Private hire operators outside London and their customers

The Court of Appeal has allowed an appeal over whether a private hire operator outside London is required by legislation to enter into a contract as principal with a person who makes a booking for their vehicle. Gerald Gouriet KC and Michael Feeney examine the ruling and its wider impact.

Almost a year ago to the day, on 28 July 2023 the High Court sent the provincial private hire industry into a tailspin, by declaring:

In order to operate lawfully under Part II Local Government (Miscellaneous Provisions) Act 1976, a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking.

The declaration presents many difficulties, legal, practical and fiscal. If it were a correct statement of the law, many a private hire business - including some of the largest of them - would be operating unlawfully. Licensing authorities up and down the country would have to police the terms on which operators conduct their business when deciding if they are “fit and proper persons”. And if an operator is contractually obliged to provide transport services, there are VAT implications which would inevitably lead to an increase in the fares paid by the travelling passenger.

It was Uber Britannia who sought the declaration in the High Court; and it was D.E.L.T.A. Merseyside Limited (“Delta”) and Veezu Holdings Limited (“Veezu”) who unsuccessfully resisted it there. They appealed to the Court of Appeal, and in a judgment handed down on July 15th the Court allowed their appeals and discharged the declaration.

Limited permission

The judgment in DELTA Merseyside Ltd & Anor v Uber Britannia Ltd [2024] EWCA Civ 802 needs to be read in the context of the terms in which permission to appeal was given by Phillips LJ.  His Order was:

Permission is granted only in relation to the wording of the declaration made below.

His reasons for giving permission were:

Section 56 of the 1976 Act expressly deems that the operator who accepts a PHV booking (out of London) is the contracting party… It appears arguable that the wording of the declaration made by the Judge is inappropriate in the above context. There may be little or no scope for a “requirement” that an operator enter a contractual obligation when accepting a booking because it is deemed to do so by virtue of section 56.

(Underlining added)

In allowing the appeal, Lewison LJ mirrored the language of Phillips LJ’s grant of permission. At paragraph 38 he said: “In my judgment, it was not appropriate for the court to have made the declaration”; and paragraphs 31, 36 & 37 focus on examples of inappropriate wording. But elsewhere in the body of his judgment he went a great deal further. Our analysis of the decision therefore falls into two parts: (1) the inappropriate wording of the declaration; and (2) wider considerations informing the decision as a whole.

1. Inappropriate wording

The wording of the declaration – “a licensed operator who accepts a booking from a passenger” – limits the reach of the Declaration to bookings made by the intended passenger. There is no cogent reason for Parliament to have so legislated. In its skeleton argument, Veezu pointed out that operators frequently accept bookings from persons or entities who are not the intended passengers (for example, hospital trusts on behalf of patients, companies on behalf of employees/clients, parents on behalf of children), and criticised the wording of the declaration as an inappropriate ‘catch-all’ of every kind of booking of a private hire vehicle that an operator may lawfully accept – irrespective of who makes the booking, whether or not the booking specifies a journey, and whether or not a journey even takes place.

Lewision LJ agreed. In paragraph 36 he said –

“The circumstances in which a booking might be made are potentially very varied. The person who makes the booking may do so on behalf of someone else without incurring any contractual liability… Moreover, a booking may not necessarily specify any journey; or even be made for a journey at all.  A vehicle may be booked simply to be on stand-by. It is thus plain (and indeed is now common ground) that the declaration made by the judge is inappropriate. It assumes that the booking is made by “the passenger”, which is not necessarily the case, and it assumes that the contract is one “to provide the journey” which is also not necessarily the case.”

Veezu further submitted that the language of the declaration (“In order to operate lawfully” and “a licensed operator… is required”) inappropriately suggests there is or may be criminal liability for non-compliance with the supposed statutory obligation. If the 1976 Act had made it unlawful to operate outside the terms of the declaration one would have expected to see a corresponding offence, such as ‘failure to enter as principal into a contractual obligation with the passenger, etc.’.  Lewison LJ put it this way:

“In addition, the declaration as made stated that the operator was required to contract in order to operate “lawfully”. The implication from this (although not spelled out) is that if the operator did not enter into a contract, it would be committing a criminal offence, even though there is no statutory provision that creates such an offence.”

Wider considerations

Section 56(1)

It is instructive to cite paragraph 22 of the judgment in full. It concerns section 56(1) of the 1976 Act, which provides –

For the purposes of this Part of this Act every contract for the hire of a private hire vehicle licensed under this Part of this Act shall be deemed to be made with the operator who accepted the booking for that vehicle whether or not he himself provided the vehicle.

The judge’s observations on the subsection fall into six propositions, regarding each of which he makes supplementary comments. For the purposes of analysis, we have broken the paragraph down as follows. (The numbering and letters are ours, the words are the judge’s.)

1. The first, and to my mind the most important point to note about section 56 (1) is that it does not apply to the invitation or making of bookings. It applies only to the ‘contract of hire’.

a. The statutory language differentiates between accepting the booking on the one hand and making a contract of hire on the other.

b. The contract of hire must, in my judgment, refer to a contract under which the hirer agrees to give consideration for their transport in a private hire vehicle.

c. That person may or may not be the person who made the booking.

2. The second point is that section 56 (1) is not prescriptive about when the contract of hire is made.

3. The third point is that the contract of hire is deemed to be made with the operator ‘who accepted the booking’ whether or not he provided the vehicle. Thus, in my judgment if a contract of hire is made after the booking is accepted (for instance when the driver arrives to pick up a passenger) that contract of hire is deemed to be made with the operator who accepted the booking.

4. Fourth, section 56 (1) does not prohibit the making of a contract of hire by a person other than the operator who accepted the booking.

a. Nor does it say that the operator who accepted the booking is the only party to the deemed contract of hire (other than the hirer).

b. All that it says is that as and when a contract of hire comes into existence, that contract of hire is deemed to be made with the operator who accepted the booking.

5. Fifth, the deeming provision applies for ‘the purposes of this Part of this Act’;

a. in other words for the purposes of the regulatory scheme and not for any other purpose.

b. If section 56 (1) were to require an operator to enter into a contract in the real world with the hirer, that contract would have an existence beyond the regulatory scheme and would thus go beyond the regulatory purpose.

6. Finally, the deeming provision applies to ‘every’ contract for hire, not to some sub-set of such contracts.

Veezu had submitted that an operator’s acceptance of a booking for a private hire vehicle is not to be equated with any subsequent contract for the hire of that vehicle – a contract which is often made between the passenger and driver without reference-back to the operator. The Court of Appeal’s agreement (point 1 above) is of fundamental importance, as is its recognition in point 3 that a contract of hire may be made with the driver of the vehicle after acceptance of the booking. In the Uber London case (Uber London v Transport for London [2021] EWHC 3290 (Admin)), Males LJ said that “the distinction … between the acceptance of a booking and the undertaking of an obligation to carry out the journey is illusory.” We doubt if that condemnation - of what in our opinion is a very real distinction - can survive the Court of Appeal’s judgment.

In the High Court, Charles Holland (instructed by Sefton Metropolitan Borough Council) made powerful submissions along the lines of point 5. It may be some consolation to him that although Mrs. Justice Foster was not persuaded by them, the Court of Appeal and he seem to be ‘ad idem’.

Passenger Safety

Uber urged ‘passenger safety’ in support of the declaration made by the High Court. They submitted that if there were no contract between the operator and the person who made the booking at the time when the booking was made, the putative passenger would have no redress if, for example, a driver failed to arrive at the booked time and place for pick up. Lewison LJ gave that submission short shrift. He said it was “an over-expansive view of passenger safety”. He cited the well-known judgment of Russell LJ in c St Albans DC v Taylor [1991] RTR 400:

“The underlying purpose of Part II is clear; it is to provide protection to members of the public who wish to be conveyed as passengers in a motor car provided by a private hire organisation with a driver. The vehicle has to be licensed before it can be so used and is subject to periodical inspection by the licensing authority to ensure its continuing suitability and safety – see section 48. The driver has to be licensed by the same authority and cannot be licensed without the requisite experience – see section 51.”

Lewison LJ continued –

“In other words, passenger safety is ensured by the suitability of the vehicle and the fitness and competence of the driver. As Mr Kolvin KC, for D.E.L.T.A. put it: if you are getting into a vehicle you need to know that it is safe and that the driver is fit and competent.

He again stressed the regulatory nature of the licensing regime and said that concerns about drivers failing to arrive can be addressed by the licensing authority attaching a suitable condition to the operator’s licence. He pointed out that that is precisely what Sefton have done – viz.:

When an Operator accepts a hiring they shall ensure that a Sefton licensed Private Hire Vehicle or Hackney Carriage attends at the appointed place and as near to the appointed time as is possible.

Failure to comply with that condition could, he said, lead to suspension or even revocation of the operator’s licence.

Conclusions

The ‘elephant in the room’ is the declaration made by the Divisional Court in the Uber London case. It is in near-identical terms to the declaration which the Court of Appeal has discharged and applies only to private hire bookings accepted in London.

In its application for permission to take this week’s Court of Appeal decision to the Supreme Court, Uber complained that the responsibilities of operators of private hire vehicles are now “materially different in London as [sic] they are in the rest of the UK (which parts of the country are not hermetically sealed from the other)”. Whether alignment would be better achieved by reversing the Court of Appeal decision or by reversing the Divisional Court decision will no doubt fuel academic discussion until a definitive ruling is given by the courts. In the meantime, we must content ourselves with the somewhat Delphic observation by Lewison LJ:

“I express no view on whether the Divisional Court was right or wrong. Suffice it to say that we are dealing with a different Act in different terms.”

Gerald Gouriet KC and Michael Feeney are barristers at Francis Taylor Building. Gerald Gouriet KC and Michael Feeney appeared for Veezu Holdings Limited in the Court of Appeal.