Amalgamated Clothing & Textile Workers Union v. Antonacci Clothes Inc. and British Brand Clothes Limited, 1984 CanLII 1035

Amalgamated Clothing & Textile Workers Union v. Antonacci Clothes Inc. and British Brand Clothes Limited

[1984] OLRB Rep. July 887

2942-83-R; 2943-83-R Amalgamated Clothing & Textile Workers Union, Applicant, v. Antonacci Clothes Inc. and British Brand Clothes Limited, Respondent

BEFORE: Owen V. Gray, Vice-Chairman, and Board Members F. C. Burnet and B. L. Armstrong.

APPEARANCES: Paul Cavaluzzo and Jack Matraja for the applicant, M. E. Geiger and Patrick Antonacci for Antonacci Clothes Inc.; Carl Fruitman for British Brand Clothes Limited.

DECISION OF VICE-CHAIRMAN OWEN V. GRAY AND BOARD MEMBER B. L. ARMSTRONG; July 10, 1984

1. These two applications were consolidated at hearing. In one, the applicant claims that "Antonocci Clothes" and "British Brand Clothing" carry on associated or related businesses under common control and direction, and asks for a declaration pursuant to subsection 1(4) of the Labour Relations Act that those respondents constitute one employer for the purposes of the Act. In the other application, the applicant claims there was a sale of business from "British Brand Clothing" to "Antonocci Clothing" in February, 1984, and asks for a declaration that the latter is bound by the terms of a "subsisting collective agreement" between British Brand and the applicant. At the hearing, the applicant filed a copy of the collective agreement on which it was relying. It is an expired collective agreement in which the employer is named "British Brand Clothes Limited", a name which its major shareholder, Carl Fruitman, confirmed was the correct name of that corporate respondent. The style of cause was amended accordingly. Counsel for the alleged successor filed a reply which stated, inter alia, that the correct name of that respondent was "Antonocci Clothing Inc.". That was amended at hearing to read "Antonacci Clothing Inc.". In all of the documentation produced by it at the hearing, including a contract prepared by the solicitor who incorporated it, the alleged successor is named "Antonacci Clothes Inc.". The Board has further amended the style of cause to describe that respondent by the name both it and its corporating solicitor have consistently used to describe it.

2. The parties agree that the applicant's last agreement with British Brand Clothes Limited ("British Brand") expired November 30, 1983; there was no subsisting collective agreement between the applicant and British Brand at the time of its alleged sale of business to Antonacci Clothes Inc. ("Antonacci Clothes"). The parties also agree that if there has been a sale of business from British Brand to Antonacci Clothes, subsection 63(3) of the Act would apply and, subject to the respondent's argument that the Board should order a representation vote, the applicant would be entitled to continued bargaining rights with respect to a bargaining unit of employees "like" the unit of employees of British Brand for whom it had bargaining rights. The unit covered by the terms of the collective agreement filed with the Board consisted of all employees of that respondent, save and except shipping, receiving, warehouse and maintenance employees, foremen, foreladies, persons above the rank of foreman or forelady, designers, office staff and sales staff.

I

3. British Brand has been in the clothing business since 1943. The first witness, Carl Fruitman, became a shareholder of British Brand in 1972. The then major shareholder was Fruitman's father-in-law, Sid Birken; other shares were owned by other members of the Birken family. At that time British Brand manufactured and sold clothing, primarily men's suits and pants, both wholesale to retail clothing dealers and retail from its own showroom. Both the showroom and the production facilities were located at 215 Spadina Avenue in the City of Toronto. When the company's designer left in early 1977, Fruitman and Birken sought out Patrick Antonacci to replace him.

4. The second witness, Patrick Antonacci, has been involved in the clothing business since the late 1940's. He has worked his way up through the business. In the early 1960's, by which time he had risen to cutting room foreman, he had the opportunity to become an assistant designer. He took that opportunity, along with a consequent fifty per cent cut in pay. He worked hard, learned the work of a designer, and was securely employed as a designer with another manufacturer when in February or March of 1977 he was approached by Sid Birken. Birken offered him employment as British Brand's designer. Antonacci turned that offer down. Birken came back with an offer which included the opportunity to purchase a ten per cent interest in British Brand. Antonacci accepted, borrowed funds, purchased the shares offered, and became British Brand's designer as well as a director and shareholder.

5. When Antonacci joined British Brand, it had over one hundred production employees engaged in both "manufacturing" and "contract" or "cut, make and trim" work. "Manufacturing" was described as involving production of clothing from fabric purchased by the manufacturer directly from the mill; in a "cut, make and trim" operation, on the other hand, the contractor fills each retailer's order by producing clothing from fabric supplied by that dealer. In 1977, production was evenly divided between manufacturing and "cut, make and trim" or contract work. At the peak of its business in 1979, British Brand supplied forty to fifty clothing retailers; sixty-five to seventy percent of its sales were made in this wholesale market, the balance were made through the company's retail showroom. The fabrics used in British Brand's manufacturing operation were of extremely high quality; suits made of similar fabrics today would retail for $850.00 to $900.00. The market for expensive men's suits was sharply curtailed by the recession of 1980-81. British Brand's production volume was significantly reduced, particularly in manufacturing. By late 1983, British Brand had only 19 production workers, and ninety-five per cent of the remaining production was contract work for dealers. By that time, British Brand still had on hand fabric with a book value of a half million dollars, most of which had been purchased during 1980. With total production down considerably, British Brand was left with excess production capacity and reduced sales. In 1982, Birken, Fruitman and Antonacci all took a 60% cut in the salaries they drew from the company. In 1982 and again in the summer of 1983, British Brand sold items of equipment it was no longer using in what was left of its production operation.

6. As of the summer of 1983, the retail part of British Brand's operation was doing well, but the production part still was not. The lease of its Spadina Avenue premises was due to expire April 30, 1984. Birken and Fuitman had lost interest in continuing the production operation; over the course of the summer and early fall, they resolved to dispose of that operation, continue in the retail trade selling custom made suits, and contract out the production of those suits. The process by which and time at which this decision was made are both a bit unclear; if there was ever any coherent plan as to how British Brand would go about disposing of its production operation and facilities, it is equally unclear what that plan was from time to time. There was no evidence of any systematic effort to attract purchasers for the operation or any of the assets used in it: no evidence of advertising, oral or written, of any sort, and no evidence of listing for sale with any broker or agent of any kind. However, at some point after the decision had been made, Antonacci had discussions with a business acquaintance, Sid Frohman. Frohman and an unnamed associate from Montreal were interested in joining with Antonacci in forming a new corporation to purchase British Brand's production facilities. Antonacci would be a one-third shareholder and continue in charge of design, production and quality control for the new entity. Although arrangements were made for Frohman and the man from Montreal to meet with Birken and Fruitman, the plan fell apart in mid-November before that meeting took place, for reasons which were never revealed to Antonacci. Antonacci faced some hard choices. He had been offered work in Quebec, but did not wish to move his family. Frohman had urged him to cease working for others and go out on his own, and had offered his support in such a venture. Antonacci discussed this with his family, who were supportive. He approached clothing dealers who were still wholesale customers of British Brand, to find out whether they would deal with him if he set up a contract operation. Those dealers said that if he was going to continue to make the same type of garment, he could count them in. He discussed the idea with Fruitman, who said the plan looked good for Antonacci, although he would not do it himself. Antonacci testified, when explaining Fruitman's unfamiliarity with the term "cut, make and trim", that Fruitman was not a "clothing man"; Antonacci was the clothing man at British Brand, that aspect revolved around him. Production was all Antonacci knew; he wanted to stay in it.

7. Antonacci retained Mr. Frohman's lawyer, who caused the respondent Antonacci Clothes Inc. to be incorporated. Antonacci made a list of all the production equipment still in use at British Brand, then spoke to manufacturers of such equipment to find out the fair market value of used equipment of that type. He secured Fruitman's agreement to sell him the listed equipment at the prices he had established. He also secured Frohman's agreement that British Brand would use Antonacci's new company exclusively for a period of one year for the manufacture of all custom garments sold by British Brand. Antonacci's lawyer reduced these agreements to writing on a legal stationer's form of Offer to Purchase, by which Antonacci Clothes Inc. agreed to purchase:

"all the goods, chattels, fixtures and equipment of the business carried on by the Vendor, situated at 215 Spadina Avenue, Toronto, as listed in Schedule "A" (three pages) hereto annexed.. . at the price or sum of... $46,100.00 as follows: .. . $100.00 . . . as a deposit and... $13,730.00 ... to the Vendor on closing ... and for the balance of the purchase price to give back to the Vendor a Chattel Mortgage bearing no interest and running for a term of one (1) [sic] from the date of closing with the privilege of repaying [sic] the principal sum secured by the said chattel mortgage in whole or in part at any time or times without notice or bonus.

The document went on to provide:

In consideration of the Purchaser entering into this agreement, and conditional upon the Purchaser completing the transaction, the Vendor covenants and agrees to use the Purchaser exclusively for a period of one (1) year from the date of closing for the manufacture of all garments custom [sic] sold by the vendor during the said one (1) year period.

This document is dated December 20, 1983, and executed by Mr. Antonacci on behalf of Antonacci Clothes; the acceptance is executed by Carl Fruitman on behalf of British Brand. The evidence did not establish when the instructions were given to incorporate the new corporation, nor, if different, when the instructions were given to prepare this offer, nor when Fruitman signed the acceptance. Although nothing turns on it, it is interesting that the standard form employed for this transaction has printed on it at the bottom of the front page a note, in italics, which reads, in part:

NOTE:Reference should be made to Section 55 of The Labour Relations Act re employees' contracts, .

The form is labelled "Revised April 1976"; the section of the Labour Relations Act then numbered 55 is now numbered 63.

8. The agreement formed by British Brands' acceptance of the Antonacci Clothes offer provided for a closing date of February 15, 1984. Antonacci also executed a written resignation as a director of British Brand, effective February 15, 1984. He explained that this date was selected because his bank loan was not to be effective until February 1, 1984. British Brand ceased production at the end of January, 1984. Antonacci then took possession of British Brand's production equipment, and moved it to new premises at 75 Homer Avenue. Antonacci Clothes Inc. commenced operations at that address on February 6, 1984. In addition to the equipment set out in the written agreement, Antonacci or his company also purchased British Brand's findings: the buttons, thread, tapes, canvas, pocketing and lining on hand. Antonacci paid $5,200.00 for the findings; he testified that this is less than he would have paid had he purchased these materials new, and more than British Brand would have received had it sold them piecemeal. Antonacci also purchased or obtained from British Brand two desks, two typewriters and six filing cabinets. The evidence did not reveal what was paid for this office furniture. Antonacci also took with him the patterns he had used when he worked at British Brand. Antonacci conceded that patterns are very important in the clothing industry, and that a designer guards and tries to keep these to himself as far as possible. Antonacci claimed, however, that patterns were his property. Apart from the purchases from British Brand, Antonacci Clothes' only other major start-up expenses were for moving and installing the equipment, as well as the necessary electrical services and other leasehold improvements, in the premises at 75 Homer Avenue.

9. British Brand's employees were given notice of termination at the beginning of December, 1984. At some time in December, Antonacci met with the employees and explained to them that he was going into the contracting business. He told them he required people to work for him, if nothing was available to them through the union they could come and see him, and he would use them. A number did come to work for Antonacci Clothes. In addition to Antonacci's wife and son, Antonacci Clothes had seven employees when it commenced production on February 6, 1984. Five of these had come from British Brand; one, its new working foreman, had been working foreman at British Brand. By April 2nd, the initial work force of seven had grown to 25 employees, fifteen of whom had been employed at British Brand in December. We do not understand our colleague's reference in his dissent to these employees having been hired "in the open employment market". The only evidence we have before us is that former British Brand employees came to Antonacci at various times, but all in response to the invitation Antonacci extended at the meeting referred to earlier. As noted earlier, British Brand had had only 19 employees when it ceased production. Antonacci Clothes includes in its list of customers all the retailers with which British Brand was dealing before it ceased production. It also lists new customers Antonacci has solicited.

10. After these transactions, British Brand was left with its name, a large quantity of fabric, its contract with Antonacci Clothes Inc., the premises on which its lease was about to expire, and miscellaneous items of little consequence. In mid April, 1984, British Brand itself moved to new premises at 3328 Yonge Street, from which it now sells the custom suits Antonacci has contracted to supply. British Brand plans to sell off its inventory of fabric. The British Brand name or label had previously appeared only on suits it sold in its retail showroom and on model suits it used to promote its manufacturing and contract operations. Suits sold to dealers seldom, if ever, had a British Brand label; they normally had the dealer's label sewn into them. It is not surprising, then, that the name remained with the retail operation. It seems that Antonacci's name also had value to British Brand's continuing retail operation. Fruitman testified that retail customers who have asked have been told that British Brand still has a tie with Antonacci in that he manufactures suits for the company.

11. The Board heard evidence concerning the union's reaction to the discontinuance of British Brand's production operation, its communications with the employees it represented in those operations, its awareness of Antonacci's plans and its communications with Antonacci prior to the filing of these applications March 14, 1984. Mr. Matraia, the third and last witness heard by the Board, is the manager of the Toronto Joint Board of the applicant. He and Mr. Antonacci are well acquainted with one another; in addition to all of his other responsibilities, Antonacci was the member of British Brand's management who dealt with its day-to-day labour relations matters. Matraia met with British Brand employees at the lunch hour on January 1 2, 1 984, having learned earlier of British Brand's decision to terminate the employees and to cease production. The main purpose of the meeting was to discuss with employees the benefits available to them in these circumstances, and have them sign documentation in that connection. The employees told Mr. Matraia of their meeting with Mr. Antonacci and his invitation to apply for work with him. With respect to that invitation, Matraia told the employees that they would have to go on a waiting list for "union" jobs; if they could not wait, they could do what they wished. There was no suggestion that Antonacci's new operation would be a "union" employer. Matraia's secretary had attempted to contact Antonacci prior to the January 12th meeting with employees. A message was left for Antonacci, but it was not returned. Matraia called again later. His evidence is that he got through to Antonacci, had a discussion about why the earlier call had not been returned, told Antonacci that he had heard British Brand was closing and that Antonacci would be "moving out", and suggested it would be advisable for them to get together to discuss "the matter". According to Matraia, Antonacci agreed to get back to him the following week and set a date for such a meeting, but later failed to do so. Antonacci does not recall any telephone conversation with Matraia. He admits he was aware Matraia wanted to hear from him. He did not contact Matraia because he felt it was up to Matraia to contact him. Matraia and Antonacci are agreed that until Antonacci received the notice of hearing in these proceedings, the union had given Antonacci no notice that it claimed bargaining rights for the employees of Antonacci Clothes.

12. At the conclusion of the evidence, the applicant withdrew its claim for relief under subsection 1(4) of the Act. This left at issue the question whether there had been a sale of business from British Brand to Antonacci Clothes and, if so, whether the Board should direct a representation vote as requested by counsel for Antonacci Clothes.

II

13. The effect of section 63 of the Labour Relations Act was described in Vaunclair Meats Limited, [1981] OLRB Rep. May 581, in the following terms:

14. When a business or part of a business is transferred or disposed of, the transferee acquires it subject to the collective bargaining obligations of the transferor. A union holding bargaining rights for the employees of the transferor retains those bargaining rights for the employees in a "like unit" to that which existed prior to the transfer, and the transferee must continue to apply the collective agreement to that unit until the Board otherwise declares. This transfer and continuation of bargaining rights happens automatically upon the sale of all, or part, of the transferor's business. The Board may terminate the union's bargaining rights if the successor employer significantly alters the character of the business or part of a business acquired; however, until the Board otherwise declares, the transferee stands in the shoes of his predecessor with respect to established bargaining obligations. In this sense, a union's bargaining rights are in the nature of a vested right, which, by statute, "runs with the business

15. The Board has always recognized that the meaning to be attached to the word "business" depends to a great extent upon the facts and circumstances in each particular case. It cannot be said that any one facet of an enterprise taken by itself comprises the "business". The business is the "totality of the undertaking", including: the physical assets, tools and equipment, management and operating personnel, goodwill, and other intangibles. (See Raymond Cote, [1968] OLRB Rep. March 1211.) Thus, in determining whether it is the "business" which has been transferred, the Board has frequently found it useful to consider the extent to which these various elements of the predecessor's business organization have been transferred into the hands of the alleged successor; that is, whether there has been an apparent "continuation of all, or part, of the business — albeit with a change in the nominal owner." Many of these factors which the Board considers were summarized in Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691 (application for judicial review dismissed):

"In each case the decisive question is whether or not there is a continuation of the business .. . the factors which might assist the Board in its analysis; among other possibilities the presence or absence of the sale or actual transfer of goodwill, a logo or trademark, customer lists, accounts receivable, existing contracts, inventory, covenants not to compete, covenants to maintain a good name until closing or any other obligations to assist the successor in being able to effectively carry on the business may fruitfully be considered by the Board in deciding whether there is a continuation of the business. Additionally, the Board has found it helpful to look at whether or not a number of the same employees have continued to work for the successor and whether or not they are performing the same skills. The existence or non-existence of a hiatus in production as well as the service or lack of service of the customers of the predecessor have also been given weight. No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of utmost importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aids the Board in deciding whether the nature of the business after the transfer is the same as it was before, i.e. whether there has been a continuation of the business.

The issue before the Board, of course, remains whether there has been a transfer of a business" or "part of a business"; but it is much easier to make that finding, and to conclude that the collective bargaining relationship should be continued, if there is substantial continuity of the other elements of the predecessor's business organization. If the elements formerly used by "A" to carry on business are now in the hands of "B", and are used for the same business purposes, it is difficult to resist the conclusion that there has been some form of transfer "of a business" from "A" to "B". (See also: the remarks of Widgery J. In Kenmir v. Frizzel et al [1968] 1 All ER 414 — a case arising out of legislation similar to section 55 [now 63].)

25. Most of the cases under section 55 involve an alleged sale of a business in its totality. Only a few consider the meaning to be ascribed to the words "part of a business". Yet those words pose much more difficulty than the term business itself. Almost anything actually traceable to the predecessor could be regarded as "part" of its business, but it cannot have been intended that every minor disposition of surplus assets should give rise to a successorship. To accept this view, would make section 55 the vehicle for extending rather than preserving bargaining rights. Again, the issue must be considered in the factual context of each case and the Board has found a transfer of "part of a business" where one of a chain of retail stores has been sold to a competitor (Loblaws Grocerterias Limited, [1973] OLRB Rep. Jan. 72; More Grocerteria Limited, supra); where there was a transfer of certain milk delivery routes in a particular geographic area (Borden Company Limited, [1970] OLRB Rep. Jan. 1244); where there was a transfer of the oil burner and installation service of a firm which was primarily engaged in the sale and delivery of fuel oil. (Automatic Fuels Limited, [1972] OLRB Rep. May 515); and where a slaughter house, which was formerly part of a much larger integrated meat packing company, was transferred to a new owner, (Beef Terminal, [1980] OLRB Rep. Aug. 1167). In Central Native Fisherman's Co-Operative el al, [1977] 1 Can. LRBR 329, the British Columbia Relations Board found that there had been a transfer of a "part of a business" when a cannery which was formerly part of a much larger business organization was sold to a fisherman's co-operative.

The Board referred to Canac Shock Absorbers [1973] OLRB Rep. Oct. 508 and Alcan Building Products Limited, [1968] OLRB Rep. May 213, and continued:

28. In each of the cases to which we have referred, the Board found that the predecesor had transferred a coherent and severable part of its economic organization managerial or employee skills, plant, equipment, "knowbow" or goodwill, — thereby allowing the successor to perform a definable part of the economic functions formerly performed by the predecessor. This economic organization undertook activities which gave rise to employment, and the terms and conditions of employment, together with the union's right to bargain about them, were preserved. The part of the predecessor's business which it no longer wished to continue, provided the business opportunity which the successor was able to pursue to its own advantage. In all of the cases, there was a transfer of a distinct part of the predecessor's configuration of assets, and no material change in the character of the work performed by employees within that asset framework. There was a continuation of the work performed, the essential attributes of the employment relationship, the skills of employees, and the functional coherence of at least a part of the employee complement; and but for section 55, the established bargaining and collective agreement rights would have been lost. This was the very mischief to which section 55 is directed, and the Board was satisfied on the evidence in each case that it should be applied.

29. In giving his evidence, Mr. Antonacci spoke as though this application were concerned with whether what he had done was "wrong". He and his counsel emphasized his good relations with the applicant over the years, and protested that the transactions in question were not intended to undermine the applicant's rights. We are all satisfied there is no evidence that the respondents, or their principals, instituted any of these transactions for the purpose of avoiding collective bargaining with the applicant. That finding does not resolve the issue. Section 63 is not an "unfair labour practice" provision. While it provides protection against schemes adopted for the sole or primary purpose of avoiding established bargaining rights (see, for example, Carroll Electric, [1982] OLRB Rep. Dec. 1814), it is also intended to preserve bargaining rights from the incidental dislocating effects of genuine commercial transactions undertaken for reasons which have nothing to do with any desire to frustrate the collective bargaining rights of employees and their bargaining agent: see, Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193 at ¶26; and, Aircraft Metal Specialists Limited, [1970] OLRB Rep. Sept. 702 at ¶ ¶ 5 and 6. The question at hand is not whether any of the respondents intended to disrupt the applicant's bargaining rights, nor whether they intended that their transactions amount to a "sale of business" in the sense intended by section 63 or in any commercial sense. The question is whether their transactions amount, in all the circumstances, to a "sale of business" within the meaning of section 63. The intentions of the participants are relevant only to the extent that they assist in assessing the nature of the transactions themselves.

30. As counsel for both parties noted, the Board's decisions under section 63 and its predecessors are numerous, each ultimately turns on its own facts, and none establishes a comprehensive, unfailing litmus test for the presence or absence of a sale of business. Counsel for the respondent Antonacci Clothes cited in argument Marvel Jewellery, [1975] OLRB Rep. Sept. 733, Shiffer-Hillman Clothes, [1983] OLRB Rep. May. 764; Braneida Mechanical Service Ltd., [1981] OLRB Rep. Aug. 1102; L. Davis Textiles Co. Limited, [1982] OLRB Rep. May 664 and Bermay Corporation Limited, [1979] OLRB Rep. July 608. Counsel for the applicant referred also to Tatham Company Limited, [1980] OLRB Rep. March 366; Vaunclair Meats Limited, supra, and the cases referred to in the above-quoted passage from that case, Dellelce Construction, [1972] OLRB Rep. Jan. 60, and Metropolitan Parking Inc., supra. The applicant submits that contract production work was a coherent and severable part of British Brand's business, and was therefore a "business" capable of being the subject of a sale within the meaning of section 63 of the Act. The applicant argues that Antonacci Clothes acquired all of the essential elements of that business and thereby acquired the business itself. Antonacci Clothes argues that British Brand's production business had effectively ceased to exist when the transactions in question occurred, that the transactions in issue transferred only assets surplus to British Brand's continuing requirements, and that the life-force of Antonacci Clothes came not from British Brand but from the accumulated expertise, knowledge and contacts of Patrick Antonacci. Counsel for Antonacci Clothes relied heavily on the fact that his client acquired neither the British Brand name nor the location at which British Brand had formerly operated.

31. One very important element common to Antonacci Clothes and the production part of British Brand's business is Patrick Antonacci. He dealt with the day-to-day employee relations at British Brand; according to the evidence, he did the hiring for Antonacci Clothes. He designed British Brand's suits; he designs Antonacci Clothes' suits. He supervised production at British Brand; it appears he supervises production at Antonacci Clothes. He was in charge of quality control at British Brand; there is no evidence that anyone other than Antonacci deals with quality control at Antonacci Clothes. No matter who owned them at the time, the patterns Antonacci took with him are the patterns that were used at British Brand when Antonacci was there. They were in use or available for use at British Brand until Antonacci left. They are in use, or available for use, at Antonacci Clothes.

32. Patrick Antonacci is not the only element common to the alleged predecessor and successor businesses. The production equipment in use at Antonacci Clothes is the core equipment British Brand still needed and used as it continued production on a scale much reduced from that of the late 70's. Many of the employees who operate this equipment operated that equipment for British Brand. Those employees are now supervised by two working foremen; one was the working foreman at British Brand, and the other is a former British Brand employee. What they do with the equipment is make suits similar to the suits formerly made at British Brand. Antonacci Clothes sought out and serves many of British Brand's former wholesale customers. Antonacci Clothes is the exclusive supplier for British Brand's retail operation, as was the alleged predecessor operation when it formed part of British Brand.

33. While we agree with counsel for the respondent that the case for a sale of business would be stronger if the successor had retained the predecessor's name and location, the fact that those elements were not transferred does not seriously detract from the effect of the substantial congruence of other features of the predecessor and successor. Counsel for Antonacci Clothes argued that the Board's decision in Shiffer-Hillman Clothes, supra, assigned great weight to location and name in assessing sale of business in the clothing industry. As in this case, the alleged predecessor business in Shiffer-Hillman Clothes manufactured clothing which it then sold in an on-site retail showroom. The predecessor had been put in receivership by its bankers. The receiver auctioned off most of the predecessor's equipment and machinery, and sold to the public most of its inventory of finished clothing. The successor purchased what remained: the name, left-over clothing inventory, clothing patterns and miscellaneous left-over equipment. By means not made clear in the decision, the successor was able to lease a portion of the premises formerly leased and occupied by the predecessor. The successor contracted out the manufacture of suits using the patterns formerly employed by the predecessor, and entered into the retail sale of that clothing under the predecessor's name. In the circumstances of that case, the Board found that there had been a sale of business through the receiver from the predecessor to the successor. The decision illustrates that the retail part of a retail/wholesale operation can also be the subject of a sale of business, and that name and location are important elements of the retail part of such a business. We are not dealing with that part of the business here. There was no evidence before us to suggest that the business of a wholesaler is in any significant way dependent on its location. As to the name, the evidence suggests that wholesale customers were more concerned with the design and the identity of the designer than they were with the name of the owner of its clothing supplier. The former matters would affect the quality of suits and hence the retailer's ability to sell them. Because its name did not appear on the predecessor's products when sold by other retailers, it is difficult to see how a change of name unaccompanied by any change in designer or production management could make a significant difference in the wholesale market.

34. As for the absence of any transfer from British Brand to Antonacci Clothes of accounts receivable, customer list, "goodwill" and the like, the following passages from Winiker Industrial Auctioneers Ltd., [1978] OLRB Rep. Jan. 15, are particularly apt:

35. In support of his contention that there has not been a continuation of the business of Radio by the respondent, counsel placed stress upon the fact that there has not been a sale of goodwill. The absence of goodwill in the sale is evidence, counsel says, that there has not been a section 55 disposition. The presence of goodwill in a transaction is often an important indicator that a sale, or other disposition, within the meaning of section 55, has occurred. It is not necessary, however, that there be a transfer of goodwill in order to find a section 55 disposition. The presence or absence of goodwill in a transaction is only significant to the extent it helps to resolve the more fundamental question of whether or not there has been a continuation of the business (see Culverhouse, supra; Hughes Boat works Inc., Board File No. 0655-77-R, December 1977; and Zehrs Markets Limited, [1974] OLRB Rep. May 331.

36. The evidence in this case is that the business has continued to operate after the sale, and that it has continued to operate in virtually the same manner as before. The same products are being produced, by the same employees, using the same production facilities and equipment. Although there was no purchase of accounts receivable, customer lists the other intangibles normally embraced by the term goodwill, the evidence is that the business has continued to serve the same customers, although it would appear that it is presently serving fewer.... In the circumstances, the absence of a transfer of goodwill cannot negate the conclusion that the transaction in question has resulted in a continuation of the business, particularly in view of the respondent's knowledge and familiarity with the audio products markets. To the extent that goodwill existed at the time of the sale, it would appear that the respondent had no need of such goodwill in order to continue the business as a going concern.

In the case before us, the goodwill associated with British Brand's production operation was in no small part personal to Patrick Antonacci; in the circumstances, he would not have needed a formal transfer from British Brand in order to exploit that goodwill, particularly given the firm decision of the other shareholders that British Brand would not continue in clothing production in any way.

20. With respect to Antonacci's approaches to British Brand's customers and his success in acquiring them as customers of Antonacci's Clothes, counsel submitted that this was the result of Antonacci's personal efforts with people whom, for the most part, he knew before joining British Brand, and not the result of something done for him or transferred to him by British Brand. It cannot be overlooked, however, that Antonacci was an officer, director and shareholder of British Brand at the time he approached these customers. They would be used to dealing with him as a representative of British Brand. They expressed to him a continuing desire for the type of garment they had been able to purchase from British Brand. These were not competitive approaches; Antonacci was not asking British Brand's customers to leave it and go with him. It would have been quite inconsistent with his fiduciary duties to British Brand for Antonacci to promote a competing business while still engaged as a senior officer and director of British Brand. However, British Brand was going to leave the market; Antonacci planned to enter it as British Brand left, and with British Brand's blessing. That was the context of and for Antonacci's approaches to British Brand's customers. He was not leaving British Brand to compete with it. British Brand was leaving him free to stay in clothing production. The only competition on the scene was just what had always been there: British Brand's competitors. Neither the approaches to customers nor their success is a negative or neutral factor in assessing whether what has occurred here constitutes a sale of business; in our view they are indicia that a sale has occurred, and in that regard we adopt the analysis at paragraph 12 of the Board's decision in Big Bear Storage, [1979] OLRB Rep. March 164:

21. Unless the predecessor's customers are tied to contracts which can be assigned, it falls to the successor to cultivate and maintain these customers. An attempt by a purchaser to gain access to i.e. through customer lists or cultivate the predecessor's customers is an indicia of the successor's intent to operate the predecessor's business. Conversely, if the alleged successor fails to cultivate or serve the predecessor's customers as in re Dufferin Steel, (supra), the Board may view this failure as supportive of the conclusion that there has not been a continuation of the predecessor's business. The decision by Mr. Young to gain assurances from the largest customer of the predecessor that it would leave its stored goods at 1290 Bendale Road if he operated a warehouse business from the premises and the decision of Starkist and many of the other customers of the predecessor to do business with Big Bear supports the conclusion that there has been a continuation of the predecessor's business. The fact that he gained these assurances on his own initiative and possibly as a result of his personal reputation in no way supports the conclusion that there has not been a sale of a business.

22. Counsel for the respondent Antonacci Clothes argued that there was no "business" for British Brand to sell by the time the transactions in question occurred. The production side of the business had been losing money for some time, the decision to cease production had already been made, the only potential sale of that part of the business as a going concern had fallen through, and the employees had been given notice. When put in the balance with all the other facts and circumstances of this case, these factors cannot be given much weight. The fact that the owner of a business is in financial difficulty at the time of an alleged sale has never been fatal to the argument that a "sale of business" has occurred. Any number of Board decisions have held that dispositions by trustees in bankruptcy, court appointed receiver-managers, and receiver-managers appointed by instrument can constitute a sale of business: see, for example, Marvel Jewellery Ltd., [1975] OLRB Rep. Sept. 733; Hughes Boat Works Inc., [1977] OLRB Rep. Dec. 815 (application for judicial review dismissed at 1979 CanLII 1853 (ON HCJ), 26 O.R. (2d) 420); Winiker Industrial Auctioneers Ltd., supra; Big Bear Storage, supra; and Shiffer-Hillman Clothes, supra. In each of these cases the financial difficulties of the owner had led the trustee or receiver to engage in transactions which, as the Board found in each case, resulted in a sale of business. In Marvel Jewellery Limited, for example, the receiver continued to operate the business while attempting to sell it as a going concern. After having no success, the receiver ceased operations, terminated the employees and closed the plant. The transaction ultimately found to be a sale of business was first proposed to the receiver only after all these events had occurred. Here, of course, there was no receiver. The decision to dispose of the production aspects of the business was a voluntary one; it could be given effect at a pace more leisurely than would be found in a receivership situation. It was a decision with which Antonacci was not happy, but he had no real control over it. It would have been clear that Antonacci would prefer to continue in production; it would have been clear also that the value of British Brand's production operation would be highly dependent on whether Antonacci continued to be associated with it. This undoubtedly explains why there is no evidence that anyone other than Antonacci was actively involved on British Brand's behalf in the attempt to dispose of the production operation, nor evidence of any prospective transaction which did not involve Antonacci in some way.

23. In all the circumstances, we conclude that there was a sale of business from British Brand Clothes Limited to Antonacci Clothes Inc.

III

23. The respondent Antonacci Clothes argued that if the Board found that there had been a sale, it should order a representation vote pursuant to section 63(8) of the Act. Its counsel noted that there were among his client's employees persons who had not been employees of British Brand and might not, therefore, favour representation by the union which had represented the employees of British Brand. Counsel suggested that the Board's decision in Bermay Corporation Limited, supra, was authority for the exercise of the Board's discretion to order a representation vote when a substantial number of the employees of a successor employer were not formerly employed by the predecessor. With respect to the remaining employees who had formerly been employed by British Brand, counsel suggested the evidence had established that they thought they were entering non-union employment when they applied to work for Antonacci Clothes. Some emphasis was also placed on the fact that the union had not earlier alerted Antonacci to the position it now takes.

24. Subsections 2 and 3 of section 63 of the Act are concerned with preserving a trade union's right to represent employees in a bargaining unit when there is a change in the real or nominal ownership of the business in which those employees are engaged. When the employees in the bargaining unit for which the trade union has bargaining rights are not covered by a collective agreement at the time of the change in ownership of the business in which they are engaged, subsection 3 provides that the trade union continues to be the bargaining agent for employees of the successor ". . . in the like bargaining unit in that business . . .". Where the subject employees are covered by a collective agreement at the time of the sale, subsection 2 provides that the successor is "bound by the collective agreement as if he had been a party thereto . . . '' . These words have been interpreted by the Board in a manner consistent with the language of subsection 3; the scope clause in the predecessor's collective agreement is not applied literally to all the employees of the successor after the sale, but only to those of its employees who are at that time engaged in the sold business: The Bryant Press Limited, [1972] OLRB Rep. Apr. 301. The rights preserved are not just the right to represent the particular persons who fell within the bargaining unit at the time of the sale. The scheme of the Labour Relations Act is that trade unions acquire, by certification or voluntary recognition, the exclusive right to bargain on behalf of and represent employees in a defined bargaining unit. Those bargaining rights are not limited to the particular employees who may have fallen within the bargaining unit description at the time those rights were first acquired. Bargaining rights cover all those who, at any given time, fall within the reach of the bargaining unit definition. An employer's work force may expand or contract, new employees may be hired and old ones depart; while these events may change the number and identity of employees for whom the trade union has bargaining rights, the bargaining rights themselves remain unaffected. While a trade union's right to represent employees in a particular bargaining unit is initially determined by the wishes of the employees in the bargaining unit at the time of the determination, the union's status as exclusive bargaining agent is not continuously exposed to reappraisal of the desires of the employees who may from time to time thereafter find themselves within that bargaining unit. The occasions on which such a reappraisal may occur are circumscribed by the "timeliness" provisions of sections 5, 57, 59, 61 and 123 of the Act. Nothing in subsection 2 or subsection 3 of section 63 renders timely a reassessment of representation rights which would have been untimely had a sale not occurred. Indeed, section 63(10) makes untimely some representation applications which would have been timely but for the intervening sale of business: see Don Hemmelskamp, [1979] OLRB Rep. Feb. 99 at ¶14.

25. Section 63 contemplates that a finding that a sale of business has occurred, and the resulting application of either subsection 2 or subsection 3 of the section, may not resolve all the labour relations issues which can result from a sale of business. Subsections 4 and 6 specifically address the complications which can arise when a successor employer is already engaged in a business at the time of the sale which is the subject of the application. Subsection 4 empowers the Board to resolve certain questions of definition which can arise in these circumstances, in order to preserve appropriately the boundaries of the "like unit" in respect of which subsection 2 or 3 has operated to preserve a trade union's bargaining rights. Subsection 6 recognizes that labour relations realities may make ineffective or undesirable the attempt to maintain those boundaries. As the Board observed in the Essex County Board of Education, [1969] OLRB Rep. July 552:

26. The purpose of section [63(6)] is to avoid that confusion which arises where employees represented by one trade union as their bargaining agent are intermingled with other employees who may or may not be represented by a bargaining agent. Hence, intermingling, whether it is factual or deemed by operation of section [63(11)], is a condition precedent to bringing an application under section [63(6)]. Once that condition is satisfied the Board then may exercise its powers under section [63(6)] and section [63(8)]. Intermingling then becomes one of the factors which the Board considers in determining an appropriate bargaining unit under section [63(6)(b)].

The exercise of the Board's power under subsection (6)(b) may result in one or more new bargaining units containing elements of the bargaining unit for which rights are preserved by subsection 2 or 3 as well as elements of an actual or inchoate bargaining unit of employees engaged in the business in which the successor was engaged prior to the sale. This redefinition of bargaining units will raise a representation issue which is not resolved simply by asking whether a sale of business has occurred and then determining the description of the bargaining unit affected by the sale. The remaining provisions of subsection 6 of section 63 empower the Board to resolve that representation issue and deal with the consequences of that resolution. In Alliance Dairy Limited, [1966] OLRB Rep. Aug. 336, the Board noted that it will not in every such case be necessary to conduct a representation vote in order to resolve this issue of representation:

5. The purpose of section 47A is, subject to the provisions set out in the section, to continue the bargaining rights of a trade union which had represented employees in a bargaining unit where the employer has sold his business. Bargaining rights thus are protected in the interest of stability in collective bargaining relationships. Where two or more bargaining units are, as the result of a sale and the intermingling of employees, merged into one, as in the instant case, both the need for stability in collective bargaining relationships and plain common sense would require that, where there is a large disparity in the size of the two groups of employees, there would be no representation vote, with its necessary expense, propaganda and disruption, but rather a declaration should be made that the trade union representing the great majority of the employees is to be bargaining agent for the new bargaining unit.

When two or more bargaining units are merged by the Board in the exercise of its powers under subsection 63(6), a substantial disparity in their relative sizes has been dispositive of the question of the resulting question of representation not only where persons employed by the successor prior to the sale were represented, as in Alliance Dairy, but also where one of the intermingled groups was not previously represented: Town of Iroquois FaIls, [1969] OLRB Feb. 1208. Where disparity in size is not determinative of the issue of representation, the Board has exercised its power under subsection 63(8) to direct a representation vote in order to assist the Board in resolving the issue of representation created by the redefinition of bargaining units.

26. On its face, section 63(8) gives the Board an unfettered discretion to direct a representation vote in the course of disposing of an application under section 63 of the Act; however, there are some logical limitations on the exercise of that discretion. A representation vote is intended and designed to determine representation issues. The existence of a sale of business settles the question of representation dealt with by subsections (2) and (3); a representation vote is of no assistance in determining whether a sale has occurred (see Vaunclair Meats Limited, supra, at ¶33) and the mere existence of a sale does not raise or make timely a reappraisal of representation rights. As we have noted, however, a representation issue may arise if there is resort to the Board's powers under section 63(6). That is what happened in Bermay Corporation Limited, supra.

27. In Bermay Corporation Limited, the Board found that the respondent Bermay, a furniture manufacturer, was the successor of Golderest Furniture Limited, another furniture manufacturer, as a result of transactions which the Board found amounted to a sale of business.

Before the sale, Bermay had employed in its business 26 unorganized employees; Golderest had employed over 70 employees represented by the trade union applicant in that case. In the course of the sale, Bermay hired 24 of Goldcrest's former employees, moved its pre-existing business and employees into Goldcrest's premises, and hired twenty "new employees" not previously employed by either company. After finding that there had been a sale of business, the Board went on to say:

17. That finding, however, does not dispose of the matter. In this case the respondent has some 70 production employees, 24 of whom were represented for collective bargaining purposes by the applicant under the predecessor employer. While Section 55 of the Act operates to protect the bargaining rights of those employees and their union it also provides a mechanism to balance their interest with the interest of the respondent's former employees and new employees who work side by side with them. Section 55(6) of The Labour Relations Act provides as follows:

"(6) Notwithstanding subsections 2 and 3, where a business was sold to a person who carries on 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.”

18. An obvious concern in the resolution of the conflict that arises upon the intermingling of employees who have previously been organized with employees who were previously not organized is the interest of the employer to have its industrial relations conducted within the framework of a rational bargaining structure. In this case, the Board is satisfied that it would be contrary to the interests of the employer and of the employees as a group to segregate the former employees of Goldcrest into a vestigial bargaining unit that would exclude all other production employees. It would, in our view, be equally inappropriate to effectively grant the bargaining rights for the two third of the production employees who have not previously been organized to the applicant without any indication of the wishes of that majority group. The Board is therefore satisfied that it should in these circumstances describe the appropriate bargaining unit and exercise its discretion under section 55(8) of The Labour Relations Act to conduct a representation vote among all of the employees in the bargaining unit.

We do not understand the quoted references to "new employees" as suggesting that the Board will order a representation vote whenever a successor employer hires, at or shortly after the time of a sale, persons who were not previously employed by the predecessor employer. The "new employees" referred to by the Board in Bermay Corporation Limited were employees hired simultaneously with the consolidation by Bermay of its existing furniture business with the business it purchased from Golderest and the consequent intermingling of Bermay's former employees with employees formerly employed by Golderest. The Board's resort in Bermay Corporation Limited to its powers under section 6 3(6) did not depend on the presence or absence of "new employees", but on the intermingling of employees identified with the two pre-existing bargaining units. It may not have been possible, and in any event was not necessary, for the Board to determine whether the "new employees" represented an accretion to one or other or both of those pre-existing bargaining units. The important fact was that the merger of businesses had made it necessary to redefine bargaining units and, as a result, bargaining rights; it was that exercise, and not the hiring of "new employees", which created the representation issue to which the Board responded by ordering a representation vote.

28. In this case, the respondent Antonacci Clothes came into existence for the purpose of engaging in the transaction which we have found constituted a sale of business within the meaning of section 63. The only business in which this respondent has engaged is the business it purchased from British Brand. All its employees can therefore be described as falling within the "like" bargaining unit in respect of which the applicant's bargaining rights are preserved by our finding that there has been a sale of business. If one disregards the change in ownership of the business in question, the situation here is this: a small number of the employees employed in the business prior to February 1st are no longer employed in it, and another, larger, number have since been hired to work in the business. Those circumstances would not normally give rise to a question of representation, unless it were a question raised in a timely manner by the employees themselves. The fact that some employees are new to the unit is of no more consequence than it would have been had the ownership of this business remained unchanged. The change of ownership does not change that result where, as here, the sale of business has not itself created circumstances which give rise to a question of representation.

29. Counsel for Antonacci Clothes was unable to cite, and we have been unable to find, any decision in which the Board ordered a representation vote pursuant to subsection 63(8) otherwise than to resolve an issue raised under subsection (6) as a result of intermingling which had occurred or, by virtue of subsection (11), was deemed to have occurred. Although we doubt that resort to a representation vote under subsection 6 3(8) is appropriate in any other circumstances, we need not decide that here. We find that the employment by Antonacci Clothes of persons not previously employed by the predecessor British Brand does not warrant the direction of a representation vote, and that follows as much from our conclusion that to do so would be inconsistent with the general scheme of the Act as from the fact that subsection 6 3(6) has not been and could not be applied to these circumstances. The respondent also based its request on the fact that the applicant had not told Antonacci or the British Brand employees that by operation of law it would have bargaining rights with respect to any production employees of Antonacci Clothes. We observe that those employees had notice of this application and none opposed it on any ground. As for Antonacci, he can hardly complain about what the union did not say on a subject he avoided discussing with it. We observe also that each alleged "failure" to opine or assert rights occurred before the sale transaction took place. No matter how broad the discretion to order a vote under subsection 63(8) may be, these would not be proper grounds on which to exercise that discretion. The permanence of the bargaining rights protected by section 63 should not depend on anticipatory assertion of them prior to a sale. In short, none of the circumstances of this case warrant our directing a representation vote.

IV

30. In the result, the Board declares that British Brand Clothes Limited has sold part of its business to Antonacci Clothes Inc., and that the applicant has the right to represent employees of the respondent Antonacci Clothes Inc., pursuant to section 63(3) of the Labour Relations Act.

DECISION OF BOARD MEMBER F. C. BURNET;

1. I dissent from the opinion of my colleagues on the Board.

2. The majority notes in its extensive review of the jurisprudence that no single test or combination of tests exists to determine whether a sale of a business has occurred, although several factors have been identified as being pertinent to such determination. These include such matters as the transfer of goodwill, customer lists, brand names, existing contracts, equipment, premises, the fact or not of hiatus etc. None of these are controlling, and each carries significance only to the extent that it indicates whether there has been a continuation of a business.

3. Superseding all these tests is the simple central issue whether implicitly or explicitly, there were negotiations or an understanding of any nature leading to the transfer of the business as an operating entity, (whether viable or not), for financial or other considerations.

4. In this case, the answer is clearly negative. British Brand had taken a decision to wind up the business, not to sell it, and the reason was clear. Earlier attempts to sell the business had elicited only one inquiry and that had not developed. In short, the business was losing money and was not saleable as an operating entity. It had failed and the only remaining values lay in the intrinsic value of certain physical assets. Most customer accounts had been lost, employment had declined from over 100 to 19, and these were given notice of termination in December 1983. Much equipment that had become surplus to requirements through the recession had been sold off, and the balance was made available for disposal. Purchase of fabrics had long since ceased and existing inventories of fabrics and related supplies were being worked off. Clearly, the business was dead and hence not saleable.

5. In an attempt to secure his own livelihood in the face of impending lay-off, Mr. Antonacci, the key employee in British Brand's manufacturing operation and the sole repository of the design and technical know-how, chose to risk starting up his own operation. The company he formed was totally distinct from and corporately unrelated to British Brand. He purchased his basic equipment and some supplies from British Brand for the sensible reason that he could buy it more advantageously from the defunct company that he could through equipment and material suppliers; he did not acquire the building lease but rented other quarters. He did not acquire customer lists or contracts, since British Brand had none which they could dispose of in any sale. British Brand did not solicit any former customers on his behalf. He did not acquire any goodwill (none remained), nor did he acquire any trademarks, or accounts receivable or other assets. Neither did he assume any liability for accounts payable or other debts. I distinguish the case of Winniker Industrial Auctioneers Ltd., [1978] OLRB Rep. Jan. 15, upon which the majority in this case rely in respect to the issue of customer lists, goodwill and the like. The Winniker business had continued to operate; British Brand manufacturing had not. Winniker products were the same; Antonacci products were the same only in the generic sense of being mens suits, — but made to whatever specifications the customer demanded. Winniker products were produced by the same employees; Antonacci products were produced by some former British Brand's employees who had been terminated and were hired in the open employment market as needed and in competition with other applicants.

6. Mr. Antonacci did hire a few former employees of British Brand and added to them as he became established, nut not as a part of any contractual obligation or other commitment as is commonly the case when a business is sold as a going concern. The former employees of British Brand came, as did others, as new employees of a new company. He hired them simply because he wanted experienced help and they had been unable to secure other employment through the union or their own efforts.

7. He did secure business from former customers of British Brand but only through ordinary competitive marketing efforts and not from the purchase of contracts or any other efforts on his behalf from British Brand. His sole assistance from British Brand in this respect was a short term contract (one year) to supply the needs of their retail trade — a reasonable arrangement considering the amicable relationship between him and his former employer and their interest in the success of his enterprise in view of the fact that he purchased some of the equipment from them on time. I do not attach the same significance as the majority has in its paragraph 20 to the fact that Antonacci was an officer of British Brand when he solicited business from former British Brand's customers — first, because Antonacci was a very nominal officer indeed. He had no title as such, and no duties beyond those of his salaried position as designer. He never attended Board meetings, as there apparently were none and he apparently took no part in decisions, beyond those of his designer job. Second, these approaches to potential customers were very much normal competitive approaches — not competitive against British Brand, for it was effectively dead (in manufacturing) and had no customers — but against all other manufacturers in the business.

8. Finally, it is significant that Mr. Matraia, the manager of the union, testifies to a long and amicable relationship with Mr. Antonacci, and more particularly, that the decision of British Brand to close its manufacturing operation, and the start up of Antonacci Clothing was in no way a ploy to frustrate the bargaining rights of the union the employees.

9. In all these circumstances, I would find that British Brand did not sell or dispose of its manufacturing operation to Antonacci Clothing, and I would dismiss the application.

10. However, given the decision of the majority that a sale occurred I do not dissent from the decision to deny a representation vote.