An attempt by Uber Britannia Limited to force provincial hire operators outside London to contract direct with their customers has foundered in the Court of Appeal. The Court overturned a judgment of Mrs Justice Foster in July 2023, which had held that in order to operate lawfully under the Local Government (Miscellaneous Provisions) Act 1976, operators had to contract with passengers to provide the journey the subject of the booking.
The appeal was brought by two provincial operators, D.E.L.T.A. Merseyside Limited and Veezu Holdings Limited, who argued that the Act contained no language requiring the operators to contract. They said that the agency business model, under which the operator accepts the booking but the driver enters the contract with the hirer, preceded the Act and was not abolished by it. Further, the Act swept up all contracts in a single provision, section 56, which deems that contracts are with the operator, regardless of who actually contracts with the customer.
Uber argued that section 56 should be read narrowly as only dealing with cases where the operator had sub-contracted to another operator. The Court of Appeal disagreed. It noted that section 56 states in terms that it applies to every contract of hire, not just cases of sub-contracting. It cover both cases where the operator contracted and hadn’t, by producing a uniform result for every contract. Where the operator had contracted it is bound by its contract and where it hadn’t it is bound by the deemed contract.
Uber also pointed to R (United Trade Action Group Ltd) v Transport for London [2021] EWHC 3290 (Admin), in which the Divisional Court held that the Private Hire Vehicles (London) Act 1998 did require the operator to enter into the contract. The Court of Appeal did not consider that made any difference, since the 1998 Act was differently phrased and contained no deeming provision. The Court expressed no view on whether the Divisional Court was right or wrong, since it was concerned with a different Act in different terms.
While the difference between an obligation to contract and a deemed contract may seem technical, it carries potential fiscal consequences, since if operators are bound to contract, then they would be bound to charge their passengers VAT. HMRC has been consulting on what would have to happen should the appeal fail. Now the appeal has succeeded, it remains to be seen how HMRC will proceed.
HMRC’s Consultation can be found here.
The Court of Appeal refused Uber’s application for permission to appeal to the Court of Appeal.
The full judgment can be found here.
Philip Kolvin KC of 11 KBW acted for the First Appellant, D.E.L.T.A, together with Jen Coyne, instructed by Layla Barke-Jones of Aaron and Partners LLP.
