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Case Comment - Liability Provision in Section 86 of the British Columbia Motor Vehicles Act
Published in the December 2007 issue of Transportation Notes - View Article
The Supreme Court recently dismissed an application for leave to appeal in Yeung (Guardian at litem of) v. Au, 2006 BCCA 117. The case involved the interpretation of an exception to the vicarious liability provision in section 86 of the British Columbia Motor Vehicles Act. The provison in question applies to exempt certain parties involved in the “sale” of a motor vehicle from the imposition of vicarious liability. The issue in the case was whether this exemption applied to the lessor of a car involved in an accident, Transportaction Lease Systems Inc. (“TLS”). More specifically, the issue addressed was whether the extensive definition of “conditional sale” (which encompasses leases with an option to purchase) contained in the repealed BC Sale of Goods on Condition Act continued to apply to the vicarious liability provisions. The British Columbia Court of Appeal, reasoning that the vicarious liability provisions were to be addressed on their own specific wording and preferring a more narrow definition of conditional sale, decided that TLS was not covered by the exception and was therefore vicariously liable for damages sustained in the accident.
The Plaintiff and Appellant was the passenger of a car driven by the son of the lessee. She was rendered severely disabled as a result of an accident. The driver lost control of the car, swerved into oncoming traffic and was found negligent Damages in the amount of $5.8 million were awarded to the Plaintiff. The only outstanding issue, which went before the BC Court of Appeal, was whether the lessor of the car was also liable, along with the lessee and his son. The arrangement between the parties was for a three-year lease with monthly payments and an option to purchase at the expiry of the term. The agreement also required the payment of a $25,000 refundable deposit by the lessee that could, among other things, be used if the car sustained more than reasonable damage while leased or if the lesssor ended up selling the car at less than fair market value. The lessee was requested to obtain insurance in the amount of $2 million. In addition, the lessor had its own insurance. The car was registered under the Personal Property Security Act with the father of the driver as the debtor. After the accident, TLS signed a salvage release form to the insurer in which it declared itself the registered owner and the sole legal or beneficial owner of the vehicle.
The trial judge first dealt with a jurisdictional argument. There was a clause in the lease that provided that the lease was to be governed by the law of Ontario. If Ontario law should apply TLS would certainly have been vicariously liable. The trial judge dismissed the Ontario jurisdiction argument, holding that in tort, the law of the place where the activity occurred (lex loci delicti) applied. In this case, the claim was in tort and TLS was not relying on a contractual defence.
The trial judge went on to find that TLS was covered by the exception and was without liability because the lease constituted a contract of conditional sale. Contrary to the usual principles, the trial judge decided to allow evidence of insurance coverage for TLS because this would go toward determining whether TLS could be considered an owner of the car.
With respect to the interpretation of the exemption provisions under the Motor Vehicle Act the trial judge found that, while on the face of it, a lease would not appear to be a “contract of conditional sale” matters were complicated by the fact that, until 1990, a conditional sale included a lease with an option to purchase by virtue of the definition of this term in the Sale of Goods on Condition Act (“SGCA”). This act was subsequently replaced by the Personal Property Security Act (“PPSA”), which does not contain a definition of “conditional sale”. The trial judge found that this change in the law did not change the meaning of conditional sale established by the repealed statute. If the legislature had intended to change the meaning of this term, it would have done so explicitly in the PPSA. Further, the trial judge held that according to rules of statutory interpretation, the repeal of a statute is not to be taken as making a statement about the previous state of the law. Therefore, the repeal of the SGCA could not be taken as an intention to change the meaning of “contract of conditional sale”.
The trial judge also rejected an argument that the arrangement between the parties was a “true lease” rather than a “security lease” based on, inter alia, the fact that the option to purchase was at the fair market price, and that generally, persons who purchased lease vehicles were not the lessees. The trial judge found a number of factors which led to the conclusion that the arrangement was not a true lease: a $25,000 security down payment was made; for tax purposes TLS treated the lease as a loan transaction; the lessee was required to pay more than “rent” money insofar as he had an obligation to cover any shortfall if the lessor did not receive fair market value when it sold the vehicle. Finally, the trial judge rejected the argument that, notwithstanding the definition of “conditional sale” TLS was a de facto owner because it had retained the insurance .
The Court of Appeal disagreed with the trial judge’s conclusions, finding that TLS was not covered by the conditional sale exception. First, the Court endorsed the trial judge’s conclusion regarding choice of jurisdiction. The court then turned to the interpretation of “conditional sale”. The Court underlined that, according to rules of statutory interpretation, exemptions or exceptions have to be interpreted “in light of their underlying rationale” and should not be used to “undermine the broad purposes of the legislation”. The Court noted that the original purpose of the vicarious liability provisions was to ensure that the victim has as broad a right to recovery as possible. While the advent of compulsory automobile insurance might seem to make this purpose less necessary, this purpose still stands due to the principle of indemnity.
The Court further stated that, while no evidence of legislative debate on the purpose of the exemption in s. 86 had been presented, it was likely that it was meant to apply in situations where a vehicle had been “sold”, meaning that the former owner had parted with possession and control as well as title to the vehicle. The term “sold” would not apply where there was an option to purchase that might never be exercised. Further, although in other portions of the Motor Vehicle Act a broader definition of owner could be found that included a lessee, the Court was of the view that the section on vicarious liability had effectively created its own definition of ownership.
The Court also addressed the issue of the repeal of the Sale of Goods Act. Unlike the trial judge, the court was not persuaded that the rules of statutory interpretation in British Columbia mandating that a repeal should not be taken as a statement about the law were helpful in this case. In the Court’s opinion, these rules in no way required that judicial interpretations of a repealed act should continue to be applied in a separate statutory context. Rather, the Court was persuaded by the principle that once a statute is repealed it should be deemed to have never existed.
Finally, the Court stated that it did not find helpful the Appellant’s arguments about “de facto” ownership by TLS. The point, the Court said, was the statutory interpretation of that specific provision of the Motor Vehicle Act as compared to the legal consequences of the agreement between the parties. In this case, the parties had signed a document that was called a lease, that called for the payment of “rent” for a specified term, and that offered only an option to purchase at the end. Therefore, the legal nature of the agreement was a lease and not a “disguised sale” or a “contract of conditional sale” at common law.
The Court in this case was clearly focused on the particular provisions of the Motor Vehicles Act and also gave weight to the purpose underlying these provisions. The Court was not willing to import interpretations of the terms at hand from a repealed statute or even other provisions within the same act. The case represents a victory for the policy of full indemnity to accident victims over questionable statutory interpretation.
Yeung (Guardian at litem of) v. Au,
2006 BCCA 117