Ontario Labour Relations Board
[1984] OLRB Rep. August 1108
0196-84-R; 0197-84-R United Brotherhood of Carpenters and Joiners of America, Local 93, Applicant, v. Doran Construction Limited, Taggart Construction Limited and Taggart General Contractors Limited, Respondents
BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members J. A. Ronson and B. L. Armstrong.
APPEARANCES: David Jewitt, Frank Manoni and Wilf Clermont for the applicant; Ronald Douglas Thomson for the respondent Doran Construction Limited; Robert M. Nelson, Russel W Zinn, Jim Taggart and Dave Parkes for the respondents Taggart Construction Limited and Taggart General Contractors Limited.
DECISION OF THE BOARD; August 28, 1984
1These are consolidated applications under sections 63 and 1(4) of the Labour Relations Act.
2The style of cause in this matter is amended by adding Taggart General Contractors Limited as a respondent in these proceedings.
3It is conceded that the two Taggart companies named as respondents are related companies within the Taggart group, but that is not the issue here. The issue is essentially whether there has been a sale of the business of Doran Construction Limited to the Taggart group, within the meaning of section 63 of the Act.
4At the material time Doran Construction Limited was owned and operated jointly by three principals: Mr. Thomson, an engineer, who was President and Chief Executive Officer; Mr. Kent, a surveyor, who was the main estimator for the company; and Mr. Carber, an accountant, who kept the books for the company. The company operated for a number of years as a general contractor in the construction industry, but in the latter period of its operation began to encounter financial difficulties, largely because of the size of a claim against one of its former customers which was tied up in the courts, and by May of 1983, its bonding had been cancelled altogether. The principals then set about to find other sources of financial backing, and Mr. Thomson approached Minto Construction Limited, a substantial residential builder in the City of Ottawa. The individual that Mr. Thompson approached at Minto indicated that the company would not be interested in investing any funds in Doran, but indicated that it was interested itself in getting into the general contracting field, and asked Mr. Thomson if he would like to come and work for them. Mr. Thomson talked this offer over with his other two partners, and, with both of them being much closer to retirement than Mr. Thomson, and the prospects for further financing not being good for Doran, it was agreed that Doran would be wound up, and that Mr. Thomson would accept the Minto job offer, effective January 1, 1984. Mr. Thomson then advised his foreman to get the equipment of Doran ready for sale.
5Doran and Taggart Construction Limited have always had business dealings together. One day at the end of September Mr. Thomson ran into Jim Taggart, one of the Taggart principals, in the parking lot of the Taggart offices while dropping off a cheque. Mr. Taggart asked Mr. Thomson in a casual way how things were going, and Mr. Thomson replied that things were not going well at all, and that in fact they were in the process of winding Doran Construction up. Mr. Taggart expressed interest at this development, and indicated to Mr. Thomson that he and his partners had recently decided to go into the general contracting business. Mr. Taggart suggested that the principals of the two companies get together to see whether they could not work out some arrangements that would be convenient to both of them.
6That meeting did take place shortly thereafter, in October, between the three principals of Doran and the three principals of Taggart, being James Taggart, Ian Taggart and David Parkes. At that meeting essentially two things were agreed: Taggart would purchase as a package the equipment of Doran Construction, and the three principals of Doran would provide assistance to Taggart on a part-time basis for a period of one year, in order to, as Mr. Thomson put it, assist them in getting into the general contracting business. Mr. Taggart testified that his company had done a bit of general contracting work from time to time over the years, but that he still thought it would be advantageous to have available at this point the particular expertise of the Doran principals, and so took advantage of the opportunity. It was understood that the equipment of Doran would be valued on the basis of their 1982 book value for the purposes of the sale, being $50,000 in total, and that the price to be paid for Doran for the services of its three principals would be $75,000 in addition. Mr. Thomson testified that the transaction did not include the transfer to Taggart of any of Doran's contracts or customers, and added that in this industry, which operates 99% on the basis of the lowest bid, the transfer of such things would not be possible. He stated: "In this business, all of the contacts are personal — that's why Minto has me". Mr. Taggart testified that the purchased equipment went into a common yard for Taggart Construction Limited and Taggart General Contractors Limited but that the bulk of its use was by Taggart Construction. Taggart Construction Limited has been involved essentially in the sewer, watermain, and excavating sector of the construction industry, and Mr. Thomson testified that the bulk of what Doran sold to Taggart would be too small for the normal kind of work which Taggart Construction Limited did.
7As it turns out as well, Taggart General Contractors Limited, the new company began with the assistance of the three Doran principals, shared office space for that first year with Doran Construction Limited itself. Mr. Taggart testified that he did not have enough space in Taggart's present offices for the additional business and so, agreed to take off Doran's hands approximately half of the space to which Doran Construction was under lease at its own location. The Taggart company will be moved to the main Taggart office when construction of addition has been completed. Mr. Thomson testified that Doran cannot be formally wound up until the judgment debt owing in Quebec has been collected, and that Doran has retained one employee in its office for the purpose of opening mail and answering the telephone. Taggart General Contractors Limited, now that it shares the space of Doran Construction Limited, also shares the use of that one employee. Mr. Thomson testified that it was a fair assumption that any calls which now came in for the inactive Doran Construction Limited, would be referred by the receptionist to Taggart General Contractors Limited instead.
8As agreed, the principals of Doran have been assisting the Taggart people to obtain contracts in the general contracting field. Mr. Thomson was active in helping them to take off costs and prepare estimates until mid-December and since that time the bulk of the help has come from Mr. Kent. At all times, of course, the decision as to which contracts to bid on, and the final figure to be entered on the bid, have been the decision of the Taggart principals. Mr. Kent, it will be recalled, was also the Chief Estimator for Doran, and is currently training a younger person in the Taggart organization to take over when the one-year period expires. Mr. Thomson, as a concerned employer, did what he could to assure that the various employees of Doran did not find themselves out of work, and a number of them have been hired on his recommendation by Taggart General Contractors Limited. These included a carpenter and job superintendent, Mr. Geick, as well as Doran's Project Manager, Mr. Chuebryk. A number of Doran's labourers went over to Taggart General as well, although the movement of rank-and-file employees is not significant in "sale of a business" terms.
9Mr. Taggart was asked on cross-examination whether the members of the Ottawa Bid Depository and the Ottawa Construction Association would be generally aware that the principals of Doran were now participating in the preparation of tenders for Taggart General Contractors Limited, and Mr. Taggart answered that he assumed that they would be. To date Taggart General Contractors Limited has bid successfully on a number of projects for the Regional Transit Authority, and that is a customer for whom Doran Construction Limited has successfully bid in the past. Mr. Taggart testified that a primary interest of his group is in obtaining general contracting jobs which have a large sewer and watermain, or excavating component, which can be sublet to Taggart Construction Limited. Some of the projects successfully bid so far, however, do not involve such a component.
10The Board has repeated many times that no simple test can be adopted to determine whether a "sale of a business" has taken place, and in particular that the relevant criteria will vary from industry to industry. In Tat ham Company Limited, [1980] OLRB Rep. March 366, the Board commented at paragraph 26:
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, a particular figuration 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.
Most often the question will arise where the purchaser of certain assets uses those assets in essentially the same kind of business as did the vendor, and the Board:
must be careful to distinguish between the predecessor's "business" and a similar or parallel business which performs work of a similar nature.
See Thunder Bay Ambulance, [1978] OLRB Rep. May 467, at paragraph 13. The Board studies the facts, in the words of The Tatham Company, supra, at page 25, to determine
... the extent to which the various elements of the predecessor's business can be traced into the hands of the alleged successor;
or, as the Board put it in Gordon's Market, [1978] OLRB Rep. July 631, at paragraph 17, to decide whether the purchaser's business can be said to "take its life" from that of the vendor. As the Board went on in Tatham, supra:
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.
11Here the Taggart respondents argue that the business of Taggart General Contractors Limited clearly takes its life from Taggart Construction Limited, rather than from Doran Construction Limited. They describe the ability to be bonded as the "crucial" element in the general contracting business, and point to the fact that Taggart General Contractors Limited's ability to be bonded arose from Taggart Construction Limited. In addition, they argue, Taggart Construction itself had always been engaged to some degree in the general contracting business in conjunction with its main business of excavating, and what occurred was no more than an expansion under Mr. Parkes of its own general contracting business.
12The Board does not agree. While bonding is unquestionably a sine qua non for carrying on this business, it is an entirely internal matter, and not one which distinguishes one business from another, or gives it a competitive advantage, in its dealings with the public. As for the argument that this was simply an expansion of the business that Taggart itself had carried on, the Board acknowledges that that is something which the Taggart group might have done. They might, in the words of Jim Taggart, have "muddled along", gradually building up the kind of expertise, recognition and "personal" contacts that Mr. Thomson and the other Doran principals enjoyed. But that is not what happened. The Taggart group saw an opportunity for a "short-cut", through the sudden availability of the Doran principals, and, as Mr. Taggart testified, they decided to take advantage of that opportunity. Thus the Taggart group acquired, for the critical period of their start-up at least, all of the built-up experience and familiarity of the Doran principals. That such were assets of considerable value even in an industry which operates 99 per cent on a "bid" basis is attested to by the price which the Taggart group themselves were prepared to put on them. If the allocation of the "purchase price" between the tangible and intangible assets of Doran reflected something other than the parties' assessment of their relative worth, no witness came forward to offer evidence in that regard.
13The case does not, in fact, stop there. Apart from acquiring the services of the Doran principals and virtually all of Doran's equipment, the new Taggart company also began its life by operating out of the same premises as Doran, and sharing the same secretary. While walk-in trade is obviously not a factor in this business, this arrangement did mean that any calls coming for Doran with respect to new work could be, and, we are told, probably would be, redirected to Taggart. There was, in addition, a transfer of management beyond the three principals of Doran, in the person of the Project Manager Chuebryk, and the job superintendent Geick. In Tatham Company, supra, the alleged successor acquired the excavating and grading machinery, the "key" employees, the office staff and equipment, the business location and the yard facilities of the Tatham Company. The Board found a "sale of a business" to have taken place, notwithstanding the fact that by the time the company came to be wound up, the business reputation of the Tathams could be said to have been a negligible or even a negative factor. The Board wrote, at paragraph 27:
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 ....
In our own case, there were no "yard facilities" involved, but it was the services of the Doran principals themselves which were carried over into the new company, albeit on a limited-term basis. The comment of the Board above in Tatham appears every bit as applicable to the facts of this case. In our view, Taggart General Contractors Limited did in fact acquire from Doran, at least for the critical months of its "start-up", "the economic organization which is used to attract customers or perform the work" (see Metropolitan Parking Ltd., [1979] OLRB Rep. Dec. 1193, at page 44).
14The respondents also rely upon the decision of the Board in Rivard Mechanical, [1981] OLRB Rep. May 550. There the Board emphasized the importance of the original principal's personal experience and reputation in dealing with questions of a "sale of a business" in the construction industry. But in reaching its decision in that case, the Board also emphasized that the individual behind the vendor company J.G. Rivard Ltd., Jean-Guy Rivard himself, played no role whatsoever in the start-up or operation of the company which the persons formerly associated with him had spun off. Had the new company in the present case not had the transitional advantage which the one-year service contracts with the Doran principals gave to it, the result here might have been the same. But those are not our facts.
15For the reasons set out, the Board concludes that a sale of the business of Doran Construction Limited has taken place to Taggart General Contractors Limited, and declares, pursuant to the provisions of section 6 3(2) of the Labour Relations Act, that Taggart General Contractors Limited was bound, as of the date of the sale, to the applicant's collective agreement.
16The Board has noted the relationship of Taggart General Contractors Limited to Taggart Construction Limited, for the purposes of the finding of a "sale" to the former, and that finding would appear to meet the applicant's concerns in the present application. The evidence is that Taggart Construction and Taggart General Contractors are being carried on a separate and discreet basis, and the Board sees no reason at the present time to extend the impact of the "sale" to Taggart Construction Limited by way of a "related employer" declaration.