Court File and Parties

COURT FILE NO.: CV-16-546464 and CV-16- 552350 DATE: 20170317 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Court File No. CV-16-546464 SAM CAETANO, as representative of the members of the United Food and Commercial Workers Canada, Local 175, Region 6 who were employed by the Quality Meat Packers Limited, Toronto Abattoirs Limited, Great Lakes Specialty Meats of Canada and/or any of the Defendants in this Action in 2014 Plaintiffs (Responding Parties)

• and -

QUALITY MEAT PACKERS HOLDINGS LIMITED, QUALITY MEAT PACKERS LIMITED, TORONTO ABATTOIRS LIMITED, GREAT LAKES SPECIALTY MEATS OF CANADA INC., 2268204 ONTARIO INC., TWO TECUMSETH STREET INC., TASTY CHIP (2008) INC., BNJ COLD STORAGE INC., FRANKLYN BERNARD COMPANY LIMITED, 1581337 ONTARIO INC., DAVID SCHWARTZ, FRANKLYN SCHWARTZ, BRIAN SCHWARTZ and SHELDON GARFINKLE Served Defendants (Moving Parties)

AND BETWEEN:

Court File No. CV-16-552350 DEBBIE ABREU, in their personal capacity and as the proposed representative of all non-union terminated employees and retirees of QUALITY MEAT PACKERS LIMITED under Rule 10 of the Rules of Civil Procedure, ALEX ABREU, in their personal capacity and as the proposed representative of all non-union terminated employees of TORONTO ABATTOIRS LIMITED and GREAT LAKES SPECIALTY MEATS OF CANADA INC., under Rule 10 of the Rules of Civil Procedure Plaintiffs (Responding Parties)

• and -

QUALITY MEAT PACKERS HOLDINGS LIMITED, QUALITY MEAT PACKERS LIMITED (in bankruptcy), TORONTO ABATTOIRS LIMITED (in bankruptcy), GREAT LAKES SPECIALTY MEATS OF CANADA INC. (in bankruptcy), 2268204 ONTARIO INC. (under receivership) TWO TECUMSETH STREET INC., TASTY CHIP (2008) INC., BNJ COLD STORAGE INC., FRANKLYN BERNARD COMPANY LIMITED, 1581337 ONTARIO INC., DAVID SCHWARTZ FRANKLYN SCHWARTZ, and BRIAN SCHWARTZ Served Defendants (Moving Parties)

BEFORE: Justice Edward P. Belobaba

COUNSEL: Jeffrey E. Goodman and Frank Cesario for Defendants Quality Meat Packers Holdings Limited, BNJ Cold Storage Inc., Two Tecumseh Street Inc., Tasty Chip (2008) Inc. and David Schwartz Matthew P. Gottlieb and Brad Vermeersch for Defendants Brian Schwartz and Franklyn Bernard Company Limited John Porter and Kyla Mahar for Defendant 1581337 Ontario Inc. Andrew J. Hatnay, Demetrios Yiokaris and Amy Tang for Plaintiffs

HEARD: February 22 and 23, 2017

JURISDICTION AND LIMITATIONS

[1] A family-owned meat processing business went bankrupt in 2014 and some 800 employees were terminated without notice or severance.

[2] Two actions were commenced on behalf of the terminated employees – one by Sam Caetano as the “representative” of the 700 or so unionized employees and the other by Debbie Abreu and Alex Abreu as the “proposed representatives” of the 100 or so non-unionized employees.

[3] The defendants in both actions are the bankrupt companies, the other allegedly related family-owned companies and two individuals that, together, are alleged to have been the common employer of the terminated employees and thus jointly and severally liable for the unpaid severance.

[4] The solvent defendants [1] bring two motions - one under Rule 21.01(3)(a) asking that that the Caetano action be stayed on the basis of jurisdiction and the other under Rules 21.01(1)(a) and (b) that the Caetano and Abreu “representative actions” be dismissed because they are time-barred and thus fail to disclose a reasonable cause of action.

Background

[5] Quality Meat Packers Limited (“QMP”) and Toronto Abattoirs Limited (“TAL”) operated a swine slaughterhouse and meat-processing facility at 2 Tecumseth Street in the Liberty Village area of downtown Toronto. On May 6, 2014, all the employees of QMP and TAL were terminated without notice or severance when the two companies went bankrupt and were permanently shut down.

[6] Great Lakes Specialty Meats of Canada Inc. (“GLSM”) operated a meat processing facility in Mitchell, Ontario. On June 9, 2014, the employees of GLSM were also terminated without notice or severance. On June 10, 2014, GLSM was placed into receivership and several months later was adjudged a bankrupt.

[7] According to the plaintiffs, the bankrupt businesses and the other defendant companies are controlled and managed in common by members of the Schwartz family, in particular David Schwartz. The plaintiffs allege that the Schwartz group of companies include four insolvent companies (QMP, TAL, GLSM and 2268204 Ontario Inc.) and six solvent companies (Quality Meat Packers Holdings Limited, Two Tecumseth Street Inc., Tasty Chip (2008) Inc., BNJ Cold Storage Inc., Franklyn Bernard Company Limited and 1581337 Ontario Inc.).

[8] The terminated union employees filed an omnibus proof of claim in the three bankruptcies for about $9.4 million in damages for wrongful dismissal. They soon learned that no monies were available to pay the claims of any of the unsecured creditors, including the terminated employees. They also learned that the QMP and TAL land parcel (owned by Two Tecumseh Street Inc.) had been sold to developers for $37.5 million just months after the employees were terminated.

[9] The terminated employees commenced two actions for wrongful dismissal - the Caetano Action on behalf of the 700 union employees and the Abreu Action on behalf of the 100 non-union employees. Both actions are styled as representative actions and claim damages for wrongful dismissal as well as punitive damages on three bases: common employment, conspiracy and oppression. [2]

[10] The Caetano Action was commenced on February 11, 2016, about three months before the two-year limitation period expired. The Abreu Action was commenced on May 6, 2016, the last day of the two-year limitation period for the QMP and TAL employees and about a month before the limitation period expired for the GLSM employees. The solvent defendants have not yet served their statements of defence.

[11] I will deal first with the jurisdiction motion and then the limitations motion.

Jurisdiction

[12] The jurisdiction motion only applies to the Caetano Action commenced on behalf of the 700 or so unionized employees that were subject to a collective agreement.

[13] The solvent defendants say that the court has no jurisdiction to decide this matter because the Caetano Action is in essence a claim relating to the wrongful dismissal of unionized employees and wrongful dismissal claims by unionized employees are subject to the exclusive jurisdiction of the provincial labour relations regime, namely labour arbitrators and the Ontario Labour Relations Board (“the OLRB”).

[14] I agree with this submission.

[15] The collective agreements with QMP, TAL and GLSM deal comprehensively with the employment terms of the unionized employees, including hours of work, wages, and conditions of employment. They incorporate, as a matter of law, all of the provisions of the provincial employment standards law. The collective agreements also set out a detailed dispute resolution procedure that must be used to resolve grievances and that culminates in a hearing before a labour arbitrator. Any employment dispute, including claims for compensation owing on termination, is governed by and must be resolved under the collective agreements.

[16] The Supreme Court has made clear that “where the dispute, regardless of how it may be characterized legally, arises under the collective agreement, then the jurisdiction to resolve it lies exclusively with the labour tribunal and the courts cannot try it.” [3] That is, “if the essential character of the dispute arises either explicitly or implicitly, from the interpretation, application, administration or violation of the collective agreement, the dispute is within the sole jurisdiction of an arbitrator to decide.” [4]

[17] The Caetano Action claims damages of $10 million for lack of notice and unpaid severance and benefits. The claim advances several causes of action, wrongful dismissal (based on the ‘common’ or ‘related employer’ allegation), conspiracy and oppression. Each of these causes of action, however, is directed at the same wrongful dismissal damage claim. And each of these causes of action can be and have been decided within the labour arbitration process. Indeed, the OLRB is statutorily required to decide related employer claims under s. 1(4) of the Labour Relations Act [5] (“LRA”) and ss. 4 and 99 to 101 of the Employment Standards Act [6] (“ESA”) and labour arbitrators have often assessed and remediated claims of conspiracy [7] and oppression. [8] In short, there is nothing about any of the claims being advanced in the Caetano Action that cannot be resolved within the provincial labour relations regime.

[18] The fact that QMP, TAL and GSLM are bankrupt does not affect the arbitrator’s exclusive jurisdiction. Labour arbitrators deal routinely with situations where the immediate employer is bankrupt and no longer operating. [9] Related or common employer claims are referred to the vice-chair of the OLRB for determination and the finding is then incorporated into the arbitrator’s final decision about the defendants’ joint and several liability for monies owing under the ESA. [10]

[19] The fact that the unionized employees’ omnibus proof of claim in the amount of $9.4 million was not disallowed by the receiver and has thus been “de facto admitted” [11] has no bearing on the jurisdictional issue -– the monies that are owing and the solvent defendants’ liability, if any, for their payment must still be determined within the exclusive confines of the labour relations regime.

[20] And the fact that the union has not filed a grievance on behalf of the terminated employees does not mean that the employees are without a remedy. The employees can pursue a “duty of fair representation” complaint against the union to the OLRB [12] and the OLRB can order the union to initiate a grievance on the employees’ behalf. [13] Tracking the language of the Court of Appeal in Hatfield v. Essroc Canada [14], the employees are “not without recourse to seek a remedy for [their] complaints”:

The [employees] may file an unfair representation complaint against the union under s. 74 of the [LRA] and the Board, under s. 96, has broad remedial power, including the power to award damages, against both the union and the employer. [15]

[21] In sum, the core dispute in Caetano’s claim is wrongful dismissal and unpaid severance. The claim is directly connected with their employment at QMPL, TAL and GLSM, the terms and conditions of which are governed by comprehensive collective agreements. Since the essential character of the dispute arises out of the interpretation, application, administration or violation of the collective agreements, the dispute falls within the exclusive jurisdiction of an arbitrator and the OLRB.

[22] The plaintiff’s reliance on this court’s decision in Ritchie v. Canadian Airlines International [16] is misplaced. The claim that the representative plaintiff made against the corporate defendants in Ritchie was not a common employer claim, as here, but a breach of contract claim that was found by the court to be “separate and apart” from the collective agreement. Cumming J. concluded that the court had jurisdiction to deal with the subject matter of the action because the dispute arose from the contract itself and fell “outside the ambit of the collective agreement”. [17] This is not the case here where the core allegation against the defendants - wrongful dismissal and common employer – is well within the ambit of the collective agreement.

[23] For all of these reasons, I conclude that the Caetano Action must be stayed because this court does not have the requisite jurisdiction. I now turn to the limitations motion.

Limitations

[24] The limitations motion under Rules 21.01(1)(a) and (b) focuses on the “representative actions” commenced by Caetano and Abreu. The defendants agree that to the extent that the two actions were brought in the plaintiffs’ personal capacities they were properly commenced within the two-year limitation period [18] and are not time-barred. The defendants take issue with the representative component. The defendants say that the representative component in both actions is time-barred because the required representation order was not (and still has not been) obtained within the two-year limitation period.

[25] The applicable law is not in dispute. The material facts as pleaded must be deemed to be proven or true; the statement of claim must be read generously and the cause of action can only be struck if it is plain, obvious and beyond doubt that it has no chance of success and is certain to fail. [19]

[26] The ‘plain and obvious’ test also applies to motions under Rule 21.01(1)(a) for the determination of a question of law raised by a pleading, including the question of whether an action is statute-barred by a limitations period. [20] Rule 21.01(1)(a) may be applied to strike a claim where a limitation period has expired in circumstances where discoverability is not in issue. [21] Here discoverability is not in issue. The plaintiffs plead facts establishing that the causes of action as against the defendants were discovered on the dates of the employees’ terminations.

[27] Thus, the only issue is whether it is plain and obvious and beyond doubt that the two representative actions are certain to fail because the required court orders authorizing the actions were not obtained within the two year limitation period.

[28] In my view, separate and apart from the jurisdictional barrier, the failure to obtain the required representation order within the two year limitation period (or at all) in the Caetano Action is fatal. The Caetano representative action is time-barred and thus certain to fail.

[29] The same cannot be said about the Abreu representative action. In my view, the Abreu representative action is not time-barred and may proceed. However, the required court order must be obtained forthwith. I will explain each of these conclusions in turn.

The Caetano representative action is time-barred

[30] The reason why the outcomes for the Caetano and Abreu Actions are different is because the applicable Rules are different. The Caetano representative action was brought under Rule 12.08 [22] which provides as follows:

Proceeding by Unincorporated Association or Trade Union

12.08 Where numerous persons are members of a … trade union and a proceeding under the Class Proceedings Act, 1992 would be an unduly expensive or inconvenient means for determining their claims, one or more of them may be authorized by the court to bring a proceeding on behalf of or for the benefit of all.

[31] Note the precision in the statutory language: a proposed representative “may be authorized by the court to bring a proceeding on behalf of or for the benefit of all.” In my view, this only can be read in one way. A representation order authorizing the plaintiff to commence a representative proceeding under Rule 12.08 must be obtained before the proposed representative proceeding is actually commenced. It is not enough to commence an individual action, add a representative component in the style of cause and then, perhaps years later, seek the required court order. Under Rule 12.08, a court order is needed to authorize the initiation of the representative action. And the initiation of the representative action will only be authorized by the court if the plaintiff can show that “a proceeding under the Class Proceedings Act, 1992 would be an unduly expensive or inconvenient means for determining [his] claim.”

[32] Here no such showing was made, no court order was obtained and thus no representative action as contemplated under Rule 12.08 was ever brought. The two year limitation period has expired and it is now too late to obtain the required court order. [23]

[33] I find it plain and obvious and beyond doubt that the Caetano representative action on behalf of the former unionized employees is time-barred and must be dismissed.

The Abreu representative action is not time-barred

[34] The outcome for the Abreu Action, brought on behalf of the non-union employees, is different because it was brought under Rule 10.01 which contemplates a prior proceeding and a later representation order:

10.01 (1) In a proceeding concerning,

(a) the interpretation of a deed, will, contract or other instrument, or the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

(b) the determination of a question arising in the administration of an estate or trust;

(c) the approval of a sale, purchase, settlement or other transaction;

(d) the approval of an arrangement under the Variation of Trusts Act;

(e) the administration of the estate of a deceased person; or

(f) any other matter where it appears necessary or desirable to make an order under this subrule,

a judge may by order appoint one or more persons to represent any person or class of persons who are unborn or unascertained or who have a present, future, contingent or unascertained interest in or may be affected by the proceeding and who cannot be readily ascertained, found or served.

[35] Two points about Rule 10.01 should be noted in the context of this motion. First, a plaintiff may commence a proceeding where it may be necessary or desirable to obtain a representation order because a class of persons “may be affected by the proceeding and … cannot be readily ascertained, found or served.” Second, the required representation order can only be obtained after the initial proceeding has been commenced.

[36] According to their counsel, Debbie and Alex Abreu commenced their “proposed representative action” under Rule 10.01 because they could not readily ascertain the names of the non-union employees that would be affected by the proposed proceeding. And here, unlike in Rule 12.08, they were legally able to bring a proceeding in the capacity of “proposed representatives” without first obtaining the required court order.

[37] Is there anything in Rule 10.01 that plainly and obviously requires that the representation order be obtained within the same (two year) limitation period that applies to the contemplated initial proceeding? In my view, there is not. It is not plain and obvious and beyond doubt that a proposed representative action under Rule 10.01, otherwise properly brought within the two year limitations period, is certain to fail if the court order actually appointing the representatives is not obtained within the same two year limitation period. All the more so when one considers the admonition in Rule 1.04(1) that the Rules of Civil Procedure “shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”

[38] I hasten, however, to add the following proviso. In fairness to the defendants, the plaintiffs in the Abreu Action must obtain the required representation order forthwith. The granting of such order on the facts herein is not a foregone conclusion. At the hearing of the Rule 10.01 motion, the defendants will be entitled to argue that the “balance of convenience” (the test that applies in the Rule 10.01 context [24]) favours the defendants and the representation order should not be granted.

[39] I must also add a final comment that applies to both the Caetano and Abreu representative actions. Whether or not the required representation order under Rules 10.01 and 12.08 must be obtained within an applicable limitation period is a question that does not turn on any notion of “adding parties.” Both sides spent some time in their written material and oral submissions advancing or refuting lower-court decisions that appeared to undertake an “added parties” analysis under Rule 5.03 or s. 21(1) of the Limitations Act. [25]

[40] It is important to remember both in the context of class proceedings and representative proceedings that the only “parties” to the action are the certified or court-appointed representative plaintiffs and the named defendants. The class members that are represented under the Class Proceedings Act [26] or the class of persons that is represented under Rules 10.01 and 12.08 are not “parties.” [27] It causes unnecessary confusion in the case law to suggest otherwise.

Disposition

[41] The jurisdiction motion is granted in full. The Caetano Action is stayed, both the personal component and the representative component. This court does not have the jurisdiction to hear this matter. The terminated employees who were members of a union and subject to a collective agreement must pursue their claims for wrongful dismissal within the provincial labour relations regime – that is via arbitration and the OLRB.

[42] The limitations motion is granted in part and dismissed in part. The Caetano “representative” action is time-barred and cannot proceed in this court because no judicially authorized representative action was brought within the applicable two year limitations period.

[43] The Abreu Action is not time-barred and may proceed but with the proviso that the plaintiffs must seek a representation order forthwith at which time the defendants will have the opportunity to make submissions about balance of convenience, including non-compensable prejudice.

[44] If the representation order is granted in the Abreu Action (not a foregone conclusion) the plaintiffs will probably amend their statement of claim to transform the representative action into a class proceeding. Before doing so, however, they may wish to consider the following: given that the representative action is akin to a class proceeding in terms of what has to be established [28] it may be more efficient and overall more sensible to simply carry on with the representative action. I will, of course, leave this decision to the Abreu plaintiffs and their counsel.

[45] The parties have advised that they will try to resolve the costs issue themselves. If they are unable to do so, brief costs submissions can forwarded to my attention.

Belobaba J. Date: March 17, 2017

Footnotes

[1] Quality Meat Packers Holdings Ltd., Two Tecumseth Street Inc., Tasty Chip (2008) Inc., BNJ Cold Storage Inc. Franklyn Bernard Company Limited, 1581337 Ontario Inc., David Schwartz and Brian Schwartz (the "Solvent Defendants").

[2] In the Caetano Action, the statement of claim also alleges that the two individual defendants were negligent.

[3] Weber v. Ontario Hydro, [1995] 2 S.C.R. 929, at para. 43.

[4] Allen v. Alberta, [2003] 1 S.C.R. 128, at para. 15.

[5] Labour Relations Act, 1995, S.O. 1995, c.1, Sched. A.

[6] Employment Standards Act, 2000, S.O. 2000, c. 41.

[7] Weber, supra, note 3, at para. 53.

[8] Air Canada Pilots Association v. Air Canada Ace Aviation Holdings Inc., 2007 ONSC 337 at para. 84.

[9] CAW-Canada, Local 195 v. Steel Master Tool Co., [1999] O.L.A.A. No. 335 (Watters); Marvic Concrete & Drain Ltd. v. L.I.U.N.A., Local 183, (2004) 126 L.A.C. (4th) 328 (Herman); Central Chrysler Plymouth (1981) Ltd. and CAW-Canada, Local 195, Re, (2004) 79 C.L.A.S. 516 (Etherington); Fincore Industries Inc. v. U.S.W., [2006] O.L.A.A. No. 150 (Carrier); and Ferro-Fab Inc. and USWA, Local 3950-33 (Bhatia), (2010) 101 C.L.A.S. 99 (Chauvin).

[10] ESA, supra, note 6, ss. 4 and 101, and see Hillside Park Retirement Residence (Sudbury) v. United Food And Commercial Workers Canada, Local 175 and; Northland Superior Supply Company Ltd v Sheet Metal Workers International Association, Local 397; Essar Steel Algoma Inc v United Steelworkers, Local Union 2251; Ontario Public Service Employees Union, Local 253 v. Victorian Order of Nurses Waterloo-Wellington-Dufferin Branch; and Union of Needletrades, Industrial and Textile Employees, Local 1938 v. George Hancock Textiles Ltd..

[11] Lechcier-Kimel (Re), 2016 ONSC 1185 at para. 16.

[12] LRA, supra, note 5, s. 74.

[13] Hills v. Local 210 Staff Assn..

[14] Hatfield v. Essroc Canada Inc., 2007 ONCA 151.

[15] Ibid., at para. 2.

[16] Ritchie v. Canadian Airlines International Ltd., [2001] O.J. No. 2461 (S.C.J.).

[17] Ibid., at para. 32.

[18] Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 4.

[19] Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 at 977; R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45 at para. 17; and Morden and Perell, The Law of Civil Procedure in Ontario (2014) at 532.

[20] Soteropoulos v. Charles, 2012 ONCA 252, at para. 3.

[21] Beardsley v. Ontario Provincial Police, [2001] O.J. No. 4574 (C.A.) at para. 21; Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469, at paras. 6 and 28.

[22] Although there is no specific reference to Rule 12.08 in the statement of claim, Caetano agrees in his factum that he proceeded under this Rule. Also, given that the statement of claim attaches a Schedule naming the 700 or so unionized employees that the plaintiff proposes to represent and given that the represented persons are thus “ascertained”, Rule 10.01 is not available. Rule 10.01 is only available if the represented class of persons “cannot be readily ascertained.” Discussed more below.

[23] See Pal v. Powell, [2009] O.J. No. 658 (Div. Ct.) at paras. 7 and 12-15. Note, however, that this decision involved an attempt by the plaintiff to appoint certain defendants as “representative defendants” under Rule 12.07 (not Rule 12.08). The reasoning of the Divisional Court is therefore not directly applicable to the case at bar.

[24] Police Retirees of Ontario Inc. v. Ontario Municipal Employees’ Retirement Board, [1997] O.J. No. 3086, at para. 18.

[25] Supra, note 18.

[26] Class Proceedings Act, 1992, S.O. 1992, c. 6.

[27] Fanshawe v. LG Philips LCD Co.Ltd., 2016 ONSC 3958 at para. 61; Berry v. Pulley, 2011 ONSC 1378, at paras. 55-56; and see generally, Abrams and McGuinness, Canadian Civil Procedure Law (2008) at 3.55 and 3.56.

[28] Ottawa Police Assoc. v. Ottawa Police Services Board, 2014 ONSC 1584, at para. 38.