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ATOOL Decision

An appeal has been filed after a pre-Christmas decision by a Provincial Court Judge to deny class action status to a group representing Toronto taxicab owners seeking compensation for loss of license value since app-based dispatch companies, like Uber and Lyft, were allowed to operate in the city.

Arguments from both sides of the certification bid were heard in November and the ruling was published on December 16, 2019.

Judge Perell ruled that while some of the city arguments opposing the class action lawsuit were “feeble”, nonetheless, and critically, the plaintiffs, All Taxi Owners and Operators Limited, or ATOOL, failed to establish that the city owed a “duty of care” to the taxi industry.

The representative plaintiffs are Lawrence Eisenberg, Behrouz Hadjnourollah Khamseh and Sukvir Theti. All own and operate taxis in Toronto. The group also has a steering committee.

The group is suing the City of Toronto for damages that could be “at least” $1.7 billion, if the suit is successful.

Even though the city admittedly failed to enforce its bylaws governing vehicle for hire businesses, including app-based dispatchers, there is no legal obligation forcing the city to enforce its bylaws the judge ruled.

ATOOL is suing for the loss in value of taxi plates associated with their sale, transfer or lease and loss in value for operation of taxi licenses “resulting from the negligent manner” in which the city enforced its bylaws governing vehicles for hire and drivers working these dispatch platforms.

The plaintiffs, represented by Attorney Michael Binetti, allege the city was a “willing participant” in the taxi industry, and not just a regulator.

In his decision, Judge Perell first discussed the history of taxi licensing in Toronto, including the advent of app-based dispatch companies beginning with Hailo and succeeded by Uber, then Lyft and others.

ATOOL argued the city owed plate owners a “Duty of Care” due to the “close relationship” it developed with almost every aspect of the business and was “required to take reasonable care to avoid causing foreseeable harm to plate owners.”

The city, it is alleged, must treat plate owners “fairly.”

And the city has a duty to enforce its bylaws against non-complaint persons offering vehicles for hire, ATOOL claims.

Initially, Uber and other companies did not receive city licenses, although the company Hailo, teh first app-based dispatch company, did eventually obtain a license. When the city tried to force Uber to get a city license, taking the company to court asking for an injunction, the judge ruled city bylaws did not cover Uber’s operations.

Meanwhile, it was alleged, Uber stared up a platform called UberX and dispatched to unlicensed and uninsured cars.

A few months later the law was changed and Uber did become licensed.

ATOOL alleges the city was negligent in that it did not “take adequate measures” to prevent UberX services from expanding, it failed to adequately enforce against UberX services, it failed to prosecute cases against UberX drivers, it allowed UberX to operate at will with no limit on the number of its drivers and it failed to consider the effect on taxi plate holders.

This resulted in the destruction of the market for selling and leasing of regular taxi plates, it is alleged.

The lack of enforcement continues to this day, with only 10 bylaw Enforcement officers dedicated to the entire vehicle for hire industry, despite at least two City Council directives that the interests of taxi plate holders and taxi drivers must be respected.

ATOOL further noted it is much less expensive to regulate the so-called Private Transportation Companies while it receives large amounts of money from the PTCs.

ATOOL also cited an Ottawa case where class action status was granted to the plaintiffs for essentially the same grounds.

THE CITY DISAGREED

On the other hand, Toronto argued the ATOOL case “does not satisfy the cause of action, the common issues, and the preferable criteria for certification.”

City lawyers, led by Attorney Michele Wright, argued for certification as a class action to go ahead, a five-art test must be met.

There must be a “cause for action,” the plaintiffs must be identifiable, common issues must be raised, a class action is the “preferable” way to proceed, and there is a 
“representative plaintiff” to fairly represent the interest of others, who has a workable plan to move forward and keep others informed and whose interests are not in conflict with others in the class.

The City did not dispute that there was an identifiable class and representative plaintiff.

That there is a common issue is also not seriously at dispute, except that there is no commonality regarding damages to each member of the class.

Wright argued each member of the class did not suffer equally, so compensation, if any, would have to be determined on an individual basis and not apportioned equally among all class members.

Also at dispute was the “preferable procedure” criterion. Wright argued members of the supposed class had other, better ways to seek redress of grievances, such as lawsuits brought as individuals, bringing cases forward that would be “fair, efficient and manageable.”

Since, Wright said, licenses were claimed to be worth in excess of $340 thousand, there was no real financial deterrent for the plaintiffs to go ahead with individual cases or forming small groups and sharing costs of each action.

THE JUDGE ANALYZED THE ARGUMENTS

In his analysis of the arguments, the judge called this last argument, “feeble” saying it “misses the target by the proverbial country mile.”

He said, “Viewed through the lens of access to both procedural and substantive justice, behaviour modification, judicial economy, and no meaningful alternative procedure remotely as useful or feasible as the proposed class action the Plaintiff’s proposed class action would have satisfied the preferable procedure but for the fact that it fails to provide a legally viable cause of action.”

The judge’s further analysis of the cause of action led him to state he did not accept a city argument that the plaintiff was alleging “negligent misrepresentation” but he accepted the argument was for simple negligence by not enforcing its own bylaws.

However other courts, including the Supreme Court of Canada, have ruled that simple economic loss is not sufficient for a class action to go ahead.

A genuine “Duty of Care” on the part of the regulator must be established, the Judge wrote, not affected by considerations such as policy. As well, legislatures have solid protections allowing them to make decisions such as enactment of the governing bylaw without having to worry about lawsuits brought by negatively affected parties.

Then the judge turned to allegations of negligently failing to enforce the bylaw.

While the plaitiffs suffered a pure economic loss as a result of city actions, it is “plain and obvious that they do not have a cause of action for negligence.”

He said case law has developed for many years to the effect that “there is no duty upon a municipality to enforce a bylaw which it has enacted in the exercise of a discretionary power.”

Other courts have ruled that in cases of pure economic loss municipalities do not assume a duty of care to badly affected parties.

He noted the overall principle is that the municipality owes a duty of care to the public as a whole, not to a particular affected group.

He noted “there were no commercial dealings between the licencees and the city.”

He analyses a number of previous decisions in case law brought to him by both parties, of varying relevance to this matter.

In the end he concluded, “The Plaintiffs have failed to satisfy the cause of action criterion for certification.”

THE APPEAL

Acording to the ATOOL appeal, the group argues the judge erred in law “in deciding that the pleadings fail to disclose a cause of action pursuant to … The Class Proceedings Act.

They say the judge erred in law in deciding that in this case, liability cannot be established on a class wide basis because each class member would individually have to prove causation and quantification of damages.

And the judge erred in law in not certifying the action as a class proceeding pursuant to s. 5 of the Class Proceedings Act, 1992.

It is not yet known when the appeal will be heard by the higher courts.

 

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February 2020

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