Canadian Paperworkers' Union v. Somerville Belkin Industries Limited, 1985 CanLII 972

[1985] OLRB Rep. May 734

0497-84-R Canadian Paperworkers' Union and its Locals 36, 311, and 1112, Applicant, v. Somerville Belkin Industries Limited, Tencorr Packaging Inc., Belkin Packaging Ltd., and Canadian Folding Cartons Limited, Respondents

BEFORE: R. 0. MacDowell, Vice-Chairman, and Board Members W H. Wightman and P. Grasso.

APPEARANCES: Harold F. Caley and Garry Buccella for the applicant; B. R. Baldwin and David Daugharty for Somerville Belkin Industries Limited; Howard A. Levitt, Rick Ellery and John Singer for Tencorr Packaging Inc.; Bruce Binning and Gerard J. Jansen for Belkin Packaging Ltd.; no one appearing independently for Canadian Folding Cartons Limited.

DECISION OF THE BOARD; May 24, 1985

I

1. This is an application under sections 63 and 1(4) of the Labour Relations Act made by the Canadian Paperworkers' Union (CPU) on its own behalf and on behalf of its Locals 36, 311, and 1112. The named respondents are: Somerville Belkin Industries Limited (Somerville Belkin), Belkin Packaging Ltd. (Belkin). Tencorr Packaging Inc. (Tencorr), and Canadian Folding Cartons Limited (CFC). Somerville Belkin is a wholly-owned subsidiary of Belkin. CFC is a corporate relative of both Belkin and Somerville Belkin, but it appears that this company is inactive, and would not be immediately affected by the outcome of these proceedings. CFC, as such, did not enter an appearance. The relevant provisions of the Labour Relations Act are as follows:

1(4) Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction, the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associates or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.

(5) Where, in an application made pursuant to subsection (4), it is alleged that more than one corporation, individual, firm, syndicate or association or any combination thereof are or were under common control or direction, the respondents to the application shall adduce at the hearing all facts within their knowledge that are material to the allegation.

63(1) 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.

(13) Where, on an application under this section, a trade union alleges that the sale of a business has occurred, the respondents to the application shall adduce at the hearing all facts within their knowledge that are material to the allegation.

2. This proceeding was originally scheduled for hearing before the Board on July 9, 1984. At the request of the parties, the matter was adjourned while they pursued settlement discussions. It eventually came on again for a hearing before the Board on October 15, 1984. At the opening of that hearing, the respondents made a number of submissions concerning the interpretation of sections 63(13) and 1(5), as well as the way in which, in their view, the case should be conducted. Before dealing with these submissions it may be useful to briefly sketch in the purpose of the related employer and successor rights sections of the Act. Both are designed to protect bargaining and contractual rights, but their focus is somewhat different.

II

3. Section 63 ensures that when a business or part of a business is transferred to a new owner, the transferee acquires the business subject to the collective bargaining obligations of the transferor. Collective bargaining rights are treated as a kind of vested interest which runs with the business so that the new owner stands in the shoes of his predecessor. Collective bargaining rights are not treated as co-extensive with commercial ownership, nor, in sale of business situations, does the common law notion of privity of contract have any application to collective agreements. Moreover, the term sale is not used in its ordinary commercial sense, but can include a lease arrangement or any other manner of disposition. Of course, it remains to be determined in each case whether there has been a sale of a business within the meaning of section 63 - that is, whether there has been a disposition or transfer of something, and whether what has been transferred can sensibly be described as a business or part of a business. That is not always an easy task, as the Board noted in The Tat ham Company Limited, [1980] OLRB Rep. March 366 at paragraph 26:

All of the cases to which we have referred recognize that there are no easily administered mechanical tests which permit the Board to readily distinguish between a mere sale of assets and a sale of part of a business. As the Board commented in Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1194 at paragraph 34:

This distinction is easily stated, but the problem is, and always has been, to draw the line between a transfer or a 'business' or 'a part of a business' and the transfer of Incidental' assets or items. In case after case the line has been drawn, but no single litmus test has ever emerged. Essentially the decision is a factual one, and it is impossible to abstract from the cases any single factor which is always decisive, or any principle so clear and explicit that it provides an unequivocal guideline for the way in which the issue will be decided.

The issue of employer successorship arises Out of a seemingly endless variety of factual settings, with each new case presenting some of the factors considered relevant to the resolution of prior cases while raising other materially altered, entirely omitted, or newly-added facts which arguably should affect the decision on the merits. Much of the confusion which attends successorship results from the facility with which each case can be distringuished [sic] on its facts from all former cases; but to dismiss the confusion so lightly would be to disregard the fundamental differences inherent in the various business contexts in which the successorship issue arises. Factors which may be sufficient to support a sale of business finding in one sector of the economy may be insufficient in another. In some industries, particular configuration of assets — physical plant machinery and equipment — may be of paramount importance; while in others it may be patents, know-how, technological expertise or managerial skills which will be significant. Some businesses will rely heavily on the goodwill associated with a particular location, company name, product name or logo; while for other businesses these factors will be insignificant. The Labour Relations Act applies equally to primary resource industries, manufacturing, the retail and service sector, the construction industry and certain public services provided by municipalities and local authorities. In each of these sectors the nature of the business organization is different, yet in each case section 55 [now section 63] must be applied in a manner which is sensitive to both the business context and the purpose which the section is intended to accomplish.

A recent example of this difficulty is illustrated by Riverview Manor, [1983] OLRB Rep. Sept. 1564. In that case, the Board held that, in the nursing home industry, the transfer of a nursing home licence may be sufficient, in itself, to warrant a successor rights declaration even though the successor builds a new nursing home in a new location within the same municipality. The licence was the essential asset of the business carrying with it a guaranteed market. Without the licence, the business would not be able to operate. On review, the Divisional Court held that the Board's interpretation was both reasonable and right in that context (see Riverview Manor v. Service Employees' International Union, Local 183, unreported, February 26, 1985 (Ont. Div. Ct.). The point is, that from a labour relations perspective, there may be a sale of a business to which section 63 applies, even though a commercial lawyer might not characterize the transaction in this way. That is why it is necessary to carefully analyze all of the facts in order to reach a conclusion which is faithful to both the remedial purpose of the legislation and the commercial context under review.

4. Section 1(4) was enacted in 1971, and deals with situations where the economic activity giving rise to the employment or collective bargaining relationships regulated by the Act is carried out by or through more than one legal entity. If the requirements of section 1(4) are met, the Board is empowered to pierce the corporate veil and declare them to be one employer for the purposes of the Act. Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members will attach to a definable commercial activity rather than the legal vehicle(s) through which the activity is carried on. Legal form is not permitted to dictate or fragment an established collective bargaining structure, nor will alterations in legal form undermine established collective bargaining rights. Indeed, section 1(4) does not even require that the related business activities be carried on simultaneously or contemporaneously. That issue was clarified in 1975 by the addition to section 1(4) of the phrase whether or not simultaneously. The 1975 amendment reflects a legislative recognition that the essential unity of an economic activity or business may be preserved, even though the legal vehicles through which it is carried on may not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any indicia of a transfer of a business which might trigger the application of section 63. Section 1(4) is typically applied where a unionized business, intent upon expanding or achieving a commercial advantage, decides to incorporate a new company which it then claims is not bound by the existing collective agreement. In such cases the Board may declare the two companies to be one employer for the purposes of the Act.

5. It will be seen that both sections 63 and 1(4) require a careful analysis, from a labour relations perspective, of the details of commercial transactions which ordinarily will not be within the knowledge of the employees or their bargaining agent. That is why, in 1975, the Legislature passed sections 1(5) and 55(13) [now 63(13)] imposing an obligation on respondent employers to adduce at the hearing all facts within their knowledge that are material to the assertion made by the applicant union(s). The purpose and effect of those amendments was considered by the Board in Canada Cement Lafarge Ltd. and Point Anne Quarry Company, [1977] OLRB Rep. Jan. 5, in a long passage to which we might usefully refer:

6. Prior to the enactment of sections 1(5) and 55(13), certain threshold evidentiary difficulties faced an applicant attempting to invoke section 1(4) or section 55. For example, the issue under section 1(4), as to whether corporations carrying on related or associated activities or businesses should be treated as one employer, is dependent upon facts which lie peculiarly within the knowledge of the corporations concerned. The same is true where the sale of a business is alleged under section 55. Since the ultimate burden of proof lies with the applicant in such cases, it was necessary, prior to the amendments, for the applicant to subpoena officers or employees of the respondents in an attempt to prove its case. Failure to call any evidence was fatal to the applicant's case: see Super City Discount Foods Limited, O.L.R.B. Monthly Reports, August 1969, p.666. Thus, the applicant was in an anomalous position of having to rely upon evidence of persons adverse to the interest which it was asserting. Moreover, in determining how to proceed, the applicant faced several difficult decisions: who amongst a corporation's various officers or representatives was in the best position to testify fully and accurately on all material aspects of the relationship or transaction in question; what documents, if any, should be subpoenaed; how could the subpoena for documents be cast in sufficiently broad terms to cover the appropriate material without it being struck out for lack of particularity? At the hearing, since the respondent's officers were the applicant's own witnesses, the applicant could not probe their testimony in the usual manner by cross-examination. Frequently, therefore, the applicant was left with evidence from a vague, reticent or ill-informed witness — a witness who, at least technically, was his own.

7. It is, we think, reasonable to assume that these and related problems gave rise to the enactment of sections 1(5) and 55(13). As we construe the amendments, the onus of adducing the material facts has now been placed upon the parties having knowledge of, and access to, those facts. What does this mean in practical terms? A basic question, and one raised directly by Mr. Dunn's motion, is: what is meant by all material facts? Construed literally, it could, as Mr. Dunn contends, mean all facts conceivably bearing upon the particular issue in dispute. If that was the Legislature's intention, a respondent's ability to comply would ultimately depend upon the ingenuity and speculative talent of the applicant's counsel. Hypothetically, a series of questions could be devised, the answers to which could conceivably be material. A witness' inability to answer such inquiries could then give rise to repetitive and, in theory, endless assertions that the respondent was failing to fulfil its statutory obligation.

8. In our view, the amendments are not intended to permit an applicant to engage in a fishing expedition of a sort suggested by that hypothesis. where relief under section 1(4) and/or section 55 is claimed, we believe that the respondent's obligation, must be sensibly delimited. In defining the obligation, some assistance is obtained by looking to Court practice in examinations for discovery in civil actions. Clearly, the analogy is not perfect or complete: the purpose of pre-trial discovery in a civil suit is quite different, as is the rationale for restricting the ambit and nature of questioning on discovery. However, the analogy is instructive, especially where there are corporate parties, for the limited purpose of indicating who should be produced, the extent to which the person produced should prepare himself to testify, and the remedies, should the witness fail to supply information properly requested from him.

9. On an examination for discovery, the person being examined is bound to make reasonable efforts to inform himself of all matters material to the issue in question. In the case of a corporate officer, this entails acquainting himself of facts not within his personal knowledge which are within the knowledge of other officers, servants or agents of the corporation or which form part of the records of the corporation: Bondar v. Usinovitch, 1918 CanLII 180 (SKSC), [1918] 1 W.W.R. 557 (Sask.); Geddings v. C.N.R., (1919) 1919 CanLII 223 (SK KB), 1 W.W.R. 909 (Sask. CA.); Star Electric Fixtures Ltd. v. Sussex Fire Insurance Co., [1936] OWN. 654 (S.C.); and, generally, Homestead & Gale, Ontario Judicature Act and Rules of Practice, vol. 2, p.134.

Similarly, a party giving discovery is under duty to make a careful and diligent search of all relevant documents in his possession and to make diligent inquiries about all material documents which may be in the possession of others for him: Price v. Price, (1879), 48 C.J. Ct.215.

Under the Supreme Court Rules of Practice, a corporate witness may he ordered to inform himself concerning questions properly put to him which he is unable to answer. The court also has the power to grant leave to examine a second officer if the witness has failed to give to the party seeking it the information to which it is entitled.

15. We believe that similar principles and procedures should apply under sections 1(5) and 55(13). The obligation to adduce material facts is upon the respondent, and the witness or witnesses chosen by it should tender their evidence-in-chief. Except, in exceptional circumstances (e.g., where the respondent is unrepresented), we do not believe that it is desirable for the Board to conduct the inquiry. Nothing in the recent amendments causes us to disagree with the observation of the Board in the Super City Discount Foods case, supra, that It is not for the Board. . . to undertake an inquiry of its own in the matter. There may be situations where members of the panel may wish to question witnesses to have testimony clarified or amplified. However, generally speaking, it is desirable that the carriage of the proceedings be left to the parties.

16. Once the respondent has completed its evidence, the applicant may wish to contend that the initial obligation to adduce all material facts has not been met. In such cases, an applicant may, at that stage, ask the Board to direct compliance. In most instances, however, it would seem to us that the applicant should proceed with its cross-examination. If, in cross ­examination, the witness is unable, or unwilling, to respond to questioning, and if the applicant can persuade the Board that the answer sought is likely to be material to the issues in dispute, the applicant is entitled to seek a direction from the Board requiring that the information be supplied, either by the witness informing himself or by the respondent producing the information through another witness. If the applicant completes its cross-examination without

objection to the testimony given, it is reasonable to assume that it is content to accept the testimony of the particular witness as tendered. And when the respondent completes its evidence, and the case proceeds without objection from the applicant, the reasonable conclusion is that the applicant has waived any right to contend that the respondent has not fulfilled the obligation created by section 1(5) or section 55(13), as the case may be. It may be noted that there is nothing to prevent an applicant from calling evidence to add to, vary or contradict the testimony of the respondent's witnesses.

Given the positions of the parties on the merits of the present case, it is interesting to note that the Board in Canada Cement Lafarge Ltd. eventually determined that because the successor's product, manufacturing process, and market were quite different, there had been no sale of a business, even though the alleged successor carried on operations at the same location as the predecessor.

6. In the instant case, counsel for the respondents Belkin, and Somerville Belkin, each put before the Board a document entitled statement of facts which, it was said, was the final product of a series of earlier drafts. Counsel took the position that this was all that was necessary to satisfy the onus cast upon the respondents by sections 1(5) and 63(13). In counsel's submission, there was no obligation to support these assertions of fact, demonstrate that they are material, amplify or clarify them, or produce a witness who could be submitted to cross-examination or questioning about the facts asserted or any other facts arguably material to the Board's determination.

7. It was also asserted that what has been put forward in the purported statements of fact may or may not be entirely true or complete; however, the respondents argue that they should have to address that matter only after the union has called its evidence on the transaction and relationships between the various respondents. The respondents point out that section 1(5) refers only to facts respecting common control and direction — not whether the respondents are engaged in related activities or businesses. The respondents argue that there is no obligation whatsoever to tender any facts or information about the nature of the respondents' business activities — although their document did, in fact, contain some information in this regard.

8. The respondents also filed with the Board copies of certain purported leases, debentures, and related documents indicating at least some of the commercial relationships between them. The respondents resisted the production of any other documents and, in particular, the so-called corrugator financing agreement between Belkin and Tencorr. This agreement is one of several related documents evidencing an important transaction and commercial relationship between Belkin and Tencorr which is mentioned in the statements of fact and some of the documents filed with the Board, but is otherwise unexplained. The respondents assert that these documents (and perhaps others) are not material to these proceedings and contain sensitive and confidential financial information which they are unwilling to disclose. Finally, the respondents submit that the Board should only consider section 1(4) of the Act and the relationship, if any, between Somerville Belkin and Belkin. They argue that the union's concern is restricted to the business activities currently being carried on at the former Somerville Belkin premises at 188 Cartwright Avenue in Toronto, and assert that the only collective agreement potentially applicable to that location was an agreement between Somerville Belkin and CPU, Local 311.

9. Assuming, for the moment, that the factual assertions filed with the Board are true, and the commercial documents are genuine (albeit incomplete), what is the picture that emerges?

10. Somerville Belkin is a wholly-owned subsidiary of Belkin and, for a time, produced folding box board cartons at its manufacturing facility at 188 Cartwright Avenue in Toronto. Its employees were represented by CPU, Local 311. In 198 1-82, that operation was transferred to another Toronto plant on Rayside Avenue which was purchased by Belkin and subsequently transferred to Somerville Belkin. The employees of the Rayside plant were, and remain, represented by CPU, Local 36. However, Somerville Belkin continued to use the Cartwright Avenue premises as a warehouse until March, 1984, and, while doing so, applied the Local 36 collective agreement to the employees stationed there. Belkin also has a collective agreement with CPU, Local 1112, covering employees of what is described as a paperboard mill.

11. At the present time, Tencorr occupies one-half of the Cartwright Avenue premises and Belkin occupies the other half. Tencorr obtained a sublease of these premises from Somerville Belkin, which was directed by its corporate parent to execute that document. Belkin has a sublease for the other half of the premises. In addition, Belkin entered into a multi­faceted commercial relationship with Tencorr involving what is described as: a corrugator financing agreement with Tencorr which encompassed a loan transaction secured by a debenture, a container board sales agreement, a sublease of part of the premises at 188 Cartwright Avenue, a purchase order for equipment being financed under the corrugator financing agreement and a shareholders' purchase agreement. The union's position is that, superficially at least, the essential elements of Tencorr's business (premises, equipment and maybe even market) were secured from Belkin or Somerville Belkin which, admittedly, are related companies. The picture is not clear. A number of these documents were not filed with the Board and, of course, the sublease is actually from Somerville Belkin. It might also be noted that the lease with Somerville Belkin mentions the corrugator financing agreement, obligates Tencorr to maintain, inter alia, the equipment financed under that agreement, requires the maintenance of insurance satisfactory to Belkin (interestingly enough described as the sublessor rather than Somerville Belkin) which must be named as an insured, restricts the use of the premises to a corrugated container plant or such business or operations as may be ancillary thereto or capable or being conveniently carried on in connection therewith without consent of Somerville Belkin, and provides that any notices required under the agreement be given to both Somerville Belkin in Mississauga and Belkin in Vancouver. It is clear that while the sublease is nominally between Somerville Belkin and Tencorr, a key player in the transaction is Belkin, the corporate parent which at one point in the document is even described as the sublessor.

12. At the present time, the details of these relationships are uncertain, because the supporting documentation has not been revealed. Nor is it entirely clear whether Tencorr acquired any equipment from Somerville Belkin, whether it is sharing any equipment installed by Belkin on its half of the premises, whether or to what extent the operations of Belkin and Tencorr are physically, functionally or economically interrelated, and whether the commercial arrangement with Belkin gives it effective direction or control over Tencorr's business activities. Certainly they do share the same premises formerly occupied by Somerville Belkin, Belkin's subsidiary, and apparently both will produce (in a generic sense) a kind of paper packaging product. Of course, whether one or more of these entities might be related in the sense contemplated by section 1(4), and even if they were, whether the Board would so declare, would depend upon an assessment of all of the facts. Likewise, as we have already

noted, the potential application of section 63 depends upon a careful assessment of all of the economic and business circumstances in light of collective bargaining considerations, and the underlying purpose of both sections 63 and 1(4) which are both intended to preserve rather than extend bargaining rights. At this stage, we do not think it would be appropriate to narrow the scope of the Board's enquiry or focus on but one set of relationships or parties to the exclusion of the others. Such approach might be warranted if there were full and complete disclosure of the details of these relationships, but is not appropriate where, as here, the respondents are not prepared to fully disclose the legal and economic relations between them.

13. We have considered the respondents' submission that a mere recitation of facts asserted by them to be material (but, they concede, not necessarily true, complete or provable) is sufficient to fulfill the onus under sections 63(13) and 1(5). We do not accept that position. It appears to the Board that the procedure enunciated in Canada Cement Lafarge Ltd., supra, is the correct one, and the appropriate course to follow in the instant case.

14. While there may well be a distinction between facts and evidence, we do not think it is a helpful one in interpreting the onus provisions of sections 63(13) and 1(5) of the Labour Relations Act. Nor is the discovery analogy entirely parallel, appropriate, or applicable to proceedings before this Board. Of more assistance is the remedial thrust and purpose of the 1975 amendments, which, in our view, clearly require the respondents to produce witnesses to testify under oath as to the material facts of the transaction and relationships under examination, as well as the completeness and materiality of those facts. To say that this obligation can be satisfied by pleadings — which need not be substantiated — is to blunt the intent of the legislative change. Moreover, while it may be that section 1(5) is restricted to the question of common control or direction, section 63(13) clearly has no such limitations. Section 63(13) requires the respondent employers to adduce all of the facts of the transaction(s) between them said by the applicant union to constitute a transfer of all or part of a business. As noted above, that determination turns on a careful analysis of all of those facts, having regard to the purpose and ambit of section 63, and in the absence of a more complete disclosure of the commercial facts, we are hesitant to limit the obvious effect of section 63.

15. It may be that the union will not be successful in its various assertions. But that does not diminish the respondents' obligation to provide the required information. Questions of relevance or concerns about confidentiality can be dealt with as they arise. Proceedings of this kind always involve the details of the parties' corporate commercial relationships, but, prima facie, there is no right to withhold the production of otherwise relevant material on the ground that it may contain confidential financial information. The Board can entertain such evidence, in camera, should that be necessary and, of course, any improper use of confidential information gained through this proceeding would be a contempt of the Board and subject to appropriate sanctions (see Shaw-Almex Ind. Ltd., [1984] OLRB Rep. Apr. 659). We do not think we should assume in advance that there would be an abuse of the Board's process.

16. For the foregoing reasons the Registrar is directed to relist this matter for hearing, at which time the respondents will be required to produce witnesses to adduce all facts within their knowledge that are material to the successor rights and related employer allegations. Such witnesses will be subject to cross-examination in the manner discussed in Canada Cement Lafarge Ltd., supra.

17. We do not wish to leave this matter without making some brief concluding observations.

18. This is but one of dozens and dozens of successor rights or related employer proceedings which have come before the Board in recent years. The members of this panel of the Board have been involved in quite a number of these cases. In our experience, and when all is said and done, the commercial facts have not generally been much in dispute —even though the process of adducing those facts through viva voce and documentary evidence has sometimes been laborious and time-consuming. In most cases, the real problem is not the commercial facts, but whether the circumstances trigger section 63, or, in the Board's opinion. should trigger section 1(4). These questions of labour relations law and policy are often much more difficult to resolve than the details of the underlying commercial transaction, which usually come out sooner or later, either in accordance with sections 1(5) and 63(13), from witnesses or documents subpoenaed by the union, or as a result of inferences properly drawn from the evidence adduced before the Board or conspicuously absent. For this reason, it is not at all unusual for parties in proceedings such as these to meet, in advance, to narrow the issues or even agree on the commercial and collective bargaining facts upon which the Board must ultimately make its determination. Indeed, such pre-trial discovery can often result in a resolution of the entire matter. While the facts vary in infinite degree, the general principles that the Board applies to those facts are relatively straightforward: the purpose of the remedial provisions is to preserve, not extend the scope of the union's bargaining rights; a dependent or even symbiotic economic relationship will not necessarily trigger section 1(4) or 63, and the transfer of certain assets of a business does not necessarily constitute the sale of part of a business within the meaning of section 63. The Board recognizes that companies may be able to engage in joint ventures without extending bargaining rights to their unorganized partners and that, to some extent, a business can be identified and defined only in respect of a particular product and market. That is the thrust of the Riverview Manor decision referred to above.

19. With these observations in mind, we respectfully suggest that the parties meet with a view to resolving the commercial facts of the transactions under consideration in this case and determining what facts, if any, are in dispute. Such frank disclosure may well make a continuation of this proceeding unnecessary. In any event, the Registrar is directed to relist the matter for hearing. This panel of the Board is not seized with the merits of the case.