Law Times

Page 8 OctOber 19, 2015 • Law times www.lawtimesnews.com Fernandes v. Araujo Lawyers welcome court's statement on vicarious liability BY MARG. BRUINEMAN For Law Times he Ontario Court of Appeal has over- ruled a 62-year-old decision in uphold- ing a lower court ruling determining when to hold a vehicle's owner vicari- ously liable. "The Court of Appeal, and rightly in my opinion, decided it was appropriate to close the loophole," says Stacey Stevens, a personal injury litigator and partner at Thomson Rogers who acted for Sara Fernandes in Fer- nandes v. Araujo. "It really sup- ports the case law that goes back before 1953." When Carlos Almeida told Eliana Araujo she could try an all-terrain vehicle, his cousin said she should remain on the property. Later that day, Araujo took the vehicle off the property and ended up rolling it, leaving Fernandes, the passenger, with serious injuries. The Allstate Insurance Co. of Canada had denied Araujo third-party coverage because she didn't have the necessary class of licence to operate the vehicle. The superintendent of financial services, in assuming Araujo's defence, issued a claim against the insurer. In two motions for sum- mary judgment, Allstate sought to dismiss Fernandes' claim on the grounds that Araujo wasn't driving with the owner's consent and that she wasn't entitled to cover- age because she didn't have the proper licence. The mo- tion judge dismissed the mo- tion on the issue of permis- sion and allowed the third- party claim for coverage. The owner's insurer, All- state, argued before the On- tario Court of Appeal that the owner wasn't vicariously liable for damages sustained in a highway accident. As part of its arguments, it cited its 1953 decision in Newman v. Terdik. In examining the issue, the Ontario Court of Appeal referred to the 2007 decision of Finlayson v. GMAC Leaseco Ltd. in which it affirmed "a long line of authority going back to 1933 holding that as the vicarious li- ability of an owner rests on pos- session rather than operation of the vehicle, the owner will be vi- cariously liable if the owner con- sented to possession, even if the driver operated the vehicle in a way prohibited by the owner." In the August decision writ- ten by Justice Robert Sharpe, the Ontario Court of Appeal pointed to an inconsistency in Newman where the same court held that in a similar situation in which the driver had received permission to drive on private property but not to take the vehicle on the highway, the owner wasn't vicariously liable for the resulting damages. "I conclude that the deci- sion in Newman is inconsistent in principle with the prevailing line of authority culminating in Finlayson. I also conclude that the interests of legal clarity and certainty would best be served by overruling Newman," wrote Sharpe, dismissing the 62-year- old determination. In Newman, the Ontario Court of Appeal found the own- er of a car driven negligently on a highway by a farm employee wasn't vicariously liable. The owner had told him he could drive the automobile on the farm property but not on the highway. The proposition was that where the person driving violates a condition imposed by the owner, possession could change from rightful to wrongful. Sharpe wrote that Finlay- son supports the proposition that owners will be liable where they've consented to possession no matter how the person drives the vehicle. "If the owner cannot escape liability where the person with possession violates a condition that he or she not drive the car at all, it is difficult to see why the re- sult should be different where the condition is that the car not be driven on a highway. I see noth- ing in the language of s. 192(2) capable of justifying treating a stipulation by an owner that his or her vehicle not be taken on the highway differently from any other stipulation restricting the use or operation of the vehicle," wrote Sharpe in the unanimous decision in "correcting the error" by overruling Newman. With Newman still in place, the door was open to defendants to claim no consent, says Ste- vens. Fernandes, then, closes the door to the discrepancy and confirms that vehicle own- ers are liable for the actions of the driver as soon as they give permission to operate the vehicle. "One of the challenges we had to deal with was convincing the court that it was appropriate to overturn Newman," says Stevens. "It takes away the motor vehicle owner's opportunity to es- cape liability for an injured person's damages by saying they didn't consent to the way the vehicle was being op- erated. In firming up the law, it gives injured plaintiffs the ability to access justice." Stevens notes that for Fer- nandes, who suffered a seri- ous brain injury, the accident has had a definite impact on her ability to live an indepen- dent life. Cory Giordano, an associate at Ottawa-based Supreme Advo- cacy LLP, points out that the court has the ability to overturn its own previous decisions and notes the case has wide implications. "This has implications for the insurance defence industry," says Giordano. "It will have wide implica- tions for scenarios in which an individual lends or grants per- mission to another individual. I think it's going to fall to future courts to examine the param- eters of this case." What Giordano also found interesting in Fernandes was the court's use of language es- sentially preventing an appeal to the Supreme Court of Canada by writing that the decision isn't of national importance. Fernandes also helps to clar- ify the test on whether or not a driver has the consent of the owner, says Jennifer Hunter, a defence and health law lawyer at Lerners LLP. While the case is important because it overturns an older decision, there was support for getting rid of it, says Joni Dob- son, a personal injury lawyer at Legate & Associates LLP in Lon- don, Ont. "In my view, the importance of the decision was really that the Court of Appeal decided to fix it," says Dobson. "From both sides, it was a good decision." Others agree. "This was a good outcome in that the Court of Appeal confirmed what people in the business thought that the law was all along," says Lorraine Takacs, an insurance defence lawyer at Hughes Amys LLP who represented Araujo. "It resolves any confusion." LT 'In firming up the law, it gives injured plaintiffs the ability to access justice,' says Stacey Stevens. 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