Appeal court holds ATV owner vicariously liable because driver was permitted to ‘possess’ vehicle

The Court of Appeal for Ontario has overruled a 1952 ruling, by the same court, on the issue of a vehicle owner’s vicarious liability for negligent use of the vehicle, where an owner gives the driver permission to possess the vehicle but not to operate it on a public highway.

In a decision released Monday, the province’ appeal court dismissed an appeal from Allstate Insurance Company of Canada, which had asked a lower court to dismiss claims by Sara Fernandes against Eliana Araujo and Carlos Almeida. In May, 2007, Fernandes had been injured in a single-vehicle rollover accident, on an all-terrain vehicle, near Dundalk, Ontario. The vehicle was driven by Araujo, owned by Almeida and insured by Allstate.

In a decision released last November, Mr. Justice Paul Perell, of the Ontario Superior Court of Justice, dismissed Araujo’s third-party claim, at the request of Allstate. However Justice Perell turned down Allstate’s request to dismiss Fernandes’ claim against Almeida based on Allstate’s contention that Araujo was not driving the ATV with Almeida’s consent.

“Allstate’s argument essentially challenges the factual findings of the motion judge,” wrote Mr. Justice Robert J. Sharpe, of the Court of Appeal for Ontario, on behalf of the five-judge panel which dismissed Allstate’s appeal. Although Araujo admitted “she did not have express permission to take the ATV off the farm property,” she did not admit that Almeida had “forbidden her from driving the ATV on the highway, and the motion judge refused to draw that inference,” Justice Sharpe added.

Allstate cited the 1952 decision by the Court of Appeal for Ontario, in the case of Newman vs Terdik. That case involved a lawsuit arising from a vehicle collision near Simcoe, Ontario. In Newman, the appeal court found that a vehicle owner was not vicariously liable for a driver’s negligence. Although the driver had the owner’s permission to drive on a lane on the owner’s tobacco farm, the driver did not have permission to drive on the highway.

To overrule the Newman ruling “would enhance rather than undermine the interest of clarity, coherence and predictability in the law,” Justice Sharpe wrote this week, in Fernandes vs Araujo, alluding to Section 192(2) of Ontario’s Highway Traffic Act, which states: “The owner of a motor vehicle or street car is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle or street car on a highway, unless the motor vehicle or street car was without the owner’s consent in the possession of some person other than the owner or the owner’s chauffeur.”

The court cited a more recent Court of Appeal for Ontario ruling, released Aug. 3, 2007, in a lawsuit filed by Tracy Finlayson and Robert O’Connor against GMAC Leaseco Ltd. Finlayson and O’Connor were injured in 2000 when they were passengers in a truck driven by John Simon, who leased the truck from GMAC but was prohibited, under the terms of the lease, from driving that truck. The Court of Appeal for Ontario upheld a finding that GMAC was still vicariously liable for Simon’s negligence.

“Possession and operation are not the same thing, in law,” the appeal court wrote in 2007 in Finlayson. “GMAC consented to Mr. Simon’s possession of the vehicle; it did not consent to his operation of it. Breach of conditions placed by the owner on another person’s possession of the vehicle, including those relating to who may operate the vehicle, do not alter the fact of the second person’s possession.”

Citing Finlayson, Justice Sharpe found, in Fernandes vs Araujo, that the court should now “overrule” the Newman decision “and declare that it no longer represents” Ontario law.

“There is a long line of authority for the proposition that where the owner has consented to possession, the owner will be liable pursuant to (Section 192 (2) of the Highway Traffic Act) even if the vehicle is operated in a manner forbidden by the owner,” Justice Sharpe wrote.

The other four judges – Madam Justice Jean MacFarland, Mr. Justice Paul Rouleau, Mr. Justice Peter Lauwers and Madam Justice Gladys Pardu – concurred.

“It cannot be the case that if the person in possession subjectively believes that he or she has the owner’s consent, that alone is sufficient determine the liability of the owner,” Justice Sharpe wrote. “That would allow anyone with actual possession of the vehicle to fix the owner with liability even where the owner had not consented to that person having possession of the vehicle. The focus of the language and purpose of the provision are on the actions of the owner who is charged with the responsibility of exercising appropriate caution when giving another person possession of the vehicle.”