Judge sides with workers in new TCT Logistics ruling

TORONTO, (April 5, 2004) — The Ontario Court of Appeal has overturned a bankruptcy court ruling, and decided that a receiver for a former trucking company must abide by worker contracts as it continues to operate the insolvent business for sale.

The appeal court ruled last Friday that a bankruptcy judge erred by deciding KPMG Inc. — the receiver of bankrupted TCT Logistics of Calgary — was not a successor employer when it sold the assets of TCT Logistics and related firms without accompanying collective agreements. The court went on to say that the bankruptcy judge had no jurisdiction to reject a bid by the Industrial Wood and Allied Workers that argued worker contracts should continue to apply after the sale.

In Friday’s precedent-setting case, the appeal court set aside the bankruptcy court judge’s decision and sent the issue back to the lower court for consideration of the union’s request to pursue its allegations before the labour board. In effect, the decision suggested collective agreements should remain in place when a receiver or trustee continues running a business.

TCT’s largest creditor appointed KPMG as interim receiver over the company’s assets when the carrier entered receivership in January 2002. KPMG then stopped contributions to the workers’ pension plan and funding for vacation pay before selling TCT’s warehouse operation to Spectrum Supply Chain Solutions. That deal also included provisions where KPMG would terminate all employees and would only rehire certain workers.

Meanwhile, a new chapter in the ongoing battle between KPMG and carriers brokered to haul freight for TCT will be written next month. KPMG is appealing an August 2002 decision by Madame Justice Greer of the Ontario Superior Court. The judge handed a victory to a group of about two dozen carriers when she ordered that the funds paid by shippers to bankrupt TCT Logistics for transportation services were trust monies, and therefore not subject to claims by creditors of the company.

The ruling was made despite KPMG’s argument that any monies set aside for the carriers should be released to pay secured creditors, who were reportedly owed $70 million. The Ontario Court of Appeal will hear an appeal from KPMG, who wants detailed clarification of a number of issues arising from Justice Greer’s order.

— with files from Canadian Press