Possession Is Still 9/10ths Of The Law

The Superior Court has released a decision dealing with whether an owner of an ATV can be held vicariously liable for a driver’s negligence, even though no consent was given to operate the vehicle.

In Fernandes v Araujo, Fernandes was seriously injured while a passenger on an ATV. The ATV was owned by Carlos Almeida and insured by Allstate. Eliana Araujo was the driver of the ATV; she had a G1 licence at the time of the accident.

Carlos was fixing a fence on his farm with some of his friends, including Eliana. Carlos told Eliana that she could drive the ATV on the farm, while Carlos’ cousin, Jean Paul, told Eliana not to leave the farm on the ATV. Carlos did not expressly forbid Eliana and Fernandes to leave the farm, although later he said if Eliana and Fernandes had asked him to leave the property he would have said no.

Eliana and Fernandes left the property to drive over to a nearby farm on a public road without permission. While returning back from the nearby farm, the ATV rolled over and Fernandes was seriously injured.

Allstate brought two summary judgment motions: the first dealt with whether Allstate was liable to provide insurance coverage when the owner of the ATV did not give his consent for Eliana and Fenandes to drive it.

The second summary judgment motion asked the court to dismiss Eliana’s third party claim because she was operating the ATV without the owner’s consent and was operating the ATV contrary to Statutory Condition (4.1) of O.Reg 777/93, which states that an insured shall not operate, drive or permit another person to operate or drive a vehicle unless they are authorized by law to do so.

Allstate’s motion in the main action was dismissed and was granted in the third party action.

In the main action, the judge relied on the Court of Appeal’s decision in Finlayson v. GMAC Leasco Ltd. In Finlayson, the Court of Appeal held that vicarious liability under section 192(1) of the Highway Traffic Act is based on possession, not operation, of a vehicle, following an old line of authority (Thomson v. Bouchier). In Finlayson, it was stated that if an owner gives possession of a vehicle to another, and the owner expressly prohibits that person from operating the vehicle, the owner is nonetheless vicariously liable for the negligent operation of that vehicle.

The judge had to reconcile this decision with the Court of Appeal’s decision in Newman v. Terdik. In Newman, Terdik was a tobacco owner who gave his worker permission to use the defendant’s automobile to travel down a laneway between two tobacco farms, but was expressly forbidden from driving on the highway. The worker drove on the highway where he hit the plaintiff, Newman, who sustained injuries. The Court of Appeal held that the worker did not have possession of the vehicle with consent; therefore, Terdik was not vicariously liable. The Court of Appeal found that possession is a fluid concept; it can change from rightful to wrongful possession or to possession with or without consent.

The judge found that Newman was distinguishable because Carlos did not expressly impose any restrictions on Eliana’s operation of the vehicle; he gave her possession of that vehicle. The fact that Carlos’ cousin expressly forbid Araujo from leaving the property could not be attributed to Carlos. However, the judge went further, stating that Newman may be wrongly decided as it did not follow Thompson v. Bourchier.

Accordingly, the judge found that there was consent as Carlos gave Eliana possession of the ATV.

With regard to the third party action, the judge held that Araujo was not licensed to drive an ATV because she was not authorized by law to drive it. Section 18 of O.Reg 316/03 states that a driver of an off-road vehicle requires a valid A, B, C, D, E, F, G, G2, M, or M2 driver’s licence. Further, section 32(1) of the Highway Traffic Act states that no person shall operate a vehicle on a highway unless they hold a valid licence.  Finally, Statutory Condition 4.1 states that an insured shall not operate, drive or permit another person to operate or drive a vehicle unless they are authorized by law to do so.

Araujo was operating the ATV with a G1 licence, and therefore, the judge found that she breached Statutory Condition 4.1 under the Allstate policy.

This decision confirms that vicarious liability is based on possession, not operation. Even if a person is expressly prohibited by the owner from operating the vehicle, the owner will be found vicariously liable if possession has been granted. The fact that a driver of a vehicle is operating without the owner’s consent is irrelevant if the owner has given possession of the vehicle to the other party.

See Fernandes v Araujo 2014 ONSC 6432 (CanLII)

Monika Bolejszo

Monika Bolejszo

Associate at Miller Thomson LLP

Email: [email protected]
Tel: +1 519 593 32

Monika is an associate in Miller Thomson’s Kitchener-Waterloo office and practices insurance litigation. Monika joined Miller Thomson as an articling student in 2013.