[1985] OLRB Rep. August 1225
0659-85-R; 0918-85-R Labourers' International Union of North America, Ontario Provincial District Council and Labourers' International Union of North America, Local 607, Applicant, v. Thunderbrick Limited, Thunder Tile Limited and Great Lakes Ceramics Inc., Respondents, v. Group of Employees, Objectors; Group of Employees of Great Lakes Ceramics Inc., Applicant, v. Labourer's International Union of North America Ontario Provincial District Council and Labourer's International Union of North America, Local 607, Respondent, v. Great Lakes Ceramics Inc., Intervener
BEFORE: D. F. Franks, Vice-Chairman, and Board Members F. W. Murray and T. Theobald.
APPEARANCES: David Strang and Pat Little for Labourers' International Union of North
America, Ontario Provincial District Council and Labourers' International Union of North
America, Local 607; H. D. Bernhard, Q. C. and Ella Bernhard for Thunderbrick Limited,
Thunder Tile Limited; William G. Shanks and Robert J. Gotts for Great Lakes Ceramics Inc.;
F. J. W Bickford and Joe Comuzzi for Group of Employees of Great Lakes Ceramics Inc.
DECISION OF THE BOARD; August 16, 1985
Board File 0659-85-R is an application by Labourers' Union Local 607 pursuant to section 63 and/or section 1(4) of the Act concerning the respondents Thunderbrick Limited and Great Lakes Ceramics Inc. Board File 0918-85-R is an application for termination brought by a group of employees with respect to the employees of Great Lakes Ceramics Inc. against the same Labourers' Local 607. Since the termination application is contingent upon a finding under section 63 or section 1(4) in Board File 0659-85-R, the Board dealt with the section 63/1(4) application first. In those proceedings counsel for the applicant Labourers' Union agreed to the participation in the proceedings by counsel for the group of employees in the termination proceedings. However, he reserved his rights with respect to the voluntariness of the petition document filed in the termination proceedings.
At the conclusion of the evidence in the section 63/1(4) application, counsel for the applicant Labourers' Union abandoned his application with respect to the section 1(4). The Board then heard the representations of the parties on the section 63 issue and at the conclusion of argument dismissed the section 63 application orally for reasons to be given in writing. Herein are the reasons for the decision in File No. 0659-85-R.
The applicant Labourers' Local 607 was certified for the employees of Thunderbrick Limited in 1977. Subsequently, collective agreements were entered into and in 1972 the then in forced collective agreement expired. The union and the employer Thunderbrick Limited had been negotiating for the renewal of that collective agreement. A "no board" letter had been issued in due course. At about that time, however, the respondent Thunderbrick closed its brick work plant in Thunder Bay.
The brick work plant in Thunder Bay had been developed in the mid 70's by West German interests through a corporate entity known as Thunderbrick Limited. A substantial amount of money was invested both by the West German family and the Northern Ontario Development Corporation. The scheme was to use a previous brick plant and local clay deposits. A large kiln was built and by 1977 the plant was in production. It appears, however, that the plant never made a profit, there were problems with the quality of the bricks and also with the decline in construction activity in the various construction markets. In any event, some time in the early 80's it was decided to try converting the plant from a brick plant to a tile plant again using the local clay and the facilities in Thunder Bay. It appears on the evidence before us that some trial runs were made at producing tiles. The tiles were unsatisfactory and could not be marketed and the plant was subsequently closed.
The owners of the plant maintained the closed plant at a considerable loss from the period of 1982 to early 1985. They attempted to sell the facility. The only serious offer they had apparently during this period was an offer to purchase the facility at scrap value. In the meantime it appears there were a substantial number of bricks and the "experimental" tile in the yard which, on the evidence, it appears the respondent Thunderbrick Limited tried to sell.
The respondent Great Lakes Ceramics Inc. is owned by two groups, one a group of investors who are former residents of Hong Kong and a Saskatchewan group whose initial activity was searching for and developing clay deposits for refractory uses. It appears that the Saskatchewan group had found and developed a clay deposit suitable for tile development and was anxious to go into the production of ceramic tiles. In investigating the possibilities for production they became aware of the unused site in Thunder Bay and commenced negotiations with the West German owners of the Thunder Bay site.
It is clear that there is no connection whatsoever between the West German interests which own Thunderbrick Limited and Thunder Tile Limited and the group which owns Great Lakes Ceramics Inc. The discussions concerning the Thunder Bay property eventually lead to a document which can best be described as a lease with an offer to purchase. Clearly, Great Lakes Ceramics Inc. was in a buyer's market and were able to extract quite favourable terms concerning the lease and possible purchase of the site. We need not go into the agreement in detail. The main thrust of it is that there is a $50,000 payment at the start, for the first year there are no rent payments, the second year's rent is $3,000 per month and the rent increases to $5,000 a month after month. The option to purchase is to be exercised on or before December 31st, 1989. The purchase price would be 3.2 million dollars (the estimate of the amount of money used to develop the facility was of the order of 8 million). Of interest in the lease option agreement for our purposes is what is included and what is excluded from the purchase arrangement. Basically the lease purchase involves the manufacturing facility and the yard but excludes the local clay pits and the Thunder Bay clay pits from the agreement. The equipment purchased were essentially the equipment which had been used in relation to the experimental tile production. The brick equipment is not part of the transfer arrangement nor was any of the inventory of bricks and tiles in the yard, nor any customers' lists.
The agreement, however, contains a provision which reads as follows:
All right title benefit and interest of the vendor in and to all registered or unregistered trademarks, trade or brand name service marks, patent rights, goodwill, licences and franchises employed in connection with the Thunder Bay ceramic tile manufacturing facility.
Normally such a provision would signify the sale of an on-going concern. The evidence, however, and this is borne out by other parts of the agreement as well, is that there was no transfer of goodwill. In fact the evidence is clearly that Great Lakes Ceramics Inc. has had serious problems in overcoming the negative market reputation of the previous owners. It would appear that although the clause is in the transfer arrangement there was in fact nothing of that sort transferred.
It should also be noted that Great Lakes Ceramics Inc. has in fact hired seven people who had worked at the previous Thunderbrick operation several years ago. Counsel for the applicant argues that the fact that previous employees were employed, together with the clause transferring goodwill, are grounds for the Board considering this to be the sale of a business within section 63 of the Act. He also notes that the fact that the business has closed down some two years is not grounds for denying his application under section 63 of the Act.
Clearly, in the present case the form of the transaction, that is, a lease option to purchase is something which may be the subject of section 63 applications and, indeed, the fact that only part of a business has been sold is also something to which section 63 can attach. However, in our view, it is clear on the facts that no business was sold. Indeed, we are of the view that not even the assets which are sold can be considered to be "part" of a business. At best Great Lakes Ceramics Inc. has potentially bought certain facilities which were not capable of being used in the manner in which they intend to use them without significant modifications and different clay. It cannot be said on the facts of this case that Great Lakes Ceramics Inc. purchased a tile manufacturing facility from Thunderbrick Limited or Thunder Tile Limited since it is clear on the evidence that Thunder Tile Limited never had such a facility that could be sold. For these reasons, therefore, we are of the view that the transaction between Thunderbrick Limited or Thunder Tile Limited and Great Lakes Ceramics Inc. was not such as could be described as the sale of a business within the meaning of section 63 of the Act and for these reasons therefore the application is dismissed.
In view of our finding that Great Lakes Ceramics Inc. is not the successor employer to Thunderbrick Limited or Thunder Tile Limited, the proceedings in Board File No. 0918-85-R are therefore dismissed.```