Liverpool v Kelly

This is the Judgment of the court. This appeal by the Defendant Council from a judgment of Andrew Smith J is before us by leave of the judge. He recognised that the case is of some general importance to local authorities all over the country. The case had been argued in front of him by Mr Kelly in person and Mr Kelly won. Before us Mr Vincent Fraser appeared for the Council but Mr Kelly chose not to appear or send anyone else. We were told this morning that Mr Kelly had confirmed by telephone to a representative of the Council that he did not wish to appear.

The appeal concerns the powers granted by section 70 of the Local Government (Miscellaneous Provisions) Act 1976 to local authorities to charge fees for the grant of vehicle licences. The term ‘vehicle licence’ is defined in section 80 so as to mean in relation to a hackney carriage a licence under sections 37-45 of the Town Police Clauses Act of 1847 and in relation to a private hire vehicle a licence under section 48 of the 1976 Act. For present purposes no distinction is to be drawn between hackney carriages and private hire vehicles. Both Acts require the vehicle to be licenced. The later Act circumscribes the discretion of the local authority more than the former one.

Section 48 of the 1976 Act states that:

The 1976 Act in terms, and the 1847 Act arguably by implication, obliges councils to inspect the vehicle which it is sought to licence. The inspection process costs money. Parliament has authorised authorities to charge fees so that they may reimburse themselves this cost.

The background to this appeal is this. Mr Kelly has a hackney carriage in Liverpool. The Council has given his taxi a vehicle licence but in order to obtain licences, which only last one year, he has had to pay considerable sums of money each year to the Council in respect of their inspection charges. If he had not paid he would not have got a licence. As charges rose he got increasingly upset and asserted that the Council were not entitled to charge him. He sued to get back the money which he had had to pay.

Before the judge it seems that the parties agreed that it would be useful to have a decision on various preliminary issues in relation to the power to charge. If those issues were decided against the Council then further matters remained to be tried. If they were decided in favour of the Council, then the case could be dismissed.

The judge decided that Councils could only charge those to whom they granted licences. The authority contend that they are empowered to charge all those whose vehicles they inspect whether or not a licence is eventually granted. The authority point out that a consequence of the judge’s decision is that the cost of inspecting vehicles which should not have been submitted for testing falls upon those who ensure that their vehicles are up to scratch before they submit them for testing.

Section 70 provides for the charging of fees for vehicle licences. It reads as follows:

The Judge considered that it was not lawful to charge those who had not been granted licences. His reasoning was simple and understandable. He rightly said that the section provided for the charging of fees “for the grant of …vehicle licences”. He was of the view that it followed that if no licence was granted no fee could be charged.

Mr Fraser submitted that the provision that the council may charge “for the grant” of licences merely meant that any fees charged must arise out of functions properly associated with the function of the granting of a licence and that inspection for the purpose of ascertaining whether to grant a licence was fundamental to this function.

He submitted that the phrase was ambiguous. It could be limited in the way that the judge had held but it was also capable of bearing the interpretation which he submitted was the correct one.

We agree. The phrase is ambiguous and can bear either meaning.

A number of points can at first sight be made in favour of the narrower interpretation adopted by the judge.

It seems odd to provide in subsection (2) of section 70 that there is a maximum fee “for the grant of a vehicle licence” if what was envisaged was that those not granted such a licence would still have to pay. However, we consider this point to be a false one. It is to put the cart before the horse. All that subsection (2) does is to limit the amount that may be charged under subsection (1). It does not purport to identify the circumstances in which any amount may be charged.

It at first seems odd that an unsuccessful applicant for a licence should need to bear a proportion of the costs of providing hackney carriage stands of which he will not have any need if he is refused a licence. However, there are a number of answers to this point. The first is that it only runs in relation to hackney carriages and not in relation to private hire vehicles and yet the answer to the question must be the same for both. The second is that it is not an unavoidable consequence of the wording of the section that all applicants must bear the cost of providing hackney carriage stands. It seems to us possible to charge applicants for a licence the costs of inspecting their vehicle and administrative costs involved in determining whether the licences should be granted or renewed without charging them the costs of providing hackney carriage stands. Apart from anything else subsection (6) gives the utmost flexibility.

Mr Kelly relied before the judge on Department of Transport Circular 8/86 which states in paragraph 25:

We have been persuaded that the judge was wrong in the view which he apparently held that it was wrong to charge fees to those applicants whose vehicles did not pass the test and were thus not granted a licence first time. His conclusion involves the proposition that either the Council or those who present first class vehicles for licensing must pay for the inspection costs of those who repeatedly present substandard vehicles. We cannot believe that this was intended by Parliament.

The Council has a policy of charging £30 to those who present a vehicle for inspection for an initial test. If the vehicle fails the test and is then represented for inspection a further £25 is charged. Mr Kelly has, we understand, found himself the subject of repeat charges and resents it. He submitted before the judge that it was unlawful to make these charges at the time of inspection.

The judge held that Mr Kelly was right. His reasoning however was based on the premise that those who failed the inspection were not liable to pay the inspection charge. For reasons which we have endeavoured to set out, we reject this premise and thus the conclusion. We see nothing wrong in what we are told is the widespread practice of authorities, namely, to charge for each inspection at the time that it is carried out.

The broad policy of the charging section is clear. The fees charged for the grant of licences are not to be used as a revenue raising measure. On the other hand authorities are entitled to charge sums sufficient to cover the costs of doing the three things set out in subsection (1).

Section 70(2) sets a limit to the amount of fees which may be charged. Parliament provided for an initial maximum fee of £25 in respect of each of the three types of licence there specified. However Parliament foresaw that it might become desirable in the judgment of any particular authority to depart from this figure. Parliament gave authorities the power to do this provided that opportunity was given for objection.

We see that it is arguable that subsection (2) envisaged a single cash maximum and that any variation was limited to the possibility of specifying a different cash maximum. However, even if this were the correct interpretation of the subsection it would not follow that every applicant must be charged the same amount for the processing of his application. We see nothing even arguably unlawful in a regime which provides that in respect of each application for a vehicle licence the Council will charge:

An inspection charge of £a for the first inspection and £b for each subsequent inspection, plus

A fee of £c for non inspection costs

Mr Fraser however submitted that such a proviso was unnecessary. He submitted that the authority were permitted to vary the single figure of £25 so as to provide for charging on the following basis: £x for the first inspection and £y for each subsequent inspection and £z for the cost of providing hackney carriage stands and administrative charges. This would leave the maximum total cash amount uncertain (because it would depend on the total number of inspections required before passing) but, he submitted, this created no problems unless the applicant repeatedly presented sub-standard vehicles.

We see no policy reason against establishing such a regime and see that it might well be regarded as desirable both in the interests of encouraging applicants only to present vehicles which are likely to be approved and in the interests of not forcing those who present vehicles which pass first time to pay the costs of those who present, perhaps repeatedly, sub-standard vehicles.

Subsection (2) itself sets out a maximum in respect of each of the three types of licence there set out. However it expressly provides that “in any such case” (e.g. in the case of a vehicle licence in respect of a hackney carriage) the fees chargeable shall not exceed “such other sums as the district council may … determine”. The words “in any such case” indicate that, for the purposes of construing the rest of the subsection, one must proceed case by case.

The plural “sums” is in our judgment significant. We accept that the plural could have been inserted merely to justify a second increase after a first increase. However it was not necessary to use the plural for that purpose. Even had the singular been used the Council would have been able to substitute a new maximum as they “from time to time determine”. See also in this context section 12 of the Interpretation Act 1978.

In our judgment the plural entitles a district council to specify a maximum sum in respect of the first vehicle inspection, a maximum sum in respect of a second vehicle inspection and a maximum sum in respect of administrative costs and so on, without specifying an overall maximum figure.

What is clearly important is that any proposed increase is advertised and considered in the way envisaged in subsections (3) – (5).

The Council had a regime which specified that £30 should be paid prior to and in respect of the first test and £25 prior to and in respect of each subsequent test. Once the vehicle had passed the test a further sum of £120 had to be paid for the licence. We see nothing legally objectionable in such a scheme which we understand is similar to that adopted by many other councils.

We therefore allow the appeal, set aside the order of the judge, and dismiss Mr Kelly’s action with costs here and below. We note that there was some suggestion in the court below by Mr Kelly that the Council was in some way misusing its powers even if they be construed as we have construed them. This suggestion was not pleaded by him or dealt with by the judge and we do not comment upon it save to say that it would not be right to resolve those matters in the course of the present action.