Judge rules in favour of Ontario carriers in TCT Logistics case

TORONTO (July 19, 2002) — An Ontario Superior Court judge has ruled that funds set aside to pay trucking companies for hauling freight brokered from TCT Logistics may not be used to compensate the bankrupt firm’s secured creditors.

Ontario’s Truck Transportation Act (O. Reg. 556/92) requires companies that broker loads to keep the portion of the payment owed to the carrier in a trust account. Judge Susan E. Greer’s ruling means that KPMG, the trustee in the bankruptcy of the Calgary-based trucking company, must release funds, believed to be $2.8 million, to a group of about two dozen Ontario carriers. KPMG is expected to appeal.

Lawyers for KPMG claimed that any monies set aside for the carriers should be released to pay secured creditors, who reportedly are owed $70 million. They argued that TCT Logistics is subject to federal bankruptcy laws, which would usurp any provincial regulation.

“Finally, the load broker liability law in this province actually means something,” said John Douma, a lawyer for one of two groups of carriers left unpaid by TCT Logistics. “The law is there to protect carriers and to make sure they get what they’re owed, even when the broker goes bankrupt. Secured creditors can’t just jump in line ahead of them. The carrier has priority.”

He added that the decision clarifies the legal obligations of load brokers in Ontario. Most brokers aren’t even aware the law exists, in part because it is poorly enforced by the province.

Douma, who represents the Ontario Trucking Association, added that the ruling could open the door to civil action against officers and directors of load brokers that do not deposit 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 goes under,” he said.

Ontario is the only province to have a law that governs the legal responsibilities of load brokers.