Imagine you lend your car to a friend but tell her she
shouldn't drive it on the 401 Highway in Toronto. Contrary to
your instructions, however, she does drive it on the highway and
causes an accident. Are you (and your insurer) liable?
The answer to this question was recently provided by a 5-member
panel of the Court of Appeal for Ontario in Fernandes v. Araujo. In that decision, the
Court expressly overruled its 1953 decision in Newman and Newman v.
Terdik. Since the Court rarely overrules itself,
preferring if at all possible to uphold its prior rulings under the
principle of stare decisis, Fernandes offers
important insight into the circumstances where it will be done.
The action arose out of an all-terrain vehicle accident on a
highway. The ATV owner allowed the defendant to borrow the vehicle,
but the owner's insurer contended that the defendant was
expressly prohibited from driving the ATV off of the farm property.
The insurer sought to absolve itself of liability by relying on the
interpretation in Newman of section 192 of Ontario's
Highway Traffic Act that an owner is not vicariously
liable for damages sustained in a highway accident when that owner
expressly prohibited the operation of the vehicle on a highway.
However, in the 2007 decision of Finlayson v. GMAC, the Court
affirmed a contrary line of authorities going back to 1933, holding
that an owner's vicarious liability rests on whether or not the
owner consented to possession, even if the driver operated the
vehicle in a way expressly prohibited by the owner.
Reasons for Overruling Newman
The Court relied upon David Polowin Real Estate Ltd v. Dominion of
Canada General Insurance Co, as the guiding precedent
as to when a court may overrule one of its prior decisions. The
Court must consider the "advantages and disadvantages of
correcting the error" by focusing on four things: the nature
of the error; "the effect and future impact of either
correcting it or maintaining it"; "the effect and impact
on the parties and future litigants"; and the effect and
impact "on the integrity and administration of our justice
Justice Sharpe, writing for the unanimous panel of five judges
in Fernandes, held that the interests of certainty,
clarity, coherence, and predictability in the law required the
explicit overruling of Newman. Justice Sharpe emphasized
the inconsistency between Newman and the earlier 1933
decision. He also highlighted the steady string of subsequent
decisions weakening Newman's authority. He noted that
Newman created "an anomaly that cannot be supported
in principle, one that undermines the coherence of this area of law
and that is likely to lead to confusion." He observed
that some trial judges have commented on the inconsistency, and
refused to follow Newman, while others have felt compelled
to follow it. Accordingly, he concluded that these cases suggest
that Newman has "sown the seeds of
Although Justice Sharpe noted the role of the Supreme Court of
Canada in settling conflicting interpretations of statutes, it
usually does so on questions of national importance. As such,
Justice Sharpe affirmed the responsibility of the Court of Appeal
for Ontario to not shirk its responsibility and overrule
Newman to ensure that Ontario law was consistent.
Furthermore, Justice Sharpe noted that it was unlikely that any
vehicle owner or any insurer would have relied on Newman
in daily practice since insurers must still provide owners with
coverage even where the vehicle is operated in a manner prohibited
by the owner.
Since the doctrine of stare decisis ensures consistency
and predictability, it is unusual for an appellate court to
expressly overrule one of its prior decisions. However, as shown in
Fernandes, it can occur when doing so eliminates a past
inconsistency to enhance the fundamental interests of clarity,
coherence, and predictability in the law.
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