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Dempsey v. Bagley – Alberta Court of Queen’s Bench clarifies issue of liability of lessor

Posted in: Case Summaries // Written on behalf of Cuming & Gillespie
June 20, 2016

The issue of vicarious liability on a lessor of a vehicle was at the forefront of a recent decision out of the Court of Queen’s Bench of Alberta on two actions in which Cuming & Gillespie lawyers represented the Plaintiffs. While leasing of vehicles is increasingly common and it is standard for the lessor to be named as a defendant in an action where a driver of the leased vehicle caused injury to others, the liability of the lessor is often not dealt with. This is because in most circumstances, the owner/lessee’s insurer responds to the claim.

The two related actions dealt with in the decision of Madame Justice C.S. Phillips in Dempsey v. Bagley, 2016 ABQB 124, were unique in that the Plaintiffs were statute-barred from pursuing a claim against the at-fault driver or his employer (the lessee/owner of the vehicle), by virtue of the Workers’ Compensation Act. Alberta’s WCB legislation specifically precludes anyone injured while in the course of their employment and covered by WCB from pursuing a claim against their employer or any other at-fault party also covered by WCB in relation to the incident. Although the lessor in this case (PHH) was a registered employer under the Workers Compensation Act, it was conceded that the claims could proceed against PHH on the basis that neither the driver nor the plaintiffs were employees of PHH.

As a result, claims were issued against the vehicle lessor. With liability and quantum of damages agreed to, the parties appeared before the Court on the issue of whether the vehicle lessor could be held vicariously liable for the actions of the at-fault driver of the leased vehicle. PHH and the lessee/owner (Brinks) argued that because there was an indemnity clause in the lease contract, which would result in Brinks having to indemnify PHH for any amount awarded against it, PHH could not be held liable as that result would run contrary to the purpose of the Workers’ Compensation legislation. The Court however accepted the position of the WCB and the Plaintiffs – that a commercial contract between two parties cannot be used to circumvent the intention of the Traffic Safety Act, which sets out that an owner of a vehicle (including a lessor) is vicariously liable for the negligence of the driver operating the vehicle with consent.

The Court then went on to apportion vicarious liability between Brinks and PHH, as required under s. 23(2) of the Workers’ Compensation Act, and held that joint and several liability did not apply, such that PHH and Brinks were each considered liable only for their degree of fault stemming from their role as employer of the driver and/or owner(s) of the vehicle.

Taking into consideration the degree of control each party had over the vehicle and driver, Madame Justice Phillips apportioned 25% liability to PHH and 75% liability to Brinks. The practical result of this apportionment was that the Plaintiffs were each able to obtain 25% of their damages, payable by PHH. Given the indemnification clause in the contract between PHH and Brinks, it is expected that Brinks will ultimately be paying the proportion of damages awarded to the Plaintiffs.

While a difficult result for the individual Plaintiffs who were severely injured in this accident, if not for the fact that there was a lessor of the vehicle involved, the Plaintiffs would have had no recourse outside of claims through the WCB.

Many cases involving the WCB are extremely complex and fact-specific. The outcome in this case should act as a signal that even where on first glance, any claim outside of the WCB appears to be statute-barred, it is worth digging further to confirm that there is not a lessor or other party whom the injured individual may have a valid claim against.

This decision will likely also draw the attention of employers who not only pay WCB dues, but enter into lease contracts that include indemnification clauses.

Read the decision here.

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