The Court of Appeal in the August 10th, 2015 decision in Fernandes v. Araujo et al. addressed the vicarious liability of an owner of a vehicle for the negligence of a person who had possession of the vehicle with the owner’s consent. The Statutory Third Party Insurer for the owner of the ATV was denying third party coverage to the Defendant driver and was relying upon the 1952 decision in Newman and Newman v. Terdik, which held that:

The owner is not vicariously liable for damages sustained as a result of a highway accident when the person with possession of the vehicle violated the condition and drove the vehicle on a highway

However, the Court of Appeal

Affirmed a long line of authority going back to 1933 holding that as the vicarious liability of an owner rests on possession rather than operation of the vehicle, the owner will be vicariously liable if the owner consented to possession, even if the driver operated the vehicle in a way prohibited by the owner.

What is the basis for this finding?

1. The Highway Traffic Act

s. 192 (2) of the Highway Traffic Act provides:

192(2) 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.

This provision therefore places the onus on the owner of the vehicle to be careful in who is being provided responsibility for the operation of the vehicle.

2. Was the decision in Newman wrongly decided?

The Court of Appeal held that:

The proposition upon which Newman rests, namely, that “possession can change from rightful possession to wrongful possession, or from possession with consent to possession without consent” where the person in possession violates a condition imposed by the owner, is inconsistent with the reasoning of this line of authority.

The Court of Appeal cites many cases contrary to the findings in Newman. Although it grapples with its authority to overturn Newman, the Court of Appeal ultimately finds that

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 Accordingly, it is my view that we should overrule the case and declare that it no longer represents the law of Ontario.

What does this mean?

  1. If possession is given, the owner will be liable even if there is a breach of a condition attached to that possession, including a condition that the person in possession will not operate the vehicle.
  2. Breach of conditions placed by the owner on a person’s possession of the vehicle, including conditions as to who may operate the vehicle, do not alter the fact of possession.1

Therefore, be careful with regard to who borrows your vehicle.