Stewart (AP) (Respondent) v. Perth and Kinross Council (Appellants)(Scotland)

A statutory power to license a business and impose reasonable conditions does not, without clear language, authorise a licensing authority to regulate the terms on which the licensee contracts with customers.

A licensing condition must pursue a licensing purpose, relate fairly and reasonably to the licensed activity, and satisfy public law standards of reasonableness. A condition requiring a second-hand vehicle dealer to provide customers with inspection reports exceeded those limits. The required statements could constitute representations or contractual terms and materially alter the dealer’s liabilities. The condition was therefore ultra vires.

A local authority refused to renew a second-hand motor vehicle dealer’s licence partly because he had failed to comply with a condition requiring the inspection of vehicles and the provision of inspection reports to prospective purchasers. The dealer sought judicial review, contending that the condition exceeded the authority’s powers under the Civic Government (Scotland) Act 1982.

The Lord Ordinary refused the petition. The Extra Division, by a majority, recalled that decision and reduced the refusal of the licence: [2002] ScotCS 268; 2003 SC 551. The council appealed. The central issue was whether the general power to impose reasonable licensing conditions authorised a requirement which could affect the contractual relationship between dealer and purchaser.

Appeal dismissed unanimously. The majority of the Extra Division had correctly held condition 2.5(a) ultra vires.

1. Per Lord Hope of Craighead, the specific power in section 24(4) of the Civic Government (Scotland) Act 1982 authorised conditions concerning the recording and retention of information about stock. The disputed condition went further. It required information to be displayed and supplied to prospective purchasers. Authority for those requirements therefore had to be found in the general power under paragraph 5 of Schedule 1 to impose such reasonable conditions as the licensing authority thought fit.

2. Per Lord Hope and Lord Rodger of Earlsferry, such general words take their meaning from the statutory context. Conditions must serve a licensing purpose, relate fairly and reasonably to the licensed activity, and satisfy public law standards of reasonableness. Parliament must use clear language if it intends to empower a public authority to regulate contracts between private parties. The principle in Mixnam’s Properties Ltd v Chertsey Urban District Council [1965] AC 735 applied.

3. Per Lord Hope, Lord Rodger and Baroness Hale of Richmond, the reports required statements about mileage, condition and repair. Those statements could induce a purchase, support liability for misrepresentation, constitute contractual terms or warranties, and affect the statutory terms concerning quality. The condition therefore did more than regulate the manner in which the business was conducted. It could materially alter the legal relationship and contractual liabilities of dealer and purchaser.

4. Per Lord Hope, the statutory provisions concerning second-hand dealers concentrated upon record-keeping and the tracing of stolen goods. Section 24(5), although concerned with odometer fraud, required only that a mileage record be kept. Its failure to require disclosure to customers strongly indicated that Parliament had not delegated power to regulate dealers’ contracts through locally devised licence conditions. Consumer protection of that kind was ordinarily provided by national primary legislation.

5. Lord Carswell agreed that the condition was ultra vires because it could interfere with contractual relations. He considered, however, that the Act’s purposes were broader than crime prevention and could permit suitably framed consumer-protection conditions which did not interfere with the terms of trade. Lord Hope did not accept consumer protection as a safe general guide to the purpose of the condition-making power.

1. House of Lords: The council’s appeal was dismissed unanimously. The decision reducing the refusal to renew the licence was affirmed: [2004] UKHL 16.
2. Extra Division of the Court of Session: By a majority, the court recalled the Lord Ordinary’s interlocutor, granted the petition and reduced the decision refusing renewal of the licence: [2002] ScotCS 268; 2003 SC 551.
3. Lord Ordinary: The petition for judicial review was refused.
4. Sheriff and earlier Court of Session proceedings: The sheriff initially remitted the renewal application for reconsideration. That interlocutor was subsequently recalled by the Court of Session.