Car Rental Company’s Lack of Diligence Opens the Door to Litigation

Car Rental Company’s Lack of Diligence Opens the Door to Litigation

A recent decision by the New Brunswick Court of King’s Bench confirms the commercial reality that the parties to a contract are not always those who sign it. In the context of car rentals, where rental companies face the risk of accidents that may lead to insurance claims, it is crucial for rental agreements to accurately reflect the “real” parties to the contract — those who can be sued to enforce the rental agreement.  As logical as it may seem, this aspect is sometimes inadvertently overlooked, leaving the door open to unnecessary litigation.

Chiasson-Basque v. Enterprise Rent-a-car Canada Ltd., [2024] N.B.J. No. 335, 2024 NBKB 214[1] is a New Brunswick Court of King’s Bench summary judgment decision from C. Bourque J. arising from a three-vehicle collision that occurred on June 17, 2011. Jonathan Davies (“Mr. Davies”), the driver of a pickup truck (“the truck”) owned by Enterprise Rent-A-Car Canada Limited (“Enterprise”), was driving under the influence, crossed the center line, and caused an accident that ultimately led to his own death. The drivers of the two other vehicles involved in the accident, David Basque (“Mr. Basque”) and Fernand Landry (“Mr. Landry”), also sustained fatal injuries in the accident.

At the time of the accident, Mr. Davies was employed by Acciona Infrastructures Canada Inc. (“Acciona”). He was working on a wind farm project in Lamèque, New Brunswick (“the project”) as part of a joint venture (the “joint venture”) with Tetra Tech Canada Construction Inc. (“Tetra Tech”).

Following the accident, the estate and family members of Mr. Basque launched lawsuits against:

1. Davies’ estate for his personal negligence;
2. Acciona for their vicarious liability as employer; and
3. Enterprise for their vicarious liability as owner of the truck.

On a motion by Enterprise and Mr. Davies’ estate to set aside a noting in default in the Landry proceedings, the Court denied the motion. The Court held that neither Mr. Davies nor Enterprise had established a prima facie defence and concluded that Mr. Davies was at fault for the accident and that Enterprise was liable for Mr. Davies’ negligence as owner of the vehicle, pursuant to section 267 of the Motor Vehicle Act, RSNB 1973, c M-17. The Court then authorized Mr. Davies’ estate and Enterprise to file claims for contribution and indemnity against, among others, Acciona and Tetra Tech.

Enterprise issued a cross claim and third-party claim against Acciona and Tetra Tech wherein they sought indemnification under the indemnification provisions of (1) the Rental Agreement and (2) The Corporate Services agreement (between Enterprise and the joint venture). Enterprise argued that the two agreements placed liability on the Renter instead of on Enterprise in the event of an accident. Further, Mr. Davies’ vehicle was being used for work purposes at the time of the accident, and the joint venture covered the rental costs, making the joint venture the “true” Renter and not Mr. Davies.

Both Acciona, and Tetra Tech (“the moving parties”) counterattacked launching summary judgment motions seeking the Court’s dismissal of Enterprise’s claims against them for several reasons, including the fact that:

1. Davies personally executed the Rental Agreement with Enterprise, which names only him as the Renter; and
2. The Corporate Services Agreement (“Business Agreement”) was not signed.

For non-lawyers, a motion for summary judgment is generally filed by a party who believes that there is no genuine issue necessitating a trial because in the moving parties’ view, the claims made against them are without merit and can be easily resolved since the facts are undisputed. Needless to say, this is a costly additional procedure in litigation, which is only introduced if a party believes it has a very strong case which, if decided summarily, will save it the time and expense of going to trial.

In the case of Chiasson, what prompted Acciona and Tetra Tech to move for summary judgment was the fact that:

1. Davies signed a Rental Agreement for a Dodge Ram pickup truck that named him as the Renter and included an indemnity clause that stated:

“Renter and driver shall defend, indemnify, and hold Owner harmless from all losses, liabilities, damages, injuries, claims, demands, costs, legal fees, and other expenses incurred by Owner in any manner from this rental transaction...”[2]

2. The Rental Agreement included a clause relating to damage, loss or theft of the vehicle:

“Renter accepts responsibility for damages to, loss or theft of Vehicle...”[3]

3. The Rental Agreement contained an acknowledgment to be signed by Mr. Davies, confirming that the agreement comprising of four pages constituted the entire agreement between the Renter and Enterprise, to the exclusion of any other parties. This applied regardless of whether another party made the vehicle reservation, covered the payment, or negotiated specific terms. The agreement further stipulated that it could not be amended without the signatures of both parties, Enterprise and the Renter[4]

4. Finally, neither Acciona nor Tetra Tech were mentioned in the Rental Agreement.

Acciona and Tetra Tech submitted that since the agreement terms were unambiguous and clearly concerned Mr. Davies and Enterprise, there was no need to consider whether parties other than Mr. Davies (i.e. Acciona and Tetra Tech) were responsible to indemnify Enterprise. In other words, it was justified to rely solely on the provisions of the Rental Agreement.

In addition, Acciona and Tetra Tech argued that, although the joint venture had received a Business Agreement from Enterprise for the latter to supply a number of cars to some of its seconded employees, including Mr. Davies, this commercial agreement was never signed by the moving parties and its indemnity provisions were never brought to their attention. Consequently, the moving parties asserted that they had never intended to be bound by this agreement. The indemnity provision of the Business Agreement read as follows:

“Customer agrees to pay Provider upon demand for all rentals and other charges incurred and all indemnity and other payments owed by an Eligible Renter under a Rental Agreement relating to a rental for business use not timely paid by the Eligible Renter.”[5]

Further to the parties’ respective submissions at the summary judgment motion, Justice Bourque sided with Enterprise and dismissed the moving parties’ motion opining that a trial was necessary on the grounds that, in this case, there was insufficient evidence that the Rental Agreement applied solely to Enterprise and Mr. Davies. She emphasized in line with a number of New Brunswick Court of Appeal decisions: Directcash ATM Management Partnership v. Maurice's Gas & Convenience Inc., 2015 NBCA 36, Pharmacie Acadienne De Beresford Ltee v. Beresford Shopping Centre Ltd./Ltee, 2008 NBCA 12 and New Brunswick Highway Corporation v. MRDC Operations Corporation, 2023 NBCA 19, as well as the Supreme court of Canada: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, that the face of the contract is the starting point for the court’s “objective” fact-finding mission, which must extend beyond it and examine the wider context and circumstances surrounding its formation[6].

She also relied notably on the case of Aviva Insurance Company v. Wawanesa Mutual Insurance Company, 2019 ONCA 704, in which the Court applied agency principles to find that the driver of a truck delivering furniture was not the lessee, but an agent of his principal on whose behalf he had contracted. The reasoning being that the principal would be the one entitled to benefit from the contract thus negotiated, as well as the one liable in the event of a breach.

Justice Bourque concluded, among other things, that:

1. After Tetra Tech and Acciona formed the joint venture for the design and construction of the wind farm, in preparation for the project, they contacted Enterprise to arrange rental vehicles for employees;
2. Enterprise’s Business Rental Sales Executive responded with an email detailing the rental rates, inclusions, exclusions, additional driver protection products, and kilometer charges;
3. Tetra Tech directed that all vehicles be rented in the joint venture’s name, as they were intended for “business use on the Project”;
4. The vehicle rentals were arranged through a Business Agreement negotiated by Robert Both (the Purchasing Manager at Tetra Tech), acting on behalf of the joint venture;
5. Enterprise sent the Business Agreement to Mr. Both requiring his signature;
6. The agreed rental rate was a corporate rate for fleet vehicles, not a personal rate;
7. The joint venture instructed staff to refuse offers for additional insurance coverage when picking up the vehicles, a directive that Mr. Davies followed;
8. The joint venture obtained an endorsement from its own insurer to include the rental vehicles under the project’s liability insurance policy;
9. All invoices for rentals, including Mr. Davies’ were billed to and paid by the joint venture;
10. Although the Rental Agreement signed by Mr. Davies only had his name, it clearly stated that the rental was for “business” purposes and referenced the joint venture, Lameque Wind Farm, with “Source” listed as “Lameque WI”;
11. The Rental Agreement was processed through a corporate account established by Enterprise for the joint venture on behalf of the project;
12. Once all vehicles in the corporate fleet were picked up, Enterprise sent a confirmation email to the joint venture; and,
13. The joint venture covered the cost of any damages to vehicles during the term of the Rental Agreement.

With regard to the failure of the moving parties to sign the Business Agreement, Justice Bourque found that the absence of a signature in itself did not invalidate the existence of the agreement. From Mr. Both’s testimony, Tetra Tech’s omission appeared to be an oversight. Furthermore, according to the explanations of Mr. Michael Giannelia of Acciona, the document was not signed due to a breakdown in “the internal reporting process”[7]. For all these reasons, Justice Bourque concluded that the failure to sign the Business Agreement did not mean that the parties in question did not intend to be bound by its provisions.

The key takeaway from this decision is that while the Chiasson case is a reminder that identifying the true parties to a contract may necessitate looking beyond the “four corners” of the agreement, it also offers a chance to consider what could have been done differently to prevent additional litigation. Arguably, the moving parties’ motion for summary judgment, from a substantive perspective, was inappropriate or at least risky. Nevertheless, they felt empowered by some of Enterprise’s errors. It is likely that if Enterprise had reviewed the Business Agreement with the moving parties and required their signatures before making vehicles available to their employees, in addition to ensuring its Rental Agreement clearly identified Mr. Davies as Renter “on behalf of Acciona and Tetra Tech”, a motion for summary judgment on the issue of determining the “true” Renter would likely have been avoided.

NB: Acciona and Tetra Tech's motion for leave to appeal Justice Bourque's decision was dismissed by the New Brunswick Court of Appeal on February 11, 2025.

[1] “Chiasson”

[2] Chiasson at para 25.

[3] Ibid at para 26.

[4] Ibid at para 30.

[5] Ibid at para 36.

[6] Ibid at paras 90 and 91

[7] Ibid at para 106.