Ontario Court of Appeal resolves conflicting case law on borrowed vehicles

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The Ontario Court of Appeal recently resolved a conflict between two Court of Appeal cases when it comes to liability for owners whose vehicles are being driven by others.

This recent case, Fernandes v. Araujo, revolves around an ATV accident.

Case example

A member of the ATV owner's family told the driver, in the presence of the ATV's owner Carlos Almeida, to keep the vehicle on the farm. The driver failed to obey this instruction, and took Almeida's ATV to a neighbouring farm.

On the return journey, the ATV rolled over, and the plaintiff passenger was injured. The owner's insurer asserted that it did not have to cover the driver's negligence, because the driver did not have Almeida's consent to drive.

The case made its way to the Court of Appeal, where Sharpe J.A. was met with conflicting Court of Appeal jurisprudence to resolve. In cases following Finlayson v. GMAC Leaseco Ltd., the owner of the vehicle would be found vicariously liable so long as she had consented to the driver taking the vehicle in the first place.

In these cases, it does not matter whether the driver used the vehicle to do something the owner had forbidden (e.g. taking the vehicle off-road or on a highway despite specific instructions not to). However, the Court of Appeal had five decades earlier, in Newman v. Newman and Terdik, determined that the owner was not vicariously liable for damages when the owner gave the driver permission to drive on private property but forbade the driver from taking the car onto the highway.

Fernandes overrules Newman, holding that it is the consent to possession that makes the owner vicariously liable. The violation of conditions placed on possession by the vehicle's owner does not invalidate the driver's possession of the vehicle.

Justice Sharpe wrote for a five-judge panel of the court as follows:

"[53] Refusing to overrule Newman would reaffirm our commitment to precedent. However, it would serve no other advantage. The interests of justice would not be served by absolving Carlos and his insurer Allstate from responsibility for the damages suffered by Fernandes. Overruling Newman would enhance rather than undermine the interest of clarity, coherence and predictability in the law. Accordingly, it is my view that we should overrule the case and declare that it no longer represents the law of Ontario."

The Finlayson approach may seem harsh at first sight, because it makes owners liable for accidents they didn't actually cause. It does serve an important policy goal, though: the Finlayson approach tends to give injured claimants a better chance of accessing insurance in response to their claim.

For that reason, the decision is cause for cheer among accident victims' advocates - as well as a welcome clarification in the law.


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