LANDMARK DECISION: Court of Appeal OVERTURNS High Court ruling in Uber vs Delta and Veezu case

In a landmark decision, the Court of Appeal has overturned a High Court ruling that imposed a contractual obligation on private hire vehicle operators to enter into contracts with customers when accepting bookings.

The decision, handed down today, saw Veezu Holdings Ltd and D.E.L.T.A. Merseyside Ltd successfully appeal against the ruling, which was opposed by Uber Britannia Ltd.

The case revolved around the interpretation of Part II of the Local Government (Miscellaneous Provisions) Act 1976, which governs private hire vehicles outside London. The High Court had previously ruled that operators must enter into a contract as principal with the person making a booking. This decision was challenged by Veezu and D.E.L.T.A., who argued that their business models did not necessitate such contracts.

Veezu operates across 22 local licensing authorities, offering a mix of corporate and non-corporate services. They act as intermediaries, connecting passengers with licensed drivers but not providing the transportation services directly. D.E.L.T.A., a major player in Merseyside, follows a similar model, focusing on connecting passengers with drivers without directly providing the journey.

The regulatory framework under the Act stipulates the licensing requirements for vehicles, drivers, and operators but does not explicitly mandate operators to enter into contracts with passengers. The Act’s section 56(1) deems that any contract of hire is made with the operator who accepted the booking, irrespective of whether they provided the vehicle.

The Court of Appeal, led by Lord Justice Lewison, clarified that the deeming provision in section 56(1) does not extend to the invitation or acceptance of bookings but only to the contract of hire. This means that operators are not required to enter into a contract at the time of booking. The court highlighted that passenger safety is ensured through vehicle and driver licensing rather than through contractual obligations at the booking stage.

This ruling has significant implications for private hire operators, allowing them to continue their current business practices without the need to enter into contracts with passengers at the booking stage. This in turn means the driver will be liable for VAT, rather than the operator.

The Court of Appeal’s decision has provided the latest clarity on the contractual obligations of private hire operators, reinforcing that the Act does not require operators to enter into contracts with passengers at the time of booking. The outcome is seen as a huge win for Veezu and D.E.L.T.A., enabling them to operate without altering their established business models.

Layla Barke-Jones, Dispute Resolution Partner at Aaron & Partners, who represented Delta Taxis, in the case, said: ​​“Today’s decision handed down by the Court of Appeal is a victory for the taxi industry and all those who depend on it. This was a landmark case, the result of which could have had a terrible impact on the lives of so many people – not to mention the administrative burden for operators.

“The collective aim for us and our client in this case has always been to protect passengers and taxi firms alike, so the news customers outside London won’t have to have VAT forced upon them will bring a collective sigh of relief.

“Despite positive economic indications of late, everyone knows that the cost-of-living crisis has hit working families everywhere. The last thing anyone needed was yet another price hike.

“Vulnerable consumers caught in the crossfire of Uber’s lawsuit rely on the services offered by taxi firms. This frequently includes the disabled, elderly and low income households. The government recognised the potential impact of the initial High Court judgment by launching a consultation identifying that thousands of firms would need to change their operating model forcing them to now collect VAT from passengers. 

"Delta Taxis, and fellow operator Veezu, rallied against it by appealing the previous decision up to the Court of Appeal - seeking a decision on appeal that would maintain the safety that the licensing regime provides and promoting fair and open competition for private hire businesses.

“Therefore, we warmly welcome today’s announcement that the appeal has been successful – and would like to pay our gratitude to the hard work of our team including Counsels Philip Kolvin KC, and Jen Coyne.”