August 28, 2015

After 62 Years, Court of Appeal Admits it was Wrong: Summary of Fernandes

A five-judge panel of the Court of Appeal just over-ruled its own decision from 1953 on vicarious liability of the owner of a vehicle being driven on the highway.

This week, the Court released its decision in Fernandes v. Araujo (2015 ONCA 571) about the liability of the owner of an ATV driven on the highway. The plaintiff was a passenger on the ATV. The owner of the ATV told the driver and the plaintiff they could try it out on the farm property. They were not to drive it on the highway. The driver took it off the farm property, onto the highway, and the plaintiff was injured when it rolled over.

The issue arises from section 192(2) of the Highway Traffic Act which provides that an owner is liable for damages arising from the negligent operation of a motor vehicle on a highway unless the vehicle was in the possession of some other person without the owner’s consent.

In 2007, in Finlayson v. GMAC Leaseco Ltd., the Court of Appeal affirmed a long line of authority (going back to 1933) that the vicarious liability of an owner rests on possession rather than operation of the vehicle. If the owner consents to possession, he will be vicariously liable even if the driver operates the vehicle in a way prohibited by the owner. In Finlayson, the Court held that the purpose of the section was to protect the public safety, and to encourage owners to be careful when giving possession to others.

However, in 1953, in Newman and Newman v. Terdik, the Court of Appeal had held that an owner is not vicariously liable for negligent operation on a highway if he permits the driver to operate the vehicle on private property, but expressly prohibits operation on the highway. In Newman, the Court reasoned that possession can change from possession with consent to possession without consent even without a change in physical possession where the person in possession violates a condition imposed by the owner.

The Court has now decided Newman was wrong.

In this case, Allstate argued that Newman was different than the decisions affirmed in Finlayson. It contended that, because the language of s. 192(2) refers to the negligent operation of the motor vehicle on a highway, where the owner does not consent to use on the highway, the consent required by the section is absent. The Court of Appeal disagreed, holding that the reference in s. 192(2) to operation on a highway just means that the owner’s vicarious liability will be triggered only where the place of the negligence and injury is on a highway. The Court found it difficult to see why the result should be different in the case where the owner imposes a prohibition on operation on the highway (Newman) than in a case where the owner imposes a prohibition on any operation at all (Finlayson). There was nothing in the language of the section to justify that difference.


The Court concluded:

In my view, Newman was wrongly decided. It is inconsistent with the reasoning and principle expressed in the long line of cases commencing with Thompson that if the owner has consented to possession, the owner will be vicariously liable even if there is a breach of a condition imposed by the owner relating to the use or operation of the vehicle.

It over-ruled its decision in Newman because leaving it intact would not serve the interests of certainty and predictability in the law. Newman was inconsistent with decisions made both before and after it, and created an anomaly that could not be supported in principle and undermined the coherence of this area of law.