E-Conomy Finance Group publishes articles focusing on a different aspects of trucking industry. Issue 2: “Collecting Unpaid Invoices”…

 

 

Originally this article was published in: Doroga/Road: March 2013

 

 

 

“Collecting Unpaid Invoices”

 

March 8, 2013

 

There is always a time when carrier faces issue of unpaid charges.  Either, it is due to a dispute over quality of service provided, or broker simply defaults on payment.  Either or, unpaid invoices may be collectable.

 

The load broker may act either as a sole proprietor, or as a corporation.  In both scenarios, person behind the brokerage operations could be found personally responsible for paying your freight invoice.  Even where corporation declares bankruptcy, carrier can always try to collect unpaid charges from the directors of the broker’s corporation.   

 

Load Broker Responsibility.  In Ontario, load broker responsibility for payment to carrier  is governed by the Highway Traffic Act. This Act creates the statutory trust by subsection 191.01(3) which stipulates that broker must hold funds received from shipper or consignee in trust for the hired carrier.  Failure to keep carrier’s portion of the freight charges in trust account can be viewed by  the  Ontario Courts as a breach of trust.  In this scenario, corporate directors and officers may  become personally liable for the breach of trust. This concept may be used against unscrupulous brokers that subsequently become insolvent or simply refusing to pay its legitimate creditors.  It is also should serve as a warning to brokers to ensure that funds for carriers must be held in a separate trust account and not simply deposited into general accounts, as this constitutes breach of the Highway Traffic Act trust provisions.

 

          Consignee Responsibility.  Section 7(1) of the Mercantile Law Amendment Act (Ontario) and section 2 of the Bills of Lading Act (Canada) make certain consignees liable for carriage charges under contract of carriage to which they are not a party. 

          However, the statutory rights made available under the Bills of Lading provisions require certain characteristics to be attached to  bill of lading in particular transaction. For example: bill of lading must be accepted by each party to transaction; the carrier name must be clearly indicated and all other parties  must be accurately described in bill of lading.   

 

          It is not every consignee that attracts liability, but one named in the bill of lading to whom property of the cargo passes.

 

 

 

These legal concepts may help carrier to collect unpaid charges in courts.   In previous Issue on Trucking Industry we have mentioned the importance of the proper Accounts Receivable Management.  You may review this article by visiting our web site. It provides you with tips on managing your accounts receivable. 

 

By way of setting your credit limits and reviewing them on regular basis you may control your potential damage.  The debt under $25,0000.00 is subject to the jurisdiction of the small claims court, where process is simplified and does not required legal representation.