City owed industry ‘duty to care’, claims $1.7 billion ATOOL law suit
by Mike Beggs
Should it receive certification in Ontario Supreme Court, the Toronto taxi owners’ proposed $1.7 billion class action suit against the City can be expected to be a long, contentious battle.
This given the breadth of the allegations against the City and magnitude of the damages being sought, coupled with the City’s wholesale denial of any wrong- doing.
Owners are seeking damages to offset their heavy losses in plate values and leasing income, “resulting from the negligent manner in which the City enforced the bylaw against drivers of unlicensed Private Transportation Company vehicles such as Uber between 2014 and 2016,” and its implementation of the 2016 Vehicle-For-Hire bylaw which placed them at a significant disadvantage in competing against Uber X and other PTC vehicles.
As a consequence of the City’s actions, they say, the bottom has fallen out of plate values (down to just $30,000) and lease rates (now at no more than $400 per month).
In their Statement of Claim, they note the City has regulated taxi service for decades, and has consistently limited the number of taxi plates issued. And they assert, “There has been an understanding between (the two sides) that in exchange for significant regulations upon them, including upon pricing of services, taxi plate holders were permitted to earn a reasonable living.”
Further to the point, they claim that when a taxi plate was issued, the City staff would congratulate the plate holder on being given their “pension” for retirement. They say this practice was commonplace over decades, and meant that taxi plate holders now held something of value that could be sold, or from which income could be derived.
The City denies both of these assertions, in its Statement of Defence.
It reads, “Since 1957, the City has limited the number of taxi owner licenses, but has from time to time, increased the number available, changed requirements for, and imposed new regulations upon taxicab owners, drivers, and other participants.
“Changes in the licensing regime have been enacted as a result of the City’s determination of what was in the public interest. While potential economic impacts and other factors were considered in the course of consultations and decision-making, the City is not, and has never been liable to compensate licensees for alleged impacts of regulatory changes.”
Similarly, it states the City is not liable to plate owners, in negligence, or otherwise, for any decisions made respecting enforcement, or how enforcement actions were carried out.
But the taxi owners claim the “contract” between the City and plate owners has existed for decades, and, “a secondary market in taxi plates has developed as a result.”
“The City is more than just a regulator of the taxi industry, it was a willing participant in the business of the transfer of plates, from which it profited,” the Statement of Claim reads.
“The City created the conditions whereby a taxi plate came to be treated as an investment, and a form of retirement security for plate owners. And the City collected vast sums in plate transfer and renewal fees over decades, in the range of $3,000 to $5,000 every time a plate was transferred.”
They say the City is well aware some taxi plates were purchased for $300,000 or more, and that it has a “duty of care” both to the public, and to taxi plate holders.
“The City was under an obligation to be mindful of the legitimate interests of taxi plate holders, which the City failed to do,” they state.
The City refutes the notion that it was a “participant” in the taxi business, or that it has any obligation to protect the financial interests of taxicab owners. Furthermore, the City takes the position that, “a taxicab owner’s license is not, and never has been the property of any licensee.”
But plate owners point out that, “the City was so concerned with the economic viability and sustainability of the taxicab industry”, that Council made this consideration a fourth Directive of the 2012 Taxi Industry Review.
Long-time owner/operator Gerry Manley asserts that while he can produce numerous violations of senior statutes surrounding the content of Chapter 546, and plenty of conflicts within the VFH bylaw itself, the issue of economic sustainability represents, “the one overriding point that proves the City’s inability to fairly regulate their taxicab industry.”
“With the number of vehicles on the road now (almost 70,000 PTC’s) how does that address the City Council directive of 2012?” he asks.
Plate owners maintain that when Uber arrived in Toronto in 2012, “at all times Uber and its drivers fell within the relevant definitions of Chapter 545, yet was unlicensed by the City.
Moreover they say, “Uber X service was and is a taxi service for the purpose of the Excise Tax Act (Canada), yet the City refuses to acknowledge this fact. The City has permitted two taxicab industries in one City with different regulations, all to the detriment of Taxi Plate Holders and contrary to the 2012 Directive.”
They say the City’s acceptance of Private Transportation Companies also ran afoul of the requirements for accessible taxicabs under the Accessibility for Ontarians with Disabilities Act, 2005.
“The City was determined to permit PTC’s no matter the cost to Taxi Plate Holders, and regardless of what was required in statute,” the Statement of Claim reads.
They allege, “The City was negligent in its enforcement of Chapter 545 against the illegally operating Uber X, and thus, failed to meet the standard of care owed to Taxi Plate Holders.
They allege the City: failed to take adequate measures to prevent the Uber X service from expanding; failed to provide adequate resources to enforce Chapter 545 against Uber X service; failed to prosecute cases against Uber X drivers; and allowed the Uber X service to operate at will with no limitation on the number of affiliated drivers . They say this created the conditions that resulted in the market for the purchase and leasing of Taxi Plates effectively being destroyed; and failed to protect the interests of Taxi Plate Holders, as they were required to do pursuant of the 2012 Directive and under the aforementioned “contract, while also lowering safety standards for the riding public.”
They say, “The City was capable of taking action under Chapter 545 to stop the illegal Uber X service, but just didn’t. This negligence in enforcing Chapter 545 was derived from the City’s preference to permit private unlicensed vehicles to operate in Toronto.”
They allege, no real enforcement steps were taken by the City between 2014 and 2016, and that the City’s lack of enforcement continues under Chapter 546 to the detriment of Taxi Plate holders. They note there are only approximately 10 bylaw inspectors dedicated to enforcing the Chapter 546, and that Uber X drivers now regularly pick up street hails, contrary to the bylaw.
The Statement of Claim asserts. “The 10 bylaw enforcement officers are unable to enforce Chapter 546.”
And with the number of PTC vehicles (overwhelmingly Uber X) having skyrocketed up to almost 70,000, they note, “The City has refused to add additional bylaw enforcement officers. And Chapter 546 doesn’t contain any authority for those bylaw enforcement officers to stop an Uber X vehicle, rather, complaints are simply referred back to Uber.”
“The City failed to protect the various investments of the Toronto taxi industry, specifically those of Taxi Plate Holders, and the public , and was thus, negligent,” they allege. “Decisions were made by the City to adopt Chapter 546, to permit Uber to legally enter the marketplace in which they had been illegally operating without due regard to the interests of Taxi Plate Holders, and the safety of the public.
“The City improperly preferred the interest of PTC’s without due regard for the interests of Taxi Plate holders contrary to the 2012 Directive from City Council. In fact, staff’s preference was to destroy the traditional taxi industry in favour of PTC’s, and they undertook actions that would achieve that end,” they allege.
“The City also preferred its’ own interests to the detriment of Taxi Plate holders. PTC’s are less costly to regulate, yet they generate enormous fees for the City. The City, and City staff’s preference is to collect licensing fees from PTC’s, and to leave the vast majority of enforcement functions to PTC’s. The City, and City staff’s goal, was to be able to refer complaints about Uber, or companies like it, back to Uber.
“As a result of the City’s negligent enforcement of Chapter 545, and by virtue of the adoption of Chapter 546, the value of Taxi Plates has been reduced and Taxi Plate Holders have suffered a loss of income as a result,” the Claim reiterates.
The City responds that, “Any claim that the City was negligent in adopting Chapter 546 is statute-barred by Section 390 of the City of Toronto Act, which states that the City may not be sued in negligence in connection with its exercise of a discretionary power, if it results from a policy decision made in good faith.” They say its decision to enact Chapter 546 “reflects the exercise of its discretion as to the appropriate balancing of competing interests, and priorities.”
Furthermore, they say the claim that Chapter 546 was unreasonable is also barred by Section 213 of COTA, which provides that a City bylaw may not be quashed and is not open to review by any court for its’ supposed unreasonableness. And in any case, any such application must be commenced within a year of the bylaw’s enactment, which has already elapsed.
The City maintains it is not liable to the plaintiffs for any damages that may have been incurred as a result of its legislative decisions to amend taxi licensing requirements or to enact Chapter 546, or its decisions with respect to enforcement measures.
“If the prices for the sale of taxicabs, or the income earned by owners has decreased, the decrease is the result of market forces beyond the City’s control, for which it is not responsible, and are an expression of consumer preferences that taxicabs have failed to satisfy,” the Statement of Defence reads.
Relying on the Negligence Act, the City of Toronto Act, the Courts of Justice Act, and the Toronto Municipal Code, “the City pleads that the claim against it should be dismissed.”
Having led an unsuccessful legal challenge against the City back in the early 2000’s, Lucky 7 Taxi owner Lawrence Eisenberg claims the owners have, “no shortage of proof” of its claims, dating right back to the (City-commissioned) Coopers & Lybrand Reports of 1982 and 1987, and the Lorenthal Report of 1988.