TORONTO, Ont. — Ontario carriers have been rewarded by the courts in their action to get funds held in trust after the TCT Logistics bankruptcy.
Madame Justice Susan E. Greer ruled load broker provisions in the Ontario Truck Transportation Act impose a trust in favor of fleets and dictate all funds the load broker receives on behalf of the carriers should go to the carriers.
In practical terms this means the estimated $2.8 million sitting in the defunct company’s trust account will be disbursed to carriers and not secured creditors.
“This is a victory for carriers,” says David Bradley, president of the Ontario Trucking Association (OTA).
OTA’s lawyer John Douma represented one of the two groups of carriers left unpaid by the TCT division. Ontario is the only province to have a law governing the legal responsibilities of load brokers.
Douma says this decision clarifies the legal obligations of load brokers in Ontario, many aren’t even aware the law exists due to poor enforcement over the years.
“The law is there to protect carriers and to make sure they get what they’re owed, even when the broker goes bankrupt. It is our view that secured creditors can’t just jump in line ahead of them, and that the carrier has priority as a result of the legislation, and the Court agreed,” says Douma.
He adds the ruling could potentially open the door to civil action against officers and directors of load brokers not depositing the carrier’s portion of the freight payment into a trust account.
“If they’re guilty of breaching a provincial law, they might not be allowed to hide behind the limited liability of their company if it goes under,” he insists.
KPMG, the receiver in the TCT bankruptcy, is expected to challenge the ruling claiming federal law should over-trump any provincial statutes in such a matter.
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