Ontario court to decide fight over TCT Logistics receivables earmarked for carriers

TORONTO (April 3, 2002) — An Ontario Superior Court is scheduled to hear a motion April 18 to decide whether a little-enforced provincial regulation governing load brokerage operations should apply to the bankruptcy of TCT Logistics.

The court hearing gives hope to dozens of carriers in Ontario who provided transportation services for the Calgary-based trucking and logistics company but became unsecured creditors when the business entered receivership on Jan. 24.

The provincial 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. Lawyers representing a group of trucking companies left unpaid by TCT Logistics argue that monies owed to the carriers must be set aside, carriers are legally entitled to their portion.

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

“The court will decide what should apply in this case: federal law or provincial law,” said John Douma, a transportation lawyer for the Ontario Trucking Association. The OTA has offered to co-ordinate legal representation for carriers.

Douma said he believes the amount held in trust for carriers by KPMG is around $2.8 million.

“Now, is the trustee bound by provincial law to keep that money in trust and leave it alone?” he asked. “The issue is this: we have a provincial law that says any time a broker receives money from a shipper, the portion owed to the carrier must be held in trust. Even in a bankruptcy, the trust accounts must be sacred. Protecting carriers is the intent of the law.”

Douma said the case is also important because it would shine a spotlight on the legal obligations of load brokers in Ontario. The Truck Transportation Act is poorly enforced by the province, he said. Most brokers aren’t even aware of what the law requires or that it even exists. Ontario is the only province to have a law that governs the legal responsibilities of load brokers.

The OTA said it projects legal costs for the initial challenge in the range of $20,000 to $25,000. Douma said the association would proceed if at least 25 carriers commit $1000 each to a legal defence fund by 5 p.m. tomorrow, April 4. For information, contact the OTA at 416/249-7401.