Corporation of the Town of Ajax v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (CAW-Canada) and its Local 222 et al.*
[Indexed as: Ajax (Town) v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (CAW- Canada), Local 222]
41 O.R. (3d) 426
 O.J. No. 3915
Court of Appeal for Ontario
Austin, Laskin and Goudge JJ.A.
September 30, 1998
*Note: An appeal to the Supreme Court of Canada (McLachlin C.J., L’Heureux-Dub, Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour, and LeBel JJ.) was dismissed on April 27, 2000. S.C.C. File No. 26994. This information was noted at 47 O.R. (3d) 800. Full text of the S.C.C. appeal is available at  S.C.J. No. 23 in the S.C.J. database (neutral citation: 2000 SCC 23).
Employment — Labour relations — Successor rights — Sale of business — Town cancelling its contract with transportation company which had operated town transit system and hiring drivers and other employees who had previously provided same services while working for transportation company — Ontario Labour Relations Board granting declaration that circumstances constituting sale of business within meaning of s. 64 of Labour Relations Act — Decision of Board not patently unreasonable — Labour Relations Act, R.S.O. 1990, c. L.2, s. 64.
The respondent Town cancelled its contract with C Ltd., which had provided it with the drivers and other employees needed to operate the town transit system, and hired its own drivers, mechanics and cleaners. The vast majority of those hired came from that group of C Ltd. employees who had previously been operating the transit system for the Town. The appellant Union sought to preserve its bargaining rights by seeking a declaration that these circumstances constituted the sale of a business within the meaning of s. 64, the successor rights provision of the Labour Relations Act, R.S.O. 1990, c. L.2. The Ontario Labour Relations Board granted the declaration. The Divisional Court allowed the Town’s application for judicial review and quashed the decision of the Board, finding it to be patently unreasonable. The Union appealed.
Held, the appeal should be allowed.
The applicable standard of review of the Board’s decision was that of patent unreasonableness. In interpreting and applying s. 64 of the Act, the Board was engaged in one of those tasks that most obviously engaged its specialized expertise, namely the determination of whether the labour relations obligations of one employer pass to another employer. It was appropriate that a reviewing court approach the Board’s decision on such a question with firm curial deference.
The Divisional Court erred in finding that Board’s decision that the acquisition by the Town of the former employees of C Ltd. constituted a transaction of sale between the Town and C Ltd. within the meaning of s. 64 of the Act was patently unreasonable. The conclusion that the facts constituted a “sale” as defined by s. 64 was not clearly irrational. The statutory definition is inclusive: “‘sells’ includes leases, transfers and any other manner of disposition”. Because of the remedial purpose of s. 64, namely the preservation of bargaining rights, this definition is to be given a broad and liberal interpretation. It is not required that the transfer take any particular legal form or that it take place by way of a legal transaction. The nexus between C Ltd. and the Town was the commercial history without which the Town’s acquisition of the work force would not have occurred. This acquisition represented a “transfer” to the Town of that work force. These factors provided a reasonable basis for concluding tha t what happened here was a sale or transfer within the meaning of s. 64 of the Act.
The Divisional Court also erred in finding clearly irrational the Board’s conclusion that in taking on the employees in question the town acquired a “part” of C Ltd. within the meaning of s. 64 of the Act. In essence, the Board found that what was transferred was not just the work formerly done by the C Ltd. employees nor the employees themselves. There was the added value that came with the continuity, experience and stability of this work force. Hence, there was a reasonable basis for the finding that what was transferred to the Town was a significant part of the business which C Ltd. conducted for the Town. This finding was not patently unreasonable.
Union des Employs de Service, Local 298 v. Bibeault,  2 S.C.R. 1048, 95 N.R. 161, 35 Admin. L.R. 153, 89 C.L.L.C. 14,045, 24 Q.A.C. 244, distd
Other cases referred to
Canada (Attorney General) v. Public Service Alliance of Canada,  1 S.C.R. 941, 101 D.L.R. (4th) 673, 150 N.R. 161, 93 C.L.L.C. 14,022; United Assn. of Journeymen & Apprentices of the Plumbing & Pipefitting Industry, Local 740 v. Lester (W.W.) (1978) Ltd.,  3 S.C.R. 664, 76 D.L.R. (4th) 389, 123 N.R. 241, 91 C.L.L.C. 14,002, 88 Nfld. & P.E.I.R. 15, 247 A.P.R. 15
Statutes referred to
Labour Relations Act, R.S.O. 1990, c. L.2, ss. 64 (rep. & sub. 1992, c. 21, s. 29), 108(1), 110 — now Labour Relations Act, 1995, S.O. 1995, c. 1
APPEAL from a decision of the Divisional Court ((1995), 21 B.L.R. (2d) 196, 95 C.L.L.C. 210-040) allowing an application for judicial review of a decision of the Labour Relations Board ((1994), 24 C.L.R.B.R. (2d) 280).
Barrie D. Chercover, for appellant.
Richard J. Charney and Damhnait Monaghan, for respondent, the Corporation of the Town of Ajax.
Ronald J. Lebi, for respondent, Ontario Labour Relations Board.
The judgment of the court was delivered by
GOUDGE J.A.: — For many years the Town of Ajax contracted with Charterways Transportation Limited to provide it with the skilled drivers and the limited number of mechanics and cleaners needed to operate the town transit system. These people were employees of Charterways and were represented in their collective bargaining with their employer by the appellant Union, CAW-Canada.
As of January 1, 1993 the Town determined that it would take back the operation of its transit system. It cancelled its contract with Charterways and hired its own drivers, mechanics and cleaners. The vast majority of those hired by the Town came from that group of Charterways employees who had previously been operating the transit system for the Town.
The Union sought to preserve its bargaining rights by seeking a declaration that these circumstances constituted the sale of a business within the meaning of s. 64, the successor rights provision of the Labour Relations Act, R.S.O. 1990, c. L.2, as amended. The Ontario Labour Relations Board granted the declaration [reported (1994), 24 C.L.R.B.R. (2d) 280]. On the judicial review application brought by the Town, the Divisional Court quashed the Board’s decision finding it to be patently unreasonable [reported (1995), 21 B.L.R. (2d) 196, 95 C.L.L.C. 210-040].
For the reasons that follow I disagree. In my opinion the Board’s decision cannot be said to be patently unreasonable. I would therefore allow the appeal and dismiss the application for judicial review.
The Relevant Legislation
Like all provincial labour acts the Ontario Labour Relations Act contains a successorship provision whose purpose is to protect the permanence of bargaining rights when a business or a part of a business is sold or transferred from one employer to another. [See Note 1 at end of document.]
That provision is s. 64. For the purposes of this appeal the relevant parts of that section are as follows:
64(1) In this section, “business” includes one or more parts of a business; “predecessor employer” means an employer who sells his, her or its business; “sells” includes leases, transfers and any other manner of disposition; “successor employer” means an employer to whom the predecessor employer sells the business.
(1.1) This section applies when a predecessor employer sells a business to a successor employer.
(2) If the predecessor employer is bound by a collective agreement, the successor employer is bound by it as if the successor employer were the predecessor employer, until the Board declares otherwise.
The task faced by the Board in this case was to determine whether on the facts as it found them there had been a “sale” of a “business” for the purposes of this section.
The Standard of Review
The parties to this litigation all agree that in reviewing the decision of the Board the court should apply the standard of patent unreasonableness.
In my opinion, this is clearly the appropriate standard of review. The Act provides two privative clauses that apply to all Board decisions. They are ss. 108(1) and 110:
108(1) The Board has exclusive jurisdiction to exercise the powers conferred upon it by or under this Act and to determine all questions of fact or law that arise in any matter before it, and the action or decision of the Board thereon is final and conclusive for all purposes, but nevertheless the Board may at any time, if it considers it advisable to do so, reconsider any decision, order, direction, declaration or ruling made by it and vary or revoke any such decision, order, direction, declaration or ruling.
. . . . .
110. No decision, order, direction, declaration or ruling of the Board shall be questioned or reviewed in any court, and no order shall be made or process entered, or proceedings taken in any court, whether by way of injunction, declaratory judgment, certiorari, mandamus, prohibition, quo warranto, or otherwise, to question, review, prohibit or restrain the Board or any of its proceedings.
In addition, the legislature has seen fit to provide a privative clause specifically applicable to the kind of decision rendered by the Board in this case. It is found in s. 64(12):
64(12) Where, on any application under this section or in any other proceeding before the Board, a question arises as to whether a business has been sold by one employer to another, the Board shall determine the question and its decision is final and conclusive for the purposes of this Act.
In interpreting and applying s. 64 the Board is engaged in one of those tasks that most obviously engages its specialized expertise, namely the determination of whether the labour relations obligations of one employer pass to another employer. It is appropriate that a reviewing court approach the Board’s decision on such a question with firm curial deference.
Hence, a reviewing court must ask itself no more than whether the Board’s decision is patently unreasonable. In Canada (Attorney General) v. Public Service Alliance of Canada,  1 S.C.R. 941 at pp. 963-64, 101 D.L.R. (4th) 673, Cory J. elaborated this test as follows:
It is said that it is difficult to know what “patently unreasonable” means. What is patently unreasonable to one judge may be eminently reasonable to another. Yet any test can only be defined by words, the building blocks of all reasons. Obviously, the patently unreasonable test sets ahigh standard of review. In the Shorter Oxford English Dictionary “patently”, an adverb, is defined as “openly, evidently, clearly”. “Unreasonable” is defined as “[n]ot having the faculty of reason; irrational. . . . Not acting in accordance with reason or good sense”. Thus, based on the dictionary definition of the words “patently unreasonable”, it is apparent that if the decision the Board reached, acting within its jurisdiction, is not clearly irrational, that is to say evidently not in accordance with reason, then it cannot be said that there was a loss of jurisdiction. This is clearly a very strict test.
If the approach taken by the Board is a reasonable one, that is if it is rationally supportable, and if the decision gives to the section of the Act a meaning which the words of the statute can reasonably bear, that decision will not be disturbed on review.
The Board’s Decision
I turn then to the principal findings made by the Board in the decision that is to be subjected to this standard of review.
The Board found that from 1977 to the end of 1992 Charterways contracted to supply the Town with the skilled workforce needed to operate its transit system. Charterways recruited, hired, trained, disciplined, scheduled and deployed the team of drivers and the small number of mechanics and cleaners needed by the transit system. The appellant Union held collective bargaining rights for this group of Charterways employees.
The contract between Charterways and the Town made clear the importance of the continuity and stability of this workforce. Among other things, this helped make the drivers familiar and identifiable to the riding public. In the language of the contract, Charterways undertook that “the same vehicle operators will be regularly assigned to the Transit System to ensure route familiarity, system continuity, and allow passenger recognition”.
When Ajax terminated this contract as of December 31, 1992 Charterways had no comparable employment to offer the group of employees who had been working on the Ajax transit contract.
However, in taking back this operation the Town conducted its hiring so as to achieve substantial continuity in the workforce operating its transit system. Twenty-three of the 30 drivers hired and three of the four cleaner and maintenance personnel hired had previously performed that work for Charterways on its Ajax contract.
Given these circumstances the Board concluded as follows:
. . . the business [of Charterways] was primarily carried on through the utilization of an identifiable employee complement skilled in the operation of the Ajax Transit System that, through its efforts over the years, it had recruited, trained and coordinated. Particularly bearing in mind the operational requirement that the employee complement remain stable, the work force engaged by Charterways can be considered its most valuable asset. Given its centrality to its operation, then, we conclude it constitutes a distinguishing “part” of its business.
. . . . .
In summary, we are satisfied that by acquiring the substantial part of the work force previously employed by Charterways to perform its obligations under its contract with the Town, the Town transferred to itself an essential element of that business. Consequently, we conclude that in so doing, Charterways and the Town have transacted a sale of part of a business within the meaning of s. 64 of the Act. The issue on this appeal is whether the Divisional Court was correct in finding this conclusion to be patently unreasonable.
Before the Divisional Court, the Town attempted to introduce an affidavit designed to demonstrate that there was no evidence before the Board that this skilled work force could be considered the most valuable asset of Charterways’ business for Ajax or that it was essential to the continued operation of the transit system. The Divisional Court declined to admit the affidavit.
On appeal, the Town renewed its request. In my view, the Divisional Court was right to reject the affidavit. The factual inferences drawn by the Board were amply supported by the evidence adduced, particularly the history of the dealings between Charterways and Ajax, the language of the contract between them, and the hiring carried out by the Town. This is not a “no evidence” case.
However, the Divisional Court did conclude that the Board’s decision was patently unreasonable in two respects.
First, the Divisional Court found that it was patently unreasonable to conclude that in the circumstances of this case there was a sale or transfer. The court put its point this way: [at pp. 215-16 B.L.R.]
. . . other than terminating their employment because, as the Board found, Charterways had “no comparable employment to offer” to the employees in question, nothing occurred between Ajax and Charterways which can be reasonably said to have caused a “sale, transfer or other disposition” of Charterways’ “business or a part thereof”. Specifically there was no “nexus”, “legal act” or “legal relations”.
The fact that those employees whose employment was terminated by Charterways were “convenient” for the purposes of Ajax is not sufficient, in my view, to support a conclusion that Charterways “relinquished” or “conveyed” those employees to Ajax. It is my opinion that the decision of the Board that the acquisition by those former employees of Charterways constituted a transaction of sale between them within the meaning of s. 64 of the Act, is “so patently unreasonable that its construction cannot be rationally supported by the relevant legislation and demands intervention by the Court upon review”, to adopt the words of Chief Justice Dickson.
In my opinion, the Divisional Court erred in this finding. The conclusion that these facts constitute a sale as defined by s. 64 is not “clearly irrational”. It does not give the section a patently unreasonable interpretation. The statutory definition is inclusive: “‘sells’ includes leases, transfers and any other manner of disposition”. Because of the remedial purpose of s. 64, namely the preservation of bargaining rights, this definition is to be given a broad and liberal interpretation. Moreover, it is not required that the transfer take any particular legal form nor take place by way of a legal transaction. In W. W. Lester, supra, at pp. 674-75, McLachlin J. put it this way:
Ten of the labour acts have provisions similarly worded to s. 89 of the Newfoundland Act, referring to transactions such as sale, lease, transfer or disposition. (The Quebec Act also contains a successorship provision but the section uses the phrase “alienation or operation”.) Although the terms “sale” and “lease” may have restricted meanings, the words “transfer” and “other disposition” have been broadly interpreted to include several types of transactions, including exchange, gift, trust, take overs, mergers, and amalgamation.
In keeping with the purpose of successorship provisions
— to protect the permanence of bargaining rights — labour boards have interpreted “disposition” broadly to include almost any mode of transfer and have not relied on technical legal forms of business transactions. As explained by the Ontario Board in United Steelworkers of America v. Thorco Manufacturing Ltd. (1965), 65 C.L.L.C. 16,052, an expansive definition accords with the purpose of the section — to preserve bargaining rights regardless of the legal form of the transaction which puts bargaining rights in jeopardy.
. . . . .
Notwithstanding the broad discretion in labour boards to determine whether or not the mode of disposition constitutes successorship, the fact remains that in virtually all jurisdictions something must be relinquished by the predecessor business on the one hand and obtained by the successor on the other to bring a case within the section.
Here, as a result of its contractual relationship with Ajax, Charterways had developed a skilled and experienced group of employees which operated the transit system for the Town. This was the business which Charterways carried on for Ajax. When Ajax terminated the contract, Charterways relinquished this work force, most of which was then acquired by Ajax. The nexus between Charterways and the Town is the commercial history without which the Town’s acquisition of the work force would not have occurred. This acquisition represents a “transfer” to the Town of that work force. In my opinion, these factors provide a reasonable basis for concluding that what happened here was a sale or transfer within the meaning of s. 64 of the Act. The Board’s conclusion to this effect is not patently unreasonable.
Second, the Divisional Court found clearly irrational the Board’s conclusion that in taking on the employees in question Ajax acquired a “part” of the business of Charterways within the meaning of s. 64 of the Act. It put its finding this way [at p. 217]:
Quite apart from my own view of the effect or meaning of those provisions in the contract I cannot conclude in any event that they can reasonably lead to a finding that the employees hired by Ajax constituted a “crucial” or “essential” element of Charterways’ business so as to constitute them as a “part” of Charterways’ business in accordance with the gloss which has been placed on the provisions of s. 64 of the Act by the various decided cases . . . .
This conclusion is also in error in my view. The Board found that the scope of the business engaged in by Charterways for Ajax consisted primarily of the provision of this skilled work force to the Town and that therefore this work force could be considered the most valuable asset of that business. The importance to the Town of the continuity and stability of this work force is reflected in the terms of the contract between the parties and in the results of the hiring done by the Town when it took back the operation of the transit system.
In essence, the Board found that what was transferred was not just the work formerly done by the Charterways employees nor the employees themselves. There was the added value that came with the continuity, experience and stability of this work force. Hence, there was a reasonable basis for the finding that what was transferred to Ajax was a significant part of the business which Charterways conducted for Ajax. This finding was not patently unreasonable.
Beyond the reasons offered by the Divisional Court, the respondent argued that the result it reached was supported and perhaps compelled by the decision of the Supreme Court of Canada in Union des Employs de Service, Local 298 v. Bibeault,  2 S.C.R. 1048, 95 N.R. 161 (hereinafter “Bibeault”). In my opinion, Bibeault springs from a factual and legal context that is quite different from this case. In Bibeault, the alleged successor employer acquired nothing more than the work done by its predecessor. It did not acquire any employees, let alone a work force that had special value due to its continuity. The relevant legal provision did not have the expansive definition of “sells” that appears in s. 64 of the Act. Hence, the finding of the Supreme Court that, on the facts before it, there was no successorship is of little use in this appeal.
In summary, I conclude that the decision of the Divisional Court cannot stand. The conclusion of the Board that on the facts before it there was the sale of a part of a business within the meaning of s. 64 of the Act is a finding that is rationally defensible. Its decision cannot be said to be clearly irrational or patently unreasonable.
I would allow the appeal and dismiss the application for judicial review with costs to the appellant here and below payable by the respondent Ajax.
Note 1: See United Assn. of Journeymen & Apprentices of the Plumbing & Pipefitting Industry, Local 740 v. Lester (W.W.) (1978) Ltd.,  3 S.C.R. 644 at pp. 673-74, 76 D.L.R. 389, per McLachlin J.