TORONTO — Ontario logistics companies and brokers must put payment in a trust for its transport carriers, regardless of where the contract was made or whether the service operator is based in the province, an Ontario Superior Court Justice ruled.
Writing in a recent Private Motor Truck Council of Canada newsletter, Gowlings partner Dean Saul explained how the new ruling on Section 191.0.1(3) of the Ontario Highway Traffic Act affects truckers, logistics providers, and load brokers.
Specifically, the decision gives more power to trucking companies to recoup payment from logistics providers or brokers that file for bankruptcy.
Section 191.0.1(3) states that " a person who arranges with an operator to carry the goods of another person … shall hold any money received from the consignor or consignee of the goods in respect of the compensation owed … in a trust account in trust for the operator until the money is paid to the operator.”
However, until now, that provision has been interpreted differently by various interests; and it has been somewhat difficult for carriers to claim a benefit for a trust account.
The court was asked to determine whether the home base of the operator is relevant to the Section, as well as the where the contract between the logistics company and carrier was made, or if the transportation service had either an origin or a destination in Ontario.
The court concluded each question is irrelevant to a carrier’s ability to make a claim under the Section.
The implications of the decision are two-fold, Saul explains:
A logistics company or anyone else based in Ontario who arranges for the transportation of customer’s goods has a statutory obligation of establishing a trust account for the transport operator and those funds must be held until the operator has been paid for the arranged services.
As well, in situations where a logistics provider with financial difficulties, "a claim under the trust obligation (if there are available funds in trust) trumps all other claims on the basis that the money sought by the operator was never an asset of the logistics company, and consequently cannot be made the subject of a claim by the company’s secured or unsecured creditors."
Companies that arrange transportation services from a base outside of Ontario, however, are not subject to the trust obligation.
However, questions linger over whether the Section has any teeth. As, Saul notes, it does not specifically set out a penalty for the failure of the "arranger" to comply and maintain the prescribed trust account.
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