By MARK COOMBS, Student at Law
Be careful who you trust with your car keys. The older approach taken by the Court of Appeal in Newman and Newman v. Terdik,  O.R. 1 (C.A.) gave owners a break by not making them vicariously liable where an operator drove outside the scope of the permission given, such as on the highway when permission was limited to the neighbourhood streets. That’s now changed since the recent case of Fernades v. Araujo, 2015 ONCA 571 where Justice Sharpe held that vehicle owners are liable for the negligence of others they lend their vehicle to, regardless of the extent of permission they give them.
The plaintiff, Sara Fernandes, sustained serious injuries as a passenger on an ATV driven on a highway by Eliana Araujo. The ATV was owned by Carlos Almeida who had given permission for Eliana to “try it out” but had silently agreed with his cousin John Paul that Araujo should not take it off of farm property. Araujo left with Fernandes and, on their return to the farm, they were involved in an accident.
Almeida’s insurer brought a motion for summary judgment, essentially stating that since he had not given Araujo permission to drive on the highway he could not have been found vicariously liable. The motion’s judge dismissed this, stating that Almeida did not expressly forbid Araujo from driving on the highway and that even if he did, he would still be vicariously liable as per Finlayson v. GMAC Leaseco Ltd., 2007 ONCA 557.
The Decision of the Court of Appeal
The case turned on the interpretation of The Highway Traffic Act, R.S.O. 1990, c. H.8, s. 192 (2) which provides that an owner is vicariously liable unless the use of the vehicle “was without the owner’s consent in the possession of some person other than the owner….”.
Justice Sharpe explained purpose of this provision was to protect the public by imposing responsibility for the management of a vehicle on the owner. He then went on to explain a rift in the law had developed in the application of the provision, with some cases finding liability for owners who had lent out their vehicle and some cases finding none. These cases were exemplified by Newman and Finlayson.
Newman or Finlayson?
In Newman an employer, the owner of the vehicle in question, had told his employee that he could drive the vehicle on the farm but not to take it on the highway. Justice McKay held that the owner of the vehicle was not vicariously liable for the operator’s negligence because he had not consented to that type of use of the car.
Finlayson involved a truck owned by GMAC and leased to two individuals. One of those individuals drove the truck and got into an accident even though he was an excluded driver under the lease. The Court held GMAC liable in Finlayson because the corporation gave the driver access to the truck allowing him to possess it. Even though the individual was forbidden from driving the truck, GMAC was still liable because they had given him access to it.
Justice Sharpe recognized that Newman and Finlayson were irreconcilable and decided to follow the approach in Finlayson. He agreed that Newman did apply in this case but also stated that it was wrongly decided. He then set out the test for overruling prior jurisprudence of the Court of Appeal.
Overruling Prior Jurisprudence
Following past jurisprudence and the concept of stare decisis are extremely important for our common law legal system. Following past decisions creates consistency and predictability in the law, allowing others to behave with their legal obligations in mind. However, the Court of Appeal can overrule a prior decision as long as it is satisfied that the error should be corrected after considering:
- The advantages and disadvantages of correcting the error;
- The effect and future impact of either correcting it or maintaining it on both the parties and future litigants; and
- The integrity and administration of our justice system.
The Court found that the advantages of overruling correcting the error it made in Newman outweighed the disadvantages. It was unlikely that Almeida or any other vehicle owner would have relied on Newman when deciding to grant possession of a vehicle to another party. The Court also mentioned that insurers such as Allstate probably did not rely much on Newman, since they must provide owners with coverage even where the vehicle is operated in a manner prohibited by the owner.
Why the decision is important
The Court of Appeal’s decision in Fernandes confirms the vicarious liability of owners and solidifies the proper approach to take when overruling prior jurisprudence. It also means that consideration over whether a limit on consent from the owner was express or implied is now a non-issue because it doesn’t matter. Owners will be liable for the negligence of those they lend their keys to, regardless of curfew conditions or anything else imposed.
So, when you hand over your keys, make sure the person driving knows with what you are trusting them.