Ontario Labour Relations Board
4292-96-ES Thomas C. Assaly, Applicant v. Gordon Millar, Fleurette Guenette, Helen Dellaire, Philip R. Furness and Ministry of Labour, Responding Parties.
BEFORE: Mary Ellen Cummings, Adjudicator/Referee.
APPEARANCES: Andrew Lister and Linda Mosienko for T. C. Assaly; Murray Klein for the Ministry of Labour; no one appearing for the other responding parties.
DECISION; March 22, 2000
[1]. This is an employer appeal of an Order to Pay dated February 27, 1995 in the amount of $105, 220.26.
[2]. A group of property development companies in the Ottawa area failed in the mid-1990s when economic and taxation changes had a serious impact on their business. The significant facts are set out in my earlier decision of September 17, 1999, and need not be recounted here. Ultimately, a number of employees were terminated, and the companies did not pay termination or severance pay. The employees complained to the Employment Standards Branch; an investigation was undertaken and an Officer issued an Order to Pay with respect to 13 corporations and Thomas Assaly, in his individual capacity. The Officer concluded that all the corporations and Mr. Assaly were engaged in related activities and should be considered a single employer within the meaning of section 12 of the Employment Standards Act, with the consequence that they are jointly and severally liable for the unpaid wages. A judicial review application, about which I know little, was commenced. One of the issues raised by the applicants was that two of the corporations, Asset Management Corporation and 688951 Ontario Ltd. had not received notice nor an opportunity to participate in the investigation before the Officer issued the Order to Pay.
[3]. The applicants lost the judicial review applications, which were then appealed. Ultimately, the Supreme Court of Canada denied leave to appeal, and the matter commenced before me on the merits. On the first day of hearing, May 12, 1998, I dealt with a number of procedural matters, confirmed in a written decision, dated May 15, 1998. Most significant, I accepted the withdrawal of the appeal on behalf of the 13 corporations. Counsel for the applicants conceded that all 13 corporations were engaged in related activities and should be considered a single employer within the meaning of section 12 of the Employment Standards Act, with the consequence that they are jointly and severally liable for the unpaid wages. Counsel for the applicants dropped a number of other issues initially raised in the appeal, in order to focus the proceeding on one issue, that is, whether Mr. Assaly had been properly named in the Order to Pay.
[4]. A hearing over several days on the merits with respect to Mr. Assaly's relationship with the corporations followed. I found that Mr. Assaly was the sole shareholder and directing mind in each of an integrated group of corporations in the property development and property management business. More significant, I determined that Mr. Assaly undertook all of his business through the named corporations and engaged in no business activities as a sole proprietor. Consequently, having regard to the decision of the Divisional Court in Re 555051 Ontario Ltd. et. al. v. Framingham et. al., 1991 CanLII 7388 (ON CTGD), 82 D.L.R. (4th) 731, which said that an individual may not be the subject of a declaration under section 12 of the Act unless he or she is carrying on a sole proprietorship, I concluded that Mr. Assaly should not have been named in the Order to Pay. I amended the Order to Pay to remove any reference to Mr. Assaly in his personal capacity. In that decision I invited the parties to request a hearing on the remaining issue, that is the destiny of the letter of credit held by the Director, Employment Standards. It was the position of the applicants that since Mr. Assaly had provided the letter of credit personally, it should be returned to him.
[5]. A hearing on that issue was scheduled for March 1, 2000. Although I had not seen the relevant documents before that date, the impression left by counsel for the applicants (and not corrected by counsel for the Ministry of Labour) was that the letter of credit provided to the Director, Employment Standards to perfect the application had been paid by Mr. Assaly in his personal capacity. However, on March 1, 2000 when I reviewed the first letter of credit, dated April 9, 1996, I saw that the issuing customer was Asset Management Corporation, one of the corporations named in the Order to Pay. Mr. Assaly's name appears nowhere on the letter of credit. More important, Asset Management Corporation is one of 13 companies on behalf of whom the appeal of the Order to Pay was withdrawn. Put simply, Asset Management Corporation is one of the corporations that has admitted to sharing joint and several liability for the unpaid wages at issue in this matter.
[6]. However, I am the only one who seemed to think it was significant that Asset Management Corporation, not Mr. Assaly as I had been led to believe, furnished the letter of credit. I understand that the Ministry of Labour's position is it does not matter who paid the money in, it is not to be refunded. And I also understand, as I will set out later, that Mr. Assaly personally furnished subsequent letters of credit when the first expired (and indeed lapsed). And I further understand, as I will set out in more detail later, that the issuing bank required Mr. Assaly to personally guarantee the first letter of credit. But I am very troubled by the imprecision in the way in which the issue of the letter of credit was characterized, a characterization that I adopted in both the oral rulings and in my decision of September 17, 1999. My failure to appreciate that it was Asset Management Corporation and not Mr. Assaly who put up the letter of credit, affected my view of the order of proceeding. Put bluntly, had I known that Asset Management Corporation put up the letter of credit, I might well have decided that the letter of credit issues should be heard and determined first.
[7]. Turning to the evidence and submissions I heard on March 1, 2000, Mr. Assaly's long-time assistant Linda Moseinko testified that Asset Management Corporation was incorporated on August 30, 1993 with a view to continuing in the property management business after the demise of the other corporations (which we have colloquially called the Assaly Group). Ms. Mosienko said that it was hoped Asset Management Corporation could move into the future with a clean slate and that was one of the reasons the application for judicial review was brought with respect to it; it was Mr. Assaly's view that since it was incorporated after the demise of the other companies, it should not have been included in the list of corporations found liable for the wages owed to former employees of the other corporations.
[8]. The "seeds" of Asset Management Corporation was the assignment of property management contracts initially held by ASGO Management Ltd., another of the Assaly Group. In 1994, Asset Management Corporation had revenues of over $1million, but they had declined to $160,000 by the end of 1997. In 1996, Asset Management Corporation lost the last of its property management contracts causing a significant drop in revenue. It has not gained any new business and has never been profitable. Its only assets are furniture. On the other hand, it continues to exist, and in fact it employs Ms. Mosienko on a full-time basis. When asked why she was still there if there was no business activity, she responded that she did not know. She said she spends most of her time attending to Mr. Assaly's personal affairs.
[9]. When asked about the circumstances leading to the preparation of the letter of credit in April 1996, Ms. Mosienko testified that she did not know why it was issued in the name of Asset Management Corporation, rather than Mr. Assaly. She said that Asset Management Corporation did not have money to support the letter of credit, and as a result, a portion of Mr. Assaly's personal financial portfolio was provided to the issuing bank as a guarantee. In 1997, the letter of credit expired. Ms. Mosienko said that the issuing bank, knowing the state of Asset Management Corporation's affairs, did not want to provide a further line of credit, so another bank was approached, and this time, the letter of credit was taken out in Mr. Assaly's name. However, the carrying costs of the second letter of credit were paid by Asset Management Corporation, and all the correspondence and arrangements were made by Ms. Mosienko, an employee of Asset Management Corporation. The final renewal of the letter of credit was prepared by Ms. Mosienko but on Mr. Assaly's personal letterhead. Mr. Assaly also paid the charges personally. Ms. Mosienko said there was no significance to the use of Mr. Assaly's letterhead or that of Asset Management Corporation; they were used interchangeably.
SUBMISSIONS
[10]. Counsel for the applicants said that I should dismiss as absurd the notion that having been successful in his appeal, Mr. Assaly should not get his money returned. I suggested to counsel for the applicants that I had considerable sympathy with that position, but was troubled by the fact that the first letter of credit was supplied by Asset Management Corporation. Counsel asked me to consider substance not form; it is Mr. Assaly who actually paid, because Asset Management Corporation did not have the funds. He asked me to consider Mr. Assaly as indistinguishable from Asset Management Corporation, and vice versa.
[11]. That proposition might have some attraction had I not sat through a significant number of hearing days in which the applicants, through evidence and submissions, sought to convince me that Mr. Assaly never mixed personal business with corporate business and undertook all corporate business exclusively through the appropriate corporate vehicles, and all personal business privately. Or put another way, had the evidence satisfied me that Mr. Assaly had not respected the corporate form in undertaking his business, I would have been more likely to find that he had been properly named in the Order to Pay. It is because I had been convinced that Mr. Assaly (and Ms. Mosienko) understood and scrupulously adhered to the corporate structure in carrying out the Assaly Group's activities that I was astounded to see the first letter of credit issued in the name of Asset Management Corporation. Consistent with everything I have heard over the course of this hearing, I am unable to conclude that the first letter of credit was provided by Mr. Assaly personally; it was taken out by Asset Management Corporation. The guarantee provided by Mr. Assaly is irrelevant for my purposes; it is little different from seeking a commercial lender to guarantee a letter of credit, a common occurrence. I find therefore that the first letter of credit was taken out by one of the corporations already found jointly and severally liable for the unpaid wages.
[12]. Is there any significance to the fact that the renewals were provided by Mr. Assaly personally, although the correspondence and the fees (for at least the second one) were provided by Asset Management Corporation? Typically adjudicators and referees do not concern themselves with the form of a letter of credit. In fact, the version of the Act in effect at the time of this appeal does not even mention letters of credit. Section 68(1) directed the employer to pay "…the wages and administrative costs required by the order" as a pre-condition to making an application. But over the years, the Director, Employment Standards has been prepared to accept irrevocable letters of credit, a reality reflected in the present version of the Act at section 68(5).
[13]. In any event, payment of monies into trust or the provision of an irrevocable letter of credit is a pre-condition to an adjudicator or referee's jurisdiction to hear the matter. An employer has to satisfy the decision-maker that the money or letter of credit has been provided. And the first letter of credit provided in this case, the one which established my jurisdiction, was not paid by Mr. Assaly.
[14]. I do not believe that any adjudicator has determined what happens if a letter of credit lapses and is not renewed before the proceeding is completed. Does the adjudicator lose jurisdiction to continue with the proceedings? This would typically be a matter between the party that supplied the letter of credit and the Director, Employment Standards. Of course, if the Director, Employment Standards is careful, and ensures either a timely renewal of the letter of credit or cashes it, and holds the money in trust, the letter of credit will not become an issue in the proceedings. Counsel for the applicant reminded me that in this case, the first letter of credit lapsed, which would have left the Ministry of Labour in an unprotected position. And I should remember, counsel argued, Mr. Assaly's provision of the letter of credit was consistent with his long held desire to challenge the Officer's conclusion of his personal liability and clear his name. Whatever Mr. Assaly’s intentions, the initial letter of credit was not provided by him.
[15]. Taking all these considerations into account, I am still left with the fact that the letter of credit which established my jurisdiction was paid by one of the corporations that is undoubtedly liable for the wages, and that the assets and administrative support of that same company facilitated the renewals. On the other side of the equation, I have Mr. Assaly personally providing two renewals of the letter of credit, and paying the carrying charges for one. On balance, I am not satisfied that the letter of credit should be returned to Mr. Assaly. As I think is evident from the decision I have put greatest reliance on the fact that the first letter of credit, and the one that established my jurisdiction to hear the matter, was provided by Asset Management Corporation.
DISPOSITION
[16]. As I advised the parties orally at the end of the hearing, the Director, Employment Standards is not required to return the letter of credit to Mr. Assaly. The Director can exercise the letter of credit and disburse the funds to the employees.
“Mary Ellen Cummings”
Ajdudicator/Referee
This decision is issued under the administrative auspices of the Ontario Labour Relations Board, 505 University Avenue, 2nd Floor, Toronto, Ontario, M5G 2P1