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EXCLUSIVE: Canadian trucking companies win landmark settlement with CRA on behalf of O/Os

TORONTO, Ont. -- A group of Canadian trucking companies has won a landmark settlement with Canada Revenue Agency (CRA) that will see up to $15 million distributed to owner/operators who hauled into the US between 1991 and 2002.


Nolan Transport vp Jim Peacock (left) presents a cheque to former owner/operator Dave Monroe (middle), along with co-owner Kelly Nolan.
Nolan Transport vp Jim Peacock (left) presents a cheque to former owner/operator Dave Monroe (middle), along with co-owner Kelly Nolan.

TORONTO, Ont. — A group of Canadian trucking companies has won a landmark settlement with Canada Revenue Agency (CRA) that will see up to $15 million distributed to owner/operators who hauled into the US between 1991 and 2002.

About 35 companies were involved in the November settlement and the first cheques are now making their way to owner/operators, many of whom are now retired and caught entirely off-guard by the windfall.

Nolan Transport is one of three Canadian fleets that has received a payment from CRA. In November, Nolan received more than $310,000, with much of that destined for owner/operator pockets. The largest of those cheques is for about $16,000 and is going to an owner/operator who has since retired.

“A lot of the drivers that are benefiting from this haven’t been with us for a few years,” Kelly Nolan, co-owner of Nolan Transport told Trucknews.com Wednesday. “So, I’m calling people in P.E.I., Elmira…people I haven’t talked to in years. It’s been kind of sweet.”

The massive government payout stems from a long-running court challenge involving the payment of excise fuel taxes on diesel consumed outside Canada. In the early 1990s, Larry Babins, at that time an accountant with Permicom Permit Services and now director of consulting firm SimpleAce, noticed some discrepencies between how excise taxes were applied in various sectors of the economy, and even within the transport industry. As far back as 1880, he noticed, ships leaving England were eligible for refunds on the tax they paid on coal consumed once the ship left the country. He also noticed Canadian manufacturers were given refunds on the excise tax they paid on items destined for consumption outside Canada. Babins felt the same principles should apply in trucking, where Canadian trucking companies would often fill up with fuel in Canada, paying the federal excise tax on diesel before crossing the border into the US.

Eventually, Babins was able to bend the ear of Winnipeg, Man.-based lawyer Israel Ludwig, who agreed so vehemently that he offered to take the case on spec’. In 1998, a court challenge was launched on behalf of more than 100 trucking companies.

“Under the Excise Tax Act, if you are paying excise tax on an item that is subsequently exported, you can get that money back,” Ludwig recalled in an interview with Trucknews.com on Wednesday. “These trucks, after filling up with diesel, were driving into the US. So the question becomes: Is the fuel in the tank of your truck an exported item, such that you can claim a rebate on the tax?”

Not surprisingly, CRA initially denied the claims, but the case was brought all the way to the Supreme Court of Canada where a judge finally ruled in the carriers’ favour. In 2003, 117 carriers shared a windfall amounting to about $12 million on the excise taxes they paid on diesel purchased in Canada and consumed in the US between 1991 and 2002.  

The carriers, however, had unfinished business. CRA agreed only to pay the amount claimed for company-owned trucks and would not provide rebates for owner/operators who were working for those same companies.

“They said ‘We’ll pay the money for the trucks owned by the company, but if it’s owned by an owner/operator, the owner/operator should have filed their own application for a rebate’,” Ludwig says. “We said ‘no, no, no – that’s not the industry practice. A company always files fuel tax applications on behalf of an owner/operator’.”

Jim Peacock, vice-president of Nolan Transport, was involved in the case from the beginning.

“CRA’s whole argument was that the owner/operators should be filing on their own, because they’re independent businesses,” he says. “But the fuel is all bought through our fuel tax account.”

Nolan, like many trucking companies, would pay the fuel up front and then deduct it from its owner/operators’ pay – so ultimately the O/O was paying for the fuel.

Still, CRA wouldn’t budge. And for a while, it looked like the owner/operators were going to lose out. But then, Ludwig’s position received a boost when the Supreme Court of Canada ruled in an unrelated case that United Parcel Services (UPS) could collect GST overpayments made by its independent contractors on their behalf. That ruling prompted Ludwig to renew discussions with senior management at CRA, who this time knew they were beat.

“In the end, they eventually agreed that yes, the trucking companies could file tax returns on behalf of their owner/operators,” Ludwig says. “They have agreed to pay that money, of course with interest, to the companies that were affected and that will flow then to the owner/operators.”

How much is at stake? “It’s hard to say, because there’s going to be interest on that,” Ludwig told Trucknews.com. “Maybe as much as $15 million, but we won’t know until all the money comes in.”

In addition to Nolan, Bison Transport and Penner International agreed to be test cases. All three of those companies have now been paid, Ludwig says. Another 35 or so companies will also receive payments on behalf of their owner/operators as well.

“Some have to go through further audits. Those cases will wait until the audits are complete and the audits will determine how much they’re getting,” Ludwig says. “The other ones, who already had audits done in 2003 or 2004, will be getting cheques within the next 60-90 days.”

The cheques are issued to Ludwig, who takes his 35% cut before turning the money over to Babins for distribution to the carrier. You don’t need to be a math whiz to realize Ludwig received a staggering amount, but the trucking companies he represented don’t begrudge him.

“It wouldn’t have happened without him,” says Nolan. And in most cases, the interest paid by CRA is enough to cover Ludwig’s fees. That pay arrangement, however, does raise the concern that some carriers may not pass the sum along to the owner/operators it is intended for, especially considering it may take some effort to track down owner/operators who may not have worked for the company in more than a decade. Peacock says CRA was adamant the funds be redistributed to the owner/operators, but he worries not all carriers will comply.

“I’m sure there are carriers out there that are going to try to keep the money,” he says, noting many of Nolan’s recipients didn’t even know they had it coming.

“I think what’s really important is to get the word out there,” says Nolan. “If there are owner/operators out there that went cross-border between 1991 and 2002, they should be contacting their company to see if there’s a fuel tax rebate for their truck. It doesn’t hurt to ask. If a company doesn’t have a clue what this is about, the’ll say ‘no.’ If a company does know, hopefully they’ll do the right thing and say ‘As a matter of fact, we have received a cheque and we’re working things out’.”

And Ludwig warns that carriers that don’t pass along the rebates could face ramifications.

“If they pocket the money themselves without the consent and permission of their owner/operators, in my opinion that would be an illegal act,” Ludwig says. “It was raised in the UPS case. (The judge) said that if someone commits a criminal act (by failing to pass on the rebate to the independent contractor), they will be dealt with by the criminal authorities.”

When asked to furnish a list of all the carriers that are receiving rebates, Ludwig said “I don’t think I’m allowed to. I have confidentiality rules I have to respect from the Law Society.”

For Nolan Transport, there’s been no attempt to circumvent the ruling by pocketing the refund. In fact, Nolan says that while tracking down past owner/operators has been difficult (made even more difficult by the accidental deletion of all driver files in 1996), it’s been worth the effort.

“I found one fellow – he was shocked,” Nolan says. “I called him out of the blue and I told him there was a bit of money for him. His wife was dying of cancer and things were rough. When I told him how
much money it was, he was silent. He needs the money right now. He’s retired and things are tough and it makes a difference to have this windfall right out of the blue.”

Dave Monroe was easier to find. He’s a recently retired owner/operator who had been with Nolan for about 18 years and was called before a panel of CRA lawyers for questioning about two years ago. Monroe, along with three other owner/operators and general manager Peacock, were grilled by CRA officials who seemingly attempted to trip them up to avoid payment.

“It was intimidating,” Monroe says. “They tried to screw us up a little bit. They were asking us questions about what happened in 1995. How much fuel did you put in? Where did you buy it? We lost pretty much a day out of it, but it was worth it.”

Monroe received a cheque for $9,600 right before Christmas.

But not every owner/operator made out quite so well. In fact, Nolan says in some instances it was discovered the owner/operators actually owed the company money.

“There are cases where people owe us money as a consequence of this. They were overpaid, but it’s usually small amounts and we’re not going after those,” Nolan says.

Payouts range from $500 to $16,000 at Nolan, depending on fuel buying patterns during the affected years. Generally, owner/operators that bought fuel in Canada and did most of their driving in the US made out the best.

Unfortunately for O/Os who worked for a company between 1991 and 2002 that did not participate in the litigation, it’s now too late to make a claim. The feds moved quickly to close the loophole that allowed the multi-million dollar payouts.

“When the Government of Canada realized it lost the case after the Supreme Court handed down the decision (for company-owned trucks in 2003), they immediately passed legislation that said from here on in, nobody could make a claim for excise tax on diesel fuel that is being transported across the border,” Ludwig says. “If you haven’t made a claim by Feb. 14, 2003, you are barred from filing a claim.”


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26 Comments » for EXCLUSIVE: Canadian trucking companies win landmark settlement with CRA on behalf of O/Os
  1. Glenn says:

    Interesting article

  2. ralphthetrucker says:

    Is there any chance that a “complete” list of carriers involved in this litigation might be published soon?

    There’s a STRONG chance that the majority of O/O’s and former O/O’s won’t get their rebate cheque because there is only three carriers listed in the article.

    Thanks,

    Ralph

  3. James Menzies says:

    Ralph, We’re working on it.
    James

  4. Judy says:

    Only thing, many owner ops and companies will have destroyed company records from that many years ago so it would be impossible for them to try to recapture this lost money……………..should they desire to try.

  5. Dave says:

    In typical canadian fashion,even when the working man is due a rightful refund,the government steps in and makes ,what amounts to nothing more than an stepping out of bounds(what probably is an illegal action)to block further refunds due,UNBELIEVABLE! They should be taken to task and a class action lawsuit should start immediately again the government sector who done this! Also,what is so hard about releasing ALL the names of the elegable carriers DUE A DAMN REFUND! Oh no,that would be illegal and completly out of the question.

  6. glen says:

    ok good for them. What does that do for all the other o/o with other companies do we get anything? or what do we do to get something refunded? OH well at 4.25per gallon now its more than 1 dollar per gal cheaper in the us pay the tax now its cheaper:)

  7. ALAIN BELLEHUMEUR says:

    CAN YOU GIVE ME THE NAMES OF THE CIE WHO WERE INVOLVED IN THAT CLAIM. I WAS WORKING AT THIS PERIOD AND I WANT TO KNOW WERE I COULD GET INFORMATIONS.
    THANKS

  8. Dave says:

    The tax man always hands thier hands open and take from all that owe no exceptions when it comes to thier own rules.. Lets not forget that the CRA had the methods on how to track down Owner operators by reviewing thier data base of BIN numbers and tax returns,I feel this action should have been open to everyone..I feel as though the CRA should settle with all companies and thier owner operators. YES “CRA IT’S TIME TO PAY UP”

  9. PUTTING THE BRAKES ON!! says:

    OMG WE THE O/O OR EVEN THE L/O AT THAT TIME ARE OWED MONEY AND WE GET IT…BASICALLY IN A NUT SHELL WE MAY GET THE MONEY AND WE MAY NOT AS PER JUDY’S COMMENT (who BTW sounds like she works in a payroll department) WE ARE EXPECTED TO HOLD ALL OUR RECORDS AND SO SHOULD THE CARRIERS JUST GIVE THE MONEY UP…HEY ITS OUR MONEY NOT THE CARRIERS MONEY AND AS FAR AS DESIRE WELL WE THE O/O & AND L/O’S OF ONTARIO DESIRE TIO BE MULTIMILLIONAIRES TOO SOME DAY JUST LIKE THE COMPANIES INVOLVED IN THE LAWSUITS…DRIVERS GET WIND OF THE COMPANY NAMES AND THE COMPANIES DIDN’T PAY THE MONEY TO THE DRIVERS YOU COULD DEFINATELY HAVE AN ISSUE WITH LOADS MOVING ANYWHERE…WE WOULD ALL HAVE TO SHUT DOWN NOW WHO’S BOTTOM DOLLAR IS BEING AFFECTED THINK ABOUT YOUR ACTIONS…YOU ALL DARN WELL KNOW YOUR O/O & L/O THEY PUT YOU WHERE YOUR COMPANIES ARE TODAY!!!

  10. Audrey says:

    I was wondering if ther was a list of companies involved in this law suit!There may be people who have moved on to “greener pastures” who may be able to lay a claim based on where they worked
    thanks

  11. Watson Haulage says:

    Is there a list of Companies available to us, we were running Canada/USA at that time. thankyou

  12. steve cassidy says:

    does anybody know if contrans [particularly laidlaw van division] was involved in the lawsuit? I was with them as an o/o at that time. thank-you.

  13. Brian says:

    How do you determine if you get this rebate. I was an o/o for Trailwood Transport out of Alliston. The company has been sold same name but different owners.

  14. robin says:

    where does one find a complete list of companies that filed

  15. Grant Lough says:

    Has the list been public knowledge yet as to which companies are involved with this matter? Year 2001 I was a owner-op with Fastrax Transportation(division of Day&Ross group) and was wondering if they are one of the companies involved. Thanks

  16. Bernhard says:

    Where to go if the company since then closed it’s doors?

  17. James Menzies says:

    I am still awaiting the full list from CRA. It could take several weeks, I’m told. In the meantime, any owner/operator wanting to know if their carrier was involved can contact Larry Babins at: 416-992-7875.

    James

  18. Jake Goertzen says:

    As a former contractor with one of the trucking companies mentioned in the article within the qualifying time period, I wonder if my former employer will make any unprompted effort to forward to me what is rightfully my money, whether they will send my cheque within the prescribed time period and whether they will use the correct calculation in determining my share? In other words, the CRA or other governmental department should provide public information about this ruling so employers are verifiably held to account.
    Thanks James for your commitment to provide whatever information you are able to provide.

  19. David McCutcheon says:

    I was in contact today with a senior executive at Highland Transport in Markham Ontario to enquire as to whether Highland was a party to the class action suit. I was informed that indeed they were, and that they are awaiting payment from CRA. I suggest anyone who was contracted to Highland between 1991 and 2002 should contact them with regard to this matter.

  20. Robert Herr says:

    I contacted Bison transport as I was a owner operator for them from 94-99 as was told by bison the lawsuit only coverd the period from 2001-2002 and I was not eligible ????? was the story wrong or is bison

    Thanks

  21. Steve Robertson says:

    you should now publish the names of the federal mps who not only proposed the legislation to close what you refer to as a loophole in the tax law but publish also a list of mps who voted for this so at next federal election we could hold them to account as to why they are stealing money from this industry again. I will say it one more time there is no tax that is good for the economy there is no tax that creates a producing job and there is nobody better at spending or investing that money than the man or woman who earned it certainly not a polotician or buracrat.

  22. Gary Maher says:

    Sure would like to know the time period that the Companies have to forwards the cheques. They must have had the paperwork done before going to court.

  23. David McCutcheon says:

    Further to my posting on this site in March of this year, I have additional info to share. I have been advised by a senior executive at Highland Transport that they are in receipt of the rebated excise tax from the CRA.
    I have been further advised that the matter is being handled by Highland’s parent company, TransForce Inc.

    The contact info I have been given is as follows: Josiane-M. Langlois, VP Legal Affairs and Corporate Secretary, or Martin Quesnel, VP Finance, Transforce Inc. 8801 Trans Canada Highway, Suite 500, St. Laurent Quebec H4S 1Z6.

    I urge anyone who was under contract with Highland during the period between 1991 and 2002 to contact either of the above parties by letter.
    Include in your letter the dates you were under contract with them, your unit numbers, employee numbers, etc. Be sure to include the name of your business if you were under contract on that basis. It would also be helpful to include the jurisdictions you operated in outside of Canada during your tenure with Highland. You should not have to provide mileage info, just the states operated in should be sufficient.

    I sent my letter to the above parties August 9, 2011. To date I have not received a reply. I am now sending a follow up letter, with the original letter enclosed. I am sending this second letter registered mail, signature required on receipt. I suggest anyone sending a letter regarding this matter do the same.

    Just one further note; none of my friends that are still with the company and who were there during the affected period have heard anything from management in this regard. The silence is deafening.

  24. B. Kloosterman says:

    Was an o/o for Royal Tanklines out of Barrie, has anyone received any
    monies from them? Does anyone know if they were part of the 117 companies
    that applied?

  25. Wayne and Pat Cuthill says:

    We too have been told by Highland (Transforce)they were part of the companies that went to court in regard to the rebated sales tax on fuel purchased. We too have sent a registered letter to transforce in St Laurent but have received no reply or anything from Transforce regarding expected refunds.
    I think someone needs to investigat these companies and find out where and what is going on with the cash!!!!!

  26. frank hyl says:

    hello.. my name is frank Hyl ..yes i worked at Highland Transport as an Owner-Operator from 1987- til 1996. please look into this meter for me . i am retired driving school bus now. thank you . Frank Hyl

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