Ontario Labour Relations Board
Citation: [1984] OLRB Rep. May 773 File No.: 1463-83-R Date: May 9, 1984
Between: Retail Wholesale and Department Store Union Local 414, Applicant, v. 555190 Ontario Ltd. carrying on business as Valencia Foods, Respondent
Before: Owen V. Gray, Vice-Chairman and Board Members J. A. Ronson and W. F. Rutherford.
Appearances: David I. Bloom and Bob Mackay for the applicant; Roy C. Filion, Q. C. and Robert E. Salisbury for the respondent.
DECISION OF THE BOARD
1The name of the respondent is amended to read: "555190 Ontario Ltd. carrying on business as Valencia Foods".
2This application focuses on a building in Martingrove Shopping Centre, a small shopping plaza in the City of Etobicoke in the Municipality of Metropolitan Toronto. For many years, Dominion Stores Limited ("Dominion") operated a retail food store in that building. That store closed April 30, 1983. The respondent opened a retail food store in the same premises on September 14, 1983. The applicant trade union says that Dominion has sold to the respondent that part of its business formerly conducted in the subject building. It asks for a declaration that, pursuant to section 63 of the Labour Relations Act, the respondent is bound by the terms of the applicant's current collective agreement with Dominion, which applies to all employees of Dominion at its stores in various municipalities including the Municipality of Metropolitan Toronto. The respondent denies that there has been a sale of business within the meaning of section 63 of the Act. A group of its employees filed a petition opposing this application. Several employees attended on the first day of hearing. They were asked by the Board whether they wished to take any formal part in the proceedings. None asked to intervene; one told the Board that the employees were content to leave the defence of the application to the respondent.
3Martingrove Shopping Centre consists of two buildings connected by a mall and surrounded by a parking lot, occupying together a site of approximately three acres bounded on all four sides by municipal streets. One building contains about 12,400 square feet of retail space at ground level, occupied at the time the application was heard by a barber shop/beauty parlour, bakery, ladies' wear store, dry cleaners, video movie retail outlet and Chinese restaurant; this building also has a second storey of about 7,700 square feet subdivided into a half dozen offices. The other building contains approximately 16,000 square feet. It was leased by Dominion in 1968 for a 20-year term, with four consecutive options to renew for further 5-year terms at the original rent. Only escalation of property taxes was the subject of any "pass through" to the tenant under that lease. By 1976, when Victern Developments Limited ("Victern") bought the plaza and became Dominion's landlord, this lease was financially unattractive from a landlord's perspective and promised to be increasingly so as the years went on. Sid Sitzer, the principal of Victern, took this into account when negotiating the price paid for the plaza. At that time, Sitzer believed the premises would become increasingly uneconomic for Dominion, despite the attractive rent. To his knowledge, a typical Dominion store operation in 1976 occupied 40,000 or more square feet. There would, he thought, be diseconomies of scale in trying to conduct a full Dominion store operation in 16,000 square feet of space. He thought Dominion would be ready to give up the lease before the end of its term.
4Mr. Sitzer's initial impression was borne out. As time went on it appeared that Dominion was not devoting much energy or attention to the promotion of business at this location. Sitzer could see that customer traffic in the Dominion store was light. The ancillary retail tenants were complaining that the Dominion store was doing nothing to attract business; their sales were down as a consequence, as Sitzer knew because their rent (unlike Dominion's) was tied to their gross sales. Sitzer wrote to Dominion in July, 1982. He said he had in mind renovations to Martingrove Shopping Centre which would require demolition of the building occupied there by Dominion. He invited Dominion to discuss the terms of a surrender of lease. Dominion was receptive. By November, 1982, Dominion had agreed in principle to a surrender, on terms still to be negotiated. The most substantial outstanding term was the amount to be paid by Victern for the surrender. Negotiations continued in the new year. and concluded on March 17, 1983, in an oral agreement between A. D. Titherington on behalf of Dominion and Annette Ross, Sitzer's sister and Victern's property manager, on behalf of Victern. The agreement fixed the amount to be paid by Victern to Dominion, and required that Dominion remove its trade, fixtures and equipment from the location and deliver vacant possession of the premises in a "broom-swept condition" by May 20, 1983. This agreement was reduced to writing in a letter dated March 22, 1983 from Dominion to Victern.
5In late 1982, after Dominion had agreed in principle to a surrender of its lease and before the terms of the surrender were settled, Sitzer began to hear rumours from Eiis other tenants that Dominion was moving out, and Victern began receiving inquiries about the Dominion store space. He had by this point abandoned his earlier plan for major reconstruction of the plaza. He now contemplated renovating and subdividing the Dominion store space into smaller units for which he intended to seek a butcher, a baker, a fruit and vegetable shop, and similar operations as suitable tenants. His discussions with Dominion were ongoing, however, and Victern was unable to tell any prospective tenant that all or any of the [)ominion store space was or would later be available. It was at this point that Valencia Foods first entered the picture.
6Valencia Foods is a trade name used by the respondent and its two sister companies: 359906 Ontario Limited and Valencia Foods Inc. The shares of all three companies are owned by members of the Troiani family, of which Pompeo Troiani is the patriarch. Valencia Foods has operated a 13,000 square foot supermarket on Sheppard Avenue near Jane Street in Metropolitan Toronto for approximately six years; a second supermarket of about 10,0(10 square feet was opened in February, 1980 in a plaza near Highway 7 and Islington Avenue N Woodbridge, just to the north of Metropolitan Toronto. Both locations cater particularly to what was described as the "Italian" market. Pompeo Troiani has been doing business in the food industry "in the Italian way" since 1956. Valencia Foods' stores carry the products Mr. Troiani believes Italian people want. The stores carry more and different products than would be found in a conventional food store of the same or even larger size; this is especially so with respect to cheeses, meats, fruit and fresh produce. The predominant language spoken in Valencia Foods' stores between staff and customers is Italian.
7As head of the family, Pompeo Troiani is in charge of seeking out locations for new Valencia Foods' stores. He looks for locations near Italian neighbourhoods. In very early 1983, he noticed that houses were going up in an area near where he lives and, it turns out, near the shopping plaza in question. One day in February, 1983, he went to an Italian real estate office to ask what sort of people were buying those houses. He was told that 90 per cent of the purchasers were Italian. He spent more time exploring the area. He saw the Martingrove Shopping Centre, and went in to take a look. He noticed that the barber was Italian and engaged him in conversation, asking how business was. The barber said that business was dead, that the Dominion Store across the mall was closing and no one seemed to want to come into the shopping centre. Troiani asked how the barber knew that the Dominion Store was closing; the barber said there was a rumour to that effect. Troiani asked who the landlord was, and the barber gave him Victern's telephone number and Annette Ross' name. When he got back to his office, Mr. Troiani asked his son, Frank, to call Victern. Frank Troiani contacted AnnetteRoss by telephone. He asked about the availability of the Dominion Store space in the Martingrove Shopping Centre. Ms. Ross said there was no space available at that time. As there were no signs at the plaza to prompt such an enquiry, Ms. Ross asked Frank how he had heard about the centre. Frank told her about the barber's rumour. Frank followed up with a letter confirming the interest of Valencia Foods in renting space in the Martingrove Shopping Centre. He requested a meeting. Ms. Ross was impressed, and arranged to meet with Frank and Pompeo Troiani on February 17, 1983.
8At the meeting of February 17, 1983, the Troiani's told Ms. Ross about the Valencia Foods operation, its size and existing locations and the amount of business done in those locations. Ms. Ross concluded that Valencia Foods was a desirable prospective tenant, and had it in mind to attract them to this or some other location managed or developed by Victern. While rumours about the Dominion Store space had prompted many inquiries, there had been only one other approach which Ms. Ross had taken seriously, and that was by a real estate agent acting on behalf of an as yet undisclosed client. Ms. Ross did not negotiate terms of lease of the Dominion store premises with Valencia at this meeting. Those premises were not yet available. Moreover, Sitzer was still planning to subdivide the Dominion store space; Valencia, on the other hand, wanted at least 12,000 square feet, and preferably the full 16,000 square feet, if the Dominion store premises became available. Sitzer was leaving in late February on an extended trip out of the country. Ross thought he should meet the Troiani's before he left.
9Sitzer met the Troiani's briefly on or shortly before the day he left the country. In this or the earlier meeting with Ms. Ross, the Troiani's made it clear that their operation would include a bakery, a fresh produce section and a full service meat counter. These were elements Sitzer had in mind for subdivided units in the Dominion store space, once that space became available. The Troiani's were trying to persuade Sitzer that he could accomplish his objectives by renting to them when the space became available. Neither Ross nor Sitzer made any commitment to the Troiani's at this meeting, which was quite short. Sitzer was impressed with the Troiani's however. While subdivided space would attract more rent per square foot than undivided space, there were other factors for Sitzer to consider. On balance, Sitzer decided he would be prepared rent the entire Dominion store space to Valencia when it came available, if the price were right. He made this decision after his meeting with the Troiani's and before March 17. Sitzer gave Ross instructions on the negotiations with Dominion before he left the country, and in periodic telephone conversations thereafter. By the same means, and before March 17, he also instructed her on the position to take with Valencia.
10Victern had no further contact with Valencia until after March 17, 1983, when Ross concluded the surrender terms with Dominion. Annette Ross then contacted the Troiani's, met with them and negotiated the terms of a lease of the space Dominion had agreed to surrender. An offer to lease was prepared on Victern's standard form and sent to Valencia for execution on March 22, 1983. Mr. Troiani amended the document in accordance with his lawyer's advice, executed it, and returned it to Victern. It was not signed on behalf of Victern until after Victern received the letter from Dominion of March 22, 1983, confirming the terms of the surrender agreement. The tenant named in the agreement to lease is "359906 Ontario Limited trading as Valencia Foods". The Board was told that the respondent's sister company executed the agreement because the respondent had not yet been incorporated for the purpose of operating the Valencia Foods store at the subject location. The formal lease, prepared later, was executed by the respondent itself. The parties are agreed that we should ignore the separate existence and involvement of the intermediary, and deal with these facts as though the actions of the Troiani's were actions on behalf of the named respondent at all material times.
11After the agreement to lease was entered into, Mr. Troiani started making plans to equip and renovate the subject premises. In early May he became aware from his refrigeration supplier that Dominion was selling some of the equipment it had used at the subject premises, as well as equipment located at a Victoria Park store which Dominion was also closing at that time. The Troiani's submitted to Dominion a list of the equipment Valencia wanted to buy, then learned that some of that equipment had already been sold. On May 9, 1983, Valencia purchased a great deal of the equipment which remained unsold at the subject premises, for a price of $56,000. This amount was less than 15 per cent of the total amount paid by Valencia to equip and renovate the building for operation as a Valencia Foods store. Victern played no part in the dealings between Valencia and Dominion. Victern only became aware of those dealings when it received Dominion's draft surrender of lease, in which Victern's requirement that the premises be left in a broom-swept condition had been modified by Dominic.n to give it the right to leave on the premises the fixtures it had sold to Valencia.
12The respondent's new Valencia Foods store opened September 14, 1983. The store's store manager, bookkeepers, department heads and a number of its senior clerks, a total of 15 employees, came from Valencia Foods' other two operating stores. The balance of the 50 full-time and part-time employees ultimately employed at the store were hired from among persons who responded to a sign put up in the store premises two or three weeks before the opening. Between fifty and one hundred people responded to that sign by submitting job applications. None of those applicants listed the subject Dominion Store as a prior employer.
13Since the opening, Valencia Foods has operated the new store in the same manner as its other two stores. The new store advertised in local weekly newspapers in the English language. The other two stores are mentioned in that advertising. All three stores advertised and still advertise in Italian language print and electronic media: Corriere Canadese and CHIN Radio. All three stores enjoy common administration, and centralized purchasing for all but a few small items.
14The applicant did not name Dominion Stores Limited as a respondent; no one gave evidence on Dominion's behalf. The applicant subpoenaed and interviewed Mr. Titherington, the Dominion employee most familiar with the lease surrender negotiations. Mr. Titherington was not called as a witness. The applicant also subpoenaed and interviewed Mr. Field, the Dominion employee familiar with the sale of store fixtures to Valencia. Mr. Field was not called as a witness. About Dominion's operations at Martingrove Shopping Centre prior to the surrender of the lease, we have only Mr. Sitzer's observations. About Dominion's operations following the surrender, we know from Mr. Troiani that after he opened the store in the Martingrove Shopping Centre he found that there was a Dominion store operating a couple of miles south of Albion Road on Kipling Avenue, which we note would be a drive of about 4 miles from the subject site. From the cross-examination of the applicant's business agent, Robert McKay, we know that employees of Dominion at the closed store were absorbed into other Dominion stores pursuant to the provisions of the applicant's collective agreement with Dominion. Although Mr. McKay thought there might have been some employees who had been denied that opportunity or did not qualify for it, he was unable to name one.
II
15Counsel for the respondent argued that the opening of his client's store in the Martingrove Shopping Centre represented the expansion of its existing, parallel business, not the purchase of a part of Dominion's business. He emphasized the differences between the Dominion operation and the respondent's "Italian" operation, and noted that the managerial skills necessary to run the operation came entirely from the existing Valencia Foods operations, not from Dominion. He argued that the surrender of lease from Dominion to Victern, the lease from Victern to Valencia and the sale of fixtures from Dominion to Valencia were all independent transactions no one of which had been conditional on any of the others. He suggested this was one of several critical distinctions between the facts of this case and the facts in More Groceteria Limited, [1980] OLRB Rep. Apr. 486. Counsel noted that the origin of managerial skills and the unrelated nature of the succession of transactions by which the alleged successor obtains a business location were both important elements in the board's decision in Calmil Enterprises, [1980] OLRB Rep. Apr. 401.
16Counsel for the respondent also argued that the facts in this case are on all fours with the facts in Sunnybrook Food Market (Keele) Limited, [1974] OLRB Rep. Jan. 47. In that case, A & P had operated a supermarket in Brampton from premises it occupied pursuant to a 10-year lease which included three extension options of 5 years each. Six months before the end of the initial 10 year term, A & P gave notice to the lessor that it would not be exercising its options. The reason A & P gave for this decision was that the premises were small and outmoded, and only marginally profitable. The respondent Sunnybrook came into the picture when it leased from A & P's landlord the premises occupied by A&P for a term commencing upon the expiry of A & P's lease. Sunnybrook had no dealings with A&P before committing itself to a lease of the premises, and there was no corporate relationship between A & P and either Sunnybrook or the landlord. A week after committing itself to the premises, Sunnybrook received a letter from A&P offering for sale the fixtures located in the subject premises. Sunnybrook accepted the offer, and acquired those fixtures. The Board rejected an application for a declaration that these transactions amounted to a sale to Sunnybrook of A & P's business. At paragraph 24 of the decision, the Board said:
We do not agree with the sweeping proposition advanced by counsel for the applicants that in the retail food market business, the business adheres in the premises. In our view, the sale of fixtures by A & P to the respondent, in the circumstances of this application, was merely the sale of unwanted assets and was not the sale of a business within the meaning of section 55 [now 63] of the Labour Relations Act.
17Counsel for the respondent also emphasized the 4-1/2 month hiatus between the closing of the Dominion store and the opening of the Valencia Foods store. He noted that such a hiatus had been an element considered by the Board in other retail food store cases including Darrigo Consolidated Holdings Inc., [1980] OLRB Rep. Jan. 29, although he conceded that the hiatus in that case was greater than the hiatus here.
18Counsel for the respondent noted that Dominion was still doing business in Etobicoke near the location in question. Noting also the applicant's failure to put Dominion's side of the story before the Board, he asked the Board to conclude that that side of the story would not have assisted the applicant in persuading the Board that a sale of business had occurred.
19Counsel for the applicant observed that Dominion operated, and Valencia Foods operates, a retail food store. He emphasized the similarity of the work performed before and after the change in tenants, a consideration which he submitted is always given great weight, citing Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691. He pointed out that we have no evidence from which to assess what portion of the Valencia Foods operation is uniquely Italian and what portion involves the sale of goods similar to those sold in any supermarket operation. He cited Yesteryear Grocers Inc. [1982] OLRB Rep. Dec. 1975 for the proposition that a change in marketing concept should not lead to a finding that there had been a substantial change in the business. Counsel dwelt at length on the timing of the transactions between Victern and Dominion on the one hand, and between Victern and Valencia on the other. He likened Victern's role to that of a receiver, and suggested that its interest in these transactions had been more substantial than that of a landlord only. He argued it was important that during the negotiations between Victern and Dominion there had been occasional suggestions that various rights of first refusal might be granted to Dominion, and asked the Board to note that this possibility had been abandoned by Dominion when it finally made its agreement to surrender the lease.
20Counsel for the applicant argued that the result and reasoning in Calmil Enterprises is to be confined to the unique facts of that case. He submitted that the Sunnybrook case could be distinguished on the basis that the landlord there had not actively solicited a surrender of lease by A&P. Responding to the argument that Dominion had remained in the market, counsel for the applicant argued that the market to be examined was the market in the immediate vicinity of the subject location, and did not extend so far as to include the Dominion store referred to in evidence by Mr. Troiani. He suggested that the More Groceteria decision supported an analysis of this sort, which he said should lead to a finding of sale of business on the basis of the locational analysis in Dutch Boy Food Markets, 65 CLLC ¶ 16,051. He argued that a hiatus of 4-1/2 months was not sufficient to impede a finding of sale of bustness, observing that longer periods of 7 months and 11-1/2 months had been involved in Zehr 's Markets Limited, [1974] OLRB Rep. May 331 and Darrigo Consolidated Holdings Inc., supra, respectively.
21One of the points respondent's counsel dealt with in reply was the question of substantial change. He conceded that the differences between an operation like Valencia's and an operation like Dominion's are not so substantial as to warrant an order pursuant to section 63(5) terminating bargaining rights if the Board found the respondent otherwise bound by such rights as a result of a sale of business. While not substantial in that sense, those differences were nevertheless relevant and significant, he argued, in assessing whether there had been a sale at all.
III
22The relevant provisions of section 63 of the Act are as follows:
63.-(l) In this section, (a) "business" includes a part or parts thereof;
(b) "sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings.
(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.
(3) Where an employer on behalf of whose employees a trade union or council of trade unions, as the case may be, has been certified as bargaining agent or has given or is entitled to give notice under section 14 or 53, sells his business, the trade union, or council of trade unions continues, until the Board otherwise declares, to be the bargaining agent for the employees of the person to whom the business was sold in the like bargaining unit in that business, and the trade union or council of trade unions is entitled to give to the person to whom the business was sold a written notice of its desire to bargain with a view to making a collective agreement or the renewal, with or without modifications, of the agreement then in operation and such notice has the same effect as a notice under section 14 or 53, as the case requires.
23Section 63 preserves the collective bargaining and collective agreement rights of persons employed in a business when there is a change in the real or nominal ownership of that business. A sale of an incorporated business can come about by means of a sale of assets or by a sale of shares. Even without section 63, collective bargaining and collective agreement rights of employees would not be affected by a sale of shares of an incorporated business, because the legal identity of the corporate employer would remain unchanged. If the sale of business is accomplished by a sale of assets, the legal identity of the employer does change. The new employer is not named in the certificate or recognition agreement from which bargaining rights flow, nor in any existing collective agreement, and on general principles of commercial law alone the new employer would not be bound or affected by any of those documents. This would be so even if the real beneficial or underlying ownership of the business remained unchanged, as where a sale of assets occurred between two corporations with identical shareholders. The choice between sale of assets and sale of shares as a means of transferring ownership of a business may have little effect on the continued day-to-day functioning of the business. Apart from section 63, however, the choice of form would affect collective bargaining and collective agreement rights of the employees engaged in those day-to-day operations. The object of section 63 is to ensure that the effect on these rights is uninfluenced by the choice of form. If a sale of assets is the form adopted for what is, in substance, a transfer of ownership of a business, section 63 imposes on the asset transaction the same labour relations result as obtains in a sale of shares, by imposing the vendor's bargaining and agreement obligations on the purchaser of the business: the purchaser stands in the shoes of his vendor for labour relations purposes. Of course, ownership of an unincorporated business can be transferred only by transferring assets. Significant as the legal form of ownership and control may be for commercial law purposes, it is not relevant to the purposes served by the Labour Relations Act. The form of ownership should be no more critical to continued collective bargaining and collective agreement rights than the form a transfer of ownership may take. Thus, section 63 prescribes the same labour relations result for unincorporated businesses as for incorporated ones: the purchaser of the business stands in his vendor's shoes. (For other statements on the purposes of section 63, see Aircraft Metal Specialists Ltd., [1970] OLRB Rep. Sept. 705 at ¶¶5 and 6; Marvel Jewelry, [1975] OLRB Rep. Sept. 733 at ¶8; and Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193 at ¶¶18 to 26.)
24Section 63 takes effect only if there is a "sale" of a "business". A sale of business will always involve the transfer of assets of some kind from one legal entity to another, whether the assets transferred are shares or assets used in the business; however, a transfer of assets will not always constitute a sale of business. When section 63 is invoked, the Board must determine whether there has been a "sale", a concept broadly defined in the statute and liberally interpreted by the Board: Thorco Manufacturing Ltd., 65 CLLC ¶16,052. In determining whether there has been a sale, the Board is more concerned with the substance of transactions than with their form. Two or more transactions or events may, together, constitute a sale. As the Board noted in Metropolitan Parking inc., supra, at ¶28:
The Board has found a transfer of a business through a "chain" transaction, or sequence of sales (Culverhouse Foods Ltd., [1976] OLRB Rep. Nov. 691; Trenton Riverside Dairies, [1964] OLRB Rep. May 72), a corporate reorganization and merger, (Eaton Yale Ltd., [1971] OLRB Rep. Oct. 667; Westeel-Rosco Ltd., [1966] OLRB Rep. Dec. 718) and through the offices of a receiver where "the business" has been transferred as a going concern (Marvel Jewelry Ltd., [1975] OLRB Rep. Sept. 733; Field-Price Ltd., [1973] OLRB Rep. Oct. 543; Parnel Foods Ltd., [1971] OLRB Rep. Nov. 715.) The manner of disposition is irrelevant so long as a transfer has, in fact, taken place. The interposition of a third party, acting as an agent or conduit, does not affect the result.
25The identification of a "sale" is usually less difficult than the determination whether the subject matter of the sale constitutes a "business" or "part of a business". In a "textbook" business acquisition by asset purchase, the purchaser seeks from the vendor the tangible and intangible assets employed in the business, assurances of continued commercial relations with suppliers and customers, and covenants of the vendor with respect to various matters, including non-competition. Where all the textbook elements are present, it is not difficult to conclude that a sale of business has occurred. Some elements may be absent because, in the particular circumstances, those elements are not necessary, or because the parties or their advisors have not read the "textbook", or because the parties intend to convey a business but do not wish it to appear so. Elements may also be absent because the parties have no desire or intention to convey a business. Not infrequently, the parties to a transaction are focusing simply on the effective conveyance of certain assets, and do not ask themselves whether the assets sold together constitute a business. That question is, however, one which the Board is regularly obliged to address. As the Board said in Culverhouse Foods, [1976] OLRB Rep. Nov. 691 at ¶16:
... In each case the decisive question is whether or not there is a continuation of the business.. . .the cases offer a countless variety of 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 it is was [sic] before, i.e. whether there has been a continuation of the business.
In Grand Valley Ready Mixed Concrete Supply Limited, [1981] OLRB Rep. June 663, the Board described the appropriate analysis in this way:
.In most section 55 [now 63] applications, whether involving the alleged sale of the whole business or a part thereof, the nature of the alleged predecessor's business organization provides the ultimate answer. The Board identifies its essential elements and determines if sufficient of these have been transferred to the successor as to allow the business and the employment which it generates to continue. See Thunder Bay Ambulance Service, [1978] OLRB Rep. May 467 and Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691. However, if as in Canada Cement Lefarge, [1977] OLRB Rep. Jan. 5, and Darrigo Consolidated Holdings, [1980] OLRB Rep. Jan. 29, assets have been disposed of which are peripheral or unrelated to the business organization to which the bargaining rights at issue attach, the Board will not find that there has been a sale of a business within the meaning of the section.
- The exercise becomes more complicated where, as in this case, the alleged successor has carried on a parallel business. Where the alleged successor has carried on a parallel business the result of the transaction may as easily be an expansion or alteration of his business as the transfer of the alleged predecessor's business. An employment opportunity which flows from an expansion or alteration of the business carried on by the alleged successor prior to the section 55 transaction does not trigger the operation of the section. The union's bargaining rights attach to the predecessor's business and their preservation is contingent upon a transfer and continuation of that business.
26In Metropolitan Parking Inc., sup ra, the Board observed that continuity of the work performed is not by itself a conclusive test for applicability of section 63:
For a transaction to be considered a "sale of a business" there must be more than the performance of a like function by another business entity. There must be a transfer from the predecessor of the essential elements of the business as a block or as a "going concern." A business is not synonymous with its customers or the work it performs or its employees. Rather, it is the economic organization which is used to attract customers or perform the work. The Legislature could have provided for the continuation of bargaining rights whenever there is a continuity of the work performed, but it did not do so. Bargaining rights are continued only when the employer transfers his business. The use of the active verb and possessive pronoun is not insignificant.
Section 53 of the British Columbia Labour Code and section 144 of the Canada Labour Code are similar to section 63 of the Labour Relations Act. Both the B.C. and Canada Labour Relations Boards have recognized that the language and purpose of these provisions require more to support a declaration than similar work, as appears from the following passage from the B.C. Board's decision in Canadian Odeon Theatres Limited, 82 CLLC ¶16,139, [1981] 3 Can. LRBR 372, at pages 374 and 375:
As the Board pointed out in Lyric Theatre, [[1980] 2 Can. LRBR 331], the similarity of work performed before and after the transfer is not sufficient of itself. The Canada Board put it best in Radio CJYQ Limited and Newfoundland Broadcasting Ltd. and National Association of Broadcasting Employees and Technicians, [1978] 1 Canadian LRBR 565 at 574:
But continuity of the work done is not sufficient alone to satisfy section 144. There must be some nexus between the two employers other than the fact that one employed persons to do certain work that the other now does or will do, before one can be declared the successor of the other. Otherwise a loss of work to a competitor employer would result in a successorship. There must be some continuity in the employing enterprise for which a union holds bargaining rights as well as continuity in the nature of the work. The two go hand in hand.
27Dutch Boy Food Markets, 65 CLLC ¶ 16,051 is one of the first cases in which the Board had an opportunity to assess an alleged sale of business in the retail food industry. In that case, Kitchener Foods offered to buy all of the leasehold improvements and fixtures on the premises from which Steinberg's then conducted its sole retail operation in Kitchener. The offer was conditional on the assignment to Kitchener Foods of Steinberg's leasehold interest in those premises. Steinberg's accepted the offer. The parties entered into a written agreement which contained no restrictive convenant by Steinberg's and expressly excluded "goodwill" from the purchase price. The Board rejected the argument that these features of the agreement precluded a finding that there had been a sale of business:
Had Kitchener Food only purchased the contents of the premises at 274 Highland Road and moved them into other premises we would have no difficulty in finding that the transaction was only the sale of assets. In the instant case, however, Kitchener Food acquired not just assets, but Steinberg's entire interest in the premises. Stated another way Steinberg's disposed of its entire operation in the Kitchener area which obviously must have had some effect on its operations in Ontario. If by the terms of the transaction Steinberg's had been restricted from carrying on business in the same area we would have no hesitation in saying that there was a sale of a "business" within the meaning of section 47a of the Act. The absence of such convenant, however, is not by any means conclusive that there was not a sale of a "business".
A retail food supermarket, unlike some other businesses, has no customer orders or lists which can be transferred to a purchaser who intends to carry on the same type of business. By the very nature of a retail food business, with the exception of the name, a vendor has no goodwill which he can effectively give or withhold from a purchaser. The success of a food supermarket is dependent, on large measure, upon the support of the people who live in the area in which the store is located. Accordingly, any goodwill consists in the habit of customers of the vendor continuing to patronize the food market located on the same premises. If there was any goodwill to be acquired by Kitchener Food it was inherent in the premises themselves in which Steinberg's had carried on the same type of business as that carried on by Kitchener Food. Accordingly, the exemption of goodwill from the purchase price, in our opinion, has no real meaning.
Similar arguments were similarly rejected in L & M Food Markets (Ontario) Limited, [1965] OLRB Rep. Sept. 440 and Leader's Clover Farms Food Market, [1966] OLRB Rep. Nov. 636, both cases in which the successor acquired in a single transaction the predecessor's premises, fixtures, and equipment along with considerable stock-in-trade: all but the brand-name inventory in the L & M case, and all but the meat, frozen food, damaged stock and brand-name inventory in Leader's. The successor supermarkets opened 3 and 16 days, respectively, after their predecessors' supermarkets closed. The Board in Dutch Boy found a hiatus of 7 weeks' duration did not make the transaction there any less the sale of a business. It is perhaps noteworthy that, on the facts before it, the Board in that case was able to make a positive finding that the parties before them intended to engage in a sale of business:
Viewing the transaction more positively, we find it most significant that the wording of the Offer to Purchase itself clearly contemplates the sale of a "business". More particularly, the second paragraph of Article 2 on page 3 reads:
This transaction of purchase and sale is to be completed on or before the 31st day of December, 1964 on which date vacant possession of the business and premises of the Vendor is to be given to the Purchaser. (The underlining is added for emphasis.)
In our opinion, the above wording makes it abundantly clear that it was the intention of the parties that Kitchener Food acquire by sale the "business" of Steinberg 's.
(emphasis added)
In assessing whether a sale of business has taken place, the absence of "textbook" elements becomes less critical if it is clear the parties thought they were engaged in a sale of business in a commercial sense.
28Subsequent Board decisions all acknowledge, expressly or impliedly, the importance of the store premises as an element of a business in the retail food trade, and the significance of the inclusion of that asset in a putative "sale of business" transaction. The cases also reiterate the need to assess even that important factor in the context of all the surrounding circumstances, including the corporate relationship, if any, of vendor and purchaser, the continued presence or relocation of the vendor within the relevant market area, continued involvement of key personnel, the length of and reasons for the hiatus between the vendor's closing and the purchaser's opening, and any post-sale effort by the purchaser to identify its location by reference to the vendor prior operation: Super City Discount Foods Limited, [19'70] OLRB Rep. Apr. 118; Gordons Markets, [1978] OLRB Rep. Dec. 1102; Zehrs Markets Limited, [1974] OLRB Rep. May 331; Dominion Stores Limited, [1979] OLRB Rep. 626; Darrigo Consolidated Holdings Inc., [1980] OLRB Rep. Jan. 29; More Grocerteria Limited, [1980] OLRB Rep. Apr. 486. The importance of each factor is likewise a function of surrounding circumstances. The importance of both location and premises depend on the nature of the market served. The habit addressed in Dutch Boy is the habit of patronizing a business which has become identified with a location, and not just the tendency, all other things being equal, to shop near home. A hiatus in operation will diminish the force of that habit at a rate and to an extent which depend, presumably, on the nature of the shopping alternatives available, the regularity of resort to those alternatives, and the extent to which vendor or purchaser behaviour encourages or discourages any impression that the discontinuance of supermarket operations is temporary. It is not realistic to suppose that the relationship and application of these factors can be reduced to an algebraic formula. This is in part because when one goes beyond obvious generalities, the description and prediction of shopping behaviour cease to be the proper subject of judicial or administrative notice and become a matter for empirical and expert evidence of a nature seldom, if ever, placed before the Board in these cases. More importantly, the attempt to reduce these matters to a formula, through expert evidence or otherwise, would be of limited use; answers to these questions about the retail market are not ends in themselves, but merely one of the means employed in assessing the still highly qualitative question whether a "business" has been sold. The lesson of the cases is that while location and premises are important elements of a retail food business, they are not themselves the business; even location and premises can be or become mere "surplus assets" which alone, or even in combination with other assets, can lack the dynamic or organic quality which distinguishes a business from an idle collection of assets: Sunnybrook Food Market (Keele) Limited, [1974] OLRB Rep. Jan. 47; and see More Groceteria Limited, supra, at ¶¶21-24.
IV
29We are satisfied that Mr. Sitzer and Ms. Ross were totally candid with the Board on all the matters on which they testified. We accept at face value their description of the actions they took and their reasons for those actions. We agree with counsel for the applicant when he says that Victern was acting throughout in economic self-interest; we find nothing sinister in that. We find nothing suspicious about a landlord's becoming increasingly serious about prospective tenants as the prospect of having space to rent matures. We would have been suspicious if a sophisticated commercial landlord had told us that, in the circumstances of this case, he would give prospective tenants no attention at all until he had a concluded agreement by the existing tenant to surrender its lease. We do not find that the interests in which Victern acted went beyond the interest of a commercial landlord of retail space. In particular, we find nothing in these facts to suggest that Victern was seeking to become a broker in the sale of Dominion's retail business. We do not agree that Victern played here a role analogous to that played by receivers in such cases as Marvel Jewelry, sup ra, and Field-Price Ltd., [1973] OLRB Rep. Oct. 543. The role played by Victern here is indistinguishable, for our purposes, from that of the landlord in Sunnybrook. The important question is not whether it was the former tenant or the landlord who initiated the question of a surrender of lease, but whether there was anything more to their dealings than a surrender of lease. In that regard, we do not find it significant in these circumstances that options or rights of first refusal on space were mentioned and then dropped as potential terms of an agreement to surrender Dominion's lease. This was mere tinkering with the substantial bundle of rights whose surrender was under discussion. Had Dominion been interested in selling its business at the subject location, it could have set out to find an assignee for the lease and made the assignment conditional on the assignee purchasing fixtures. Dominion did not seek out Valencia or other potential supermarket assignees, any more than Valencia sought out Dominion. Both sought to deal with the landlord; neither did so on any conditional basis. Dominion's surrender was not conditional on its finding a purchaser for any of its assets; indeed, it had no assurance that any new tenant or tenants would have any desire to purchase Dominion's equipment or, for that matter, any need for such equipment. Equally, Valencia's obligation to Victern was not conditional on its obtaining anything from Dominion. We are unable to discern from Valencia's behaviour any interest in, or intention to acquire, part of the business of Dominion. What Valencia set out to do was to expand its existing business into a new location because of the market potential there for an Italian-style supermarket. What evidence there is of Dominion's involvement in these transactions does not support an argument that a sale of business transaction was involved or intended.
30The absence of evidence that the parties intended to engage in sale of business in a commercial sense does not determine the question under section 63. The objective result of transactions can be a "sale of business" despite the neutral or even contrary subjective intent of the parties to those transactions. That is not the result here. The absence of former Dominion employees among the Valencia workforce at this location is a neutral fact where, as here, Valencia has neither sought out nor avoided them. The coincidence of location and similarity of operation by themselves would favour a sale finding. However, the independence, each from the others, of the surrender of lease, the lease and the equipment purchase, the independence of the parties to those transactions and the length the premises remained vacant all weigh against finding a sale, as do the existence and similarity of Valencia's preexisting operation and its role as the source of management and key employees at the new location. On balance, we do not find a sale of business in the facts of this case. In our view, the presence of Valencia at Dominion's former location represents the expansion of a parallel business in which some assets of Dominion came to be used. Those assets did not alone constitute a business or part of a business, and it cannot be said in this case that an existing business has expanded by purchasing a competitor's business and refurbishing it. This application is, accordingly, dismissed.
31In the course of the Board's hearing, counsel for the applicant requested reasons for one of our procedural rulings. We would be content to reduce those reasons to writing if counsel renews his request in writing, after considering whether those reasons would be of assistance.