COURT FILE NO.: CV-18-00601574-00CP

DATE: 2019/12/16

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LAWRENCE EISENBERG, BEHROUZ HADJNOUROLLAH KHAMZA and SUKHVIR THETHI

Plaintiffs

• and -

CITY OF TORONTO

Defendant

Michael I. Binetti and Annie (Quarran-ul-ain) Tayyab for the Plaintiffs

Michele A. Wright and Matthew Cornett for the Defendant

Proceeding under the Class Proceedings Act, 1992

HEARD: November 19-20, 2019

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] Pursuant to the Class Proceedings Act, 1992,[^1] the Plaintiffs, Lawrence Eisenberg, Behrouz Hadjnourollah Khamseh, and Sukhvir Thethi, bring a $1.7 billion proposed class action against the City of Toronto.

[2] The Plaintiffs bring their action on behalf of a proposed class comprised of all persons:

a. Who were taxicab Plate Owners pursuant to Chapter 545 of the Toronto Municipal Code on September 1, 2014;

b. Who became holders of taxicab plates pursuant to Chapter 545 between September 1, 2014 and July 14, 2016; and,

c. Who were taxicab Plate Owners between July 15, 2016 and the date this proceeding is certified pursuant to the Class Proceedings Act, 1992 regardless of the number of plates owned by such persons.

[3] The core of the Plaintiffs’ proposed class action are three allegations: (1) the City was negligent in enforcing Chapter 545 of the Toronto Municipal Code from September 1, 2014 to July 14, 2016; (2) the City was negligent in enforcing Chapter 546 of the Toronto Municipal Code from July 15, 2016 to the present day; and (3) the City was negligent in adopting Chapter 546 of the Toronto Municipal Code, which essentially revised the taxicab licence scheme of Chapter 545.

[4] The Plaintiffs move for certification of their action as a class action.

[5] The City resists certification. It disputes that the Plaintiffs have a reasonable cause of action against the City. It disputes that some of the proposed common issues satisfy the test for a common issue. It disputes that this class action satisfies the preferable procedure criterion.

[6] For the reasons that follow and because the Plaintiffs have not disclosed a reasonable cause of action, I dismiss the certification motion.

B. Facts

1. Legislative and Regulatory History

[7] Pursuant sections 6, 8, 10, 86, and 94 of the City of Toronto Act, 2006[^2] and other statutes, the City of Toronto is empowered to pass bylaws to provide for a system of licences with respect to businesses operating in the city. The City is specifically empowered by s. 94 of the Act to pass licensing bylaws with respect to taxicabs and to establish the rates or fares to be charged, provide for the collection of the rates or fares, and limit the number of taxicabs or any class of them that may be licensed.

[8] For decades, the regulation of taxicabs was set out in Chapter 545 of the Toronto Municipal Code. On July 15, 2016, the City revised the taxicab licensing regime and the regulation was set out in Chapter 546 of the Toronto Municipal Code.

[9] Both Chapters 545 and 546 of the Toronto Municipal Code required taxicab owners to obtain a licence and affix a plate to their vehicles. No taxicab owner had a right to the continuance of their licence, and at all times the licence remained the property of the City. Additional restrictions were imposed on other taxicab owner licence classes, known as Ambassador or Toronto Taxicab owner licences.

[10] The oldest form of taxicab licence is the “standard” taxicab licence (sometimes referred to as an “STL” or “standard plate”). It is the least restrictive of the licences, because, among other things, it can be held by a corporation, does not require the Plate Owner to personally operate the taxicab, and allows for the taxicab to be leased to someone else to drive under certain conditions. Standard taxicab owners could sell their taxicab equipment, and the purchaser could apply to the City to be issued a new licence, if the purchaser met the applicable licensing criteria.

[11] In 1998, to encourage owners to operate their own taxis, the City began issuing “Ambassador” licences that required Plate Owners to personally own and operate the taxicab for a minimum number of hours each month. Leasing of Ambassador plates was not permitted.

[12] As is well known “Uber” are technology corporations that market a software program that can be used by car drivers and passengers to operate a private transportation service or what amounts to a private taxicab service. In 2012, Uber began operations in Toronto. Initially, it offered its dispatch service to licensed taxicab drivers, but by 2014, it expanded its operations to allowing non-licensed drivers to provide transportation services. The City bylaw enforcement officers responded by laying charges against the unlicensed drivers using the Uber software.

[13] In July 2014, the City began to issue only “Toronto Taxicab Licenses”, or “TTLs”. TTLs, unlike standard plates, could not be held by corporations, required the use of a wheelchair-accessible taxi, and required the Plate Owner to personally operate the taxi.

[14] In November 2014, the City applied for an injunction to stop Uber from operating in Toronto without a licence, and to restrain Uber from recruiting, contracting with, or registering drivers or vehicles that were not licensed.

[15] On July 3, 2015, the court dismissed the City’s application. The court held that Uber was not required to be licensed under Chapter 545.[^3]

[16] On September 30, 2015, City Council amended Chapter 545 to provide that technology-based companies such as Uber were required to have a licence to operate and could dispatch only licensed taxis.

[17] City Council directed the Executive Director of Municipal Licensing and Standards (“MLS”), the department responsible for administering and enforcing Toronto’s taxicab bylaws, to implement and enforce Council’s amended Chapter 545, including if necessary, requesting City Council, through the City’s Budget Process, additional dedicated bylaw officers to ensure adherence to this bylaw.

[18] MLS sent a letter to Uber requiring it to comply with the law. Uber, however, did not change its operations.

[19] From July 2015 to March 2016, City Staff carried out consultations and public meetings on how to regulate the transportation industry, at which consumers, the taxicab industry, and other made submissions about how Uber should be regulated.

[20] In May 2016, Toronto City Council adopted recommendations to licence private transportation companies (“PTCs”) to operate in Toronto. Chapter 546 of the Toronto Municipal Code was revised to reduce the regulatory requirements applicable to taxicab owners and expanded the right to lease or sell taxicabs.

[21] Chapter 546 allowed Uber to operate legally in Toronto. With the amendments to Chapter 546, Uber obtained a PTC licence.

[22] Chapter 546 came into force on July 15, 2016. In July 2016, when Chapter 546 came into force, all Ambassador plates were converted to standard plates, and those who wanted to obtain a licence were permitted to apply for a standard plate rather than a TTL.

[23] The legality of Chapter 546 of the Toronto Municipal Code had not been challenged in the courts.

[24] On July 13, 2018, the Plaintiffs commenced this proposed class action.

C. The Representative Plaintiffs

[25] The proposed Representative Plaintiffs are Lawrence Eisenberg, Behrouz Hadjnourollah Khamseh, and Sukhvir Thethi.

[26] Mr. Eisenberg has been involved in the taxicab industry for over 55 years. He has been a driver, agent, manager, and fleet operator. He currently owns three taxicab plates. He retired from driving taxis in 2010, and since then, has leased his taxicab plates.

[27] Mr. Khamseh has been a taxicab plate owner since 2002. He has two plates; he uses one plate to drive a taxicab full-time, and the other is leased.

[28] Mr. Thethi has been a taxicab driver since 1993. He received an Ambassador plate in May 2002. In 2016, Mr. Thethi’s Ambassador plate was converted to a standard plate. Mr. Thethi has one plate and drives it himself.

[29] All three proposed Representative Plaintiffs are part of the organization All Taxicab Owners and Operators Ltd. (“ATOOL”), whose mandate is to advocate for the interests of taxicab owners and operators in Toronto.

[30] ATOOL is supporting this litigation with the guidance of its steering committee.

[31] Proposed Class Counsel are Affleck Greene McMurtry LLP.

D. Statement of Claim

[32] The Plaintiffs’ Statement of Claim is concise and rather than paraphrase it, I set it out in full below.

1. The Plaintiffs Claim:

(a) an order certifying this action as a class proceeding pursuant to the Class Proceedings Act, 1992, and appointing the Plaintiffs as the representative plaintiffs for:

(i) all persons who were holders of taxicab owner licence(s) pursuant to Chapter 545 (Licensing) of the Toronto Municipal Code (“Chapter 545”), on September 1, 2014 or who became holders of taxicab owner licence(s) pursuant to Chapter 545 between September 1, 2014 and July 15, 2016;

(ii) all persons who were holders of taxicab licences between July 15, 2016, the date on which new Chapter 546 (Licensing of Vehicles-for-Hire) of the Toronto Municipal Code came into force (“Chapter 546”), and all persons who became holders of taxicab owner licence(s) pursuant to Chapter 546 between July 15, 2016 and the date this proceeding is certified pursuant to the Class Proceedings Act, 1992 (the persons described in (i) and (ii) above are collectively referred to as “Plate Owners” and taxicab owner licences are referred to as “Taxi Plates”);

(iii) such other group of persons as may be approved by the Court;

(b) damages in the amount of at least $1,700,000,000.00, or as determined at trial, in respect of the loss in value associated with the sale, transfer or lease of Taxi Plates and loss of income resulting from the operation of the taxicabs resulting from the negligent manner in which the City of Toronto enforced Chapter 545 against drivers of unlicensed private transportation vehicles such as Uber, and against Uber itself, and for adopting Chapter 546 that disregarded the interests of Plate Owners;

(c) prejudgment interest in accordance with section 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended;

(d) postjudgment interest in accordance with section 129 of the Courts of Justice Act;

(e) the costs of this proceeding, plus all applicable taxes; and,

(f) Such further and other Relief as to this Honourable Court may seem just.

2. The City of Toronto is incorporated pursuant to the City of Toronto Act, 2006, S.O. 2006, c. 11, Sched. A.

3. The Plaintiffs were licensed Plate Owners under Chapter 545 and/or are Plate Owners under Chapter 546.

4. The City has regulated taxi services since 1957. The City has always required all Plate Owners to hold some form of taxicab owner licence (e.g., a “Taxi Plate”) under Chapter 545, Chapter 546, and predecessor legislation. The City has consistently limited the number of Taxi Plates issued for a variety of reasons including:

(a) to prevent ruinous competition amongst an unlimited number of Plate Owners;

(b) to prevent an oversupply of taxicabs including aging and ill-kept taxicabs and high turnover among underpaid and poorly qualified drivers;

(c) to ensure properly paid and qualified drivers;

(d) to ensure that the operation of taxicabs would result in fair and consistent income and a return on investment to Plate Owners; and

(e) to ensure vehicle and driver safety and quality of service.

5. As a result of the above, Taxi Plates acquired significant value that was realisable by Plate Owners by way of the sale, transfer, or lease of Taxi Plates and/or by way of the operation of taxicabs. The City has always been intimately aware of the value of Taxi Plates.

6. It was a common City practice that when a Taxi Plate was issued, City staff and/or prior City licensing commission staff would congratulate the Plate Owner on being given their “pension” for their retirement. This reference to a pension was commonplace over decades and meant that Plate Owners now held something of value that could be sold, leased, transferred for money, or from which income could be derived by way of the operation of taxicabs. The City knew that Plate Owners were relying on the value of the Taxi Plates and the income derived therefrom for their financial wellbeing, such as into their retirements (the City itself made those promises by calling Taxi Plates “pensions”). The City also knew that any changes thereto would necessarily impact on the financial interests and wherewithal of Plate Owners.

7. The City permitted Taxi Plates to be transferred to widows/widowers of Plate Owners upon the death of a Plate Owner so that the widow/widower would continue to receive income (i.e., a pension) from the Taxi Plate and/or sell, lease, or transfer the Taxi Plate for value to use during their retirement or otherwise.

8. Taxi Plate owners would have never invested in the taxicab industry absent the above circumstances.

9. The City was more than just a regulator of the taxi industry: it was a willing participant in the business of taxicabs. The City permitted the sale, lease, and transfer of Taxi Plates and charged associated fees. By doing so, the City created the conditions whereby a Taxi Plate came to be treated as both an investment and a form of retirement security for Plate Owners. The City has always been aware that it created a secondary market in which Taxi Plates have been sold, leased, or transferred. The City was directly aware of the value any sales, leases, or transfer and that some Taxi Plates have sold for over $380,000 because the City required that the purchase price or lease amount be disclosed to them in any sale, lease, or transfer of a Taxi Plate. Any and all sales, leases, or transfers of Taxi Plates could not occur without the City’s approval. When it approved a sale, lease, or transfer, the City collected vast sums in the form of fees ranging from $3,000 to $5,000 for each sale or transfer of a Taxi Plate and other fees in respect of leases of Taxi Plates.

10. Without limiting the generality of the foregoing, the City owes a duty of care to Plate Owners by virtue of its close relationship with them as described above, and generally. The City was at all times required to take reasonable care to avoid causing foreseeable harm to Plate Owners. The City was under an obligation to be mindful of the legitimate interests of Plate Owners in conducting the City’s affairs, which for the reasons below, the City failed to do.

11. Plate Owners have come to expect that the City would consider their legitimate interests in the enforcement of the City’s bylaws and treat them fairly with respect to any changes to the taxi industry keeping in mind the principles at paragraph 4. Plate Owners relied on the City’s obligation to enforce its bylaws and to be mindful of the principles at paragraph 4 when entered into the taxicab industry by purchasing or obtaining Taxi Plates.

12. The City has always had a duty to enforce its bylaws against non-compliant persons offering vehicles for hire. The City was fully aware of its obligation to be mindful of the interests of Plate Owners and of its obligation to enforce its own bylaws in the taxicab industry.

13. Under the auspices of a 1998 City-led taxi industry review, City Council approved the following guiding principles for that review:

(a) the general public has the right to expect and demand clean, safe taxicabs;

(b) the general public has the right to expect and demand courteous, knowledgeable and experienced drivers;

(c) drivers have the right to expect and demand a fair return for their labour;

(d) plate holders have the right to expect and demand a fair return for their investment; and

(e) the City has the right to expect and demand that its bylaw will be obeyed.

14. In a further 2012 taxi industry review, City staff recommended to Council that it adopt as principles for regulating the taxicab industry three principles: consumer protection, health and safety, and City well-being. In response to that staff recommendation, City Council added and directed to staff that “the taxicab economic viability and sustainability of the taxi industry be added as a fourth key principle of the Taxicab Industry review” recognizing the importance of the interests of Plate Owners (the 1998 and 2012 principles referred to in paragraphs 13 and 14 are hereinafter referred to as the “1998 and 2012 Directives”).

15. In 2012, two companies, Hailo and Uber, began operating in Toronto. Both used a smartphone application to connect passengers with municipally-licensed taxis. Hailo operated as a licensed taxicab broker pursuant to Chapter 545 until 2014. From the time it entered the Toronto market and up until Chapter 546 was adopted, Uber and its drivers never obtained any form of licence from the City and operated illegally.

16. In September 2014, Uber began operating another unlicensed service in Toronto called “UberX.” In addition to being an unlicensed broker of licenced taxicabs since 2012, Uber was now connecting passengers with unlicensed and uninsured vehicles for hire through its UberX service.

17. At all times, Uber and its drivers fell within the relevant definitions of Chapter 545 yet was unlicensed by the City. The UberX service was and is a taxi service for the purposes of the Excise Tax Act (Canada). The City has permitted two taxicab industries in one City with different regulations with no regard to the interests of Plate Owners, all to the detriment of Plate Owners and contrary to the principles at paragraph 4 and the 1998 and 2012 Directives.

18. The City was negligent in its enforcement of Chapter 545 against the illegally-operating Uber and thus, failed to meet the standard of care owed to Plate Owners. Without limiting the generality of the forgoing, the City:

(a) failed to take adequate measures to prevent the UberX service from expanding;

(b) failed to provide adequate resources to enforce Chapter 545 against Uber in respect of the UberX service;

(c) failed to prosecute cases against UberX drivers;

(d) allowed the UberX service to operate at will, with no limitation on the number of affiliated drivers, which created the very conditions that resulted in the market for the purchase and leasing of Taxi Plates effectively being destroyed and wholly contrary to the principles at paragraph 4 and the 1998 and 2012 Directives;

(e) failed to consider the interests of Plate Owners as they were required to do pursuant to the principles at paragraph 4 and the 1998 and 2012 Directives.

19. The City was wholly capable of taking action under Chapter 545 to stop the illegal UberX service but failed to do so. No real enforcement steps were taken by the City between 2014 and 2016 to stop an illegally-operating service despite the 1998 Directive that the City had the right to expect and demand that its bylaw would be obeyed and its duty to enforce bylaws.

20. In July 2016, the City enacted amendments to the regulatory scheme in the form of Bylaw 575-2016, which removed from Chapter 545 certain vehicle-for-hire licensing provisions and created a new Chapter 546 to deal with vehicle-for-hire licensing separately. Chapter 546 came into force on July 15, 2016.

21. Chapter 546 created a new class of licence for “Private Transportation Companies” in addition to those that governed traditional taxicabs under the previous Chapter 545. Chapter 546 allowed Uber and other Private Transportation Companies to operate legally in Toronto for the first time. By that point, Plate Owners had suffered considerable financial damage.

22. The City’s acceptance of Private Transportation Companies also ran afoul of the requirement for accessible taxicabs required under the Accessibility for Ontarians with Disabilities Act, 2005, S.O. 2005, c. 11.

23. The City’s lack of enforcement continues under Chapter 546 to the detriment of Plate Owners. There are only 10 bylaw inspectors dedicated to enforcing the Chapter 546, which 10 bylaw inspectors are unable to enforce Chapter 546. UberX and other Private Transportation Company drivers, contrary to Chapter 546, permit themselves to be hailed curbside rather than be hailed through the Uber smartphone app. The City has refused to add additional bylaw enforcement officers. Chapter 546 does not contain any authority for those bylaw enforcement officers to stop a Private Transportation Company vehicle; rather, complaints are simply referred back to them for enforcement. All of this compounds the Plaintiffs’ damages.

24. The number of vehicles currently for hire on the UberX platform and other Private Transportation Companies is well over 50,000 and perhaps as high as 75,000 (the exact number is known to the City), whereas there were approximately 5,500 Taxi Plates available for service, not all of which were on the road at any given time.

25. The City failed to protect the various segments of the Toronto taxi industry – specifically those of Plate Owners – and the public, and was thus, negligent. Decisions were made by the City to adopt Chapter 546 to permit Uber to legally enter the marketplace in which they had been illegally operating without due regard to the interests of Plate Owners and the safety of the public.

26. The City improperly preferred the interests of Private Transportation Companies without due regard for the interests of Plate Owners, contrary to the 1998 and 2012 Directives from City Council that they do so.

27. The City also preferred its own interests to the detriment of Plate Owners. Private Transportation Companies are much less costly to regulate, yet they generate enormous fees for the City. As a result, the City is collecting vast licencing fees from Private Transportation Companies and are leaving the vast majority of enforcement functions to Private Transportation Companies themselves.

28. There are approximately 5,500 Taxi Plates that have suffered a reduction in value of approximately $310,000 each, the details of which are known to the City.

29. As a result of the City’s negligent enforcement of Chapter 545, and by virtue of the adoption of Chapter 546, Plate Owners have suffered a loss in value associated with the sale, transfer or lease of Taxi Plates and loss of income resulting from the operation of the taxicabs.

E. Procedural Background

[33] On July 13, 2018, the Plaintiffs commenced this proposed class action by Notice of Action.

[34] On August 10, 2018, the Plaintiffs delivered their Statement of Claim

[35] The Plaintiffs propose the following class definition:

All persons who were Plate Owners pursuant to Chapter 545 on September 1, 2014 or who became holders of plates pursuant to Chapter 545 between September 1, 2014 and July 14, 2016; and all persons who were Plate Owners between July 15, 2016 and the date this proceeding is certified pursuant to the Class Proceedings Act, 1992 regardless of the number of plates owned by such persons.

[36] The term “Plate Owner” is defined in the Statement of Claim. “Plate Owners” are defined as all holders of taxicab owner licenses pursuant to Chapter 545 and/or Chapter 546 between September 1, 2014 and the date this proceeding is certified pursuant to the Class Proceedings Act, 1992.

[37] The Plaintiffs estimate that the proposed class consists of approximately 5,000 individuals, which approximates the number of licensed taxis in Toronto.

[38] The Plaintiffs propose the following common issues:

1. Was the City negligent in enforcing Chapter 545 from September 1, 2014 to July 14, 2016?

2. Was the City negligent in adopting Chapter 546?

3. Was the City negligent in enforcing Chapter 546 from July 15, 2016 to the present day?

4. Are damages assessed in the aggregate an appropriate remedy?

5. Is it possible to assess on a class-wide basis whether the claim with respect to the City of Toronto’s enforcement of Chapter 545 is statute-barred by the Limitations Act, 2002? If so, is the claim statute-barred?

[39] On September 20, 2018, the City delivered its Statement of Defence.

[40] By notice of motion dated March 8, 2019, the Plaintiffs moved for certification of their proposed class action. Their motion was supported by:

• The affidavits of Lawrence Eisenberg dated March 8, 2019 and August 12, 2019;

• The affidavit of Behrouz Hadjnourollah Khamseh dated March 8, 2019;

• The affidavit of Sukhvir Thethi dated March 8, 2019;

[41] The City resisted the motion for certification with the following evidence;

• The affidavits of Carleton Grant dated June 18, 2019 and August 9, 2019. Mr. Grant is the Executive Director of the Municipal Licensing and Standards Division (“MLS”) of the City of Toronto. Before his appointment as Executive Director he was the Director of Policy and Strategic Support at MLS.

[42] On August 12, 2019, Messrs. Eisenberg, Khamseh, and Thethi were cross-examined on their affidavits.

F. Certified Class Action in Ottawa

[43] In Ottawa, where Uber began operating in 2014, a class action similar to the immediate proposed class action was commenced. The Plaintiffs in the immediate case rely on the decision in the similar Ottawa class action as a precedent for certifying their case against the City of Toronto.

[44] The Plaintiffs in the Ottawa action alleged that the City of Ottawa was negligent in the manner in which enforced its Taxi licensing Bylaw against Uber drivers and for unlawfully amending its Taxi Bylaw to permit Uber to operate in the City. In addition, the Plaintiffs alleged that the amendment to the Taxi Bylaw was discriminatory and contrary to s. 15 of the Canadian Charter of Rights and Freedoms and s. 3 of the Human Rights Code.[^4]

[45] On January 16, 2018, Justice R. Smith certified the action as a class proceeding.[^5]

[46] The Representative Plaintiffs in the Ottawa action allege that the City of Ottawa is responsible for the loss of the value of their plates as a result of the negligent manner in which Ottawa enforced its bylaws against Uber drivers.

[47] The common issues about negligence in the Ottawa action are as follows:

1. Was the City negligent in enforcing the Taxi Bylaw from September 1, 2014 to September 30, 2016?

2. Were the 2016 amendments to the City’s Taxi Bylaw unlawful?

3. Are damages assessed in the aggregate an appropriate remedy?

G. The City of Toronto’s Opposition to Certification

[48] As noted above, the City submits that the Plaintiffs’ proposed class action does not satisfy the cause of action, the common issues, and the preferable procedure criteria for certification.

H. Certification: General Principles and Introduction

[49] The court has no discretion and is required to certify an action as a class proceeding when the following five-part test in s. 5 of the Class Proceedings Act, 1992 is met: (1) the pleadings disclose a cause of action; (2) there is an identifiable class of two or more persons that would be represented by the representative plaintiff; (3) the claims of the class members raise common issues; (4) a class proceeding would be the preferable procedure for the resolution of the common issues; and (5) there is a representative plaintiff who: (a) would fairly and adequately represent the interests of the class; (b) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and (c) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

[50] For an action to be certified as a class proceeding, there must be a cause of action shared by an identifiable class from which common issues arise that can be resolved in a fair, efficient, and manageable way that will advance the proceeding and achieve access to justice, judicial economy, and the modification of behaviour of wrongdoers.[^6] On a certification motion, the question is not whether the plaintiff's claims are likely to succeed on the merits, but whether the claims can appropriately be prosecuted as a class proceeding.[^7] The test for certification is to be applied in a purposive and generous manner, to give effect to the goals of class actions; namely: (1) providing access to justice for litigants; (2) encouraging behaviour modification; and (3) promoting the efficient use of judicial resources.[^8]

[51] In the immediate case, the City does not dispute that the identifiable class and representative plaintiff criteria have been satisfied.

[52] As I have foreshadowed above, in my opinion, the reason for not certifying this action is that the Plaintiffs’ have not satisfied the cause of action criterion. In the discussion that follows, I shall address that criterion last.

[53] I shall first discuss the common actions criterion and the preferable procedure criterion on the assumption that the Plaintiffs have shown a viable; i.e. a legally tenable cause of action.

I. Common Issues Criterion

1. General Principles

[54] The third criterion for certification is the common issues criterion. For an issue to be a common issue, it must be a substantial ingredient of each class member's claim and its resolution must be necessary to the resolution of each class member's claim.[^9] The underlying foundation of a common issue is whether its resolution will avoid duplication of fact-finding or legal analysis of an issue that is a substantial ingredient of each class member’s claim and thereby facilitate judicial economy and access to justice.[^10] In Pro-Sys Consultants Ltd. v. Microsoft Corporation,[^11] the Supreme Court of Canada describes the commonality requirement as the central notion of a class proceeding which is that individuals who have litigation concerns in common ought to be able to resolve those common concerns in one central proceeding rather than through an inefficient multitude of repetitive proceedings.

[55] All members of the class must benefit from the successful prosecution of the action, although not necessarily to the same extent. The answer to a question raised by a common issue for the plaintiff must be capable of extrapolation, in the same manner, to each member of the class.[^12]

[56] An issue is not a common issue if its resolution is dependent upon individual findings of fact that would have to be made for each class member.[^13] Common issues cannot be dependent upon findings which will have to be made at individual trials, nor can they be based on assumptions that circumvent the necessity for individual inquiries.[^14]

[57] Commonality is a substantive fact that exists on the evidentiary record or it does not, and commonality is not to be semantically manufactured by overgeneralizing; i.e., by framing the issue in general terms that will ultimately break down into issues to be resolved by individual inquiries for each class member.[^15] In Rumley v. British Columbia,[^16] Chief Justice McLachlin stated that an issue would not satisfy the common issues test if it was framed in overly broad terms; she stated:

[….] It would not serve the ends of either fairness or efficiency to certify an action on the basis of issues that are common only when stated in the most general terms. Inevitably such an action would ultimately break down into individual proceedings. That the suit had initially been certified as a class action could only make the proceeding less fair and less efficient.

[58] However, the commonality requirement does not mean that an identical answer is necessary for all the members of the class, or even that the answer must benefit each of them to the same extent; it is enough that the answer to the question does not give rise to conflicting interests among the members; success for one member must not result in failure for another.[^17]

[59] The common issue criterion presents a low bar.[^18] An issue can be a common issue even if it makes up a very limited aspect of the liability question and even though many individual issues remain to be decided after its resolution.[^19] Even a significant level of individuality does not preclude a finding of commonality.[^20]A common issue need not dispose of the litigation; it is sufficient if it is an issue of fact or law common to all claims and its resolution will advance the litigation.[^21]

2. Common Issues: Discussion and Analysis

[60] The five proposed common issues are set out above.

[61] In my opinion, with the exception of question 4, the question about aggregate damages, the questions satisfy the common issues criterion.

[62] Aggregate damages as specified by The Class Proceedings Act, 1992 are not available in the circumstances of the immediate case. Liability cannot be established on a class wide basis because each class member would individually have to prove causation and quantification of damages.

[63] For an aggregate assessment of damages to be available, no questions of fact or law other than those relating to the assessment of monetary relief must remain to be determined in order to establish the amount of the defendant’s monetary liability. An antecedent finding of liability is required before resorting to the aggregate damages provision of the Class Proceedings Act, 1992, and if liability cannot be established through the common issues, then an aggregate damages common issue cannot be certified.

[64] In the immediate case, the common issues criterion is satisfied but for the proposed question (Question 4) about aggregate damages.

J. Preferable Procedure Criterion

1. General Principles

[65] Under the Class Proceedings Act, 1992, the fourth criterion for certification is the preferable procedure criterion. Preferability captures the ideas of: (a) whether a class proceeding would be an appropriate method of advancing the claims of the class members; and (b) whether a class proceeding would be better than other methods such as joinder, test cases, consolidation, and any other means of resolving the dispute.[^22]

[66] In AIC Limited v. Fischer,[^23] the Supreme Court of Canada emphasized that the preferability analysis must be conducted through the lens of judicial economy, behaviour modification, and access to justice. Justice Cromwell for the Court stated that access to justice has both a procedural and substantive dimension. The procedural aspect focuses on whether the claimants have a fair process to resolve their claims. The substantive aspect focuses on the results to be obtained and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. Thus, for a class proceeding to be the preferable procedure for the resolution of the claims of a given class, it must represent a fair, efficient, and manageable procedure that is preferable to any alternative method of resolving the claims.[^24] Arguments that no litigation is preferable to a class proceeding cannot be given effect.[^25] Whether a class proceeding is the preferable procedure is judged by reference to the purposes of access to justice, behaviour modification, and judicial economy and by taking into account the importance of the common issues to the claims as a whole, including the individual issues.[^26]

[67] Relevant to the preferable procedure analysis are the factors listed in s. 6 of the Class Proceedings Act, 1992, which states:

6. The court shall not refuse to certify a proceeding as a class proceeding solely on any of the following grounds:

7. The relief claimed includes a claim for damages that would require individual assessment after determination of the common issues.

8. The relief claimed relates to separate contracts involving different Class Members.

9. Different remedies are sought for different Class Members.

10. The number of Class Members or the identity of each Class Member is not known.

11. The class includes a subclass whose members have claims or defences that raise common issues not shared by all Class Members.

[68] To satisfy the preferable procedure criterion, the proposed representative plaintiff must show some basis in fact that the proposed class action would: (a) be a fair, efficient and manageable method of advancing the claim; (b) be preferable to any other reasonably available means of resolving the class members' claims; and (c) facilitate the three principal goals of class proceedings; namely: judicial economy, behaviour modification, and access to justice.[^27]

[69] In considering the preferable procedure criterion, the court should consider: (a) the nature of the proposed common issue(s) and their importance in relation to the claim as a whole; (b) the individual issues which would remain after determination of the common issue(s); (c) the factors listed in the Act; (d) the complexity and manageability of the proposed action as a whole; (e) alternative procedures for dealing with the claims asserted; (f) the extent to which certification furthers the objectives underlying the Act; and (g) the rights of the plaintiff(s) and defendant(s).[^28]

[70] The court must identify alternatives to the proposed class proceeding.[^29] The proposed representative plaintiff bears the onus of showing that there is some basis-in-fact that a class proceeding would be preferable to any other reasonably available means of resolving the class members’ claims, but if the defendant relies on a specific non-litigation alternative, the defendant has the evidentiary burden of raising the non-litigation alternative.[^30] It is not enough for the plaintiff to establish that there is no other procedure which is preferable to a class proceeding; he or she must also satisfy the court that a class proceeding would be fair, efficient and manageable.[^31]

[71] In AIC Limited v. Fischer, Justice Cromwell pointed out that when the court is considering alternatives to a class action, the question is whether the alternative has potential to provide effective redress for the substance of the plaintiff’s claims and to do so in a manner that accords suitable procedural rights. He said that there are five questions to be answered when considering whether alternatives to a class action will achieve access to justice: (1) Are there economic, psychological, social, or procedural barriers to access to justice in the case? (2) What is the potential of the class proceeding to address those barriers? (3) What are the alternatives to class proceedings? (4) To what extent do the alternatives address the relevant barriers? and (5) How do the two proceedings compare?[^32]

[72] And in light of the Supreme Court of Canada’s directives in Hryniak v. Mauldin[^33] and Bruno Appliance and Furniture, Inc. v. Hryniak,[^34] one should now add to the preferable procedure factors the factor of the relationship between access to justice, which is the preeminent concern of class proceedings, and proportionality in civil procedures. The proportionality analysis, which addresses how much procedure a litigant actually needs to obtain access to justice, fits nicely with the focus on judicial economy and with the part of the preferable procedure analysis that considers manageability and whether the claimants will receive a just and effective remedy for their claims.

[73] In cases, particularly cases where the individual class members’ respective harm is nominal, or cases where an aggregate assessment of damages in whole or in part is possible, a class action may more readily satisfy the preferable procedure criterion because the common issues trial may be the only viable means for remedying the wrong and for calling the wrongdoer to account because individual litigation may be prohibitively expensive.[^35]

[74] In undertaking a preferable procedure analysis in a case in which individual issue trials are inevitable, it should be appreciated that the Class Proceedings Act, 1992 envisions the prospect of individual claims being litigated and it should be noted that sections 12 and 25 of the Act empower the court with tools to manage and achieve access to justice and judicial economy; thus the inevitability of individual issues trials is not an obstacle to certification. In the context of misrepresentation claims, numerous actions have been certified notwithstanding individual issues of reliance and damages.[^36]

[75] That said, in a given particular case, the inevitability of individual issues trials may obviate any advantages from the common issues trial and make the case unmanageable and thus the particular case will fail the preferable procedure criterion.[^37] Or, in a given case, the inevitability of individual issues may mean that while the action may be manageable, those individual issue trials are the preferable procedure and a class action is not the preferable procedure to achieve access to justice, behaviour modification, and judicial economy. A class action may not be fair, efficient and manageable, having regard to the common issues in the context of the action as a whole and the individual issues that would remain after the common issues are resolved.[^38] A class action will not be preferable if, at the end of the day, claimants remain faced with the same economic and practical hurdles that they faced at the outset of the proposed class action.[^39]

2. Analysis: Preferable Procedure

[76] Assuming that the Plaintiff’s negligence action is legally sound and it not being contested that the identifiable class and representative plaintiff criteria are satisfied and it having been found that there are common issues, the City’s submission that a class action would not be the preferable procedure was very weak and unconvincing.

[77] The City feebly submitted that since the Class Members were seeking $1.7 billion, each member’s share would be $340,000 and there was nothing to suggest that any of the taxicab owners would be unable to individually prosecute their own claims or form a small group to advance a collective claim and share the costs of doing so.

[78] The City’s argument misses the target by the proverbial country mile. Viewed through all the lens of access to both procedural and substantive justice, behaviour modification, judicial economy, and no meaningful alternative procedure remotely as useful or feasible as the proposed class action, the Plaintiffs’ proposed class action would have satisfied the preferable procedure criterion but for the fact that it fails to plead a legally viable cause of action.

K. Cause of Action Criterion

1. General Principles: Cause of Action Criterion

[79] The first criterion for certification is that the plaintiff's pleading discloses a cause of action. The "plain and obvious" test for disclosing a cause of action from Hunt v. Carey Canada,[^40] is used to determine whether a proposed class proceeding discloses a cause of action for the purposes of s. 5(1)(a) of the Class Proceedings Act, 1992. To satisfy the first criterion for certification, a claim will be satisfactory, unless it has a radical defect, or it is plain and obvious that it could not succeed.[^41]

[80] In a proposed class proceeding, in determining whether the pleading discloses a cause of action, no evidence is admissible, and the material facts pleaded are accepted as true, unless patently ridiculous or incapable of proof. The pleading is read generously, and it will be unsatisfactory only if it is plain, obvious, and beyond a reasonable doubt that the plaintiff cannot succeed.[^42]

[81] Matters of law that are not fully settled should not be disposed of on a motion to strike an action for not disclosing a reasonable cause of action,[^43] and the court's power to strike a claim is exercised only in the clearest cases.[^44] The law must be allowed to evolve, and the novelty of a claim will not militate against a plaintiff.[^45] However, a novel claim must have some elements of a cause of action recognized in law and be a reasonably logical and arguable extension of established law.[^46]

[82] In R. v. Imperial Tobacco Canada Ltd.,[^47] the Supreme Court of Canada noted that although the tool of a motion to strike for failure to disclose a reasonable cause of action must be used with considerable care, it is a valuable tool because it promotes judicial efficiency by removing claims that have no reasonable prospect of success and it promotes correct results by allowing judges to focus their attention on claims with a reasonable chance of success.

[83] The failure to establish a cause of action usually arises in one of two ways: (1) the allegations in the statement of claim do not come within a recognized cause of action; or (2) the allegations in the statement of claim do not plead all the elements necessary for a recognized cause of action.[^48]

2. Analysis: Cause of Action Criterion

[84] The analysis of the cause of action criterion may begin with three preliminary points.

[85] The first preliminary point is that the decision in the comparable case in Ottawa, Metro Taxi Ltd. v. City of Ottawa,[^49] is of no assistance to the Plaintiffs in the immediate case.

[86] In the Ottawa case, the City of Ottawa agreed that the pleadings disclosed a valid cause of action in negligence but submitted that the negligence could not succeed because a witness for the Plaintiffs had allegedly admitted that the cause of his losses was caused by Uber. This supposedly was an admission that the City of Ottawa was not a cause of the Class Members’ damages and, therefore, could not be liable for its negligence.

[87] Justice Smith did not think there was any substance to this argument, and very sensibly, he concluded that it did not detract from the City of Ottawa’s concession that a viable cause of action had been pleaded. Justice Smith concluded that the cause of action criterion had been satisfied.

[88] For present purposes, the point to note is that there was no argument in Metro Taxi Ltd. - like the vigorously argued debate in the immediate case - about whether the City has a duty of care when it enacts a bylaw and succumbs to the invasion of Uber into the transportation business.

[89] That Metro Taxi Ltd. was certified where there was no similar debate as occurred in the immediate case means that the case has no precedential value for the immediate case.

[90] The second preliminary point is that much of the City’s attack on the Plaintiffs’ cause of action was that it was not a genuine negligence claim but rather that the Plaintiffs claim was a disguised and defective cause of action for negligent misrepresentation.

[91] This submission was vigorously disputed by the Plaintiffs who denied that they were alleging negligent misrepresentation. The Plaintiffs adamantly asserted that they were pleading negligence simpliciter in the enactment of Chapter 546 and negligence simpliciter in the enforcement of Chapters 545 and 546 of the Toronto Municipal Code. The Plaintiffs asserted that the pleadings of the statements that were made by City staff and officials about the value of the taxi plates were relevant to whether there was a duty of care but the allegations were not pleaded as misrepresentations upon which the Class Members relied.

[92] I agree with the Plaintiffs’ argument on this point, and I agree that their cause of action is based on negligence and not on negligent misrepresentation and therefore their Statement of Claim should be evaluated accordingly. The issue then becomes whether, based on the material facts pleaded, which are assumed to be true or capable of proof, the Plaintiffs have a viable cause of action in negligence against the City.

[93] The third preliminary point is that in the immediate case, there is no dispute that the allegations in the statement of claim plead all the elements necessary for a recognized cause of action in negligence. The elements of a claim in negligence are: (1) the defendant owes the plaintiff a duty of care; (2) the defendant's behaviour breached the standard of care; (3) the plaintiff suffered compensable damages; (4) the damages were caused in fact by the defendant's breach; and, (5) the damages are not too remote in law.[^50] The constituent elements of the tort are pleaded in the Statement of Claim, but the controversy remains whether the cause of action in negligence as pleaded is a recognized cause of action in negligence. The parties dispute whether the City has a duty of care to the Class Members.

[94] To begin to answer this question, the starting point is that the Plaintiffs’ and the Class Members’ claim in negligence is a claim for pure economic loss. The circumstances in which Canadian courts have allowed recovery in negligence for pure economic loss are limited. As the Supreme Court of Canada noted in Martel Building Ltd. v. R. [^51] at paragraphs 36 and 37:

36. An historical review of the common law treatment of recovery for economic loss has been undertaken by this Court on several occasions. See Rivtow Marine Ltd. v. Washington Iron Works, 1973 CanLII 6 (SCC), [1974] S.C.R. 1189; Canadian National Railway Co. v. Norsk Pacific Steamship Co., 1992 CanLII 105 (SCC), [1992] 1 S.C.R. 1021; and D'Amato, supra. Rather than re-canvassing the jurisprudential genealogy reviewed in these cases, it is enough to say that the common law traditionally did not allow recovery of economic loss where a plaintiff had suffered neither physical harm nor property damage. See Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453.

37. Over time, the traditional rule was reconsidered. In Rivtow and subsequent cases it has been recognized that in limited circumstances damages for economic loss absent physical or proprietary harm may be recovered. The circumstances in which such damages have been awarded to date are few. To a large extent, this caution derives from the same policy rationale that supported the traditional approach not to recognize the claim at all. First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests. Second, an unbridled recognition of economic loss raises the spectre of indeterminate liability. Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom they fall through such means as insurance. Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate lawsuits.

[95] As the law has developed in Canada, the Supreme Court has recognized that there are categorical exemptions to the general principle that purely economic losses are not compensable in negligence. In Canadian National Railway Co. v. Norsk Pacific Steamship Co.,[^52] the Court recognized five established categories where recovery for pure economic losses was permitted; namely: (1) negligent misrepresentation; (2) negligence of public authorities; (3) negligent performance of a service; (4) supply of shoddy goods or structures; and (5) relational economic losses. Further, the Supreme Court recognized that the categories were not closed, and new exceptions were possible. And, the Court envisioned that a duty of care analysis and principled approach could be used to identify new exceptions to the general principle that pure economic losses are not recoverable in negligence.

[96] Thus, where there is a pure economic loss, if the relationship between the plaintiff and the defendant does not fall within a recognized class where the defendants have a duty of care, then whether a duty of care exists involves satisfying the requirements of a three-step analysis of: (1) foreseeability, in the sense that the defendant ought to have contemplated that the plaintiff would be affected by the defendant's conduct; (2) sufficient proximity, in the sense that the relationship between the plaintiff and the defendant is sufficiently close prima facie to give rise to a duty of care; and (3) the absence of overriding policy considerations that would negate any prima facie duty established by foreseeability and proximity. Thus, in a new category of case whether a relationship giving rise to a duty of care exists depends on foreseeability and proximity, moderated by policy concerns.[^53]

[97] In the immediate case, the Plaintiffs’ claim is not a novel or new category of negligence claim for pure economic loss. It falls within the category of the liability of public authorities, and, therefore, it is not necessary to undertake a new duty of care analysis.

[98] When the defendant is a statutory actor, the allegation of negligence must be analyzed in the context of the statutory scheme.[^54] A duty of care may arise from an express or implied statutory duty or it may arise as a matter of the common law.[^55] In addition to a statutory duty of care set out in the governing legislation, there may be a common law duty of care that arises by virtue of interactions between the statutory actor and a private individual.[^56] Where the defendant is a statutory actor, the proximity inquiry will focus initially on the applicable legislative scheme and secondly, on the interactions, if any, between the regulator or governmental authority and the putative plaintiff.[^57] Once the statutory actor has direct interaction with the individual in the operation or implementation of a policy, a duty of care may arise, particularly where the safety of the individual is at risk.[^58]

[99] The focus of the analysis as to whether a public body or statutory actor has a duty of care is proximity and the statutory scheme is the core of the proximity analysis.[^59] The statutory scheme must be examined as to whether it establishes a direct relationship between the public body and the plaintiff and whether the statutory scheme forecloses the existence of a common law duty of care claim against the statutory actor or public body; other relevant factors are reliance, whether the statute provides adequate alternative remedies for a person injured by his or her interaction with the public authority,[^60] and whether the recognition of a duty of care would conflict with an overarching statutory or public duty.[^61]

[100] When a statutory actor or public authority is alleged to owe a duty of care, the court must consider whether the impugned conduct was a policy decision dictated by financial, economic, social or political factors or constraints, for which statutory actors or public authorities are accountable to the electorate, or operational conduct based on administrative direction, expert or professional opinion, technical standards or general standards of reasonableness, for which the public authority may be liable for negligence.[^62] A public authority may be liable for a negligent failure to act in accordance with an established policy where it is reasonably foreseeable that failure to do so will cause physical harm to the plaintiff.[^63]

[101] In the case at bar, there are two alleged duties of care that are alleged to have been breached by the City. The first of these is the allegations that the City was negligent in the enactment of Chapter 546 of the Toronto Municipal Code.

[102] There is, however, very strong authority that a municipality cannot be liable for negligence with respect to its legislative activities. The leading case is Welbridge Holdings Ltd. v. Greater Winnipeg.[^64]

[103] In Welbridge Holdings, after a zoning bylaw was amended by the City of Winnipeg to permit the construction of an apartment building on Wellbridge Holding’s property, it obtained a building permit to construct the building. Wellbridge Holdings hired a general contractor, but construction stopped when, in court proceedings, the bylaw was declared illegal for procedural irregularity. The City of Winnipeg revoked the building permit. In a judgment written by Justice Laskin, the Supreme Court held that Wellbridge Holdings did not have a cause of action in negligence. Justice Laskin stated:

A rezoning application merely invokes the defendant's legislative authority and does not bring the applicant in respect of his particular interest into any private nexus with the defendant, whose concern is a public one in respect of the matter brought before it. The applicant in such case can reasonably expect honesty from the defendant but not a wider duty. Beyond this, I would adapt to the present case what the late Mr. Justice Jackson said in dissent in Dalehite v. United States [(1953), 346 U.S. 15.], at p. 59 (a case concerned with the Federal Tort Claims Act, 1946, of the United States), as follows:

When a [municipality] exerts governmental authority in a manner which legally binds one or many, [it] is acting in a way in which no private person could. Such activities do and are designed to affect, often deleteriously, the affairs of individuals, but courts have long recognized the public policy that such [municipality] shall be controlled solely by the statutory or administrative mandate and not by the added threat of private damage suits. (The words in brackets are mine).

The defendant is a municipal corporation with a variety of functions, some legislative, some with also a quasi-judicial component (as the Wiswell case determined) and some administrative or ministerial, or perhaps better categorized as business powers. In exercising the latter, the defendant may undoubtedly (subject to statutory qualification) incur liabilities in contract and in tort, including liability in negligence. There may, therefore, be an individualization of responsibility for negligence in the exercise of business powers which does not exist when the defendant acts in a legislative capacity or performs a quasi-judicial duty.

Its public character, involving its political and social responsibility to all those who live and work within its territorial limits, distinguishes it, even as respects its exercise of any quasi-judicial function, from the position of a voluntary or statutory body such as a trade union or trade. [….] A municipality at what may be called the operating level is different in kind from the same municipality at the legislative or quasi-judicial level where it is exercising discretionary statutory authority. In exercising such authority, a municipality (no less than a provincial Legislature or the Parliament of Canada) may act beyond its powers in the ultimate view of a court, albeit it acted on the advice of counsel. It would be incredible to say in such circumstances that it owed a duty of care giving rise to liability in damages for its breach. […]

[…] If, instead of rezoning the land involved herein to enhance its development value, the defendant had rezoned so as to reduce its value and the owners had sole it thereafter, could it be successfully contended, when the rezoning bylaw was declared invalid on the same ground as Bylaw No. 177, that the owners were entitled to recoup their losses from the municipality? I think not, because the risk of loss from the exercise of legislative or adjudicative authority is a general public risk and not one for which compensation can be supported on the basis of a private duty of care. The situation is different where a claim for damages for negligence is based on acts done in pursuance or in implementation of legislation or of adjudicative decrees.

[104] I will consider below whether there is a cause of action for negligence for the City of Toronto’s for alleged failures to enforce Chapters 545 and 546 of the Toronto Municipal Code, but based on the authority of Welbridge Holdings, it is plain and obvious that it cannot be liable for negligence for having enacted Chapter 546. The enactment of Chapter 546 was an activity of the City’s legislative authority that is not to be controlled by the threat of private damage suits. The City was not implementing its business powers, but in enacting Chapter 546, it was acting in its legislative capacity. Legislative activities inevitably affect individual citizens; for some the affect is positive, and for others the affect is negative, but the legislative activity has a public character and to quote Justice Laskin “the risk of loss from the exercise of legislative or adjudicative authority is a general public risk and not one for which compensation can be supported on the basis of a private duty of care”. The Plaintiffs and the Class Members were adversely affected by the enactment of Chapter 546 and suffered a pure economic loss, but it is plain and obvious that they do not have a cause of action for negligence.

[105] Before moving on to consider whether the City could be liable in negligence for its alleged failures in enforcing Chapters 545 and 546 against Uber and Uber drivers, I note that other cases have held that a municipality is not liable in tort for damages with respect to the enactment of a bylaw. See: Entreprises Sibeca Inc. v. Frelighsburg (Municipality),[^65] [enactment of zoning bylaw does not trigger a municipality's liability even if the effect of the bylaw is to reduce the value of the lands affected]; Thirsty's Bar and Grill v. Waterloo (Regional Municipality) [smoking bylaw].[^66]

[106] I turn now to the purported action in negligence against the City for its failure to enforce Chapters 545 and 546 of the Toronto Municipal Code against Uber and the Uber drivers. In paragraph 12 of the Statement of Claim, the Plaintiffs plead that the City has always had a duty to enforce its bylaws against non-compliant persons offering vehicles for hire. However, whether the City has a duty is not a fact, it is a legal matter, and as a legal principle, the law for some long time has been that there is no duty upon a municipality to enforce a bylaw which it has enacted in the exercise of a discretionary power.[^67]

[107] In the immediate case, the negligence action for recovery of pure economic losses falls into the category of cases in which the highest Canadian authorities hold that the public authority is regulating in the public interest and has not undertaken a private duty of care. The leading cases are the 2001 cases of Cooper v. Hobart[^68] and Edwards v. Law Society of Upper Canada.[^69]

[108] In Cooper, the Registrar of Mortgage Brokers had statutory authority to license and regulate the activities of mortgage brokers. The plaintiffs suffered economic losses investing with a non-compliant mortgage broker, and they argued that the Registrar owed them a private law duty to suspend the broker's licence. In Edwards, the Law Society of Upper Canada had statutory authority to license and regulate the activities of lawyers. The plaintiffs suffered economic losses caused by improper use of a lawyer's trust account, and they argued that the Law Society, having knowledge of the manner in which the lawyer operated his trust account, owed them a private law duty to ensure that the lawyer's trust account was operated according to the regulations. In both cases, the Supreme Court of Canada held that there was no private law duty of care on the statutory authority to control the improper behaviour of those it regulated.

[109] In my opinion, the material facts of the pleaded case are governed by the authority of Cooper and Edwards and demonstrate that it is plain and obvious that the City does not have a duty of care to the Plaintiffs and to the putative Class Members.

[110] In Vlanich v. Typhair,[^70] a case even closer in its facts of the immediate case, the Vlanichs were injured in a motor vehicle accident involving a taxi owned by the defendant carrying on business as Aces Taxi. In addition to suing the defendant taxi company for damages for their personal injuries, the Vlanichs sued the Township of North-Grenville for its failure to enforce its taxi licencing and regulation bylaw that required licensed taxis to carry a minimum of $1.0 million in insurance coverage. The Vlanichs alleged that the Township negligently failed to enforce the Bylaw.

[111] Affirming the trial judge, the Court of Appeal dismissed the action against the municipality. In doing so, Justice Sharpe stated at paragraphs 30-32, 43-44 of his judgment:

30. By enacting the Bylaw, the Township established a general standard to benefit the public as a whole. This is a common feature of legislation and bylaws. Standards are established in the general public interest and public authorities have a duty to the public at large to see to their enforcement. But public authorities are not liable for losses simply because a legislated standard was not enforced: see e.g. Cooper; Kent v. Laverdiere, 2011 ONSC 5411, 85 C.C.L.T. (3d) 296, at paras. 115 and 135; and 118143 Ontario Inc. v. City of Mississauga, 2015 ONSC 3691, 39 M.P.L.R. (5th) 231, at paras. 226-27. The added element of proximity must be present.

31. Proximity between a public authority and an individual member of the public may arise in circumstances in which the public authority assumes responsibility for ensuring compliance with a standard that is intended to avoid or to reduce a risk of physical damage or harm.

32. In the inspection cases, the public authority is directly implicated in the risk of physical damage or harm because it has invited the injured party to rely on an inspection, and it has assumed responsibility for avoiding the risk. If the public authority fails to inspect as required by the legislated standard, the physical damage or harm will occur. The plaintiff relies on the public authority to take steps to avoid the risk through reasonable inspection and the authority's obligation to do so is what creates a relationship of proximity with the injured party.

33. I cannot accept State Farm's submission that Cooper and Edwards are distinguishable on the basis that the regulatory bodies were not obligated to suspend the licenses by virtue of a specific bylaw. The Supreme Court's conclusions were premised on a finding that any duty was owed to the public as a whole rather than to individual investors or clients who interacted with the brokers or lawyers regulated by the legislation.

34. In Cooper, the Supreme Court noted, at para. 49: "Even though to some degree the provisions of the Act serve to protect the interests of investors, the overall scheme of the Act mandates that the Registrar's duty of care is not owed to investors exclusively but to the public as a whole." Similarly, in Edwards, the Supreme Court found, at para. 14: "The Law Society Act is geared for the protection of clients and thereby the public as a whole, it does not mean that the Law Society owes a private law duty of care to a member of the public who deposits money into a solicitor's trust account."

[112] The Plaintiffs and the Class Members’ argument in the immediate case for a private duty of care is even weaker than the case advanced in Vlanich where the Plaintiffs had suffered personal injuries. In the immediate case, the losses are purely economic, and even though Chapter 546 and more so Chapter 545 of the Toronto Municipal Code to some degree protect the financial interests of taxi licensees, the overall scheme is that the duty of care is owed to the public as a whole. Neither the City of Toronto Act nor the Toronto Municipal Code require the City to protect the interests of taxicab owners. The statutory scheme does not create a positive duty to enforce Chapter 545 or Chapter 546 to achieve health and safety outcomes and there no obligation to protect the economic interests of those granted taxi licences.

[113] In the immediate case, the Plaintiffs relied on the inspection cases or road repair cases of Kamloops (City) v. Nielsen,[^71] Rothfield v. Manolakos,[^72] and Ingles v. Tutkaluk Construction Ltd.[^73] I would distinguish those cases for the same reasons that Justice Sharpe did in Vlanich. In the immediate case, there was no foreseeable physical harm to the Plaintiffs or the Class Members from the City’s failure to enforce Chapters 545 or 546 and the City did not assume responsibility for preventing the risk of pure economic losses to the taxicab licensees.

[114] The Plaintiffs rely on the Court of Appeal’s decision in Grand River Enterprises Six Nations Ltd v. Attorney General (Canada),[^74] to support their argument that it is not plain and obvious that the City does not owe them and the Class Members a duty of care in the enforcement of Chapters 545 and 546 of the Toronto Municipal Code.

[115] However, the Grand River Enterprises case is not only distinguishable, it rather makes the point that the City would not have a duty of care in the immediate case.

[116] In analyzing the Grand River Enterprises case, the essential point to note is that the case involved an up-close and personal, very intense taxation and regulatory relationship between four individual status Indians and the government of Canada.

[117] The four individuals were partners in a business manufacturing the sale of products on an Indian reserve. In negotiations to obtain a tobacco manufacturing license, they were lied to by the then Minister of National Revenue that they must also obtain an excise licence. The four individuals were then prosecuted for violating excise and customs legislation and when they applied for an excise licence, they were lied to again and told that they had to incorporate their business. They incorporated their partnership’s business, which had the effect of exposing the business to excise duties. As status Indians living on a reserve, operating as a partnership, no duties would have been payable.

[118] At the time when the four individuals were told to apply for the excise licence, officials of the Department of National Revenue agreed that the government would carry out an intensive enforcement initiative to ensure that other on-reserve manufacturers of tobacco products would abide by the same rules that governed the incorporated business. What followed was that the incorporated business annually paid between $50 million to $60 million in taxes and duties, but the government made no effort to combat the illicit trade in contraband tobacco products on the reserve.

[119] The four former partners and their incorporated business sued the Federal Government for $1.5 million in damages for breach of fiduciary duty, misfeasance in public office, and negligence. The Court of Appeal struck the claim for breach of fiduciary duty, but it concluded that it was not plain and obvious that the claims for misfeasance in public office and negligence were not viable causes of action.

[120] In Grand River Enterprises, Justice Epstein wrote the judgment for the Court of Appeal, and she noted that there were two situations when a government actor owes a prima facie duty of care: (1) the situation where the alleged duty of care arises explicitly or by implication from the statutory scheme; and (2) the situation where the duty of care arises from interactions between the claimant and the government and the duty is not negated by the statutory scheme. She said that the Grand River Enterprises case was within the second category. [^75]

[121] She went on to hold that the specific conduct and interactions between the parties was such that it was not plain and obvious that there was not a proximate relationship giving rise to a discrete duty of care between the parties and the statutory scheme did not exclude that possibility. She noted that there was no implication of indeterminate liability because there was no allegation that the government owed a duty of care to other tobacco producers and the claimants were asserting only that they had been singled out by the Federal government.

[122] Unlike Grand River Enterprises, in the immediate case, to the extent that the Plaintiffs rely on a private duty of care, there was no agreement reached with the Plaintiffs or the putative Class Members that the City would enforce its licensing bylaw against Uber and Uber drivers for the financial benefit or protection of the existing licence holders.

[123] Recalling that the Plaintiffs have adamantly denied that they are advancing a negligent misrepresentation case, in the case at bar, there were no specific interactions between the Plaintiffs and the Class Members, who applied for a license under the regulatory scheme without specific interactions or advice or directions from government officials. There were no commercial dealings between the licensees and the City. That some licensees were congratulated on achieving a license is not a specific interaction that would give rise to a duty of care. The case at bar is more like Weninger Farms Ltd. v. Canada (Minister of National Revenue),[^76] in which the Court of Appeal distinguished in its decision in Grand River Enterprises.

[124] In Weninger Farms, a proposed class action, the plaintiffs’ argument for imposing a duty of care relied on the statutory scheme, but Justice Grace concluded that the cause of action criterion had not been satisfied. Weninger Farms involved tobacco growers who claimed that the federal and provincial governments allowed the sale of contraband tobacco in contravention of federal and provincial legislation. The plaintiffs sued for misfeasance in public office and for negligence in the enforcement of the regulatory law.

[125] Justice Grace concluded that the legislation was aimed at the general public and that there was no private duty of care. At paragraph 60 of his judgment, he quoted from his own judgment in Ashak v. Ontario (Director, Family Responsibility Office)[^77] and stated:

60 That leaves only one possibility: a statutory scheme that creates a duty of care. The plaintiffs' task is not easy.

It may be difficult to find that a statute creates sufficient proximity to give rise to a duty of care. Some statutes may impose duties on state actors with respect to particular claimants. However, more often, statutes are aimed at public goods, like regulating an industry...or removing children from harmful environments...In such cases, it may be difficult to infer that the legislature intended to create private law tort duties to claimants. This may be even more difficult if the recognition of a private law duty would conflict with the public authority's duty to the public.

[126] The case at bar is similar to the circumstances in Weninger Farms; in the case at bar, Chapters 545 and 546 of the Toronto Municipal Code like the legislation in Weninger Farms is legislation in the public interest not in the private and commercial or proprietary interest of the taxi owners and drivers.

[127] Further, as noted in Wu v. Vancouver (City).[^78] a decision of the British Columbia Court of Appeal, it is not sufficient to point to interactions that are inherent to the regulatory scheme to ground liability for a private law duty of care. In Wu, Justice Harris stated at para. 65:

65. While the relationship between the parties can be described as "direct and transactional", this does not materially advance the proximity analysis because such a relationship is both inherent in and an inevitable and necessary part of the regulatory framework, in which individuals apply for permission to undertake a certain activity. The same applies to virtually any licensing or permitting process. I do not think that the inevitable reality of a specific individual making an application to a regulator, and thereby entering into a direct transactional relationship with the regulator, advances the argument that proximity exists in the sense that the regulator has come under an obligation to have particular regard for the interests of the applicant beyond the regulator's obligation to fulfil his or her statutory duties.

[128] In Wu, the Wus sued the City of Vancouver for negligence in making a decision about their development permit application. By the time a decision was made, the Wus had lost a right to compensation that would otherwise have been available had a timely approval been forthcoming. The British Columbia Court of Appeal held that the trial judge had erred in recognizing a novel private law duty of care for a municipality to make a decision within a reasonable time in accordance with the applicable bylaws.

[129] In the immediate case, the alleged duty of care in enforcing by-laws, of course, is much different than that in Wu, but, for present purposes, Wu is illustrative that while a statutory scheme will often create a foreseeable relationship between a government and an individual member of the public, the statutory relationship does not generally give rise to private law duties of care. Thus, in Wu, Justice Harris stated at paragraphs 55 and 56:

55. … [W]hile a scheme of statutory regulation may be relevant to whether proximity exists, generally the existence of such a scheme is insufficient to support a finding of proximity. The Supreme Court of Canada appears to have moved beyond its statement in Edwards v. Law Society of Upper Canada, 2001 SCC 80 at para. 9, that factors giving rise to proximity must be grounded in the governing statute if one exists. More recently, in Reference re Broome v. Prince Edward Island, 2010 SCC 11, Justice Cromwell observed that statutory duties "do not generally, in and of themselves, give rise to private law duties of care": at para. 13. A similar view is found in Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24. In that case, the Chief Justice, endorsing Broome, reasoned that "[w]here the defendant is a public body, inferring a private duty of care from statutory duties may be difficult, and must respect the particular constitutional role of those institutions": Alberta at para. 74. Much the same view was articulated in Imperial Tobacco. In that case, the Court noted "[i]t may be difficult to find that a statute creates sufficient proximity to give rise to a duty of care": at para. 44.

56. … [A] principal reason why public law duties are, standing alone, generally insufficient to create proximity is because statutory schemes generally exist to promote the public good. To the extent that one conceives the issue as a matter of legislative intent, as the Supreme Court of Canada noted in Imperial Tobacco, it is difficult to infer that a legislature intended to create a private law duty where a scheme is aimed at a public good: at para. 44. Viewed in this way, the question is whether the legislature intended as a positive matter to create a private law duty notwithstanding that the scheme is aimed at promoting the public good. The basic proposition remains, however, that a public law duty aimed at the public good does not generally provide a sufficient basis to create proximity with individuals affected by the scheme. This is so, even if a potential claimant is a person who benefits from the proper implementation of the scheme. This proposition is illustrated by numerous cases including Cooper, Gill v. Canada (Minister of Transport), 2015 BCCA 344, Imperial Tobacco, and Elder Advocates, to name just a few.

[130] In the immediate case, the Plaintiffs also rely on James v. British Columbia,[^79] a decision of the British Columbia Court of Appeal, but upon analysis this case is also not helpful to them.

[131] The facts of James were that in 1991, the Minister of Forests in British Columbia granted a sawmill operator a tree farm licence. Clause 7, a term of the licence, stipulated that the sawmill operator would not reduce production or close for a sustained period unless the Minister agreed to the closure. When the licence was extended in 1997, however, Ministry staff inadvertently failed to include Clause 7 in the license. In 2001, the sawmill operator permanently shut down the sawmill. Mr. James brought a class action against the Province of British Columbia for negligence for failing to include Class 7 in the province’s ongoing contract with the sawmill operator. Reversing the motions judge on the certification motion, the British Columbia Court of Appeal concluded that the cause of action criterion had been satisfied.

[132] I can be brief in explaining why the James decision is not helpful to the Plaintiffs in the immediate case. There are three reasons.

[133] First, in James, Justice Esson reasoned that the pleadings were sufficient to distinguish the Supreme Court of Canada’s decisions in Cooper v. Hobart, supra and Edwards v. Law Society of Upper Canada and, therefore, the cause of action criterion was satisfied. As I have explained above, it is plain and obvious in the immediate case that Cooper and Edwards apply to the circumstances of the immediate case.

[134] Second, in James and like the situation in Grand River Enterprises and unlike the case at bar, there were intense and direct dealings with the government actor who made contractual or other undertakings.

[135] Third, in James, Justice Esson reasoned that in addition to the established category of recovery for pure economic loss for the independent liability of statutory public authorities, there arguably was liability for the negligent performance of a service. In the case at bar, this categorical head of liability for pure economic loss is not available because the enforcement of bylaws is not a service but is a legislative, regulatory or administrative activity. In other words, the impugned activities in the immediate case are not about a public authority’s negligence in issuing licences but rather concerns the alleged negligence in enforcing compliance with the terms of the licensing bylaw.

[136] Thus, in my opinion, by virtue of decided authority, it is plain and obvious that the Plaintiffs and the putative Class Members do not have a cause of action in negligence for the City of Toronto’s alleged failure to enforce Chapters 545 and 546 of the Toronto Municipal Code against Uber and the Uber drivers.

[137] Strictly speaking, in the immediate case, it is not necessary to undertake an Anns/Merton analysis of whether there is a duty of care. But, undertaking that analysis, in my opinion, there is not sufficient proximity to establish a duty of care and there are policy reasons both as a matter of proximity and as matters that would negate a duty of care that make it plan and obvious that there is no duty of care.

[138] In the case at bar, there is nothing in the statutory scheme that expressly imposes a duty of care to enforce the licensing bylaw and the spectre of indeterminate liability is a solid policy reason to not expand the circumstances for which a public authority should be liable for pure economic losses.

[139] In Vlanich v. Typhair,[^80] discussed above, Justice Sharpe noted that if the Township were found liable for the negligent enforcement of the taxi licencing Bylaw, the financial burden on small municipalities with limited resources would be significant and therefore residual policy considerations militated against the recognition of a duty of care. In the immediate case, I take judicial notice that the City of Toronto’s 2019 operating budget is $13.5 billion. There are approximately 59 different types of businesses that must obtain a licence under Chapter 545 and Chapter 546 of the Toronto Municipal Code. The Plaintiffs and the putative Class Members are just one of those businesses and they are advancing a claim for $1.7 billion, which is 12.6% of the operating budget. In the immediate case, residual policy considerations militate against the recognition of a duty of care.

[140] In the result, I conclude that the Plaintiffs have failed to satisfy the cause of action criterion for certification.

L. Conclusion

[141] For the above reasons I dismiss the certification motion.

[142] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the City’s submissions within 20 days of the release of these Reasons for Decision followed by the Plaintiffs’ submissions within a further 20 days.

Perell, J.

Released: December 16, 2019

COURT FILE NO.: CV-18-00601574-00CP

DATE: 2019/12/16

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LAWRENCE EISENBERG, BEHROUZ HADJNOUROLLAH KHAMZA and SUKHVIR THETHI

Plaintiffs

• and -

CITY OF TORONTO

Defendant

REASONS FOR DECISION

PERELL J.

Released: December 16, 2019

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