Car Operated without Consent but Leasing Company Still Liable

NOTE: An appeal from the decision discussed in this posting was dismissed by the Court of Appeal on August 3, 2007. The reasons are available here.¬†Although the Court of Appeal upheld the decision of the motions judge, it disagreed with his statement that “it is not possible for a person to be in operation of a vehicle without being in possession” of it. In this case, even though the lessee was not permitted to operate the vehicle, the Court held that he was “in possession” of it “because he was permitted to control its use”.

The Court drew a sharp distinction between “use or operation” and “possession”. It is the latter that gives rise to vicarious liability under s. 192 of the Highway Traffic Act. Here, while GMAC Leaseco had not consented to the operation of the vehicle by the lessee, by entering into a lease with him, it had consented to him having possession of the vehicle.

The Court of Appeal’s reasons reconcile what we said, in our original post, was puzzling about the motions judge’s decision. He had found that GMAC had not consented to the lessee having possession of the vehicle, yet he nevertheless imposed liability on it. The C.A. held that the lessee did have possession with GMAC’s consent, which is what must be established to trigger vicarious liability under s. 192 of the Highway Traffic Act.

The original post follows:

This is an interesting, but puzzling, decision. In Finlayson et al. v. GMAC Leaseco Limited, Mr. Justice J.W. Quinn of the Ontario Superior Court was dealing with a personal injuries claim by passengers in a car leased by GMAC Leaseco. The lease contained a term, prohibiting the car from being driven by excluded drivers. The lessees were John Simon and Teresa Jeffries.

Simon had been named as an excluded driver in a policy issued by Economical Mutual. This was apparently because of an impaired driving conviction and suspension of his driver’s licence.

However, Simon was driving the leased car when it was involved in the accident giving rise to this claim. GMAC took the position that it was not liable for Simon’s negligence under s. 192(1) of the Highway Traffic Act, because that section imposes liability on the owner of a motor vehicle “unless the motor vehicle…was without the owner’s consent in the possession of some person other than the owner”. GMAC argued that in this case, the car was in Simon’s possession without¬†its consent, triggering the exception in the section.

So far, so good. Justice Quinn concluded that “possession of a vehicle and operation of it are not necessarily synonymous: one may possess a vehicle without being in operation of that vehicle, but it is not possible to be in operation of a vehicle without being in possession”.

The problem comes in paragraph 22, where Justice Quinn answers the question, “Did GMAC consent to Simon having possession of the vehicle?” His answer is: “No. In accordance with s. 18 of the policy [it was actually s. 18 of the lease] Simon was not permitted to drive the vehicle, which is another way of saying that he was not to be in possession of the vehicle on a highway.”

Yet despite having found that Simon did not have possession of the vehicle with the consent of the owner and that “on the clear wording of the statute, it is the absence of consent to possession (not to operation) that triggers s. 198(1)”, Justice Quinn made an order, declaring that “pursuant to s. 192(1) of the Highway Traffic Act, GMAC is vicariously liable for any negligence on the part of Simon”.

This doesn’t make sense to us. Section 192(1) says that the owner is liable unless the vehicle is in the possession of someone without the owner’s consent”. His Honour found that Simon was the operator of the vehicle, that one could not be in operation without being in possession, that Simon did not have possession with the consent of GMAC, but that GMAC was nevertheless vicariously liable. Given the legal principles that Justice Quinn had articulated, he should have found that GMAC was not vicariously liable for Simon’s negligence.

Thinking we had overlooked something, we contacted Robert Ledgley, counsel for GMAC Leaseco. Mr. Ledgley advised that we had not missed anything (in his view, at least!) He was in the process of drafting a notice of appeal, based on the problem described in the preceding paragraph.

We will continue to follow this case.

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