[1985] OLRB Rep. March 516
2884-83-R; 3039-84-U Retail Wholesale and Department Store Union —Local 414 AFL-CIO-CLC, Applicant/Complainant, v. Dominion Stores Limited, Willett Foods Limited, Termarg Food Services Limited, Respondents
BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members W. H. Wightman and B. L. Armstrong.
APPEARANCES: James Hayes. B. A. Hanson, Sheila Mclntyre and Robert McKay for the applicant/complainant; R. C. Filion, Q. C. and C. R. Robertson for Dominion Stores Limited and Willeti Foods Limited; James B. Noonan, Richard J. Nixon and Terence J. Nicol for Termarg Food Services Limited; Lorne Morphy, Q.C. and Richard Van Banning for Argcen Holdings Inc. and Argus Corporation; R. A. Spence for G. Montegu Black and Conrad M. Black.
DECISION OF THE BOARD; March 25, 1985
The applicant to these section 1(4) and 89 proceedings seeks to add as respondents the corporations Argeen Holdings Inc. and Argus Corporation as well as individuals Conrad and Montegu Black. The addition of the corporations is on the basis of an alleged re-organization on or about August 30, 1984, in which the respondent Dominion Stores Limited was to become 100 per cent owned by Argcen, which in turn is said to be a company under the control and direction of the Argus Corporation. The basis for adding the Blacks is essentially the allegation that they in one way or another, as major shareholders in Argus, or as officers and directors of the various Argus companies (including Dominion), direct and control the activities of Dominion Stores Limited. The applicant relies as well on published media accounts of direct involvement in the affairs of Dominion on such matters as the firing of its President, John Toma. In addition to these corporate developments already referred to, the applicant points to the recent sale of a substantial number of Dominion's stores to competitor A & P. together with other real property that previously had housed the head office and distribution facilities for Dominion Stores Limited.
While the Board can understand the applicant's concern over the impact on its current litigation of the events recently unfolding around it, the fact is that the respondent "Dominion Stores Limited" has apparently been operated for a good deal longer than the events in question as a subsidiary of the Argus group of companies. There is nothing new in that. More importantly, Dominion Stores Limited was, at the time of franchising, the corporate entity carrying on the business in question for that group, and continues to do so today, whether on the basis of the remaining 41 stores operated by it under its own name, or, as this application alleges, through its franchised "Mr. Grocer" stores as well. The applicant at the hearing advanced a number of credible concerns in support of its request to the Board to add additional parties, but its desire to insure the results of its various legal proceedings by way of further "deep pockets" did not emerge until counsel for Dominion tabled with the Board an earlier letter from counsel for the applicant. That letter asked that the applicant be furnished with a guarantee that the additional corporations and individuals now sought to be added as respondents would honor any claims arising from the instant proceedings. The applicant stated its position as follows:
"We are currently actively reviewing, among other things, the possibility of seeking to name additional parties to the imminent Ontario Labour Relations Board proceedings which would include a corporation or corporations related to Dominion, and also the principal shareholders or persons in control of the corporations in their personal capacities.
Naturally we are quite anxious to avoid spawning additional grounds for controversy which may be unnecessary. There would clearly be no need to pursue such a course of action should the corporate and individual principals be prepared to provide us with a written guarantee that they would honour any claims which may be asserted whether or not Dominion continues in business."
- The Board in the relatively recent case of Total Marketing Incorporated, [1983] OLRB Rep. April 616, expressly addressed the issue of attempting to use section 1(4) of the Act solely as a means of collecting from a "deeper pocket", where that other "pocket" is not itself engaging in the business to which the Union's bargaining rights attach. The Board wrote:
The facts are not in dispute. The applicant has a bargaining relationship with Sepeographics Incorporated, which is a wholly owned subsidiary of the respondent Total Marketing Incorporated. In an arbitration award dated August 21, 1981, it obtained an order for the payment of 53,403.39 against Sepeographics Incorporated. Sepeographics Incorporated was insolvent at the time of the arbitration and subsequently made an assignment in bankruptcy. The full amount of the arbitration award remains unsatisfied. By this application the applicant seeks to put itself in a position to realize its arbitration award, now registered in the Court as a judgment debt, against the respondent Total Marketing Incorporated.
The material before the Board establishes that the two corporate entities are under common control and direction, and would qualify as related companies within the meaning of section 1(4) of the Act. This is not a case, however, where the Board should exercise its discretion to declare that Total marketing Incorporated is a related employer for the purposes of the Act.
It is clear that Sepcographics Incorporated has ceased operations, and that the work which it performed is no longer being done. There has been no transfer of work, and in that sense no undermining or erosion of the applicant's bargaining rights. If it appeared on the material before us that the respondent had spun off a similar company to do identical work the case might be more compelling for relief, whether by way of declaration of successorship under section 63 of the Act or by the application of section 1(4). In those circumstances the Board could, by the operation of section 1(4) pierce the corporate veil in the interests of protecting the bargaining rights. (See e.g., Devon Studio, [1980] OLRB Rep. July 961). Those facts are not shown in the instant ease. The purpose of section 1(4) of the Act is to preserve bargaining rights. It is not intended to give a party to a collective agreement the right to a "deep pocket" recovery of an unsatisfied debt against a related corporation.
The Labour Relations Act is predicated on the free choice of employees. It is also drafted in contemplation of the existing economic order, with due allowance for the realities of commercial law, including principles of limited liability for corporations. While section (4) provides an exception to that law for a limited purpose, that purpose must always be kept in mind. The section was not intended to extend bargaining rights, nor should it be used to extend the liabilities that arise under them, when bargaining rights have not in fact been transferred or undermined. (ef. Re Cassin-Remco Ltd., [19801 1979 CanLII 2013 (ON HCJ), 105 D.L.R. (3d) 138 (Ont. H.C.)). The Board should not generally allow a union with bargaining rights for the employees of a subsidiary to use section 1(4) to automatically obtain a declaration that its bargaining rights extend to the parent company and its employees, or to a sister company. We do not see why the consequences should be any different simply because the subsidiary has become insolvent. (ef. Chandelle Fashions, [1982] OLRB Rep. June 828 at 848-49).
The Board is not without sympathy for the hardship suffered by the applicant. It is left with an uncollectable bad debt. That result, however, is a risk that unions and employees have always assumed like all participants in the economic marketplace. Whether employees of a bankrupt subsidiary or their union should have a claim for an unpaid debt against a parent company that is solvent is a policy question of substantial consequence best resolved legislatively. It is not a result that should, absent clear and unequivocal language in the Act, be ushered in by this Board through a novel interpretation or application of section 1(4)."
That case has equal application to the matter before us. Apart from the application, where appropriate, of section 1(4) of the Act, the law recognizes the separate identity of each individual corporate entity, notwithstanding that a corporate entity in fact can act only through individuals, and may be controlled to a greater or lesser extent by other corporate entities, whether through the ownership of its shares or through the existence of common officers or directors. Here, as in the Total Marketing case, there is no allegation of a "transfer of the work", and thus the work opportunities of the employees for whom the applicant has bargaining rights, other than to the extent already covered by the application as filed (i.e. the franchising through Willett Foods Limited of "Mr. Grocer" stores), and apart from the sale of certain stores to A & P (which the applicant does not challenge). Were that to change, the full "successor" and "related employer" provisions of the Labour Relations Act, together with its unfair labour practice provisions, would again be available to the applicant for the purpose of litigating any claims it might have.
There is, of course, a companion section 89 complaint in these proceedings, as there was in Penmarkay, [1984] OLRB Rep. Sept. 1214, although the Board in that case did not deem it necessary to comment upon it. With respect to section 89 relief, the Board made it clear in Sunnylea Foods, [1981] OLRB Rep. Nov. 1640, and in Daynes Health Care Limited, [1985] OLRB Rep. Mar. 387. released March 5, 1985, that, in an appropriate kind of case, and at least where the corporate entity itself has disappeared, or has explicitly threatened to do so if a full measure of damages is claimed, the Board is not unprepared to affix liability to an individual or "person" acting on behalf of the corporate employer. But again, every corporation must ultimately act through individuals, and the applicant has been unable to plead (nor, as in Sunnylea and Daynes, has prior litigation shown) a course of conduct anywhere close to the exceptional circumstances causing the Board to consider the steps it did in those latter two cases.
On the basis of the foregoing, the request of the applicant to expand the list of parties beyond those already encompassed by the present proceedings is denied.