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Licensed operators such as Uber who accept bookings from passengers required to enter as principal into contractual obligation: Administrative Court

App-based minicab services such as Uber must – in order to operate lawfully in London – contract directly with passengers, the Administrative Court has ruled.

The background to the case of United Trade Action Group Ltd, R (On the Application Of) v Transport for London (Rev1) [2021] EWHC 3290 (Admin) was that Uber London Ltd and Transopco (UK) Ltd (the latter trading as "Free Now") are each operators licensed under the Private Hire Vehicles (London) Act 1998 ("the 1998 Act"). Users of their services are able to book a private hire vehicle using a smartphone app.

The issue had arisen whether private hire vehicle drivers providing services to passengers through the Uber app were to be regarded as "workers" within the meaning of various provisions of employment protection legislation. The case, Uber BV v Aslam [2021] UKSC 5, [2021] ICR 657, went to the Supreme Court which held that they were.

In the course of his judgment, with which the other members of the Supreme Court agreed, Lord Leggatt considered an argument advanced by Uber that it was acting as agent of the driver. He suggested, albeit without finally deciding the point, that in order to comply with the provisions of the 1998 Act, Uber would have to accept a contractual obligation to the passenger as a principal to carry out the booking.

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That suggestion gave rise to the first issue in the proceedings before the Administrative Court where Lord Justice Males and Mr Justice Fraser heard two linked claims.

In the first, Uber, supported by Free Now, sought a declaration that an operator licensed under the 1998 Act who accepts a booking from a passenger is not required to enter as principal into a contractual obligation with the passenger to provide the journey in question.

In the second case a taxi industry body, the United Trade Action Group, sought to quash Transport for London’s decision of August 2020 to renew Free Now's operator's licence on the grounds that its bookings are accepted by private hire vehicle drivers and not by Free Now itself, and that private hire vehicles ply for hire by using the Free Now app, which is unlawful as they are not licensed hackney carriages. It also argued this conduct meant Free Now was not a fit and proper person to hold a licence.

In relation to the first claim, Uber and Free Now argued that it was not necessary for a licensed operator to accept a contractual obligation to the passenger as a principal to carry out the booking, while UTAG and a drivers’ body the App Drivers and Couriers Union said it was. TfL was neutral.

Lord Justice Males and Mr Justice Fraser said: “To say that the 1998 Act contemplates that there will be a contractual obligation on the operator does not necessarily mean that the Act requires that there will be. [Emphasis in original]

“In our judgment, however, the Act does so require. To interpret the Act in this way gives effect to the statutory purpose of ensuring public safety. As [counsel for the App Drivers and Couriers Union] pointed out, passengers booking journeys on these apps may be vulnerable; the journeys may be booked late at night; the consequences of a driver failing to turn up may be serious.”

The judges noted that if the passenger's only contractual relationship was with a driver he or she had never heard of and who was in any event unlikely to be worth claiming against, any claim was likely to be practically worthless. “Conversely, if the obligation must be undertaken by the operator, the operator will have a powerful incentive to ensure that the drivers it uses are reliable and, if something does go wrong, a remedy against the operator is likely to be worthwhile.”

The Administrative Court also said:

35. As we have concluded that in order to operate lawfully, an operator must undertake a contractual obligation to passengers, and as both Uber and Free Now acknowledge that they do not at present do so, they will need to amend the basis on which they provide their services. Both companies have indicated that they will do so if that is what the court concludes.

36. It follows also that TfL will need to reconsider its current practice which is that it does not review the contractual terms of an operator when considering a licence application. Since an operator which does not undertake the required contractual obligation is not operating lawfully, TfL will need to consider how best to ensure that the basis on which Uber, Free Now and perhaps other similar operators conduct their operations is in accordance with the requirements of the 1998 Act.

37. We do not consider, however, that it is necessary or appropriate to quash the decision to grant a licence to Free Now. Free Now has made clear that it will, if necessary, amend its terms to comply with the outcome of these proceedings and has acknowledged that, if it were to fail to do so, that would provide grounds for TfL to take action. In these circumstances to quash the licence would be disproportionate, as well as having a potentially very significant impact on drivers using the Free Now app, who have no reason currently to believe that they are engaged in any unlawful activity, and a great many of whom make their livelihoods in this way.

38. We have not been directly concerned in these proceedings with whether it is open to an operator who accepts a contractual obligation to a passenger to carry out a booking to exclude in effect all liability to the passenger in the way which Free Now's Users' Terms current at the date of the licence appear to do. That too, however, is a matter which TfL will need to consider. At first sight it appears hard to reconcile with the purpose of the legislation as we have described it.”

On the plying for hire claim, the judges concluded that it was their duty to follow the Administrative Court’s decision in Reading Borough Council v Ali [2019] EWHC 200 (Admin), [2019] 1 WLR 2635. In the Reading case it had been found that an Uber driver was not plying for hire since the vehicle in question had no markings indicating this and advertised no telephone number to contact, was parked lawfully, was not available to a person hailing it on the street - but only through the app - and the app did not identify a particular driver or a particular car.

Lord Justice Males and Mr Justice Fraser said: "We conclude, therefore, that Free Now does not facilitate or encourage its drivers to ply for hire and that this ground of challenge to TfL's decision to grant it an operator's licence must fail,” they said. However, permission to appeal was granted on this issue.

Disposing of the claims, the judges said: “We have concluded, perhaps not surprisingly, that the Supreme Court meant what it said in Uber v Aslam and that we must follow the decision of this court in Reading v Ali. Accordingly we grant a declaration in both proceedings that in order to operate lawfully under the Private Hire Vehicles (London) Act 1998 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. Otherwise we dismiss the claim for judicial review.”

Barristers chambers Francis Taylor Building, from which David Matthias QC and Charles Street acted for the United Trade Action Group, said: “The consequences of this are likely to be significant. In addition to any taxation and employment law consequences, the court held that TfL will now need to reconsider its current practice, which is that it does not review the contractual terms of an operator when considering a licence application. This is likely to require close scrutiny of those contractual terms since, as the court indicated, terms which in effect exclude all liability to the passenger are ‘hard to reconcile with the purpose of the legislation’.”

Jason Galbraith-Marten QC, of Cloisters Chambers, who acted for the App Drivers and Couriers Union, said: “In this latest case Uber effectively argued that the 1998 Act did not prevent it from adopting an agency model of operation. By rejecting this, the High Court has confirmed that operators are primarily responsible for ensuring that private hire trips are carried out safely. All operators who currently purport to contract with passengers only as the agent of drivers will have to change their contractual arrangements to ensure that they comply with the Court’s ruling, and TfL are responsible for ensuring that this happens.

“As a consequence of this decision, it is now very likely that all private hire vehicle drivers in London are properly to be regarded as employed by the operator (or operators) for whom they drive. This will mean that thousands more drivers are eligible for employment rights such as the right to minimum wage, to paid holiday and adequate rest breaks. In the long-term this should significantly enhance passenger safety.”

Mark Smulian

In United Trade Action Group Ltd, R (On the Application Of) v Transport for London (Rev1) [2021] EWHC 3290 (Admin), David Matthias QC and Charles Streeten of Francis Taylor Building (instructed by Chiltern Law) appeared for United Trade Action Group Ltd; Jason Galbraith-Marten QC of Cloisters (instructed by ITN Solicitors) appeared for the App Drivers and Couriers Union; Maya Lester QC and Tim Johnston of Brick Court Chambers (instructed by Transport for London Legal) appeared for Transport for London; Ranjit Bhose QC and Josef Cannon of Cornerstone Barristers (instructed by Hogan Lovells International LLP) appeared for Uber London Ltd; Philip Kolvin QC and Ronnie Dennis of 11KBW (instructed by EMW Law LLP) appeared for Free Now.

 

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