On August 23, 2013, the CFLA reported that one of its members (a
finance company) was issued an order by the Ontario Ministry of
Labor under OHSA for damages allegedly suffered as a result of an
accident with respect to equipment that was subject to an equipment
lease. Briefly, under the OHSA, and other Canadian similar
legislation, a supplier of equipment to a company may be liable if
the equipment is involved in an accident. The definition of the
word supplier under the OHSA includes, without limitation, a lessor
The summary provided by the CFLA indicated that there were no
reported cases where an equipment finance company had such an order
made against them in the past. As such, this is a new area of
concern for lessors generally. The impact of the order is that a
lessor can be held liable for the actions of its lessee. This
results in a form of vicarious liability, which has to date,
generally not been considered in a credit analysis. Needless to
say, this is a very troubling result which the CFLA is taking
seriously. As is reported on its website, the CFLA is commencing a
lobbying initiative, first with the Ontario Government, to amend
the legislation to exclude leases in excess of four months, among
other things. We will keep you advised as to further updates with
respect to these lobbying efforts.
Unfortunately, it is not possible for the parties to contract
out of the OHSA obligations and, as such, there is no provision
that may be embedded into lease documents which will cause this
particular risk to be eliminated. While well drafted leases have
applicable covenants and indemnities, these protections are only as
strong as the party providing the promise. There are, however,
certain practices that can be followed which can minimize or reduce
the risk, some of which can be included easily into existing
procedures. Other techniques may cause burdensome procedures. We
will be providing our clients with certain suggestions to
modifications to their lease forms, practices and procedures, which
could help reduce but not eliminate the potential of lessor
liability with respect to the OHSA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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