NEWS
15.07.2024 - DELTA TAXIS OVERTURNS LANDMARK "UBER vs SEFTON COUNCIL" JUDGEMENT.
In what is being hailed as the most significant and consequential judgement to date in the history of Private Hire regulation, Delta Taxis, a traditional family business from Merseyside, have stood up to and defeated a multi-billion-dollar Silicon Valley giant in the Court of Appeal. How did such a David and Goliath engagement come about and what exactly was at stake for the industry and its consumers?
Ever since its launch, market disruptors Uber have repeatedly fallen foul of regulators all over the world. When they first arrived in Europe, claiming to be no more than a digital service beyond the scope of licensing or regulation, the European Court of Justice ruled otherwise, classifying Uber’s particular business model as “a service in the field of transport” under EU law.
This very same business model led to trouble here in the UK where between 2016 and 2020 Uber spent a fortune arguing from the Employment Tribunal all the way up to the Supreme Court that their workers were self-employed. The unequivocal “Worker Status” ruling was a direct result of the unique way in which Uber’s business model differs from traditional Private Hire Agencies.
In stark contrast to the vast majority of legacy operators, The Supreme Court focussed on how Uber controlled not only the journey price but the route their drivers should take. Uber collected the full payment for each journey direct from “riders” before taking its charges and then passing on a smaller fee to whichever driver they appointed to carry out the journey on their behalf. It was reported that they repeatedly penalised drivers for refusing to accept bookings they might have been offered, they paid signing-on bonuses and performance related remuneration to drivers according to ratings submitted by passengers and they refused their drivers the well-established self-employed “right of substitution”.
At the Supreme Court Uber argued that they were acting as an agent for each driver. It was at this critical juncture (and whilst affirming that Uber’s model engaged worker drivers), that Lord Leggatt suggested, albeit without finally deciding the point, that in order to comply with the 1998 Act (which governs all London licensed Private Hire operations) Uber would have to accept a contractual obligation with the passenger as a principal to carry out each booking.
Uber attempted to challenge Lord Leggatt’s comment asking the High Court for a declaration that they were NOT acting as principal. Their gamble however backfired, spectacularly, with the judge finding that the wording of London’s 1998 Act did require all London operators to contract with passengers as principal (i.e. preventing the agency model from being used in London).
Finding themselves stuck with worker status (meaning they were supplying the service of private hire to passengers), which in London required them to contract with passengers as principal, Uber were forced to add VAT to their journeys and change their terms and conditions. Uber then committed what Lord Justice Lewis described as “a three point turn” seeking to force the declaration it rallied against onto all private hire operators in England and Wales (outside of London) using genuine agency models and arguing they were somehow operating unlawfully. Despite there being no dispute between operators and the local authority and despite Uber saying it would be unaffected by the declaration, Uber pursued the case against Sefton Council, (although Sefton remained neutral), seeking a court declaration seemingly criminalising the activities of all their commercial competitors (who use the agency model) here within Sefton, and by extension every other competitor licensed by the same regime throughout the rest of England and Wales.
The only opposition to the case was from those who chose to get involved (what lawyers call “intervenors” in the case). DELTA stood up to argue that licensing legislation should have no bearing on contract law, employment law or tax law. There is no crossover. Delta operated the exact same agency model for 8 years prior to legislation (which was introduced in 1976) and for the 48 years since. The Act did not change our business model, nor did it criminalise it. DELTA pointed out the Act was introduced so as to regulate for safe, comfortable, transport, not to dictate how operators should structure their business or arrange their contracts.
Uber’s argument improperly lumped together the booking process for a private hire vehicle with the journey arising from that booking. Whilst this could well be the case for principal business models such as Uber when supplying both the booking process as well as the journey itself, it has never been the case for legitimate agency models like Delta Taxis, where we handle just the booking process so that independent, self-employed drivers can supply each journey within a separate contract. Nothing whatsoever within the 1976 Act changes this fact.
The devastating impact, had Uber got away with this, would have been immeasurable. Apart from the immediate hiking up of all nationwide private hire taxi fares by 20% due to the VAT implications of being forced to act as principal for other people’s journeys, operators would have had to completely overhaul their business models so as to be capable of monitoring and accounting for each penny paid to every driver. Such upheaval would most likely have been beyond the means of many small businesses, resulting in their premature exit from the industry. Larger operators would need to rely more on smartphones Apps to take and track bookings, morphing into just another version of Uber, where telephone bookings and cash, already under risk of annihilation, were essentially phased out in favour of easily tracked card payments.
Fortunately, the industry and the wider public it serves have been rescued from this dystopian future with the Court of Appeal agreeing with DELTA that the agency model is not outlawed by the legislation and the consequence of VAT on all private hire fares therefore doesn’t follow.
We wholeheartedly thank the fellow operators who have continued to support Delta, our Legal Team headed by Layla Barke-Jones at Aaron and Partners, and of course Philip Kolvin KC whose elegant and persuasive advocacy provided clarity and simplicity to the judiciary in our hour of need.
Delta Merseyside Ltd
The salient points from today's judgement are as follows :-
Para 22 – acknowledges that the contract for hire and booking are separate things and that the contract for hire, can arise at different times and can be with different people/entities. In particular this sums up the position - “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. "
Para 29 – highlights that the Act does all it needs to to ensure safety.
Para 30 – All of Uber’s eggs are in the s55A(2) basket (that’s the Deregulation Act 2015 addition) – this is “too slender a peg” on which to hang the entire argument.
Para 31 – there is no need for a contract between the operator and passenger to be required, there is no need for a contract in the real world because there is a deemed one.
Para 37 – the Court should be very cautious indeed in indulging requests for a declaration where there is no real dispute (the licensing authorities were not calling for this).
Click to view full judgement Here
Click to view Hearing session 1
Click to view Hearing session 2
In what is being hailed as the most significant and consequential judgement to date in the history of Private Hire regulation, Delta Taxis, a traditional family business from Merseyside, have stood up to and defeated a multi-billion-dollar Silicon Valley giant in the Court of Appeal. How did such a David and Goliath engagement come about and what exactly was at stake for the industry and its consumers?
Ever since its launch, market disruptors Uber have repeatedly fallen foul of regulators all over the world. When they first arrived in Europe, claiming to be no more than a digital service beyond the scope of licensing or regulation, the European Court of Justice ruled otherwise, classifying Uber’s particular business model as “a service in the field of transport” under EU law.
This very same business model led to trouble here in the UK where between 2016 and 2020 Uber spent a fortune arguing from the Employment Tribunal all the way up to the Supreme Court that their workers were self-employed. The unequivocal “Worker Status” ruling was a direct result of the unique way in which Uber’s business model differs from traditional Private Hire Agencies.
In stark contrast to the vast majority of legacy operators, The Supreme Court focussed on how Uber controlled not only the journey price but the route their drivers should take. Uber collected the full payment for each journey direct from “riders” before taking its charges and then passing on a smaller fee to whichever driver they appointed to carry out the journey on their behalf. It was reported that they repeatedly penalised drivers for refusing to accept bookings they might have been offered, they paid signing-on bonuses and performance related remuneration to drivers according to ratings submitted by passengers and they refused their drivers the well-established self-employed “right of substitution”.
At the Supreme Court Uber argued that they were acting as an agent for each driver. It was at this critical juncture (and whilst affirming that Uber’s model engaged worker drivers), that Lord Leggatt suggested, albeit without finally deciding the point, that in order to comply with the 1998 Act (which governs all London licensed Private Hire operations) Uber would have to accept a contractual obligation with the passenger as a principal to carry out each booking.
Uber attempted to challenge Lord Leggatt’s comment asking the High Court for a declaration that they were NOT acting as principal. Their gamble however backfired, spectacularly, with the judge finding that the wording of London’s 1998 Act did require all London operators to contract with passengers as principal (i.e. preventing the agency model from being used in London).
Finding themselves stuck with worker status (meaning they were supplying the service of private hire to passengers), which in London required them to contract with passengers as principal, Uber were forced to add VAT to their journeys and change their terms and conditions. Uber then committed what Lord Justice Lewis described as “a three point turn” seeking to force the declaration it rallied against onto all private hire operators in England and Wales (outside of London) using genuine agency models and arguing they were somehow operating unlawfully. Despite there being no dispute between operators and the local authority and despite Uber saying it would be unaffected by the declaration, Uber pursued the case against Sefton Council, (although Sefton remained neutral), seeking a court declaration seemingly criminalising the activities of all their commercial competitors (who use the agency model) here within Sefton, and by extension every other competitor licensed by the same regime throughout the rest of England and Wales.
The only opposition to the case was from those who chose to get involved (what lawyers call “intervenors” in the case). DELTA stood up to argue that licensing legislation should have no bearing on contract law, employment law or tax law. There is no crossover. Delta operated the exact same agency model for 8 years prior to legislation (which was introduced in 1976) and for the 48 years since. The Act did not change our business model, nor did it criminalise it. DELTA pointed out the Act was introduced so as to regulate for safe, comfortable, transport, not to dictate how operators should structure their business or arrange their contracts.
Uber’s argument improperly lumped together the booking process for a private hire vehicle with the journey arising from that booking. Whilst this could well be the case for principal business models such as Uber when supplying both the booking process as well as the journey itself, it has never been the case for legitimate agency models like Delta Taxis, where we handle just the booking process so that independent, self-employed drivers can supply each journey within a separate contract. Nothing whatsoever within the 1976 Act changes this fact.
The devastating impact, had Uber got away with this, would have been immeasurable. Apart from the immediate hiking up of all nationwide private hire taxi fares by 20% due to the VAT implications of being forced to act as principal for other people’s journeys, operators would have had to completely overhaul their business models so as to be capable of monitoring and accounting for each penny paid to every driver. Such upheaval would most likely have been beyond the means of many small businesses, resulting in their premature exit from the industry. Larger operators would need to rely more on smartphones Apps to take and track bookings, morphing into just another version of Uber, where telephone bookings and cash, already under risk of annihilation, were essentially phased out in favour of easily tracked card payments.
Fortunately, the industry and the wider public it serves have been rescued from this dystopian future with the Court of Appeal agreeing with DELTA that the agency model is not outlawed by the legislation and the consequence of VAT on all private hire fares therefore doesn’t follow.
We wholeheartedly thank the fellow operators who have continued to support Delta, our Legal Team headed by Layla Barke-Jones at Aaron and Partners, and of course Philip Kolvin KC whose elegant and persuasive advocacy provided clarity and simplicity to the judiciary in our hour of need.
Delta Merseyside Ltd
The salient points from today's judgement are as follows :-
Para 22 – acknowledges that the contract for hire and booking are separate things and that the contract for hire, can arise at different times and can be with different people/entities. In particular this sums up the position - “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. "
Para 29 – highlights that the Act does all it needs to to ensure safety.
Para 30 – All of Uber’s eggs are in the s55A(2) basket (that’s the Deregulation Act 2015 addition) – this is “too slender a peg” on which to hang the entire argument.
Para 31 – there is no need for a contract between the operator and passenger to be required, there is no need for a contract in the real world because there is a deemed one.
Para 37 – the Court should be very cautious indeed in indulging requests for a declaration where there is no real dispute (the licensing authorities were not calling for this).
Click to view full judgement Here
Click to view Hearing session 1
Click to view Hearing session 2