DATE: 20031218 DOCKET: M30704/C39988

COURT OF APPEAL FOR ONTARIO

RE:

GMAC COMMERCIAL CREDIT CORPORATION OF CANADA (Applicant (Respondent in Appeal)) - and - T.C.T. LOGISTICS INC., T.C.T. WAREHOUSING LOGISTICS INC., KPMG INC., the Interim Receiver and Trustee in Bankruptcy of T.C.T. Logistics and T.C.T. Warehousing Logistics Inc. (Respondents (Respondents in Appeal))

BEFORE:

FELDMAN J.A. (In Chambers)

COUNSEL:

Andrew Hatnay and Stephen Wahl for the Union, Moving Party

Orestes Pasparakis for respondent GMAC

Nando De Luca for respondent KPMG, Interim Receiver

HEARD:

December 12, 2003

ENDORSEMENT

[1] The union moves under s. 193(e) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, for leave to appeal to the Court of Appeal the order of Ground J. dated April 29, 2003. The motion was originally brought before a panel of this court to be argued together with the appeal. The panel determined that this was a case where leave is required and must be obtained from a judge in chambers. The parties advised that a date for the hearing of the appeal has been obtained in the event that leave is granted.

[2] Because I have decided that this is an appropriate case for leave to be granted so that there will be a full hearing of the issues by the panel, I will only briefly set out the facts and reasons for granting leave.

[3] The context of this motion is the receivership of the T.C.T. Companies including its unionized warehouse operation at Toronto, which employed seventy employees. When the companies became insolvent, the largest secured creditor, GMAC Commercial Credit Corporation - Canada, obtained the court appointment of an interim receiver, KPMG, who later also became the trustee in bankruptcy.

[4] The interim receivership order, which was initially obtained ex parte, contained a standard form clause protecting the receiver from the status of successor employer under the collective agreement. It also contained another standard form clause preventing anyone from bringing any action or proceeding against the receiver without leave of the court.

[5] The receiver eventually sold the assets of the warehousing business to a newly formed company owned by executives of T.C.T., which company moved the operation from the unionized premises to another warehouse in Mississauga and hired some of the former employees.

[6] Following the sale, the union brought an application before the Ontario Labour Relations Board against KPMG and the purchasing company for a declaration that the purchasing company is the successor employer to T.C.T. or KPMG and thus bound by the collective agreement; a declaration that T.C.T. and the purchasing company are a single employer for the purposes of labour relations; a declaration of unfair labour practice and damages against T.C.T. and/or KPMG and the purchasing company for eliminating the union; and for the certification of the union as the exclusive bargaining agent for the employees of the purchasing company.

[7] The OLRB stayed the application against KPMG because the union had not obtained leave of the court. The union then brought its motion before Ground J. for an order deleting the provision of the receivership order that prevented the receiver from becoming a successor employer, and for an order granting leave under the receivership order or under s. 215 of the BIA to commence proceedings against the receiver before the labour board.

[8] Ground J., in a thoroughly reasoned judgment, amended the receivership order to provide that the receiver could not be deemed a successor employer as long as it acted only as a realizer of the assets of the debtor and not as an employer operating the business, following the decision of Farley J. in Re Royal Crest Lifecare Group Inc., 2003 11504 (ON SC), [2003] O.J. No. 756 (S.C.), and the decision of the Nova Scotia Court of Appeal in Saan Stores Ltd. v. Nova Scotia (Labour Relations Board) (1999), 1999 NSCA 26, 173 N.S.R. (2d) 222 (C.A.). He also made a finding that KPMG had only acted as a realizer of assets in this receivership. Consequently, he saw no basis for the court to grant leave to the union to proceed against the receiver before the OLRB. He noted that his order would have no impact on the union's proceeding at the labour board against the purchaser corporation.

[9] The test for granting leave to appeal under s. 193(e) of the BIA has been described as containing the following criteria: leave should only be granted if the judgment is contrary to law; amounts to an abuse of judicial power or involves an obvious error, causing prejudice for which there is no remedy: McNab v. B.S. & B. Enterprises Ltd. (1951), 32 C.B.R. 53 (Que. K.B.), and from Power Consolidated (China) Pulp Inc. v. British Columbia Resources Investment Corp. (1988), 19 C.P.C. (3d) 396 (B.C. C.A.): whether the point of the appeal is of significance to the practice; whether the point raised is of significance to the action itself; whether the appeal is prima facie meritorious or frivolous; and, whether the appeal will unduly prejudice the progress of the action. When the order appealed from is discretionary, the issue must be of importance to the administration of justice or to the rights of the parties: Zurich Indemnity Co. of Canada v. Reemark Rideau Developments Ltd. (1992), 1992 624 (BC CA), 22 C.B.R. (3d) 291 (B.C. C.A.). Finally, the significance of the issue in bankruptcy law can determine whether leave is granted: Re Nagy (1997), 1998 ABCA 15, 1 C.B.R. (4th) 179 (Alta. C.A.).

[10] The receiver opposes the motion on several grounds including the fact that the union waited until after the business was sold to bring its proceeding, after the receiver had acted on the understanding that it had the protection of the receivership order in respect of any obligations to employees and under the collective agreement. Linked with that objection is that this motion is holding up the conclusion of the receivership and is causing the receiver to incur significant cost. The receiver also submits that an order under s. 215 of the BIA is discretionary and therefore unlikely to be reversed on appeal.

[11] The union puts forth explanations for its delay in moving against the receivership order and before the labour board. I conclude from my review of the reasons of Ground J. that he did not base his decision on the union's delay. The union says that it is (or may be) prejudiced in its proceedings against the purchasing company if the receiver is not a party to the proceedings for the purpose of continuity.

[12] Most importantly, the union points to developing jurisprudence across Canada regarding the relationship between the role of the bankruptcy court and the role of the labour board in determining the rights of employees of insolvent companies, the status of a receiver or trustee as successor employer and its obligations under a collective agreement: Re Big Sky Living Inc. (2002), 2002 ABQB 659, 318 A.R. 165 (Q.B.); Saan Stores Ltd., supra; Re Royal Crest Lifecare Group, supra; Syndicat national de l'amiante d'Asbestos inc. v. Jeffrey Mines Inc., 2003 47918 (QC CA), [2003] R.J.Q. 420 (C.A.).

[13] The question of leave is further complicated by the fact that the Royal Crest case has been argued in this court and is under reserve. Although some of the same issues are raised in that case, the facts are quite different.

CONCLUSION

[14] In my view, this is a case where leave ought to be granted. Ground J. not only made a discretionary order, he also made the finding of no successor employer and the amendment to the receivership order regarding the immunity of the receiver. The legal issues identified in para. 12 are significant to commercial practice regarding bankruptcy and receivership and ought to be considered and addressed by this court. The issues are also of significance in the action. It is timely that the issues be addressed by this court as part of the currently developing jurisprudence.

[15] The appeal is scheduled to be heard on January 28, 2004. The costs of this motion will follow the event of the appeal in an amount to be determined by the panel based on the bills of costs that were filed at the hearing of this motion. The costs incurred by the two respondents in preparing the responding factums in response to the new factums filed on short notice by the union are fixed at $1,200 each and are payable forthwith.

Signed: "K. Feldman J.A."