City of Toronto v. Uber Canada Inc. et al.

[Indexed as: Toronto (City) v. Uber Canada Inc.]

Ontario Reports
Ontario Superior Court of Justice,
Dunphy J.
July 3, 2015

126 O.R. (3d) 401 | 2015 ONSC 3572

Case Summary

Municipal law — Licences — Most Uber vehicles not falling within definition of "taxicab" in City of Toronto Municipal Code — Uber not "accepting" calls for taxicabs or limousines in Toronto and therefore not carrying on business as taxicab broker or limousine service company — Uber not required to apply for licence — City of Toronto Municipal Code, c. 545.

A "taxicab broker" is defined by Article I of c. 545 of the City of Toronto Municipal Code as "any person who accepts requests in any manner for taxicabs used for hire", and a "limousine service company" is defined as "any person or entity which accepts calls in any manner for booking, arranging or providing limousine transportation. Uber operated a "peer-to-peer" driving service. Using an app which might have been downloaded anywhere in the world, a Toronto customer would use her smartphone to display a map showing the location of drivers willing to carry her to her destination for hire. When she pressed a button, her phone would send a digital request to a server in California, and software on that server would automatically transfer the request to the smartphone of the driver of the car nearest the customer. If the driver pressed "accept" on his own smartphone, his phone would then send his own data through the same server back to her and they would meet. The city applied for an injunction requiring Uber to apply for a licence to operate either as a taxicab broker or a limousine service company, arguing that they "accept" calls or requests for taxicabs or limousines.

Held, the application should be dismissed.

With the exception of the roughly 500 Uber Taxi drivers and 50 Uber Access drivers, none of the Uber drivers operated vehicles that fell within the definition of "taxicab" in c. 545 of the Code. Uber did not "accept" calls for taxicabs or limousines in Toronto and therefore did not carry on business as a taxicab broker or a limousine service company. Uber was not required to apply for a licence.

Gilbert v. Ottawa (City), [1975] O.J. No. 1272 (Div. Ct.); R. v. Emslie (1959), O.W.N. 279, distd

Other cases referred to

Agraira v. Canada (Public Safety and Emergency Preparedness), [2013] 2 S.C.R. 559, [2013] S.C.J. No. 36, 2013 SCC 36, 2013EXP-2099, J.E. 2013-1121, EYB 2013-223432, 52 Admin. L.R. (5th) 183, 360 D.L.R. (4th) 411, 16 Imm. L.R. (4th) 173, 446 N.R. 65, 228 A.C.W.S. (3d) 1098

Statutes referred to

Canadian Charter of Rights and Freedoms, s. 2(b)

City of Toronto Act, 2006, S.O. 2006, c. 11, Sch. A, ss. 2, 8(2), para. 11, 86(1), 94(1), 380 [as am.]

Rules and regulations referred to

City of Toronto Municipal Code, c. 545, arts. I, II [as am.], VIII [as am.] [page402]

APPLICATION for an injunction requiring the respondents to apply for a licence.

Michele Wright and Matthew Cornett, for applicant.

John Keefe, Julie Rosenthal and Ryan Cookson, for respondents.

[1] DUNPHY J.: — This evening, a tourist from London visiting Toronto will take out her smartphone and press a button to activate an "app" that she downloaded months or even years ago. Her smartphone will display a map showing her location and a number of tiny black cars moving on the map near her. Each "car" on her map represents the location of a driver who is willing to carry her to her destination for hire. When she presses a button on screen, her phone will send a digital request to a server in Northern California, and software on that server will automatically transfer the request to the smartphone of the driver of the car nearest her that she saw on the map. If the driver presses "accept" on his own smartphone, his phone will then send his own data through the same server back to her and they will meet and he will drive her to her destination. Other than the tourist and the driver, no human will participate in making that connection. Software on her phone, on the driver's phone, at the server in Northern California and throughout the Internet will receive and pass along the data packets sent by each.

[2] Can it be said that each of the company who licensed the software to her in London a year ago, the company that licensed the software used by the driver she summoned, the Canadian company who marketed the software to those drivers in Canada, or the owner of the software running 24:7 on that server in Northern California "accepts" a call or request for service in Toronto as the City of Toronto claims? Are any of them sufficiently similar to the traditional telephone operator/ dispatcher of a taxicab broker to require a licence in Toronto to continue to permit their software to operate automatically on that server in Northern California or on the phones of users worldwide who may happen to pass through Toronto?

Overview

[3] When the City of Toronto was incorporated 181 years ago, the Industrial Revolution was in its infancy. Local transport was by foot or by horse and communication with the central government required days at sea.

[4] The arrival of the private automobile early in the last century marked a disruptive change in the technology of the era. [page403] In a market characterized by vulnerable consumers and limited transparency, the City determined that the consumer interest in the taxi industry urgently needed protection. It reacted with regulations controlling prices, licensing drivers and placing strict limits on the numbers of licences issued.

[5] The umbrella of regulation was soon extended to taxicab brokers, who accepted calls from potential passengers and arranged to dispatch drivers to them due to their strategic placement as intermediary between drivers and passengers in many cases.

[6] In 2012, a new and potentially disruptive business model, pioneered by Uber, began operating in Toronto. It has been doing so in other municipalities in Canada and around the globe, operating in 260 cities and 45 countries from a common Internet-based platform.

[7] In the short time it has operated in Toronto, Uber has increased both its scale and its service offerings. Uber exploits the speed of the Internet and the ubiquity of GPS-enabled smart phones among large segments of the public to enable connections to be forged between drivers and passengers in new ways while offering broad ranges of choice both in terms of price and class of vehicle or service.

[8] Uber has developed a "peer-to-peer" service model that matches supply with demand and incents drivers to provide coverage where none might otherwise be available. In a few short years, Uber has grown tremendously. Tourists and residents alike use it and are able to select the type of car and service they wish. It has almost as many drivers in Toronto as there are licensed taxicab drivers in Toronto. The entire licensing regime of the taxicab and limousine industry is under growing pressure in the City as a result.

[9] The City finds itself caught between the Scylla of the existing regulatory system, with its numerous vested interests characterized by controlled supply and price, and the Charybdis of thousands of consumer/voters who do not wish to see the competition genie forced back into the bottle now that they have acquired a taste for it.

[10] The City seeks an injunction requiring Uber to apply for a licence to operate either as a taxicab broker or limousine service company arguing that, in substance, they "accept" calls or requests for taxicabs or limousines.

[11] Uber's strategy for exploiting an alleged "peer-to-peer" path exception to restrictive local regulations has been there for all to see for some time. [page404]

[12] Have the City's regulations, crafted in a different era, with different technologies in mind, created a flexible regulatory firewall around the taxi industry sufficient to resist the Uber challenge, or have they instead created the equivalent of a regulatory Maginot Line behind which it has retreated, neither confronting nor embracing the challenges of the new world of Internet-enabled mobile communications?

[13] While both sides took great pains to couch their arguments in terms of the public interest, this court is not the proper forum for that debate. Questions of what policy choices the City should make or how the regulatory environment ought to respond to mobile communications technology changes are political ones. Such questions are, of course, the stuff of democracy. While democracy can be a messy business, our system wisely recognizes that the perfect must sometimes yield to the practical at the risk of a wrong turn or two along the way. Courts determine disputes in the light of the output of the political process and with all of the respect for the differing opinions of the actors that our constitutional order demands.

[14] For the reasons that follow, I have concluded that the City has failed to demonstrate a breach by the respondents of its by-law, and the City's application should therefore be dismissed.

[15] The narrow definition the City has fashioned to describe these two regulated businesses is focused entirely upon the acceptance of a communication from a prospective passenger of taxicab or limousine services. None of the other aspects of the "Uber" business -- marketing, recruiting drivers or even billing passengers and remitting fares to drivers -- figure within the defined business of a taxicab broker or limousine service company upon which the City's entire application rests. The evidence has not demonstrated that any of the Uber respondents "accepts" communications from passengers from the point where a passenger determines to find a car and driver until the door closes behind him or her at the start of the intended trip. Software downloaded weeks, months or years in advance of the intended trip is simply activated by the passenger at the time and place of her choosing. There is no evidence before me as to the owner of the server in Northern California that relays messages between the rider and driver using their respective versions of the Uber App, and the Uber entity that actually owns the software is not party to this proceeding at all. Accordingly, none of the respondents can fairly be described as carrying on either of the two businesses (taxicab broker or limousine service company) for which the City requires a licence. [page405]

[16] My conclusion does not imply any judgment upon the merits of the existing regulatory regime the City administers, nor any conclusion as to what role the City may in future play in regulating new entrants such as Uber if it so chooses.

Application dismissed.

Notes

1 By "local" in this instance, I mean "Canada" as Uber Canada provides supporting services for all of Uber's operations in Canada in the various markets which it now serves.

2 Uber claims that at least 26 licensed Toronto taxi or limousine drivers have failed Uber's driver review process and been denied access to the Driver App.