In the recent case of Dempsey v. Bagley
(“Dempsey”), Justice C.S. Phillips of the
Alberta Court of Queen’s Bench considered the issue of
vicarious liability of a vehicle lessor for the actions of a driver
of the leased vehicle.
Dempsey involved two actions, both of which arose from
single-vehicle accidents involving Brinks armored vehicles. The
passengers of the Brinks vehicles were injured in the accidents,
and sued the drivers, the drivers’ employer, Brinks Canada
Limited (“Brinks”), and PHH Vehicle Management Services
Inc. (“PHH”), which had leased the vehicles to Brinks.
One of the terms of the lease between PHH and Brinks was that
Brinks would indemnify PHH for any claims relating to the leased
vehicles. It was agreed by the parties that by virtue of the
Traffic Safety Act (“TSA”), both PHH and
Brinks were “owners” of the vehicles.
Liability was admitted in respect of the accidents, and the
amount of damages for each passenger had been agreed upon by the
parties. Because it was determined that the passengers and drivers
were in the course of their employment with Brinks at the time of
the accidents, the parties agreed the claims could not proceed
against the drivers or Brinks by virtue of s. 23 of the
Workers’ Compensation Act (“WCA”), which
bars claims against workers and employers who are subject to the
WCA. Thus, the issue at play in this trial was the liability of
The parties agreed that the claims could proceed against PHH,
even though PHH was also a registered employer under the WCA, as
PHH was not the employer of the passengers or the drivers. Because
of the indemnity clause between Brinks and PHH, the practical
result is that Brinks would be paying any damages assessed against
PHH, even though Brinks is a “protected” employer under
the WCA scheme.
Brinks and PHH argued that the claim against PHH should be
estopped on the basis that the indemnity clause creates a result
that is contrary to the spirit of the WCA. The Court held that the
commercial arrangement between Brinks and PHH could not be used to
circumvent the intention of the TSA, which states that an owner of
a vehicle is vicariously liable for a driver operating the vehicle
with consent. The fact that the practical result is something
unintended by the WCA was not persuasive to the Court. As such, the
claim was allowed to proceed against PHH.
The Court was therefore asked to apportion vicarious liability
as between Brinks and PHH, in accordance with s. 23(2) of the WCA.
In assessing this issue, the Court agreed that these parties should
be severally liable—in other words, each party should only be
liable for their own degree of fault. The Court confirmed Brinks
and PHH were only vicariously liable as a result of their status as
employer of the drivers (in the case of Brinks) and as owners of
the vehicles (in the case of Brinks and PHH). The Court considered
the control each party exercised over the vehicles and drivers
involved in the accidents, and ultimately apportioned liability at
75% to Brinks and 25% to PHH. Thus, the Plaintiffs were entitled to
judgment against PHH for 25% of their agreed-upon damages.
This case will no doubt encourage lessors to continue the use of
indemnity clauses in motor vehicle leases and should serve as a
warning to employers who expect to be immune from liability as a
result of the WCA. In circumstances where they have entered into
lease agreements with a comprehensive indemnity clause, the
employer may wind up paying both WCB premiums and compensation for
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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