Ontario Labour Relations Board

0115-01-G United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industries of the United States and Canada, Local 46, Applicant v. Bennett & Wright Group Inc., Responding Party.

BEFORE: Harry Freedman, Vice-Chair.

DECISION OF THE BOARD; June 21, 2001

1. This is a referral of grievance to the Board for determination under section 133 of the Labour Relations Act, 1995, S.O. 1995, c. 1, as amended (the “Act”). The Chair of the Board authorized me pursuant to section 110(14)(a) to sit alone to hear and determine this matter.

2. The responding party made an assignment in bankruptcy on March 1, 2001. This referral was filed with the Board on April 10, 2001. The Board, in a decision dated April 17, 2001 pointed out that counsel for the trustee of the bankrupt estate of the responding party had submitted that this proceeding was stayed by virtue of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as am. (the “BIA”) and referred to section 69.3 of the BIA which provides, in part:

…on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor's property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy, until the trustee has been discharged.

Counsel for the trustee submitted that the stay under the BIA precluded the Board from proceeding further with this matter and that the hearing that had been scheduled for April 24, 2001 should not proceed. The Board directed the applicant to make submissions to the Board with respect to the submissions of counsel for the trustee before April 19, 2001.

3. The applicant did not file submissions with the Board as directed by the Board’s April 17, 2001 decision. Rather, counsel for the applicant, by letter to the Board dated April 23, 2001 advised that the applicant wished to request an adjournment of the hearing scheduled for April 24, 2001. That letter went on to state: “We are compiling a motion record in order to attend before the Commercial Court Master for leave to proceed on the grievance while the respondent is in bankruptcy.” As a result of that request, the Board, by decision dated April 24, 2001, adjourned this matter sine die.

4. Counsel for the applicant, by letter to the Board dated May 31, 2001 requested that this matter proceed and that the Board issue an ex parte order in the form set out in the referral and made submissions in support of his request. The order sought by the applicant is an order requiring the responding party to pay $34,236.59 to the applicant “subject to any legal restrictions that may be imposed upon this order as a result of the Bankruptcy.”

5. Counsel for the applicant submitted that the statutory stay in the BIA has no application to this proceeding on the ground that the applicant is “seeking an order from the Board confirming the liability and quantum of its claims in order to pursue a remedy against the individual directors of the company.” Counsel also advised that the applicant wishes to pursue a remedy against the directors under the Business Corporations Act, R.S.O. 1990, c. B-16, as amended, (the “OBCA”) and in order to do so, requires that its grievance be determined. The applicant referred to section 131 of the OBCA and the decision of the arbitrator in Advanced Metal Products Ltd., (2001), 2000 CanLII 50219 (ON LA), 93 L.A.C. (4th) 170 (Luborsky).

6. I have reviewed carefully the grievance material and the referral to arbitration. Nowhere does the applicant indicate in its materials that it is seeking an order only for the purposes of recovering the amount outstanding against the directors of the responding party. The order sought by the applicant is an order against the responding party. There is no basis, in my view, for construing this application as something other than a “proceeding for the recovery of a claim provable in bankruptcy”. It is the kind of claim that appears to fit squarely within the provisions of section 69.1 of the BIA.

7. The award in Advanced Metal Products Ltd., refers to and adopts the analysis of the arbitrator in Steel Master Tool Co., (1999), 1999 CanLII 35932 (ON LA), 81 L.A.C. (4th) 124 (Watters) in which the arbitrator concluded that he had the jurisdiction, notwithstanding the BIA, to determine liability and quantum because the stay imposed by the BIA should be effective only when an affected party sought to enforce the order against the bankrupt. Neither award referred to the Board’s decision in Steinberg Inc., [1992] OLRB Rep. July 860 in which the Board held that a stay ordered by a superior court judge under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 applied to proceedings before the Board under section 96 of the Act. Nor did those awards have the benefit of the reasoning of the British Columbia Labour Relations Board in Imperial Optical Company Limited, BCLRB No. B58/93, application for reconsideration refused, BCLRB No. B49/95. The British Columbia Labour Relations Board, applying the Board’s analysis in Steinberg Inc., held that the BIA stayed proceedings before the BCLRB in which the applicant union had sought merely to have the BCLRB hear a matter in which quantification of damages was at issue because the employer, Imperial Optical, had gone into bankruptcy. The BCLRB reasoned in that case that as the statute allowed an order quantifying damages to be filed in the Supreme Court, the amounts being claimed are enforced through the Court and therefore the claim should have been made to the trustees under the BIA.

8. Furthermore, there is nothing in section 131 of the OBCA that requires that a grievance be determined by an arbitrator prior to pursuing the directors in a court action. Section 131(1) provides:

The directors of a corporation are jointly and severally liable to the employees of the corporation for all debts not exceeding six months' wages that become payable while they are directors for services performed for the corporation and for the vacation pay accrued while they are directors for not more than twelve months under the Employment Standards Act, and the regulations thereunder, or under any collective agreement made by the corporation.

Section 131(1) appears to impose liability on directors for wages and vacation pay under a collective agreement. Section 132(2) of the OBCA establishes the process for obtaining recovery from a director. It provides:

A director is liable under subsection (1) only if,

a) the director is sued while he or she is a director or within six months after ceasing to be a director; and

(b) the action against the director is commenced within six months after the debts became payable, and

(i) the corporation is sued in the action against the director and execution against the corporation is returned unsatisfied in whole or in part, or

(ii) before or after the action is commenced the corporation goes into liquidation, is ordered to be wound up or makes an authorized assignment under the Bankruptcy Act (Canada), or a receiving order under the Bankruptcy Act (Canada) is made against it, and in any such case, the claim for the debts is proved.

It is not apparent to me why the applicant could not prove its claim against the responding party through the bankruptcy process. If it has a claim under the collective agreement against the responding party, there is no reason provided by the applicant to suggest that the trustee in bankruptcy is not in a position to deal with that claim in the same way the trustee deals with the claims of any other unsecured creditor.

9. Perhaps more importantly, the grievance filed by the applicant asserts that the responding party had failed to remit “Welfare Contributions, Pension Plan Contributions, Union Training Fund Contributions, Supplementary Unemployment Benefit Contributions, Zone Association Industry Fund Contributions, Union Promotion Fund Contributions and Alcohol/Drug Abuse Fund Contributions” and in the referral claims not only the amounts owing by way of remittances to those funds, but also “late payment damages of $3,112.42” as part of its total claim of $34,236.59. If, as the applicant submits, the only purpose of proceeding before the Board is obtain an order so that the applicant can sue the directors of the responding party under the OBCA, surely the applicant should only be seeking an order in respect of wages, including vacation pay, owing to employees and not late payment damages or other amounts that do not constitute wages owed to employees. Without necessarily establishing the precise definition of wages for purposes of the OBCA, it seems that most, if not all of the amounts claimed in the grievance are amounts payable to the applicant’s funds (or employer association funds) and not to employees. Section 131(1) of the OBCA imposes liability on directors for wages owed to employees. It does not appear to impose liability on directors to make up the shortfall in contributions to various funds administered by the union that represents employees or the employer association of which the bankrupt employer was a member.

10. The Board noted in Trafalgar Mechanical Inc., decision dated November 17, 1999, Board File No. 2064-99-G, unreported, Q.L. cite [1999] O.L.R.D. No. 4087 that benefit contributions under a collective agreement did not constitute wages within the meaning of the Employment Standards Act, R.S.O. 1990, c. E. 14, as am. The Board in Trafalgar Mechanical Inc. wrote at paragraph 14:

I have concluded that the fund contributions in this collective agreement are not wages within the meaning of the ESA, but are “contributions to a fund, plan or arrangement to which Part X of the Act applies”. Although it is true that the applicant administers the plans and funds, the contributions come from employers. Indeed this case is all about an employer's failure to remit the contributions in a timely way, and the applicant's efforts to require the employer to comply with its collective agreement obligations, and make the contributions. I also note, that the collective agreement wording with respect to each of the benefit plans begins with the words “each contractor shall contribute to the Local 46 ...”. While too much emphasis should not be placed on the parties' choice of words, the overall context appears more consistent with a regime in which employers contribute to plans, pursuant to a term or condition of employment (i.e. the collective agreement) which directly or indirectly, in this case under the administration of the union, provides benefits.

In my view, the Board’s interpretation of wages in Trafalgar Mechanical Inc., is also consistent with the interpretation of the term “wages” under the OBCA used by the courts. In Zavitz v. Brock et al., (1974), 1974 CanLII 839 (ON CA), 3 O.R. (2d) 583 (C.A.) the Ontario Court of Appeal found that commissions payable to an employee sales representative were included in the term wages under the predecessor to the OBCA. In the course of doing so, the court referred to a number of earlier decisions under prior statutes, including the decision of the Supreme Court of Ontario, Appellate Division in Re Parkin Elevator Co., Ltd., (1916), 1916 CanLII 548 (ON SCAD), 31 D.L.R. 123 in which Meredith C.J.C.P wrote at page 127:

If we should go on thus, step by step in advance, without ever looking back at the enactment, we might very easily get in time even far beyond such a case as this -- for instance, the case of a solicitor and his fees, or a physician or surgeon and his. Looking back at the enactment, I cannot but think that the cases have already gone to the furthest extent the elasticity of the words of the enactment in question will permit, whether they have or have not been overstretched in any case. It seems to me quite contrary to any reasonable meaning that can be attributed to the words "salary or wages" which a clerk or other person has earned from the company, to include that proportion of the price of the goods sold which the respondent was to have for the sales made by him; though, having regard to that which the respondent was bound to do under his agreement, he might well be a person in the employment of the company entitled to the special privilege in question…,

In Re Parkin the commissions payable to a sales agent were viewed as not being wages for purposes of priority ranking in an insolvency. It seems to me therefore, that a claim for remittances to various funds, including training funds, employer association funds, promotion funds and substance abuse funds fall well outside the notion of wages under the OBCA and therefore can only be construed as being a claim against the responding party for recovery from it as the directors could not be liable for such amounts under the OBCA.

11. The applicant, in its grievance sought an order that the responding party “pay all sums by way of damages required to be paid pursuant” to the collective agreement. The Ontario Court of Appeal in Mesheau v. Campbell, (1982), 1982 CanLII 2063 (ON CA), 39 O.R. (2d) 702; 141 D.L.R. (3d) 155 held that damages arising from a successful wrongful dismissal claim were not recoverable as wages against the bankrupt corporation’s directors under the federal counterpart to the OBCA. Thus, to the extent that the claim by the applicant is characterized by the applicant itself as a claim for damages and not wages owing to employees, damages are not recoverable, as are wages, from the directors of a bankrupt corporation.

12. In any event, although the applicant at paragraph 7 of the referral states that it relies on the employee lists of hours and projects provided to the applicant by the responding party, those lists of hours and projects were not included in the material the applicant had filed with the Board, so that the Board is unable to ascertain the basis of the applicant’s calculation of damages. Thus, even if the Board were inclined to proceed with this matter, it would not, in the absence of particulars of the claim, make the order sought by the applicant ex parte.

13. The Board also notes that the applicant had, in its letter to the Board of April 23, 2001 indicated that it was preparing to attend before the Master in the Commercial Court for leave to proceed with this grievance while the responding party is in bankruptcy. The applicant did not, in its submissions to the Board in which it sought to have the Board continue with this matter, provide any indication of the Master’s disposition of the applicant’s motion for leave. If the applicant had obtained leave for the matter to proceed, then there would be no issue of a stay under the BIA. If the leave to continue was refused, it seems to me that the Board ought not to proceed in the face of an order dismissing a request for leave to proceed with this matter. In my view, the applicant’s failure to indicate the disposition of its application for leave to proceed with this matter is but another ground for refusing to proceed to issue the order sought by the applicant.

14. The applicant sought to have the Board proceed to issue an order in the format set out in its referral despite section 69.1(3) of the BIA which it submits does not apply to the circumstances of this case. For the reasons set out above, the applicant’s request is dismissed and, in view of the nature of the claims made (damages for failing to remit to the various welfare and benefit funds under the collective agreement together with late payment charges), which, in my view, are not recoverable from the directors of the responding party under the OBCA, this referral is dismissed, without prejudice to the applicant seeking to prove its claim for damages before the trustee of the responding party’s bankrupt estate under the BIA.

“Harry Freedman”

for the Board