The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

An Appeal Panel hearing was held on February 20, 2001, at the request of an advocate, acting on behalf of the appellant. The Panel discussed this appeal on February 20, 2001.

Issue

Whether or not the firm's assigned 1998 and 1999 rates of assessment should be based on new firm rates for industry code 20102 (Mining).

Decision

That the firm's assigned 1998 and 1999 rates of assessment should be based on new firm rates for industry code 20102 (Mining).

Background

On December 16, 1997, [ABC] Gold Mining Co. Ltd. and its parent company [XYZ] Gold Corporation were petitioned into bankruptcy by their major secured creditor. [LMN] Inc. was appointed Receiver and Manager over the companies' various assets. File documentation revealed that [LMN] Inc. employed workers in connection with [ABC] Gold Mining Co. Ltd. from December 1997 to June 1998. [LMN] Inc. had taken over the administrative operations only and [ABC] Gold Mine itself was not active during this time.

The Workers Compensation Board (WCB) opened a file for [LMN] Inc. to collect the WCB premiums on the wages it paid. The assessment rate charged to [LMN] Inc. was carried over from [ABC] Gold Mining Co. Ltd.'s file. In accordance with WCB policy 31.05.20, Section A, 1(c), the claims from [ABC] Gold Mining Co. Ltd.'s file for the past five years were also transferred to [LMN] Inc.'s file.

On June 16, 1998, the assets of [ABC] Gold Mining Co. Ltd. were sold to [DEF] Gold (Canada) Inc. and a WCB firm registration was set up. The rate of assessment and the claims over the previous 5 years together with [ABC] Gold Mining Co. Ltd.'s associated costs were transferred from [LMN] Inc. to [DEF] Gold (Canada) Inc.'s account. [LMN] Inc. had only operated for a six-month period, thus the rate and costs, which were transferred to [DEF] Gold (Canada) Inc., were those borne by the experience of [ABC] Gold Mining Co. Ltd. The rate and costs were transferred from [LMN] Inc. and [ABC] Gold Mining Co. Ltd. to [DEF] Gold (Canada) Inc. in accordance with WCB policy 31.05.20, Section A, 1(b).

In a submission dated October 10, 2000, the advocate acting on behalf of [DEF] Gold (Canada) Inc. requested the WCB's Assessment Committee to review the assessment rate charged for the years 1998, 1999 and 2000. The advocate noted that in 1997 [ABC] Gold Mining Co. Ltd. was operating as [ABC] Gold Mine. On December 15, 1997, [ABC] Gold Mining Co. Ltd., declared bankruptcy with [LMN] Inc.'s being formally appointed as the receiver and trustee in bankruptcy by the courts. The advocate advanced the position that [LMN] Inc.'s sole function was to be responsible for the care and maintenance of the mining facility on behalf of the major secured creditor so that the assets could eventually be sold. During this time period prior to the sale of the assets, there were approximately 15 people on the payroll whose primary responsibility was one of security, but absolutely no mining or related operations were being carried on. [DEF] Gold (Canada) Inc. purchased the following assets on June 11, 1998: the mine lease, the site buildings and the existing mining equipment. [ABC] Gold Mining Co. Ltd.'s shares were not included as part of the purchase. The former chief geologist and chief engineer of [ABC] Gold Mining Co. Ltd. were hired by [DEF] Gold (Canada) Inc. It was the advocate's position that [ABC] Gold Mining Co. Ltd., operating as [ABC] Gold Mine, was a defunct firm and its ongoing cost experience should have been allocated as per part A of the WCB's policy 31.05.20. Had this been done, then [DEF] Gold (Canada) Inc. would be considered a "New Firm" and assessed accordingly for the years 1998 and 1999.

On November 9, 2000, the Assessment Committee determined that the WCB would not amend [DEF] Gold (Canada) Inc.'s 1998, 1999 or 2000 rates of assessment as requested, and that the cost experience transferred from [ABC] Gold Mining Co. Ltd. and [LMN] Inc. would remain on [DEF] Gold (Canada) Inc.'s file.

As part of its rationale for this decision, the Assessment Committee pointed out that although WCB policy 31.05.20, (Transfer of Employer Cost Experience), states that the costs of claims will be shared amongst all employers in a class where a business ceases to operate, it, however, goes on further to provide:

1. Where the change in ownership occurs through:

   b) the sale of a substantial portion of the assets of an incorporated business and the business continues to operated in substantially the same form; or,

   c) the appointment of a trustee, receiver, liquidator, executor or administrator who carries on all or part of the business,

   the cost experience will be transferred to the successor employer(s).

The Assessment Committee indicated that the WCB applied Part (c) of the foregoing policy when it transferred the costs from [ABC] Gold Mining Co. Ltd.'s claims and rate of assessment to [LMN] Inc.'s file. In its view, the wording of the policy clearly suggested an interpretation that [LMN] Inc. need only operate "part of the business" in order for the costs to be transferred.

When [DEF] Gold (Canada) Inc. purchased the assets from [LMN] Inc., it was reasonable for the WCB to transfer the costs to [DEF] Gold (Canada) Inc., because it would be operating [ABC] Gold Mine in the same manner as [ABC] Gold Mining Co. Ltd. had been doing previously. Part (b) of WCB policy 31.05.20 provides for the transfer of costs where a substantial part of the business has been purchased and where the operations are substantially the same. The Assessment Committee felt that the sale to [DEF] Gold (Canada) Inc. met these criteria. The fact that there were no "breaks" in the employment of workers in connection with the mining operations, whether "in part or in whole", being conducted by [ABC] Gold Mining Co. Ltd., [LMN] Inc. and [DEF] Gold (Canada) Inc., substantiates the conclusion that the operations had not in fact "ceased".

The Assessment Committee also considered the WCB's current practice in applying policy consistently. "This situation is viewed no differently than when a firm 'winds down' their own operations and keeps only administrative staff on payroll to sell off their assets. When the assets are sold, the rate of assessment and claims costs are transferred in the same manner."

On November 9, 2000, the advocate for [DEF] Gold (Canada) Inc. appealed the Assessment Committee's decision and an oral hearing was arranged.

Reasons

WCB policy 31.05.20 has a clearly defined purpose:

"This policy establishes criteria for when an employer's cost experience will follow the business on a change in ownership and to be used to determine assessment rates and merits or surcharges for the new employer. It is important to distinguish between when a business ceases to operate and when all or part of a business continues under new ownership because the WCB sets assessment rates and levies merits or surcharges based, in part, on employer cost experience.

As a general principle, the cost experience will follow the business where all or part of a business changes ownership. The cost experience of the predecessor employer will be transferred to the successor employer and will be used to determine the assessment rate and merit or surcharge (if applicable) of the successor employer.

Where the business ceases to operate, the ongoing cost experience will be shared among employers in the Class, in accordance with the formulae prescribed for allocating "defunct" firm costs in the WCB's Assessment Rate Setting and Merit/Surcharge programs."

The overwhelming body of evidence confirms that [LMN] Inc.'s role as receiver and trustee was simply to preserve the assets of the bankrupt company for and on behalf of the major secured creditor pursuant to its debenture security. The business completely ceased to operate after [ABC] Gold Mining Co. Ltd. was petitioned into bankruptcy. [LMN] Inc. did not in any way actively participate in or carry on the business of mining. Its sole function was to secure the assets for resale.

We find, in accordance with the evidence and WCB policy 31.05.20 that [DEF] Gold (Canada) Inc.'s assigned 1998 and 1999 rates of assessment should be based on new firm rates for industry code 20102 (Mining).

Panel Members

R. W. MacNeil, Presiding Officer
A. Finkel, Commissioner
M. Day, Commissioner

Recording Secretary, B. Miller

R. W. MacNeil - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 28th day of March, 2001