Insolvency Stay Of Proceedings Does Not Stay Certification Of Union

The Court of Appeal recently caused a sea change in the law of insolvency when it permitted a union to certify after the employer had come under the control of a receiver in Romspen Investment Corporation v. Courtice Auto Wreckers Limited.1 The significance of the Court's decision is well reflected in the words of Justice Lauwers who dissented from the majority opinion:

The effort in this case to certify the union after the receiver's appointment represents a new front in the "battle" the authors describe between employees and other creditors of an insolvent business, and requires careful scrutiny. Even if the effect is limited in this particular case because some of the other units in the debtor's business are unionized already, my colleague's decision would be a critical precedent of broader application. It is necessary to step back and consider the larger context.2

The case arose when six employees of Courtice Auto Wreckers Limited ("Courtice"), one of a group of companies that had been put under receivership, applied to have a union certified with the Ontario Labour Relations Board (the "OLRB"). Two days after the application, the receiver dismissed four of the six employees and retained new individuals to do the same jobs, citing legitimate business reasons. The OLRB concurrently stayed the union's application for certification on the basis of the stay of proceedings that had been made when Courtice had gone into receivership. The union filed an unfair labour practice complaint with the OLRB concerning the dismissals. It then brought an application to Court seeking to lift the stay to proceed with both its application for certification and the complaint.

The motion judge denied the union's request and so the union appealed.

The Majority Focuses on Union Rights

The principal issue that split the majority and dissenting opinions was whether employees' rights to organize should trump the rights of creditors to the largest realization possible on the debtor's assets. Whether to lift a stay is based on the totality of the circumstances and the relative prejudice to both sides. The majority viewed the prejudice of union certification to the creditors as merely speculative, while the prejudice to the employees of denying the application had become manifest, when the receiver had dismissed a majority of them shortly after they filed their application to certify.

The motion judge had given four reasons for denying to lift the stay:


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