Ontario Labour Relations Board

[1983] OLRB Rep. October 1706

1723-82-R London & District Service Workers' Union, Local 220, SEIU, AFL, CIO, CLC, Applicant, v. Price Waterhouse Limited and Canadian Imperial Bank of Commerce, Respondents.

BEFORE: R. A. Furness, Vice-Chairman, and Board Members B. L. Armstrong and E. J. Brady.

DECISION OF THE BOARD; October 24, 1983

1. In a decision dated July 8, 1983, the Board dismissed the application for relief under sections 1(4) and 63 of the Labour Relations Act. In that decision the Board stated that reasons would be given at a later date. These reasons are now set forth.

2. It was the position of the applicant that a collective agreement was entered into between the applicant and Willson Nursing Homes Limited ("Willson") on June 9, 1982, and that as a result of a sale of a business by Willson to Price Waterhouse Limited ("Price") and to the Canadian Imperial Bank of Commerce ("CIBC") the respondents were bound by the collective agreement and were required to bargain with the applicant with a view to making a new collective agreement. The applicant alleged that on or about November 23, 1982, Price was appointed receiver and manager of Willson by the CIBC and that Price and CIBC have continued to run the business of Willson and to employ members of the applicant. Subsequently, the applicant notified the Board that it wished to make representations as to the application of section 1(4) of the Act.

3. Willson sold its nursing home business on or about May 12, 1981, to Romi Nursing Homes Ltd. ("Romi"). Romi had previously been incorporated on March 31, 1981, and is the present operator of the business being carried on as a nursing home in St. Thomas. In a general security agreement dated November 9, 1982, Romi charged in favour of and granted to the CIBC a security interest in all of the undertaking property and assets of Romi. In a debenture dated May 11, 1981, Romi, together with Mirdem Nursing Homes Limited ("Mirdem"), charged to and in favour of United Dominions Investments Limited ("United") all of Romi's undertaking, property and assets to secure the sum of seven hundred and fifty thousand dollars. Mirdem operates a nursing home in Hamilton and is of no significance in this application. In an agreement dated October 1, 1982, United assigned the debenture to the CIBC and all of the monies secured thereunder. On November 12, 1982, the CIBC duly demanded from Romi payment of Romi's indebtedness to the CIBC as secured by the general security agreement and debenture. Romi failed to make the payments so demanded and on November 22, 1982, the CIBC appointed Price as receiver and manager of Romi's undertaking, property and assets pursuant to the terms of the debenture. Price has also taken possession of Romi's assets, including the business.

4. Price has continued to run the business and has retained all of the employees previously employed by Romi at the wage scale set forth in the collective agreement at that time and has abided by the terms of the collective agreement during the period of its operation of the business. Price accepts no responsibility for any breaches which Romi may have committed prior to November 22, 1982. Price and the CIBC have denied that they are successor employers within the meaning of section 63 of the Act, and further deny that the appointment of Price by the CIBC as receiver and manager of Romi's undertakings, property and assets, constitute a sale within the meaning of section 63 of the Act. At the hearing, Price and the CIBC further denied that the provisions of section 1(4) were applicable to the series of commercial transactions which form the background to this application.

5. The licensee of the Nursing Home under the Nursing Homes Act is Romi and the licence was renewed on May 12, 1982. There was general concern by Romi and by the Ministry of Health about the manner in which the Nursing Home was being operated and on July 27, 1982, Romi entered into an agreement with 430029 Ontario Limited carrying on business as Krizanc Consulting Services to provide administrative and support services to the Nursing Home. The administrator of the Home on November 22, 1982, was replaced by a Mr. Cranwell who thereafter took his instructions from Price. Price, as the receiver manager, looks after all receipts and disbursements for the Home and Krizanc and Mr. Cranwell look after the day to day administration of the Nursing Home. The concerns over the adequacy of the care which put the licence in jeopardy are still the subject of monitoring by the Ministry of Health. The debenture contains the usual provision whereby the acts of Price as receiver and manager are the acts of Romi. The employees of Romi were advised of the presence of Price and when the last salary cheques for the employees were not honoured by the Bank, they were replaced by Price, not as a matter of requirement under the law, in the view of Price, but as a gesture to the employees. Price has also honoured Romi's duty to bargain to make a new collective agreement and has performed this duty through Mr. Cranwell, the administrator. A conciliation officer was appointed and the differences of the parties were submitted to arbitration under the Hospital Labour Disputes Arbitration Act. Two grievances were filed under the collective agreement since the appointment of Price.

6. It is agreed that the CIBC has merely acted in order to protect its security by virtue of the debenture and general security agreement and that the appointment of Price was for no improper reason. CIBC is faced with various alternatives in realizing its security. It may elect to sell the assets of Romi, or it may elect to operate Romi through the receiver/manager as a going concern and then endeavour to find a suitable purchaser for the Nursing Home, bearing in mind that the consent of the Ministry of Health is necessary for the transfer of the licence. It appears that the CIBC has chosen the latter route and is running the business until a suitable purchaser can be found.

7. The applicant urged the Board to find that there was a sale of a business within the meaning of section 63(l)(b) of the Act and argued that the Board should look to see who has the effective control of the running of the Nursing Home. It was argued that while Romi and Willson continued to exist, Willson had passed out of the picture and that Romi has no effective control over its assets or in running the Nursing Home. While the applicant agreed that the CIBC was not in the business of running a Nursing Home, and while it accepted that the CIBC was merely trying to realize on its security, it felt that the fact that there was no effective limit on how long the CIBC may run the Nursing Home, required the Board to find that the CIBC and Price were the successor employers in the context of labour relations. The applicant argued that the agency relationship which is said to arise under the debenture, whereby the agent has more power than the principal in commercial law, can have no effect in labour relations law. The Board was asked to look at the substance and not the form of the nature of the relationship between Romi, Price and the CIBC. Acknowledging that the receiver/manager was appointed by instrument and not by the court and is, therefore, an agent of the company, the applicant saw no difficulty in regarding both the CIBC and Price as the successor employers. The applicant posed the question of whether there had been a disposition of the assets and, if so, who had control over the hiring, firing, discipline, expenditures and existing contracts, customer lists and good will. It was urged that there had been a de facto disposition of the business and the assets of Romi.

8. In the alternative, it was the position of the applicant that the successor employer is the CIBC and that the receiver/manager, Price, is its agent. In the further alternative, it was the applicant's position that if the CIBC is not the successor employer then Price ought to be considered the successor employer. With respect to the requests for relief under section 1(4) of the Act, the applicant argued that Romi was not making any of the decisions and that they remain merely nominal owners who may have, at the most, certain revisionary rights. Since the decisions were made by Price, there was, in effect, a common ownership, control of employees and a representation to the public as a single integrated enterprise. It was also argued that another related employer could be the CIBC, which has the ultimate control of the destiny of the Nursing Home. The applicant argued that the CIBC and Price between them were making all of the effective decisions in regards to labour relations.

9. In opposing the requests for relief under sections 1(4) and 63, the CIBC and Price viewed their position in this application as being asked to guarantee wages because money had been loaned in order to promote a business. The respondents argue that the business of Romi continued to exist and that it had not been disposed of, and that the action before the Board was premature. It was the position of the respondents that the present state of the Nursing Home was fairly to be considered as a process of managing a business which had been previously poorly managed and that the action of managing the business was solely to protect the security of the CIBC. The respondents argued that the applicant may bargain, and indeed was bargaining, and that the applicant's position was unrealistic in that it did not take into account the precarious financial position of Romi. The role of the receiver/manager was portrayed as requiring flexibility in a background where final decisions may not always be possible.

10. The respondents characterized the applicant's position as trying to compel the respondents to make good past obligations under the collective agreement before the appointment of Price on November 22, 1982. In the view of the respondents, the applicant was trying to put itself in a special position amongst creditors. The CIBC referred to section 75 of the Bank Act, wherein banks are prohibited from carrying on a trade or a business. The CIBC characterized the introduction of a receiver/manager as a means of insulating the Bank from the prohibitions contained in section 75. It was strongly argued by the respondents that there was nothing in the way of a disposition of a business or assets on the material before the Board. The respondents emphasized that the applicant had not been able to point to any instance where there had been a change in the ownership of any of the property or resources of Romi. The CIBC argued that the appointment of a receiver/manager by instrument in an attempt to preserve the business and find a new purchaser was far better than the prospect of bankruptcy where there would be an immediate loss of jobs.

11. The respondents argued that the Board ought not to exercise its discretion under section 1(4) of the Act, because this was not a situation where there had been any shifting or juggling of employees and where the applicant knew with whom it was dealing. The respondents emphasized that the present intercession of the CIBC through Price in the business of Romi was caused solely by the financial circumstances of Romi. The respondents further argued that none of the prerequisites for the operation of section 1(4) had been established before the Board.

12. Price was clearly the agent of Romi when it entered into control of the Home on November 22, 1982. The Board does not agree with the criticism of the principal and agency relationship advanced by the applicant. There are valid reasons in commercial law for incorporating the provision in the debenture whereby the receiver/manager is the agent of the debtor company. It is, of course, not always possible for a receiver/manager to secure the cooperation of the officers of a debtor corporation. The principal and agent relationship which exists between Romi and Price is entirely realistic in the context of commercial law. Price managed the Nursing Home for the benefit of Romi and, in our view, the application under section 63 is premature.

13. Price was appointed receiver and manager by means of a private appointment as opposed to a court appointed receiver/manager. This appointment, sometimes referred to as an instrument appointment, has previously been considered by the Board in Price-Waterhouse Limited, [1979] OLRB Rep. Jan. 50, where the Board stated at page 51:

14. The Board considers that this application has been prematurely brought. In order for a sale of a business within the meaning of section 55 [now section 63] 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 the expenses". In these circumstances, it cannot be said that a disposition within the meaning of section 55 [now section 63] has occurred.

15. It is clear that in this application the applicant still holds bargaining rights and is in a position to negotiate a collective agreement. The applicant would, of course, prefer to negotiate a collective agreement with one or two solvent entities, such as the CIBC or Price. However, the business of running the Nursing Home has not extinguished the bargaining rights, and as long as the business of running the Nursing Home continues to function the obligations between an employer and a trade union still exist. It is quite clear that Price has honoured the terms of the relevant collective agreement since it has been appointed receiver and manager. Since there has been no sale or disposition within the meaning of section 63, it therefore follows that this application under section 63 is premature and must be dismissed.

16. The criteria adopted by the Board with respect to the application of section 1(4) of the Act have been set forth in Walters Lithographing Company Limited, [1971] OLRB Rep. July 406 at pages 412-414. In our view, the applicant has not established any of the criteria set forth in that decision. There has been no showing of common ownership or control. There has been no indication of a representation to the public of a single enterprise and no evidence that the supervision and labour relations fall under common control. This is not a case where an employer is moving around employees to the detriment of a trade union. The employment relationship is known by the applicant, the identity and nature of the principal and agent relationship between Romi and Price is known to the applicant and the applicant has been bargaining with Romi through Mr. Cranwell, the administrator, who is controlled by Price. Section 1(4) is not a means for collecting Romi's uncollectable collective agreement debts from its solvent creditor, the CIBC. In a recent decision of the Board in Total Marketing Incorporated, [1983] OLRB Rep. April 616, the Board was asked by a trade union to declare that the parent company of an insolvent subsidiary with which it had undischarged collective agreement obligations, was a related employer for the purposes of section 1(4). That application had been brought solely for the purpose of realizing otherwise uncollectable claims against a related company which was solvent. In declining to exercise its discretion to make a declaration pursuant to section 1(4) of the Act, the Board made the following remarks:

17. It is clear that [the insolvent employer] has ceased operations and that the work which it performed is no longer being done. There has been no transfer of work, and in that sense, no undermining or erosion of the applicant's bargaining rights. If it appeared on the material before us that the respondent had spun off a similar company to do identical work, the case might be more compelling for relief, whether by way of declaration of successorship under section 63 of the Act or by the application of section 1(4). In those circumstances, the Board could, by the operation of section 1(4) pierce the corporate veil in the interests of protecting the bargaining rights (see, E. G., Devon Studio, [1980] OLRB Rep. July 961). Those facts are not shown in the instant case. The purpose of section 1(4) of the Act is to preserve bargaining rights, it is not intended to give a party to a collective agreement the right to a "deep pocket" recovery of an unsatisfied debt against a related corporation.

(See, also, Chandel Fashions, 11982] OLRB Rep. June 828 at pages 848-849.)

16. Clearly the facts of this case do not indicate an erosion of bargaining rights by means of a scheme to defeat those bargaining rights. The facts of this application establish a situation where the financial position of Romi, the operator of the Nursing Home, has called for a creditor to take steps to protect its security. The applicant in all of the circumstances of this case has singularly failed to establish its entitlement to any relief under section 1(4) of the Act and its application under that section is dismissed.