City of Toronto v. Uber Canada Inc., Uber B.V., and Rasier Operations B.V.

The City of Toronto sought various forms of relief, including: (i) a declaration that the Respondents are operating a taxicab brokerage and a limousine service company, contrary to the provisions of the City of Toronto Municipal Code; and (ii) a permanent injunction restraining the Respondents from operating a taxicab brokerage or a limousine service company in the City of Toronto, without obtaining the applicable municipal licences.

On July 3, 2015, Justice Sean Dunphy released Reasons for Judgment, dismissing the City’s application in its entirety.

Justice Dunphy’s Reasons include this historical summary, “ … The arrival of the private automobile early in the last century marked a disruptive change in the technology of the era … the City determined that the consumer interest in the taxi industry urgently needed protection. It reacted with regulations controlling prices, licensing drivers and placing strict limits on the numbers of licenses issued.

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

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

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

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

The proceeding arose out of the Uber entities’ operations in the City of Toronto. Those operations revolve around a software application that users can download and use on their smartphones. The app provides a digital platform that enables passengers to connect with independent, third-party drivers for the purpose of requesting transportation services.

In its application, the City alleged that Uber was operating as a “taxicab broker” and/or as a “limousine service company,” as those terms are used in the City of Toronto Municipal Code. Under the Municipal Code, any person operating as a “taxicab broker” or as a “limousine service company” requires a municipally issued licence. Because Uber did not have any such licence, the City alleged that it was operating in breach of the Municipal Code and, on that basis, requested a permanent injunction prohibiting Uber from carrying on its business in Toronto.

Justice Dunphy rejected the City’s arguments. He held that, properly interpreted, neither the definition of “taxicab broker” nor that of “limousine service company” captured any of the Uber companies. A “taxicab broker” is defined as a person who “accepts requests” for transportation services to be provided by a “taxicab.” A “limousine service company” is defined as a person who “accepts calls” for transportation services to be provided by a “limousine.”

With respect to “taxicab broker,” Justice Dunphy focussed first on the use of the word “accept.” He held that none of the Uber companies actually accept requests from passengers. The only parties who “accept” requests are the drivers themselves (who are not Uber employees). That provided a sufficient reason for rejecting the City’s argument that any of Uber’s activities bring it within the definition of “taxicab broker.” Second, he noted that most of the rides provided through the Uber app are not provided in “taxicabs” (which is defined to mean municipally licensed taxicabs). Accordingly, that provided a further reason why most of the Uber services fall outside of the definition of “taxicab broker.”

With respect to “limousine service company,” Justice Dunphy noted that his reasons regarding the word “accept” applied with equal force to whether any of the Uber entities fell within the definition of “limousine service company.” He went on to provide an additional reason, which revolved around the use of the word “calls” in the definition. He held that “call” refers to a telephone call. Because the use of the Uber app does not involve telephone calls of any kind, that provided a further reason for holding that the Uber entities do not fall within the definition of “limousine service company.”

The Uber entities advanced an alternative argument. If the judge found that Uber fell within the definition either of “taxicab broker” or “limousine service company,” then Uber argued that the provisions of the Municipal Code which require a person to obtain a licence before “accepting requests” or “accepting calls” infringed the right to freedom of expression, contrary to section 2(b) of the Charter of Rights and Freedoms. Because this argument was advanced only in the alternative, Justice Dunphy held that it was not necessary to address it.

Uber Canada Inc., Uber B.V., and Rasier Operations B.V. were represented by Goodmans LLP with a team that included John Keefe, Julie Rosenthal and Ryan Cookson.

The City of Toronto was represented by City legal counsel, Michele Wright and Matthew Cornett.