Toronto Livery Association v. Toronto (City), 2009 ONCA 535

CITATION: Toronto Livery Association v. Toronto (City), 2009 ONCA 535

DATE: 20090702

DOCKET: C48898

COURT OF APPEAL FOR ONTARIO

Doherty, Cronk and Rouleau JJ.A.

BETWEEN

Toronto Livery Association, Ontario Limousine Owners’ Association and Taras Danylevich, personally and on behalf of certain individuals holding one or more standard livery licences with the City of Toronto

Appellants (Applicants)

and

City of Toronto

Respondent (Respondent)

Ingrid Matckars, for the appellants, Toronto Livery Association and Taras Danylevich

Michele A. Wright, for the respondent

Heard: April 17, 2009

On appeal from the judgment of Justice Nancy Backhouse of the Superior Court of Justice, dated May 28, 2008.

Cronk J.A.:

I. Introduction

[1] This appeal involves a challenge to the new municipal limousine licensing scheme introduced by the City of Toronto (the “City”) in 2005.

[2] Taras Danylevich (“Danylevich”) operates a sole proprietorship as a livery cab[^1] (limousine) business licensed by the City. At the commencement of this litigation, he held a standard livery cab licence. He was also a licensed taxicab driver. The Toronto Livery Association (the “Association”) is a not-for-profit organization having among its objects the promotion of the interests of limousine owners and operators carrying on business in the City.

[3] Danylevich, in his personal capacity and as a representative of the Association in this proceeding, appeals on his own behalf and on behalf of certain other individual limousine licence holders and the Association (collectively, the “appellants”) from the judgment of Backhouse J. of the Superior Court of Justice dated May 28, 2008, dismissing an application to quash By-laws 706-2005 and 217-2006, two of the City’s limousine licensing by-laws (the “By-laws”), in whole or in part, and to obtain declaratory relief regarding the By-laws.

[4] In their factum, the appellants challenged the By-laws on several grounds. They argued that:

(i) in enacting the By-laws, the City exceeded the scope of its statutory authority;

(ii) By-law 706-2005, the main by-law in contention, was enacted by the City in bad faith and is unreasonable;

(iii) there is no rational connection between the City’s legitimate statutory objectives and several provisions of the By-laws;

(iv) the By-laws wrongfully and arbitrarily differentiate between licence holders, interfere with their business operations and, more generally, violate their consti-tutionally protected equality rights under s. 15(1) of the Charter of Rights and Freedoms (the “Charter”);

(v) the By-laws offend the provisions of the Competition Act, R.S.C. 1985, c. C-34 (the “Competition Act”); and

(vi) the process followed by the City in enacting the By-laws was procedurally unfair.

The appellants also challenged the application judge’s award of costs in favour of the City.

[5] For the reasons that follow, I would dismiss the appeal.

II. Background

(1) New Limousine Licensing Scheme

[6] For decades, the limousine industry in Toronto has been regulated by a municipal licensing scheme established by the City. Under the By-laws, this scheme provides for three types of limousine licences: (i) a limousine owner licence, which entitles the licensee to own a limousine and to pick up passengers in the City for transportation to any destination; (ii) a limousine driver licence, which authorizes the licensee to drive, but not to own, a licensed limousine to pick up passengers in the City for transportation to any destination; and (iii) a business licence for limousine service companies (“LSCs”). As defined under the By-laws, a limousine is any automobile other than a taxicab, including a stretch or sedan luxury vehicle, that meets minimum size criteria set by the City and that is used “for hire for the conveyance of passengers in the City”.

[7] From 1986 to 2005, the City imposed a “cap” of 375 limousine owner licences in Toronto (the “Cap”). Since the Cap limited its ability to grow, the Toronto limousine industry lobbied extensively for many years to persuade the City to remove the Cap.

[8] These lobbying efforts eventually bore fruit. In 2001, the City embarked on a major review of its limousine licensing scheme. On July 21, 2005, after several years of study and consultations, the City enacted By-law 706-2005 under the authority of the Municipal Act, 2001, S.O. 2001, c. 25 (the “Municipal Act”). By-law 706-2005, which became effective on September 1, 2005 and was subsequently amended by By-laws 217-2006 (enacted March 30, 2006), 1417-2007 (enacted December 13, 2007), and 230-2008 (enacted March 5, 2008), is the cornerstone of the City’s current limousine licensing regime and the primary focus of the issues on appeal.

[9] The By-laws introduced significant changes to the City’s former limousine licensing scheme. Under By-law 706-2005, the Cap was removed and replaced by criteria to be met by prospective licensees. Among other things, By-law 706-2005:

(i) requires all owners of licensed limousines to register their vehicles with and to operate through a LSC under a service level agreement. It also obliges LSCs to maintain identified business records at a central place of business that is accessible during regular business hours (collectively, the “LSC Requirements”);

(ii) limits the age of limousine vehicles eligible for licen-sing;

(iii) prescribes a minimum fare of $70 per hour for the first two hours or part thereof to be charged by a limousine owner, driver or LSC for trips other than trips to Lester B. Pearson International Airport (the “Minimum Fare Requirement”);

(iv) requires LSCs, as a minimum licence requirement, to own or employ, under a service level agreement, a specific ratio of stretch to sedan vehicles (the “Ratio Requirement”); and

(v) regulates limousine passenger pick-up times and locations.

[10] By-law 217-2006 “grandfathered” limousine vehicles licensed as of May 19, 2005, to exempt LSCs operating such vehicles from the Ratio Requirement. By-laws 1417-2007 and 230-2008 corrected certain drafting errors and omissions in By-law 706-2005.

[11] On July 20, 2006, the appellants commenced an application against the City, seeking orders quashing the By-laws, in whole or in part, and declarations that the By-laws were void for illegality on various grounds. [^2]

(2) Toronto Act

[12] On January 1, 2007, five months after the initiation of the appellants’ application, the City of Toronto Act, 2006, S.O. 2006, c. 11, Schedule A (the “Toronto Act”) came into force. Under ss. 2 and 8(2) of the Toronto Act, the City was granted broad authority to “[d]etermine what is in the public interest for the City” and to “[r]espond to the needs of the City” (s. 2), and to pass by-laws regarding the “[e]conomic, social and environmental well-being of the City”, the “[h]ealth, safety and well-being of persons”, “[p]rotection of persons and property, including consumer protection”, and “[b]usiness licensing”, among other matters (s. 8 (2)). I will refer throughout these reasons to particular provisions of the Toronto Act in the context of the issues on appeal to which they relate.

(3) Application Judge’s Decision

[13] The application judge held that:

(i) the City acted within the scope of its licensing powers under the Toronto Act in enacting the By-laws;

(ii) there was no evidence of bad faith by the City in the passage of the By-laws;

(iii) in the absence of a showing of bad faith by the City, the By-laws could not be set aside solely on the ground of alleged unreasonableness;

(iv) each of the impugned provisions of the By-laws relates to a legitimate regulatory concern regarding the limousine industry. Further, the By-laws constitute “rational regu-lations in the public interest”; and

(v) the City’s goal of ensuring that the limousine and taxicab industries in Toronto operate in the public interest is a rational objective.

[14] Accordingly, the application judge concluded that there was no basis for quashing the By-laws and dismissed the application. She also awarded costs in favour of the City in the amount of $27,972.50.

III. Issues

[15] We called on the City to respond to two issues:

(1) Did the City act in excess of its statutory powers in enacting the By-laws?

(2) Did the application judge err by failing to quash certain provisions of the By-laws on the basis that they are arbitrary and unreasonable or illegal?

IV. Discussion

[16] The appellants advance two jurisdiction complaints. First, they contend that the Municipal Act, rather than the Toronto Act, governs the question of the City’s jurisdiction to pass the By-laws and that the City exceeded its statutory authority under the Municipal Act in enacting the By-laws. If that argument fails, the appellants next submit that in passing certain specific provisions of the By-laws, the City exceeded the scope of its jurisdiction. I will address these arguments in turn.

(1) Challenge to the By-laws as a Whole

[17] At the outset, I note that the application judge stated in her reasons: “The applicants did not contend that the impugned provisions [of the By-laws] exceeded the City’s statutory powers.” Contrary to this statement, the appellants claim that their jurisdiction challenge was a live issue before the application judge. The City does not contest this assertion and the question of the City’s statutory authority to pass the By-laws was fully argued before this court. Further, the fresh as amended notice of application before the application judge included a challenge to the City’s jurisdiction to pass the By-laws under the Municipal Act. As this notice was delivered in July 2006, it contained no reference to the Toronto Act, which was not yet in force.

[18] In these circumstances, I am satisfied that the issue whether the City had jurisdiction to enact the By-laws was joined by the parties and that it is properly before this court for determination. I therefore turn to the merits of this ground of appeal.

(i) Governing Statutory Framework

[19] In my view, the first branch of the appellants’ jurisdiction complaint, by which they attack the By-laws as a whole, must fail. The contention that the Municipal Act governs the City’s authority to pass the By-laws is inconsistent with the Municipal Act, as amended on enactment of the Toronto Act. It is also inconsistent with the purpose and the express provisions of the Toronto Act.

[20] On January 1, 2007, the same day that the Toronto Act became effective, s. 7.1(1) of the Municipal Act came into force.[^3] Section 7.1(1) provides that the Municipal Act does not apply to the City “except as otherwise provided by another provision of the [Municipal Act] or of the [Toronto Act]”. There is no suggestion that this exception is engaged in this case. Accordingly, on the introduction of s. 7.1(1), the Municipal Act ceased to apply to the City and was replaced by the Toronto Act.

[21] The Toronto Act, in turn, contains several transitional provisions, two of which are especially relevant in this case. Section 419(2) of the Toronto Act provides that a provision of that statute, for which there is a corresponding provision of the Municipal Act, and the enactment of s. 7.1 of the Municipal Act are deemed to constitute the substitution of the provision of the Toronto Act for the corresponding provision of the Municipal Act. The effect of s. 419(2), for example, is to continue the City’s by-law making authority, formerly established by the Municipal Act, under the Toronto Act.

[22] In addition, s. 419(4) of the Toronto Act expressly addresses the effect of that statute on by-laws enacted by the City under the Municipal Act. Pursuant to s. 419(4), if a by-law that was in effect immediately before January 1, 2007 was made by the City under a provision of the Municipal Act for which there is a corresponding provision of the Toronto Act, the by-law remains in effect and is deemed to have been made by the City under the corresponding provision of the Toronto Act.

[23] Under the Municipal Act, the City was empowered to license, regulate and govern any business carried on within the City (s. 150(1)). By virtue of s. 150(2) of the Municipal Act, the City was required to only exercise its licensing powers under s. 150(1), including its power to impose conditions, for one or more of the following purposes: “1. Health and safety. 2. Nuisance control. 3. Consumer protection.”

[24] Moreover, under s. 150(8) of the Municipal Act, the City’s power “to license, regulate and govern a business” by by-law included the power: “to prohibit the carrying on of or engaging in the business without a licence” (s. 150(8)(a)); “to refuse to grant a licence or to revoke or suspend a licence” (s. 150(8)(b)); “to define classes of businesses and to separately license, regulate and govern each class” (s. 150(8)(d)); and “to exempt any business or person from all or any part of the by-law” (s. 150(8)(j)), among other matters.

[25] The City’s regulatory authority was significantly expanded under the Toronto Act. Indeed, as the application judge observed, the Toronto Act affords the City “sweeping powers”. As I have mentioned, s. 2 states in part that the purpose of the Toronto Act is “to create a framework of broad powers for the City”, which recognizes that the City must be able, among other things, to: (i) “[d]etermine what is in the public interest for the City” and (ii) “[r]espond to the needs of the City”, in order “to provide good government”.

[26] Section 8(2) of the Toronto Act vests the City with broad powers to make by-laws, including by-laws regarding business licensing. This provision states in part:

The City may pass by-laws respecting the following matters:

5. Economic, social and environmental well-being of the City.

6. Health, safety and well-being of persons.

7. Protection of persons and property, including consumer protection.

8. Business licensing.

[27] The City also enjoys statutory authority under the Toronto Act to provide for a system of business licences. Section 86(1) authorizes the City to prohibit the carrying on or engaging in a business without a licence (s. 86(1)(a)); to refuse to grant a licence or to revoke or suspend a licence (s. 86(1)(b)); to impose conditions as a requirement of obtaining, continuing to hold or renewing a licence (s. 86(1)(c)); to impose special conditions on a business in a class that have not been imposed on all of the businesses in that class in order to obtain, continue to hold or renew a licence (s. 86(1)(d)); and to license, regulate or govern real and personal property used for a business and the persons carrying it on or engaged in it (s. 86(1)(f)).

[28] Given the purpose of the Toronto Act expressed in s. 2, the effect of ss. 8(2) and 86(1) of the Toronto Act is to grant wide authority to the City to pass business licensing by-laws that advance the public interest and respond to the needs of the City. Under the express language of s. 8(2), those by-laws may relate to consumer protection, the economic and social well-being of the City, and the health, safety and well-being of persons in the City.

[29] Importantly, the powers conferred on the City by the Toronto Act attract an expansive and deferential interpretation. Section 6(1) of the Toronto Act contains the following blunt legislative directive:

The powers of the City under this or any other Act shall be interpreted broadly so as to confer broad authority on the City to enable the City to govern its affairs as it considers appropriate and to enhance the City’s ability to respond to municipal issues.

[30] Section 6(1) of the Toronto Act is far-reaching. It applies to the City’s general power to make by-laws under s. 8(2) and its specific power under s. 86(1) to establish business licensing systems. Furthermore, by its terms, s. 6(1) is stated to apply to the powers of the City “under this or any other Act” (emphasis added). Thus, the expansive interpretive approach mandated by s. 6(1) also applies to the construction of the scope of the City’s statutory powers under the Municipal Act.

[31] The effect of these provisions, in my opinion, is that the City’s statutory authority to license, regulate and govern the limousine industry – previously conferred under the Municipal Act – is now continued and expanded by the Toronto Act. Further, by the combined effect of s. 7.1(1) of the Municipal Act and ss. 419(2) and (4) of the Toronto Act, the By-laws are deemed to be governed by the Toronto Act. Accordingly, the issue whether the City acted within the scope of its statutory authority in passing the By-laws must be determined by reference to the Toronto Act.

[32] I am fortified in this conclusion by an additional compelling factor. If the appellants’ contention that the Municipal Act governs the By-laws was to be accepted, it would result in the continuing application of two separate statutory regimes – the Municipal Act and the Toronto Act – to the City’s exercise of its by-law making powers, including its business licensing jurisdiction. This would give rise to potential confusion, uncertainty and inconsistency regarding the source and limits of the City’s regulatory jurisdiction in respect of a host of businesses, including the limousine industry. There is nothing in either statute that directs or even suggests this legislative intention. On the contrary, the clear and unambiguous language of s. 7.1(1) of the Municipal Act and s. 419 of the Toronto Act suggests precisely the opposite.

(ii) Bad Faith Claim

[33] I did not understand the appellants to dispute the wide cast of the City’s powers under the Toronto Act. Rather, they submit that the City did not act in good faith in passing the By-laws, with the result that it had no jurisdiction to enact them. I do not accept this submission.

[34] Under the Toronto Act, City by-laws are insulated from attack on the ground of alleged unreasonableness unless they are passed by the City in bad faith. Section 213 of the Toronto Act states:

A by-law of the City or a local board of the City passed in good faith under any Act shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law. [Emphasis added.]

Section 272 of the Municipal Act is to the same effect.

[35] In Equity Waste Management of Canada v. Halton Hills (Town) (1997), 35 O.R. (3d) 321 (C.A.), at para 61, this court indicated that bad faith by a municipality “connotes a lack of candour, frankness and impartiality. It includes arbitrary or unfair conduct and the exercise of power to serve private purposes at the expense of the public interest” (citations omitted).

[36] The application judge found that there was no evidence of bad faith by the City in enacting the By-laws. In particular, she reviewed in detail the City’s public notice and consultation process concerning the By-laws and held that it was “indicative of a careful approach to the City’s powers of regulation” and “bespeaks the absence of both bad faith and arbitrariness”.

[37] These findings were open to the application judge on the evidence. Her appreciation of the evidence and her factual findings attract deference from this court: see Equity Waste, at pp. 333-34. I see no basis on which to conclude that the application judge’s finding of an absence of bad faith by the City is tainted by palpable and overriding error.

[38] In light of the statutory provisions of the Municipal Act and the Toronto Act, described above, and the absence of a showing of bad faith by the City in enacting the By-laws, I have no hesitation in concluding that the Toronto Act afforded the City ample jurisdiction to pass the By-laws.

(2) Challenge to Specific Provisions of the By-laws

[39] This, however, does not end the matter. As advanced during oral argument before this court, the appellants impeach three particular aspects of the By-laws: (i) the Minimum Fare Requirement; (ii) the LSC Requirements; and (iii) the Ratio Requirement (collectively, the “Challenged Provisions”). They argue that the Challenged Provisions are arbitrary and oppressive; that there is no rational connection between the Challenged Provisions and the City’s legitimate statutory objectives; and that the Challenged Provisions unfairly favour the taxicab industry over the limousine industry. Therefore, the appellants submit, the application judge erred by failing to quash the Challenged Provisions on the basis that they are unreasonable or illegal.

[40] The City accepts that a municipal by-law may be quashed if it was passed in bad faith. The City also acknowledges that bad faith may be found where a municipal council has acted “unreasonably and arbitrarily and without the degree of fairness, openness, and impartiality required of a municipal government”: see Equity Waste, at pp. 343-45, citing Re H.G. Winton Ltd. and Borough of North York (1978), 20 O.R. (2d) 737 (Div. Ct.), at pp. 744-5. See also Ottawa (City) v. Boyd Builders Ltd., [1965] S.C.R. 408, at p. 415. However, relying on s. 213 of the Toronto Act, above-quoted, the City asserts that the Challenged Provisions cannot be quashed on the ground of unreasonableness absent bad faith by the City, which was not made out in this case.

[41] I agree. On the facts of this case, the By-laws are not susceptible to attack for alleged unreasonableness. The appellants bore the onus to establish that the City acted in bad faith in enacting the By-laws: see Boyd Builders, at pp. 412-13; Equity Waste, at p. 343. On the application judge’s findings, the appellants failed to meet this onus.

[42] However, the appellants also claim that the application judge erred by failing to quash the Challenged Provisions under s. 214(1) of the Toronto Act on the ground of illegality. Section 214(1) reads:

Upon the application of any person, the Superior Court of Justice may quash a by-law, order or resolution of the City or a local board of the City in whole or in part for illegality. [Emphasis added.]

[43] The application judge rejected the appellants’ assertion of illegality, reasoning as follows:

In my opinion, each of the impugned by-law provisions related to a legitimate concern in terms of regulating the limousine industry. This regulation does not occur in a vacuum. The City also regulates the taxi industry. Its goal of ensuring that each industry can operate in the public interest is rational.

In my view, several factors support these conclusions.

[44] To begin, the examination of the legality of the Challenged Provisions must proceed in light of the generous, deferential standard that applies to appellate review of the exercise of municipal powers: see Equity Waste, at p. 339, citing Howard and Toronto (City) (Re) (1928), 61 O.L.R. 563 (C.A.) and Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231, per McLaughlin J., in dissent, at para. 24; Cash Converters Canada Inc. v. Oshawa (City) (2007), 86 O.R. (3d) 401 (C.A.), at para. 20; Toronto Taxi Alliance Inc. v. Toronto (City) (2005), 77 O.R. (3d) 721 (C.A.), at para. 46. This deferential approach requires a reviewing court “[to] respect the responsibility of elected municipal bodies to serve the people who elected them and exercise caution to avoid substituting their views of what is best for the citizens of those municipal councils”: Shell Canada, at para. 19. Further, this approach to the interpretation of municipal powers presumes that municipal by-laws are validly enacted absent a clear demonstration that the by-law in question exceeds the municipality’s powers: see Ontario Restaurant Hotel & Motel Assn. v. Toronto (City), [2005] O.J. No. 4268 (C.A.), at para. 3, leave to appeal refused, [2006] S.C.C.A. No. 45.

[45] Second, the appellants’ illegality claim rests in part on their assertion that the Challenged Provisions unfairly and arbitrarily discriminate against the limousine industry in favour of the taxicab industry. I disagree.

[46] The taxicab and limousine industries are both important components of the public transportation services available to the public in Toronto. The evidential record supports the City’s claim, detailed in its factum, that the City “was cognizant of the need to balance the interests of the two industries to prevent the limousine industry from being flooded with additional operators, potentially to the ultimate detriment of the travelling public and the City as a whole”.

[47] In this context, it was for the City, acting within its authority under the Toronto Act, to determine what measures for the regulation of the limousine industry are in the public interest. So long as the measures chosen are not arbitrary and are rationally connected to a legitimate municipal objective, the court is precluded from second-guessing City Council on what regulatory measures are in the public interest of the citizens of the City. As this court explained in Howard and Toronto at p. 567:

What is or is not in the public interest … is a matter to be determined by the judgment of the municipal council; and that what it determines, if in reaching its conclusion it [acted] honestly and within the limits of its powers, is not open to review by any court. [Citations omitted.]

[48] In this case, the Toronto Act specifically empowers the City to differentiate between licence holders when passing by-laws in the exercise of its business licensing and other powers under s. 8(2). Section 10(1) of the Toronto Act reads:

Without limiting the generality of section 6 and except as otherwise provided, a by-law under this Act may be general or specific in its application and may differentiate in any way and on any basis the City considers appropriate. [Emphasis added.]

[49] Thus, the City had the statutory power to take steps, by by-law, that advantaged the taxicab industry over the limousine industry, so long as the City acted honestly in so doing and the steps taken were rationally connected to a legitimate municipal objective.

[50] Third, there can be no sustainable complaint concerning the Challenged Provisions on the basis that they oblige limousine owners or drivers to undertake specific actions or to operate their businesses in ways expressly delineated by the City. As I have said, the City’s powers under the Toronto Act to regulate businesses includes the power to impose conditions as a requirement of obtaining, holding or renewing a licence (s. 86(1)). See also United Taxi Drivers’ Fellowship of Southern Alberta v. Calgary (City), [2004] 1 S.C.R. 485, at para. 13; Ontario Restaurant Hotel & Motel Assn., at para. 7.

[51] In addition, s. 8(3) of the Toronto Act provides:

Without limiting the generality of section 6, a by-law under this section respecting a matter may,

(a) regulate or prohibit respecting the matter;

(b) require persons to do things respecting the matter;

(c) provide for a system of licences respecting the matter.

[52] In the end, the appellants’ real complaint in this case is that the Challenged Provisions are arbitrary and that they are not rationally connected to legitimate City concerns regarding the regulation of the limousine industry. The application judge rejected this contention. In my view, she was correct to do so. I say this for the following reasons.

(i) Minimum Fare Requirement

[53] Virtually from the outset of the development of potential by-law amendments to remove the Cap, the City proposed the establishment of a minimum hourly fare for limousine services. From at least January 2002, a minimum hourly fare was called for in City staff and committee reports regarding reform of the City’s limousine licensing scheme.

[54] This proposal also formed part of various regulatory measures discussed with representatives of the limousine and taxicab industries at meetings and workshops held by the City prior to the enactment of By-law 706-2005. Indeed, the minutes of a meeting held with representatives of those industries on March 4, 2005 suggest that the participants in the meeting agreed on a minimum fare of $60 per hour for the first two hours or part thereof of limousine services.

[55] A City staff report to the Planning and Transportation Committee of City Council dated April 1, 2005 identified the following rationale for the Minimum Fare Requirement:

Concern has been raised relative to the similarity between livery service and the service provided by taxicabs in the City. Taxicab operators are concerned that livery vehicles will compete for their business. The introduction of a minimum fare for livery service that is well above the average taxicab fare and the pre-arranged fare provisions will deter direct competition between the two modes of transportation service.

[56] The recitals to By-law 706-2005, as subsequently amended by By-law 1417-2007, accord with the rationale for the Minimum Fare Requirement advanced by City staff. They include the following statement:

Whereas a minimum rate for limousine transportation services is necessary to deter direct competition between limousines and taxicabs and to establish and maintain a clear distinction between limousine transportation services and taxicab transpor-tation services;

[57] Consistent with this rationale, Bruce Robertson (“Robertson”), the Director of the City’s Licensing Services, Municipal Leasing and Standards Division, swore in his affidavit filed on the application that the objective of the Minimum Fare Requirement was “to discourage fly-by-night operators and to maintain the distinction between the taxi and limousine industries”. He also said that the City’s Licensing Sub-Committee ultimately settled on a minimum hourly fare of $70 on the basis of the exercise of its judgment and information received from one of the largest limousine companies in the City that it charged $85 per hour.

[58] Thus, the record supports the conclusion that the Minimum Fare Requirement is directed at a legitimate municipal goal – the regulation of competition between the limousine and taxicab industries in the City, in the public interest. In my view, it was for the City to determine the appropriate quantum of such a measure. On this record, it cannot be said that the Minimum Fare Requirement is arbitrary or irrational.

(ii) LSC Requirements

[59] I reach a similar conclusion regarding the LSC Requirements. By-law 706-2005 offers the following justification for the LSC Requirements: “WHEREAS [LSCs] will ensure a level of accountability to the public for the arrangement of limousine service, ensuring all limousines used in their companies comply with the Municipal Code provisions”.

[60] This accountability focus of the LSC Requirements was also emphasized by the City’s Commissioner of Urban Development Services in a report to the Planning and Transportation Committee of City Council dated April 1, 2005:

The recommendation to create a new licence category for companies that provide livery service, separate from driver’s and owner’s licences, will establish a level of accountability for these types of businesses and provide higher standards of consumer protection. The companies will be responsible for ensuring the pre-arrangement of fares, for ensuring vehicles used in their business are inspected, insured and properly licensed, and for maintaining proper records of all requests for service.

[61] In his affidavit, Robertson reiterated that the requirement that all limousine owners and drivers enter into a service agreement with a LSC was intended to ensure a level of accountability to the public for businesses that arrange and provide limousine services in the City. Further, he said that the City sought to impose requirements that would “facilitate investigation and enforcement to ensure greater compliance with the City’s licensing requirements”.

[62] Robertson also deposed that before the introduction of the LSC Requirements, limousines generally operated in the City through a company or brokerage that received customer telephone calls and arranged trips. Consequently, Robertson indicated: “[A]s a practical matter, the creation of a license requirement for [LSCs] and the requirement that limousines do business through a [LSC] simply formalized the general manner in which limousines operated to being with.”

[63] In his affidavit sworn on May 31, 2007 in support of the application, Danylevich suggested that after the introduction of LSCs, “some brokerages began to increase the charges payable by livery vehicle owners to operate”. But the appellants have been unable to point to any evidence of usurious administrative or other fees charged by LSCs to individual limousine drivers or owners or any other LSC-imposed measure that has restricted the ability of limousine vehicle drivers or owners to carry on business. On this record, there appears to be no firm evidence of the overcharging of limousine drivers or owners by LSCs.

[64] Moreover, the evidence suggests that the LSC Requirements have not frustrated the ability of limousine drivers and owners to obtain licences or to carry on business. As of February 2008, 668 limousine owner licences and 950 limousine driver licences had been issued under the By-laws. In contrast, as of August 31, 2005, 305 limousine owner licences (out of a potential 375 such licences) and 726 limousine driver licences had been issued by the City.

[65] This evidence undercuts the appellants’ claim that the LSC Requirements have had “the effect of denying most individuals who would have wished to become part of the livery industry legally the opportunity to do so”. On the contrary, as sought by the limousine industry, the By-laws appear to have resulted in a material relaxation of the pre-2005 limits on the growth of the limousine industry and the number of limousine licences actually made available in the City.

[66] Nor does the evidence support the appellants’ submission that the requirement for LSCs to maintain specific business records at a central office location is arbitrary or unconnected to a valid City regulatory objective. On the evidence, this requirement is intended: (i) to ensure that the City’s zoning by-laws are respected by requiring that limousine businesses be conducted from locations zoned for that use; and (ii) to facilitate investigations into any offence under the By-laws by requiring that business records be maintained and made available for inspection at designated places of business.

[67] I conclude that there was ample evidential support for the application judge’s holding of a rational connection between the LSC Requirements and the regulation of the limousine industry in the public interest. There was evidence before the application judge demonstrating that the LSC Requirements are linked to the health, safety and well-being of members of the travelling public and, more generally, to consumer protection.

(iii) Ratio Requirement

[68] I turn now to the Ratio Requirement, which deals with the number and type of vehicles required to be operated by LSCs. This provision of By-law 706-2005, as amended by By-law 1417-2007, obliges LSCs to maintain and operate, as a minimum licensing requirement, service agreements for at least one stretch vehicle and two sedan vehicles and thereafter, to operate a fixed number of stretch vehicles in proportion to the number of sedan vehicles operated (e.g. one stretch vehicle for up to four sedans and one stretch vehicle for each six additional sedan vehicles) in order to obtain and hold a limousine owner licence.

[69] Danylevich’s complaints regarding the Ratio Requirement were outlined in his May 2007 affidavit. In that affidavit, he alleged that the Ratio Requirement “makes no rational, economic or legal sense”. In support of this allegation, he maintained that: (i) the mandatory purchase of a stretch limousine is “financially ruinous” given (a) the high costs of a stretch limousine (approximately $100,000 to $135,000 per unit), (b) the declining consumer demand for stretch limousine services, and (c) the fuel costs for such vehicles; and (ii) the application of the Ratio Requirement to existing smaller limousine business owners – such as Danylevich – (a) will result in “very little legitimate expansion of small, closely held independent livery businesses”, (b) will force such limousine operators “to drive for a brokerage, and pay dues and rentals for so doing”, (c) will reduce the number of new licences issued and “create a vicious cycle of failed livery businesses”, and (d) will force small or independent limousine operators out of business and into a service agreement and contract with an existing broker.

[70] The application judge rejected these complaints, stating:

The ratio of stretch limousines to sedans is designed to limit the number of limousines. Although other means might have been selected, the goal of limitation is a rational one. [Emphasis added.]

[71] The City defends the Ratio Requirement primarily on the ground that it was intended to reduce a flood of new limousine licence applicants on removal of the Cap. The City maintains that a flood of new applicants: (i) might have led to an increase in the number of vehicles operating as limousines to improperly circumvent the City’s taxicab licensing requirements; and (ii) might, as well, have had deleterious effects on the limousine industry to the disadvantage of the travelling public. The City says that both of these scenarios, if realized, would result in consequential adverse effects on the economic well-being of the City.

[72] The City also emphasizes that the grandfathering provision of By-law 217-2006 was intended “to ensure an orderly transition period for those who owned limousines as at May 19, 2005” and, further, “to minimize potential disruption in services to the public”. In reality, the City submits, the attack on the Ratio Requirement is designed to achieve a broader exemption from the Ratio Requirement than is contemplated by the grandfathering concession agreed to by the City.

[73] I agree with the application judge that the Ratio Requirement addresses a “goal of limitation” – that is, the control of the number of limousines in the City. For several reasons, I also agree that, on this record, the Ratio Requirement cannot be said to be irrational or arbitrary.

[74] First, on the City’s evidence, the Ratio Requirement is directed at consumer protection, public safety and the economic well-being of the City. In its factum, the City described the link between these legitimate municipal objectives and the Ratio Requirement in this fashion:

From the City’s perspective, a flooding of the transportation industry by newly licensed limousines had the potential to negatively impact customer service and public safety because the City considered there to be a correlation between good driving and good service and the economics of the industry. Too many drivers driving for too little business encourages drivers and owners to cut corners, by not properly maintaining vehicles, driving aggressively and dangerously, or failing to provide good customer service, in order to make money; all of which compromises public safety and consumers.

[75] Second, as outlined in the April 1, 2005 report by the City’s Commissioner of Urban Development Services to the Planning and Transportation Committee of City Council, the introduction of the Ratio Requirement was tied to the removal of the Cap and the core feature of the City’s new limousine licensing scheme – the creation of LSCs as a device to “establish a level of accountability for [limousine service] businesses and provide higher standards of consumer protection”. In that context, the express goal of LSCs was to “ensure that livery service is provided by full-service businesses and not independent operators of one vehicle. As a minimum requirement to obtain a licence, a company will be required to [abide by the Ratio Requirement]”. Further, “[T]he recommendation that luxury sedans meeting specific criteria can only be licensed as livery vehicles in conjunction with stretched vehicles will establish criteria for legitimate livery operations in the City, as [distinct] from the taxi business.”

[76] The Ratio Requirement is also intended to prevent “bandit” or unlicensed limousine operators from continuing to operate in the City and to ensure that full-service limousine services are made available to the public by established operators under controlled conditions. These objectives of the Ratio Requirement were detailed in a December 8, 2005 staff report to the Planning and Transportation Committee, in which the grandfathering provision introduced under By-law 217-2006 was also recommended:

[The Ratio Requirement is] intended, in part, to allow unlicensed limousine activity that has been operating in the city for several years to come under the regulatory framework. The vehicle ratios are designed to ensure that these new companies [LSCs] are legitimate operators who are providing full limousine service to the community.

[77] This evidence indicates that the Ratio Requirement is integrally linked to the removal of the Cap and the new LSC business licence system introduced by the City. This system, in turn, is designed to maintain the distinction between taxicabs and limousines, to deter competition between the taxicab and limousine industries in the City, to ensure that limousine services are offered by full-service operators who meet high standards of consumer protection and business regulation set by the City, and to control and deter limousine operators who previously operated without authority to do so.

[78] Reasonable people might disagree on the choice of the Ratio Requirement as a control measure for the purposes advanced by the City. However, I am unable to conclude that it is arbitrary or unconnected to valid City objectives or that the purposes for which it was introduced, as articulated by the City, are outside the boundaries of legitimate City concerns. There is support in the evidential record for the City’s claim that the Ratio Requirement is rationally related to public safety, consumer protection and the economic well-being of the City. These are valid regulatory objectives in respect of which the City, in the exercise of its discretion, may pass by-laws under the authority of s. 8(2) of the Toronto Act.

[79] Third, I note that the establishment of the Ratio Requirement was not a surprise development in the City’s overhaul of its limousine licensing scheme. As I have said, the City’s review of its pre-2005 licensing scheme commenced in 2001. Like the Minimum Fare Requirement, the recommendation by City staff that limousine vehicles be registered with the City according to a stretch limousine-sedan ratio formula had emerged from at least January 2002 and was an item for discussion at various public consultation and workshop meetings held by the City with representatives of the limousine and taxicab industries thereafter. Those meetings eventually led to the grandfathering exemption from the Ratio Requirement provided for under By-law 217-2006. Danylevich made submissions to the City’s Planning and Transportation Committee concerning the proposed grandfathering exemption from the Ratio Requirement.

[80] Finally, as I have said, deference is owed to the decisions of City Council as to how best to regulate the limousine industry and to balance the competing interests of the limousine and taxicab industries in the City. As the appellants fairly conceded during oral argument, it was open to the City to retain the previous Cap or to impose a new and different cap. It was also open to the City to decline to exempt any limousine licence holder from the Ratio Requirement. It chose not to do so, opting instead for an integrated limousine licensing scheme that incorporates a variety of controls on the provision of limousine services and the number of limousines in the City. The Ratio Requirement is but one of these.

[81] Accordingly, for the reasons given, I would not give effect to the appellants’ attack on the Ratio Requirement.

(3) Other Issues

[82] I conclude with three observations. First, as I have indicated, the Toronto Act confers express authority on the City to differentiate by by-law “in any way and on any basis the City considers appropriate” (s. 10(1)). The application judge essentially concluded that in invoking its statutory authority to differentiate between licence holders and between the limousine and taxicab businesses in the City, the City did not act contrary to the public interest or in an arbitrary or capricious manner. I am not persuaded that in so holding, the application judge misapprehended the evidence or otherwise erred.

[83] Second, I reiterate that, on the findings of the application judge, the City did not act in bad faith in passing the By-laws. In particular, its notice and consultation process was not inadequate, contrary to the City’s procedural by-law, or discriminatory in the manner alleged by the appellants. In these circumstances, no breach of s. 15(1) of the Charter nor any procedural unfairness was made out.

[84] Third, I cannot accede to the appellants’ argument that the By-laws offend the provisions of the Competition Act. The regulation of the limousine business in the City is a bona fide municipal objective, authorized by statute. Incidental to the City’s power to regulate this business is the implicit power to consider and regulate competition between the limousine and taxicab businesses in the City, in the public interest. See for example, Associated Cab Limousine Ltd. v. Calgary (City) (2006), 390 A.R. 82 (Alta. Q.B.).

V. Disposition

[85] I would dismiss the appeal. I would award the City its costs of the appeal in the total amount of $10,000, inclusive of disbursements and GST, as agreed by counsel. There is no basis to interfere with the application judge’s costs award in favour of the City.

RELEASED:

“JUL -2 2009” “E.A. Cronk J.A.”

“DD” “I agree Doherty J.A.”

“I agree Paul Rouleau J.A.”

[^1]: Under the City’s new limousine licensing scheme, the term “limousine” was substituted for the former phrase “livery cab”.

[^2]: Originally, the application and this appeal were initiated by the Association, Ontario Limousine Owners’ Association and Danylevich. However, by the time of the oral hearing before this court, the Ontario Limousine Owners’ Association had withdrawn from the appeal.

[^3]: See S.O. 2006, c. 11, Sched. B, s. 9(2) and S.O. 2006, c. 32, Sched. A, s. 7.