Unifor, Local 1688 v. The City of Ottawa, 2018 ONSC 3377

COURT FILE NO.: 17-72322

DATE: 2018/05/30

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Unifor, Local 1688, Botros Nakhle and Nega Haile

Applicant

– and –

The City of Ottawa

Respondent

K. Scott McLean and Monica Song, for the Applicants

Benoit M. Duchesne and Jacob Polowin, for the Respondent

HEARD: February 22, 23, March 5, 8, 2018 (at Ottawa)

REASONS FOR JUDGMENT

Linhares de sousa j.

Nature of application

[1] The Applicants seek relief, pursuant to sections 272 and 273 of the Municipal Act, S. O. 2001, c. 25 (the “MA 2001”), to quash the Vehicle-for-Hire By-law, By-law 2016-272 (the “2016 VFH By-law”) enacted by the City of Ottawa’s Council (the “Council”) on April 13, 2016.

[2] In addition to the relief sought by the Applicants to quash the 2016 VFH By-law, they also seek declaratory relief and judicial direction as outlined in the Applicants’ Submissions on Relief, filed as Exhibit #1 at the hearing.

[3] In the alternative, the Applicants seek a judicial declaration that the 2016 VFH By-law was enacted in breach of sections 106 and 272 of the MA 2001, with judicial directions as to how to address the deficiencies, as outlined in exhibit #1. The Applicants also seek their costs of the proceedings.

[4] The Respondent, the City of Ottawa (the “City”), contests the Application and requests that the Court dismiss it, with costs.

PARTIES

[5] This Judicial Review Application arises out of a complex, multi-faceted, long–standing and historical set of circumstances and relationships that have existed between the parties and those they represent. It is therefore useful to identify the parties. They are the following, as stated in the Applicants’ Factum at pages 5 and 6, which was not contested:

• The respondent City of Ottawa (the “City”), is a municipality incorporated on January 1, 2001, pursuant to the City of Ottawa Act, 1999, S. O. 1999, c. 14, Sched E. The City is the successor corporation to the Regional Municipality of Ottawa-Carleton, the City of Cumberland, the City of Gloucester, the Township of Goulbourn, the City of Kanata, the City of Nepean, the Township of Osgoode, the City of Ottawa, the Township of Rideau, the Village of Rockliffe Park, the City of Vanier and the Township of West Carleton.

• The applicant Unifor, Local 1688, is a union within the meaning of the Ontario Labour Relations Act, 1995 S. O. 1995, c. 1, Sched. A. It holds bargaining rights jointly with Unifor, which is also a union, for persons working as Taxicab Drivers for various companies in Ottawa.

• The applicant Botros Nakhle is a licensed Taxicab Driver in the City of Ottawa. He owns and operates a Taxicab bearing plate number 442. His plate is associated with the Blue Line Taxi Company, which is a licensed Taxicab Broker that provides dispatch services and controls a number of licensed taxi stands in the City of Ottawa. Mr. Nakle has been a full-time professional Taxicab Driver licensed by the City for the City of Ottawa for the past 23 years.

• The applicant Nega Haile is a licensed Taxicab Driver in the City of Ottawa. He owns and operates a Taxicab bearing taxi plate number 587. Mr. Haile uses dispatch services and taxi stands controlled by Capital Taxi Company, which is a licensed Taxi Broker in the City of Ottawa. Mr. Haile has been a full-time professional Taxicab Driver licensed by the City of Ottawa for the past 20 years.

• Mr. Nakhle is the former President of Unifor, Local 1688, having resigned his position in the middle of November 2017. Mr. Haile replaced Mr. Nakhle and currently serves as President of Unifor, Local 1688.

[6] It is also important to add here that, while not a party, the principal Affiant for the Applicants, Mr. Amrik Singh Dhami, is a licensed Taxicab plate holder, plate number 218, and longstanding licensed Taxicab driver in the City. He is the former President of Unifor, Local 1688 and held that position from 2010 until June 22, 2016. (See Affidavit of Amrik Singh Dhami, Application Record, vol. I of V, tab 2.)

[7] To say that the nature of stakeholders and players in the taxi industry is a fairly complex one would not be an exaggeration. As was pointed out in the City staff report at page 20:

…there are taxi brokers, taxi plate owners and drivers. There are accessible taxi plates, and regular or standard taxi plates. There are plate owners who are also brokers. There are plate owners who are drivers. There are principal drivers who lease plates and drivers who neither own nor lease plates. There are specific regulations for each of these categories, with the result that Ottawa’s taxi regulations are themselves complex. (See Application Record, vol. I of V, tab J, page 163.)

[8] Furthermore, as Mr. Singh Dhami pointed out during the cross-examination on his affidavit, which took place on December 12, 2017, depending on how you are identified in the taxi industry, the different stakeholders can have different viewpoints vis-à-vis taxi regulations (i.e. as between multiple plate holders and single plate holders). (See Application Record vol. IV of V, tab 6, page 1365.)

[9] Finally, in order to complete the discussion of the complexity of the taxi industry, the Applicant union, Unifor, represents taxi drivers who drive for three different management companies or owners’ groups (West Way, Capital and Blueline). Unifor negotiates collective agreements with these owners’ groups that then bind the taxi driver union membership. The City is not involved in this process. (See Application Record, vol. IV of V, tab. 6, page 1389.)

[10] In addition to being regulated by the existing municipal regulatory scheme relating to taxis, the negotiated collective agreements to which taxi drivers are subject also imposes rules and restrictions that the industry participants must respect and that play a role in determining taxi operational costs. Some examples of these mentioned by Mr. Singh Dhami during the cross-examination on his affidavit are dispatch procedures, monthly taxi stand rentals, plate rentals, 12 and 24 hour daily car rentals, rates of point of sale machines and electronic software application (“app”) booking. According to Mr. Singh Dhami, the value of taxi plates transferred from party to party was also at one time set by the taxi collective agreement but not anymore. (See Application Record, vol. IV of V, tab 6, pp. 1343-1344 and pp. 1388-1394.)

THE CITY’S EMPOWERING LEGISLATION

[11] It is not disputed that the By-law under review was enacted under section 5, subsections 8(3) and (4), paragraphs 6, 8 and 11 of subsection 10(2), sections 150, 151 and 156 of the MA 2001 and the resolutions relating to VFH services in the City of Ottawa. Those sections of the MA 2001 set out the fundamental powers of the City to enact regulatory by-laws both in general and specifically as they relate to the taxi industry operating within the city’s jurisdiction. They are as follows:

Powers exercised by council

5 (1) The powers of a municipality shall be exercised by its council. 2001, c. 25, s. 5 (1).

Section Amendments with date in force (d/m/y)

2006, c. 32, Sched. A, s. 5 - 01/01/2007

Scope of By-law making power

8 (3) Without limiting the generality of subsections (1) and (2), a By-law under sections 10 and 11 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. 2006, c. 32, Sched. A, s. 8.

Scope of by-laws generally

(4) Without limiting the generality of subsections (1), (2) and (3) 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 a municipality considers appropriate. 2006, c. 32, Sched. A, s. 8.

By-laws 10 (2) A single-tier municipality may pass by-laws respecting the following matters:

6. Health, safety and well-being of persons

7. Protection of persons and property, including consumer protection

8. Business licensing. 2006, c. 32, Sched. A, s. 8; 2017, c. 10, Sched. 1, s.

150 In this Part,

“business” means any business wholly or partly carried on within a municipality even if the business is being carried on from a location outside the municipality and includes,

(c) the sale or hire of goods or services on an intermittent or one-time basis and the activities of a transient trader,

Section Amendments with date in force (d/m/y)

2002, c. 17, Sched. A, s. 33 (1-4) - 01/01/2003

2006, c. 32, Sched. A, s. 82 - 01/01/2007

Powers re licences

151 (1) Without limiting sections 9, 10 and 11, a municipality may provide for a system of licences with respect to a business and may,

(a) prohibit the carrying on or engaging in the business without a licence;

(b) refuse to grant a licence or to revoke or suspend a licence;

(c) impose conditions as a requirement of obtaining, continuing to hold or renewing a licence;

(d) 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;

(e) impose conditions, including special conditions, as a requirement of continuing to hold a licence at any time during the term of the licence; and

(f) license, regulate or govern real and personal property used for the business and the persons carrying it on or engaged in it.

(g) Repealed: 2017, c. 10, Sched. 1, s. 12 (1).

2006, c. 32, Sched. A, s. 82; 2017, c. 10, Sched. 1, s. 12 (1).

Power to suspend a licence

(2) Without limiting sections 9, 10 and 11, for the purpose of clause (1) (b), if a municipality is satisfied that the continuation of a business poses an immediate danger to the health or safety of any person or to any property, the municipality may, for the time and on such conditions as it considers appropriate, without a hearing, suspend a licence subject to the following:

1. Before suspending the licence, the municipality shall provide the licensee with the reasons for the suspension, either orally or in writing, and an opportunity to respond to them.

2. The suspension shall not exceed 14 days. 2006, c. 32, Sched. A, s. 82.

Exercise of power

(4) The exercise of a power under clause (1), (b), (d) or (e) is in the discretion of the municipality, and the municipality shall exercise its discretion,

(a) upon such grounds as are set out by By-law; or

(b) upon the grounds that the conduct of any person, including the officers, directors, employees or agents of a corporation, affords reasonable cause to believe that the person will not carry on or engage in the business in accordance with the law or with honesty and integrity. 2006, c. 32, Sched. A, s. 82; 2017, c. 10, Sched. 1, s. 12 (2).

Application re system of licences

(5) Subsections (1) to (4) apply with necessary modifications to a system of licences with respect to any activity, matter or thing for which a By-law may be passed under sections 9, 10 and 11 as if it were a system of licences with respect to a business. 2006, c. 32, Sched. A, s. 82.

Section Amendments with date in force (d/m/y)

2002, c. 17, Sched. A, s. 34 - 01/01/2003

2006, c. 32, Sched. A, s. 82 - 01/01/2007

2017, c. 10, Sched. 1, s. 12 (1, 2) - 30/05/2017

Licensing taxicabs

156 (1) Without limiting sections 9, 10 and 11, a local municipality, in a By-law under section 151 with respect to the owners and drivers of taxicabs, may,

(a) establish the rates or fares to be charged for the conveyance of property or passengers either wholly within the municipality or from any point in the municipality to any point outside the municipality;

(b) provide for the collection of the rates or fares charged for the conveyance; and

(c) limit the number of taxicabs or any class of them. 2006, c. 32, Sched. A, s. 82.

Section Amendments with date in force (d/m/y)

2006, c. 32, Sched. A, s. 82 - 01/01/2007

[12] In fact, the City, on a longstanding basis, has exercised its powers to enact by-laws with respect to taxi cab services, as well as with respect to limousine services under a separate regulatory regime, within its jurisdiction.

[13] Furthermore, it is not inaccurate to say that in its regulation of the transportation services within its jurisdiction, of which taxis and limousines form a part, the City, implicitly, has also been regulating competition as between those two transportation businesses. In the case of Associated Cab Limousine Ltd. v. Calgary (City), 2006 ABQB 32, 390 A.R. 82, aff’d 2009 ABCA 181, the court found that the regulating of competition between local businesses was necessarily an incidental aspect of regulating businesses, within the jurisdiction of the municipality and in the “overall public interest” (paras. 17 and 18).

[14] The By-law under review replaced the previously existing By-law 2012-258 passed by the City in 2012. It provided for the licensing, regulating and governing of taxicabs, taxicab drivers, taxi plate holders and taxicab brokers operating within the City.

2016 VFH BY-LAW

[15] The details of the multi-page By-law under review is found in the Application Record, vol. III of V, tab. Q, formally entitled “A by-law of the City of Ottawa to provide for the regulating, licensing, and governing of VFH in the City of Ottawa, being Taxi-cabs, Taxicab Drivers, taxi plate holders, Taxicab Brokers, Limousine Services and Private Transportation Companies, and to repeal By-law No. 2012-258 and Schedule 10 of By-law No. 2002-189”.

[16] Counsel for the Parties have also summarized the highlights of this By-law from their perspective in their respective Facta. (See Factum of the Applicants, paras. 50 to 65 and the Respondent’s Factum, para. 69.) The 2016 VFH By-law was enacted by the Council on April 13, 2016, and came into force on September 30, 2016.

[17] By way of a very brief summary and for introductory and contextual purposes only, the 2016 VFH By-law kept and continued the existing regulatory taxi regime, but introduced a number of amendments to that regime touching on such subjects as reduction of license fees, waiver of accessible taxi driver license fees, the elimination of the mandatory taxi driver education program, the elimination of the uniform and street guide requirements, the permitting of more flexibility in the setting of fares and the payment of fares with prior notice to the City, taxi vehicle standards, permissible and allowable vehicle age restrictions, new in-vehicle camera standards, enlargement of regulated geographical area to cover the entire City of Ottawa, the increase of the ratio of plates-to-population, the increase of commercial general liability insurance and other administrative requirements, continued mandatory identification of taxi vehicle, continued exclusive right to stand pick-ups and hails and technical and enhanced enforcement amendments.

[18] What is most contentious is that the By-law also created a new and third category of VFH called “Private Transportation Companies (“PTCs”) which would be permitted to operate concurrently and competitively with taxis and be subject to its own regulatory regime under the By-law. It should be mentioned here that the second category was the regulatory regime dealing with limousines, which is not relevant to this Application.

[19] Again, by way of very brief summary, the regulatory regime governing PTCs covered such subjects as license fees for PTCs, including per-trip driver charge and an annual license fee that would reflect the size of the PTCs fleet or number of drivers, commercial liability insurance for both the PTCs and the PTC driver, mandatory annual Police Vulnerable Sector Records checks and driving records checks that would be kept by the PTCs and subject to City examination and monitoring, age of vehicle restrictions for PTC drivers, no identification restrictions for PTC driver vehicles, restrictions on modes of procuring PTC rides (pre-arranged by app with hailing and stand pick-ups prohibited), the seeking of authority to negotiate, finalize and establish voluntary, per-trip surcharge for accessibility and other administrative and enhanced enforcement measures.

LEGISLATIVE AUTHORITY TO CHALLENGE MUNICIPAL BY-LAW AND STANDARD OF REVIEW

[20] Sections 272 and 273 of the MA 2001 set out the Court’s authority to quash a municipal By-law. Those sections are the following:

Restrictions on quashing by-law

272 A by-law 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

Application to quash by-law

273 (1) Upon the application of any person, the Superior Court of Justice may quash a By-law of a municipality in whole or in part for illegality

[21] Another relevant part of the MA 2001 to keep in mind when considering the Court’s powers of review in this matter are subsections 8(1) and 8(2), referencing the fact that the powers of the municipality under the MA 2001 are to be “interpreted broadly so as to confer broad authority on the municipality”. Subsections 8(1) and 8(2) read as follows:

Scope of powers

8 (1) The powers of a municipality under this or any other Act shall be interpreted broadly so as to confer broad authority on the municipality to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality’s ability to respond to municipal issues. 2006, c. 32, Sched. A, s. 8.

Ambiguity

(2) In the event of ambiguity in whether or not a municipality hs the authority under this or any other Act to pass a by-law or to take any other action, the ambiguity shall be resolved so as to include, rather than exclude, powers the municipality had on the day before this Act came into force.

[22] Consequently, a by-law enacted by the City of Ottawa in good faith is not subject to interference by the Court, however unreasonable the by-law may be. Furthermore, the Court may quash a by-law in whole or in part for illegality.

[23] It is not contested that the onus of establishing that the City has enacted a by-law in the absence of good faith or one that is illegal rests on the party challenging the by-law. Furthermore, a by-law, properly enacted, is presumed to be valid and passed in good faith. (See Grosvenor v. East Luther Valley (Township), 2007 ONCA 55, 2007, 84 O.R. (3d) 346, paras. 26-28.)

[24] The standard of review to be applied to this case is a restricted one. The legislation mentioned above, as well as the case law, supports granting municipalities a wide discretion in the carrying out its affairs and in using the regulatory powers given to them under the empowering legislation.

[25] The jurisprudence clearly establishes that in matters of this kind, a municipal Council is entitled to considerable deference, absent clear evidence of illegality or bad faith. For the unequivocal declaration of this principle and the rationale for the substantial deference to be given to municipalities by the reviewing court, see the following cases: Shell Canada Products Ltd v. Vancouver (City), 1994 CanLII 115 (SCC), [1994] 1 S.C.R. 231, pp. 246-248; Nanaimo (City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000] 1 S.C.R. 342, paras. 27-34; Grosvenor v. East Luther Grand Valley (Township), 2007 ONCA 55, 2007, paras. 30-31; Friends of Lansdowne Inc. v. Ottawa (City), 2011 ONSC 4402, 107 O.R. (3d) 104, paras. 11-15 and aff’d 2012 ONCA 273, paras. 12-15. POSITION OF THE PARTIES

The Applicants

[26] The Applicants rely on a number of grounds in support of their request to have the Court quash the 2016 VFH By-law.

[27] Firstly, the Applicants allege that the City enacted the By-law in bad faith as evidenced by a number of indices. These are identified as the following:

• Not carrying out the City’s due diligence to consider and take account of the substantial economic and financial ramifications of the By-law to those whose interests and livelihoods were most effected, the taxi industry;

• Enacting a By-law with insufficient notice to the taxi profession and hence, not according the taxi industry the opportunity to be heard on the subject matter of the By-law;

• Enacting a By-law that was both arbitrary and for a collateral purpose; and

• Enacting a By-law that was discriminatory and unjust.

[28] Secondly, the Applicants challenge the legality of the By-law on the grounds that the By-law grants a “bonus” that assists a specific business (PTCs and PTC drivers) with an advantage, contrary to section 106 of the MA 2001.

[29] Thirdly, the Applicants allege that the 2016 VFH By-law is so patently discriminatory in the different ways it regulates the taxi drivers and PTC drivers without meeting the City’s own declared objectives of public safety, consumer protection and accessibility, that it is ultra vires of the municipality’s authority under the MA 2001.

The Respondent

[30] The Respondent contests the Application on all grounds. The Respondent takes the position that it has been conceded that the 2016 VFH By-law has been duly enacted in accordance with all of the procedural requirements by the City.

[31] The Respondent also takes the position that the Applicants have not met the substantial legal onus on them to justify the court interfering with the City’s regulatory power with respect to the enactment of the 2016 VFH By-law.

[32] Firstly, the Respondent argues that prior to enacting the 2016 VFH By-law, the City carried out its due diligence by undertaking a broad and adequate investigation and consultation guided by the City’s legitimately declared guidelines of public safety, consumer protection and accessibility. The Respondent further alleges that in this study and consultation process leading up to the enactment of the By-law by the Council, the Applicants were given ample opportunity to participate and to clearly state their point of view on the future regulation of the taxi industry and the emerging new business models for VFH.

[33] Secondly, the Respondent argues that the evidentiary record before the court establishes that the By-law was not enacted by Council arbitrarily or for a collateral purpose. The Respondent argues that the enactment of the By-law by the City was to affect regulatory change in the VFH industry, an area well within its legislative competency and which had been rendered necessary as a result of developing circumstances in that industry in the Ottawa area.

[34] Thirdly, the Respondent contests that the 2016 VFH By-law is discriminatory and hence ultra vires. The Respondent acknowledges the differential regulations found in the By-law, as it relates to the taxi industry and to the new category of app-based PTCs and PTC drivers. Nonetheless, the Respondent argues that this differentiation is well within the municipality’s competence to establish and treat different “classes” pursuant to the MA 2001. Nor, the Respondent argues, does it amount to the establishment of a “bonus” for the PTC drivers, contrary to section 106 of the MA 2001.

FACTUAL BACKGROUND

[35] Because of the multiple grounds on which the Applicants rely to support their request that the Court quash the 2016 VFH By-law, it is relevant and useful here to describe in some detail the process, as established by the evidence, leading up to, and which resulted in, the ultimate enactment of the 2016 VFH By-law.

[36] The creation of the third category of VFH and its regulation, as found in the 2016 VFH By-law, was part of the City’s response to the uncontrolled introduction into the Ottawa area, in October 2014, of a new and competitive business model of VFH, pioneered by “Uber” (an umbrella name for a collection of corporations incorporated in different jurisdictions). As described in other jurisdictions and legal contexts involving Uber, “in affiliation with each other, these corporations, carry on business in the app and application licensing businesses in relation to facilitating private transportation services for compensation through telecommunications platforms and/or digital network”. (See Respondent’s Factum, para. 16 and Toronto (City) v. Uber Canada Inc. 2015 ONSC 3572, paras. 30-34.)

[37] Effectively, the business model is to “offer drivers and passengers an app-based interface on smartphones that connects people seeking rides with those offering rides.” Besides the app-based interface between driver and passenger other aspects of the business model includes, reputation ranking, variable fare determination and automatic credit card payment. (See Application Record, vol. II of V tab J 11, page 421.)

[38] The arrival of this new VFH business model was happening in other cities in North America with differing municipal responses. There were generally rapid exponential increases in the usage of the Uber business model thereby having a substantial impact on the traditionally regulated taxi system of VFH. There have since grown up companies other than Uber such as Lyft, Sidecar and Hailo.

[39] One of the City’s original responses to the arrival of Uber in Ottawa was by way of its By-law enforcement powers, namely, the issuing of charges against drivers as unlicensed taxis believed to be working with Uber resulting in some convictions. This was without a doubt the response encouraged by the taxi industry.

[40] As described in his Affidavit dated 16 August, 2017, Roger Chapman, Manager of By-law and Regulatory Services for the City of Ottawa, the enforcement efforts against Uber drivers were “labour intensive, and expensive in terms of staff time and resources”. Between October 2014 and March 18, 2016, 174 charges were issued against unlicensed drivers believed to be working with Uber, resulting in 154 convictions. (See Respondent’s Application Record, vol. 1 of 2, tab 1). This represented a notable increase in the City’s enforcement of such infractions under the existing taxi regulation regime. (See Application Record, vol. II of V, tab. J 10.) Dialogue on the issue between the stakeholders and participants of the taxi industry, members of the public and municipal officials became vocal and appeared in the local media.

Review of the Taxi and Limousine Regulations, Including New Business Models, May, 2015

[41] In early May of 2015, there was a staff report sent to the Community and Protective Services Committee of City Council (“CPSC”), made up of ten City Councillors and to City Council which recommended that Council approve the scope of a “comprehensive review of the City of Ottawa’s taxi and limousine regulations, including potential regulations to recognize the emergence of new hailing technologies and transportation-for-a-fee models, as outlined in the report”. (See Application Record, vol. I of V, tab. 2 H.) Included in that report was a discussion of the various issues that might arise in such a review. The focus and parameters of the review to be undertaken was made clear by the City staff in its General Conclusions at page 6:

The City’s role is to regulate taxi services, not operate it, within the parameters of its enabling authority in the Municipality Act, 2001. Further, as regulator, it is not appropriate for the City to be directly involved in the economic status of the industry. It is the objective of the City, as regulator, to ensure public safety, public interest and consumer protection.

[42] By the end of May, 2015, the comprehensive review was authorized by Council and by the beginning of July, 2015, the City issued a Request for Proposals for qualified consultants and/or consultant firms to carry out and complete the comprehensive review of the City’s taxicab and limousine industries in the following terms:

… A result of emerging issues, new technologies, and non-traditional service models, a complete and thorough review of Ottawa’s taxicab and limousine industries as well as the existing regulatory framework is required to determine if these meet the needs of residents and visitors. This review has been identified as a priority in the 2015-2018 City Strategic Plan.

Guiding Principles

This review is to be based upon the following guiding principles:

1- Public Safety – including vehicle condition, insurance coverage, driver and other screening processes;

2- Accessibility – service delivery model that considers the aging population and meets the needs of the accessible community; and

3- Consumer Protection – including: measures to protect both the passenger and the driver; means by which to establish reasonable fares for service; and thorough complaint resolution processes.

(See Respondent’s Application Record, vol. 2 of 2, tab. 3 B page 18 of 20.)

KPMG Review, Research and Consultation, August 25, 2015 to December 31, 2016

[43] At the end of the competitive procurement process, on August 25, 2015, the City engaged the consulting firm of KPMG to conduct the Review as a third party consultant to the City staff. KPMG, in turn, sub-contracted three other firms to assist it in its Review mandate, namely (1) Mowat Centre, (2) Hara Associates, and (3) Core Strategies Inc. KPMG conducted its review from August 25, 2015 to December 31, 2016, four months after which it delivered its final Report to the City on December 31, 2016. (See Application Record, vol. I of V, tab 2, page 40).

[44] The evidence filed with the Court indicates that KPMG, in conducting the review, did so in three stages. The first was the research stage during which 6 discussion papers on different aspects of the taxi industry, its regulation, its perception by the public and emerging issues in the field were examined.

[45] The following are the specific 6 discussion papers, their dates of completion and a brief overview of the content:

(1) October 1, 2015, The KPMG Case studies – an examination of the current status of the vehicle-for-hire industry in Ottawa, positive public response to the new app-based models, an examination of responses from other municipalities, such as Toronto, Quebec, Waterloo, Vancouver, New York, Washington and San Francisco. (See Application Record, vol. II of V, tab. J 9.);

(2) October 9, 2015, the Current Regulatory Regime (completed by the Hara Associates) – an examination of the elements and practical functioning of the current regulatory regime of taxis in the city of Ottawa, including the types of licenses and taxi drivers, the function of taxi plates, taxi plate rentals and dispatch, the functioning of labour bargaining collective agreements, the functioning of taxi brokers, the role of taxi meters and the setting of rates, the cost aspects of operating a taxi cab and estimated returns, the impact of the entry of new competition, the function of enforcement provisions. (See Application Record, vol. II of V, tab. J 10.);

(3) Undated, Emerging Issues in the Taxi and Limousine Industry (completed by the Mowat Centre) – an examination of the new technology app-based business model for VFH such as Uber, the mode of functioning, the associated costs, advantages and disadvantages of the new business model, the positive public response to the new business models, the policy, responsibilities and challenges associated with the regulation of the new business models and the economic implications of the new competition into the taxi industry (reported to be “still in the nascent stage” from the point of view of local economies, taxi drivers and plate holders and users, service impacts and accessibility. (See Application Record, vol. II of V tab. J 11.);

(4) Undated, Accessibility Service in Ottawa – examination of how the needs of residents with disabilities have been met by the accessibility regulation in the taxi industry, the high Ottawa standard and leadership in this field, the cost of accessible taxis, cooperative programs with other services such as Para-Transpo, the general absence of accessible transportation in the new app-based VFH and change required. (See Application Record, vol. II of V tab. J 12);

(5) October 10, 2015 – Taxi Economics – Old and New (completed by the Hara Associates) – an examination of the economics of regulatory issues surrounding the taxi industry and the impact of the app-based service models, such as Uber, the functioning of plate limits and the associated plate values, plate values and fairness issue, the potential impact of plate values by unlimited and uncontrolled competition from other sources, historical experience with regionalization in Ottawa, impact on driver income in short and long term, Uber driver income and pricing strategy, respective insurance costs, entry management of new competition and relation to regulation restrictions and true volume impact of new competition. (See Application Record, vol. II of V, tab. J 13.); and

(6) October 14, 2015- Customer Experience – an examination of customer experience as between the use of traditional taxis and the new Uber type app-based VFH, examination of various categories to determine this question, such as cost, wait times, travel times, driver courtesy, professionalism, vehicle comfort, safety and security, high rating for Uber, concerns about the lack of regulation with Uber in areas of insurance, and taxation, expectations of higher costs but with new regulations for a new level of competitive playing field. (See Application Record, vol. II of V. tab. J. 14.)

[46] All of the above discussion papers were made available to the public and published on the City website. As KPMG indicates in its final report dated December 31, 2015, the published discussion papers became the focus for discussion in the next phase of its review.

[47] The second stage was a consultation stage during which KPMG consulted widely with key players and stakeholders in the taxi industry, including taxi drivers, taxi brokers, limousine drivers and companies, taxi union officials and individuals involved with the Uber business model, users of VFH and members of the public. KPMG carried out this consultation by way of the City website and participation in planned webinars, a specific taxi email address, and a dedicated taxi telephone line where any member of the public could share their views and comments. Exhibit D to the Affidavit of Leslie Donnelly, dated 10 August, 2017, found in the Respondent’s Application Record, vol. 2 of 2, tab 3 provides an example of the City webinars made available to the public. There was broad participation in the review.

[48] The second consultation stage ended on November 18, 2015 at which time KPMG produced an interim report entitled “Policy Options” with a final report to the City to follow at the end of December, 2015. This interim report was also published on the City’s website on a dedicated taxi webpage. The public was again invited to comment on the policy options identified in the interim report by way of email, the dedicated taxi telephone line and registering on the City webinar until November 18, 2015.

[49] The second consultation stage also included the holding of seven workshops with taxi drivers, Uber drivers and members of the public. The workshops were held in different parts of the city in English and French. (See Application Record, vol. 1 of V, tab J 1 page 263).

[50] According to Leslie Donnelly, over 6,000 submissions were received during the consultation stage of the review, including submissions from taxi drivers, taxi brokers, taxi plate holders and members of Unifor, Local 1688, as well as the public. (See Affidavit of Leslie Donnelly, dated 10 August, 2017, found at the Respondent’s Application Record, vol. 2 of 2, tab 3.)

[51] The KPMG Policy Options interim report identified three different strategies that the City could follow in dealing with regulation of VFH and discussed the advantages and disadvantages of each strategy. It did not see that any one strategy was exclusive of the other two. The details of the three strategies identified can be found in the interim report and need not be repeated here.

[52] The KPMG Interim Report also went on at some length to discuss some “Key Issues” that the City would have to deal with, regardless of what strategy or fusion of strategies was ultimately chosen by the City. The key issues identified included such things as public safety, insurance, driver screening, vehicle age and inspection, vehicle identification and the need for it, the options and rationale for cameras in vehicles, accessibility and accessible services, consumer protection via fare pricing, regulated or unregulated, complaint resolution process, dispatching, use of apps, payment options and flexibility, regulation of plates in relation to population and financial and economic implication, the City’s involvement or non-involvement in private plate transfers, the role of union and collective bargaining, the collection and remittance of HST, driver and accessible training, license and annual fees, geographical boundaries and regulation, and enforcement and need for enhanced enforcement powers. (See Application Record, vol. II of V, tab J 15.)

[53] KPMG’s final report was submitted to the City and dated December 31, 2015. (See Application Record, vol. 1 of V, tab J 1). This was the third and last stage of the review, consisting of an analysis of all of the research and the consultation input and the preparing of a Final Report containing recommendations to the City as the City embarked on its final decision making process. For some reason, which no party could explain, this Final Report was not made public at the time it was delivered like the Interim Report of November 18, 2015, and all of the discussion papers. The parties agree that it was finally made available to the public some three months later on March 31, 2016, as an attached document to the Staff Report that was sent to the CPSC, scheduled to meet on April 7, 2016, and to Council scheduled to meet on April 13, 2016.

[54] While the final KPMG report speaks for itself, I think it is useful to highlight some of the salient features or recommendations that eventually found their way into the 2016 VFH By-law. KPMG’s Final Report recognized the three-pronged focus and guiding principles of the review, established by the City at the very commencement of the taxi industry review (public safety, accessibility and consumer protection). It further recognized that those three guiding principles would also determine the potential path forward to be taken by the City. As a result, KPMG suggested to the City that any new by-law would have to have a “level playing field” within the city regulation of differences in the industry, would have to consider such things as modernization, simplification and reduction of existing regulatory burdens, the removal of regulatory barriers and would have to change the existing status quo regulatory environment.

[55] Based on these preliminary comments, the KPMG’s Final Report went on to make a series of recommendations. The Final Report also referenced its recommendations to the relevant guiding principles of public safety, accessibility and consumer protection and to the concern for attaining a “level playing field” (an expression that appeared frequently in the Final Report) among the different categories of VFH.

[56] The following are just some of the notable recommendations, the details of which can be found in the report: the legalisation of app-based VFH by creating a new licensing category, Transportation Network Company (“TNCs”); initiatives to make TNCs accessible or contribute financially to the needs of accessibility; differences in regulation and licensing based on the inherent differences of the services and business model as between taxis and app-based VFH; change to the existing taxi and limousine regulatory regime so as to reduce the regulatory burden in an attempt to achieve a “level playing field”, such as eliminating driver training, reducing license fees, the considering of fare flexibility and use of credit cards without fees, protecting exclusive taxi stand pick-ups and hails; and while recognizing differences, ensuring common and equal regulation where required to meet the three-pronged guidelines, such as in insurance requirements, vehicle age and safety restrictions, mandatory police checks and driver record checks and changing permitted plate numbers which were in line with current population figures.

[57] The final KPMG report also acknowledged the limitation of its review. The issue of plates and plate values and the impact of the new app-based competition on plate values had been raised a number of times by the participants and stakeholders in the taxi industry throughout the KPMG research and consultation process. The final KPMG report concludes the issue with the following words:

This document does not address the subject of plate values which is a secondary market, neither established by nor under the control of the City. The taxi industry indicated frequently through the review process that the value of taxi plates has been impacted by Uber’s operation and may be impacted further if TNCs are allowed to continue operations. Taxi industry leaders, representatives and members also spoke to the broader economic impact of the Uber entry into the Ottawa market. The consideration of such issues was outside the scope of this engagement. (See Application Record Vol. I of V, tab J 1 page 266.)

[58] With respect to this, and without in any way judging the issue, which will be the subject of other litigation, the City has always taken the position that its role in the taxi industry is purely regulatory and that “the City has no input into the purported value of the licensee declared in the agreements of purchase and sale by the transferor and the transferee”. (See Affidavit of Leslie Donnelly, dated 10 August, 2017, Respondent’s Application Record, vol. 2 of 2, tab. 3)

[59] It is not disputed that throughout the KPMG review, the Applicants met with KPMG personnel to express their views on any proposed changes to the regulatory scheme for taxis and other VFH. According to Mr. Singh Dhami, he personally met with KPMG personnel three times in the fall of 2015 and was able to put forward his position to them.

[60] According to the Affidavit evidence of Mr. Singh Dhami, the message was always the same, namely, that whatever regulatory changes were implemented by the City, they had to apply the same regulations to taxis drivers and to PTC drivers to ensure a “level playing field” for all of the categories of VFH. (See Affidavit of Amrik Singh Dhami, dated 12 April, 2017, Application Record, vol. I of V, tab 2; and Cross-Examination of Amrik Singh Dhami, Application Record, vol. IV of V, tab 6, pp. 1380-1381.)

[61] Mr. Singh Dhami also mentions in this same Affidavit that during this review process, he and others representing the interests of the taxi industry had many meetings with City officials, City Councillors and even the Mayor to make their views known and to encourage more strenuous enforcement against unregulated Uber drivers. On June 18, 2015, Mr. Singh Dhami wrote an open letter to City Council entitled “Enough is Enough”. (See Affidavit of Amrik Singh Dhami, dated 12 April, 2017, Application Record, vol. 1 of V, tab 2, Exhibits R and S.)

City Staff Report and Recommendations

[62] On March 31, 2016, some three months after KPMG submitted its Final Report, City Staff released its Report to be considered by the CPSC at its meeting scheduled for 7 April, 2016, and ultimately by Council at its meeting scheduled for 13 April, 2016. The City Staff Report entitled Regulating Vehicles for Hire in the City of Ottawa: Taxi, Limousines & Private Transportation Companies; Technical Briefing was over 100 pages and contained 16 attachments. One of these attachments was the KPMG Final Report, dated December 31, 2016, (Document 1), and first published with the Staff Report on March 31, 2016.

[63] A substantial number of the other attachments were documents that had been in the public realm for some time and had featured in the research and consultation review process carried out by KPMG. Six of the attachments, for example, were the six discussion papers produced by KMPG in the research stage of the review (Documents 9 to 15). Another was the Competition Bureau’s White Paper, “Modernizing Regulation in the Canadian Taxi Industry”, retrieved from the Competition Bureau’s website which was recognized and discussed in the KMPG Interim and Final Reports (Document 16). A reading of this document appears to suggest that the Competition Bureau generally supported the approach of KMPG and City staff to permit the competition of the new business models and a reduction of the regulatory burden of the taxi industry.

[64] Effectively, the Staff Report recognized the 70 or so separate recommendations made by KPMG in its Final Report, dated December 31, 2016, on the whole agreed with them and recommended to both the CPSC of the City Council and to City Council that those recommendations form the basis of the enactment of a new by-law regulating all categories of VFH which would include the traditional categories of taxis and limousines, as well as a new third app-based one. (See Summary of Staff Report, Application Record vol. I of V, tab 2J.)

[65] It is not disputed that the Staff Report of March 31, 2016 was the first time the City revealed to the public and the stake holders in the taxi industry its intention and commitment to pursue the legalization and regulation of a third category of app-based VFH, namely the PTCs to operate along with the other two traditional categories of VFH, the taxis and the limousines. It was not, however, the first discussion of it as a regulatory possibility.

[66] The Staff Report made some amendments to the KPMG recommendations. One of the attachments to the staff report, Document 5, entitled “Summary of KPMG Recommendations including Staff Disposition”, was a detailed chart of the KPMG recommendations, whether they were accepted or not and if not, the suggested changes with the rationale for the Staff decision. (See Application Record vol. I of V, tab 2 J5.)

[67] In brief, the Staff Report recommended to the CPSC and to City Council that there be a new consolidated VFH By-law; that there be some common regulations dealing with all VFH touching on such topics as driver screening, a complaints process, vehicle safety and age of vehicle, levels of commercial liability insurance, accessibility and enforcement; that there be a third category of VFH created (PTC) that would also be subject to a regulatory license fee, record keeping, spot inspections and enforcement measures consistent with its business model (see attachment, Document 2 to Staff Report); and finally, that amendments be made to the existing taxi By-law to reduce the regulatory burden on taxis and to allow, as the staff report perceived it, the taxi industry the flexibility to innovate and compete under the new circumstances. This included such things as a reduction in taxi license fees, a waiver of license fees in accessible vehicles, elimination of the mandatory driver education program, fare flexibility in consultation with the City, elimination of credit card fees, continued vehicle identification, continuation of vehicle cameras but with more flexibility in the type of camera, continued exclusive right to street hails and taxi stand pick-ups and increase of taxi plate numbers to population. (See attachment, Document 3 to Staff Report.)

[68] In support of and as a supplement to its recommendations to the CPSC and Council for the enactment of a new VFH By-law founded on the KPMG Final Report, the Staff Report also included the following documents as attachments:

• Document 2, a Draft Private Transportation Company By-law;

• Document 3, Drafting Instructions – Amendments to Taxi By-law (2012-258, as amended);

• Document 4, Drafting Instructions – Amendments to Schedule 10 to the Licensing By-law (2002-189), as amended relating to Limousine Service;

• Document 6, Licensing Fee Summary – Taxi, Limousine and Private Transportation Company Licensing Fee;

• Document 7, Ottawa Taxi Passenger Fares (2005-2016); and

• Document 8, Ottawa Taxi Plate Summary.

(See Application Record vol. I of V, tabs 2 J2, J3, J4, J6, J7, and J8.)

[69] The Affidavit of Mr. Singh Dhami, dated April, 12 2017, indicates that the day after the Staff Report was published, Mr. Singh Dhami met with the Mayor and the Chair of the CPSC and expressed his disappointment with the Report, that the union did not consider it fair and that the union anticipated that it would have dire consequences to professional taxi drivers. Two other meetings took place subsequently on April 5 and 11, 2016, one before the April 7, 2016 meeting scheduled for the CPSC and one after that meeting. (See Application Record, vol. I of V, tab 2 Exhibits R.)

[70] At the April 1, 2016 meeting between Mr. Singh Dhami, the Mayor and the Chair of the CPSC, according to Mr. Singh Dhami, the Mayor requested to hear what the union wanted. As a result, a document entitled “Key Motions Requested By Ottawa’s Taxi Brokerage Companies and the Local 1688 Unifor, Taxi Driver’s Union for the CPS Debate on PTC”, was prepared and submitted.

[71] This document advanced and supported equal regulations in direct interaction with the City relating to driver records, police checks, in-vehicle cameras, mandatory driver education, equal level of commercial insurance, mandatory fleet numbers, stoppage of Uber operation pending more rigorous provincial legislation enforcement, mandatory age for vehicles, a change in the name of PTC to “Private Taxi Company” with HST registration number and car inspections to be carried out by the City. (See Affidavit of Amrik Singh Dhami, dated April 12, 2017, para. 147, Exhibit FF, Application Record vol. I of V, tab 2.)

[72] It must be remembered that both sides of this very intense debate sought to have their point of view heard by the people who would ultimately decide the issues. While the taxi industry, including the Applicants and individual taxi brokers, were registered in the City of Ottawa Lobbyist Registry which documents their lobbying efforts, so were individuals associated with Uber Canada, Inc. It is evident that both sides of this debate lobbied actively from October 2014 leading up to the enactment of the 2016 VFH By-law by City Council on April 13 2016. (See Affidavit of Leslie Donnelly, dated 10 August, 2017, para. 20, Respondent’s Application Record, vol. 2 of 2, tab 3 and Exhibit #2 filed at the hearing; Affidavit of Amrik Singh Dhami, dated 12 April, 2017, Application Record, vol. 1 of V, tab 2; and Cross-Examination of Amrik Singh Dhami on his Affidavit, Application Record vol. IV of V, tab. 6, pp. 1375-1385.)

CPSC Special Meeting, April 7and 8, 2016

[73] On April 7 and 8, 2016, the CPSC held a Special Meeting to consider the Staff Report, including the draft 2016 By-law. As is clear from the evidence before the Court, there was significant public and Council interest in this report. The Special Meeting, originally scheduled for one day, went on for a second day and had to change location in order to accommodate the large number of people who attended. The KPMG people were also present at this Special Meeting in order to answer questions about their review. It was not disputed that the calling and holding of the Special Meeting of the CPSC complied with the City’s Procedural By-law 2014-441. (See Affidavit of Leslie Donnelly, dated 10 August, 2017, Respondent’s Application Record, tab 3). Leslie Donnelly held the position of Deputy Clerk of the City of Ottawa at the time the Special Meeting was held.

[74] The Minutes of the Special Meeting show that there were a number of delegations that spoke to the CPSC during this Special Meeting, 48 in total, and that they are listed in the Minutes of the Special Meeting. In addition, the CPSC had received 54 pieces of correspondence which were on file with the City Clerk’s Office. The evidence shows that presentations to the CPSC were made from a number of participants and stakeholders in the taxi industry, taxi drivers and taxi brokers, as well as from the Uber organization and drivers and members of the public. Presentations were limited to a set time period. The CPSC heard from among others, Richard Szirtes, the President of West Way Taxi and Marc Andre Way, the President of Capital Taxi and the President of the Canadian Taxi Association, and Chris Schafer, Public Policy Manager, Uber Canada, Brian Wade, Chair Accessibility Advisory Committee and Bob Brown, Council of Canadians with Disabilities.

[75] The Applicants made presentations and were heard by the CPSC, this included Pierre Nahkle, Mr. Singh Dhami, the Applicant’s main affiant and then President of the Applicant, Unifor. Bob Orr, assistant to the President of Unifor, and Sean McGee, Legal Counsel to Unifor, Local 1688, made representations to the CPSC on behalf of the Applicant union.

[76] In brief, some of the content of the delegations received by the CPSC is included in the Minutes of the Special Meeting and, among others, included comments that the proposed draft By-law does not create a “level playing field” among all categories of VFH; all regulations that apply to taxis should also apply to PTC drivers, such as insurance, cameras, mandatory courses, etc.; plate owners should be compensated by the City for the reduction in their investment and the value of the plates; it could not be expected that companies such as Uber would respect the regulations; and, the KPMG report is unfair and unbalanced.

[77] During the Special Meeting, City staff were requested by the Council members of the CPSC to respond to the number of concerns raised by the various individuals and organizations that spoke during the two-day proceedings, which they did. As the Minutes of the Special Meeting show, during the Special Meeting a number of motions were made with a view to amending certain aspects of the Staff Report recommendations. One of these was a motion put forward by participants and stakeholders in the taxi industry to extend, by approximately three months, the implementation date of the draft By-law. This motion was carried by a majority of votes with one “nay”.

[78] Other motions carried touched on such issues as enforcement, licensing fees for PTCs, initiatives to make PTCs more accessible, HST payment by PTCs, record keeping requirements for PTCs and enforcement, fare flexibility, vehicle safety verification, insurance and future environmental protection measures. Two other motions that were not carried dealt with mandatory driver education for PTC drivers and mandatory cameras for all categories of VFH.

[79] The last motion, carried unanimously by the CPSC at the Special Meeting, recommended to Council that it approve the draft By-law as found in the Staff Report and as amended at the Special Meeting, to establish new regulations for PTCs and to amend the existing taxi By-law. (See Application Record, vol. II of V, tab L.)

City Council Enactment of VFH By-law 2016- 272

[80] On April 13, 2016, City Council held its scheduled meeting, which was an open meeting, with many people attending and was recorded. I was given a CD of this entire meeting which gave me the opportunity to view the entire Council Meeting as it dealt with the recommendations of its CPSC to adopt the draft By-law entitled “Regulating Vehicles-for-Hire in the City of Ottawa – Taxis, Limousines and Private Transportation Companies”.

[81] The Minutes of the Council Meeting are found at Application Record, vol. II of V tab N. The meeting was chaired by the Mayor of Ottawa, Mr. Watson. There were no technical or procedural issues raised by the Applicants concerning this Council Meeting. It was duly constituted and had the authority to consider the Agenda items.

[82] As part of the procedural protocol of Council meetings, members of the public are not permitted to make presentations at the Council meeting, although it did not prevent an unidentified individual to loudly express his dissatisfaction with Council’s final decision to pass the By-law at the end.

[83] The Chair of the CPSC, Councillor Deans presented the proposed draft By-law to Council and briefed Council on the KMPG Review and documents, the nature of the consultation carried out with the public and the participants and stakeholders of the taxi industry and the rationale for the CPSC recommending that Council pass the proposed By-law.

[84] A number of councillors spoke and expressed differing views about issues raised in the proposed By-law and their anticipated impact on the taxi industry as well as on the residents of Ottawa. From the debate that took place among the councillors during this meeting, it is evident that for many councillors, the proposed By-law in many respects remained problematic from the point of view of public safety and the ultimate impact on the taxi industry. They also recognized the wide public support for the new app-based business model of VFH.

[85] As a result, a number of motions to amend the proposed By-law were introduced, debated and voted upon for several hours. The motions considered by Council raised many of the issues that had been contentious throughout the whole review, City Staff and CPSC process. The various motions addressed by Council touched on mandatory cameras in all VFH and the need to monitor this for a year, due diligence monitoring of the payment of HST by Uber drivers, the mandatory level of liability insurance, age of vehicle restrictions, transferability of regular and access plates, the regulation of fares, the need to continue to monitor the industry and collect data that might be used to make future changes and decisions regarding the VFH By-law. Staff was asked to answer a number of questions by the Councillors.

[86] Prior to the final vote being called, some 13 Councillors, including the Mayor, spoke about the proposed By-law, expressing their views of why they supported the proposed By-law, why they did not support the proposed By-law or why they supported it, but reluctantly.

[87] In the final vote, the Council approved the proposed By-law to provide for the regulating, licensing and governing of VFH in the City of Ottawa, being taxicabs, taxicab drivers, taxicab plate holders, taxicab brokers, limousine services and PTCs and PTC drivers and to repeal By-law No. 2012-258 and Schedule 10 of By-law No. 2002-189. It passed by a majority with one dissenting vote. (See Application Record, vol. III of V, tab P, Minutes of Council Meeting, dated 31 August, 2016.)

[88] It is not contested that in passing the 2016 VFH By-law, the City complied in all respects with the requirements of the Procedural By-law. (See Affidavit of Leslie Donnelly, dated 10 August, 2017, Respondent’s Application Record, vol. 2 of 2, tab 3.) In fact, this point was conceded by the Applicants in the course of their counsels’ submissions to the Court, without prejudice to their substantial arguments in law that the By-law should be quashed for absence of good faith and illegality.

ANALYSIS

Bad Faith

[89] A municipal by-law may be quashed if enacted in bad faith. The Applicants allege that the Council enacted the By-law in question in bad faith from numerous perspectives, which I will deal with individually, as well as examining them collectively.

[90] In Luxor Entertainment Corp. v. North York (City) (1969), 1996 CanLII 11766 (ON SC), 27 O. R. (3d) 259 (Ont. Gen. Div.) at para. 101 the Court stated:

In determining whether a by-law has been enacted in bad faith… the court should have regard to the presence or absence of certain evidentiary “badges” or indicia of bad faith which have been traditionally recognized by the courts. While the existence of one or more of these evidentiary badges might be insufficient to constitute bad faith, it is the cumulative effect of all of the badges, viewed collectively, which the court should take into account.

[91] There is substantial jurisprudence to guide this court in defining or identifying municipal conduct that may be considered bad faith. In examining this jurisprudence, it is, of course, important to keep in mind both the broad regulatory powers accorded to municipalities under the MA 2001 and the substantial deference owed to municipal councils in the exercise of that regulatory power by a reviewing court, as referred to above when discussing the standard of review to be applied to this Application.

[92] In the case of Grosvenor v. East Luther Grand Valley (Township), 2007 ONCA 55, supra, the Township enacted a By-law to designate a “right of way” property as a public highway. When the By-law was challenged by a group of property owners whose property abutted the trail way, it was found as a fact by the court, among other findings, that the By-law under review was passed primarily to eliminate the Township’s liability for the costs associated with the required building of a fence along the trail way. The evidence showed that the Township had taken no steps or formalized any plans to designate the lands as a highway until the request for fencing came up. There was no notice of the Township’s intention to pass the By-law, notwithstanding the public meetings and consultation process. As a result, the court found that the By-law was enacted in bad faith because it had been adopted for a collateral purpose, namely, to avoid the costs of fencing

[93] The Court of Appeal affirmed the decision of the reviewing Judge who determined that the doctrine of bad faith continued to have relevance even in light of the Supreme Court’s direction to show substantial deference to municipal decision-making. The Court of Appeal stated at para. 41, “good faith remains a central foundation for the validity of a municipal By-law enacted in conformity with the municipality’s power”.

[94] The Court of Appeal went on, at para. 39, to recognize that “bad faith” prohibition is not confined to cases where the municipality tries to do indirectly what it is not authorized to do directly. It concluded with the following words at para. 48:

…The Council members’ belief that their conduct was in the public interest and their hindsight attempts to find an underlying justification for By-law 2003-17, however, do not resolve the issue of whether they acted in good faith in enacting the By-law. The application judge recognized that his role was not to second-guess what Council had done; rather his findings led him to the conclusion that the Township had acted for a collateral purpose and that the process followed had not been characterized by the frankness, openness, impartiality and regard for the rights of the Concerned Landowners that was required of the municipality in the circumstances. His findings, and the inferences he drew from them, were all supportable on the record. In my opinion, there is no basis upon which this Court can or should interfere with them….

[95] On the facts of the Grosvenor v. East Luther Grand Valley (Township), 2007 ONCA 55, supra, clearly, the hidden or collateral reason for the passing of the By-law by the Township, and which was not supported by the process undertaken by the Township, was foundational to the finding that the Township acted, and fatally so, without “frankness, openness and impartiality” vis-à-vis the Landowners.

[96] Counsel have cited other cases where bad faith was found by a reviewing court in circumstances where a municipality enacted by-laws for a declared reason that was proven not to be the genuine reason or real objective for the exercise of municipal power.

[97] Thus, in H.G. Winton Ltd. v. Corporation Of the Burough of North York, 1978 CanLII 1566 (ON SC), 20 O.R. (2d) 737 (Ont. Div. Crt.), the municipality rezoned, with inordinate speed, a particular property without a public meeting, the usual zoning studies, traffic reports or any planning review studies or information on the subject property of the rezoning By-law. In fact, they kept in the dark from its plan and action the prospective seller and purchasers of the property in question. The Zoroastrian Society of Ontario wished to purchase the property for the purpose of a Zoroastrian Temple and had done some preliminary exploration of whether the existing zoning, before the change enacted by the municipality, permitted such use.

[98] The Court declared the rezoning By-law null and void and ordered that it be quashed. It found that the impetus for the rezoning had been a petition by some ratepayers against the sale to “a religious order or sect, which intends to hold services of some sort on the premises” (page 3). In enacting the By-law, the municipality had put aside all of its usual procedures and hence was found to have acted in bad faith, at page 6:

… There is abundant evidence from which to impute bad faith. That the By-law was pushed through with inordinate speed, that it was designed to give the pretence of being operative on a larger area, that usual Borough practices and procedures were set aside, and that the two parties most effected were kept in the dark—all point to a lack of good faith. So also, does the fact that the By-law singles out one property, to the clear detriment of its owners, for a use classification different to that applicable to all other owners covered by the same zoning category under the borough’s comprehensive zoning scheme. This indicates bad faith; it also constitutes discrimination…

[99] It is relevant to observe in this decision with respect to the court’s finding that the municipality had acted in a discriminatory manner, that the court recognized the municipality’s inherent zoning power to act discriminately, in the sense that the municipality ultimately decided what uses it would permit on certain land within its jurisdiction. However, in carrying out that authority, it had to use “proper planning grounds or standards to warrant discriminatory distinctions between property owners in the same position, classification or zoning category” (page 6). Clearly, on the facts the court was not able to find any such justification for the rezoning of the property in question.

[100] H. G. Winton Ltd. v. Corporation of the Burough of North York, 1978 CanLII 1566 (ON SC), supra, is cited with approval by the Ontario Court of Appeal in Equity Waste Management of Canada Corp. v. Halton Hills (Town), 1997 CanLII 2742 (ON CA), 35 O. R. (3d) 321 (Ont. C. A. ) where, at para. 61, the court stated the principle in this way:

61 Bad faith by a municipality connotes a lack of candour, frankness and impartiality. It includes arbitrary or unfair conduct and exercise of power to serve private purposes at the expense of the public interest…

[101] On the facts of that case, one of the arguments made before the court, to support the Applicant’s allegations of bad faith on the part of City councillors for supporting the enactment of an interim control by-law and freezing certain land developments, was the personal interest of the City councillors in appeasing some of their constituents so as to be re-elected.

[102] In response to this, the court stated that, given the legislative function being exercised by the Town, it was entirely proper for the councillors to take the views of their residents into account in deciding whether to support the By-law or not. This consideration on the part of the councillors did not show that they acted other than in the public interest in voting for the By-law. The court allowed the appeal, determining that it was not convinced that “the evidentiary record reasonably” (para. 60) supported a conclusion that the Town passed the By-law in bad faith.

[103] A similar application of the bad faith principle of law was seen in the case of Xentel DM Inc. v. Windsor (City), 2004 CanLII 22084 (ON SC), 243 D.L.R. (4th) 451 (Ont. S.C.). On the facts of that case, the city of Windsor enacted a by-law prohibiting the conducting, operating, taking part in or carrying on of any entertainment whatsoever involving participation of exotic animals. The Circus Producer Business Association and performers sought to have the By-law declared invalid. .

[104] The city’s purported purpose for passing the By-law was that it was in the interests of public safety and protection of residents and visitors. The court found, on the evidence, that the driving purpose of the By-law was not public safety but rather animal welfare and specifically the welfare of the performing animals. Consequently, the court concluded that the “process by which Council reached its decision to ban the performance of exotic animals was marked by the absence of frankness and impartiality, which are indicia of good faith” (para. 43).

[105] Effectively, while the city had the authority to regulate with respect to public safety, it did not have the power to regulate for purposes of animal welfare and hence its actions were ultra vires.

[106] In this decision, too, like in H.G. Winton Ltd. v. Corporation Of the Burough of North York, 1978 CanLII 1566 (ON SC), supra, the court recognized the city’s authority to draw distinctions and discriminate between categories (i.e. types of animals and types of performances in which the animals appear). However, in doing so, the city had to demonstrate some due diligence in identifying a “causal connection” for such discrimination. At para. 54 the court stated:

…Section 236.7 of the Municipal Act specifically provides the authority to council to regulate for public safety, but apart from the occasional utterance about this by one or more councillors during the debates, there is no evidence before me that it even considered the causal connection between exotic animal performance and public safety. Nor did it attempt to inform itself through its administration or by way of retention of outside experts, if necessary, to assess the issue of public safety which is the cornerstone of its legislative authority in the first place. This is the essence of at least the minimal due diligence which in my view Council was obligated in circumstances of this case, to carry out.

[107] In addition to the above reasons for quashing the by-law, the court also found that the City had not acted with procedural fairness in not providing the Circus with an opportunity to present its point of view and to speak to the question of whether there was a causal connection between the performance by exotic animals and the safety of citizens.

[108] With respect to this point, at para. 67, the court recognized that in cases of this kind, “when there is an economic interest at stake, or when the business of the applicants is seriously affected”, a pillar of procedural fairness required a full hearing.

[109] In the case of John Edwards and Francis Edwards v. The Corporation of the Township of Faraday, (2006), 45 M.P.L.R. (4th) 299 (Ont. S.C.), the court was asked to declare a new by-law enacted by the Township to be ultra vires. The Application was brought by an individual who had a license from the Township to operate a dog kennel which was operating as a wholesale commercial dog kennel.

[110] The new by-law dealt with the operation of kennels and among other things capped the maximum number of dogs that could be held in the kennel and also proposed the requirement of $2,000,000 commercial liability insurance policy to be carried by the kennel operator.

[111] When the By-law was passed, the Edwards would have been in breach of the insurance requirement and in jeopardy of losing his kennel license. They had applied for the insurance but there was no market available for such insurance and so was unable to obtain the required insurance.

[112] At paras. 58 and 59, the court found that the by-law effectively would result in the closure of the Edwards’ kennel. Moreover, the court concluded that the Township had, in the enactment of its new by-law, fallen short of its obligation of due diligence and procedural fairness, frankness and candour and transparency of true purpose. At paras. 59 to 61 the court states:

59 The Edwards advised the Township that they were unable to obtain the required insurance. Nevertheless, the Township refused to grant the licence even though the Township Inspector had recommended that the licence be granted. The Township did not follow its own procedure set out in Section 2.(9).2 of the By-law that required the Township to give Notice in writing of the refusal of the Licence application to the Edwards by registered mail or personal delivery. Upon receipt of that Notice, the Edwards would have been entitled to request that a hearing be held, after which the Council could have refused, or approved the Licence or approved it with special conditions. In Xentel DM Inc. v. Windsor (City), 2004 CanLII 22084 (ON SC), [2004] O.J. No. 3656 (Ont. S. C. J.), which was an application to quash a By-law, Gates J. said at paragraph 68, “Procedural fairness may be said to require a full hearing when there is an economic interest at stake, or when the business of the applicants is seriously affected.”

60 I find that the economic interests of the Edwards are at stake, and that the Township has violated the principles of fairness in not providing the Edwards with a full hearing, and in not making adequate investigations regarding the reasonableness of the conditions imposed by the By-law. The Township also violated the principles of fairness in refusing to provide to the Edwards, until well into this litigation, the names of persons complaining about the kennel. No dates of such complaints were provided and the nature of the complaint was only provided in a few cases. The Edwards’ evidence was that they had taken various steps over the years to control noise, including changing their breeding stock from larger dogs to small dogs. The Township should not be permitted to deprive the Edwards of their livelihood.

61 I find that the name of the complaints regarding the Edwards’ business are minor and are unsubstantiated.

62 I find that the attempt by the Township to severely limit or eliminate the Edwards’ business by passing a By-law clothed in the trappings of animal welfare, nuisance control, and health and safety is not a proper purpose, and the portions of the By-law relating to kennels are ultra vires the powers of the Township.

[113] In a number of instances, the court had occasion to apply these general principles relating to bad faith in cases where municipalities were exercising their power to regulate the taxi industry, as in this case.

[114] In Airport Taxicab (Pearson Airport)Association v. Toronto (City), 2008 43 M.P.L.R. (4th) 246 (Ont. S.C.), the city passed a by-law to prohibit what had been a long-standing exemption enjoyed by the Applicants of being able to pick up passengers in Toronto by pre-arrangement without holding a Toronto licence. The Applicants sought an interlocutory injunction to quash the by-law.

[115] The court determined that the granting of the motion ought to be granted in the face of the credible evidence before the court that there could be bad faith in the enactment of the impugned law.

[116] What evidence and elements supported that conclusion? There was evidence that the elimination of the Applicants as competitors would economically advantage owners of Toronto taxi licenses and would give the City a bargaining advantage in its own negotiations to obtain enlarged pick-up rights and hence the very real possibility of a collateral purpose motivating the enactment.

[117] Furthermore, there was evidence that the city had long recognized that there was a need for consultation, with all entities of different government levels, so that all stakeholders, particularly those whose interests would be most directly and adversely impacted. The enactment of the by-law without such consultation and the refusal to engage in such consultation and analysis of the issues could amount to bad faith “depending on all of the other surrounding circumstances” (paras. 5 and 6).

[118] Similarly, but with a different result, in Toronto Taxi Alliance Inc. v. Toronto (City), 2015 ONSC 685, 33 M.P.L.R. (5th) 103, a dispute arose as a result of a city having enacted change to the regime governing taxicab licensing in Toronto. Effectively, the new by-law changed the taxi licensing system in Toronto from a two-tiered model to a one–tiered owner-operated model. The by-law also imposed a mandatory conversion date. The Applicants asked the court to quash the new by-law on the grounds of bad faith, insufficiency of notice and non-adherence to its own procedural By-law.

[119] Among other things, the motion judge in assessing the rather complicated procedure by which the by-law in question was enacted permitted substantial deference to the City council in determining, interpreting and following its own procedure in the carrying out of its municipal functions.

[120] After examining, in some detail, the process of review and public consultation followed by the city Council leading up to the enactment of the by-law, and citing much of the case law mentioned above, the motion judge, with one exception, was not persuaded, either by the individual nor the collective allegations of “bad faith” that the City council’s actions rose to the level of bad faith (para. 104).

[121] The exception identified by the motion judge of a “substantive breach” of the city’s own procedural by-law related to the total absence of notice that the city intended to impose a deadline for the mandatory conversion of taxi licenses. Nowhere in the evidence could the motion judge find that this was done.

[122] Stinson J. explained the significance of this lack of notice and why it had to be considered a “substantive breach” in the following way at paras. 95 to 97, which is consistent with principles of openness, fairness, and impartiality mentioned in the jurisprudence discussed above:

95 …By contrast, where a breach of a notice requirement leads to the result that no notice is given of a significant potential legislative step, such an omission goes to the heart of the notice requirement – to facilitate transparency and participation – and cannot be called technical.

96 The particular portions of the TTL regime that was enacted in breach of the notice requirements -- the 2024 mandatory conversion date – is one with serious economic repercussions for a class of licence –holders. It removes from them, at a future date, an existing right or benefit upon which many of them depend for their livelihood and for which they may well have paid a significant amount of money. I recognize that a by-law is not open to review by a court “because of the unreasonableness or supposed unreasonableness of the by-law” (See COTA, s. 213. That said, although it is within the City’s purview to deal in such a way with a class of licences and licencees, the serious impact on STL holders underscores the importance of providing notice and a chance to be heard on the subject of a mandatory conversion date in accordance with the Procedural By-law.

97 One of the consequences of the failure to provide notice that a mandatory conversion deadline might be imposed is that there was no advance study or consideration of the impact of such a provision before the City enacted the 2024 date. Stakeholders were not given an opportunity to make representations on alternative dates or solutions. TTA was an active participant in the consultation process and engaged in significant lobbying efforts. Had TTA known that a mandatory conversion date would be considered, it would likely have made its members’ concerns known to City Councillors. In contrast to the technical breach of the Procedural By-law, such as the failure to rule on a point of order when the outcome of the ruling would have been obvious, the outcome of providing notice in this case is far from obvious.

[123] The Applicants argue that, based on the above jurisprudence, on the evidence of this case, there are a number of indicia of bad faith which they identify as the following:

• Failure to appropriately consider, research, and consult on the economic impact of the new By-law;

• Failure to provide sufficient notice of the proposed By-law so as to permit the interested stakeholders to respond and provide input, hence, lacked procedural fairness;

• Creation of false expectations of a “level playing field” by City Councillors leading up to the enactment of the By-law;

• Enactment of the By-law for a collateral purpose; and

• Differentiations found in the By-law are arbitrary, discriminatory, unjust and falling short of attaining its declared purposes.

Did the City fail to appropriately consider, research and consult on the economic impact of the new By-law?

[124] The Applicants argue that by permitting the legalized entry of the new competition of PTCs into the VFH market, which the Applicants say essentially flooded the market, the economic interests and livelihood of taxi drivers, taxi plate holders and other stake holders in the Ottawa taxi industry have been and will continue to be negatively affected. The Applicants allege that the City acted in bad faith in passing the By-law without due diligence in studying, analyzing and considering the economic implications for the taxi industry.

[125] According to the Applicants, the City was made aware that there would be negative competitive and economic ramifications if such new competition were allowed to operate uncontrolled and unregulated. The Applicants argue that from the time that Uber began operating in Ottawa in the fall of 2014, the City was informed by the various participants and stakeholders of the taxi industry, including the Applicants, of these ramifications. Members of the taxi industry diligently urged the City to prosecute these new VFH as illegal operators of taxis.

[126] The Applicants allege some of the work of the KPMG review signalled these negative economic consequences to the taxi industry and suggested further research. Nonetheless, the Applicants argue, after the review, no further study was undertaken by the City.

[127] In fact, the Applicants argue that he City closed its mind to the competitive and economic ramifications of permitting such competition in passing the 2016 VFH By-law from the very beginning, even as it commenced its review of the VFH industry. According to the Applicants, it did this by refusing to acknowledge how the use of the City’s regulatory power, historically and going forward, impacted the economic viability of the existing structures and operation of the taxi industry as it related to taxi drivers’ and taxi plate holders’ incomes and livelihood.

[128] The Applicants argue that the City behaved in this way because it had already pre-determined that the broader taxi economics, including the “secondary market” of plate value and plate marketability, was outside of the scope of its engagement, as evidenced by the limited terms of reference given to KPMG for the carrying out of the review. It is the position of the Applicants that some of the discussion papers produced by the KPMG review (i.e. “Taxi Economics” done by Hara Associates) raised these issues as well as the issue of plate values as a secondary market. But, the city considered this to be outside of its mandate.

[129] The Respondent contests the arguments of the Applicants that the City did not act in good faith by exercising due diligence prior to coming to its decision on regulation change of the VFH industry in Ottawa. It is the position of the Respondents that prior to enacting the By-law, adequate investigation was performed, including a reasonable study and analysis of the financial and economic impacts on the taxi industry.

[130] The Respondent submits that the City acted reasonably by engaging KMPG to carry out a broad review of the VFH industry. According to the Respondents, during that review, all aspects of the industry were researched, examined and analysed, as reflected in the broad research portion of the KPMG review. According to the Respondents, the economics of the taxi industry was also examined carefully by one of the sub-consultants to KPMG (Hara Associates), “Tax Economics”, dated October 19, 2015, which was made public. According to the Respondent, the KPMG review process was transparent throughout. KPMG consulted widely and made public the results of its work as it became due and followed up with requests for feedback, including from the Applicants. According to the Respondent, the Applicants were actively involved in this whole process leading up to the enactment of the 2016 VFH By-law by City Council on April 13, 2016.

[131] The Respondent argues that in engaging in the KPMG review and restricting its mandate as it did, the City acted reasonably and consistently with what it saw as its regulatory role under the MA 2001 in dealing with businesses and industries within its jurisdiction. As a result, it was not unreasonable for the City to take the position that its role was to regulate the Ottawa taxi industry and not operate it and to act accordingly.

[132] The Respondent argues that there is a fundamental disagreement between the parties as to the role and responsibilities of the City in the exercise of its regulatory power dealing with taxis and other VFH. It is the position of the Respondent that in enacting the By-law in question, it did so as a policy decision within the guidelines of its main focus as a municipal regulator, which was public safety, accessibility and consumer protection for the purpose of improving the VFH industry in Ottawa. It responded to cries for change to the regulatory regime for VFH, which came from the taxi industry and the public. The Respondent argues that such a policy decision was well within the purview of the municipality so as to be able to govern its affairs and to respond to municipal issues.

[133] After examining the very lengthy record filed with the Court in this matter, I am not persuaded that the City failed to carry out its due diligence, even as it concerns the economic ramifications of the enactment of the 2016 VFH By-law for the taxi industry.

[134] In my view, the KPMG review and the consultation and response it engendered from the public and the stakeholders of the taxi industry, shone a light on the economic implications of the new competition the taxi industry was facing by the introduction of the app-based VFH, such as Uber. I have already described the scope of the KPMG review in some detail. The KPMG review included studies and discussion papers of the economic impact of the new competition, as well as case studies of other jurisdictions where the app-based VFH already operated. An example of this is the discussion paper produced by the sub-contractors, Hara Associates and Mowat Centre. (See “Case Studies”, dated October 2015; “Emerging Issues in the Taxi and Limousine Industry”; and “Taxi Economics – Old and New”, dated October 10, 2015, Application Record, vol. II of V, tabs J 9, J 11 and J 13.) All three of these reports dealt with the economic implications of competition to the taxi industry from the new app-based VFH.

[135] The Staff Report of March 31, 2016, carried these discussions of economic implications forward to the CPSC, which in turn carried it forward to the Council before the Council vote on the By-law.

[136] In addition, the lobbying that was carried on by the taxi industry, with City officials, Councillors and in the media clearly highlighted the economic implications of the new competition to the taxi industry. The Council must be taken to have been cognizant of them. One need only listen to the comments made by the various Councillors, prior to voting on the By-law, to conclude that they were very cognizant of the economic consequences of the new regime and certainly had not closed their mind to the subject (See Respondent’s Application Record, vol. 2 of 2, tab. H).

[137] In view of this, it is difficult to conclude that the City’s research and consultation on the topic was inadequate. I found it to be extensive and comprehensive. It is within the discretion of the municipality to conclude that the KPMG review was reasonable or reasonable enough to permit the City to go forward with regime change in the VFH industry.

[138] Nor can I conclude that the City, in enacting the By-law, closed its mind to the economic implications of the regulation change. As the many discussion papers and debates produced by the KPMG review show the issues of, firstly, what causes economic upheavals and fluctuations in the wellbeing of the taxi industry (reasonable salary levels after costs, taxi costs indexes, and the robustness of the secondary industry of plate value) and, secondly, who is responsible for the economic state of the taxi industry is complex and multi-faceted and, I hasten to add, well beyond the scope of this application to resolve.

[139] Nevertheless, more will necessarily have to be said about this when I will discuss the question of whether the City had a corollary purpose in enacting the By-law. Furthermore, as I will also discuss later in the context of the question of corollary purpose, there is a fundamental disagreement between the parties as to the role and responsibility of the City vis-à-vis taxi industry economics as a result of the City having exercised its regulatory powers in the VFH industry. As I will also mention later, there is concurrent litigation in process that addresses this very issue so that question will have to be left for another day. I examine it to the extent that it may have a bearing on the sufficiency of the City’s due diligence and the appropriateness of municipal objectives or purpose, as indices of bad faith on the part of the municipality.

[140] As was made clear in the Staff Report (Application Record, vol. I of V, tab J), the City, as a municipal entity, exercises its regulatory power in the public interest. That a municipality must act in the interests of the public and in consideration of all of its constituents’ interests is not disputed. A consideration of the case law already discussed and referred to in para. 24 supports this principle. It is also the reason why municipalities, in the carrying out of their legislative and political functions, short of illegality or bad faith, are accorded substantial deference in what they do, even to the point of tolerating what may be, to some, unreasonable by-laws. (See section 272 of MA 2001).

[141] With respect to its regulatory activity in the taxi industry, both historically and going forward, the City clearly takes the position that it regulates the VFH industry and does not operate it. At page 160 of the Staff Report, it is stated in this way:

The City of Ottawa, as the regulator, is solely charged with putting rules in place that meet the public’s reasonable expectations of consumer protection and public safely and other public policy considerations like accessibility.

As regulator, the City is unable to consider or address the disruptive influences that may be affecting a private industry it regulates, or secondary markets that may exist under a current regulatory framework. However, the City can review how its current regulatory framework might hinder an industry’s ability to compete effectively when a disruption occurs – and can change and reduce its regulations in a way that allows the industry to innovate and, potentially, thrive.

(Application Record, vol. I of V, tab 2H and J at pp. 106 and 160 respectively)

[142] Part of the position of the Applicants, is that, on the contrary, the City has both a legal and moral obligation to consider and address the disruptive influences that may be affecting a private industry it regulates. (See para. 122, Factum of the Applicants, as well as Cross-Examination of Amrik Singh Dhami, held December 12, 2017, Application Record, vol. I of IV, tab. 6). The Applicants argue this because of the City’s role in permitting unbridled competition into an industry that was, prior to the enactment of the new By-law, regulated by the City through restrictions in number of taxis and taxi plates and by restrictive regulations of operation, such as vehicle identification, vehicle equipment, driver and broker fees, licences, etc.

[143] In initiating the KPMG review, the City defined the focus of that review on the basis of what it understood the public interest objectives to be in the municipal regulation of a sector of the public transportation system, namely, “to ensure public safety, public interest and consumer protection”. As a result, the review was to be based on the three guiding principles of public safety, accessibility and consumer protection. (See Application Record, vol. I of V, tab 2H, pp. 106-107.)

[144] I agree with the submissions of the Respondent that this decision on the part of the City, at its heart, was a policy decision based on it perception of what was in the public interest in this very difficult sector, given the emerging issues the City was facing in the VFH industry.

[145] In my view, that decision was well within the legislative and regulatory mandate of the City and properly took account of and was responsive to the overall public interest and concerns of the City. In doing what it did, I cannot conclude that the City closed its mind to the economic implications of the regulatory change it would make to all sectors of the VFH industry. This had been clearly revealed to the City in the review and consultation process.

[146] The City’s response to the KPMG review and consultation process was to enact the 2016 VFH By-law which clearly was based on the results and overall recommendations of that process, with some changes. In doing so, the City must be taken to have been fully aware of the competitive challenges that the creation and legalized operation of a third category of an app-based VFH, alongside the traditional taxi industry posed to the taxi industry. It responded to that knowledge by at the same time making changes to the existing regulatory regime governing the taxi industry, to permit the taxi industry to better respond to the new competition. In the face of this evidence, it cannot be said that the City closed its mind to the economic implications of the new By-law.

[147] One may conclude that the City did not do enough in addressing the issue of the new app-based VFH competition and the economic consequences to the taxi industry and that what the City did was overall unreasonable. Nonetheless, I am not persuaded that given the substantial deference owed to municipalities in carrying out its legislative affairs, the Applicants can succeed on this question. Did the City fail to provide sufficient notice of the proposed By-law so as to permit the interested stake holders to respond and provide their point of view?

[148] The Applicants argue that another indication of the City’s bad faith was that the City failed to give sufficient notice of its intention to ultimately create a two-tier regulatory system for taxis and PTCs and PTC drivers in the same competitive market. The Applicants argue that reasonableness of time to respond has to be looked at from the point of view of those most affected by the By-law, namely the taxi drivers and plate owners. The Applicants argue that the case law is clear that when an individual’s economic interests are at stake, as is the case here, then procedural fairness, a reasonable and adequate opportunity to be heard and present their point of view has to be respected. The Applicants argue that this was not done in this case.

[149] While various regulatory options had been raised, reacted to and discussed during the KPMG review period, the City’s intention to create and legalize a third regulatory regime for PTCs found in the By-law was first revealed by way of the Staff Report dated March 31, 2016. Between that date and the date the By-law was enacted by the Council on April 13, 2016, the taxi industry was given a period of two weeks to respond to the City’s intention. Effectively, the Applicants argue, the taxi industry had one week to prepare the presentation of its case at the only meeting, the CPSC meeting of April 7 and 8, 2016, where delegations were permitted to be heard. In accordance with the existing procedures followed by the Council, no delegations are permitted at the Council meeting where only the City Councillors speak and vote on the motions before it.

[150] The Applicants argue, in addition, that this time period cannot be considered reasonable in view of the fact that the enactment of a separate and regulatory regime for PTCs was contrary to what the taxi industry had been given to expect would be the intention of the City.

[151] The Applicants argued that they had been promised, whatever the new regulatory regime would be, a “level playing field” among all VFH which was not realized by the 2016 VFH By-law. This part of the Applicants’ argument, along with the Respondent’s response to it, will be dealt with more fulsomely in the following section dealing with the question of false expectation.

[152] The Applicants argue that the By-law was enacted with inordinate speed. The Applicants argue that this is especially so when one considers the historical experience of the taxi industry whereby the City had granted a much longer time to consult on and implement regulatory changes that were of minor significance, comparatively speaking. Furthermore, the way the City proceeded with the enactment of this By-law was in marked contrast to how the City had worked collaboratively with representatives of the taxi industry on regulation change in the past, such as the Taxi Advisory Committee and the Taxi Stakeholders Consultation Group.

[153] The Applicants argue the City did not publish the full text of the proposed 2016 VFH By-law prior to the meeting of the CPSC on April 7 and 8, 2016. Mr. Singh Dhami, stated in his Affidavit, dated April 12, 2017, how hard it was to follow the discussions at the CPSC meeting of April 7, 2016 because of this. All of this, the Applicants argue, was a breach of procedural fairness.

[154] Finally, at para. 89 of the Factum of the Applicants, the Applicants argue that there is text in the VFH By-law 2016-27 (para. 27(2)(d) and section 84) which was not included in either the March 31, 2016 Staff Report to the CPSC nor in the CPSC’s April 7, 2016 Report to the Council nor in Council’s April 13, 2016 resolutions. I intend to deal with argument at the end of my decision.

[155] The Respondent argues that the Applicants, as significant participants and stakeholders in the taxi industry, received adequate and proper notice of the City’s intention to review and amend the VFH regulatory regime, which included the regulation of taxis and other business models and technologies. The broad scope of the review was made public and transparent throughout. The Respondent takes the position that the Applicants were fully aware that this included an examination of the taxi industry and as well as other emerging technologies and business models for VFH.

[156] Furthermore, the Respondent argues that the Applicants were informed of all of the research and consultation undertaken by KPMG during the review process, which involved extensive research and public consultation by KPMG.

[157] The Respondent argues that, leading up to the enactment of the By-law in question, the Applicants engaged directly with the KPMG personnel, meeting with them several times to express their views and those of their constituents and to be consulted. In the cross-examination of his affidavit, dated 12 April, 2017, Mr. Singh Dhami, spoke of his meetings with KPMG and the consistent message given to KPMG personnel by the taxi industry.

[158] In addition, according to the Respondent, the Applicants also carried out and directed their own parallel participation and consultation throughout the review process by way of their active lobbying efforts, frequently meeting with City officials and City Counsellors and even the Mayor to provide their point of view and consistent message. Even after the Staff report was made public on March 31, 2016, and it was clear that the recommendation would be to create a separate regulatory scheme for PTCs and PTC drivers, the Applicants continued to meet with various City officials, Councillors and even the Mayor to express their views. According to the Respondents, the Applicants were invited to respond and did so this by submitting, under the cover letter of Coventry Connections Inc., Unifor and West-Way Taxi, their position paper, entitled “KEY MOTIONS REQUESTED BY OTTAWA’S TAXI BROKERAGE COMPANIES AND THE LOCAL 1688 UNIFOR TAXI DRIVERS’ UNION FOR THE CPS DEBATE ON PTC”. (See vol. III of V, tab. FF.) According to the Respondent, the Applicants were actively engaged in the whole process leading up to the enactment of the By-law.

[159] The Respondent contests the Applicant’s assertions that they were given to believe or promised by the Respondent that it would enact a by-law that gave equal regulatory treatment, or, as interpreted by the Applicants, a “level playing field” to all VFH categories. The Respondent accepts that the Applicants may have advanced their concept of a regulatory “level playing field” in their discussions with City officials and individual councillors and may have received what they considered to be sympathetic responses to their submissions from individuals. Nonetheless, according to the Respondent, there is no evidence that the Respondent made any such promise to the Applicants or to other participants and stakeholders of the taxi industry.

[160] The Respondent argues that, based on case law, the Council can only speak with one voice and ultimately that voice is at the Council meeting of April 13, 2016 when Council by a majority, with one “nay”, enacted the 2016 VFH By-law.

[161] This question raises the issue of procedural fairness to the Applicants. It is not disputed and certainly supported by the case law that the Applicants were entitled to procedural fairness in the circumstances of this case. The By-law in question, in that it created and regulated separately a third category of VFH to operate alongside the traditional taxi industry in the same market, would have a negative impact on the livelihood of the Applicants. This was recognized by all the parties and was documented in the KPMG review and consultation process.

[162] Consequently, as was mentioned earlier in my discussion of the following cases, Xentel DM Inc. v. Windsor (City), 2004 CanLII 22084 (ON SC), supra; H.G. Winton Ltd. v. Corporation Of the Borough of North York, 1978 CanLII 1566 (ON SC), supra; John Edwards and Francis Edwards v. The Corporation of the Township of Faraday, supra; and, Toronto Taxi Alliance Inc. v. Toronto (City) et al., 2015 ONSC 685, supra, procedural fairness is demanded for those most affected by municipal by-laws, if the municipality is to be considered to be acting in good faith, with openness, fairness and impartiality. This means a reasonable opportunity to present their case and to be heard.

[163] On the evidence, it is not disputed that it was only when the Staff Report to the CPSC and City Council was published on March 31, 2016, were the Applicants aware for the first time that it was the intention of the City to proceed with creating a third category of app-based VFH that would operate under a separate regulatory regime than that of the traditional taxi, what is essentially the By-law that was enacted by City Council on April 13, 2016.

[164] That this had been the final recommendation of the KPMG review in its final report to the City, dated December 31, 2016, was not known because that Final Report, everyone agrees, was not made public until the Staff Report of March 31, 2016.

[165] The Applicants raised a number of points under this question. Firstly, they raise the point that the City, in enacting the By-law, did so with inordinate speed and contrary to the collaborative way it had done so in the past when other significant issues had arisen in the taxi industry.

[166] How the City proceeded in the past cannot be determinative of whether the Applicants received procedural fairness on the facts of this case. And while the Taxi Stakeholders Consultation Group was not consulted as a group, as they had been on past issues, it would appear that of that Consultation Group, the “remaining non-City staff group members were consulted individually, or as a representative of their organization accordingly”. (See Application Record, vol. V of V, tab 7, p.1649.)

[167] Effectively, the evidence shows that the KPMG review was commenced in September of 2015 with its research phase. It released its interim report some two months later on November 18, 2015, containing policy options for the City to consider. (See Application Record vol. II of V, tab J15.) All of this was made public. The Applicants can be taken to have been aware of all of this.

[168] While the KPMG Interim Report, dated November 18, 2015, did not make specific recommendations to the City, it did outline in some detail three policy strategies that had arisen from the KPMG research. A reading of the KPMG Interim Report reveals that the report discussed the issues raised by each strategy option from the point of view of the City’s declared guidelines and, to a certain extent, the interim report also discussed some advantages and disadvantages of each strategy option if chosen by the City. The report also made reference to provincial legislative developments regarding app-based VFH.

[169] One of the strategy options identified in the KPMG Interim Report was Strategy B, to establish a new licensing category of app-based VFH (referred to in the report as Transportation Network Companies (“TNC”)), which would permit companies like Uber and others to continue to operate legally in Ottawa, provided it met the licensing requirements imposed on it by the City. It is therefore fair to conclude that the taxi industry was aware that this was an option for choice by the City.

[170] Furthermore, even at that early date, KPMG personnel had already been made aware of the taxi industry’s opposition (plate owners) to the legal operation of app-based VFH in the Ottawa area. (See Policy Options, p. 8, Application Record, vol. II of V, tab. J 15.)

[171] It is also noteworthy to mention that as part of its discussion of this Strategy B, the KPMG Interim Report references how allowing Uber type operations to continue would perpetuate the current negative impact on taxi operations. It added the following however at pp. 7 and 8:

…although improved taxi operations and potentially higher costs for Uber operations may limit the impact [as would] “limiting the TNCs to dispatched fares”. (See Policy Options, p.8, Application Record, vol. II of V, tab J 15.)

[172] The ultimate choice made by the City in enacting the VFH By-law 2016 272, generally speaking, appears to be Strategy B, with some changes. The new By-law realized the creation of a new licensing category, accompanied with changes to the existing taxi regulatory regime to permit improvements in the industry and a greater ability to compete under the new regime. The various discussion papers produced by KPMG during the research phase of its review as well as the KPMG Interim Report also discussed the differences in the business models, as between taxis and app-based VFH that might justify different regulations in the areas of the City’s concerns dealing with public safety, consumer protection and accessibility.

[173] In my view, the Applicants were given ample time and opportunity to respond to the intended regulatory regime change and its ramifications. During the consultation phase of the KPMG review, wide public consultation took place. The Applicants had the opportunity to participate in the multiple platforms where this consultation took place, to be heard and to express their views.

[174] The evidence provided by Mr. Singh Dhami indicates that the Applicants met directly with KPMG personnel a number of times to express their views during the consultation phase. In addition, the Applicants, in one form or another, conducted parallel lobbying activity directly with the City officials overseeing the review and councillors. Numerous meetings of this kind took place where the Applicants received a hearing and were able to express their views.

[175] Mr. Singh Dhami provided evidence relating to the content of some of these hearings during the cross-examination on his Affidavit, dated April 12, 2017. His evidence was clear that the message of the Applicants was always the same during their submissions. In a nutshell, until the City published its intention to legalize and regulate companies like Uber, the Applicants’ message was for the City to robustly prosecute Uber drivers for operating unlicensed taxis, a process which was quite costly to the City. However, after March 31, 2016, when the City expressed its intention to legalise and regulate companies like Uber, the Applicants’ message was that the licensing regulations should be the same for the two types of VFH. (See Application Record, vol. IV of V, tab. 6 pp. 1380-1381.)

[176] The evidence further shows that the Applicants had an opportunity to be heard and present their views at the CPSC Special Meeting on April 7 and 8, 2016. The Applicants also had the opportunity to meet again with City officials, Councillors and even the Mayor to be heard and present their views both prior to and after the CPSC Special Meeting on April 7 and 8, 2016. As a result of one of these meetings on April 1, 2016, the Applicants drafted and presented to the City the document found at Application Record, vol. III of V, tab 2 FF, entitled “KEY MOTIONS REQUESTED BY OTTAWA’S TAXI BROKERAGE COMPANIES AND THE LOCAL 1688 UNIFOR TAXI DRIVERS’ UNION FOR THE CPS DEBATE ON PTC.”

[177] The above facts are very different from those found in such cases as Xentel DM Inc. v. Windsor (City), 2004 CanLII 22084 (ON SC), supra; H.G. Winton Ltd. v. Corporation of the Borough of North York, 1978 CanLII 1566 (ON SC), supra; John Edwards and Francis Edwards v. The Corporation of the Township of Faraday, supra; and, Toronto Taxi Alliance Inc. v. Toronto (City) et al., 2015 ONSC 685, supra, or even the case of Langille v. Toronto (City) (2007), 33 M.P.L.R. (4th) 136 (Ont. S.C.), where the municipality imposed maximum fares on pedicab businesses without notice and an opportunity for the affected pedicab businesses to be heard.

[178] The Applicants were given procedural fairness and were heard. There is no reason to conclude that during all of these hearings and meetings accorded to the Applicants to present their position, that they were not heard and that their point of view was not considered.

Were there false expectations of a “level playing field” created by the City Councilors leading up to the enactment of the By-law?

[179] This question raises the doctrine of legitimate expectations and how that doctrine may shine a light on what is reasonable procedural fairness in the circumstances of this case.

[180] With respect to the doctrine of legitimate expectations, counsel appeared to agree on the import of the Canadian jurisprudence that guides the application of the doctrine of legitimate expectations. Both counsel cited cases that establish that the application of such doctrine, if supported on the facts of a case, is limited to procedural relief, rather than substantive relief, and would not fetter the decision-making of the official in question. (See Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services), 2001 SCC 41, [2001] 2 S.C.R. 281, paras. 35-38; and Reference Re Canada Assistance Plan (B.C.), 1991 CanLII 74 (SCC), [1991] 2 S.C.R. 525, para. 67.)

[181] There is no question that the Applicants, as stakeholders in the taxi industry, enjoyed substantial procedural rights to have the opportunity to be heard, to present their point of view in the VFH review and debate and to have that point of view genuinely considered by the Council, which would ultimately make the regulatory decision that could affect their interests and livelihood. That principle was unequivocally established in the case law above relating to the judicial review of municipal conduct and enactments.

[182] That being said, it is not evident what the doctrine of legitimate expectations adds to that already existing procedural rights of the stakeholders in the taxi industry, except perhaps the timing of the granting of the procedural rights. In other words, should the Applicants have been given more time and another opportunity to present their point of view after the Staff Report of March 31, 2016, when it became clear and public that Council was being asked to consider the legalization of PTCs under a separate and different regulatory regime than that of taxis?

[183] The doctrine of legitimate expectations has, however, been raised by the Applicants so it will be considered.

[184] The arguments of both the Applicants and the Respondent with respect to this question have already been mentioned above (see paras. 151, 159 and 160) from the perspective of how the promise of a “level playing field” may provide insight into what would be considered reasonable notice for the taxi industry or amount to procedural fairness.

[185] In brief, to recap, the Applicants allege that in their many interactions with City officials and municipal councillors they were promised that whatever regulatory changes would be enacted it would be a “level playing field”. The Applicants argue that consistent with this promise was the fact that the intention to create a “level playing field” also appeared in the many research reports and Interim and Final Reports of the KPMG review and the Staff Report.

[186] The Applicants argue that the taxi industry participants were misled by being assured by a number of City officials and City Councillors that, whatever the outcome of the review, any new VHF by-law would create a “level playing field” for all participants in the VFH industry, thereby creating legitimate expectations that this would be the case.

[187] As a result, the Applicants argue, the enactment of a two-tiered regulatory regime appeared at the last moment and without notice. But more importantly, it occurred without the participants and stakeholders in the taxi industry being able to act and to respond in time and appropriately.

[188] The Respondent argues that the Applicants received no such promise from the Respondent. It was rather a concept promoted by the taxi industry stakeholders. Furthermore, it was a concept, the meaning and application of which was not universally agreed upon within the different stakeholders of the taxi industry.

[189] Furthermore, the Respondent argues that regardless of what assurances the Applicants may have been given by individual City officials and City Councillors, no individual City Councillor nor City official can purport to speak for or bind the Council as a whole, which speaks only with one voice, upon the voting process at council meeting.

[190] Based on the evidentiary record, the phrase “level playing field” featured prominently and frequently in much of the work of the KPMG review, the subsequent discussions and reports of City officials and the dialogue carried out between municipal councillors. (See the Staff Report found at Application Record, vol. I of V, tab. J; and, the KPMG Final Report which is peppered with the phrase “level playing field” along with mention of the three-pronged guiding principles identified by the city (public safety, consumer protection and accessibility), as justifications for the many recommendations made by them, found at Application Record, vol. I of V, tab J 1.)

[191] Mr. Singh Dhami, also provided evidence in his Affidavit that throughout his many meetings with City officials, City Councillors and even the mayor leading up to the enactment of the 2016 VFH By-law, the Applicants were assured any regulatory change would provide a “level playing field” for the different operators in the VFH industry. (See Affidavit of Amrik Singh Dhami, Part VI and attached exhibits T, U, V and W, Application Record, vol. I of V, tab 2.) Mr. Singh Dhami, in his Affidavit, has, to the best of his recollection, provided details of meetings he and other stakeholders from the taxi industry had with City officials and City Councillors and what was said. Mr. Singh Dhami has provided samples of the media coverage of such comments made by City Councillors about having a “level playing field”.

[192] I have no basis for rejecting that evidence and I have no doubt that those comments were made by individual City officials and Municipal Councillors in their discussions with the stakeholders of the taxi industry, as stated by Mr. Singh Dhami. Similar comments were made by City Councillors during the Council’s deliberations and vote on April 13, 2016

[193] I agree with the submissions of counsel for the Respondent that the concept of a “level playing field” was one advanced by the Applicants and other stakeholders in the taxi industry. However, it was a concept that many people involved in the VFH review and debate, including City officials and City Councillors, agreed with and to which they gave at least a sympathetic hearing.

[194] Unfortunately, although used often, the phrase “level playing field” was never precisely defined. Nor did it ever have a clear and definitive meaning attached to it in the context of municipal regulation of VFH. The closest one that seems to come to a definition of this phrase is in the KPMG Final Report at page 2 which states as follows:

Level Playing Field: having consistent City regulation for various service types, with differences existing only when necessary (i. e., in areas where there is a significant difference in service delivery models that impacts public safety, accessibility, consumer protection or customer service). This concept was promoted consistently by representations of the taxi industry during the consultation process and was generally supported by other stakeholders as well

(See Application Record, vol. 1 of V, tab J 1.)

[195] The above definition appears to permit different regulation, when necessary, for various service types where differences exist.

[196] The phrase “level playing field” is not an expression easily found in a standard dictionary. The Wordsworth Dictionary of Cliché by Terry and David Freedman, Wordsworth Editions Ltd, 1996 at p. 149 defines it as follows:

Level A level playing field

A fair basis for making a decision or dealing with people. This twentieth-century expression comes from team sports where it is essential for the physical conditions to be the same for each team in their own part of the field

[197] In light of the above limited definitions of the term “level playing field”, and giving the phrase a contextual interpretation, as it was used in the various taxi debate reports, KPMG review reports and by the stakeholders in the taxi industry, by City officials and by City Councillors, the phrase “level playing field” strongly suggests fairness and fair regulatory treatment in the competitive circumstances of carrying out various service types in the VFH industry. The phrase “level playing field”, in the context of Ottawa’s VFH debate, clearly references regulatory treatment that will permit the different categories of the VFH industry to compete for the same market fairly.

[198] What is equally obvious, when one examines the use of the phrase “level playing field” and the context in which the phrase is used by many of the representatives and stakeholders of the taxi industry, by the KPMG review reports and by the City officials and City Councillors, there was no common understanding as to the meaning of the phrase “level playing field” in the context of the Ottawa VFH debate. This is the case, even throughout the discussions carried on within the taxi industry itself. Both multiple plate owners and single plate owners and taxi drivers used the term “level playing field” to describe their expectations of any regulatory change which the City might impose on the taxi industry. However, the specific regulatory terms of what that meant was not agreed to by the various stakeholders of the taxi industry. (See Excerpts of Proceedings Marc Andre Way—Capital Taxi, vol. V of V, tab 4 and the Cross-Examination of that Affidavit, found at Application Record, vol. IV of V, tab 6 pp. 1376-1376.)

[199] Mr. Singh Dhami, defined his interpretation of “level playing field” at para. 82 of his Affidavit dated April 12, 2017 in the following way:

My definition of a level playing field is similar to that of Federal Minister of Finance Morneau. On March 22, 2017, the Federal Minister of Finance stated that the Excise Tax Act would be amended to ensure that “ride-sharing businesses are subject to the same GST/HST rules as taxis”. Attached to Exhibit “X” to this my affidavit is a extract of the federal budget document dated March 22, 2017 and entitled “Building a Strong Middle Class “Budget 2017” where this statement is found.

[200] This definition is clearly insufficient to decide the question of whether the doctrine of legitimate expectations applies to the facts of this case. There was much discussion in the review debate and literature about Uber drivers being subject to GST/HST taxes. The issue revolved around whether it would be paid by the Uber drivers and how one could be assured that it was collected and paid.

[201] What is fair to conclude from the evidence is that the phrase “level playing field” has been interpreted by the Applicants to mean the same regulation for the two categories of taxis and PTCs and PTC drivers, because those two categories of VFH were essentially carrying out the same activity and competing for the same market. Mr. Singh Dhami recognized that there may be a justification for having a different regulatory regime for limousines.

[202] This was the clearly stated position of Mr. Singh Dhami, in his Affidavit dated April 12, 2017, found at Application Record, vol. 1 of V tab. 2 and more precisely explained in the Cross-Examination on that Affidavit found at vol. IV of V, tab 6, pp. 1370-1371. For that reason, the Applicants considered the enactment of the 2016 VFH By-law legalising a third category of app-based VFH, such as Uber, to operate under a separate regulatory regime from that of taxis as a breach of the promise by the City to create a “level playing field”.

[203] After examining all of this evidence and hearing the arguments of counsel on this issue, I cannot conclude on the evidence before me that the doctrine of legitimate expectations applies to the circumstances of this case. There is no question that during the review process and interactions with the stakeholders of the taxi industry, including the Applicants, both City officials and City Councillors endorsed a regulatory change that would create a “level playing field”. However, I cannot find that there was ever a common understanding of what that endorsement meant, even if the endorsement of attaining a “level playing field” could be raised to the level of a promise, in terms of commitment to regulatory enactments by the City.

[204] It is also important to keep in mind a principle that was not disputed by both counsel, that under the MA 2001, pursuant to section 5(1), the powers of a municipality are exercised “by its council”. In view of that, a municipal City Council, in carrying out its legislative functions under that Act, must be taken to speak with one voice which is “Council”, and which is that exercised during the Council’s vote on any particular by-law.

[205] Individual councillors, of course, represent their separate constituents, engage with them and may even make individual commitments to their constituents to pursue and endorse certain measures and results, as part of the democratic process. However, an individual councillor, even the mayor, cannot bind Council in the ultimate voting process engaged in by Council when exercising its power through the enactment of by-laws. The By-law was passed by Council almost unanimously with one “nay” after a robust debate. (See The Pas (Town) v. Porky Packers Ltd. 1976 CanLII 147 (SCC), [1977] 1 S.C.R. 51 and also Equity Waste Management of Canada v. Halton Hills (Town), 1997 CanLII 2742 (ON CA), supra.)

[206] With all of that in mind, I cannot find, on the evidence, that the Respondent ever made a promise to the Applicants that the regulatory change imposed on the new category of app-based PTCs and PTC drivers would be identical to that of taxis, a result that the Applicants would have considered a true “level playing field”.

Was the enactment of the By-law for a collateral purpose?

[207] The Applicants argue that the City demonstrated bad faith in enacting the 2016 VFH By-law because the By-law is arbitrary and passed for a collateral purpose, that is, a purpose different than that stated as justification for the By-law. Specifically, the Applicants argue that the City was fully aware that if they exercised their regulatory power in a way that substantially impacted economically the taxi industry, the City would be asked to compensate both taxi drivers and taxi-plate holders as a result of any losses due to the exercise of that regulatory power. Furthermore, the City, the Applicants argue, was aware that permitting unregulated PTC competition into Ottawa would impact, and would continue to impact, negatively the economics of the taxi industry.

[208] At para. 123 of their Factum, the Applicants describe the alleged collateral purpose in this way:

The City of Ottawa acted in bad faith by refusing to deal with the dismantling of the restrictions on taxi plates, thereby avoiding any consideration of the issue of compensation.

[209] In paras. 118 to 122 inclusive of their Factum, and in the oral arguments of their counsel, the Applicants argue as to why the City is responsible for compensation for the diminution of taxi plate values, that the City “intended from the outset to avoid any responsibility for compensating taxi plate holders for the diminution of that value, and the creation of a “new” class of VFH enabled it to hide behind that fiction that it was not dismantling the taxi regime’s restrictions on taxi plates”.

[210] The Respondent argues that there is no evidence of a collateral purpose, on the part of the City, for the enactment of the 2016 VFH By-law. The Respondent takes the position that there is no legal obligation on the part of the City to compensate plate owners arising from the City’s regulation of plate holder licenses. As a result, according to the Respondent there is, therefore, no collateral purpose to be avoided, as alleged

[211] According to the Respondents, when the enactment of the 2016 VFH By-law was considered by the Council, it was not a pro forma rubber stamping of a municipal By-law. The Council engaged in a robust debate about many aspects of the By-law and from many different points of view, then considered and voted on a number of motions put forward to amend the By-law before enactment.

[212] At para. 104 of its Factum, the Respondent summarizes its argument on this point as well as its response to the arguments made by the Applicants in support of the premise that the City is responsible for compensation for the diminution of taxi plate values as follows:

The Applicants suggest that the City enacted the 2016 By-law improperly because, by doing so, it was avoiding an alleged legal obligation to compensate owed to taxicab drivers arising from taxi plate holder licences. The Applicant Union is arguing for taxicab drivers in this Application, not taxi plate licence holders. There is no nexus or proximity between any alleged and thoroughly unproven revenues derived from driving a taxicab and any change in speculative plate holder licences values. In any event, the Applicants’ underlying proposition that plate holder licences are property in the hands of the plate licence holders is incorrect in law. A licence being a right to use subject to the conditions attaching to the licence, the sole property interest of the plate licence holders is in the fruit of the exploitation of that licence and not in the licence itself. There is therefore no collateral purpose to be avoided as there is no obligation to compensate.

[213] As has been seen in the jurisprudence dealing with bad faith discussed above, the enactment of a municipal By-law with a hidden or collateral purpose than that stated can support a finding of bad faith and thereby justify the quashing of the By-law.

[214] This was seen in the cases of Airport Taxicab (Pearson Airport) Association v. Toronto City, supra, (by-law passed, among other reasons, with a collateral purpose of obtaining an economic or bargaining advantage); Grovenor v. East Luther Grand Valley (Township), 2007 ONCA 55, supra, (by-law passed with a collateral purpose of avoiding fencing costs by the Township); H.G. Winton Ltd. V. North York (Burough), 1978 CanLII 1566 (ON SC), supra, (zoning by-law passed to stop the purchase of a property because of disapproval of a religious activity on the property); Xentel Dm Inc.v. Windsor (City), 2004 CanLII 22084 (ON SC), supra, (by-law passed with collateral purpose of animal rights rather than the stated purpose of public safety); see also Langille v. Toronto (City), 2007 CarswellOnt 2822 (by- Law passed with view to driving someone out of business).

[215] The issue of the private and secondary market of licence plate values that has arisen in the municipal regulation of the taxi industry is a complicated one, as is the question of how the value of plates are determined and what contributes to their market value as they are transferred from one holder to another.

[216] A further complication deals with whether a taxi plate licence is “property” or not. Both counsel presented conflicting arguments on this point. (See Re Foster, 1992 CanLII 7428 (ON SC), 8 O.R. (3d) 514 (Ont. Gen. Div.); and, Saulnier v. Royal Bank of Canada, 2008 SCC 58, [2008] 3 S.C.R. 166.)

[217] Furthermore, the issue of plate values and who is responsible for the changing values in this secondary market has come up before when any major change to the taxi regulatory regime has been contemplated and taken place. It is also an issue that came up in the KPMG review. (See Staff Report to CPSC and Council, Application Record vol. I of V tab J p. 239; the Affidavit of Amrik Singh Dhami, dated April 12, 2017, Application Record vol. I of V, tab 2, para. 101; KPMG Interim Report, Policy options, Application Record vol. II of V, tab J 15; KPMG Final Report dated December 31, 2016, Application Record vol. I of V tab J 1; and Hara Associates’ discussion paper, “Taxi Economic – Old and New, Application Record, vol. II of V, tab J 13.) The City has always taken the position that it regulates the taxi industry and does not operate it and cannot be held responsible for the state of the secondary industry of plate values or even the cost index relating to the operation of a taxi cab because of the role that union collective agreements may play. None of this is the subject matter of this application.

[218] There is clearly a fundamental disagreement between the parties on this issue. In fact, there is now parallel litigation between some of the parties going on to determine, among other things, the very issue of who can be held liable for compensation for the diminution of taxi plate values. It is an issue beyond the scope of this Application even though some of the Applicants may be plate holders and will have to be decided by another court. (See Endorsement of Smith J. in Abdullah v. Naziri 2016 ONSC 2168, Application Record, vol. V of V, tab 1.)

[219] The question before me is whether there is evidence to support the finding of such collateral purpose on the part of Council, when it enacted the By-law. After examining all of the evidence, I was not persuaded that the evidentiary record before me in this case supports the finding that the City enacted the By-law in question for the corollary purpose alleged by the Applicants. The fact alone that there exists a fundamental disagreement between the parties as to whether the City is responsible for compensating taxi plate holders for the diminution of their investment in the taxi plate and the fact that the matter is the subject of other litigations is insufficient, in my view, to come to that conclusion, on the balance of probabilities. On the evidence before me I cannot find any such improper motive as alleged by the Applicants.

Are the differentiations found in the By-law arbitrary, discriminatory, unjust and falling short of attaining its declared purposes?

[220] From this perspective, the Applicants argue that the City demonstrated bad faith in enacting the 2016 VFH By-law because the By-law is clearly arbitrary, discriminatory and demonstratively inadequate in attaining the City’s own declared triple guidelines or objectives in exercising its regulatory powers with respect to VFH, namely, maintaining public safety, ensuring accessibility and providing consumer protection. In support of this position, the Applicants rely on the different regulatory regimes maintained for taxi cabs compared to the one established for PTC drivers under the By-law, which the Applicants argue, amounts to no regulation for the PTC drivers.

[221] Some of the differences referred to by the Applicants in their Factum and oral submissions of their counsel include: no restrictions on the number of PTC drivers; not direct licensing of the PTC drivers by the City and the annual licence fees that accompany it; exemption from mandatory equipment such as a camera, signage as visual identifiers, functioning GPS systems, taximetres; annual provision directly to the City of driving licence types, police checks and Ministry driving records, insurance coverage, exemptions from metre- based fares and fixed fares; exemption from direct vehicle inspection and proof of vehicle age to the City; exemption from accessibility requirements; and, exemptions from being subject directly to offence and punitive fine provisions under the By-law.

[222] The Applicants argue that all of the above restrictions imposed on taxi drivers are allegedly for the attainment of the legitimate regulatory City objectives, namely public safety, consumer protection and accessibility. The Applicants argue that the absence of similar regulations, with respect to PTC drivers, the lack of balance and equal treatment between the two groups of drivers found in the By-law clearly falls short of meeting the City’s declared guidelines and objectives.

[223] The Applicants argue that while they recognize that the City, in the exercise of its regulatory power, is able to “differentiate in any way and on any basis a municipality considers appropriate” (section 8(4) MA 2001), the VFH By-law is so inconsistent in its treatment of taxi drivers and PTC drivers that it is manifestly unjust and discriminatory. This, the Applicants argue is evidence of bad faith.

[224] In response to various arguments of the Applicants on this point, the Respondent argues that the City has the legislative authority to establish different categories or classes in the exercise of its regulatory power. The Respondent takes the position that the differentiation the City has established between PTCs, PTC drivers and taxi brokers and taxi drivers in the 2016 VFH By-law is justified and reasonably grounded on the different modes of functioning and business models that is obvious and exists between the two categories of drivers. According to the Respondent, the differentiation is far from arbitrary but, rather, rationally connected to the differences that exist between the two groups.

[225] It is the position of the Respondent that the different regulatory regimes established for PTCs and PTC drivers are based on policy decisions made by City Council, arising out of the results of the broad KPMG review undertaken prior to the By-law being enacted by the City. Essentially, the Respondent argues that the app-based VFH, such as Uber, were well received and found to be desirable by the public but for certain issues relating to public safety, particularly in the area of driver insurance coverage, and accessibility (i.e. app-based VFH did not provide the high standard of accessibility service provided by the taxi industry) which Council addressed in the By-law.

[226] The Respondent denies that the new PTCs and PTC drivers are not regulated as alleged by the Applicants. It is the position of the Respondent that they are just regulated differently for the reasons stated above.

[227] In support of this position, the Respondent points to those parts of the By-law that bring PTCs under the regulation umbrella and Part IV (sections 132-148) of the By-law which imposes the requirement of licences for PTCs and payment of licence fees similar to that of taxi brokers; the cost of which would be passed down to the PTC drivers; requirements for licences; insurance coverage requirements for the PTCs; required content of the app-based communications used by the PTC to connect the passenger with the PTC driver; a record of the acceptance or refusal of the drive; secure mode of payment with receipt to the passenger; other details of the ride, including the amount of the ride and the identity of the driver and vehicle used; prohibition of street hails and pick-ups and other prohibitions found in the By-law; identity cards for the PTC drivers; access to the Chief Licence Inspector for the City to the PTC platform and database used to provide transportation service so as to check on compliance with the By-law; responsibility of PTCs to ensure PTC drivers have required driving licence; police checks and driving record; proof of insurance and to provide the City with a list of the same; and, the PTCs are subject to offence and punitive fine provisions as are the taxi drivers and brokers.

[228] I have earlier cited case law dealing with the power granted to a municipality to make distinctions in its legislative functions of licensing and regulations found in section 8(4) of the MA 2001. Furthermore, pursuant to section 8(1) of the MA 2001, the powers of a municipality under the MA 2001 are to be interpreted broadly. The parties do not disagree with these principles just the way they may be applied to the facts of this case.

[229] In Shell Canada Products Ltd v. Vancouver (City), 1994 CanLII 115 (SCC), [1994] 1 S.C.R. 231, at p. 281, the Supreme Court recognized the fundamental principle of municipal law that by-laws must affect equally all those who come within the ambit of the enabling enactment, unless there is a legislative exception or the discrimination is a necessary incident of the exercise of power. The court on the facts of that case quashed an inconsistent municipal decision to not have business dealings with a company who was doing business in South Africa. (See also R. v. Sharma, 1993 CanLII 165 (SCC), [1993] 1 S. C. R. 650 where the same principle of equal treatment was reiterated.)

[230] In H.G. Winton v. North York (Borough), 1978 CanLII 1566 (ON SC), supra, the court recognized the broad judicial deference owed to municipalities in the exercise of its powers to make such distinctions.

[231] Nonetheless, it is not a completely unfettered discretion and must pass muster of allegations of being arbitrary, discriminatory and made in bad faith. As the court made clear in H. G. Winton v. North York (Borough), 1978 CanLII 1566 (ON SC), supra, there must be some evidentiary basis to show that the distinctions made and applied by the municipality has some rational connection to municipal objectives or standards, be it in the area of property zoning or regulation of individual businesses operating within the jurisdiction of the municipality.

[232] In Toronto Livery Association v. Toronto (City), 2009 ONCA 535, 2009 CarswellOnt, the court was dealing with a By-law passed by the City of Toronto which introduced substantial changes to the City’s former licensing scheme. The basis, among others, of the Applicants’ challenge to the By-law was that it was arbitrary, unreasonable or illegal. The application judge found that there was no basis for quashing the By-law. On appeal of that decision, the Ontario Court of Appeal upheld the decision of the application judge.

[233] At paras. 45 to 48 of her decision, Cronk J.A. concluded that the Applicant’s claim that the By-laws unfairly and arbitrarily discriminated against the limousine industry in favour of the taxicab industry should be dismissed.

[234] The court examined the differences found in the By-law, including such things as minimum fare requirements and limousine service companies (“LSC”) requirements and ratio requirements. Nonetheless, it found that the authority to make such differentiations was well within the powers of the municipality in its role as regulator of the different components of the municipal public transportation system.

[235] Furthermore, the exercise of that authority, on the facts of the case, where the city was “cognizant” of the need to balance the interests of the two industries in the public interest, cannot be considered arbitrary. Finally, the court held that what is or is not in the public interest is to be determined by the judgment of the municipal council, if acted upon honestly and within the limits of its powers, and ought not to be interfered with. The appeal was therefore dismissed.

[236] In London Taxicab Owners’ and Drivers’ Group Inc. v. Corporation of the City of London, 2013, ONSC 1460, 9 M.P.L.R. (5th) 76, the Applicants represented licenced taxicab drivers. They challenged a By-law that they alleged eroded the differences between the two services of limousine drivers and taxicab drivers by permitting more direct competition between the two groups.

[237] Prior to the enactment of the By-law in question, the City had undertaken a review and consultation process which ultimately led to the enactment of the By-law. Citing such cases as R. v. Sharma, 1993 CanLII 165 (SCC), supra; Xentel DM Inc., 2004 CanLII 22084 (ON SC), supra; and H.G. Winton Ltd., 1978 CanLII 1566 (ON SC), supra, as authority, the court stated the following at para. 52:

Finally, there is case law that stands for the proposition that bylaws will not discriminate against individuals in the same or similar positions without a rational basis. Discrimination without a rational basis is beyond the authority or ultra vires the lawmaking authority conferred upon a municipality by the legislature. Where a bylaw discriminates, there is an obligation of due diligence to identify a justifiable rationale. Reasonable and proper grounds warranting such treatment must exist.

[238] The court in that case went on to examine the due diligence undertaken by the city, the long and extensive public consultation and investigation, the active participation of the industry players and an examination of the fees and business of the taxi industry so that the concerns of the taxi industry were prominent for the Council. In light of all of this, the enactment of the By-law and the differential regulatory regime enacted was upheld.

[239] One final case to examine on this point is 2211266 Ontario Inc. v. Brantford (City), 2013 ONCA 300, 87 O.A.C. 34, which dealt with the powers of a municipality to differentiate in the specific exercise of its licensing powers within its jurisdiction. The court held that combinations of subsections 8(3), 10(2) and section 151 of the MA 2001, granted to municipalities a broad licensing authority, not just of businesses but with respect to any activity, matter or thing as if it were a system of licences with respect to businesses, if it is in the promotion of a legitimate municipal purpose (paras. 8 to 11).

[240] After a consideration of the above jurisprudence and its application to the facts of this case, I am not persuaded that this court ought to interfere with exercise of Council’s discretion in establishing the separate regulatory regimes for taxis brokers and taxi drivers and PTCs and PTC drivers in the 2016 VFH By-law. Firstly, the case law establishes unequivocally that the municipal powers in this area to regulate and to determine systems of licences for businesses or any other activity is a very broad one and ought to be accorded substantial deference.

[241] Secondly, the arrival in the Ottawa area of app-based VFH, such as Uber, in the fall of 2014, created a situation that rendered the absence of action on the part of the City untenable if it were to be responsive and to continue to carry out its affairs in the regulation of the public transportation services. The fact is that there was wide public support for the new Uber VFH.

[242] From the City’s point of view the continued prosecution of Uber drivers was costly and ineffective. Litigation from other jurisdictions raised serious legal issues about the legality of such prosecutions, such as the decision in Toronto (City) v. Uber Canada Inc., 2015 ONSC 3572, 39 M.P.L.R. 5th, where Dunphy J. found that Uber app-based cars do not come within the definition of “taxicab” or a “taxicab broker”.

[243] Thirdly, before embarking on any legislative action the City decided to carry out a broad and extensive review of the VFH industry, including an examination of the current regulatory schemes governing the taxi and limousine industries as well as the new emerging technologies of the app-based VFH, such as Uber.

[244] Elsewhere in this decision I have already described the scope and chronology of this review and it need not be repeated here. Suffice it to say that, in my view, the City can be considered to have done its due diligence in coming to its decision on the enactment of the By-law.

[245] For the reasons already stated, I am satisfied that in the process of enacting the By-law, the City was exercising its powers in the promotion of a legitimate municipal purpose, namely the regulation of the public transportation system within its jurisdiction, of which VFH were just a part.

[246] In my view, the comprehensive contents of the Staff Report to the CPSC and Council, dated March 31, 2016, the evidence dealing with the proceedings of the CPSC Special Meeting and the evidence relating to the Council Meeting that took place on April 13, 2016, where a robust debate took place on various motions, many of which dealt with the sufficiency of the By-law in addressing the issues of public safety, consumer protection and accessibility as well as the attaining of a “level playing field” in VHF services.

[247] I am also satisfied, on the basis of all of this evidence, that the City, as was found in the cases of London Taxicab Owners’ and Drivers’ Group Inc. v. Corporation of the City of London, 2013 ONSC 1460, supra, and Toronto Livery Association v. Toronto (City), 2009 ONCA 535, supra, was fully cognizant of the need to balance the concerns of the taxi industry, the public demand and the need for regulation of the new app-based VFH. For that reason, the City at the same time introduced notable changes to the existing regulation of the taxi industry, thereby, introducing greater flexibility to permit the taxi industry to develop and respond to the new competitive circumstances of the VFH industry.

[248] The enactment of a dual and separate regulatory scheme for the taxi industry and app-based VFH, as is found in the By-law, in my view, does not render the By-law arbitrary, discriminatory nor unjust. It is based on the acceptance by Counsil of the inherent differences that exist between the two business models of VFH, and was supported by the results of the broad KPMG review that was undertaken by the City. Furthermore, the differential treatment was not found by Council, as evidenced by the tenor of the Council debate on April 13, 2016 to compromise the City’s objectives of public safety, consumer protection and accessibility. The concerns that were raised in these areas were resolved by the continuing monitoring (for one year) of certain portions of the new By-law, such as the issue of cameras in all VFH. One cannot deny the City’s prerogative to legislate in this way.

[249] By way of conclusion, I find for the reasons already given that in this matter the City exercised its licencing powers, pursuant to sections 151 and 156, and the power to differentiate as it saw fit, pursuant to subsection 8(4) of the MA 2001, appropriately.

[250] One may or may not agree that all aspects of the new By-law are reasonable, nor that all of the objectives of public safety, accessibility and consumer protection have been perfectly met in all respects in the new By-law. Nonetheless, the City had the discretion to make the decisions it made. It did so in pursuit of its municipal mandate to govern its affairs. The answer to this question must be in the negative.

[251] By way of conclusion on the question of whether the By-law ought to be quashed on the grounds of bad faith, for the reasons given above on the individual indices of the alleged bad faith and also considered together, I find that the Applicants have failed to prove bad faith on the part of the City Council in enacting the 2016 VFH By-law.

BONUS

Does the By-law grant to PTC drivers a “bonus” contrary to section 106 of the MA 2001?

[252] The Applicants argue that a By-law that so obviously favours PTC drivers over taxi drivers grants to the PTC drivers such competitive and undue advantage in the VFH market amounts to the granting of a “bonus” to PTC drivers.

[253] The Applicants argue that this is in breach of section 106 of the MA 2001 which prohibits a municipality from granting such bonuses. Consequently, this breach of the MA 2001 justifies the By-law being declared illegal and therefore quashed.

[254] In support of its position that the By-law grants to the PTC drivers an undue advantage without any benefit to the City, the Applicants, firstly, argue that both taxi drivers and PTC drivers are essentially doing the same job (driving passengers from A to B) and competing for the same market in the VFH industry. Therefore, the Applicants argue there is no justification for regulating them differently.

[255] Secondly, the Applicants point to the substantial differences which the By-law creates in regulatory restrictions between the two groups of taxi drivers and PTC drivers. Those differences have already been dealt with at length above but include such things as exempting PTC drivers from the plate, vehicle, driver licensing, driver behaviour and accessibility requirements that taxi drivers are subject to.

[256] Furthermore, the Applicants argue the granting of such an undue advantage on PTC drivers gives to the City no benefit from the point of view of its regulatory objective of concern for public safety, consumer protection and accessibility. Consequently, the VFH By-law involves bonusing in contravention of section of the MA 2001.

[257] The Respondent, firstly, argues that the different regulatory regimes found in the By-law, as they apply to both taxi drivers and PTC drivers and as portrayed by the Applicants, is not accurate. The Respondent argues that it is not accurate to state, as the Applicants have done, that the new By-law leaves PTC drivers unregulated. The Respondent takes the position that PTC drivers are subject to licensing and license fees but which are paid and collected differently from those of taxi drivers because the fees are paid through the PTCs to the City, who through their agreements with the PTC drivers pass on the fees to the PTV drivers. The same applies, the Respondent argues, for the other regulations mentioned by the Applicants, such as the insurance, driving records, police checks, etc. which are required but regulated differently through the PTCs. Those regulations, the Respondent argues, are put in place to meet the three-fold City objectives of public safety, consumer protection and accessibility.

[258] It is the position of the Respondent that the Applicant’s argument on this point is, at the heart, an attack on the City’s undisputed power, in the by-laws it enacts relating to licences of businesses within its jurisdiction, to “differentiate in any way and on any basis a municipality considers appropriate”, pursuant to subsection 8(4) and sections 150and 151 of the MA 2001.

[259] Finally, the Respondent argues that the regulatory differentiation found in the 2016 VFH By-law as they relate to PTC drivers and taxi drivers is legitimately based on the different business models that each presents. The Respondent argues that there is a substantial difference between traditional taxis and app-based PTCs in how they function and the new By-law reflects that difference. For that reason, one cannot conclude that PTC drivers are unduly benefited so as to amount to a prohibited “bonus” contrary to section 106 of the MA 2001.

[260] As the jurisprudence reveals, there is little case law on the prohibition against granting a “bonus” by a municipality pursuant to section 106 in the MA 2001. The most recent and comprehensive treatment of the section can be found in the case of Friends of Lansdowne Inc. v. Ottawa (City), 2011 ONSC 4402, a decision of Justice Hackland, appealed and aff’d by the Ontario Court of Appeal in Friends of Lansdowne Inc. v. Ottawa (City), 2012 ONCA 273.

[261] The facts and circumstances before Hackland J. in Friends of Lansdowne were different from those of the case at bar. The circumstances from which the litigation arose was the decision of the City of Ottawa to proceed with a redevelopment plan for Lansdowne Park proposed by the Ottawa Sports and Entertainment Group (“OSEG”).

[262] The OSEG was a consortium of Ottawa developers who had agreed to enter into a complex public private partnership with the City for the development. The project became known as the Lansdowne Partnership Plan (“LPP”) and contemplated the renovation and refurbishment of the football stadium and hockey arena on site together with housing commercial development and related parking.

[263] Leading up to the finalization of the LPP, there was extensive consultation and debate concerning the financing provisions for the LPP by City staff, Council and the Auditor General, to put it simply

[264] On the facts before him, Hackland J. was asked to find that the preferential terms with respect to OSEG’s return on their equity within the so-called waterfall distribution of revenues within the LPP, amounted to a “bonus” contrary to section 106 of the MA 2001.

[265] In coming to his decision Hackland J. examined two trial level cases dealing with the interpretation of section 106 of the MA 2001, namely a case coming out of British Columbia, Nelson Citizen’s Coalition v. Nelson (City), 1997 CanLII 2032 (BC SC), 31 B.C.L.R. (3d) 134 (B.C.S.C.) and a decision decided by himself, 1085459 Ontario Ltd. v. Prince Edward County (Municipality), 2005 CanLII 28851 (ON SC), 77 O.R. (3d) 114 (Ont. S.C.).

[266] From those two cases, Hackland J. extracted the following principles of law concerning the interpretation of section 106 of the MA 2001 at paragraphs 73 and 75 of his decision:

[73] As the court in Nelson put it, the question to be addressed by the court is whether the agreement’s complicated matrix of covenants, viewed as whole, clearly confer a benefit on the developer unsupported by any concomitant obligation benefiting the City.

[75] In the Prince Edward County decision, I made the following observations (at paragraph 12) dealing with the policy reasons supporting a restrictive interpretation of the Municipal Act’s anti-bonusing provision (s. 106) in the context of public private partnerships. In my opinion these observations are properly applied to the case at bar.

In my opinion, the prohibition against the granting of bonuses in s. 106 of the Ontario Municipal Act is the precise equivalent of the prohibition against assisting a commercial undertaking in the British Columbia legislation. I respectively agree with the approach taken by McEwan J. of the British Columbia Supreme Court in concluding that “assistance” within the prohibition in s. 292 of the British Columbia Municipal Act is to be interpreted restrictively in the sense of “conferring an obvious advantage”. The prohibition against granting bonuses should be similarly restricted. To do otherwise would be to unduly restrict the public/private joint ventures that are of increasing importance in the establishment of municipal facilities and which often depend upon a complex exchange of benefits, assets and services to facilitate development.

[267] In the final analysis, applying those stated principles, Hackland J. found that he was not persuaded that the OSEG had received any obvious advantage in the LPP, nor did he believe that he had the jurisdiction to interfere with the City Council’s determination on the reasonableness of the financial model. He did not find that as a whole there was bonusing in contravention of s. 106 (para.84).

[268] The Court of Appeal for Ontario affirmed Hackland J.’s decision and conclusion. In doing so it included in their decision an instructive review of the legislative history of section 106 of the MA 2001 and its purpose which was integral to the municipality’s jurisdiction over businesses and industry within its territory.

[269] The Court of Appeal affirmed the legal principle of “obvious advantage” in the context of according municipalities broad deference in their assessment of what is or is not reasonable or even unreasonable within their jurisdiction to enter into contracts and grant benefits. The Ontario Court of Appeal concludes at paras. 49 to 57 as follows:

[49] The parties do not dispute the correctness of that principle [“obvious advantage”], only its application. Nonetheless, it is worth observing that the concept of an obvious advantage or undue benefit makes sense. All municipal contracts confer an advantage or benefit of some kind because, in the normal course, they inevitably provide assistance or an advantage by providing work and consequent profit to the contractor. However, the advantage simply reflects the fair compensation for work undertaken. Interpreting “bonus” to prohibit ordinary contracts, or specific provisions of a contract, would clearly lead to an absurd result. Thus the granting of an advantage is to be anticipated; the granting of an obviously undue advantage is prohibited. This interpretation is supported by the legislative choice of the word “bonus”, which suggests that he advantage prohibited is one that is undue; that is, on the spectrum of benefits, it falls closer to providing a party with an unmerited windfall.

[56] On the basis of the correct application of the law and findings concerning the terms of the Plan, the application judge was entitled to conclude that the City had jurisdiction to pass the By-law because it did not grant the alleged illegal bonus.

[57] Given this conclusion, s. 272 of the Act prohibits a review of the merits of the Plan on any argument of “unreasonableness”.

[270] The facts of the case at bar are distinguishable in that they do not deal with the granting of an advantage in a municipal contract to a private party. Rather, it deals with the enactment of a regulatory regime to apply to a municipally-designated category of VFH which would operate within the same territory and market as the traditional taxi regime under its own regulatory regime.

[271] In coming to the decision that it did, in establishing the separate regulatory regime for PTCs, the City did so after a broad and extensive review carried out by KPMG, which included a broad consultation with the public and the varied and significant stakeholders of the taxi industry. During that process various regulatory options were identified and explored with more consultation and delegation submissions. As I have found earlier, the City heard and considered the position of the Applicants that the regulatory regime for PTCs and PTC drivers should be the same as that for the taxi drivers and taxi brokers.

[272] Based on the KPMG review, the City also heard from the public that there was a high satisfaction with the new business model of the app-based VFH, such as Uber. The City heard that there were some concerns raised with these new business models of VFH that touched on questions of public safety, consumer protection and accessibility.

[273] The City also heard that permitting the new app-based vehicles to operate without regulation, as they had been doing, since the fall of 2014, was untenable because the City concluded that the public safety, consumer protection and accessibility issues arising out of the new app-based VFH had to be addressed for the City to fulfill its municipal mandate.

[274] Implicit in the City’s decision to enact a separate regulatory regime for PTCs and PTC drivers from that of taxi drivers and taxi brokers is the acceptance by the City that PTCs and PTC drivers are different from traditional taxi drivers and taxi brokers, a difference based on their business model and mode of operation, which merited, in the City’s view, a separate regulatory category that would be regulated in accordance with its inherent business model and operation.

[275] As I discussed earlier, the City had the broad authority to make the differentiation. In my view, it did not do so arbitrarily but after an extensive review and consultation process. The creation of a third class of VFH, the PTCs and PTC drivers, were consistent with many of the policy options identified and discussed during the KPMG review.

[276] For the reasons already discussed, I cannot find that the By-law is arbitrary or discriminatory because it creates two separate regulatory schemes for the taxi industry and PTCs and PTC drivers.

[277] Even comparing the two regulatory schemes, one against the other, I cannot come to the conclusion that an “obvious advantage” has been given to the PTCs and the PTC drivers. Like the taxi industry, they are now subject to licencing restrictions, licencing fees, record keeping and gatekeeping with respect to their PTC drivers relating to driving records, police records, car safety, and insurance coverage. Implicit in this is the fact that the PTC drivers will have to provide this information and licence fees will be passed on to them.

[278] At the same time, restrictions on the taxi industry have been liberalized with room for future change. Clearly, the changes to the existing regulatory regime for the taxi industry found in the By-law were enacted with a view to the new competitive market in the VFH industry. The taxi industry maintains the competitive advantage of street hails and street pick-ups. Both regimes are subject to enforcement and punitive fine provisions.

[279] In the final analysis, I cannot conclude that PTC and PTC drivers have been given an undue advantage without a concomitant obligation benefiting the City. I am not prepared to interfere with the City’s discretion to make the regulatory distinctions that it did in the By-law and to determine that it was the most reasonable and beneficial solution for this sector of the public transportation system in its jurisdiction, given its concerns for public safety, accessibility and consumer protection. Viewed as a whole, VFH By-law 2016 272 does not involve bonusing in contravention of section 106 of the MA 2001.

ULTRA VIRES

Is the 2016 VFH By-law ultra vires the MA 2001

[280] The last argument made by the Applicants is that the 2016 VFH By-law ought to be declared ultra vires because in exercising its powers under section 156(1)(c) of the MA 2001, the City has restricted the number of taxi licences in the City of Ottawa and has not imposed any restrictions on the numbers of PTC drivers. This is inconsistent treatment of similar businesses without cause.

[281] It is the position of the Applicants that any differentiation or inconsistency of treatment in the application of regulations must be rationally justified and connected to municipal objectives, which the new By-law does not do.

[282] The Respondent argues that Council has the authority to make such differentiations by virtue of section 8(4) of the MA 2001. The Respondent further argues that in making the distinctions which it has in the new By-law, the City has not acted arbitrarily or in a discriminatory way, but rather, it is based on the inherent differences found in the two different business models.

[283] The Respondent argues that the Council enacted a reasonable and rational regulatory regime for all VFH within the city of Ottawa, adopting sound and reasonable differentiation grounded in the nature of the subject matter and with a view to meeting the municipal guidelines of public safety, accessibility and consumer protection.

[284] Finally, the Respondent argues that in this the City is owed substantial deference and ought not to be interfered with by the court and the By-law ought not to be declared ultra vires the MA 2001.

[285] While this question has been presented and argued as a separate question, I believe it has been substantially covered in my rulings on the other grounds of this judicial review application. For the reasons given earlier, I am persuaded that the City has the authority to make the differentiations between the taxi industry and PTCs and PTC drivers found in the 2016 VFH By-law. In my view, for the reasons already given, the exercise of this authority cannot be found to be arbitrary, discriminatory or unfair. There is evidence to show that there is an inherent difference in the two business models which could justify the differential treatment of these two sectors of the VFH industry in the view of the City. While to some the differential may seem non-existent and the discretion exercised by the City may seem inconsistent or unreasonable, nonetheless, given the substantial deference owed to municipalities established on the case law, there is no basis for this court to interfere with the exercise of municipal discretion on the facts of this case. I see no basis for finding that the By-law is ultra vires the MA 2001.

ISSUE RAISED IN PARA. 89 OF APPLICANTS’ FACTUM

[286] As stated earlier, at para. 89 of the Factum of the Applicants, the Applicants argue that there is text in the 2016 VFH By-law, para. 27(2)(d) and section 84, which was not included in either the March 31, 2016 Staff Report to the CPS Committee nor in the CPSC Committee’s April 7, 2016 Report to the Council nor in Council’s April 13, 2016 resolutions.

[287] At the hearing, counsel for the Respondent did not make submissions on this point. After a brief Court appearance with both counsel, it was agreed that, effectively, para 27(2)(d) and section 84 found their way into the 2016 VFH By-law without notice to any of the interested parties. In my view, this fact alone does not amount to bad faith but is a breach of the city’s obligation to be transparent and provide procedural fairness.

[288] In the case of Toronto Taxi Alliance Inc. v. Toronto (City), 2015 ONSC 685, supra. Stinson J. found on the facts before him an absence of notice on a substantial subject of mandatory conversion date which could have serious economic repercussions for a class of license holders. Stinson J. found that this resulted in this part of the By-law amendment to be illegal and, therefore, quashed. (See also Langille v. Toronto (City), supra (where a section of a by-law dealing with maximum fares was severed and quashed but the remaining parts of the by-law were found to be valid and binding).)

[289] The imposition of conditions for renewal of licenses accompanied by an obligation to indemnify can have serious financial repercussions for those required to do so. Notice of the City’s intention to include these sections ought to have been given so that the opportunity to address them could have been given to those affected. Paragraph 27(2)(d) and subsection 84(1) of the 2016 VFH By-law is, therefore, declared illegal, severed and quashed.

DISPOSITION

[290] For all of the reasons given, I conclude that the Applicants have not proven bad faith on the part of the City in enacting the 2016 VFH By-law. Nor have they proven that the By-law grants a “bonus” contrary to section 106 of the MA 2001. Finally, I am not persuaded that the By-law is ultra vires the MA 2001. The Application is, therefore, dismissed with the exception of paragraph 27(2)(d) and section 84 of the 2016 VFH By-law which are severed and quashed.

COSTS

[291] The last issue to be decided is that of costs. Both counsel have asked for their costs in this matter. At the last day of the hearing I asked counsel if they were able to agree on the quantum of costs, win or lose. Counsel indicated that they would inform me if they were able to agree on the quantum of costs. I have not heard back from counsel so I must assume there is no agreement on the question of quantum.

[292] The Applicants shall have two weeks from the release of this Decision to serve and file their written submissions on costs, including any offers to settle. The Respondents shall have two weeks from that date to serve and file its written submissions on costs. The Applicants shall then have one week from that date to serve and file a Reply, if they think it advisable.

Linhares de Sousa J.

Released: May 30, 2018

COURT FILE NO.: 17-72322

DATE: 2018/05/30

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Unifor, Local 1688, Botros Nakhle and Nega Haile

Applicant

– and –

The City of Ottawa

Respondent

REASONS FOR JUDGMENT

M. Linhares de Sousa J.

Released: May 30, 2018