



COURT OF APPEAL FOR ONTARIO

CITATION: Graham v. Lemay, 2016 ONCA 55

DATE: 20160127

DOCKET: C59925

Gillese, Pepall and Lauwers JJ.A.

BETWEEN

Jodi
    Graham and Colin J. Graham, by their litigation guardian,

Cheryl
    Margaret Graham, Cheryl Margaret Graham,

Joseph
    Raymond Graham and Christopher R. Graham

Plaintiffs
    (Appellants/

Respondents by way of
    cross-appeal)

and

Karine Lianne
    Lemay, GMAC Leaseco Corporation, Mario Pietrantonio,

West End
    Tile Ltd.,
Daimler Chrysler Financial Services Canada Inc.
,

Chevrolet
    West Inc., Capital Dodge Chrysler Jeep Limited,

Luciano
    Pietrantonio, General Motors Corporation and the City of Ottawa

and
Chrysler
    Canada Inc.

Defendants (
Respondents/

Appellant by way of
    cross-appeal
)

and

CorePointe
    Insurance Company, formerly carrying on business as

Daimler
    Chrysler Insurance

Respondent (Respondent)

William J. Sammon, for the appellants/respondents by way
    of cross-appeal

David A. Zuber, for the respondents Daimler Chrysler
    Financial Services Canada Inc. and CorePointe Insurance Company

W.S. Chalmers, for the respondent/appellant by way of
    cross-appeal, Chrysler Canada Inc.

Heard: September 8, 2015

On appeal from the orders of Justice Hugh R. McLean of
    the Superior Court of Justice, dated January 6, 2015, with reasons reported at
    2015 ONSC 6821, and February 5, 2015.

Pepall J.A.:

Introduction

[1]

The appellant Jodi Graham was a passenger in a motor vehicle and suffered
    serious injuries as a result of a collision with a motor vehicle driven by
    Mario Pietrantonio. The Pietrantonio vehicle had been leased. In the lease, Daimler
    Financial Services Canada Inc. (Daimler Financial) was described as the
    lessor. At the time of the accident, Chrysler Canada Inc. (Chrysler) was the
    beneficial owner of the Pietrantonio vehicle.

[2]

The appellants commenced an action against various parties, including
    Daimler Financial and Chrysler, both of whom are respondents on this appeal. 
    Both the respondents and the appellants moved for summary judgment as a result
    of which the motions judge determined that:

-

Chrysler
    was an owner of the Pietrantonio vehicle within the meaning of s. 192(2) of the
Highway Traffic Act
, R.S.O. 1990, c. H-8.

-

Both
    Chrysler and Daimler Financial were lessors of the Pietrantonio vehicle and
    therefore entitled to the cap on liability provided by s. 267.12(1) of the
Insurance
    Act
, R.S.O. 1990, c. I-8.

-

Mario
    was not an unnamed insured under Daimler Financials excess insurance policy.

-

There
    was no genuine issue requiring a trial in respect of the appellants claim
    alleging negligent entrustment of the Pietrantonio vehicle against Daimler
    Financial and therefore that claim was dismissed.

[3]

The appellants challenge the latter three determinations. Chrysler, on
    cross-appeal, challenges the first. For the reasons that follow, I would
    dismiss both the appeal and the cross-appeal.

Facts

(1)

The Accident and Insurance Coverage

[4]

On May 18, 2006, Jodi was in the front passenger seat of a vehicle driven
    by Karine Lemay.  Mario was driving a 2003 leased Dodge Durango. He T-boned the
    passenger side of Lemays vehicle. According to the appellants, Mario was
    speeding and on his cell phone at the time.  Jodi suffered a traumatic brain
    injury as a result of the accident and will be permanently disabled.  Lemay
    carried $1 million in third-party liability insurance.

[5]

The lessees of the Pietrantonio vehicle, West End Tile Limited and
    Luciano Pietrantonio (Marios father), carried $2 million in third-party
    liability insurance. West End Tile Limited and Luciano leased the Dodge Durango
    vehicle pursuant to a lease with Daimler Financial, who was the registered
    owner of the Pietrantonio vehicle. Daimler Financial carried a standard lessors
    contingent automobile policy of insurance and a standard excess insurance
    policy that provided $10 million of coverage. The policies were issued by the
    respondent CorePointe Insurance Company.
[1]
Both policies stated that coverage extended only to the named insured, Daimler
    Financial, and excluded coverage for any lessee or employee of a lessee. Furthermore,
    coverage was available only if the lessees insurance was not collectible. 
    According to the appellants, Jodis damages will significantly exceed the
    limits of the third-party liability insurance carried on the two vehicles.

[6]

Although Daimler Financial was the legal owner of the Pietrantonio
    vehicle, at the time of the accident, Chrysler was the beneficial owner as a
    result of agreements entered into with Daimler Financial.

(2)

The Pietrantonio Vehicle

[7]

Luciano incorporated West End Tile Limited in 1969. His son, Mario, was
    born in 1963 and by the date of the accident in 2006, was a co-owner of the company.

[8]

Mario became a licensed driver in 1979 and always drove vehicles that
    were either owned by, or leased through, West End Tile Limited.

[9]

His Ministry of Transportation driving record revealed that in 1981 he
    had been found speeding on three occasions and had been involved in a collision.
    He was also charged with careless driving later that year and his license was
    suspended. In 1985, 1991, and 1995, he was again found to have been speeding
    and later in 1995 he was found to have failed to use, or to have improperly
    used, a seat belt. In 2001, 2003, and 2006, three additional collisions were
    identified, although his driving record contains a driving properly notation
    for each of those incidents. Lastly, also in 2006, he was convicted of having
    an inoperative or modified seat belt assembly.

[10]

In
    November 2002, West End Tile Limited and Mario as co-lessees executed an
    agreement to lease a 2003 Dodge Durango with the Chrysler dealership, Capital
    Dodge Chrysler Jeep Limited (Capital Dodge). On November 5, 2002, both
    Luciano and Mario signed an application for credit with Daimler Financial. The
    application authorized Daimler Financial to collect personal information on
    both applicants. Marios application was not approved but no reasons were given
    for the rejection. Capital Dodge then entered into a lease with West End Tile
    Limited and Luciano as co-lessees.

[11]

During
    his examination for discovery, Luciano was asked if he knew why Mario had not
    been approved. Luciano responded that all of his sons, including Mario, could
    not lease a vehicle on their own and they always needed Luciano to act as a
    lessee or co-lessee for financial reasons.

[12]

Daimler
    Financial provided financing and, as provided in the lease, Capital Dodge
    assigned the lease and the motor vehicle to Daimler Financial. Daimler
    Financial became the registered owner of the vehicle along with West End Tile
    Limited and Luciano.

(3)

Corporate Relationships

[13]

The
    Chrysler relationships relevant to this appeal are complex.

[14]

Daimler
    Financial transferred ownership of a number of vehicles to Chrysler pursuant to
    a contract dated July 1, 1996. By contract dated July 1996, Chrysler and
    Daimler Financial entered into a Gold Key Administration and Credit Risk
    Assumption Agreement (the 1996 Gold Key Agreement).
[2]
It is uncontested that this agreement was structured to allow Chrysler to claim
    certain tax benefits in its capacity as owner of the vehicles. The 1996 Gold
    Key Agreement provided that:

-

Daimler
    Financial agreed to purchase vehicles as agent for Chrysler and to hold the
    related leases on behalf of and for the benefit of Chrysler in accordance with
    the terms of the 1996 Gold Key Agreement.

-

Daimler
    Financial would retain legal title to the vehicles and would be the registered
    lessor of the related leases as bare trustee and nominee for and on behalf of
    Chrysler. All indebtedness and liability due to Daimler Financial under the
    leases and all other benefits related to the vehicles including insurance were
    for the benefit of Chrysler.

-

Daimler
    Financial agreed to administer, for the account of Chrysler, the leases
    beneficially owned by Chrysler in return for which Chrysler would pay Daimler
    Financial a fee.

-

Chryslers
    role as beneficial owner of the vehicles and leases would not be disclosed
    except as required by law or by the 1996 Gold Key Agreement.

-

The terms
    of the 1996 Gold Key Agreement were binding on and enured to the benefit of
    successors and assigns.

[15]

The
    parties to the 1996 Gold Key Agreement subsequently entered into a Purchase and
    Sale Agreement and a Bill of Sale, both dated December 31, 2002. The latter two
    agreements, consistent with the 1996 Gold Key Agreement, effected the sales of the
    vehicles and leases to Chrysler and the requisite conveyances. It is conceded
    that the Pietrantonio vehicle was governed by these arrangements.

[16]

As
    such, to repeat, at the time of the accident, Chrysler was the beneficial owner
    of the Pietrantonio vehicle and the lease and Daimler Financial was the legal
    owner of the vehicle and the administrator of and named party to the lease with
    West End Tile Limited and Luciano.

Statutory Regimes

[17]

There
    are two statutory provisions that give rise to this dispute. First, s. 192(2)
    of the
Highway Traffic Act
provides that the owner of a motor vehicle
    is liable for loss or damage sustained by any person by reason of negligence in
    the operation of the motor vehicle on a highway, unless the motor vehicle was
    without the owners consent in the possession of some person other than the
    owner or the owners chauffeur.

[18]

Second,
    s. 267.12(1) of the
Insurance Act
provides, in essence, that in
    an action for loss or damage from bodily injury or death arising from the use
    or operation of a motor vehicle that is leased, the maximum amount for which
    the lessor or lessors are liable in their capacity as lessors is capped. For
    the purpose of this appeal, the statutory cap is $1 million subject to certain
    reductions including damages recovered under third-party liability policies.

[19]

Both
    s. 192(2) of the
Highway Traffic Act
and s. 267.12 of the
Insurance
    Act
are reproduced in full in Schedule A attached hereto.

Litigation

[20]

The
    appellants commenced an action for damages against numerous parties. Chrysler,
    Daimler Financial, and Capital Dodge moved for summary judgment dismissing the
    action against them. The appellants brought a cross-motion seeking summary
    judgment and a declaration that Mario was an unnamed insured under Daimler
    Financials excess insurance policy and that Chrysler and Daimler Financial
    were not entitled to the cap on liability of lessors as set out in s. 267.12(1)
    of the
Insurance Act
.

[21]

The
    motions judge heard the motions over two days and granted two orders. The order
    dated January 6, 2015, provided that Chrysler was an owner of the vehicle
    driven by Mario within the meaning of s.192(2) of the
Highway Traffic Act
,
and that Chrysler and Daimler Financial
    were lessors within the meaning of s. 267.12(1) of the
Insurance Act
and as such were entitled to the cap on liability. The appellants claims of
    negligent entrustment against Daimler Financial and Capital Dodge were
    dismissed.

[22]

The
    order dated February 5, 2015, was on consent. It provided that the appellants
    motion for summary judgment and a declaration that Mario was an unnamed insured
    entitled to coverage under Daimler Financials standard excess policy was
    dismissed. However, the appellants consent was without prejudice to the
    appellants right to appeal the consent dismissal on the basis that the
    decision in
Xu v. Mitsui Sumitomo Insurance Company Limited
, 2014 ONSC 167, 119 O.R. (3d) 587, affd 2014 ONCA
    805, 42 C.C.L.I. (5th) 17,
was wrongly decided or, in the
    alternative, did not apply to Daimler Financial if it was found not to be a
    lessor within the meaning of s. 267.12(1) of the
Insurance Act
.

Motions Judges Reasons

[23]

The
    motions judge commenced his analysis by observing that Chrysler admitted that
    it owned the Pietrantonio vehicle for the purpose of claiming capital cost
    deductions for income tax purposes. He found that as owner, Chrysler was able
    to achieve $200 million in tax savings. The motions judge observed that there
    was no indication that Chrysler was an owner only to the extent necessary to
    claim the capital cost deductions. In any event, such a restriction on
    ownership would not be effective.

[24]

The
    motions judge noted that West End Tile Limited, Luciano, and Daimler Financial
    were all vicariously liable for the negligence, if any, of Mario. He concluded
    that Chrysler was too. Chrysler fell within the purview of s. 192(2) of the
Highway
    Traffic Act
which rendered an owner vicariously liable for loss or damage
    sustained by any person by reason of negligence. He rejected Chryslers
    argument that it did not fall within that provision because it had no control
    or dominion over the vehicle.

[25]

The
    motions judge then turned to the availability of the cap on liability and who
    was to be considered a lessor for the purposes of s. 267.12(1) of the
Insurance
    Act
. He stated that it was obvious that Daimler Financial was a lessor as
    it was listed on title as such. As for Chrysler, it had an interest in the
    remainder of the lease, that is, when the lease ended they would re-achieve
    complete ownership in the vehicle. However, during the time the lease was
    effective, the only right [Chrysler] had was as a lessor of the vehicle. He
    observed that in most situations, an owner would be a lessor if a prior lease
    was fixed on the property itself.  He noted that there was no indication in s.
    267.12(1) of any bifurcation for the purposes of the limitation of liability
    between ownership and lessorship. Therefore, Chrysler was also a lessor.

[26]

The
    motions judge then addressed the claim of negligent entrustment. He relied on
    the case of
Cella (Litigation Guardian of) v. McLean
(1997)
, 34 O.R. (3d) 327 (C.A.), to
    conclude that such a tort existed in Ontario and that liability would be
    imposed where there is sufficient relationship between the injured party and
    another person which makes it reasonable to conclude that the other person owed
    a duty towards the injured party and should have foreseen that he would be
    injured. He cited
Schulz v. Leeside Developments Ltd.
(1978)
, 90 D.L.R. (3d) 98 (B.C. C.A.),
    at p. 105, in support of the torts requisite elements. He described these as proof
    that: (i) the entrustee was incompetent, inexperienced, or reckless; (ii) the
    entrustor knew or had reason to know of the entrustees condition or
    proclivities; (iii) there was an entrustment of the chattel; (iv)  the
    entrustment created an appreciable risk of harm to the plaintiff and a
    relational duty on the part of the defendant; and (v) the harm to the plaintiff
    was proximately or legally caused by the negligence of the defendant.

[27]

The
    motions judge was not prepared to draw a negative inference from the failure of
    Capital Dodge and Daimler Financial to produce the full lease file which
    potentially contained reasons for the initial rejection of Mario as a
    co-lessee. He said there was evidence that the rejection had to do with Marios
    financial status.

[28]

The
    motions judge also observed that there was no suggestion that there was a
    concern about Marios driving record. He summarized Marios record as
    consisting of three speeding tickets and a charge of careless driving when he
    was 18, and three speeding tickets in the next 25 years, the last being 11
    years prior to the accident. While the reasonable inference to be drawn was
    that the respondents did nothing to inquire about Marios record, there was
    nothing in the record that would trigger knowledge that the lease should not
    have been entered into or that would have alerted Capital Dodge or Daimler
    Financial to any outstanding problems with Mario. There was no evidence that
    would trigger a finding that the respondents knew or ought to have known that Mario
    was an incompetent, inexperienced, or reckless driver.

[29]

Furthermore,
    the motions judge concluded that any duty to inquire would be too remote. West
    End Tile Limited and Luciano were the lessees, not Mario, who was a driver who
    worked for West End Tile Limited. It was reasonable for the respondents to rely
    on insurance obtained by the lessees to satisfy concerns about the competence
    of the eventual driver. The motions judge accordingly dismissed the claim of
    negligent entrustment asserted against Daimler Financial and Capital Dodge.

[30]

In
    his endorsement of February 5, 2015, the motions judge dealt with the
    appellants motion for summary judgment and a declaration that Mario was an unnamed
    insured under the standard excess policy issued to Daimler Financial. He noted
    that the issue was substantially similar to that decided by McEwen J. in
Xu
,

which had just been upheld by this
    court. Given that decision and the motions judges conclusion that Chrysler and
    Daimler Financial were lessors, the parties consented to an order dismissing
    the motion without prejudice to the appellants right to appeal on the basis
    that
Xu
was wrongly decided or was inapplicable if this court were to conclude
    that Daimler Financial is not a lessor.

Issues

[31]

There
    are four issues to address:

(i)  Was Chrysler correctly found to be an owner and
    vicariously liable for Marios alleged negligence pursuant to s. 192(2) of the
Highway
    Traffic Act
?

(ii)   Are Chrysler and Daimler Financial lessors within the
    meaning of s. 267.12(1) of the
Insurance Act
and entitled to the
    benefit of the cap on liability?

(iii) Is Mario an unnamed insured under Daimler Financials standard
    excess policy?

(iv)  Was the claim of negligent entrustment against Daimler
    Financial properly dismissed?

Analysis

(i)

Chryslers Vicarious Liability

(a)     Parties Positions

[32]

Chrysler
    argues that the motions judge erred in finding that Chrysler, as a
    non-registered owner of the Pietrantonio vehicle, was vicariously liable for
    the alleged negligence of Mario pursuant to s. 192(2) of the
Highway
    Traffic Act
. It submits that a non-registered owner will be vicariously
    liable for the negligence of the person operating the vehicle only if the
    non-registered owner exercises dominion and control over the vehicle. In this
    regard, it relies on this courts decision in
Wynne v. Dalby
(1913)
, 16 D.L.R. 710.  Chrysler also
    argues that the motions judge erred in not considering Chryslers affidavit
    evidence on the absence of dominion and control.

[33]

The
    appellants respond by stating that the inquiry into whether an entity is an
    owner of a motor vehicle within the meaning of s. 192(2) of the
Highway
    Traffic Act
is a factual one that does not merely turn on the dominion and
    control test. Chrysler admitted it was an owner. Moreover, even if such a test
    is applicable, in these circumstances it was met. It is also possible to have
    two owners. Lastly, a finding that Chrysler is not an owner would be
    inconsistent with its claim for capital cost allowance deductions and contrary
    to public policy.

(b)     Chrysler is an Owner and Vicariously Liable

[34]

In
    support of its position, Chrysler relies on
Wynne
. When discussing the
    predecessor to s. 192(2) in force at that time, at p. 716, this court stated that:

I do not think that it can have been intended to fix the very
    serious responsibility which the section imposes upon one who, like the
    respondent, at the time the accident happened, had neither the possession of
    nor the dominion over the vehicle, although he may have been technically the
    owner of it in the sense in which the owner of the legal estate in land is the
    owner of the land.

[35]

Chrysler
    accepts that subsequent decisions rendered by the Supreme Court have modified
    the requirements for finding a registered owner vicariously liable.

[36]

In
Hayduk v. Pidoborozny
, [1972] S.C.R. 879, the respondent father was
    the registered owner of the motor vehicle. In the purchase agreement, he was
    identified as the purchaser for the purpose of guaranteeing the purchase price.
    However, his son had paid for the vehicle, had exclusive possession and control
    of the vehicle, and was driving it at the time of the accident.

[37]

Ritchie
    J., delivering the majority judgment, concluded that the father should be
    considered an owner and was therefore vicariously liable. In part, that
    conclusion rested on the fact that he was the registered owner of the vehicle. However,
    at pp. 885-886, Ritchie J. stated that:

In the present case, however, the contention that the father
    was the owner within the meaning of s. 130 does  not rest upon registration
    alone. Here the father was the purchaser of the motor vehicle in conformity
    with the terms of a conditional sales contract which he had signed and the son
    had not. It is true that the son made all payments under this contract from his
    own resources, but the contract was obtained on the credit of the father and
    the payments thereunder were not fully discharged until after the accident had
    occurred. With all respect to the members of the Appellate Division, I agree
    with the learned trial judge that a valid sale of this motor vehicle had been
    made to the [respondent-father] and that he was the owner at common law
    notwithstanding the fact that his son had made the payments under the
    conditional sales contract and had had exclusive possession of the vehicle from
    the date of its purchase.

[38]

The
    Supreme Court next addressed the issue in
Honan v. Gerhold
, [1975] 2
    S.C.R. 866. In
Honan
, a third party had transferred ownership of a
    vehicle to the respondent who became the registered owner. However, that third
    party had exclusive possession of the vehicle and was found to have it under
    his dominion and control. He continued operating the motor vehicle and injured
    the appellant in an accident. The issue to be decided was the respondents
    liability. The respondent was found to be an owner because his actions were
    consistent with an assertion of ownership in the vehicle. He had applied for
    the vehicle registration, the vehicle was under his insurance policy, and he benefitted
    from the proceeds of disposition of the wrecked vehicle. Spence J. wrote at p.
    874:

I have therefore come to the conclusion that the appeal should
    succeed on the basis that whether the word owner in [s. 192] of
The
    Highway Traffic Act
should be interpreted to cover registered owner, [the
    respondent] was the owner in a common law sense of the vehicle which was
    involved in this accident and therefore [the respondent] is liable under the provisions
    of [s. 192] of
The Highway Traffic Act
.

The respondent was consequently held to be vicariously
    liable for the negligence of the third party who was driving the vehicle:
Honan
,
    p. 874. In
Kerri (Guardian ad litem of) v. Decker
, 2002 NFCA 11,
209 Nfld. & P.E.I.R.,
at para. 12, the Court of Appeal
    for Newfoundland summarized the
ratio
from
Honan
as follows:

Spence J. then concluded that, whether or not the word owner
    in [s. 192 of
The Highway Traffic Act
]
should be interpreted to cover registered owners, Gerhold was the owner in a
    common law sense and, therefore, liable jointly with the driver for the damages
    that she had caused.

[39]

While
    these cases involved registered owners, the Supreme Court also looked to other
    factors to reflect ownership.  I see no reason to adopt a different approach
    for non-registered owners.  The language of s. 192(2) of the
Highway
    Traffic Act
speaks of an owner and does not reflect any distinction between
    non-registered and registered owners.  Nor does it impose any dominion and
    control requirement.  Such an approach is also consistent with the public
    protection purpose of s. 192(2).  Dominion and control may result in a finding
    of ownership in the case of a non-registered owner but other factors may also
    lead to that conclusion.

[40]

In
    this case, Chrysler admitted that it was the non-registered owner of the
    Pietrantonio vehicle. Moreover, its conduct was consistent with that admission
    in that it had claimed significant tax deductions in its capacity as owner. The
    agreements between Daimler Financial and Chrysler explicitly state that
    Chrysler is the beneficial owner. In these circumstances, it was unnecessary
    for the motions judge to engage in any additional analysis on dominion and
    control. The motions judge did not err in concluding that Chrysler was an owner
    for the purposes of s. 192(2) of the
Highway Traffic Act
. Therefore, I
    would dismiss Chryslers cross-appeal.

(ii)

Lessors Liability

(a)

Parties Positions

[41]

The
    appellants submit that the motions judge erred in finding that Chrysler and
    Daimler Financial were both lessors and therefore entitled to the benefit of
    the cap on liability. Their primary submission is that the motions judge erred
    by concluding that Chrysler was a lessor. They assert that he failed to examine
    the intent of the statutory provision and the relevant agreements between
    Chrysler and Daimler Financial. Here Chrysler did not act in the capacity of
    lessor; rather, this role was delegated by agreement to Daimler Financial. Chrysler
    chose to bifurcate ownership and leasing so as to obtain substantial tax
    benefits and it now should accept the burden of unlimited liability.
    Furthermore, the appellants argue that the purpose of s. 267.12(1) is satisfied
    if only Daimler Financial is found to be a lessor.

[42]

Alternatively,
    the appellants argue that if Chrysler is a lessor, then Daimler Financial
    cannot also be a lessor. They assert that if Chrysler is a lessor, then Daimler
    Financial is not the lessor but is just an administrator of the lease. The
    subsection does not apply to an administrator of the lessor.

[43]

Chrysler
    submits that the motions judge properly interpreted and applied s. 267.12(1).
    While the appellants rely on the agreements between the respondents to support
    their position that Chrysler is an owner of the Pietrantonio vehicle, under
    those same agreements, Chrysler is also the owner of the lease and is entitled
    to the rights and benefits of a lessor.

[44]

CorePointe
    and Daimler Financial take the position that the motions judge correctly
    concluded that Daimler Financial was a lessor as it was listed as such on the
    title of the vehicle. Additionally, West End Tile Limited and Luciano agreed to
    the assignment of the lease by Capital Dodge to Daimler Financial. Moreover, s.
    267.12(1) expressly provides that there may be more than one lessor of a
    vehicle.

[45]

No
    party relied on any provisions of the
Personal Property Security Act
,
    R.S.O. 1990, c. P-10. The lease in issue on this appeal predated amendments made
    to the Act that expanded registration requirements for leases of personal
    property.

(b)

Chrysler and Daimler Financial are Lessors

[46]

In
    examining the cap on liability issue, I will first address the interpretation
    of s. 267.12(1) and then examine the relevant agreements. Next, I will consider
    the application of the statute and the agreements to the facts of the case.

Legislative Intent

[47]

As repeatedly said, the words of an Act are to be read in their entire
    context and in their grammatical and ordinary sense harmoniously with the
    scheme of the Act, the object of the Act, and the intention of Parliament:
Bell
    ExpressVu Limited Partnership v. Rex
, 2002 SCC 42, [2002] 2 S.C.R. 559, at
    para. 26 citing Elmer A. Driedger,
Construction of Statutes
, 2d ed.
    (Toronto: Butterworths, 1983), at p.87.

[48]

Section
    267.12(1) of the
Insurance Act
was enacted in March 2006. It was part
    of a legislative initiative that included other statutory amendments relevant
    to the automotive industry.

[49]

In
Xu
, McEwen J. considered whether s. 267.12 prevented a lessee
    from obtaining coverage under a lessors insurance policy beyond the liability
    cap. At para. 31, McEwen J. discussed the policy rationale for the statutory
    cap on liability for lessors:

The legislative intent behind Bill 18 is clear from Hansard. Lessors
    were, according to the Government of Ontario, experiencing unfairly high costs
    of doing business given the fact that awards for personal injury had become
    exorbitant. This was increasing lessors insurance rates and affecting their
    ability to obtain insurance at a reasonable price. The cost of this would be
    passed on to the consumer. The purpose of the legislation was to protect lessors
    by reducing their exposures in personal injury lawsuits, thus reducing their
    insurance rates.

[50]

At
    para. 29, McEwen J. quoted from Hansard:

This is about fairness. Leasing and rental companies do not
    have control over the actions of the drivers. Those vehicles are in the hands
    of the driver for an extended period of time, and theres no direct business
    relationship, save and except the rental, between the owners of the company and
    the actual drivers. Continuing to impose uncapped vicarious liability on the
    basis of ownership may unfairly drive up the cost of doing business for the
    leasing and rental companies. This would, in turn, drive up the cost of those
    leased or rented vehicles and thus the cost to the consumer who is choosing
    that form of auto usage.
[3]

[51]

Section
    267.12 was designed to reduce insurance costs and the cost of doing business
    for leasing and rental companies in the automotive arena  an industry of
    significant importance in Ontario  and hence those of the consumer. This was
    the legislative context. The legislative objective was clearly expressed in s.
    267.12 by the introduction of the cap on liability available to a lessor or
    lessors.

Agreements between Daimler
    Financial and Chrysler

[52]

Turning
    then to an examination of the agreements in issue, three are relevant. First, the
    lease agreement respecting the Pietrantonio vehicle was executed on November 7,
    2002, by West End Tile Limited and Luciano as co-lessees and Capital Dodge as
    lessor. This agreement clearly provided that [t]his Lease is accepted and assigned
    to [Daimler Financial] according to the terms of the agreements between Lessor
    and [Daimler Financial].  It was not disputed that this agreement effected a
    valid assignment of Capital Dodges interest to Daimler Financial.

[53]

Second,
    in the 1996 Gold Key Agreement, Daimler Financial agreed to assign to Chrysler
    beneficial ownership of certain vehicles and related leases but to retain legal
    title to the vehicles and to be the registered lessor. Daimler Financial agreed
    to act as agent in administering the leases and related rights in exchange for
    a fee. Each party also paid the other party one dollar in consideration of the
    mutual covenants contained in the 1996 Gold Key Agreement.

[54]

Third,
    the Agreement of Purchase and Sale and Bill of Sale effected these commitments.
    Section 2.1 of the Purchase and Sale Agreement stated that the leases were to
    be assigned to Chrysler and it would become entitled to all the benefits of,
    and subject to all the obligations under, the leases. The Agreement provided
    that Daimler Financial was to retain legal title to the vehicles and remain the
    registered lessor of the related leases as bare trustee and nominee for and on
    behalf of Chrysler. Chrysler would become the beneficial owner of the vehicle. 
    Section 2.3 stated:

[Daimler Financial] acknowledges and declares that it will
    retain legal title to the Vehicles purchased as provided in Section 2.1 and
    shall be the registered Lessor of the Related Lease as bare trustee and nominee
    for and on behalf of [Chrysler],
[Chrysler] being the
    beneficial owner of (i) such Vehicles, (ii) the Related Leases, (iii) all
    indebtedness and liability due and to become due to [Daimler Financial] under
    or in respect of each Related Lease
and (iv) all other rights, claims
    and benefits of [Daimler Financial] thereunder or otherwise related thereto or
    to any such Vehicle, including any (a) collateral security, (b) guarantees, (c)
    insurance and proceeds of such insurance and (d) agreements and other contracts
    by or pursuant to which any of such rights, claims and benefits are created or
    arise, all of which shall be for the benefit of [Chrysler] save as otherwise
    expressly provided herein. [Emphasis added.]

[55]

The
    conveyance was effected by a Bill of Sale which stated that the vehicles and
    related leases sold were those held by Daimler Financial immediately prior to
    the end of its fiscal year on December 31, 2002. The Pietrantonio vehicle lease
    was dated November 7, 2002.

Application to Facts

[56]

The
    appellants argue that the agreements between Chrysler and Daimler Financial effectively
    divided ownership and leasing between Chrysler and Daimler Financial
    respectively. I disagree. The effect of the agreements was to divide legal
    title and beneficial ownership. Canadian law has long recognized a division
    between legal and equitable property rights: Bruce Ziff,
Principles of
    Property Law
, 5th ed. (Toronto: Carswell, 2010) at pp. 78 and 211.

[57]

A
    lease is a contract by which the lessee obtains a right to use the property
    leased in exchange for consideration. The proprietary interest in the property
    is not changed, but remains in the owner:
Canadian Acceptance Corp. v.
    Regent Park Butcher Shop Ltd.
(1969), 3 D.L.R. (3d) 304 (Man. C.A.). Put
    differently, an owner has the right to lease the vehicle owned.

[58]

Daimler
    Financial assigned to Chrysler beneficial ownership in the Pietrantonio
    vehicle, the related lease, and all indebtedness and liability due and to
    become due to Daimler Financial under or in respect of the related lease. It is
    clear from the agreements that Daimler Financial and Chrysler intended that
    Chrysler have the benefit of the debt assigned, Daimler Financial would act as
    agent to administer the leases, and the transfer was made for good
    consideration. The lease with West End Tile Limited and Luciano permitted a
    sale or assignment of both the motor vehicle and the lease to a third party 
    in this case, Chrysler. As such, at all material times, Chrysler was a lessor.

[59]

I
    would also note that the presence of the bare trustee language found in the 1996
    Gold Key Agreement and Purchase and Sale Agreement does not detract from the
    vesting of the beneficial ownership of the vehicle and the lease in Chrysler. The
    agreements reflected intertwined but separate promises: Chrysler would purchase
    the beneficial ownership in the vehicles and the related leases and Daimler
    Financial would retain legal title and remain registered lessor as bare trustee
    for Chrysler.  Both the assignment and the trust served to vest in Chrysler the
    beneficial ownership of the Pietrantonio vehicle and the related lease.

[60]

In
    conclusion, the language of s. 267.12(1), its legislative purpose, and the
    agreements between Chrysler and Daimler Financial all supported the motions
    judges conclusion that Chrysler was a lessor within the meaning of that
    subsection and was therefore entitled to the cap on liability. There is nothing
    that would cause one to conclude that a beneficial owner of the motor vehicle
    and the lease is not, or should not be considered, a lessor.

[61]

It
    remains to be considered whether Daimler Financial was also a lessor. The
    appellants submit that s. 267.12(1) does not speak of an administrator of a
    lease and as such, Daimler Financial was not entitled to benefit from the cap
    on liability.

[62]

I
    do not agree. Daimler Financial retained legal title to the Pietrantonio
    vehicle. Section 267.12 (1) speaks of the maximum amount for which the lessor
    or lessors of the motor vehicle are liable in respect of the same incident in
    their capacity as lessors of the motor vehicle. Clearly the statute
    contemplates multiple lessors.

[63]

Furthermore,
    by virtue of the assignment to Daimler Financial from Capital Dodge, the lease
    itself described Daimler Financial as lessor.

[64]

The
    appellants have failed to identify any error in the motions judges analysis on
    the application of s. 267.12(1) to Daimler Financial. Therefore, I would not
    give effect to the appellants first ground of appeal.

(iii)

Mario is not an Unnamed Insured under Daimler Financials Standard
    Excess Policy

(a)    Parties Positions

[65]

The
    appellants take the position that if this court accepts that Daimler Financial
    is a lessor for the purposes of the
Insurance Act
(as I have), then
    the decision of
Xu
should be reconsidered and Mario treated as an unnamed
    insured under Daimler Financials standard excess policy.

[66]

The
    respondents submit that an unnamed insureds access to a lessors insurance
    coverage was the very issue that was rejected by McEwen J. in
Xu
. The
    appeal to this court was dismissed. They state that the appellants are
    attempting to reargue
Xu
and, in any event, it was correctly decided.

(b)
Xu
was
    not Wrongly Decided

[67]

The
    applicant in
Xu
had been injured in a motor vehicle accident. The
    defendant had leased the vehicle he had been driving at the time of the
    accident. The issue before McEwen J. was whether the applicant could access the
    lessors insurance policy on the basis that the defendant lessee was an unnamed
    insured.

[68]

Under
    s. 277(1.1) of the
Insurance Act
, a lessees policy is required
    to respond first and if that policy provides coverage of $1 million or more,
    access to the lessors policy is precluded if s. 267.12 of the
Insurance
    Act
is applicable. McEwen J. determined that s. 267.12 did apply and did
    not permit an unnamed insured access to the lessors excess coverage. Section
    267.12(1) commenced with the phrase [Despite] any other provision in this
    Part. This language reflected both the primacy of the section and legislative
    intent.

[69]

In
    addition, as mentioned, the purpose of the provision was to protect lessors by
    reducing their exposures in personal injury lawsuits, thus reducing their
    insurance rates and keeping rental and leasing costs affordable. At para. 31,
    McEwen J. wrote that if the application were allowed, and lessors insurers were
    exposed to judgments over $1 million via lessees as unnamed insureds, the
    effect of the legislation would be nullified.

[70]

Xu
was appealed to this court. The appellants before us in this case sought
    leave to intervene but their request was denied. This court dismissed the
    appeal in
Xu
and upheld the decision of McEwen J.

[71]

Xu
is dispositive of the issue before us.

[72]

This
    court will not overturn one of its prior decisions unless sitting as a
    five-judge panel:
R. v. Labrecque
, 2011 ONCA 360, at para. 5. In this
    case, the appellants request for a five-judge panel on the basis that
Xu
was wrongly decided was refused.

[73]

In
    spite of the refusal, it is still open to a three-judge panel to request that
    an appeal be assigned to a five-judge panel if convinced that an arguable case
    can be made for reviewing or overruling the prior decision at issue:
Ontario
    (Attorney General) v. Collins
, 2012 ONCA 76, at para. 9.

[74]

In
    requesting a review of
Xu
, the appellants argue that McEwen J. ignored
    relevant considerations, such as the policy considerations underlying unlimited
    vicarious liability in the
Highway Traffic Act
, or conflated different
    issues, such as the limitation of liability in s. 267.12(1) with provisions
    governing the priority in which various insurance policies will be required to
    pay.

[75]

I
    would reject all of the appellants arguments. McEwen J. accurately considered
    the legislative history and purpose of s. 267.12(1). He correctly concluded
    that permitting a lessee to access a lessors insurance, as an unnamed insured,
    would undermine the animating purpose of that provision. That analysis was
    upheld by this court, and the appellants have not presented any cogent reasons
    for revisiting that conclusion. I would not give effect to this ground of
    appeal.

(iv)

Negligent Entrustment

(a)     Parties Positions

[76]

The
    appellants submit that the motions judge erred in dismissing their claim of negligent
    entrustment against Daimler Financial. No appeal is taken from the dismissal of
    the claim against Capital Dodge.

[77]

The
    appellants submit that the motions judge erred in his treatment of the
    evidentiary burden of proof applicable to a motion for summary judgment. In
    addition, his finding that Marios lease application was rejected due to his
    financial status was purely speculative as there was no direct evidence on this
    issue from Daimler Financial. He also erred by not drawing an adverse inference
    against Daimler Financial due to its failure to produce the leasing file for
    Mario, Luciano and West End Tile Limited.

[78]

The
    respondent answers by submitting that the motions judge properly described the
    law of negligent entrustment and found that the appellants had not made out
    their claim that Daimler Financial knew or should have known that Mario was an
    incompetent, inexperienced, or reckless driver. There was nothing in Marios
    driving record that would trigger any suggestion that the lease should not have
    been entered into with West End Tile Limited and Luciano. It was reasonable for
    Capital Dodge and Daimler Financial to rely on the insurance particulars for
    the lessees to satisfy any concerns about the liability and competence of the
    eventual driver. Lastly, there was evidence that supported the finding that
    Marios application was rejected due to his financial status.

(b)      The Claim was Properly
    Dismissed

[79]

The
    parties and the motions judge proceeded on the basis that the tort of negligent
    entrustment exists in Ontario and in that regard relied on
Cella
. While
    the tort exists in the United States and arguably in British Columbia (
Schulz
, at p. 105) and
has been advanced in
    Ontario (
Vynckier v. Brown and State Farm
, 2015 ONSC 376;
Persaud
    v. Bratanov and Unifund Assurance Co.
, 2012 ONSC 5232, 96 C.C.L.T. (3d)
    147;
Ladouceur v. Zimmerman
, [2009] O.J. No. 4777; and
Ahmetspasic
    v. Love
, 2002 CarswellOnt 4475), no definitive statement on the existence
    of the tort has been enunciated by either the Supreme Court of Canada or by this
    court. As the appeal was not argued on the basis that the tort does not exist,
    I propose to address this ground of appeal assuming, without deciding, that
    such a tort does exist.

[80]

In
    my view, the appellants argument must be rejected.  It was open to the motions
    judge to find on the record before him that the rejection of Mario as a
    co-lessee had to do with his financial status. This conclusion was based on
    Lucianos testimony. More significantly, the appellants argument fails due to the
    absence of any duty of care between the appellants and Daimler Financial.

[81]

The
    test for a duty of care is well-established in Canadian law. As noted in
R.
    v. Imperial Tobacco Canada Ltd.
, 2011 SCC 42, [2011] 3 S.C.R. 45, at para.
    41, a duty of care requires both foreseeability and a relationship of
    sufficient closeness, or proximity, to make it just and reasonable to impose an
    obligation on one party to take reasonable care not to injure the other. In
    particular, when the claim at issue alleges a failure to act, foreseeability
    alone cannot be enough and the facts must disclose a justification for imposing
    on a defendant a positive duty to act:
Childs v. Desormeaux
, 2006 SCC
    18, [2006] 1 S.C.R. 643, at para. 31. In
Childs
, at para. 31, the
    court noted that [generally], the mere fact that a person faces danger, or has
    become a danger to others, does not itself impose any kind of duty on those in
    a position to become involved.

[82]

In
Cella
, a decision the appellants rely upon, this court stated, at p.
    331, that [liability] for a negligent act or omission will be imposed in
    situations where there is a sufficient relationship between the injured party
    and another person, which makes it reasonable to conclude that the other person
    owed a duty towards the injured party.

[83]

In
    the case under appeal, the vehicle was leased not to Mario but to West End Tile
    Limited and Luciano. The motions judge concluded that a duty on Daimler
    Financial to ascertain the competency of the driver of the vehicle was too
    remote. It was reasonable for the lessors to rely on the insurance that had
    been obtained by the lessees. On this basis, the motions judge correctly
    concluded that there was no genuine issue requiring a trial on the issue of
    negligent entrustment. He wrote:

Moreover the vehicle was not leased directly to the driver; it
    was leased to the company [West End Tile Limited] for whom the driver worked.
    It would seem, therefore, that a duty to inquire about the eventual driver
    would be one that would be far too remote. Indeed, the lessors would have no
    ability to ascertain who the driver was at a particular time even if the
    driving record of the eventual driver was suspect. It would be entirely
    reasonable for them to be satisfied with regard to the fact that insurance had
    been granted.

[84]

As
    noted by the motions judge, in the present case, Daimler Financial leased the
    Pietrantonio vehicle to Luciano and West End Tile Limited. Finding a duty of
    care in the present case would lead to the conclusion that the lessor had an obligation
    to inquire into who would be driving it. The relationship between the
    appellants and Daimler Financial does not disclose proximity sufficient to
    justify imposing a duty.  The motions judge properly concluded that Daimler
    Financial had met its evidentiary burden and that there was no genuine issue
    requiring a trial on the claim of negligent entrustment.

Disposition

[85]

For
    these reasons, I would dismiss the appeal and the cross-appeal with costs in
    the amount of $5,000 payable by the appellants to each of Chrysler and Daimler
    Financial for a total of $10,000 inclusive of disbursements and HST.

Released:

JAN 27 2016                                    S.E.
    Pepall J.A.

EEG                                                I
    agree E.E. Gillese J.A.

I
    agree P. Lauwers J.A.





Schedule A

(a)
Highway Traffic Act
 s. 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 owners consent in the possession of some person
    other than the owner or the owners chauffeur.

(b)
Insurance Act
 s. 267.12

Liability of lessors

(1)  Despite any other provision in this Part, except
    subsections (4) and (5), in an action in Ontario for loss or damage from bodily
    injury or death arising directly or indirectly from the use or operation of a
    motor vehicle that is leased, the maximum amount for which the lessor or
    lessors of the motor vehicle are liable in respect of the same incident in
    their capacity as lessors of the motor vehicle is the amount determined under
    subsection (3) less any amounts,

(a)   that are recovered for loss or
    damage from bodily injury or death under the third party liability provisions
    of contracts evidenced by motor vehicle liability policies issued to persons
    other than a lessor;

(b)   that are in respect of the use or
    operation of the motor vehicle; and

(c)   that are in respect of the same
    incident.

Same

(2)  For the purposes of subsection (1), the amounts
    referred to in clauses (1) (a), (b) and (c) include only amounts recovered
    under the coverages referred to in subsections 239 (1) and (3) and section 241
    and exclude,

(a)

any sum
    referred to in subsection 265 (1);

(b)

any amount
    payable as damages by the Motor Vehicle Accident Claims Fund under the
Motor
    Vehicle Accident Claims Act
; and

(c)

any other
    amounts determined in the manner prescribed by the regulations.

Maximum amount

(3) The maximum amount for the purposes of subsection (1) is
    the greatest of,

(a)   $1,000,000;

(b)   the amount of third party liability insurance required by
    law to be carried in respect of the motor vehicle; and

(c)   the amount determined in the manner prescribed by the
    regulations, if regulations are made prescribing the manner for determining an
    amount for the purposes of this clause.

Exceptions

(4) Subsection (1) does not apply,

(a)

in such
    circumstances as may be prescribed by the regulations or to such persons,
    classes of persons, motor vehicles or classes of motor vehicles as may be
    prescribed in the regulations, subject to such terms, conditions, provisions,
    exclusions and limits as may be prescribed by the regulations;

(b)

in respect
    of amounts payable by a lessor other than by reason of the vicarious liability imposed
    under section 192 of the
Highway Traffic Act
; or

(c)

in respect
    of a motor vehicle used as a taxicab, livery vehicle or limousine for hire.

Application of subs. (1)

(5) Subsection (1) applies
    only to proceedings for loss or damage from bodily injury or death arising from
    the use or operation of a motor vehicle on or after the day this section comes
    into force.

Definitions

(6)  In this section,

lessor means, in respect of a motor vehicle, a person who is
    leasing or renting the motor vehicle to another person for any period of time,
    and leased has a corresponding meaning; (bailleur)

motor vehicle has the same meaning as in subsection 1 (1) of
    the Highway Traffic Act (véhicule automobile).





[1]
Formerly carrying on business as Daimler Chrysler Insurance Company.



[2]
The parties to the agreement were Chryslers predecessor in title, Chrysler
    Canada Ltd., and Daimler Financials predecessor in title, Chrysler Credit
    Canada Ltd. I refer to these parties as Chrysler and Daimler Financial, respectively.



[3]
Wayne Arthurs, the Parliamentary Assistant to the Minister of Finance.


