By John Duffy
Taxi News

Taxi industry members are appealing the decision to deny certification of class action status in a lawsuit they are trying to bring against the City of Toronto.

Class action status was refused by Motions Judge J Perell in November of last year.

The case revolves around the alleged city failure to enforce its own bylaws when app-based ride service Uber appeared on the Toronto for-hire-vehicle scene.

It is alleged that failing to enforce existing laws dealing with for-hire-vehicle services severely negatively impacted Toronto’s established taxi and limousine industries.

Representing the organization Associated Taxi Owners and Operators Limited (ATOOL) and lead plaintiffs Lawrence Eisenber, Behrouz Khamza and Sukvir Theti is the law firm Affleck Greene McMurtry.

The appeal was published February 26, 2020.

In the appeal document, the plaintiffs allege, “The motion judge erred in finding that a cause of action in negligence against the City was destined to fail. He did not adequately consider that a highly-similar action was already proceeding to trial in Ottawa on the same theory of liability. His refusal to certify this action means that only one group of plaintiffs in Ontario will have their day in court, and only against one municipality, concerning a failure to enforce taxi by-laws against Uber.”

They say, “the City failed to take any real steps” to consider and protect significant financial investments in the industry or the incomes of industry participants.

They allege the taxi industry was “created, fostered, and completely controlled by the City, who was an active regulator and participant in the market for taxi plates: it issued the plates and referred to them as “pensions” for owners and their widows or widowers.”

Further, they noted taxi license holders “invested significant sums of money on the basis that plates could be bought and sold, that they would generate income, and that they would serve as a source of income after they retired.”

In numerous reviews of the industry over the years, they say, the city “confirmed that owners deserved to be paid a fair return on their investment. It also expressed its legitimate expectation that the Toronto taxi by-laws would be respected.”

In 2014, ATOOL says, Uber began operating the service known as UberX – where non-professional drivers ferry passengers around in private vehicles – illegally.

The Plaintiffs allege City staff “did nothing to prevent UberX from proliferating, despite a specific directive from City Council to take all possible measures to ensure Uber’s compliance with a by-law that forbade its operations without a licence, and the City’s acknowledgement that plate owners deserved to be paid a fair return on their investment.”

By 2016 bylaws were passed dealing with Uber and similar services, but ATOOL alleges by that time significant damage had already been done to driver incomes, and sale values of taxi licenses and to the livelihoods of license holders relying on lease income for their pensions.’’

ATOOL wants the City to compensate those who suffered because of its inaction.

In discussing the history of taxi regulation in Toronto, ATOOL says “Plates have market value and have, throughout the years, been sold, transferred, inherited, and leased. The market existed because the City limited the number of plates in circulation.”

Further, ATOOL says, “Those who hold taxi licences would never have invested in the taxi industry absent their market value (and) the City has always been fully aware of this.”

In the City limited competition in the vehicle-for-hire market, lowering the volatility of the plates as investments.

Also, the City financially benefits from regulating the taxi industry collecting fees ranging from $3,000 to $5,000 for each sale or transfer of a plate, along with other fees for the lease of plates.

The city also controls the types of taxicab licences available to Plate Owners and has introduced new types of licences and converted licences from one type to another.

In 1998 the city established guiding principles in dealing with taxi regulation including, taxi drivers had the right to expect a fair return for their labor; taxi license holders Plate Owners had the right to expect and demand a fair return for their investment, and the city has a right to expect its by-laws would be obeyed.

In 2012, City Council directed that “the taxicab economic viability and sustainability of the taxi industry be added as a fourth key principle of the Taxicab Industry review” in addition to other principles including consumer protection, health and safety, and City well-being.

In 2012, app-based dispatchers Hailo and Uber began operating in Toronto. Hailo operated in Toronto until 2014 as a licensed taxicab broker. Uber did not obtain any licences from the City and (allegedly) operated illegally.

When it launched its new allegedly illegal “UberX” service in September 2014 it connected passengers with unlicensed (and, at the time, uninsured) vehicles for hire, usually at a lower cost than taxi fares.

Maximum taxi fares are set by the city.

A city application for an injunction stopping UberX operations was denied in 2015, with the judge saying the service did not fit within the bylaw. If council desired it could write new legislation to include it in the regulatory scheme.

New laws requiring this and similar services be licensed were passed in September 2015,according to the appeal, to “explicitly provide that technology-based companies such as Uber were indeed required to have a licence to operate and that they could only connect passengers with licensed taxis.”

Council “also directed the Executive Director of Municipal Licensing and Standards …to immediately implement and enforce Council’s decision.”

The appeal states “No meaningful resources were dedicated to immediately implementing and enforcing CityCouncil’s decision, presumably because MLS staff were always of the mind that the best way to deal with the problem was to license, rather than resist, Uber.”

By July 2016, Uber and other “Private Transportation Companies” started to operate fully legally in Toronto.

Meanwhile a very similar case to the ATOOL position was certified in Ottawa.

The appeal document says, “This appeal is about whether the motion judge (in Toronto) erred in refusing to certify proposed common issues which, “mirror the issues that were already certified in Ottawa and are proceeding to trial.”

The appeal says ATOOL must meet 5 requirements: “a. the pleadings or the notice of application discloses a cause of action; b. there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant; c. the claims or defences of the class members raise common issues; d. a class proceeding would be the preferable procedure for the resolution of the common issues; and e. there is a representative plaintiff or defendant who, i. would fairly and adequately represent the interests of the class, ii. has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and iii. does not have, on the common issues for the class, an interest in conflict with the interests of other class members.”

The appeal says, and this is not disputed by the city, “The Appellants met the last four requirements.”

However the Motion Judge ruled regarding “the preferable procedure criterion, that the proposed class action would have been the preferable procedure had he determined that there was a viable cause of action.

Justice Pirell did not accept the City’s submission that a class action would not be the preferable procedure, finding that the argument was “very weak and unconvincing.”

He held that there was “no meaningful alternative procedure remotely as useful or feasible as the proposed class action.”

His sole reason for dismissing the certification motion was a determination that the cause of action criterion in was not met.

Appellants say, “This finding was interesting in that the City’s main submission in its factum and at the hearing was that the Appellants’ action was in fact a claim for negligent misrepresentation. This argument was soundly rejected by the motion judge.

Judge Perell said: “[T]here is no dispute that the allegations in the statement of claim plead all the elements necessary for a recognized cause of action in negligence… but the controversy remains whether the cause of action in negligence as pleaded is a recognized cause of action in negligence.”

The appeal says “ Having held that there was no dispute that the statement of claim properly pleaded all of the elements necessary for a recognized cause of action in negligence, the motion judge erred by embarking on an analysis as to whether the City owed the plaintiffs a duty of care related to its enforcement of (the law) and further ruled the claim was for “pure economic loss.”

The motion judge then asked that where the relationship between the plaintiff and the defendant did not fall within a recognized class, then whether a duty of care exists.

The appellants say Perell erred by relying on certain cases that decided that where a municipality was regulating in the public interest, it could not be sued.

The motion judge held that although he did not need to undertake a fresh analysis of whether a duty of care existed, even if he had, he would not have certified the action because there was insufficient proximity between the Appellants and the City.

Further it is alleged Perell erred in distinguishing this case from the Ottawa case deciding “wrongly” that there was no judicial treatment of whether the City of Ottawa owed a duty of care to licensees in that case, when in fact there was.

There are now two different decisions on the same point from the same court in Ontario, the appellants say.

As well, Perell erred, it is said, in how he applied the threshold or low bar to be met by the plaintiffs.

The law says it “had to be plain and obvious that the claim could not succeed. Evidence was not admissible and the motion judge was required to accept the material facts pleaded by the plaintiffs as true and to read the pleading generously.

“It was not a merits test,” the plaintiffs say and there were no allegations or findings “that the claims were patently ridiculous or incapable of proof.”

The appeal also says Perell also erred by imposing an “overly onerous burden on the Appellants to establish the existence of a duty of care at the certification stage when there was no such burden on them.”

He failed to accept the facts pleaded in the Statement of Claim as true, and failed to consider the context of the specific and special relationship of proximity, as pleaded, between the City and the proposed class members.

The appeal then discusses various relevant previous court decisions including decisions of the Supreme Court of Canada. The appeals asks Perell’s decision be set aside and a class action lawsuit be permitted.

With the ongoing difficulties posed by the COVID-19 pandemic, it s not known when the appeal will be heard.