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Truck Transportation Deregulation

Over the past several years, there has been a continuous trend towards the reduction of economic regulation of Canada ’s truck transportation industry in favour of increased regulation of the industry’s safety operating practices.

Most recently, the province of Manitoba enacted legislation eliminating the requirement for an operating licence to conduct truck transportation services in that province. As of January 1, 2005, the Province of Ontario is the only provincial jurisdiction that continues to impose a licensing requirement for common carrier truck transportation services operating within, to, from or through the province.

On November 26, 2002, Royal Assent was given to the Ontario Government Efficiency Act which provides for the subsequent amendment of the Highway Traffic Act and the repeal of the Ontario Truck Transportation Act. However, the Government Efficiency Act has not been proclaimed in force. Once proclaimed (which may not occur until 2006), the Truck Transportation Act will be repealed and the requirement for any form of operating licence for the purpose of conducting truck transportation services within, to, from or through the Province of Ontario will cease to exist.

Regulations dealing with a truck transportation bill of lading and related matters which have fallen within the legislative purview of the Truck Transportation Act will be moved to the Ontario Highway Traffic Act virtually without change.

Safety Regulation Of Motor Carriers

Amendments to the federal Motor Vehicle Transport Act, 1987 (contained in legislation that received Royal Assent in June 2001) were anticipated to be in force by January 1, 2005. However, it now appears that those amendments will not be proclaimed in force until January 1, 2006. The existing legislation establishes basic criteria related to safety and delegates to each province and territory the authority to monitor the safety performance of extra-provincial motor carriers licensed in their respective jurisdictions. Rather than economic regulation, the focus is now on safety and carriers are required to meet the standards established under the National Safety Code (NSC) in their operations. Developed in consultation with the transportation industry, the NSC is made up of 16 minimum standards that are designed to assist road carriers to remain in compliance with local, national and international rules for operating commercial vehicles. To date, each province and territory has implemented the NSC standards through its own legislation. The monitoring of a road carrier’s operations, from a safety perspective, has essentially been limited to tracking contraventions (convictions, accidents or other safety-related occurrences) within each provincial or territorial jurisdiction.

The proposed amendments will require all motor carriers (including foreign-based motor carriers) to have a "Safety Fitness Certificate" in order to operate on Canadian roads.  Provinces and territories will monitor the safety performance of all extra-provincial motor carriers licensed (based-plated) in their respective jurisdictions by maintaining a complete safety compliance profile of each carrier, using input from all jurisdictions from which the carrier operates. Once the amendments are implemented, the goal will be to establish a comparable safety rating, regardless of jurisdiction, so that motor carriers compete on a level playing field across Canada, and eventually across North America.  It remains to be seen how the new safety registration system will be implemented to take into consideration motor carriers with multiple fleets registered in various jurisdictions across North America. As for U.S.-based carriers with no vehicles based-plated in a Canadian province or territory, it appears that they will be required to register either in Ontario (under the existing Commercial Vehicle Operator’s Registration [CVOR] system) or in Quebec (under the existing Registry of Owners and Operators of Heavy Vehicles system). This registration will be recognized by the other provinces and used to track the carrier’s safety performance.

Jurisprudence

Enforceability of Limitations of Liability

An issue that often arises in the context of road carrier operations concerns the carrier’s liability for loss or damage to cargo shipments and the enforceability of limitation of liability provisions contained in the carrier’s bill of lading. In this regard, the Ontario Court of Appeal has rendered a decision that has significant ramifications for the road carrier industry.

Solway v. Davis Moving & Storage Inc. [2002] O.J. No. 4760 ( C.A. ) involved a claim for lost goods that the plaintiffs had placed in the care of the defendant moving company. The plaintiffs had contracted with the carrier for the moving and storage of their household goods, which contained, in addition to normal household items, expensive art and objects of great personal significance.

It was agreed between the parties that the plaintiffs’ goods would be stored in the moving company’s trailer unit until such time as the plaintiffs’ new home was ready. According to the plaintiffs, the moving company had represented that the goods would be stored in a locked trailer in a supervised yard. The trailer would be stored with its landing gear down and would be securely locked. One night during the period of storage, the trailer was left on an unsupervised residential street so that the carrier yard could be snow-plowed. While the trailer was on the street, it was stolen.

In the trial decision in that case, the lower court held that the defendant moving company could not rely on the limitation of liability contained in the bill of lading, since the moving company had made several misrepresentations to the plaintiffs about the care that would be taken of their goods while the goods were being temporarily stored by the moving company.

The trial judge had held that the defendant carrier could not rely on the limitation of liability clause contained in its bill of lading and in the Truck Transportation Act, with respect to the disappearance of the plaintiffs’ goods, as the carrier’s conduct was unconscionable and unreasonable. The lower court found the carrier liable for the full value of the plaintiffs’ goods.

The moving company appealed and the Ontario Court of Appeal rendered its decision in the case. The Court of Appeal agreed with the lower court decision finding that:

"In deciding not to enforce the limitation of liability clause the trial judge appears to have equated the words "unconscionable" and "unreasonable" as these terms were discussed in Hunter Engineering. In our view, on the facts found by the trial judge, to limit the loss of the plaintiffs to $7,089.60 would, in the words of Dixon, C.J.C. be "unconscionable" or in the words of Wilson , J. be "unfair or unreasonable." This is one of those cases where relief should be granted."

One of three appellate court judges, in dissent, disagreed with the findings of the Court of Appeal with respect to the carrier’s ability to rely on a limitation of liability clause.

Carthy, J.A. noted that the trial judge had found that the plaintiffs were intelligent and sophisticated business people, that they knew of the limitation of liability provision in the contract and that they had arranged their own insurance to protect against loss during the move (their own insurance was now said to be insufficient). Carthy, J.A. reviewed the case law and the provisions of the Truck Transportation Act and found that commercial realities required a limit to the strict liability of the carrier. He found that a

"carrier has no means of knowing the value of the goods and, even if it did, the cost of insurance for the most valuable of goods in a cargo would impose prohibitive charges on the consignor of the lesser valued goods. Thus statutes or regulations emerged maintaining the concept of absolute liability, but limiting that liability to a declared value or, more often, to a value measured by weight. In this fashion the consignor can either insure the goods or bear the risk of their loss or damage, knowing the value of such goods. The carrier also bears some risk, which will act as an incentive to act prudently, while knowing that the extent of liability is tied to the weight of the goods being transported."

The Court’s dissenting view recognizes that " Ontario has a legislative policy that has developed over many years, permeates all facets of the transportation of goods industry and is based upon a sensible business and commercial rationale." Carthy, J.A. concluded that "allowing the respondents’ claim opens the door to every imaginable complaint of misfeasance and would undermine the entire structure built up under this long-standing policy."

The case may be limited to circumstances where "individual" shippers are involved, rather than sophisticated commercial shippers.  Leave to appeal this case to the Supreme Court of Canada was denied, so there will be no final determination on this issue from our highest court.

Enforcement of Trust Provisions

Another decision that is of interest in relation to the transportation industry, in particular, third-party intermediaries referred to as "load brokers" in the Ontario Truck Transportation Act, is the Ontario Superior Court of Justice decision in Sager Transport Ltd. v. Varga Trucking Ltd. [2004] O. J. No. 4923. By way of background, a load broker is generally defined as a person who arranges transportation for compensation using the services of a road carrier. The Truck Transportation Act prohibits the provision of "load brokerage" services unless, inter alia, the load broker establishes a trust account into which funds paid to the load broker by a shipper or consignee are to be held in trust for the benefit of carriers who provided the transportation services (except that portion of the funds received that are in excess of the transportation charges). As noted above, it is anticipated that the Truck Transportation Act will be repealed; however, amendments to the Highway Traffic Act once proclaimed in force will obligate any person who "arranges" for carriage of goods of another person for compensation to hold monies in a trust account, for the benefit of the carrier who provided the transportation services until the carrier is compensated.

The decision in Sager is significant because the Court decided to look beyond the corporate defendant and found the company’s two directors personally liable for monies owing to the plaintiff carrier for transportation services provided at the request of the defendant company. The Court found that even though the corporate defendant had not complied with the provisions of the Truck Transportation Act and was not licensed as a load broker, the nature of its services were such that they did in fact constitute load brokerage services. The company should have been licensed and should have complied with the provisions of the Act requiring that a trust account be established and funds be placed in trust for the benefit of carriers performing the transportation services at the request of the defendant company. The Court found that the personal defendants ultimately benefited from the funds received. The Court also found the two directors "were the directing minds of the conduct and they are not to be allowed to shield their negligence or commercial cheating behind the notion that there was no trust, and/or no deemed trust arising from the statute."

The decision is significant because it indicates the willingness of the Ontario Court to pierce the corporate veil in enforcing the statutory trust provisions. The statutory obligation to establish a trust account and to hold funds in trust for the benefit of carriers performing the transportation services will apply potentially to a broader class of persons involved in the transportation industry after amendments to the Ontario Highway Traffic Act are proclaimed in force. As such, the case will continue to have significant consequences for those involved in the transportation industry.

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