The High Court has determined that Uber and Free Now’s business model, of acting as an agent for its drivers is unlawful. Their model must be updated to be in accordance with the Private Hire Vehicles (London) Act 1998.
Uber and TRANSOPCO (trading as Free Now) must contract directly with passengers who book. This will affect all private hire operators in England and Wales, with very limited exceptions.
The High Court has confirmed Lord Leggat’s obiter in Uber v Aslam  UKSC 5, and has given both drivers and passengers more protection when using private hire apps.
Alexi Norris, Assistant Editor, interviewed barrister Charles Streeten of Francis Taylor Building, who acted for United Trade Action Group (UTAG) in this case. UTAG brought the judicial review to the operator’s licence for Free Now and (along with the App Drivers and Couriers Union) was one of the two successful Respondents to Uber’s Part 8 Claim for declaratory relief.
Question 1: For those who are not familiar with the case, can you break down the facts and legal arguments?
Charles Streeten: There were two cases which were heard together: (1) a CPR Part 8 claim for a declaration made by Uber against TfL. That claim related to whether or not Uber had to contract with its passengers, or whether it could act as agent for its drivers, with the primary contract existing between the driver and the passenger. That case was brought because in separate litigation, judicial review brought by my client (UTAG) against TfL’s decision to licence Transopco (operating as Free Now). Following the grant of permission for judicial review in the Free Now case, Uber filed its application for the Part 8 declaration. In both cases, the question of whether the App based operator could contract as principal was front and centre. In the Free Now case, the issue of whether private hire vehicles ‘ply for hire’ when they operate off the app was also in dispute.
(i) Operation as a principal
On what has become known as the “Operator issue”, both cases turned on the construction of the Private Hire Vehicles (London) Act 1998, which (as the name suggests) regulates the operation of “private hire vehicles” in London. Our case was essentially that implicit within the term ‘hire’ is the concept of a contract. If you read the legislation as a whole, and particularly section 5 on sub-contracting, it is clear that one of the ways the legislation seeks to protect members of the public is ensure that passengers contract with the operator, and have recourse against them, rather than the multiplicity of independent drivers, acting on behalf of the operator in the contract.
(ii) Plying for Hire
On the ‘plying for hire’ case, the issue requires the reconciliation of about 100 years of different judgments on what ‘plying for hire’ means. The most recent of them is a case called Reading Borough Council v Ali  EWHC 200 which was essentially against us. Before the Divisional court, the issue was whether we could distinguish that case. We said we could, and the Court disagreed.
Question 2: Did the case further expand on the Supreme Court’s Uber v Aslam judgment?
CS: I think the short answer is ‘yes it did’. The longer answer is that, if you read the last paragraph of the judgment it says, unsurprisingly, ‘we have found that the majority of the Supreme Court meant what they said in Uber v Aslam’, so its more a question of elaboration than expansion.
Undoubtedly, Uber v Aslam was a tenet upon which the case was built in oral argument, but the Divisional Court does go further.
Firstly, the remarks of Lord Legatt in Uber v Aslam are no longer obiter; they are now binding dicta of the Divisional Court.
Secondly, the Court indicated that TfL must now scrutinise the contractual terms on which operators are accepting bookings. Although the more extensive comments made were obiter, it does now seem that waiver of liability by an operator would not accord with the statutory purpose of the 1998 Act. In reality, this case is going to significantly increase the extent of the control by TfL over operators, to ensure that the system is performing as it should – to secure the safety of passengers.
Question 3: Did you find any of your submissions particularly challenging to plead?
(i) On the operator issues
We had the unanimous verdict of the Supreme Court (albeit obiter) in support of our position, and that undoubtedly made the argument on the Operator issue easier to make. It is worth noting, however, that when we originally pleaded the claim in the Free Now judicial review, Uber v Aslam had not been handed down. So, we pleaded that point without the support of the Supreme Court, and certainly it was very helpful to receive supporting obiter dicta endorsed by all the members of the Supreme Court in Uber v Aslam in the course of the Free Now proceedings. The Free Now judicial review was refused permission on the papers originally, but we were granted permission at an oral renewal in front of Lang J. In between those two, we had the judgment of the Supreme Court in Uber v Aslam. That improved the ‘arguability’ of the point which ultimately succeeded no end.
(ii) On the ‘plying for hire’ point
It is no great revelation to say we faced an uphill struggle because of Reading v Ali when appearing before the Divisional Court. It is always difficult to distinguish a recent and similar decision by the same tribunal, in particular before the Divisional Court, which otherwise regards itself as bound by its own judgments.
Having said that, we were granted permission to appeal on the plying for hire point the Divisional Court, so there is an element of ‘watch this space’.
Question 4: Do you think this judgment will contribute to the existing influx of claims against Uber, with regard to workers’ rights and status such as national minimum wage, holiday pay, or is this a matter strictly relating to licensing?
CS: Well, I think Jason Galbraith-Marten QC is more likely to be able to help you with this. It may be that it will galvanise people who are bringing claims in other fora, but those are largely outside my area expertise.
I would say that, even in a regulatory context, there remain areas of potential dispute, some of them canvassed in the judgment, and some of them relating to the legislation outside London. Most will regard the ratio in the judgment as applying as much to the Local Government Act 1976 as to the 1998 Act, but I suspect that there are those who disagree with that position. So, there is potential for litigation with respect to the operating model outside of London.
Question 5: Do you think this case will hamper the luxury of flexibility, and the low cost model, of the ‘gig economy’?
CS: Maybe there’s a fallacy in the first part of the question? Perhaps it’s not the luxury of flexibility that people presently enjoy, but the luxury a service being provided at below its true cost.
This judgment will, to a considerable degree, put an end to that in terms of private hire vehicle operation in London. It will no longer be possible to provide a service at below the minimum costs inherent in complying with the regulatory requirements of providing that service. So, the cost will go up. As the media are suggesting, there likely to be VAT implications from the judgment, and workers’ rights implications.
The effect of that, as the press have said, is that the cost of operating private-hire vehicles will go up. The reason for this is not because this is going to destroy flexibility, it’s because it’s going to require operators to comply with their regulatory obligations effectively, and the cost of doing so is higher than the below-market rate which has been charged to date.
Question 6: So how will this case impact licensing applications with TfL? Do you think many licenses will be quashed following this decision, and will TfL will have to change their policies, including reviewing contractual terms of the operator?
CS: In a word, significantly.
In the course of the hearing, the advocate for TfL said it would take them a year to deal with reviewing the licences which they presently have for operators and ensuring that they meet the requirements the Divisional Court’s judgment has set down.
To me, that task seems to require a sea change in TfL’s approach. They can no longer turn a blind eye to the terms on which operators’ contract. They will be required, as the judgment indicated, not just to ensure that operators are contracting with passengers, but also that they are contracting on terms that accord with the objectives of the legislation, TfL will need to ensure that the safety of passengers is protected by the operator and the terms on which they operate.
To give an example, it’s clear from the judgment that Free Now has included in its contractual terms a refusal to guarantee that the driver is who they say they are. That is not just troubling, its fundamentally not in accordance with the objectives of the 1998 Act.
Question 7: Do you think this case will have the ability to impact all gig economy businesses, or is it only limited to private hire models?
CS: I think this case is limited to the licensing of private-hire vehicles – I don’t profess to have expertise in questions regarding workers rights, and Jason Galbraith-Marten QC is probably the best person to ask about that.
Question 8: Following the ‘Uber’ judgment, is there an achievable business model for a private hire company to operate solely as an agent and not a principal? Do you think there’s any wiggle room?
CS: Well, it’s not for me to tell operators on how to run their businesses. What I can say is that the 1998 Act was enacted to regulate private hire operation in London, and that sector operated lawfully for a very long time.
There was a point about 10 years ago where the industry changed how it operated, and the effect of that has been unlawful operation. But, it must be possible to comply with the statutory requirements, and how you do so is ultimately a matter for each business to determine.
Question 9: Do you think this case will be litigated further or is Uber fully reconciled with this decision?
CS: Neither Uber nor Transopco have applied for permission to appeal the Divisional Court’s judgment. I could not tell you whether they intend to apply to the CoA, but the combined weight of the authorities (Uber v Aslam and this decision) set a steep uphill struggle for anyone seeking to overturn the judgment on the ‘operator’ issue.
On the ‘plying for hire’ issue, the Division Court regarded Reading v Ali as binding on itself, but it didn’t endorse the reasoning in Reading v Ali. It did grant permission to appeal against the decision, which opens the possibility for the ‘plying to hire’ issue to be heard in the CoA and perhaps even the SC.
I don’t think I should say more than ‘let’s wait and see what happens’, but, I would be surprised if there wasn’t further litigation in the appellate courts on ‘plying for hire’.