3445-00-R Universal Workers Union, L.I.U.N.A. Local 183, Applicant v. Mount Citadel Inc. and/or Coram Deo Incorporated and/or McArthur Properties, Responding Parties.
0242-01-M Universal Workers Union, Labourers’ International Union of North America, Local 183, Applicant v. Mount Citadel Inc.; McArthur Properties; Coram Deo Inc.; Ministry of Labour, Responding Parties.
BEFORE: David A. McKee, Vice-Chair.
APPEARANCES: Marcia Kredentser, Wally Ruszczak and Bill Turner for the applicant; Gordon Weir, James McArthur and Robert McArthur for the responding parties.
DECISION OF THE BOARD; September 20, 2001
1Board File 3445-00-R. is an application under sections 69 and subsection 1 (4) of the Labour Relations Act, 1995. S. O. 1995 ch.1 (the "Act"). The Universal Workers Union, Labourers International Union of North America, Local 183 ("the Union") alleges that Mount Citadel Inc. (Mt. Citadel”) has sold all or part of its business to either or both of Coram Deo Inc. and Robert J. McArthur Properties Inc. ("McArthur Properties"). This assertion is resisted by McArthur Properties which acknowledges that it bought a large and valuable asset from Mt. Citadel, but describes this as a purchase of an asset and an addition to its existing business and not the purchase of Mount Citadel's business.
2Board File 0242-01-M is a reference by the Minister to the Board of two questions relating to the exercise of his power under this Act. The questions relate to the request for the appointment of an arbitrator pursuant to section 49 of the Act by the Union to deal with grievances arising out of the discharge of employees at the time of the sale to McArthur Properties. The Minister has asked the Board for its advice on the following two questions:
Does the Minister of Labour have the authority to make the requested appointment of an arbitrator?
If so, which Employer(s) are to be named as responsible for dealing with the particular grievance at issue here?
3The transaction in question involved the sale of a large, 250-unit apartment building located at 701 Don Mills Road. What was sold was the land and building (along with a few chattels of negligible value). The building was mostly, but not entirely, rented. The tenants remained in place after the transaction, paying their rent to the new owner of the building. Two superintendents who were employed by Mount Citadel, and who lived in the building, were terminated by Mount Citadel and required to vacate their apartments.
4There are two issues. First, was Mount Citadel bound to a collective agreement with the Union at all? I conclude that it was. The second question is whether the transaction constituted a sale of business within the meaning of section 69 of the Act. Again, I conclude that it did, although the relief sought by the union is overly broad and must be confined to the purposes of sections 69 and subsection 1 (4).
The Collective Agreement
5The Union asserts that Mount Citadel was bound to a collective agreement negotiated between the Property Management Services Organization (" PMSO ") and the Union. At the commencement of the union's evidence, McArthur Properties objected to the Board receiving certain documents which the Union sought to enter as exhibits. The basis for this objection was that the documents had not been filed with the original application, nor had they been filed at the time the Board requested the parties’ response to the Minister's request for the Board's advice. I ruled that the Board would receive this evidence. The relevant rule applicable to the exchange of documents is rule 36 which provides as follows:
- Each party must file with the Board not later than ten (10) days before the first date set for hearing or consultation three (3) copies of all documents upon which it will be relying in the case (for the use of the panel). At the same time, each party must deliver copies of those documents to each of the other parties.
6The Board does not always hold strictly to the 10-day time limit. In this case some of the documents were obtained from a third party to the litigation. There is obviously a limitation on obtaining documents from non-parties. In addition, it is clear that the documents had been provided to counsel for McArthur Properties prior to the second day of hearing. There has therefore been either compliance or substantial compliance with rule 36 and no prejudice to the responding parties, in the sense of being taken by surprise by documents they had not seen previously.
7One of the difficulties in dealing with what should have been fairly straightforward evidence, was the fact that the PMSO has been barely functioning for some time. The Board heard evidence from Mr. Gerry Weiman, the Vice Chairman of the PMSO. He stated that he was in fact retired from his primary line of business. The PMSO had been administered by another individual named Percy Weinberg who died approximately four years ago. Mr. Weiman stated that "no one wanted to carry on the administration of the collective agreement. I didn't either but I'm holding it [the PMSO] together." While in the end the PMSO may today have a tenuous hold on its continuing existence, it is clear from Mr. Weiman's evidence that it does continue to exist, and certainly did exist as an employer's organization when it executed a collective agreement effective December 1, 1998 to November 30, 2001.
8The PMSO was created at an organizational meeting in 1976. Its constitution was finalized in November 1979 and has not been amended since. It contains the following provisions:
B-3 To Negotiate and re-negotiate a Collective Agreement in Property Management. To provide centralized legal advice pertaining to the Collective Agreement to Member Companies. To provide administration of the Collective Agreement;
I-2 A Member may terminate his Membership by written resignation submitted to the Secretary-Treasurer at any time during the term of a Collective Agreement negotiated by the Organization until ninety (90) days prior to the expiry date of any such Collective Agreement. Any such resignation shall take effect thirty (30) days after its receipt and upon payment of all Annual Dues and Assessments due and payable for the year in which the resignation is to take effect. No resignation shall be submitted during the period commencing within ninety (90) days prior to the expiry of any such Collective Agreement and ending on the date the renewal Collective Agreement is signed by the Organization.
I-3 The Executive Board may, in their discretion, suspend or cancel the Membership of any Member who has been guilty of conduct substantially prejudicial to the Objects of the Organization or of continued breach of the Constitution or By-laws, or may reprimand such Member.
J-4 Those Member Companies failing to pay Annual Dues by 1st August will be given written notice via their recorded representative(s). Any Member Company who is in arrears in payment of Annual Dues or Special Assessments as of 15th September shall cease to be a Member.
9The Board heard evidence from both Mr. Weiman and Michael Goldstein, who acted as the property manager for Mount Citadel. Their evidence was consistent and was not challenged by any contradictory evidence. The union was certified to represent "all employees of Mount Citadel Ltd. engaged in cleaning and maintenance at Mount Citadel, 701 Don Mills Road, Toronto..." in 1976. Mount Citadel Ltd. joined the PMSO sometime in the 1980s. It paid dues until November of 1999. It received a notice of dues owing from the PMSO in August 2000, presumably in accordance with Article J -3, but did not pay dues at that time. Mount Citadel never formally resigned from the PMSO, nor did it ever give notice to the union or to the PMSO that it wished to resign from membership or that the PMSO was no longer authorized to bargain a collective agreement on its behalf.
10Both witnesses agreed that the PMSO was authorized by its members to negotiate a collective agreement and did so. Mr. Goldstein testified that he was a director and officer of Mount Citadel and Mt. Citadel Ltd. and had the authority to bind them to contracts, including a collective agreement, but not a contract to sell the building. Mr. Goldstein helped to negotiate the collective agreement between the Union and the PMSO for the 1988-1991 collective agreement. In fact he executed that collective agreement. Mr. Goldstein stated that he believed the Union represented employees of Mount Citadel from 1979 to 1999, the year in which he ceased to be the property manager. After 1991 he was not involved in bargaining but Mount Citadel "followed" the collective agreement. He was naturally reluctant to express a legal opinion about the effect of the collective agreements but he stated with respect to agreements after 1991 "we agreed to continue the agreement the PMSO negotiated". In January 1998 he executed minutes of settlement with respect to a grievance that had been had been filed by the Union.
11The most recent collective agreement between the Union and the PMSO was effective December 1, 1998 to November 30, 2001. The Memorandum of Agreement settling this collective agreement was executed in November of 1998.
12Mr. Weiman's evidence was that Mount Citadel had paid its dues regularly until 1999. At that time he spoke to a woman he identified as Raynard Perrara, working for the new property manager of Mount Citadel who had inquired about the payment of dues. He was advised by another officer of the PMSO that the dues were paid in November of 1999. Although counsel for McArthur Properties characterized this evidence as hearsay, as a director and officer of the organization, Mr. Weinberg is entitled to give evidence about the state of accounts of the organization. Certainly no attempt was made to summons the primary records of the PMSO between the second and third days of hearing.
13On November 13th 2000 Mr. Weiman prepared a list of members of the PMSO for another member of the organization. He listed Mount Citadel as a member at that time. However, since Mount Citadel had not paid its dues for the year 2000, and had in fact been reminded of this fact in August 2000, it is probably incorrect to say that it was a member at that date. However, the collective agreement was finalized two years earlier, in November, 1998, when Mt. Citadel was a member.
14Mount Citadel paid its employees at 701 Don Mills Road the rates set out in the collective agreement until the day of their discharge in January 2001. Dues were deducted and employer contribution remittances were sent to the Union until that time as well. A grievance regarding an employee of Mt. Citadel was filed under the collective agreement and settled pursuant to a memorandum dated October 22, 1997.
Analysis
15It is quite clear from the foregoing facts that Mt. Citadel Inc. was bound to the collective agreement between the PMSO and the union effective December 1, 1998 to November 30, 2001. Sections 57 (1) and (2) of the Act provide as follows:
- (1) A collective agreement between an employers' organization and a trade union or council of trade unions is, subject to and for the purposes of this Act, binding upon the employers' organization and each person who was a member of the employers' organization at the time the agreement was entered into and on whose behalf the employers' organization bargained with the trade union or council of trade unions as if it was made between each of such persons and the trade union or council of trade unions and upon the employees in the bargaining unit defined in the agreement, and, if any such person ceases to be a member of the employers' organization during the term of operation of the agreement, the person shall, for the remainder of the term of operation of the agreement, be deemed to be a party to a like agreement with the trade union or council of trade unions.
(2) When an employers' organization commences to bargain with a trade union or council of trade unions, it shall deliver to the trade union, or council of trade unions a list of the names of the employers on whose behalf it is bargaining and, in default of so doing, it shall be deemed to bargain for all members of the employers' organization for whose employees the trade union or council of trade unions is entitled to bargain and to make a collective agreement at that time, except an employer who, either alone or through the employers' organization, has notified the trade union or council of trade unions in writing before the agreement was entered into that the employer will not be bound by a collective agreement between the employers' organization and the trade union or council of trade unions.
The definition of "employer organization" is found in section 1 (1):
"employers' organization" means an organization of employers formed for purposes that include the regulation of relations between employers and employees and includes an accredited employers' organization and a designated or accredited employer bargaining agency.
The PMSO was an organization of employers. It was founded for purposes that included the negotiating a collective agreement with the Union. It had that actual authority from its members, and did so regularly for many years.
16Mt. Citadel was a member from sometime in the early 1980s. In fact, its representative. participated directly in bargaining for the 1988-1991 collective agreement. After that date it remained a dues paying member of the organization until September 15, 2000. That is, it was a member when the last collective agreement was executed. Therefore, by virtue of section 57 (2), Mt. Citadel was bound to the collective agreement. Although the facts are slightly different, the rationale in Paul D'Aoust Construction Limited and the Ottawa Construction Association, [1976] OLRB Rep. Sept. 529 at paras. 31-35 is applicable here.
17Similarly there is no question of any abandonment of bargaining rights by the Union. McArthur Properties, of course, had no knowledge of the history of relations between Mt. Citadel and the Union, and quite properly required them to prove that there had been no abandonment. The continued application of the terms and conditions of the collective agreement, including settling a grievance in 1998, are strong evidence of a continued bargaining relationship. As counsel for McArthur Properties candidly conceded, there is no evidence of abandonment in this case.
18As indicated above there were in fact two corporations by the name of Mt. Citadel in existence from time to time. The original owner of the property was Mt. Citadel Ltd. and it was that corporation which was the responding party in the union's application for certification. It was a corporate vehicle through which a number of trusts (or, more precisely, “stiftung”s) based in Switzerland owned the property. In 1993 or 1994, ownership of the building was transferred to Mt. Citadel Inc. as part of this change in the structure of the beneficial ownership of the corporation. Basically, one of the Swiss trusts, which had been part of a consortium of owners who were the beneficial owners of the shares of Mt. Citadel Ltd., took over complete ownership of the building. It used Mt. Citadel Inc. as the corporate vehicle. Other than a corporate vehicle, and the last word in the corporate name, nothing changed and the entirety of the business was transferred to Mt. Citadel Inc.
19Mt. Citadel Ltd. is not named as a party to these proceedings, but no relief is sought against it. Indeed, that corporation may no longer exist. Mt. Citadel Inc. was named as a party but chose not to appear. On the evidence we heard, it is clear that there has been a sale of a business from Mt. Citadel Ltd. to Mt. Citadel Inc. Section 69(2) provides:
- (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, her or its business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if the person had been a party thereto and, where an employer sells his, her or its business while an application for certification or termination of bargaining rights to which the employer 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 the person were named as the employer in the application.
Since the Board has found that there was a sale the effect of section 69 is that Mt. Citadel Inc. was bound to the collective agreement from sometime between 1993 and 1994 to the present.
The Sale Application
Mount Citadel
20Mr. Goldstein acted as the property manager for the owners of Mount Citadel from the end of 1979 to September of 1999. The beneficial owners of Mount Citadel were several groups of Swiss investors. Mr. Goldstein testified that he had met one or two of these individuals but that he had not met and did not know the identities of all of them. He was aware that their identities changed from time to time. Essentially Mr. Goldstein managed the building, and accounted for the profits from the operation of the building to the owners of Mount Citadel. In doing so he rented out residential units and collected rents from tenants. Mount Citadel employed superintendents and cleaners who were represented by the Union. He contracted out repair and maintenance work as necessary, although the superintendents also performed some repair work.
21In August 1998 the beneficial owners of Mount Citadel Inc. sold the shares of the corporation to a Montreal investment group. This commercial sale does not constitute a sale of a business for the purposes of section 69 because the corporation which was the employer, Mt. Citadel, remained unchanged. It was still the party to the collective agreement regardless of who held the shares. The Montreal group was represented primarily by an individual named Stanley Zipkin. In September of 1999 this group transferred the management of the building to a company identified as Cromwell.
22The Board also heard evidence about the nature of Mount Citadel when it was under the control of the Montreal investors from James McArthur, a principal of McArthur Properties. While his evidence was based, it would appear, on a certain amount of hearsay and inferences drawn from what he saw of the vendors on the other side of this transaction, for the purposes of this application I am prepared to accept his evidence that its highest. He described the Montreal investors as being in the business of trading assets and properties. Their profits were drawn from the capital appreciation, or perhaps strategic market shifts, which changed the value of the assets traded, rather than from the long-term maximization of income from each of the assets. Indeed he testified that the proceeds of the sale of this building were used by the Montreal group to purchase a piece of fine art. He believed that the Montreal investors still owned certain properties in Toronto and a car dealership in Montreal. Mr. McArthur, of course, had no knowledge of the business operations of the Swiss investors.
McArthur Properties
23McArthur Properties was originally incorporated to provide real estate management services for various multi-residential properties. Over the years it came to own the properties it managed and now only owns and manages properties on its own account. While there are still some small buildings in its inventory, it now looks to own and manage buildings in the 250-unit range.
24Mr. McArthur testified that McArthur Properties has a different approach and methodology with respect to owning and managing properties. He regarded this as a superior business proposition and incidentally a superior value for tenants. The business strategy of McArthur Properties is to own a number of properties and manage them as a single group, rather than as a series of isolated properties. That is, rather than dedicating staff to a single building, McArthur Properties will use some of its employees, particularly maintenance employees, across all of its properties. This gives McArthur Properties greater control of the quality of work and particularly of the quality of materials used. In the long run Mr. McArthur believed this creates greater value and greater profits for his company. Further, this approach enables McArthur Properties to apply economies of scale to increase the return from the buildings. Although he did not say so explicitly, his assumption appeared to be that a company managing a rental property on its own account was likely to be more aggressive and more careful in the recruiting and selection of tenants than an absentee landlord.
25McArthur Properties was originally approached by a real estate broker to determine if it was interested in purchasing the property. Mr. McArthur's evidence was that he regarded this acquisition as purely an asset purchase. Indeed, the commercial structure of the transaction had to be an asset purchase to enable McArthur Properties to take advantage of the capital cost deduction allowance against its other properties. It was that allowance for taxation purposes that made the property at 701 Don Mills Road worth the purchase price that was ultimately agreed upon. Mr. McArthur stated he was interested only in the building. That is, the building was situated in a good location for a rental property in the City of Toronto and as a property demonstrated a potential to produce income which would add to the profit of McArthur Properties. Certainly the few chattels included on the agreement of purchase and sale are of negligible value and had no effect on this transaction at all. Further, McArthur Properties acquired nothing from the management companies that had run the business before the sale.
26A different corporation, Coram Deo Inc. (“Coram Deo”) became the registered owner of the property. Again, this was done for valid and legitimate business purposes including the provision of insurance, a limiting of liability, and tax planning issues. This is, however, of concern to commercial and taxation law only. The employer of persons who work at 701 Don Mills Road is McArthur Properties. For the purposes of the Act, the two corporations are essentially the same entity.
27There was some dispute about the value of the rents paid by tenants at 701 Don Mills Road. Mr. McArthur testified that he regarded the existing tenants (some of whom had written leases and some of whom were on month to month tenancies) as liabilities. He explained that due to legislative restrictions on increases in residential rents, he regarded most of the rents in 701 Don Mills Road as being below market value. He testified that the building would have been worth more had every apartment been empty. His evidence appears to be somewhat overstated. Since the transaction was financed, at least in part, by a loan secured by a mortgage, it would have been necessary to have a fairly substantial cash flow to pay the interest almost immediately. Further, even in the tight rental market of Toronto, it is unlikely that 250 units all appearing on the market on the same day would not have had some effect on what the market rent was. At one point in his evidence Mr. McArthur stated that he "just looked at the physical condition of the building, the cash flow, and the potential for growth". That is, the cash flow from existing tenants was a consideration in determining whether to purchase the building and at what price.
28Certainly McArthur Properties purchased none of the expertise or management skills of the previous managers or owners. It did more than replace existing staff. It brought to the building a different method of managing the building, of ensuring cleaning and repair of the building, a more aggressive approach to marketing and a different method of tracking the financial state (ongoing costs vs. income from rent) from its predecessor. Aside from cleaning and maintenance, he indicated that the individuals employed as property managers and assigned to each of the properties owned by McArthur Properties all developed particular expertise in different areas and then provided training and assistance to other property managers. In his view this provided for greater depth of experience than a single property manager managing a single property.
29We did not in fact hear any evidence about which employees work in the building and how much of the time is spent there. Mr. McArthur did say that there were two superintendents one of whom was always present in the building. It is not clear if either of them live in the building. However, given the requirement that one of them be there at all times, it seems a logical inference that at least one person dedicates virtually all of his or her time to work at 701 Don Mills Road.
30Mr. McArthur summarized this purchase as an addition to the property management and tenancy portfolio of McArthur Properties. It was an addition to their existing property assets. He did not regard it as the purchase of a business from Mount Citadel.
Analysis
31As is often the case in this type of application, the commercial facts are not seriously in dispute. The issue is a proper characterization of those facts. The Union characterizes as a sale of the business, McArthur Properties calls it the purchase of an asset.
32First, it is perhaps necessary to state the obvious. Section 69 is a provision in the Labour Relations Act, 1995. It has no application to any other statute or legal analysis. To begin with, the definition of "sale" in section 69 (1) is very different from any definition of a sale in commercial or taxing statutes, or certainly, at common law. When the Board finds the transaction to be a sale of business for the purposes of Labour Relations Act, 1995 this in no way detracts from its character, in commercial or taxation terms, as a purchase of assets.
33As both counsel pointed out, there are dozens of decisions of this Board that have analyzed whether or not section 69 applies to a particular transaction. Just as there are an infinite number of possible businesses and manners of carrying on business, there are infinite number of ways of selling, transferring, or alienating a business, part of the business, or just the physical assets of the business. For that reason it is impossible to provide any overall definitive analysis of section 69 that can be applied to any and all fact situations. The best that one can do is to try to set out the framework within which the Board should analyze the facts of any individual case before it.
34One such framework was set out by the Board in Accomodex Franchise Management Inc., [1993] OLRB Rep April 281 as follows:
- But does section 64 apply in this case? In addressing that issue, we do not think that it advances the analysis very much to describe the transaction under review as a mere “sale of assets”. It certainly involves that; but even from a purely commercial law perspective, one way of buying a business is to purchase its assets. As Arthur Scace observed in his text, the Income Tax Law of Canada (5th ed.):
Although businesses may be consolidated in a number of different ways, e.g. by an amalgamation or winding up, there are only two methods by which a business can actually be bought or sold, namely the purchase and sale of either assets or shares.
A commercial lawyer would hardly consider it a novel proposition if it were suggested that a sale of a business could be accomplished by an asset transaction, or that someone could go into business by acquiring someone else’s business capacity. To describe what has occurred here as an asset transfer, simply begs the question of whether there has nevertheless been a “sale” of all or “part” of the Triumph’s business, for collective bargaining purposes, under the Labour Relations Act.
The instrumental approach to successorship suggests that bargaining rights are attached to an economic vehicle – the mechanism, resources or facilities by which the undertaking serves its purpose – rather than the purpose itself, the employees, or their work. Bargaining rights attach to the business undertaking. The Board then tries to determine, from a labour relations perspective, whether the transfer and continuation of some facet or facets of that undertaking, warrants a continuation of bargaining rights – for, of course, when interpreting section 64, the Board has to keep in mind its purpose and effect. The Board tries to reach a result which is fair to both the statute and the context under review – that is, a result that appears to be called for to remedy the mischief for which section 64 was passed. That mischief is not the loss of work or work opportunities, but rather the disruption of bargaining rights which would flow from a change in the ownership but continuation of all or part of the elements that make up the business.
As a result of section 64, bargaining rights are not coextensive with commercial ownership or the continuing identity of the owner, nor does it matter how the new owner comes to have possession of the instruments necessary to carry on all or part of the functions of the predecessor. Bargaining rights continue with a continuation of the business undertaking or a part of it. The cases explore just what those instruments or elements of the business are, and what can be said to be the essence of the undertaking – land, equipment, location, employee skills, licences, patents, etc. They consider, from a labour relations perspective, whether a sufficiently-coherent grouping of those things has been transferred so as to warrant a continuation of bargaining rights.
Accordingly, in deciding whether there has been a sale of the predecessor’s “business” for successor rights purposes, the Board has found it useful to consider the extent to which the various elements of the predecessor’s business can be traced to the alleged successor – that is, whether there has been an apparent continuation of the predecessor’s undertaking or organization, albeit with the change of owner. This “tracing” approach was considered by the Board in Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691 (application for judicial review dismissed January 18, 1979) where the Board listed some of the factors which might be significant in deciding if there had been a transfer of the predecessor’s business:
In each case the decisive question is whether or not there is a continuation of the business … the cases offer a countless variety of factors which might assist the Board in its analysis; among other possibilities the presence or absence of the sale or actual transfer of goodwill, a logo or trademark, customer lists, accounts receievable, existing contracts, inventory, covenants not to compete, covenants to maintain a good name until closing or any other obligations to assist the successor in being able to effectively carry on the business may fruitfully be considered by the Board in deciding whether there is a continuation of the business. Additionally, the Board has found it helpful to look at whether or not a number of the same employees have continued to work for the successor and whether or not they are performing the same skills. The existence or non-existence of a hiatus in production as well as the service or lack of service of the customers of the predecessor have also been given weight. No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of utmost importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aids the Board in deciding whether the nature of the business after the transfer is the same as it was before.
- In each of these cases, the Labour Relations Board found that the predecessor had transferred a coherent and severable “part” of its economic organization, managerial, or employee skills, plant, equipment, know-how, or goodwill – thereby allowing the successor to perform a definable part of the economic functions formerly performed by the predecessor. This “new” economic organization undertook activities which gave rise to employment, and the terms and conditions of employment, together with the union’s right to bargain about them were preserved. The “part” of the predecessor’s business which it no longer wished to continue, provided the business opportunity which the successor was able to pursue to its own advantage.
Within the analysis, then, the task is to determine:
(a) what was transferred;
(b) whether it constituted all or a coherent part of the economic organization which continued to function as such;
(c) whether the union's bargaining rights were in fact grounded in the employees who performed the work as part of the economic organization.
35McArthur Properties, of course, argues that it did not purchase any sort of economic organization. In his evidence, Mr. McArthur approached this transaction from the basis of his conception of his business: profitability, potential for growth, inadequate fit with existing assets, and a favourable tax position. From this perspective he saw the transaction as an acquisition of a property that could be integrated into its already functioning business. He wanted no part of the business techniques or organization of the vendors. Indeed he put forth a clear and articulate rationale is to why his business differed from that of Mt. Citadel when was owned by the Montreal group, and even, too much lesser extent, from when its Swiss owners owned it.
36However the Board is not an arbiter of commercial values or business plans. The purpose of section 69 is to protect bargaining rights of trade unions representing employees from the disruption that might otherwise occur on a sale of the business. This section is neutral in its application. That is, counsel for a McArthur Properties is incorrect in his assertion that the purpose of section 69 is limited to protecting bargaining rights from sales which are designed to avoid collective agreement obligations. No such intention is evident in section 69 and the Board has never interpreted it that way. The focus of the Act is on the business as an employer of employees for whom a trade union has bargaining rights and as the economic entity to which the union’s bargaining rights attach.
37It is therefore not a helpful analysis in applying section 69 the Act to contrast the "style" or business purpose of McArthur Properties as one which operates a business designed to produce income from prudent long-term management of the asset as opposed to the style or business purpose of the Montreal owners to quickly realize a capital gain, perhaps at the expense of the long-term value of the asset. While those differences may be central to the law of commercial organization and taxation, it is not of assistance in answering the question posed by section 69. The union's bargaining rights were not affected by the way in which the Swiss owners of Mt. Citadel operated the building (which is a similar to that of McArthur Properties, if not as successful) or by the change when the Montreal group began to operate it for different corporate purposes.
38To be fair, McArthur Properties argument was drawn somewhat more widely than that than that. It argues that the property was not a good business in its own right, but only valuable because it complimented the existing assets. In essence as counsel put it, "we brought the business to the asset, making it part of our business".
39Attractive as this analysis is initially, in the end it fails to address the issue of what the business was for the purposes of the Act, that is the bargaining rights relating to employees of the business. It is, of course, not enough to point to the same employees during the same work in the same location. They must do so as part of the ongoing economic activity of the business. As the Board said in Zellers Inc., [1995] OLRB Rep. Aug. 1141:
- The significance of the Board’s adoption of an instrumental analysis is that the applicant must demonstrate that something more has been disposed of from the predecessor to the successor employer than simply the function of performing the same work. The applicant must go further and prove that an operational entity consisting of constituent components and particular relationships between those components has passed from predecessor to successor employer. There are of course varying degrees to which this may occur and the term “business” in section 64(1) is defined to include one or more parts of a business. As the Board noted in Accomodex at paragraph 58, the more the successor employer’s ability to carry on business is derived or is dependent upon things which were acquired from the predecessor employer, the more likely a transfer of a business has taken place.
See also Borden Cold Storage Ltd., [2001] OLRB Rep. April 277.
40Counsel relied heavily on a number of cases involving retail premises. These were all cases where one retail operation (usually a chain) vacated a location and another retail operation, often a competitor, commenced business in the same location and carried on a similar business. These cases included Zellers, supra; Queensway Foods Ltd. [1984] OLRB Rep. Feb 358; Valencia Foods, [1984] OLRB Rep. May 773; Gilham Foods, [1984] OLRB Rep Oct 1423; Super Tops Holdings Inc., [1986] OLRB Rep 168; and Miracle Food Mart, Steinberg Inc., [1988] OLRB Rep. July 679. They all, of course, involved a different kind of business or industry from that of McArthur Properties. The “essential elements” of a business will inevitably vary from one industry to another. In each of these cases, the only element of substance that two employers had in common was the retail premises themselves. The Board did not find that the bare walls, with or without fixtures, constituted any sort of business or functioning economic vehicle. In the retail food industry, the key elements include (1) all of the operations that supply goods to the storage (including the sourcing of product, the arranging of transportation and the cost-effectiveness of both), (2) the soliciting of customers by creating an image relating to the quality and price of a particular chain, brand loyalty, or other schemes of creating customer loyalty, and (3) and presumably least, the manner of display and service in the store and other symbols to reinforce the "brand" identification of the store. The location, although it may be important for the market strategy of the chain, is of limited importance. By itself it is simply an asset that could not possibly function without the other components of the business.
41In contrast, the "product" being delivered in this case is these specific residential apartments. Unlike kiwi fruit and rutabagas, they do not have to be gathered from any other source. The apartments exist only at 701 Don Mills Road. Along with the physical structure, tenants expect heat, water, electricity, garbage removal, elevators, repairs to the structure and fixtures and some form of general building cleanliness. These can only be delivered in the building. The customers are those who inhabit the apartments. The bargaining rights of the Union relate to the persons who perform the cleaning, the repairs, and the general arranging for the provision of services in the apartment building. That is the portion of the economic undertaking in which the Union’s bargaining rights are rooted. Whether the economic vehicle is used to generate quick capital appreciation or long-term income, does not really impact on the portion of the business in which employees perform bargaining unit work. The Union's bargaining rights do not cover the accounting staff, business planners, financial or taxation personnel or any of the elements which Mr. McArthur identified as his conception of his business.
42The building and services provided at 701 Don Mills Road are the key elements of this economic vehicle, and are the areas in which the employees work and hence the Union’s bargaining rights are rooted. It is that ability to provide apartments and ancillary services to the satisfaction of tenants that produces the income stream for the long-term investor, or preserves the capital value for the speculator.
43Counsel also referred to the analysis in cases such as Northway Bus Lines Inc., [2000] OLRB Rep. Nov. 1182 and Metropolitan Parking Inc. [1979] OLRB Rep. Dec. 1193, for the proposition that a sale of business does not occur when one business is supplanted by a competitor. With respect, this analysis is not applicable to the facts of this case. The two cases dealt with the replacement of one contractor by another contractor to provide particular services which were essential to the business with an "owner" with whom each one contracted. That is the owner, who was the source of the work, required the service; the contractor simply provided the service to the owner. Mt. Citadel and McArthur Properties, may in some senses be competitors of one another, but they are the primary businesses themselves. They do not act as a contractor simply to supply services to a third party. By analogy to the facts of those two cases, Mt. Citadel and McArthur Properties are in the position of the Airport Authority or the School Board.
44This can be put in focus by comparing this transaction with the sale of the shares of Mt. Citadel from the Swiss group to the Montreal group. A commercial lawyer would call that a sale of a business. Similarly the same commercial lawyer would call the transaction between Mt. Citadel and McArthur Properties a sale of assets. For commercial and taxation purposes that is what they were. For the purposes of the Act there is no difference (although one engages section 69 and the other does not). Both transactions involved the transfer of a functioning economic vehicle, and the work associated with it, from one owner to another. Different means of effecting this transfer were used for reasons unrelated to labour relations. The fact that different strategies and methods of operation were employed once the sale is completed does not change the fact that what was sold, in both transactions, was a functioning economic vehicle.
45The analysis in Accomodex, supra, deals with facts that are closer to the facts in this case than those in the cases cited by counsel for McArthur Properties. The analysis of the application of section 69 to those facts at paragraphs 77-78 of Accomodex, supra is similar to that set out above, and reinforces the conclusions I have reached in this case.
46In the Board finds, then, that there was a sale of business between Mt. Citadel and McArthur Properties.
47There is also the question of Coram Deo. Coram Deo holds the title to 701 Don Mills Road, although the beneficial owner is McArthur Properties, or perhaps, ultimately, a family trust. Subsection 1(4) of the Act provides:
- (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 associations 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.
Clearly these two corporations are simply the corporate vehicles used for proper and rational commercial and tax reasons, which operate the business at 701 Don Mills Road. While McArthur Properties seems to be the employer of the employees who work in the building, that is not clear. In order to prevent any potential erosion of bargaining rights in the future, it is appropriate to declare that McArthur Properties and Coram Deo are one employer for all purposes of the Act, but only so far as they carry on associated or related businesses or activities at 701 Don Mills Road.
Conclusion
48For the reasons given above, the Board declares that there has been a sale of business from Mt. Citadel to both of McArthur Properties and Coram Deo. Accordingly McArthur Properties and Coram Deo are bound to the collective agreement between Mt. Citadel Inc. and the Union. However it should be absolutely clear that the declaration of a sale and binding effect of the collective agreement does not extend beyond the boundaries of 701 Don Mills Road Toronto. In all other respects the Union has no bargaining rights for employees of McArthur Properties or Coram Deo at any other locations as a result of this decision.
Application of this decision on the Grievances
49The effect of this finding, pursuant to section 69(2) is that McArthur Properties and Coram Deo are parties to the collective agreement as if they had been signatory parties thereto. That is, all three corporations are the “employer” party to the collective agreement. If the arbitrator finds there was a breach of the collective agreement, he or she may find that liability for damages or the obligation to provide other remedies may be apportioned differently among them. That is, the three corporations are jointly and severally liable as the employer, but the arbitrator may well apportion responsibility for any breach among the three of them. See Cabral Foods Inc., [1985] OLRB Rep. Feb 165 at para. 9 and The Cadillac Fairview Corporation Limited, [1997] OLRB Rep. Mar/April 187.
Advice to the Minister
50The Board's answers to the questions posed by the Minister are as follows:
(1) The Board advises that the Minister does have the authority to appoint an arbitrator as requested by the Union pursuant to section 49 of the Labour Relations Act, 1995.
(2) The employers responsible for dealing with the grievance are Mt. Citadel Inc., McArthur Properties and Coram Deo.
51If an arbitrator finds a violation of the collective agreement, he or she may find that only one, or two or all three of them are responsible for some or all of the relief ordered. However, all three should be identified as employers for the purposes of this grievance. It goes without saying that it is the arbitrator, not this Board, who will determine questions of arbitrability, liability, or breaches of the collective agreement.
“David A. McKee”
for the Board