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December 2006
IS THIS LEGAL? - MY CARGO IS BEING HELD
FOR RANSOM
Sadly enough, there appears to be a "not so uncommon
practice" by carriers in the trucking industry (particularly,
smaller outfits) to improperly lien cargo, in essence, holding it
for ransom. Every year we receive calls from clients advising that
a carrier holds cargo hostage demanding that some obscure debt of
dubious character from 3 years ago be paid. Often times the client
is a load broker or a carrier itself, who subcontracted the load
and does not even own the cargo.
Usually the debt that the carrier claims has nothing
to do with this particularly movement of goods; sometimes the debt
is owed to a completely different company; and often times, there
is a very good argument whether the debt is even owed at all. Invariably,
the client has already tried contacting the police; however, they
will advise "it is a civil matter" and not become involved
in the situation. Although the law is relatively black and white
on this subject, the decision of what to do, given the business
realities, is not so clear.
Unless there is an explicit contract that states otherwise,
a carrier's cargo lien is a particular lien, not a general
lien. This means, that a carrier can only lien cargo for freight
owing for that particular shipment and not for debts from previous
shipments or for any other charges (see Bad Boy Appliances and
Furniture Ltd. v. T. Landry, Ltd. [1977] O.J. No. 536 para 15).
Even assuming there is a proper debt owing from your company from
another transaction to the carrier holding the cargo hostage, and
the cargo being held is actually owned by your company, the cargo
is still being illegally detained. A proper cargo lien is
particular only for that actual movement.
Despite this, in Ontario, you really only have a few
options for a carrier hell bent on holding onto the cargo until
the alleged debt is paid. Your company may decide to either:
- simply pay the debt;
- bring a court application for the carrier to either
release the cargo to you or force them to make delivery; or
- pay the debt under protest and sue the carrier
for the return of the money.
In essence, you can either "pay the carrier"
or "pay your lawyers". Not an enviable situation, but
one that you should be prepared for. Though the law is clear, it
requires a bit of work from your lawyers to obtain the court order.
It is generally recommended, depending on the circumstances,
that you take the second option. If your lawyer moves quickly enough,
within a week or so, you can obtain a court order requiring the
release and/or delivery of the cargo. If there are special urgent
reasons, and your lawyer works throughout the night, you can even
have your order for release or delivery of the cargo within a couple
days. However, this will typically cost anywhere from $7,000 - $10,000
in legal fees.
The last option, if an action in the small claims
court, will likely cost just as much as the second option, (depending
on how many roadblocks are thrown up by the defendant), and take
anywhere from 1-2 years. If its an action in regular court, then
the legal fees will be doubled and the time frame will be anywhere
from 2-3 years. If successful on either the application or court
action, a court will generally order that the carrier pay a couple
thousand dollars of your company's legal bills.
The worst thing you can do is to do nothing. Depending
on the expectations of the consignee, it is worth trying to negotiate
or apply industry pressure from outside players to convince the
carrier to release the cargo; however, be prepared that this is
not often successful. It is an unfair situation, but one that needs
to be dealt with immediately. It is also a good practice to keep
the consignee and shipper in the loop as to the situation and ask
them to apply pressure on the carrier to release the goods. If this
matter is not dealt with soon, your company may itself be on the
receiving end of a lawsuit by the consignee and/or shipper.
Demetrios Yiokaris
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