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Loaders you are correct everytime I see Longbow I see red because of all the money they owe and they are probably back in business somewhere.
Longbow Freight Systems
- Thread starter allfreight
- Start date
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No worries. I too am always amazed when failed business re-surface with a new name, but the same owners! Some people can take that old expression "if at first you don't succeed, try and try again" a bit too far, especially when the failure is paid for by your suppliers!
Based on the documentation that I have received from their bankruptcy trustee Longbow broke the law. It specifically states that the HTA 191.01(3) requires trust accounts and Longbow did not comply.
Why is the owners/directors of Longbow not charged?
Why is the owners/directors of Longbow not charged?
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I would assume that it is the same gov't. agencies that look after all H.T.A. regulations/infractions - MTO, OPP, local police. However, would it not be prudent to ask the broker you are about to deal with, if he adheres to this regulation? At least knowing if the trust account is there or not could help to determine if you want to enter into a business relationship. This topic has been beaten to death, on this site and elsewhere, and the answer seems to always be the same - yes, technically, the broker should be separating the funds received into a) amount due to carrier and b) amount due to broker. Technically, the only funds in the trust account should be funds received from the customer that are due to the carrier. There are a mulitude of problems with this concept. The most obvious, is the tremendous accounting burden this places on larger brokerage firms. Imagine as a trucking company, if you had to operate a separate bank account for say hmmm, employees. Every cheque you received from your customer had to have the employee component taken out and placed into a different account. On top of that, because it is a "trust" account (not yours but held for others) it really can't be viewed as an asset. The other big problem, and this has been discussed here before as well, if the customer has not or does not pay the broker, there are no funds to be placed into the trust account for dispersement to the carrier. I know that most brokers, myself included, pay our carriers regardless if we have received payment or not, but "technically" do we have to? The long and short of it is, if the trust account makes you feel more secure, only deal with brokers that have it, but there is more to a solvent, ethical broker than just operating a trust account.
Watch dog for broker trust accounts
I believe there is no governance nor specific authority for monitoring compliance with the trust account requirements. I have yet to find any specific instructions or minimum requirements for properly setting one up, or how to operate it. The bank was of no assistance either.
An interesting application of the statutory trust arises in the case where as insolvent broker, usually a limited liability company, has failed to maintain the separate trust account and records required by the regulation. In theory, the court, acting pursuant to the Ontario Business Corporations Act, may impose a personal liability on corporate directors who have permitted a company to carry on business in a manner that unfairly disregards the interest of creditors. It is obvious that a brokerage which completely ignores its duties under the Load Brokers Regulation is disregarding the interest of its carrier-creditors who are entitled to rely on the regulation being observed by brokers with which they do business.
Sometimes the secured creditor imposing receivership on a brokerage is closely related to the principle owner(s) of the brokerage. Indeed, the insolvent brokerage may disappear in the receivership while its business operations continue under the same management and staff and, ultimately, for the benefit of the same individuals. Meanwhile, the carriers' outstanding invoices become worthless, chiefly because of the brokers failure to maintain separate trust funds.
The oppression remedies provided by the Ontario Business Corporations Act coupled with the trust and record-keeping requirements of the HTA permit the court to impose personal liability on directors to pay carrier claims. Directors unwilling to test this theory in court have been known to contribute their own money toward the settlement of carrier claims. Whether such payments might properly be indemnified through Directors Liability Insurance remains to be seen.
I believe there is no governance nor specific authority for monitoring compliance with the trust account requirements. I have yet to find any specific instructions or minimum requirements for properly setting one up, or how to operate it. The bank was of no assistance either.
An interesting application of the statutory trust arises in the case where as insolvent broker, usually a limited liability company, has failed to maintain the separate trust account and records required by the regulation. In theory, the court, acting pursuant to the Ontario Business Corporations Act, may impose a personal liability on corporate directors who have permitted a company to carry on business in a manner that unfairly disregards the interest of creditors. It is obvious that a brokerage which completely ignores its duties under the Load Brokers Regulation is disregarding the interest of its carrier-creditors who are entitled to rely on the regulation being observed by brokers with which they do business.
Sometimes the secured creditor imposing receivership on a brokerage is closely related to the principle owner(s) of the brokerage. Indeed, the insolvent brokerage may disappear in the receivership while its business operations continue under the same management and staff and, ultimately, for the benefit of the same individuals. Meanwhile, the carriers' outstanding invoices become worthless, chiefly because of the brokers failure to maintain separate trust funds.
The oppression remedies provided by the Ontario Business Corporations Act coupled with the trust and record-keeping requirements of the HTA permit the court to impose personal liability on directors to pay carrier claims. Directors unwilling to test this theory in court have been known to contribute their own money toward the settlement of carrier claims. Whether such payments might properly be indemnified through Directors Liability Insurance remains to be seen.
Loaders; I agree with you fully. It is tough to manage, tough to police and I am sure that it will be tough to make stick in court. For brokers like you who pay every carrier regardless of issue with your customer this problem will never surface. This law is for the the broker who does not pay a carrier when he has been paid by the original shipper/consignee.
In Longbow's case, this bankruptcy proceeding was completed, many people lost money and it clearly states that they did not comply with the law - they should be charged.
It happens with most other laws. If I crash my car now and they find I was talking on the cell phone, I would be charged for talking on the phone.
In Longbow's case, this bankruptcy proceeding was completed, many people lost money and it clearly states that they did not comply with the law - they should be charged.
It happens with most other laws. If I crash my car now and they find I was talking on the cell phone, I would be charged for talking on the phone.
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Activet I think you are right, Longbow owes some $900,000 in unsercured money. The trustee sent out a letter stating they did not follow the trust account rules which seems to me would be damming evidence in court. Now an enterprising Lawyer/Paralegal would take that list and say for 20% of the award do a class action suit. To be honest they owe us $1400 we would give it all up just to set precedence to use/deter others from going this route.
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Another important point
One other point here that I think is relevant, is that it's my understanding the reason Longbow didn't have the $900,000 to pay the carriers is their customer went bankrupt and didn't pay them. Therefore, there would be no money in the trust account to pay the carriers making the claim, regardless of whether one was kept or not.
What the trust account does in theory, if it's applied properly is take all liability for payment away from the broker! Think about it. It's really the broker's customer you are granting credit to, not the broker.
Just food for thought. Personally, I think the whole trust account issue is an ugly mess.
One other point here that I think is relevant, is that it's my understanding the reason Longbow didn't have the $900,000 to pay the carriers is their customer went bankrupt and didn't pay them. Therefore, there would be no money in the trust account to pay the carriers making the claim, regardless of whether one was kept or not.
What the trust account does in theory, if it's applied properly is take all liability for payment away from the broker! Think about it. It's really the broker's customer you are granting credit to, not the broker.
Just food for thought. Personally, I think the whole trust account issue is an ugly mess.
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No money in trust account
That theory only holds for the carriers that did work for the client that went bankrupt.
I am sure that not all his clients went bankrupt, Therefore moneys owned to carriers for work done for solvent clients should be in the trust funds!!
That theory only holds for the carriers that did work for the client that went bankrupt.
I am sure that not all his clients went bankrupt, Therefore moneys owned to carriers for work done for solvent clients should be in the trust funds!!
An ulgy mess!
I agree with you Pablo,
Scam Chaser's post on page 6 of this thread addresses the issue regarding the dates when Longbow, or the Trustee received funds, is relevant as to whether their collectible or not.
I'm neither a lawyer nor paralegal, however I think a possible scenario would be for those creditors who are interested in pursuing things further, might collectively seek out a transportation lawyer who would act in this matter on a contingency fee basis, and have him represent them as multiple plaintiffs with each plaintiff's costs shared out on a pro-rated basis.
To further confuse things, another possibility would be to sue the consignee. The case law that brings this to mind is:
S.G.T. 2000 Inc. v. Molson Breweries of Canada Ltd. 2007 Q.C.C.A. 1364 (Can. L.I.I.)
I read about this on the web site of Fernandes Hearn LLP, in their Dec. 07 news letter section. A link to their site follows:
Fernandes Hearn LLP - Maritime, Insurance and Transportation Law Firm Canada
I found the comments of the The Court of Appeal very interesting - they follow in part.
In conclusion, the notion or concept of "pre-paid" services does not by itself constitute a relinquishment by the carrier of the rights afforded to it under the legislation.
Accordingly, the carriers were able to recover their freight charges, which were significant (exceeding $200,000) from Molson Breweries. While this no doubt worked an injustice in the mind of Molson, the legislative trade off was clear. Molson would have been able to claim against the carrier for cargo loss damage or delay, but equally having received the shipment and benefiting thereby it had to make the carriers whole for unpaid freight charges.
I hope this is helpful.
I agree with you Pablo,
Scam Chaser's post on page 6 of this thread addresses the issue regarding the dates when Longbow, or the Trustee received funds, is relevant as to whether their collectible or not.
I'm neither a lawyer nor paralegal, however I think a possible scenario would be for those creditors who are interested in pursuing things further, might collectively seek out a transportation lawyer who would act in this matter on a contingency fee basis, and have him represent them as multiple plaintiffs with each plaintiff's costs shared out on a pro-rated basis.
To further confuse things, another possibility would be to sue the consignee. The case law that brings this to mind is:
S.G.T. 2000 Inc. v. Molson Breweries of Canada Ltd. 2007 Q.C.C.A. 1364 (Can. L.I.I.)
I read about this on the web site of Fernandes Hearn LLP, in their Dec. 07 news letter section. A link to their site follows:
Fernandes Hearn LLP - Maritime, Insurance and Transportation Law Firm Canada
I found the comments of the The Court of Appeal very interesting - they follow in part.
In conclusion, the notion or concept of "pre-paid" services does not by itself constitute a relinquishment by the carrier of the rights afforded to it under the legislation.
Accordingly, the carriers were able to recover their freight charges, which were significant (exceeding $200,000) from Molson Breweries. While this no doubt worked an injustice in the mind of Molson, the legislative trade off was clear. Molson would have been able to claim against the carrier for cargo loss damage or delay, but equally having received the shipment and benefiting thereby it had to make the carriers whole for unpaid freight charges.
I hope this is helpful.