Delta Merseyside Ltd & Anor, R (On the Application Of) v Knowsley Metropolitan Borough Council

I will call the claimants in these two judicial review claims "Uber" and "Delta". They are providers of private hire vehicles (PHVs). The defendant is the local authority for the controlled district, as it is known, of Knowsley in Merseyside, which is one of five such districts in the Merseyside area. I will call the defendant "KMBC". It has, like all local authorities in England except Plymouth City Council, passed a resolution adopting the provisions relating to PHVs in Part II of the Local Government (Miscellaneous Provisions) Act 1976 (the 1976 Act), applying those provisions in its area. Uber and Delta are unhappy about a policy document adopted by KMBC in March 2017 and, in these two claims brought by permission of His Honour Judge Davies, seek an order quashing that document.

The broad effect of the policy is to require applicants for PHV driver's licences to commit themselves to driving their PHVs predominantly in Knowsley. The policy was adopted to meet a concern that PHV drivers were applying for licences from KMBC without any intention of doing their PHV driving there. Uber and Delta both hold operators’ licences issued by KMBC. They also hold such licences issued by other local authorities. In Uber's case, bookings are made using an appropriate on a smart phone or other device. In Delta's case, it takes bookings in that way and also by telephone. The customers are picked up by a PHV driver, licensed as such by KMBC, in a PHV vehicle also licensed by KMBC. The pick-up and drop-off may be within or outside the area of Knowsley, the controlled district for which KMBC is the local authority.

In 2016, KMBC noticed an increase in the number of applications for PHV driver's licences, which was putting a strain on its ability to process them. On 6 January 2017, KMBC emailed taxi and PHV companies saying it was suspending consideration of driver's licence applications. On 24 January 2017, Mr Paul McLaughlin of Delta complained about the suspension in a detailed letter, which included, in an attempt to negotiate a way forward, the observation at paragraph 29 of the letter:

On 30 January 2017, KMBC lifted the suspension but changed its practice by requiring applicants to sign a declaration in the following terms:

The new application pack, from which the declaration just quoted comes, also contained a summary of KMBC's policy with a hyperlink to the full policy. The summary included:

On or about 8 February 2017, KMBC started a four week consultation, the purpose of which was announced in an email to operators in associations active in the local PHV and taxi transport industry. It included the following:

Delta continued to complain during the consultation process and instructed solicitors. The issue came before KMBC's licensing committee on 20 March 2017. The recommendation was that the council should adopt a new "Appendix A" to the relevant officer's report. Appendix A, which I will call "the policy", is document which Uber and Delta ask this court to quash or declare unlawful. It includes the following relevant features. For new applications, as "guidance" to applicants, it stated:

Further on, the document stated at (vi):

There were further passages dealing with renewals and revocation of licences in similar vein, through which I need not go in detail. There was then mention of "exceptional circumstances", and the document stated that:

At the end of the document, the reasons for the policy were set out and these included reference to the statutory regime, including the 1976 Act, and also to:

I should explain that the reference to the Newcastle case was to the judgment of Christopher Symons QC (sitting as a Deputy Judge of the High Court) in R (Newcastle City Council) v Berwick-upon-Tweed Borough Council [2009] RTR 34. Taxi drivers, i.e. drivers of hackney carriages not PHVs, were licensed to apply for hire in Berwick only; they were not licensed to ply for hire in Newcastle. They went up to Newcastle and took prebooked customers there. They were not caught by the 1976 Act because their vehicles were not PHVs. A vehicle is either a hackney carriage or a PHV, it cannot be both at the same time.

Their work carrying passengers therefore fell between the two regimes and was unregulated. Newcastle argued unsuccessfully that it was unlawful for Berwick to license the proprietors of hackney carriages unless it was satisfied that their drivers did not intend to exploit this loophole. However, the judge did say that Berwick had a discretion under section 37 of the Town Police Clauses Act 1847 whether to issue a licence to the proprietor and that it should not exercise that discretion in a case where the authority knew that the driver intended to operate unregulated outside the area covered by the licence.

Returning to this case, on 20 March 2017 the committee debated the issue. I have a note prepared by Uber of the discussions. It was made clear at the meeting that the issue the new policy was designed to meet was one that related to Uber only and not to other operators such as Delta. The issue was, according to the note, that KMBC were only interested in "targeting the drivers who were coming to Knowsley and then never darkening our doorstep again". There was also some discussion at the meeting of exactly what was meant by "predominantly", referring to drivers having to do their driving "predominantly in Knowsley".

The committee decided to adopt the policy, which was described in the minutes as an amendment to the main current hackney carriage and private hire driver policy. The amendment to the policy which KMBC resolved to adopt was, "approved for all new [and] existing private hire and hackney carriage drivers licensed in Knowsley".

The current declaration used by KMBC which applicants for licences are required to sign includes the following:

The statutory scheme begins with the Town Police Clauses Act 1847. It is not necessary to say much about it. Section 37 gave certain commissioners power to license "hackney coaches or carriages of any kind or description adapted to the carriage of persons". Hackney carriages were defined, and are still defined, in section 38. I need only read part of the definition:

That is the essential part of the legal definition of what are now commonly known as taxis. Both the hackney carriage and the driver must be licensed on pain of committing an offence. There is no separate "operator" required to be licensed. A hundred and twenty-nine years later, Parliament decided to regulate the growing minicab trade by enacting Part II of the 1976 Act. It applies everywhere in England except in Plymouth. It deals with PHVs, which differ from hackney carriages in that they must have an "operator" and cannot ply for hire but only take pre-booked passengers. The following are the main provisions for present purposes.

A PHV is a motor vehicle other than a hackney carriage or a public service vehicle (commonly known as a bus) "constructed or adapted to seat fewer than nine passengers" and "provided for hire with the services of a driver for the purpose of carrying passengers" (section 80(1)). By section 46, except as authorised by the 1976 Act it is an offence to use or permit use in a controlled district of a PHV as such, unless the vehicle is licensed, the driver is licensed and the operator is licensed.

Since three separate licences are required to avoid committing an offence, the regime was referred to before me in biblical vein as requiring a "trinity" of licences. It is fundamental to the statutory regime that the three licences must all be issued by the same authority. Where a vehicle is used in a controlled district, an offence is committed - subject to an exception to which I am coming - unless the three licences are all issued by the authority for the controlled district where the PHV is being used. Although section 46 does not say that expressly, it is agreed, and I accept, that such is the effect of section 46 read together with section 80(2).

The offences created by section 46 are, however, not committed if the driver and vehicle are licensed by the authority for a different controlled district (see section 75(2)). This exemption has the effect of creating what has been described as the "right to roam", i.e. the liberty to pick up and drop off passengers in districts other than that of the authority which issued the licences. Indeed, PHVs frequently stray from the controlled district that licensed them; and some drivers in PHVs may rarely enter it, a matter of concern to KMBC.

The authority for a controlled district may license a PHV but only if satisfied it is, broadly speaking, safe and comfortable (section 48). This provision creates a discretion. Conditions may be, and commonly are, attached to the licence, such as a requirement to display signage. The proprietor of a PHV must make the vehicle available for inspection and testing within the area of the licensing authority on up to three occasions within any 12 month period and must keep the authority informed of where the vehicle is kept (section 50). It is an offence not to comply with these obligations. Under section 68, an authorised officer of the authority or a constable has power to inspect and test a vehicle at other times, to ascertain its fitness.

The provision at the heart of this case is section 51. The authority shall, on receipt of an application from any person for the grant to that person of a licence to drive a PHV, grant the licence, provided that it shall not do so unless satisfied that the applicant is a "fit and proper" person to hold a driver's licence (section 51(1)(a)(i)) and (at (ii)) is not disqualified from holding one by the person's immigration status. The authority "may attach to the grant of a licence under this section such conditions as they may consider reasonably necessary" (section 51(2)). The licence lasts for up to three years (section 53(1)(a)). A badge must be issued to the licence holder, who must wear it (section 54).

PHVs are hired out by their operators. To "operate" means "in the course of business to make provision for the invitation or acceptance of bookings for a [PHV]" (section 80(1)). By section 46(1)(d) it is an offence to operate any vehicle as a PHV within a controlled district without having a current "operator's licence" under section 55. The wording of section 55 dealing with operator's licences for PHVs is materially the same as that of section 51 dealing with driver's licences for PHVs. There is no exemption from committing that offence under section 46(1)(d), either in section 75(2) or any other provision.

The operator is the party deemed to contract with the passenger. It must keep a record giving particulars of bookings in accordance with the condition attached to its operator's licence and must keep such records as the council requires (section 56). The authority may require applicants for licences to provide such information to support the application as the authority may reasonably require (section 57). Sections 60 to 62 deal with suspension and revocation of licences on certain grounds, including "reasonable cause". There is a right of appeal to a magistrates' court. It is unnecessary to say more about those provisions for present purposes.

The provisions concerning operators are difficult. I need not attempt a full exposition of the law. The effect of those provisions has been considered in a number of cases. One clear and useful proposition is that uttered by Latham LJ in Shanks v North Tyneside Borough Council [2001] LLR 706, at paragraph 26:

Blue Line Taxis (Newcastle) Limited v Newcastle City Council [2013] RTR 8 concerned the validity of a condition that a Newcastle-licensed operator must use a different telephone number from its sister company licensed in North Tyneside. Upholding the validity of the condition, Hickinbottom J, as he then was, referred at paragraph 8 to the private hire regime being "inherently local in nature". He said the operation of a licensed operator is "geographically fixed in the operator's licensing area: that area must be where the operator's premises are located, bookings made and from which vehicles are despatched"; and "[i]t is an offence for operators to operate outside that licensing area".

The authorities there cited include Shanks (cited above), Windsor and Maidenhead Royal Borough Council v Khan [1994] RTR 87 and Dittah v Birmingham City Council [1993] RTR 356. Without, I confess, complete conviction, I will assume that the law is as set out in a note from the Department of Transport endorsed by the Divisional Court in the course of Kennedy J's judgment in Dittah at 363D-E:

My hesitation in accepting Hickinbottom J's propositions at paragraphs 8 and 64 in Blue Line Taxis arises from my inability to find in the statutory provisions any requirement that the operator must have a physical presence in the area of the licensing authority or, indeed, that it must have conventional "premises" at all. Nowadays, it may provide its operation through a server that could be located anywhere. Indeed, in the present case I was told that both Uber and Delta have a condition attached to their operator's licence that they must have premises in Knowsley's area and therefore do. That condition would be unnecessary if the statutory provisions already compel that requirement.

I also have difficulty in reconciling the "inherently local" character of the licensing regime with Latham LJ's correct proposition in Shanks that the operator can use "vehicles and drivers for journeys which ultimately have no connection with the area in which they are licensed". That area bears an uncomfortable resemblance to a "flag of convenience" state in which a ship owner chooses to register its ship because of a preference for that state's regulatory regime.

It is not necessary for me in this case to attempt a resolution of these difficult and at times seemingly contradictory propositions, but in the light of them I do well understand, and have sympathy with, the concern of KMBC to preserve elusive local control over the operator's drivers and the vehicles which it licenses. This explains the reference in the policy document to the problems thrown up by the hackney carriage case involving Newcastle and Berwick, mentioned above.

With that introduction, I come to the grounds of challenge. The first ground is that the policy was contrary to the 1976 Act because it provided that KMBC would normally treat an absence of intention to work predominantly in Knowsley as showing that a driver was not a fit and proper person to hold a licence.

That, argued Uber and Delta, is a misdirection. If someone is a fit and proper person to hold a licence, that conclusion cannot be altered by a lifestyle choice of that person whether to work predominantly out of Knowsley or not. The "fit and proper person" test, they submitted, though arising in a variety of statutory contexts, is concerned with the personal qualities and professional qualifications of the individual, not with the intended predominant work location of that person, which has nothing to do with his or her personal qualities.

The obligation on KMBC under section 51, Uber and Delta submitted, is to grant a licence if satisfied that the driver is a fit and proper person to hold one and, conversely, not to grant one unless so satisfied. Contrary to KMBC's arguments, they submitted, there is no discretion to withhold a licence from a person found to be fit and proper. It is unlawful, the claimants argue, to treat as relevant to fitness to hold a licence whether the holder is willing to sign up to a commitment to work mainly out of Knowsley.

In support of that argument, Uber and Delta rely on cases in which the personal qualities and professional qualifications reasonably required to perform the task in question have been emphasised: see McCool v Rushcliffe Borough Council [1998] 3 All ER 889, DC, per Lord Bingham CJ at 891(f); followed by Silber J in Leeds City Council v Hussain [2002] EWHC 1145 (Admin) at paragraphs 13-16 and 24-25; and R v Warrington Crown Court, ex p RBNB [2002] 1 WLR 1954, per Lord Bingham at paragraph 9.

They contend that the policy is an attempt to exert improper pressure on drivers to behave in the way KMBC wishes them to behave, in such manner as to undermine and defeat their lawful "right to roam" which is inherent in the statutory scheme; in the same way as the government had attempted unlawfully to deter lawful behaviour in Congreve v Home Office [1976] QB 629, in the different context of renewing television licences.

Mr Gerald Gouriet QC, for Delta, drew a distinction between generic licences given to an individual permitting an activity, such as a driver's or operator's licence; and specific licences, applicable to particular things such as a vehicle, or premises, which must be shown to be in good condition, or appropriate for their intended use. He submitted that the fit and proper person test applies to generic licences and that its generic quality could not be curtailed by reference to a criterion such as location, which may be apt for licences that are specific to a particular situation.

Mr Leo Charalambides, for KMBC, countered those arguments as follows. He pointed out that Lord Bingham in the citations relied on by Uber and Delta, had left open the possibility of other features being relevant when applying a "fit and proper person" test, going beyond the personal and professional characteristics of the individual. It is an expression which "takes its colour from the context in which it is used" (per Lord Bingham at paragraph 9 in the Warrington Crown Court case. Here, Mr Charalambides pointed out that context included a statutory right to seek information from the licensed applicant (see section 57 of the 1976 Act).

He referred to cases in which, albeit in the different context of alcohol licensing, matters other than the qualities of the individual had been properly taken into account. His starting point was that the central premise of the 1976 Act was localised governance, citing the judgment of Hickinbottom J in Blue Line Taxis at paragraph 64. In oral argument, he accepted my suggestion that his case was that a fit and proper person was someone who was visible to the local authority; thus, the location or predominant location of that person was relevant to whether he or she is fit to be licensed as a PHV driver.

Mr Charalambides also relied on Wilkie J's decision in Darlington Borough Council v Kaye [2005] RTR 14, which establishes that a local authority may adopt a policy for the purpose of measuring whether a person is a fit and proper person to hold a hackney carriage or PHV licence. Such a policy could include consideration of matters such as the applicant's standard of driving (see paragraph 23 of the judgment).

He also relied on two other cases. In one, R v Newington Licensing Justices [1948] 1 KB 681, the issue was whether the justices had had power to compel the production of a mortgage deed of certain licensed premises. The issue before the justices had been, as Humphries J put it at 688, "[w]hether the transferee is a fit and proper person to hold a particular licence". Questions relating to the tenure of the premises could be relevant to that issue, it was held.

In the other case, R v Preston Crown Court, ex p Cooper (unreported but cited by Lord Bingham in the Warrington Crown Court case, at paragraph 14) a Divisional Court had dismissed a judicial review application where the Crown Court had found that the licensed applicant was to be a "stooge" or front for unsuitable persons who would, in reality, control the company which was the lessee of the premises to which the licence related.

In my judgment, Uber and Delta's submissions are correct and KMBC is wrong. I agree with their contention that it is wrong to describe KMBC as having any discretion in the matter of determining applications for driver's licences for PHVs. It is unfortunately part of judicial life that one frequently hears the word "discretion" lazily misused. Here, the issue of the licence is a mandatory consequence of a finding that an applicant is a fit and proper person to hold the licence.

I do not accept that the authorities relied on by KMBC justify the proposition that a person may be fit and proper to hold a licence if willing to sign up to work predominantly from Knowsley, yet unfit to hold a licence if unwilling to do so. I accept that the phrase "fit and proper person" in this context refers to the personal characteristics and professional qualifications of the driver and not to his or her work preferences and visibility.

The cases cited from other contexts do not, in my judgment, support KMBC's argument. In the Newington Justices case, the issue related to fitness to run particular premises. The licence was, in Mr Gouriet's classification, specific not generic. A driver's licence in the present context is generic, not specific; it is a licence to drive any PHV provided the PHV and its operator are also licensed by the authority for the same controlled district.

I do not think a driver with an impeccable driving record can be fit to hold a licence if working in Knowsley, yet become unfit if he or she happens to move to Cornwall. If you are fit and proper in Gateshead, you are fit and proper in Minehead. In none of the cases cited to me involving licences issued to drivers of hackney carriages or PHVs, has a court ever held that issues not personal to the applicant, such as location, are relevant to determine fitness to hold a licence to drive any licensed PHV. The seminal work in the field, Button on Taxis, Licensing Law and Practice (4^th edition), contains no reference to any such case (relevant extracts at pages 526-572 and 752-756).

The position is obviously different if a person is applying for a licence to run specific premises. The premises may be relevant as well as the person. That is not the position in the case of an applicant for a PHV licence: the licence holder can work in any controlled district provided the "trinity of licences" issued by the same authority is in place. I conclude that KMBC's policy does indeed attempt to curtail the freedom of a PHV driver lawfully to do so.

It follows that the first ground of challenge is good and the policy document must be quashed. It was agreed that if the policy was bad in relation to first time applicants, it must also necessarily fall in so far as it applies to cases of renewal and revocation. It is therefore appropriate to quash the whole of the policy document, including the parts dealing with renewals and revocation.

The second ground of challenge advanced by Delta is that the intended locations where the licence applicant intends to drive the PHV is an immaterial consideration which was wrongly taken into account. That proposition is correct but adds nothing to the first ground of challenge and would naturally stand or fall with it.

The third ground of challenge, again advanced by Delta, is that the policy is too vague to be enforceable. It is argued by Mr Gouriet that the policy does not inform the licence applicant whether the predominance of Knowsley as the intended work location is to be measured by mileage, or by time, or a combination of both and whether a test of predominance is satisfied by a greater than 50 per cent presence in KMBC's area or something more than that.

There is evidence before me that drivers have not found the policy easy to understand, and I have sympathy with that. Mr Charalambides accepted that the drafting, which I add was not his responsibility, left something to be desired. On the other hand, as he pointed out, Delta itself appeared to have no difficulty with the test of predominance, since it offered to submit to a licence condition importing that same test. If the case turned upon the point, I would have been reluctant to hold that the policy was void for uncertainty. In the event, it is not necessary to decide the issue.

The same is true of Delta's fourth and last ground, which is that the policy infringes the freedom of establishment right enshrined in article 49 of the Treaty on the Functioning of the European Union (TFEU). As is well known, restrictions on that right must be proportionate, i.e. they must pursue a legitimate aim and adopt a suitable measure for the purpose of achieving that aim, and the measure must be necessary to achieve it, such that it could not be attained by a less onerous method.

A recent example of case where those principles were applied may be found in Mitting J’s decision in R (Uber London Limited) v Transport for London [2017] EWHC 435 (Admin); see the judgment at paragraph 16, citing R (Lumsdon) v Legal Services Board [2016] AC 697 in the judgments of Lords Reed and Toulson JJSC.

I think it is strongly arguable that the policy imposes a disproportionate burden on licence applicants, since they would have to forego their freedom to base themselves predominantly outside Knowsley and, as I have said, the scheme of the 1976 Act permits that. But it is not necessary to decide the proportionality issue, since the reason the measure is said to be disproportionate is essentially the same as the reason why it is illegal, as I have decided in considering the first ground of challenge.

For those reasons, I will quash the policy. I would add by way of postscript that there was some discussion during oral argument to test the limits of the parties' positions about whether KMBC could lawfully impose a condition on the licences of PHV drivers or their operators requiring the drivers to work predominantly out of Knowsley, or some similar condition replicating, or largely replicating, the effect of the policy.

I need express no view on this, since it is not necessary for the purpose of deciding this case and could become a live issue in future litigation. Mr Kolvin, for Uber, submitted that any such condition would offend against the Padfield principle because it would be an attempt to curtail the "right to roam" inherent in the 1976 Act. Mr Gouriet for Delta was prepared to accept my suggestion that an appropriately narrow clearly defined and proportionate geographical restriction might be lawful.

I refrain from expressing any view on the point, but I am fortified in my conclusion in this case by the consideration that, in principle, a condition on a licence could be imposed which, if otherwise lawful, would require a fit and proper person who is a licence holder to abide by whatever restrictions are contained within the condition that are considered reasonably necessary to meet any perceived erosion of localism in the governance of PHV licensing.