financial difficulties, the company was placed in receivership on October 29, 1982, by its chief secured creditor, the Canadian Imperial Bank of Commerce. Peat Marwick Limited was named as Receiver and Manager. The applicant Teamsters Local has had a lengthy collective-bargaining relationship with Hamilton Cargo, the most recent collective agreement between the two expiring October 30, 1982.

3. By agreement dated November 15, 1982, the Bank covenanted to sell to a third party, Cole Equipment Rental Company Limited, all of the Bank's security interest in what essentially were all of the Hamilton assets of Hamilton Cargo Transit Limited, for the price of $350,000. The transaction was contingent upon a number of matters, including the approval of the Ontario Highway Transport Board of the transfer of the licences, and satisfactory financing arrangements. The agreement contemplated that the Bank would ultimately finance the purchase of the business by Cole Equipment, and if the Bank decided against doing so, Cole Equipment had the option of terminating the agreement. On the same date, the Receiver and the Bank entered into a further agreement with a second company, 268121 Ontario Limited, for that company to operate and manage the business of Hamilton Cargo until completion of the sale transaction contemplated by the first agreement. The purpose of this second agreement was, as the Receiver put it, "to preserve the licences and business of Hamilton Cargo, so that there would be something left to sell at the end". Mr. Clifford Neal, the principal behind 268121 Ontario Limited, confirms that this was the understanding and intent of his involvement. Mr. Neal is not an owner in Cole Equipment Rental Company Limited; that is a company owned principally by Mr. Hugh Cole, together with two other minor shareholders not related to Mr. Neal. Mr. Neal, however, appears to have negotiated the sale of the business on behalf of Cole Equipment Rental Company Limited, and the Bank's decision whether to lend the funds for the purchase price to Cole Equipment Rental was to be based on the credit-worthiness of both Mr. Cole and Mr. Neal. It would appear, therefore, that the full participation of Mr. Neal in the final transaction has yet to be explored. Mr. Neal did acknowledge that he and the numbered company have a close working relationship with the Cole group of companies (principally with Mr. Cole's operating company, Cole Construction Limited) and that he expected to reap a benefit from the ultimate sale of this business to Cole Equipment Rental (a holding company) by being permitted to continue to carry on the business as manager for that company. In keeping the entire transaction in perspective it might also be noted that if the agreement of purchase and sale to Cole Equipment Rental is terminated for any reason, the interim management agreement with 268121 Ontario Limited immediately terminates as well.

4. 268121 Ontario Limited has in fact been carrying on the business since November of 1982, primarily through the use of the existing employees and broker-drivers of Hamilton Cargo. Mr. Ron Foxcroft, one of the two former shareholders and managers of Hamilton Cargo, also continued to be employed in a managerial capacity for a period of time by the numbered company. The numbered company has road-hauling operations of its own centered in St. Catharines, and three or four drivers with their rigs are, from time to time, asked to report for duty at the Hamilton Cargo terminal on Woodward Avenue. This, Mr. Neal explained, is only on an 'last needed" basis, and in fact occurs, according to Mr. Neal, only "occasionally". 268121 Ontario Limited does, however, have a collective agreement with the Labourers' International Union of North America, Local 1267, covering its operations in various municipalities across the province, including Hamilton, and Mr. Neal has, since the assumption of the operation began, applied that collective agreement to all employees engaged in the operation of the Hamilton Cargo business. This includes the required remission of union dues by the company to Local 1267, and the payment of all drivers at the rate specified in that collective agreement (being 50 cents an hour less than what the Hamilton Cargo drivers had been receiving under their Teamster agreement).

5. Two of the former Hamilton Cargo drivers, John Middleton and Charles Corrigan, appeared at the initial hearing of the Board in February, and Mr. Middleton filed a document signed by a number of individuals indicating that they "no longer wish to be represented by the International Brotherhood of Teamsters, Local 879". That panel of the Board noted that the document had not been filed in the manner set out in the Notice to Employees of the application, but went on to indicate that the weight, if any, to be accorded the document as well as the role of Mr. Corrigan and Mr. Middleton in the proceedings were matters best left to the panel of the Board which would deal with the application on its merits. The Registrar was accordingly directed to give both Mr. Corrigan and Mr. Middleton notice of the new hearing date in this matter. The Registrar has done that, but only Mr. Corrigan appeared at the subsequent hearing. Mr. Corrigan did not sign the document previously filed with the Board, nor does he support it. The Board accordingly has no viva voce evidence whatsoever before it to identify the individuals named on the document, nor to satisfy the Board in some measure that it represents the actual wishes of the persons who signed. On that basis alone, therefore, the Board indicated at the hearing that it would give the document no weight, without deciding what effect, if any, the document might otherwise have had. At the second hearing a fresh document was filed, however, by Mr. Corrigan, signed by a number of individuals affirming their support for Local 879 of the Teamsters. The Board indicated that in the context of these proceedings the greatest effect that the document might have would be to cause the Board to direct the taking of a representation vote between the two competing unions, but that as it was only the Labourers' Union which felt that such a vote was necessary, a further inquiry into the circumstances surrounding the document was unnecessary. The Teamsters made it clear that they were not relying upon the document in support of their submission that the Board ought simply to declare that the Teamsters agreement continues to apply, without the necessity of conducting a representation vote.

6. The applicant at the previous hearing had also requested the Board to add Cole Equipment Rental Company Limited as a respondent, since that company had apparently purchased all of the shares of Hamilton Cargo Transit Limited. The applicant also filed a letter requesting the Board to consider the application of section 1(4) in this matter. The Board did cause notice of the proceedings to be sent to Cole Equipment Rental Company Limited, as requested, but, based on the misinformation of the applicant and the Receiver, apparently to the wrong address. At the hearing the section 1(4) allegation was not proceeded with, and in light of the Board's disposition of this matter, the possible lack of notice to Cole Equipment Rental Company Limited will not be material.

7. The applicant acknowledges that an application for a "sale of a business" declaration may at this point be premature with respect to the pending sale to Cole Equipment Rental Company Limited, but urges the Board to find that an interim disposition has taken place to 268121 Ontario Limited, through the Receiver. The applicant acknowledges the findings of the Board in various cases, for example, Price-Waterhouse Limited, [1979] OLRB Rep. Jan. 50, that at the Receiver stage, no "sale" can be said to have taken place, but argues that the present case is distinguishable.

8. In the Price Waterhouse case, the Receiver was itself carrying on the business for the insolvent company to protect the Bank's interest while a suitable purchaser was being sought. The Board commented as follows:

7. The Board considers that this application has been prematurely brought. In order for a sale of a business within the meaning of Section 163] to occur, it is necessary that there be a disposition from, in this case, the employer that is party to the collective agreement to another person. An examination of the relationship existing between the company and the respondents reveals that this has not yet occurred. What has happened is that a receiver has been appointed to manage the business - so that the Bank which holds a first charge on the assets and undertaking may enforce its security. Although the receiver is carrying on the business for the benefit of the Bank to which it owes a fiduciary duty, its actions are those of the company which retains the legal and equitable ownership of the assets. Under the terms of the debenture constituting the receiver as the agent of the company, the company is "solely responsible for the receiver's acts or defaults and for its remuneration and expenses". In these circumstances, it cannot be said that a disposition within the meaning of Section [63] has occurred.

In the present case, the agreement between the Receiver, the Bank and 268121 Ontario Limited provides in paragraph 1:

the day-to-day operations of the Company shall be managed by the Manager under the supervision and control of the Receiver.

Beyond that, there are considerable differences, however, between this case and the Price-Waterhouse case. In this case the revenues generated from the operation of the business do not enure to the benefit of either the Bank or the debtor company. Rather, the agreement provides in paragraph 8:

All revenues earned for trucking under the Management Agreement will belong solely to the Manager, subject to all expenses specificallyincurred in those operations under the Management Agreement and will not form part of the monies available to any creditors of the Company.

And in conjunction with this, at paragraph 7:

The Manager shall be entitled to use the Company's equipment and inventory during the term of the Management Period.

In consideration of this, the Manager agrees to pay to the bank as part of the Manager's "expenses" a monthly fixed sum in the amount of $500.00, such payments being intended to partially compensate the Bank for the use of the company's assets secured in favour of the Bank".

9. Again, unlike the Price-Waterhouse case where the Receiver at all times was acting solely as the agent of the defaulting company in the continued operation of the company's business, so that the defaulting company at all times remained responsible, the present agreement provides in paragraph 3:

The Manager shall indemnify the Receiver and the Bank and hold the Receiver and the Bank harmless from and against any operating losses, damages, actions, claims, costs and expenses that are incurred during the Management Period.

The Manager also has the authority and the responsibility for the normal billing and collection of accounts, and, again, does so solely for its own benefit, with the exception of the accounts that were outstanding as of the date that the Manager took over. Specifically, its responsibilities are described in paragraph 5 as follows:

During the Management Period, the Manager shall:

(a) Only operate in accordance with the normal course of the Business and only in accordance with such rates as are filed by the Company with the regulatory bodies;

(b) Prepare and file all reports as required by various government authorities;

(c) Manage the Business of the Company in accordance with the Company's Operating Authorities and all applicable laws, regula­tions and by-laws;

(d) Use its best efforts to promote the interests of the Business of the Company and to protect the rights and interests of the Company in the Business;

(e) Use its best efforts to provide a first class service to the shipping public;

(f) Maintain the Company's accounts, books and records and prepare on behalf of and submit to the Bank and the Receiver monthly cash flow statements and provide the Bank and the Receiver will full and unobstructed access to the said accounts, books and records;

(g) Cause the Company's employees, at the Manager's expense, to take all appropriate steps to collect any and all accounts receivable which are or may be owing to the Company prior to the commencement of the Management Period, the Manager hereby covenanting with the Bank and the Receiver that such funds so received will be deposited in the Bank's Trust as provided in paragraph 10 hereof; provided that "appropriate steps" shall not include the institution of any legal proceedings except upon the Receiver giving instructions to that effect and then at the cost and expense of the Receiver;

(h) Cause the Company's employees, at the Manager's expense, to carry out normal accounting and associated functions such as preparation and delivery of income tax statements as to source deductions for employees, severance notices, etc. for the period ending on the commencement of the Management Period; and

(i) Provide such coverage of insurance for the operation of the company, during the Management Period, and for such amounts as the Bank and the Receiver require, and provide the Bank and the Receiver with proof thereof.

10. From all of the above, it can be seen that, contrary to the situation existing in, for example, the Price-Waterhouse case, any profit from the current operation of the business enures to the benefit of the "Manager". The Bank's sole interest is to have the business preserved in its present form for ultimate sale as a "going concern". Consistent with that, there are certain other limitations on the authority of the Manager. These are set out in paragraph 6 as follows:

During the Management Period, the Manager shall not, without the prior written consent of the Bank and the Receiver:

(a) Mortgage, charge, sell or otherwise dispose of any property of the Company;

(b) Make any expenditures on behalf of the Company out of the ordinary course of business;

(c) Incur any indebtedness on the part of the Company for borrowed money.

The whole arrangement, in fact, has far more of the attributes of a "lease", than it does of a "sale" in the ordinary sense. But the definition of a "sale" under the Act is extremely broad, and in fact uses the term "lease" itself. Section 63(1)(b) provides:

"sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings.

And as the Board has said, for example, in Thunder Bay Ambulance Service, [1978] OLRB Rep. May 467, at paragraphs 11 and 12:

11. ... The word ‘sells’ as used in Section 55 [now 63] of the Act encompasses any transaction or series of transactions which results in the transfer of the predecessor's ‘business' or parts thereof.

12. The expansive meaning which attaches to the term 'sells' as used in Section 55 underscores the purpose of the section. The section is designed to preserve bargaining rights regardless of the legal form of the transaction, where there is a continuum of the business. The Board discussed the intent of the section in Aircraft Metal Specialists Limited, [1970] OLRB Rep. Sept. 702 in the following terms:

'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 (now Section 55) allows the union to pursue that bargaining right when all or part of the business is sold.'

Bargaining rights which are conferred by the Board or by voluntary recognition attach to a particular business and continue by operation of Section 55 so long as the business continues.

The very use of the word "lease" in the definition in the Act seems to leave no doubt that the transfer of assets contemplated by the section may be for a limited period only, and that title to the assets need not pass at all. The inquiry is by no means academic, since an arrangement like the present may continue for months or even years prior to the time that an ultimate sale of the business is completed.

II. The facts in this case leave no doubt that what we have at this point is the continued operation of the "business" of the insolvent. The only question is whether the Board will find a "sale" to have taken place. The applicant is likely correct when it submits that, even in the absence of an interim "sale", no party would be in a position to continue to operate the "business" of the insolvent without regard to the collective-agreement obligations which the insolvent itself was subject to. As the Board noted, for example, in Price-Waterhouse Limited, supra:

8. It should be emphasized that the result of our decision is not that the bargaining rights of the applicant have been lost, which was the result in all previous proceedings in which a Section [631 declaration was refused by the Board. As was recognized by counsel for the respondents, the company's obligations both under the Act and the collective agreement were not extinguished by the appointment of the receiver. So long as the business continues to function, those obligations persist. For that reason, the receiver has continued on behalf of the company to honour the collective agreement.

But as a matter of law, we find the present arrangement to fall within the definition of a "sale", as that term is used in the Labour Relations Act, and the applicant is entitled to the declaration that it seeks. We find that there has been a "sale" of the "business" of Hamilton Cargo to 268121 Ontario Limited, albeit on a limited-term basis, and with the restrictions necessary to preserve the business "as is". In this particular case the business of the predecessor is, subject to the fixed monthly "user" fee of $500.00, being run solely for the profit of the "Manager". No third party is entitled to do that, under the provisions of section 63, without regard to the relationship existing between the predecessor employer and its Union. For the ability of a Receiver to effect a "sale" as agent for the predecessor employer see, e.g., Big Bear Storage, [1979] OLRB Rep. Mar. 164, and the cases cited therein.

12. The Board under section 63 of the Act issues a declaration of legal rights only, and does not, on its own, make any findings of past liability consequent upon that declaration. Where a collective agreement is in effect, subsection (2) of section 63 provides that:

... 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 ...

so that normally a retroactive finding of liability, enforceable through the grievance and arbitration procedures of the collective agreement, flows from a declaration of a "sale" by the Board. In the present case, however, the applicant acknowledges that the "sale" took place after the expiry of its collective agreement, and that it is section 63(3) which applies. That section provides:

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.

The Board in Oxford Manor Nursing Home, [19801 OLRB Rep. Dec. 1786 made it clear that the “freeze" provisions of section 79 do not come into play until notice to bargain has been given to the successor. But in any event, the conflicting claim of Labourers' International Union Local 1267 brings this matter squarely within the contemplation of section 63(4) of the Act.

13. Section 63(4) provides:

Where a business was sold to a person and a trade union or council of trade unions was the bargaining agent of any of the employees in such business or a trade union or council of trade unions is the bargaining agent of the employees in any business carried on by the person to whom the business was sold, and,

(a) any question arises as to what constitutes the like bargaining unit referred to in subsection (3); or

(b) any person, trade union or council of trade unions claims that, by virtue of the operation of subsection (2) or (3), a conflict exists between the bargaining rights of the trade union or council of trade unions that represented the employees of the predecessor employer and the trade union or council of trade unions that represents the employees of the person to whom the business was sold,

the Board may, upon the application of any person~ trade union or council of trade unions concerned,

(c) define the composition of the like bargaining unit referred to in subsection (3) with such modification, if any, as the Board considers necessary; and

(d) amend, to such extent as the Board considers necessary, any bargaining unit in any certificate issued to any trade union or any bargaining unit defined in any collective agreement.

The scope clause of the Labourers' collective agreement provides:

ARTICLE - RECOGNITION

1.01 The Company recognizes the Union as the sole collective bargaining agent of all employees of the Company employed at or working out of Mississauga, Brampton, Hamilton, St. Catharines, Niagara Region and Metropolitan Toronto, save and except foreman, persons above the rank of foreman, office staff and shop employees and persons regularly employed for not more than twenty-four (24) hours per week.

The claim of 268121 Ontario Limited that it had to apply the terms of the collective agreement of its existing bargaining agent to the employees of the new operation, or face a grievance under that collective agreement, appears well founded. The Board would be hard pressed to find that an employer faces liability under both collective agreements in a situation like the present until such time as the Board has made its disposition under subsection (4).

14. Subsection (6) of section 63 provides as well:

Notwithstanding subsections (2) and (3), where a business was sold to a person who carries on one or more other businesses and a trade union or council of trade unions is the bargaining agent of the employees in any of the businesses and such person intermingles the employees of one of the businesses with those of another of the businesses, the Board may, upon the application of any person, trade union or council of trade unions concerned,

(a) declare that the person to whom the business was sold is no longer bound by the collective agreement referred to in subsection (2);

(b) determine whether the employees concerned constitute one or more appropriate bargaining units;

(c) declare which trade union, trade unions or council of trade unions, if any, shall be the bargaining agent or agents for the employees in such unit or units; and

(d) amend, to such extent as the Board considers necessary, any certificate issued to any trade union or council of trade unions or any bargaining unit defined in any collective agreement.

As can be seen, the Board is given under subsection (4) much of the same powers given under subsection (6) cited above. In addition, the Board is given general power under subsection (8) of section 63 as follows:

Before disposing of any application under this section, the Board may make such inquiry, may require the production of such evidence and the doing of such things, or may hold such representation votes, as it considers appropriate.

(emphasis added)

Proceeding under either of subsection (4) or (6), therefore, the Board would have the power to amend a description of one of the bargaining units to the extent necessary to eliminate the conflict in bargaining rights, either after a representation vote, as the Labourers' Union urges, or without one, as the Teamsters submit.

15. In the present case, there is a degree of "intermingling" in the sense that a small number of drivers normally working under the Labourers' collective agreement in St. Catharines are, in effect, "borrowed" from time to time to supplement the Hamilton Cargo operation. This occurs only "occasionally", and the drivers are dispatched out of the Hamilton terminal when it does happen. The original business of Hamilton Cargo accordingly remains a distinct and identifiable one, as well as being, in the words of Mr. Neal, 90% run by persons formerly employed under the provisions of the Teamsters' collective agreement. In dealing with this interim situation, therefore, the Board does not consider it appropriate or necessary to direct the taking of a representation vote. Rather, the Board considers it appropriate to amend the description of the bargaining unit contained in the collective agreement of Labourers' International Union Local 1267 to specifically exclude the business formerly operated by Hamilton Cargo Transit Limited.

The Board accordingly:

(i) declares that a sale of a business has taken place within the meaning of section 63 of the Labour Relations Act between Hamilton Cargo Transit Limited and 268121 Ontario Limited, and that the applicant is accordingly entitled to give notice to bargain to 268121 Ontario Limited;

(ii) declares that the existing collective agreement between 268121 Ontario Limited and Labourers' International Union of North America Oil and Gas Service Domestic & General Workers Union Local 1267 be amended in its scope clause to read:

ARTICLE 1 - RECOGNITION

1.01 The Company recognizes the Union as the sole collective bargaining agent of all employees of the Company employed at or working out of Mississauga, Brampton, Hamilton, St. Catharines, Niagara Region and Metropolitan Toronto, save and except foreman, persons above the rank of foreman, office staff and shop employees, persons employed in the business formerly operated by Hamilton Cargo Transit Limited in Hamilton, and persons regularly employed for not more than twenty-four (24) hours per week.

16. With respect to Cole Equipment Rental Company Limited, the Board finds that any application to have that company declared either a successor or a related employer would be premature at this time, and the request to add Cole as a respondent is accordingly denied.

17. The separate opinion of Board Member F. W. Murray will follow.