Introduction

Local Authorities can set a limit on the number of hackney carriage vehicle (HCV) licences they will grant licences for.  Section 16 of the Transport Act 1985 permits this but only under very specific conditions.  The Department for Transport (DfT) does not consider quantity restrictions on HCVs to be best practice. However, in those areas where licensing authorities have opted to impose such a restriction, there is a requirement in the DfT’s taxi and private hire vehicle licensing best practice guidance for licensing authorities to regularly undertake surveys so to be in a position where they can evidence continuous compliance with section 16.

When a Local Authority applies a policy of quantity restrictions on HCVs, they are in effect refusing a HCV licence.  In these circumstances there is a right of appeal to the Crown Court.

In a recent case against Halton Borough Council, I successfully appealed the council’s refusals of HCV licences on the basis that they considered there to be no significant demand that is unmet for the services of hackney carriages there.  The council failed to comply with the strict requirements of the 1985 Act and the best practice guidance and therefore were not able to justify its position on appeal.

S.16 Transport Act 1985

Section 16 allows local authorities to control the number of HCV licences in their local areas.  The power that enables them to do so is conditioned however.

Section 16(b) states: “…the grant of a licence may be refused, for the purpose of limiting the number of hackney carriages in respect of which licences are granted, if, but only if, the person authorised to grant licences is satisfied that there is no significant demand for the services of hackney carriages (within the area to which the licence would apply) which is unmet.”

It is clear from the above that the power to adopt a policy that restricts the number of HCV licences is predicated on the need to evidence that there is no significant demand for the services of HCVs which is unmet.  The legislation is also very clear that limiting the number of HCVs can only be justified (“…if, but only if…”) by evidence that there is no significant demand for the services of HCVs which is unmet.

Taxi and private hire vehicle licensing: best practice guidance

The best practice guidance’s starting point on quantity restrictions is set out in paragraph 47: “Most local licensing authorities do not impose quantity restrictions; the Department regards that as best practice.

However, the best practice guidance goes on to say that in cases where local authorities have opted for a policy restricting HCV licences: “…the Department would urge that the matter should be regularly reconsidered. The Department further urges that the issue to be addressed first in each reconsideration is whether the restrictions should continue at all.

It is clear that Government’s view is that quantity restrictions are not considered best practice. 

Nonetheless, some local authorities do still impose restrictions on the number of HCV licences.  In these cases, the best practice guidance continues: “If a local authority does nonetheless take the view that a quantity restriction can be justified in principle, there remains the question of the level at which it should be set, bearing in mind the need to demonstrate that there is no significant unmet demand. This issue is usually addressed by means of a survey; it will be necessary for the local licensing authority to carry out a survey sufficiently frequently to be able to respond to any challenge to the satisfaction of a court. An interval of three years is commonly regarded as the maximum reasonable period between surveys.”  

As I mentioned previously, the effect of applying a policy of restricting licences is in essence no different from a local authority refusing an application for the grant of a HCV licence.  With this therefore, there is a right of appeal to the Crown Court.

Halton Borough Council

I recently represented a client who, in November 2018, applied to Halton Borough Council to licence 13 new HCVs in the district. 

Halton Borough Council operates a policy of restricting the number of taxi licences issued by the council.  This policy, according to the council, was informed by an unmet demand survey conducted several years ago.  The council was neither able to produce any evidence of when this unmet demand survey was undertaken nor any justification that the number set by it was justified.

In November 2018 the council’s Regulatory Committee met to determine the applications.  It was argued before the committee that that council had no grounds for refusing the applications for the additional taxi licences because it has no evidence of any significant demand for taxis that are unmet.  The committee’s attention was drawn to the fact that the only discretion they had in the matter was evidence that there was no significant demand for taxis that are unmet. In the absence of any such evidence, it was argued that the committee could not exercise its discretion to refuse the additional taxi licences.

Despite this the Regulatory Committee, on legal advice from officers, decided that there was no evidence before it that would justify them deviating from their policy of restricting the number of taxi licences.  It consequently refused all 13 applications.

No significant demand

I was instructed by Frodsham & District Taxis to lodge an appeal to the Crown Court. 

In this case, the burden of proof rested with the Council to justify its decision.  The issue before the court was whether the Council was able to convince the Court, that absent an unmet demand survey, it can be satisfied that there is no significant unmet demand. It is only on this basis that they are lawfully entitled to retain a cap at all let alone an arbitrary one.

The council sought to persuade the court of its position. 

Halton Borough Council admitted that the last unmet demand survey it carried out was many years ago and no one at the council was able to produce the survey not the survey’s recommendations.  In spite of this, the council maintained its policy of restricting the number of HCV licence in the district.

In the absence of any evidence derived from an unmet demand survey (which is national best practice), the council argued, amongst other things, that the number of taxis in its area per head exceeds that of neighbouring authorities, the local taxi trade presented the council with a petition arguing against additional licences and that unmet demand surveys are prohibitively expensive.

Other points argued by the council included:

  • The population in their district area
  • The fact that Halton had a fleet twice size of other fleets in the area
  • The fact that Halton had fleet has not increased
  • The fact that the respondent issued unified licence allowing versatility

The council refuted outright our argument that, if it were to maintain and enforce a policy of restricting the number of HCV licence, then there is a requirement on them to undertake regular survey work to justify the restrictive policy.

Before the Crown Court Taxi Defence Barristers argued:

  • Firstly, all evidence submitted to the Committee was highly questionable due to being anecdotal, instigated by the Council themselves in response to these applications, of no relevance or advanced absent any form of supporting evidence or indeed contrary to existing evidence. Either way, taken at its highest, it cannot sensibly be enough to satisfy the Council about the position in respect of demand. It is not clear without evidence from the Respondent whether they intend to persist with these arguments.
  • Secondly, the reluctance to comply with the law and fulfil the requirement to conduct a proper survey is one motivated by money – and this was inappropriately placed before the Committee in the formal report evidencing such. It is not clear without evidence from the Respondent whether they intend to persist with this argument.
  • The Council can only restrict numbers for Hackney Carriage Licenses where it is satisfied that there is no significant unmet demand. It has no other discretion to do so under Section 16 of the Transport Act 1985 (R v Reading Borough Council (1990) R.T.R 399). The Council does not and never has carried out an unmet demand survey and as such has no authority whatsoever to refuse to consider applications unless of course there is a defect within them which has not been raised. As such any form of restriction without this is unlawful and open to challenge.
  • It is submitted that section 16 Transport Act 1985 obliges the defendant to ensure that as long as any restriction is in force, that there is no significant unmet demand. The Council is not so doing and therefore cannot arbitrarily select a number in a policy and apply it – it is incorrect and unlawful.

The Court disagreed with the council.  The judge in the case stated that the Halton Borough Council has not taken sufficient steps to ensure that such a cap is justified or that that is the appropriate number. It continued by saying that the licensing authority have not taken sufficient steps to ensure themselves that such a cap is justified or that that is the appoprriate number.

To that extent appeal is allowed.

The judge in allowing the appeal remitted the matter back to the council for reconsideration but with a “strong” recommendation that the Halton Borough Council immediately undertake an unmet demand survey so that allocations of taxi licence be done fairly and based on evidence not assumptions.

The court award costs against the council.

Conclusion  

It is clear from the DfT’s Best Practice Guidance that the Government’s view is that policies that restricts the number of hackney carriage licences is considered bad practice.  This was reinforced by guidance issued by the Competition and Markets Authority in 2017 that concluded these policies is “likely to restrict competition and harm consumer welfare.”

However, the best practice guidance is also clear that councils that do operate a policy limiting HCV numbers must bear in mind the need to demonstrate that there is no significant unmet demand. This issue is usually addressed by means of a survey and it will be necessary for the local licensing authority to carry out a survey sufficiently frequently.

What the case against Halton Borough Council demonstrates is the need for councils to properly comply with its statutory responsibilities and duties.

It is equally important for the licensed trade to be aware of the duties placed on local licensing authorities to ensure they can be held to account in respect of this.

Unless properly administered and evidences, policies that restricts the number of hackney carriage licences can prove to be detrimental to the local trade and limit passenger choice.

Lifting or relaxing restrictions is never a popular choice because it ultimately devalues the economic value of existing hackney carriage licences. However, this is not, and has never been, the purpose of s.16.  As the case against Halton Borough Council evidenced, restrictive policies restricts people’s access to the taxi market and it is important therefore that it is administered fairly and in accordance with the statutory requirements.

Stephen McCaffrey

Regulatory defence barrister specialising in taxi and private hire licensing law, appeals and defence.

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