[1987] OLRB Rep. June 859

2871-86-R Local 280 of the International Beverage Dispensers' & Bartenders' Union of the Hotel and Restaurant Employees' and Bartenders' International Union, Applicant, v. John Katsuras, c.o.b. as Krush, Respondent

BEFORE: Judith McCormack, Vice-Chair, and Board Members J. A. Ronson and B. L. Armstrong.

APPEARANCES: Beth Symes, James Jackson and Joe Leith wood for the applicant; R. E. Feige for the respondent.

DECISION OF THE BOARD; June 8, 1987

1. This is an application for a declaration that the respondent is a successor employer as a result of a sale of a business within the meaning of section 63 of the Labour Relations Act. The respondent alleges that no sale of a business has occurred, and in the alternative, that there has been such a substantial change in the character of the business that the applicant's bargaining rights should be terminated. In any event, the respondent also contends that there was no collective agreement binding on its predecessor and thus no collective agreement to which it is now bound.

2. The respondent owns and operates a drinking establishment at 666 Kingston Road in Toronto which goes by the name of Krush and in which ten people are employed. The evidence establishes that these premises have seen a number of different owners since 1953, when the applicant was first certified as the bargaining agent for certain groups of employees. More recently, M. & M. Edwards Equities Inc. (hereinafter referred to as "Edwards") purchased the tavern in 1982 and operated it until March of 1986, when financial difficulties resulted in the mortgagee Paramount Investments Limited (hereinafter referred to as "Paramount") entering into possession of the premises and shutting down the tavern. On May 1st, 1986, Paramount entered into an agreement of purchase and sale with John Katsuras, the respondent in this matter, in which he agreed to purchase the premises and chattels on the premises. The agreement of purchase and sale also contained the following provision with respect to the liquor licence for the property:

The Vendor agrees that the Purchaser shall be entitled, at any time before closing, to make, at his own expense, all applications and take such steps as are required by the Liquor Licence Board of Ontario for the issuance of a Liquor Licence to the Purchaser for the subject premises. The Vendor agrees to co-operate with the Purchaser in this regard.

3. Mr. Katsuras and his real estate agent drafted the agreement, and after it was signed, he took it to his lawyer who advised him to amend the agreement by adding the following sentence:

The Vendor undertakes forthwith upon acceptance of this offer to apply for a transfer of the lounge liquor licence as mortgagee in possession and to assist the purchaser in its own application to follow.

4. The amendment was accepted by Paramount on May 2nd, 1986. Subsequently, Paramount applied to the Liquor Licence Board for a transfer of the lounge licence held by Edwards to itself, and a lounge licence identical to that issued to Edwards was issued to Paramount on May 21, 1986.

5. The sale transaction closed on July 14, 1986, and Mr. Katsuras applied for a transfer of the liquor licence held by Paramount to himself within the next three days. Major renovations were then carried out and the bar, formerly named "The Benny" was reopened as "Krush" in November of 1986 with new employees. No former employees were retained or rehired.

6. Turning first to the question of whether a "sale" of a business has occurred within the meaning of section 63(1)(b), the applicant argues that either two sales have occurred, that is, from Edwards to Paramount, and from Paramount to Mr. Katsuras, or that the chain of events reveals a sale from Edwards to Paramount with the interposition of a third party. The respondent alleges that this series of events does not constitute a "sale" because of the unique features of a conveyance pursuant to a power of sale, and because the transfer was not a direct one from Edwards to Mr. Katsuras.

7. The Board has interpreted section 63 broadly, both because it is framed in broad terms and to give effect to the labour relations purpose which underlies it. That purpose was described in Marvel Jewelry Limited and Danbury Sales (1971) Ltd., [1975] OLRB Rep. Sept. 733 as follows:

Section 55 [now section 63] recognizes that collective bargaining rights, once attained, should have some permanence. Rights created either by the Act or under collective agreements, are not allowed to evaporate with a change of employer. To provide permanence, the obligations flowing from these rights are not confined to a particular employer, but become attached to a business. So long as the business continues to function, the obligations run with that business, regardless of any change of ownership.

8. In Thorco Manufacturing Limited, 65 CLLC ¶16,052, the Board set out its general approach to construing "sale":

According to its strict signification, the term sells is usually taken to describe a transaction involving the disposal of property by one to another in consideration of a sum paid or agreed to be paid by the recipient in money or its equivalent. As used in section 155], however, the word sells had been given a wide definition which includes lease, transfers and any other manner of disposition of the business or part thereof. In legal parlance the word lease generally denotes a specific kind of contract by which one party, called the lessor, for a consideration in money or its equivalent, confers to another, called the lessee, the exclusive possession of certain property for a period of time. The word transfers, however, is obviously a term of wide signification and unless restricted by the context is capable of describing a multitude of transactions whether by sale, exchange, gift, trust or otherwise by which property, rights, or interests, etc. are transmitted absolutely, conditionally etc. or by operation of law from one person to another. We are unable to find anything in the language of the section to denote any legislative intention to restrict the meaning of the word transfers to any particular kind of transfer. Also, having regard to the particular language used and the remedial object sought to be attained by and the wide meaning which must be attributed to the preceding word transfers, it is our opinion that the generality of the words any other manner of disposition is not intended to be in any way limited by or interpreted ejusdem generis with the words leases, or transfers. In our opinion, it is more in harmony with the language of and the remedy envisaged by the enactment to interpret the words and any other manner of disposition as an omnibus or saving provision intended to include dispositions of the business or a part or parts thereof by any mode or means whatever which are not appropriately described by the preceding words which state that sells includes leases or transfers.

It is a rudimentary principle applicable to the construction of remedial legislation that, consistent with the language of the enactment, the interpretation which must be adopted is the one which best serves to advance the remedy and to suppress the mischief contemplated by the legislation. (see also section 10 of the Interpretation Act R.S.O. 160 c.191). Having regard to this principle and to the fact that the language of the section is entirely susceptible of and in agreement with such a meaning, we are impelled to give the section a large and liberal rather than narrow or restrictive construction.

9. In applying such a large and liberal construction to section 63, the Board looks at the substance and effect of the transaction rather than simply its outward legal form. As the Board commented in Hughes Boat Works Incorporated, [1977] OLRB Rep. Dec. 815 (application for judicial review dismissed, (1979), 1979 CanLII 1853 (ON HCJ), 26 O.R. (2d) 420 (Div. Ct.)):

In determining whether there has been a sale or other disposition of a business within the meaning of section 55 [now section 631, the Board takes into account the totality of the transaction and places little reliance upon its outward legal form.

10. Although it is possible to characterize the events in this matter as two distinct sales, we find it more appropriate and more accurate in the circumstances of this case to consider whether the sequence of events in total constitutes a sale of a business from Edwards to Mr. Katsuras. Having reviewed the facts before us at some length, we are persuaded that the events described above fall within the ambit of section 63.

11. The fact that the transaction was not a direct one between Edwards and Mr. Katsuras does not deter us from this conclusion. There is no requirement in section 63 that the events constituting a sale be contained in a single transaction or be direct and uninterrupted as between a previous employer and the ultimate purchaser. The Board has noted previously that the determination of a sale is not dependent upon whether there is an intermediary (see Culverhouse Foods Ltd., [1976] OLRB Rep. Nov. 691 and Vivace Tavern Inc., [1982] OLRB Rep. Aug. 1224). Neither do we find the respondent's emphasis on the form of the sale to be of assistance. The Board has previously found a sale to have occurred both upon an entry into possession by a mortgagee and where a sale has been effected through a mortgagee in possession (see Bancorp Capital Limited, unreported, Board File 2080-79-R, March 17, 1980, Cabbagetown Inn Limited, unreported, Board File 2780-80-R, May 1, 1981, and Blondies Entertainment Limited, unreported, Board File 2073-83-R, January 31, 1984).

12. In Cabbagetown Inn, supra, the Board addressed a similar situation in the following terms:

14. We are of the opinion that the transaction between Rapaport and Rubenstein, the second mortgagees in possession, and the respondent constituted a "sale" by Muckles. The Board has previously found that the interposition of a third party, acting as an agent or conduit is irrelevant so long as a transfer takes place. (See Marvel Jewelry Ltd.,[1975] OLRB Sept. 733.) In the instant case, the mortgagees in possession took steps to ensure that there was no lapse of the liquor license on their entering into possession.

13. The Board has also drawn a distinction between commercial law and the broad terms of Section 63 as the following passage from Vivace Tavern, supra, reflects:

12. While counsel for the respondent was careful to trace the conveyancing of the real property from Korn Hotels (Queensway) Limited through to the respondent to the exclusion of any part by Mitsiou and while this may be an accurate interpretation of the evidence from the standpoint of commercial law, it ignores at least one significant fact in terms of section 63. It was the respondent's own evidence that Mitsiou acquired an interest in the real property in November 1979 in partnership with a numbered Ontario company and in August 1981 acquired that partner's interest. The evidence is unequivocal that Mitsiou was at that time the sole owner of the real property, but subject to the power of sale held by Birenbaum and Steinberg pursuant to the charge which they acquired from Goldberg in November 1979. The parties are agreed that Mitsiou defaulted on its mortgage and it is common ground that, as a result of its default, Birenbaum and Steinberg were exercising their power of sale when they sold the real property to the respondent. Thus Mitsiou's interest in the property was conveyed to the respondent by the exercise of that power of sale. The inter-position of a third party in such a transaction previously has been found by the Board not to be relevant as long as a transfer takes place. (Marvel Jewelry Ltd., [1975] OLRB Rep. 5ept. 733). Thus the Board is satisfied that the transfer to the respondent from Birenbaum and Steinberg of the real property, together with whatever interest they had in the chattels and fixtures, constitutes a sale by Mitsiou to the respondent and the Board so finds.

Having regard to the ultimate effect of the series of events before us and the manner in which the Board has interpreted and applied section 63, we conclude that a sale within the meaning of section 63 has occurred.

14. However, counsel for the respondent argued that it was not a sale of a business, but rather simply a real estate transaction. In response, counsel for the applicant pointed to the fact that a number of chattels were purchased with the premises, and emphasized the significance of the transfer of the liquor licence in this particular industry.

15. In Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691, the Board posited this test for the continuation of a business:

The most appropriate test to be applied in making this determination is whether the nature of the work performed subsequent to the transaction is the same as the nature of the work performed prior to the transaction.

16. In this case, it can fairly be said that Edwards operated a bar and that Mr. Katsuras operates a bar; although they are bars with different themes and decor, the essence of the business in which employees provide for the sale of alcohol beverages to patrons is unchanged.

17. Moreover, the most critical elements of the business in this case were the premises and the liquor licence, both of which passed to Mr. Katsuras either directly or indirectly as a result of the sale. Mr. Katsuras suggested that the licence was unimportant to him since he could simply have applied for a new licence. However, he conceded that transferring the licence previously issued for the same location was faster, and it is apparent from the sequence of events, including the amendment to the purchase and sale agreement and the dispatch with which he applied for the liquor licence transfer after the sale closing, that the licence played a significant role in the transaction.

18. Mr. Katsuras also conceded that he bought the premises for the purpose of operating a drinking establishment and that he could not do so without a licence. We note that subsequent events demonstrated that it was not just a liquor licence that was of value to Mr. Katsuras, but the particular licence he obtained as a result of the sale. When Mr. Katsuras applied for the transfer of the licence, the Liquor Licence Board issued a licence which was somewhat different than that previously issued to either Edwards or Paramount in that there were restrictions on the hours that Krush could operate. The Board's decision was appealed to the Divisional Court, and counsel for the respondent conceded that Mr. Katsuras had been successful in convincing the Court that the terms of the licence could not be changed precisely because it was a transfer of an existing licence rather than a new licence. As a result of the Divisional Court decision, Mr. Katsuras was issued a licence which was identical to that issued to Edwards and Paramount.

19. The respondent also argued that no sale of a business took place because the bar had been closed for several weeks before the agreement of purchase and sale was signed, and several months before it was reopened as Krush. In these circumstances, we are drawn to the reasoning in Hughes Boat Works Incorporated, supra, in which the Board addressed a similar argument:

The respondent, as already noted, also took the position that in this case there was no continuum and that the business was not sold as a going concern since it had been closed down for approximately five months. It is to be observed, however, that in the Culver- house Foods Limited case (supra), the Board stated:

In each case, the decisive question is whether or not there is a continuation of the business. The most appropriate test to be applied in making this determination is whether the nature of the work performed subsequent to the transaction is the same as the nature of the work performed prior to the transaction. (emphasis added)

In other words, what is referred to as a continuation of the business has reference not to a continuum in time, but in the nature of the business.

[emphasis added]

20. We are reinforced in our view that these comments apply to the present situation by two very similar cases in the same industry where shutdowns of eight and seven months respectively did not deter the Board from finding a continuation of the business (see Katrina's Tavern, [1978] OLRB Rep. Sept. 838 and The Last Resort Hotel Inc., [1984] OLRB Rep. Dec. 1700). Similarly, the fact that a purchaser may have bought a deteriorating business does not in itself mean that what was purchased was not a business. We conclude then that a sale of a business within the meaning of section 63 has occurred.

21. The respondent, however, asks us to terminate the bargaining rights of the union pursuant to section 63(5) on the grounds that there has been such a change in character in the business that it is substantially different from the predecessor business.

22. In this regard, counsel for the respondent pointed to evidence that these premises had for some years previously been considered a "biker hangout". Shortly after Edwards purchased the business, the biker clientele was made to feel unwelcome and the emphasis shifted to disco music with a generally younger, although somewhat mixed, group of patrons. Music was provided by a disc jockey or on occasion towards the end of Edwards' tenure, live bands.

23. With the coming of Mr. Katsuras, the decor of the bar has changed to reflect what was described as a "booze can" ambiance. In this regard, there is no sign announcing the presence of the bar, the windows are boarded up and customers enter through a side door off an alley. The premises are furnished in what was best described as a "tacky sixties" motif, featuring recreation room furniture of that era. Mr. Katsuras testified that Krush is now designed to appeal to a clientele whom he described as "goths", that is, people who dress primarily in black, wear eyeliner and earrings, favour dyed hair and brush cuts, and cultivate artistic pursuits. David Prentice, a disc jockey employed at Krush who identified himself as a goth, testified that the music now played could be loosely characterized as new wave.

24. The new employees hired by Mr. Katsuras either affect a goth style themselves or are colourful in other respects. Part of their job is to mingle, drink and dance with patrons, and bonuses are provided for those who take their shirts off while dancing. There is some interchange in the jobs performed and Mr. Katsuras testified that he expects all employees to perform all jobs, including set-up, tending bar, waiting on patrons, and clean-up. He hires employees casually, and if they do not work out to his satisfaction, they leave or are discharged within a few weeks. It is on the basis of this evidence that counsel for the respondent argues that there has been such a substantial change in the nature of the business that continued representation by the trade union would be inappropriate or unreasonable.

25. The Board set out its approach to section 63(5) in Winco-Steak 'N Burger Restaurants Limited, [1974] OLRB Rep. Nov. 788 as follows:

The implementation of subsection 5 of section 55 [now section 63] involves the revocation of the remedial effects otherwise flowing from the provisions of section 55 [now section 63] of the Act following the sale of a business. Having in mind the fact that subsection 5 runs against the flow of the general intent of the section, the Board takes the view that the words "substantially different" must be viewed by the Board in the formulation of its opinion as involving a fundamental difference affecting the nature of the work requirements and skills involved in the business to the extent that continued representation by the trade union would be inadequate, inappropriate or unreasonable in all the circumstances of the particular case under review.

26. While there is no question that there have been considerable changes in the ambiance and clientele of this establishment, the Board has made it abundantly clear that changes of this nature are not those contemplated by section 63(5) so as to attract the relief set out therein. As the Board said in the Horseshoe Tavern, [1981] OLRB Rep. Sept. 1237:

It is now clear from the Board's jurisprudence that a mere change in decor and entertainment such as occurred here is not a "change in the character of the business" within the meaning of section 55(5) [now section 63(5)] of the Labour Relations Act.

27. Indeed, while we accept that there have been some minor changes in the work performed by employees, the basic work requirements and skills are essentially the same; that is, waiting on tables, tending bar, collecting money from patrons, creating a convivial atmosphere, and so forth. We are not persuaded that the changes in decor and ambiance represent fundamental differences affecting the nature of work and skills performed to the extent that continued representation by the union would be inadequate, inappropriate or unreasonable. As the Board noted in The Last Resort Hotel Inc., supra, themes may come and go without extinguishing the bargaining rights:

with respect to the entertainment and decor of a particular establishment, experience with the industry has shown that "themes" may come and "themes" may go (as in fact has already occurred once within the short period that the present facility has been operated by the respondent), but so long as a transaction has taken place involving the assets (and in particular the licence) essential to carrying on the business of a tavern, the Board will find a "sale". The fact that the present premises have been upgraded is not disputed by the applicant, but neither that, nor the introduction of varying forms of entertainment to attract patronage, can be said to produce a substantial change in the essential character of the business, to the point of rendering the continued representation of the Tavern's employees by the applicant in any way inappropriate.

28. We are reinforced in our views in this regard by the fact that the applicant's bargaining rights have already survived a number of metamorphoses in the character of this establishment and by the Board's jurisprudence specifically dealing with this industry. (See in this regard, The Last Resort Hotel Inc, supra, The Horseshoe Tavern, supra, Vivace Tavern Inc., supra, Colonial Tavern, supra, Jimmy'z II, [1977] OLRB Rep. Sept. 572 and Katrina's Tavern, [1978] OLRB Rep. Sept. 838.) While we recognize that a declaration of successor rights may mean some changes as the respondent adjusts operations to conform to a collective bargaining regime, we do not find that this fact leads us to the conclusion that the continued representation by the union would be inappropriate or unreasonable.

29. Finally, the Board heard uncontradicted evidence with respect to the existence of a collective agreement dated January 11, 1985 which was binding upon the applicant and Edwards. That collective agreement specifically sets out the terms under which it would cease to operate, and those terms have not been triggered with respect to this particular establishment. Indeed, the continuing validity of the collective agreement in itself was not seriously contested by the respondent. The Board therefore declares that the respondent is a successor employer to Edwards and that it is bound by the collective agreement dated January 11, 1985 as if it had been a party thereto.