Last edited by a moderator:
Ontario court ruling goes for brokers (July 01, 2010) -- TORONTO
- Thread starter Lady Blue
- Start date
10
Next step
Now the justice department simply has to set up hefty fines or in the case of insolvancy; the lifting of the corporate vail allowing carriers to go after the personal assets of the directors.
This should be a primary concern for the Ontario trucking association, let them shift their focus from creating LCV parking at the expense of regular truck parking in rest areas!!!!
Now the justice department simply has to set up hefty fines or in the case of insolvancy; the lifting of the corporate vail allowing carriers to go after the personal assets of the directors.
This should be a primary concern for the Ontario trucking association, let them shift their focus from creating LCV parking at the expense of regular truck parking in rest areas!!!!
10
Just wondering
Are there any carriers actually keeping a trust account on freight they broker out to other carriers?
Are there any carriers actually keeping a trust account on freight they broker out to other carriers?
Also....how well does the trust account work when good companies pay BEFORE the actual customer does? There never would be any funds in the trust because the carrier has already been paid?? AND how many carriers are willing to wait for payment until AFTER the carrier/broker has received payment for the shipment?
Last edited by a moderator:
30
I believe because most freight bills say "prepaid" - it is based on that. Therefore the broker holds the money in trust until the bill is paid. Being as freight bill marked "prepaid" - the broker is to have ample funds to carry themselves until they get paid.
Last edited by a moderator:
10
Pablo
Not really worried about carriers. They generally have assets, more worried about freight brokers who have a photocopier and a phone system!!
Not really worried about carriers. They generally have assets, more worried about freight brokers who have a photocopier and a phone system!!
10
Axl...
By the time a carrier is declaring bankruptcy, their assets are usually already spoken for by the banks and other secured creditors. This puts them in the same boat as a broker. No assets and alot of payables. If they don't keep a trust account for brokered freight the danger of the carriers not being paid is just as real.
By the time a carrier is declaring bankruptcy, their assets are usually already spoken for by the banks and other secured creditors. This puts them in the same boat as a broker. No assets and alot of payables. If they don't keep a trust account for brokered freight the danger of the carriers not being paid is just as real.
30
Rob, it sounds like you are a little confused regarding the meaning of "Prepaid" as it applies to a Bill of Lading. It does not mean that someone has actually prepaid the freight. It only means that the shipper has included the freight charges in his cost of the product to the purchaser and it is he who will be paying the freight charges when they're biiled. So don't think that if you haul prepaid freight for a freight broker, that the broker has somehow already been paid - he hasn't.
Last edited:
30
You're right on Pablo! Alx, I'm not sure if it was you, but someone was concerned about their outstanding invoices with MacKinnon Trans.. If they were to go out of business, your amount owed would only be protected if they had a trust account in place, regardless of the extent of their "assets". Something for everyone to ask carriers about before you take freight from them.
20
Without some serious penalties attached this is all smoke and mirrors. Unless the customer is going to include a deposit slip showing that your money went to said trust account, how are you to know that he/she has sufficient assets deposited to cover the payables? But don't worry, no matter what happens the banks and goverment will continue to get their cash first. After the owners steal theirs of course.
P.S. I saw Marvin from Longbow on the weekend. He was on his 60' Cabin Cruiser on Georgian Bay. He says to say hi and thanks to all involved.LOL
P.S. I saw Marvin from Longbow on the weekend. He was on his 60' Cabin Cruiser on Georgian Bay. He says to say hi and thanks to all involved.LOL
Trust Accounts
I think Trust Accounts will always be a thorny issue in the industry. Here's my take on things:
1. If what were supposed to be monies held in a segregated trust are actually co-mingled with general current accounts, the courts seem to be easily convinced that there's no way to untangle them. In GMAC Commercial Credit Corporation - Canada v. TCT Logistics Inc., 2005 CanLII 3584 (ON C.A.) the judge FELDMAN JJ.A. ruled: "Once the purported trust funds are co-mingled with other funds, they can no longer be said to be “effectively segregated” for the purpose of constituting a trust at common law." The practices of the Receiver has a lot to do with subsequent rulings. Here, the Receiver co-mingled the funds collected from the freight customers.
The logic of "natural justice" would then dictate the willingness of the courts to pierce the corporate veil, and allow a carrier to litigate for recovery from the corporate directors personally. This is a result of the negligence of said directors to abide by the Trust provisions of the HTA, and segregate trust funds accordingly. Has anybody sued the directors of Longbow personally? Even if all of the directors' assets are held in a spouse's name in an attempt to place them beyond the reach of creditors, the Ontario Family Law Act should allow those assets to be sold and the revenue split in order to satisfy a judgment against the debtor spouse(directors).
2. In Canadian Imperial Bank of Commerce v. Nadiscorp Logistics Group Inc., 2009 CanLII 50866 (ON S.C.), garners a different result because of the repeal of the Load Brokers Act. Here, the Receiver has to comply not only with the new provisions of the HTA (Carrier trust account), but also the provisions of the receivership Appointment Order.
Confusing? Yes, and I'll bet that every case would be decided differently.
3. All of this may perhaps be avoided altogether by instituting a STRICT
credit and collections practice. If a customer (regardless of size), goes unreasonably beyond payment terms, and not commit to a definite payment date, then it's time to take the gloves off and immediately go for the jugular. I wouldn't hesitate for a moment to contact the all the parties concerned (shipper/receiver) and demand immediate payment or face litigation for recovery. In my experience in dealing with CFOs of larger companies and collections, I've been astounded with the egotistical indignation propelled my way when making demands. I've always countered this with the comment that we're talking about monies legitimately owed and due, and not anyones emotions, feelings or Ego. As a Broker, I do not have the right to be cavalier in collecting carrier's money!
I think Trust Accounts will always be a thorny issue in the industry. Here's my take on things:
1. If what were supposed to be monies held in a segregated trust are actually co-mingled with general current accounts, the courts seem to be easily convinced that there's no way to untangle them. In GMAC Commercial Credit Corporation - Canada v. TCT Logistics Inc., 2005 CanLII 3584 (ON C.A.) the judge FELDMAN JJ.A. ruled: "Once the purported trust funds are co-mingled with other funds, they can no longer be said to be “effectively segregated” for the purpose of constituting a trust at common law." The practices of the Receiver has a lot to do with subsequent rulings. Here, the Receiver co-mingled the funds collected from the freight customers.
The logic of "natural justice" would then dictate the willingness of the courts to pierce the corporate veil, and allow a carrier to litigate for recovery from the corporate directors personally. This is a result of the negligence of said directors to abide by the Trust provisions of the HTA, and segregate trust funds accordingly. Has anybody sued the directors of Longbow personally? Even if all of the directors' assets are held in a spouse's name in an attempt to place them beyond the reach of creditors, the Ontario Family Law Act should allow those assets to be sold and the revenue split in order to satisfy a judgment against the debtor spouse(directors).
2. In Canadian Imperial Bank of Commerce v. Nadiscorp Logistics Group Inc., 2009 CanLII 50866 (ON S.C.), garners a different result because of the repeal of the Load Brokers Act. Here, the Receiver has to comply not only with the new provisions of the HTA (Carrier trust account), but also the provisions of the receivership Appointment Order.
Confusing? Yes, and I'll bet that every case would be decided differently.
3. All of this may perhaps be avoided altogether by instituting a STRICT
credit and collections practice. If a customer (regardless of size), goes unreasonably beyond payment terms, and not commit to a definite payment date, then it's time to take the gloves off and immediately go for the jugular. I wouldn't hesitate for a moment to contact the all the parties concerned (shipper/receiver) and demand immediate payment or face litigation for recovery. In my experience in dealing with CFOs of larger companies and collections, I've been astounded with the egotistical indignation propelled my way when making demands. I've always countered this with the comment that we're talking about monies legitimately owed and due, and not anyones emotions, feelings or Ego. As a Broker, I do not have the right to be cavalier in collecting carrier's money!
10
Activet
Very informative article!!
By the way I am the one that is having difficulties collecting from Mackinnon.
I will clearly follow Activet's advice and inform them tomorow that I will contact the shipper and ask directly for payment. I just found out today that an old classmate is the acting president, a bit of luck on my part.
As for the trust,
I can see only advantages, it is a step in the right direction. How it will be policed and sanctions enforced is another issue.
I have never dealt with a trust account, therefore I am not aware of the difficulties in the case there are any, of obtaining one. Are there strict standards that must be met?
Perhaps all Carriers and Brokers should be required to post a bond such as in the USA.
I am sure any convictions for fraud would hamper a few scammers ability to obtain such bonds from insurance companies!!
Base on what I read daily from this iste , that would ceratinly eliminate a few!!
Very informative article!!
By the way I am the one that is having difficulties collecting from Mackinnon.
I will clearly follow Activet's advice and inform them tomorow that I will contact the shipper and ask directly for payment. I just found out today that an old classmate is the acting president, a bit of luck on my part.
As for the trust,
I can see only advantages, it is a step in the right direction. How it will be policed and sanctions enforced is another issue.
I have never dealt with a trust account, therefore I am not aware of the difficulties in the case there are any, of obtaining one. Are there strict standards that must be met?
Perhaps all Carriers and Brokers should be required to post a bond such as in the USA.
I am sure any convictions for fraud would hamper a few scammers ability to obtain such bonds from insurance companies!!
Base on what I read daily from this iste , that would ceratinly eliminate a few!!
30
Sheesh...we're just like accounts and lawyers I guess.. You're only worth anything in life if you go deeply into debt to purchase an asset.
Some of us have of us more than office appliances...we have CUSTOMERS...and the ability to get customers by using the wet noodle between our ears..
10
Not brokers vs. carriers
Sorry guys, I didn't mean to turn this thread into another brokers vs. carriers rant. I just wanted to point out that the law covers anyone who brokers frieght regardless of whether your primary business is brokering or trucking.
I have some serious problems with this legislation and I really wish there was another legislative tool available to deal with the issue of non-payment.
1) To operate with a strict trust account really makes it next to impossible to manage your cash flow.
2) Carriers often demand payment way before the customer pays. In a trust account scenario, this would not be possible.
3) There is little if any enforcement of this provision and don't know if it would even be possible.
4) If a customer went under and didn't pay the broker (like in Longbow's scenario) there would be no funds in the trust account to pay the carriers anyway.
I personally favor a bond like in the US. Right now the US bond requirement is only $10,000, but there is legislation on the table supported by both the Transportation Intermediaries Association and the OOIDIA (sorry if I didn't get the acronym right but it's the owner operators association in the US) that will increase the bond to $100,000.
You might say that's not enough. In many cases it won't be. However, to QUALIFY for a $100,000 bond is going to be difficult. I pretty sure many of the fly by night scammers won't qualify.
Sorry guys, I didn't mean to turn this thread into another brokers vs. carriers rant. I just wanted to point out that the law covers anyone who brokers frieght regardless of whether your primary business is brokering or trucking.
I have some serious problems with this legislation and I really wish there was another legislative tool available to deal with the issue of non-payment.
1) To operate with a strict trust account really makes it next to impossible to manage your cash flow.
2) Carriers often demand payment way before the customer pays. In a trust account scenario, this would not be possible.
3) There is little if any enforcement of this provision and don't know if it would even be possible.
4) If a customer went under and didn't pay the broker (like in Longbow's scenario) there would be no funds in the trust account to pay the carriers anyway.
I personally favor a bond like in the US. Right now the US bond requirement is only $10,000, but there is legislation on the table supported by both the Transportation Intermediaries Association and the OOIDIA (sorry if I didn't get the acronym right but it's the owner operators association in the US) that will increase the bond to $100,000.
You might say that's not enough. In many cases it won't be. However, to QUALIFY for a $100,000 bond is going to be difficult. I pretty sure many of the fly by night scammers won't qualify.
30
I think everyone should remember that there is no "magic wand" that will guarantee payment of your invoices. Be it a piece of legislation, a bond (unless it equals the entire value of the payables), or whatever. The best protection against non payment is to ensure that the party you're dealing with is solvent and reputable. This requires due diligence.
As its name suggests, due diligence is hard work, takes time and has to be on-going. Sure, trust accounts and surety bonds can be of some assistance in the event of bankruptcy, but knowing who you're dealing with every day and watching for those tell-tale signs of financial difficulty, will help to prevent your receivables from disappearing off the right hand side of the ledger. You wouldn't lend $1000.00 to someone you don't know, so why haul a $1000.00 load for the same person?
As its name suggests, due diligence is hard work, takes time and has to be on-going. Sure, trust accounts and surety bonds can be of some assistance in the event of bankruptcy, but knowing who you're dealing with every day and watching for those tell-tale signs of financial difficulty, will help to prevent your receivables from disappearing off the right hand side of the ledger. You wouldn't lend $1000.00 to someone you don't know, so why haul a $1000.00 load for the same person?
Last edited by a moderator:
I agree completly with Pablo and Loaders.
This government tries to fix everything by passing laws, but until the penalty for not having a trust fund out weighs the pain of having one - most carriers or brokers will continue to operate the same way.
We are a carrier that brokers a small amount of excess or off line frieght. Setting up a trust account and paying carriers from it is a huge accounting nightmare. What is the difference between a shipper paying a carrier or a 3rd party?
If trust funds are the answer then why don't shippers have to pay carriers or brokers in the same manner?
You simply cannot pass laws that will turn bad business people into good ones.
This government tries to fix everything by passing laws, but until the penalty for not having a trust fund out weighs the pain of having one - most carriers or brokers will continue to operate the same way.
We are a carrier that brokers a small amount of excess or off line frieght. Setting up a trust account and paying carriers from it is a huge accounting nightmare. What is the difference between a shipper paying a carrier or a 3rd party?
If trust funds are the answer then why don't shippers have to pay carriers or brokers in the same manner?
You simply cannot pass laws that will turn bad business people into good ones.
Last edited by a moderator:
10
Carrier versus broker
Gentleman,
This is not an argument between carriers and brokers.
This is a first step by the government in the right direction. They are trying to regulate the industry which seems to be out of control.
The question being, will the trust be manageable? Can and will penalties apply to those that abuse the trust?
Those of us that claim to be honest, all run our businesse as we see best. We pay in a timely manner. Sometimes we pay COD. We may even pre pay if it is a last minute rush shipment for our better customers.
I do not see how a trust account would hamper anything.
One of the counter arguments I heard were the payment of carriers prior to receipt of monies from the customer. That should be the norm. If the carriers and your terms were 30 days, than 30 days it is. If your terms were 14 days than again ,that is what it is.
If this is your modus operandi, the trust account would be superfluous. It is aimed at those that are undercapitalized and pose a threat!!
What we must remember is that the carrier contract is between the two parties involved.
Again the idea of a bond would certainly be beneficial. If all it does is filter out some of the chronic abuser through the approval process.
What is now going to differentiate a carrier from a broker is the ability to carry out due dilligence regarding the clients credit history.
The fundamental difference being the number of customers that each adds weekly as well as the diverse geographical areas in which , these customers are found.
As a very small carrier , I add at least two new freight brokers a week as clients, mostly, from Ontario and Quebec. We also get Americans, their credit history is genrally solid. I do not remember when I last added a carrier.
Our loss ratio is negligible, simply because we are an LTL carrier and our receivables are spread among many clients.
I have been in the business for close to 20 years and cannot remeber when I did not get paid by a carrier. Our losses are exclusively to freight brokers.
This said, our customer base is probably 80% freight brokers, and 99% are excellent.
From what I see, most Canadian freight brokers are regional in scope and can afford to carry out due dilligence to an infinite degree. They must court their customers in order to obtain said business, this does not happen in one day. The credit report is in prior to inking the contract.
For a carrier the opportunity to fill the truck is immediate, and may not be there in the next hour. We find ourselves, having to make an immediate decision.
All in all, what we all should strive for, is regulation that would ease the elimination of the dishonest people that keep re inventing themselves. Re-opening new companies with the sole intent of not paying the people that actually carried out the work.
Gentleman,
This is not an argument between carriers and brokers.
This is a first step by the government in the right direction. They are trying to regulate the industry which seems to be out of control.
The question being, will the trust be manageable? Can and will penalties apply to those that abuse the trust?
Those of us that claim to be honest, all run our businesse as we see best. We pay in a timely manner. Sometimes we pay COD. We may even pre pay if it is a last minute rush shipment for our better customers.
I do not see how a trust account would hamper anything.
One of the counter arguments I heard were the payment of carriers prior to receipt of monies from the customer. That should be the norm. If the carriers and your terms were 30 days, than 30 days it is. If your terms were 14 days than again ,that is what it is.
If this is your modus operandi, the trust account would be superfluous. It is aimed at those that are undercapitalized and pose a threat!!
What we must remember is that the carrier contract is between the two parties involved.
Again the idea of a bond would certainly be beneficial. If all it does is filter out some of the chronic abuser through the approval process.
What is now going to differentiate a carrier from a broker is the ability to carry out due dilligence regarding the clients credit history.
The fundamental difference being the number of customers that each adds weekly as well as the diverse geographical areas in which , these customers are found.
As a very small carrier , I add at least two new freight brokers a week as clients, mostly, from Ontario and Quebec. We also get Americans, their credit history is genrally solid. I do not remember when I last added a carrier.
Our loss ratio is negligible, simply because we are an LTL carrier and our receivables are spread among many clients.
I have been in the business for close to 20 years and cannot remeber when I did not get paid by a carrier. Our losses are exclusively to freight brokers.
This said, our customer base is probably 80% freight brokers, and 99% are excellent.
From what I see, most Canadian freight brokers are regional in scope and can afford to carry out due dilligence to an infinite degree. They must court their customers in order to obtain said business, this does not happen in one day. The credit report is in prior to inking the contract.
For a carrier the opportunity to fill the truck is immediate, and may not be there in the next hour. We find ourselves, having to make an immediate decision.
All in all, what we all should strive for, is regulation that would ease the elimination of the dishonest people that keep re inventing themselves. Re-opening new companies with the sole intent of not paying the people that actually carried out the work.
Last edited by a moderator: