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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Stewart v. Perth and Kinross Council [2004] UKHL 16 (1 April 2004)
URL: http://www.bailii.org/uk/cases/UKHL/2004/16.html
Cite as: [2004] 28 SLLP 32, [2004] UKHL 16, 2004 SCLR 849, [2004] LLR 598, 2004 SLT 383, 2004 GWD 12-273

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

HOUSE OF LORDS

SESSION 2003-04
[2004] UKHL 16
on appeal from: [2002] ScotCS 268 (01 October 2002)

HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

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

[2004] UKHL 16

LORD STEYN

My Lords,

I have had the advantage of reading the opinions of my noble and learned friends Lord Hope of Craighead, Lord Rodger of Earlsferry, Baroness Hale of Richmond and Lord Carswell. I agree with their opinions. I would also dismiss the appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

The respondent has for many years carried on business as a dealer in second-hand motor vehicles. The place where he carries on this business is within the area for which the appellants are the local authority and, as such, the licensing authority for the purposes of Part II of the Civic Government (Scotland) Act 1982 ("the 1982 Act"). Section 9 of the 1982 Act enables a licensing authority to resolve that the carrying on in its area of any of the activities mentioned in sections 10 to 27 and 38 to 44 of the Act requires to be licensed in accordance with the provisions of that Act and is to be regulated by those provisions. Among the activities mentioned in Part II is the carrying on of a business as a second-hand dealer. On 4 December 1985 the Property and General Purposes Committee of the appellants' statutory predecessors, Perth and Kinross District Council ("the District Council"), resolved that all dealers purchasing or selling second-hand motor vehicles within the District would require to be licensed with effect from 1 February 1986.

The respondent first applied for a licence for his second-hand motor vehicle business in 1987. His application was granted, and a licence was issued to him. He applied for a renewal of his licence in 1990. This application too was granted, and a further licence was issued to him. It was valid until 31 July 1993. In 1993 he applied for a further renewal of his licence. His application was considered by the District Council's General Purposes (Licensing) Sub-Committee at meetings which were held on 4 and 18 February 1994. The Sub-Committee refused to renew the respondent's licence on this occasion, on the ground that he was not a fit and proper person to hold a licence. Among the reasons that were given for the refusal was the following:

On 13 February 1995 the sheriff pronounced an interlocutor remitting the respondent's application for the renewal of his licence to the District Council for reconsideration. On 6 December 1995 the sheriff's interlocutor was recalled by the Court of Session. On 4 May 2000 the respondent presented a petition to the Court of Session for judicial review of the decision of the District Council to refuse to renew his licence on the ground that its decision was ultra vires. On 15 June 2001 the Lord Ordinary refused the petition. On 1 October 2001 an Extra Division (Lords Coulsfield and Johnston, Lord McCluskey dissenting) recalled the Lord Ordinary's interlocutor, granted the prayer of the petition and reduced the decision to refuse renewal of the licence.

The only live issue at the end of the hearing before the Extra Division was whether the 1982 Act conferred power upon the licensing authority to subject the respondent's licence to a condition which had been inserted in the licences which were issued to him. The condition was in these terms:

The sample Inspection Report in Appendix 2 is headed "Used Vehicle Pre-Sales Inspection Report". It requires details of the make, model, colour and certain other details of the vehicle to be inserted. A box is provided in which the odometer reading is to be inserted, against which a statement must be made as to whether it is correct or unverified. Alongside it is another box in which the approximate true mileage is to be inserted, if different from the odometer reading. Beneath these boxes there appear three columns by which provision is made for a detailed examination of various parts of the vehicle to be carried out as listed in column 1, for any defects outstanding to be noted in column 2 and any work carried out before delivery to be stated in column 3 alongside the list of the parts to be examined which are set out in column 1. Beneath these columns the form states: "The findings of the above report take into account the age and price of the used vehicle described. To be completed on sale of vehicle". Provision is then made for the price to be inserted, beneath which there are spaces for the signature of the purchaser and the dealer. Above the space for the purchaser's signature there are these words: "I acknowledge receipt of a copy of this inspection report." Beneath the spaces for the signatures the purchaser is told: "If you purchase this vehicle it is in your interest to keep this report." Three copies are to be made of this form: a white copy for the purchaser, a yellow copy for the dealer's showroom and a blue copy for the dealer's workshop. Note 3 of the Notes attached to the licence states:

The sample Information Sheet in Appendix 3 is headed "Used Vehicle Pre-Sales Information Sheet". It requires details of the make, model and colour of the vehicle, the number of owners, the date of its first registration and certain other details to be inserted, as well as the odometer reading. It requires a statement to be made as to whether the odometer reading is correct or unverified. It provides a space for any other comments. It then states: "A full report has been completed on this vehicle and is available in the showroom/office. A copy of this report will be given on the day of delivery."

The power which is given to the licensing authority by the 1982 Act to attach conditions to a second-hand dealer's licence is set out in section 24(4), which provides:

Paragraph 5(1) of Schedule 1 to the 1982 Act provides:

Paragraph 5(2) of Schedule 1 provides:

Paragraph 13(1) of the Schedule provides that a licence may be surrendered to the licensing authority at any time and that it shall thereupon cease to have effect.

Condition 2.5(a) falls within the power which is given to the licensing authority by section 24(4) of the 1982 Act, to the extent that it requires information to be included in the dealer's records, the form which that information is to take, the premises where the information is to be kept and the period for which it is to be kept. But it is plain that the condition does more than require the dealer to record and keep information. It also requires the dealer to give information to the purchaser.

The power in section 24(4) to attach conditions to the licence is stated by the opening words of that subsection to be without prejudice to paragraph 5 of Schedule 1. Paragraph 5(1)(b) of the Schedule gives a general power to licensing authorities to grant or renew a licence subject to conditions. Two conditions are mentioned in paragraph 5(2) which have nothing to do with the giving of information by a second-hand dealer to the purchaser. But these conditions are stated to be without prejudice to the generality of the opening words of the sub-paragraph. Those words give power to the licensing authority to attach "such reasonable conditions" to the licence as it may think fit. It is to those words that one must go if one is to discover whether those parts of condition 2.5(a) which require information to be given to the purchaser are within the power to attach conditions that is given by the 1982 Act to the licensing authority.

Two questions then require to be addressed and answered. The first requires a close analysis of condition 2.5(a) and its effect. The second requires an examination of the scope of the power which the Act gives to the licensing authority. If the effect of the condition is to require the second-hand car dealer to do more than a licensing authority is empowered to require him to do, the condition must be held to be ultra vires of the District Council which attached it to the respondent's licences.

What is the effect of condition 2.5(a)?

The effect of condition 2.5(a) depends in the first place upon what it requires the dealer to do. This matter is best addressed by looking at those things that go beyond tasks relating to the recording and keeping of keeping of information which fall within the scope of the licensing authority's power to impose conditions on second-hand dealers in section 24(4). It is convenient to identify these additional tasks in the order in which they appear in the sub-paragraphs of condition 2.5(a).

Sub-paragraph (i) requires the dealer to "make a copy of the Report available for inspection by any prospective purchaser." Sub-paragraph (ii) requires him to "display" the Information Sheet "in a prominent position in the vehicle displayed for sale so that it is clearly visible." Sub-paragraph (iii) requires him to "provide the purchaser with a copy of the Inspection Report, which should be signed both by the purchaser and the dealer." These provisions have to be read together with the contents of the Report and the Information Sheet. The Information Sheet is the document that will be seen first by the prospective purchaser. It contains a representation as to whether the odometer reading is correct or unverified, an assurance that a full report has been completed on the vehicle and a promise that a copy of it will be given to the purchaser on the day of delivery. The Report contains representations as to whether the odometer reading is correct or unverified and its approximate true mileage, representations about the state of the vehicle following an examination of the matters listed in column1 taking into account its age and price, and advice to the purchaser that it is in his interest to keep the Report.

The next question is what effect, if any, these additional tasks have on the dealer's contract with the purchaser. The contract is one of sale to which the provisions of the Sale of Goods Act 1979 apply. That Act was amended in various important respects in relation to contracts made on or after 3 January 1995 by the Sale and Supply of Goods Act 1994. As the licence which is under review in this case was issued to the respondent in 1990, its effect at the time that it was issued must be judged in the light of the provisions of the Sale of Goods Act 1979 as they were prior to their amendment by the 1994 Act.

The relevant provisions of the Sale of Goods Act 1979 are these:

It should be noted in passing that section 14 of the 1979 Act as amended by the Sale and Supply of Goods Act 1994 now provides that, where the seller sells in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality and that, for the purposes of the Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all other relevant circumstances: subsections (2) and (2A) as substituted for the former subsection (2) by section 1(1) of the 1994 Act. As the law now stands, the description of the vehicle in the Inspection Report is one of the circumstances to be taken into account in a consideration as to whether or not the vehicle meets the required standard.

There was no requirement at common law or under the Sale of Goods Act 1979 for the dealer to make any representations to the purchaser about the mileage, condition or state of repair of the vehicle. If nothing was said on either side, the position under the law as it stood in 1990 was that the dealer was bound only by the implied condition in section 14(2) of the 1979 Act that the vehicle which he supplied under the contract was of merchantable quality within the meaning that is given to that expression by section 14(6). But the mere fact that there were defects in the vehicle at the time of delivery would not necessarily mean that it was not of merchantable quality, bearing in mind that the standard to be achieved depends on the market at which the vehicle is aimed and that deficiencies might be acceptable in a vehicle which is being sold as a second-hand vehicle: Rogers v Parish Ltd [1987] QB 933, per Mustill LJ. If the purchaser made known to the dealer that he wanted to purchase the goods for use as a vehicle, so as to show that he relied on his skill or judgment, the dealer would be bound also by the implied condition in section 14(3) that it was reasonably fit for the purpose as a vehicle to drive along the road: see Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013, 1016C per Lord Denning MR. It is obvious that there was a considerable overlap between these two implied conditions.

But if, on the other hand, the dealer said something which could be construed as a representation on which the purchaser relied and which induced him to enter into the contract, different consequences might well follow. The effect of attaching condition 2.5(a) to the licence was to require the dealer to make a series of representations in writing about the mileage, condition and state of repair of every vehicle which was exposed for sale in his premises. Statements which a vendor makes at or about the time of the completion of an agreement may be treated as representations on which the purchaser was entitled to rely and, as such, as part of the agreement: see Scott v Steel (1857) 20 D 253, 257, per Lord Wood. In that case a purchaser who bought a horse upon a representation by the horse-dealer that the horse was steady in harness and quiet to ride was held to be entitled to return the horse and to repayment of the price when it turned out not to be.

It is also not inconceivable that an honest dealer might take less than ordinary care in the carrying out of the inspection of the vehicle and the recording of the relevant details on the Inspection Report - in other words that he might carry out these tasks not fraudulently, with the intention of misleading the purchaser, but negligently. The effect of the condition was to expose him to the risk of providing the purchaser in that event with a remedy in damages in circumstances where the purchaser would not have had a remedy for a breach of one or other of the warranties in section 14 of the Sale of Goods Act 1979.

It was at one time the law in England that an innocent misrepresentation gave no right to damages: Heilbut, Symons & Co v Buckleton [1913] AC 30. That rule was modified in England by section 2(a) of the Misrepresentation Act 1967. A similar rule to that which had applied in England was also part of Scots law: Manners v Whitehead (1898) 1 F 171; Eastern Marine Services (and Supplies) Ltd v Dickson Motors Ltd, 1981 SC 355; Twomax Ltd v Dickson, McFarlane & Robinson, 1983 SLT 98. In Eastern Marine Services (and Supplies) Ltd v Dickson Motors Ltd the pursuer agreed to purchase a second-hand car from a car dealer on the basis of an assurance that the mileage shown on the odometer was genuine. It was alleged that this assurance was false and that the pursuers were entitled to damages. The action was dismissed on the ground, among others, that in an action founded on misrepresentations inducing contract the representations had to be fraudulent and that the pursuers' pleadings contained no such averment.

This rule was abolished by section 10(1) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, on the recommendation of the Scottish Law Commission. Section 10(1) provides:

By the date when the condition was attached to the respondent's licence it was sufficient to entitle the purchaser to a remedy in damages that he was induced to enter into the contract by the seller's representations and that these representations were negligent.

It seems to me to be clear in these circumstances that the effect of attaching the condition to the licence was to affect the contractual relationship between the dealer and the purchaser in a way that, in the event of a dispute about the condition of the vehicle when it was purchased, could prove to be highly material. As Lord Coulsfield said in the Extra Division, a report authenticated and handed over to the purchaser as the condition requires is bound to have considerable importance in any dispute: 2003 SC 551, 557G-H, para 15. The dealer cannot escape from these consequences without refraining from making these representations, which he cannot do without breaching the condition. Any attempt by him to exclude his liability for any innocent misrepresentation contained in the Inspection Report will be void against the consumer in the case of a consumer contract if it was not fair and reasonable to include the term in the contract: section 16(1)(b) of the Unfair Contract Terms Act 1977.

What does para 5 of Schedule 1 permit?

The question that must now be addressed is whether a condition which has this effect requires the dealer to do more than the licensing authority is empowered to require him to do. Does the 1982 Act permit the licensing authority to impose conditions on the second-hand motor vehicle dealer which regulate the terms on which he trades with his customers?

This question raises an issue of statutory construction. Where an authority which is clothed with statutory powers orders something to be done and accompanies this with some sanction or penalty for a failure to do it, this restricts the freedom of action by persons who are affected by it, who would otherwise be free to do as they pleased: Kruse v Johnson [1898] 2 QB 91, 96 per Lord Russell of Killowen CJ. It is a general rule of construction that, while the legislature may make whatever changes to the law that it likes, subordinate legislative authorities can make only such changes in the law as Parliament has empowered them to make. This rule was applied in Rossi v Magistrates of Edinburgh (1904) 7 F (HL) 85, where conditions in an ice-cream vendors' licence which restricted their right to open their shops when they liked and sell what they pleased were held to be ultra vires of the licensing authority; see also Spook Erection Ltd v City of Edinburgh District Council, 1995 SLT (Sh Ct) 107. It was also applied in Mixnam's Properties Ltd v Chertsey Urban District Council [1965] AC 735, in which it was held that the local authority was not entitled under the Caravan Sites and Control of Development Act 1960 to lay down conditions relating to the licensee's powers of letting or licensing caravan spaces to its customers. At p 763 Lord Upjohn said that freedom to contract is a fundamental right, and that if Parliament intends to empower a third party to make conditions which regulate the terms of contracts to be made between others then, even where there is an appeal to a court of law against such conditions, it must do so in clear terms. In the same case at p 755 Lord Reid said that it appeared to him to be a fundamental difference between prescribing what must or must not be done on a caravan site and restricting the site owner's ordinary freedom to contract with his licensees on matters that did not relate to the manner of use of the site.

The opening words of paragraph 5(2) of Schedule 1 to the 1982 Act give power to the licensing authority to attach "such reasonable conditions" to the licence as it may think fit. As I said earlier, it is to those words that one must go if one is to discover whether those parts of condition 2.5(a) which require information to be given to the purchaser are within the power to attach conditions that is given by the 1982 Act to the licensing authority. At first sight they give a wide discretion to the licensing authority. It requires a very strong case for a court to interfere with the discretion which has been vested in a body of that kind, which legislates in the interests of the community: Nicol v Magistrates of Aberdeen (1870) 9 M 306, 308, per Lord President Inglis; Da Prato v Magistrates of Partick 1907 SC (HL) 5, per Lord Loreburn LC. As Lord Russell of Killowen CJ said in Kruse v Johnson [1898] QB 91, 99, legislation of this kind ought to be supported if possible, looking to the character of the body which is legislating, the subject matter and the nature and extent of the authority which is given to the body to legislate in matters of this kind.

But it is clear that the discretion which is vested in the licensing authority is not unlimited. The authority is not at liberty to use it for an ulterior object, however desirable that object may seem to it to be in the public interest: Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554, 572 per Lord Denning; Newbury District Council v Secretary of State for the Environment [1981] AC 578, 599, per Viscount Dilhorne. The scope which is to be given to the words "such reasonable conditions" must be ascertained from their context. The search is for some indication that it was the intention of Parliament that licensing authorities should be able to regulate not only the records which dealers were to keep to enable checks to be carried out on their activities but also the contracts which they entered into with their customers.

We get no help from the two conditions which are set out in paragraph 5(2) without prejudice, as the sub-paragraph states, to the generality. It has to be borne in mind that the provisions of the Schedule relate to the licensing system in general and not just to the licensing of second-hand dealers. Neither of these conditions is concerned in any way with the relationship between the licensee and his customers. Then there are the conditions in section 24(4) which are specific to the case of second-hand dealers. It is obvious that they are concerned only with record-keeping, so here again there is no indication of an intention that licensing authorities were to be able to regulate the way the dealer was to conduct himself in relation to his customers.

The principal mischief to which the conditions in section 24(4) are directed is the handling of stolen property. It is well known that the second-hand market is attractive to resetters and others who handle stolen property. One of the principal objects of the legislation in the Burgh Police Acts, which was designed for the benefit and protection of the citizens and to which the idea of licensing second-hand dealers owes its origin, was to enable stolen property to be traced and recovered if it was handled in this way: see General Police and Improvement (Scotland) Act 1862, ss 312-317; Burgh Police (Scotland) Act 1892, ss 434-439. But there is a clear and obvious distinction between the regulation of record keeping for the prevention and detection of crime and the regulation of the way in which the dealers in the ordinary course of business negotiate and enter into contracts with their customers. There is no indication in section 24(4) that consumer protection was one of the objects of the system for requiring that second-hand dealers should be licensed.

The closest that section 24 comes to the protection of consumers is in subsection (5), which deals with odometers. It is notorious that the odometers of second-hand motor vehicles are prone to being tampered with. It comes as no surprise to find a subsection which is addressed to the prevalence of this particular mischief in the business of dealing in second-hand motor vehicles. But is instructive to see what the subsection does and does not say. What it says is that the dealer shall keep a record of the mileage reading on the vehicle's odometer when he acquired it. This is, of course, another requirement which is directed to record keeping. What it does not say is that the dealer must provide or make available this information to the customer. The customer's interest in knowing what the reading was when the dealer acquired it is not addressed at all by the subsection. In my opinion this is a powerful indication that it was not the intention that the licensing authority should have power to regulate the dealer's contractual relationship with his customers.

There are other sources of information to which it is legitimate to look to see whether, despite the lack of any indication within the four walls of the statute, it was nevertheless the intention that a power to regulate the dealer's contractual relations should be given to the licensing authorities. But here too there is no indication that it was intended that the second-hand dealer's contractual relationship with his customers should be regulated by means of a condition attached to a licence issued to him by the licensing authority.

On 2 May 1972 the Secretary of State for Scotland set up a working party to examine the powers available to local authorities in Scotland for the administration of civic government in their areas. The working party submitted its Report on 15 January 1976. It made no mention in the recommendations in section II.37-39 of the Report, which dealt with second-hand dealers, of any need to change to change the system so as to enable local authorities to regulate the terms on which they dealt with their customers. The only recommendation which touched this aspect of the way a second-hand dealer was to be allowed to carry on business was that he should be prohibited from disposing of goods to any person under the age of 18 by increasing the relevant age from 14 as provided by section 443 of the Burgh Police (Scotland) act 1892.

In July 1980 a White Paper, Proposals for a Code of Civic Government in Scotland - A Consultation Paper (Cmnd 7958), to which a draft Bill was attached, was published. The 1982 Act, which was based on the proposals in the Consultation Paper and comments which were received on it, received the Royal Assent on 28 October 1982. On 22 February 1983 the Scottish Development Department issued a departmental circular to all local authorities in Scotland: Circular 6/1983. Paragraphs 2.60-2.66 are directed to the provisions in the 1982 Act about the licensing of second-hand dealers. Paragraph 2.60 refers to the option which section 9 gives to licensing authorities to resolve to make these provisions effective in their areas. It states:

In the light of concern that had been expressed at the effect of regulation on dealers in second-hand books or used stamps, it stated that the classes to which any such licensing was to be applied must be precisely defined. Paragraph 2.62 refers to the provisions in section 24(4) about the keeping of records, which it was said could be attached to a licence after consultation with the Chief Constable. No mention is made of an intention that licensing authorities should regulate second-hand dealers by means of the licensing system as to the manner in which they conducted business with their customers. The only mention of the powers available to the licensing authority under paragraph 5 of Schedule 1 is in paragraph 2.100 where, in a reference to the licensing of private markets, it is pointed out that these powers could be used to deal with concerns about noise, crowds and other environmental annoyances to local residents.

The absence of any mention in this material of a wish to provide for the protection of consumers through the licensing system is not surprising, in view of the other ways that this need can be and is being met through primary legislation enacted by Parliament. Section 75(1) of the Road Traffic Act 1988, which is derived from section 60 of the Road Traffic Act 1972, makes it an offence for a person to supply a motor vehicle in an unroadworthy condition. That test is satisfied if it is in such a condition that its use on the road would be unlawful in the respects mentioned in section 75(3)(a), read with the Motor Vehicles (Construction and Use) Regulations 1986 (SI 1986/1078), or would involve a danger of injury to any person: see section 75(3)(b). These provisions are backed up by section 77 of the 1988 Act, derived from section 61 of the 1972 Act, which gives power to an authorised examiner to enter the premises of a dealer in second-hand motor vehicles and to test and inspect the roadworthiness of any used vehicle found on the premises. In February 2001 the Scottish Motor Vehicle Testing Unit was created to operate in partnership with the Vehicle Inspectorate. It aims to improve the level of consumer protection within the motor vehicle sector by dealing with matters such as checking the safety of vehicles offered for supply on garage forecourts. Other measures to protect consumers are contained in the Trade Descriptions Act 1968, sections 1 and 14: see also the General Product Safety Regulations 1994 (SI 1994/2328), which gave legislative effect to EC Directive 92/59/EEC on General Product Safety.

What is surprising, if it had been the intention to provide for the protection of consumers by means of conditions under the licensing system, is the absence of any mention of this intention in the list of conditions referred to in section 24(4) of the 1982 Act. That is the place where one would expect to find such a novel and far-reaching intention mentioned. One would not expect the licensing authority to have to rely, as it does in this case, on the general power in paragraph 5 of Schedule 1 to the Act to include such reasonable conditions as it thought fit. I agree with my noble and learned friend Lady Hale, for the reasons she gives, that attempts to achieve consumer protection by inserting conditions into licenses granted by local authorities may have effects which, from the consumer's point of view, are entirely arbitrary. This tends to show, in my opinion, that the licensing system is not designed for this purpose. It may have the effect of protecting the public from trading which is dishonest or unscrupulous, but I would not regard consumer protection as a safe guide to the purpose for which conditions may be inserted into licences. I would prefer not to follow my noble and learned friend Lord Carswell in approving the approach which Lord McCluskey took to this issue in the dissenting opinion which he delivered in the Inner House.

Conclusion

It is plain that condition 2.5(a) was directed to a laudable object and to a matter which was of very real concern to the public. We were shown a copy of a report by the Chief Executive to the District's General Purposes Committee on 25 May 1988 which states that the introduction of conditions in 1986 was preceded by consultation with the police, the Trading Standards Department and the Scottish Motor Trades Association and that they were reconsidered following concerns which certain dealers had expressed about them. We were told that about two thirds of all the licensing authorities in Scotland have followed the District Council's example and have introduced similar conditions into the licences which they have issued to dealers in second-hand motor vehicles. The idea of regulating the relationship between these dealers and their customers evidently has wide support throughout Scotland. In the light of this background I would not wish to disturb the practice of inserting a condition of this kind into second-hand motor vehicle dealers' licenses unless this was absolutely necessary. But wide support for the condition is not enough to make it legitimate. That depends on the intention that is to be ascribed to Parliament.

For the reasons which I have given, I would hold that Parliament did not intend the licensing system to be used in this way. The practice of Parliament is to provide for the protection of consumers by means of primary legislation which can be applied uniformly across the country. It is not its practice to delegate powers to legislate in this area to individual local authorities. I consider that the majority in the Extra Division were right to hold that condition 2.5(a) was ultra vires. I would refuse the appeal.

LORD RODGER OF EARLSFERRY

My Lords,

If you want to buy a second-hand car and visit a dealer in Perth and Kinross, you will find, displayed in a prominent position in the cars offered for sale, a summary information sheet indicating that the dealer has inspected the car and that a full inspection report can be consulted in the office or showroom. If you then go on to buy a car, you will receive a copy of the relevant report, which you are advised to keep. You will also be asked to sign another copy, to acknowledge receiving your copy. The report will cover such matters as the state of the tyres, the steering, the lights and the seat belts, whether the car starts satisfactorily and whether the oil pressure is satisfactory, and ending up with the internal and external appearance of the car. The report will tell you what work is to be done on the car before delivery and what defects are outstanding, taking into account the age and price of the car. Clearly, the contents of the report may be of assistance if you subsequently find that there is something wrong with the car and wish to take the question up with the dealer.

Such reports, which are not unique to Perth and Kinross, owe their existence to the system of licensing of second-hand motor vehicle dealers under the Civic Government (Scotland) Act 1982 ("the Act"). More particularly, they derive from a set of conditions which the licensing authority attach to the dealers' licences. Condition 2.5(a) provides:

All but three local authorities in Scotland license second-hand motor vehicle dealers and it appears that, for about twenty years, many of them have applied similar conditions without challenge. In the present proceedings, however, by a majority, an Extra Division of the Court of Session have held that condition 2.5(a) is ultra vires and so void: Stewart v Kinross and Perth Council 2003 SC 551. The licensing authority have appealed against that decision.

Today, we are used to the idea that legislation applying throughout the country regulates such matters as public health, the development of land and the protection of consumers. But, in the past, local bodies often dealt with issues of that kind by means of regulations that applied only in the particular community. The general aim was to ensure the good conduct and efficiency of the various trades and activities for the benefit and protection of the citizens in the burgh: Reid v Mini-Cabs 1966 SC 137, 143 per Lord Avonside. With increasing prosperity and better communications in the nineteenth century, it became both possible and desirable to introduce a greater measure of uniformity. The Burgh Police (Scotland) Act 1892 provided a common structure, which local authorities could adopt, if they wished, but supplement with local Acts and bye-laws. A prominent feature of the 1892 Act was the power that it gave the magistrates to control many activities by a system of licensing. Some instances, such as the licensing of hackney coaches, omnibuses and carriages of any kind, with a power to make bye-laws fixing the fares, would be familiar today. Others, such as the licensing of porters, messengers, chimney sweepers, golf cadies [sic] and vendors of newspapers, with a power to make bye-laws regulating their conduct and charges, speak of a rather different world. A notable absentee is liquor licensing, which was not introduced until the First World War. The 1892 Act also contained elaborate provisions, not involving licensing, to combat the kinds of fraud, eg, in delivering under-weight quantities of coal and supplying under-weight loaves of bread, that were common at the time. In addition, however, it made provision for licensing brokers, including dealers in second-hand goods, and pawnbrokers. The tenor of these provisions, in sections 433 to 453, suggests that the main aim was to prevent the resetting of stolen goods through such outlets.

The 1982 Act repealed the 1892 Act and swept away many provisions which had become out of date. While the number of activities that could be made subject to licensing was cut back drastically, Part II still provides for local authorities to license and regulate a considerable range of activities. There is no a priori reason to suppose that, in selecting them, Parliament had exactly the same aims in mind as ninety years before. Section 9(2) allows a licensing authority to resolve that:

Although licensing and regulation are inter-related, they are not co-extensive. In the case of window cleaners, Parliament provides only for a system of licensing in section 43; it does not actually go on itself to regulate the way that they are to carry on their trade. In other cases, however, there are more or less elaborate provisions regulating aspects of the way in which the activity is to be carried on. Sections 14 to 19 are examples in relation to taxis.

Only in the case of metal dealers is a local authority actually required to have a system of licensing and to regulate the trade, under sections 28 to 37. Otherwise, Part II simply permits local authorities to adopt the relevant provisions in relation to the activities in question: operating a vehicle as a taxi or private hire car, carrying on business as a second-hand dealer, boat hiring, street trading, operating a market, using premises as a place of public entertainment, selling meals or refreshment late at night and window cleaning. In addition, under section 44, the Scottish ministers can designate an activity as one for which a licence may be required and which is to be regulated in accordance with the provisions in the relevant order. No single theme unites this list of activities in Part II, except that in each case there may be good reason for controlling who conducts the activity and how it is carried on. For instance, taxis should be mechanically sound, the drivers should have clean licences and passengers should be protected from excessive fares. On the other hand, boats hired out to the public should be safe and late-night food outlets should not cause disturbance to people living nearby; window cleaners have access to people's houses and could have opportunities to plan or carry out thefts. All these are different, but sufficient, reasons why a local authority may decide that, in their area, people should not carry on the activity in question without a licence and that it should be regulated in accordance with the relevant provisions of the Act.

Local licensing authorities have autonomy in deciding whether or not to adopt the system for any particular activity. Whether they choose to do so may depend to some extent on the political complexion of the council: some councils may prefer to trust to market forces and to spare their council tax payers the cost of administering a licensing system; others, faced with a similar situation, may take the opposite view. In some areas the number of people carrying on a particular activity may be so small that the council judge that it is not worth licensing and regulating. On the other hand, the commercial importance of the same activity in another area might make that council think that it should be licensed and regulated under the Act.

Often, when called upon to identify the scope of powers given to a body under an Act, a court examines the long title and other provisions in order to identify the purpose for which the powers were given. In the case of the 1982 Act, however, it is not easy to apply that approach, precisely because the long title merely refers to "the licensing and regulation of certain activities" and there is no single reason for providing for such a régime. So, in relation to second-hand motor vehicle dealers, all that the general structure of the Act allows one to say is that, in the view of Parliament, there are good reasons for permitting a local authority, if they so resolve, to introduce a system of licensing and regulation.

Sections 24 to 27 concern second-hand dealers. If a local authority resolve, under section 9(1), that these sections are to have effect in their area, then in terms of section 24(1):

In other words, what is licensed is carrying on business as a dealer in second-hand goods or articles of any description: subsection (2). But, under section 9(3)(c)(iii), the council may resolve that sections 24 to 27 are to have effect only in relation to particular classes of second-hand dealing. In the present case, the council resolved that they were to have effect in relation to second-hand motor vehicle dealers. The appeal accordingly concerns a condition in the licence which the authority granted to Mr Stewart to carry on business as a dealer in second-hand motor vehicles.

Where a licence is required for an activity, Part I of the Act applies and, by section 4, the licensing system falls to be administered in accordance with the provisions of schedule 1, except in so far as special provision is made elsewhere. Even though the provisions creating the system are thus relegated to a schedule, they are in fact central to the operation of Part II of the Act.

In terms of paragraph 5(1)(b) of schedule 1, where an application is made for the grant or renewal of a licence, one of the licensing authority's powers is, in accordance with the paragraph, to "grant or renew the licence subject to conditions". Paragraph 5(2) provides:

(a)

(b)

Under paragraph 5(3)(a)(ii) the licensing authority are to refuse an application to grant or renew a licence if, in their opinion, the applicant is not a fit and proper person to be the holder of the licence. Paragraph 5(3)(c) and (d) provide that the authority are to refuse the application if, in their opinion,

These provisions in paragraph 5 apply to the licensing of persons carrying on business as dealers in second-hand motor vehicles, just as they do to people carrying on other licensed activities. In the case of second-hand dealers, however, these general provisions are supplemented by the special provisions in section 24(4) and (5):

Subsection (4) specifically allows the local authority to attach conditions to a second-hand dealer's licence requiring him to keep records of his stock. Subsection (5) is different. It is not actually concerned with the licensing of second-hand dealers; it is a measure by which second-hand dealers are regulated, if a licensing authority resolve that sections 24 to 27 are to apply to dealers in their area. In that event it becomes an offence, in terms of section 24(6) and (7), for any second-hand dealer acquiring a second-hand motor vehicle for resale to fail to keep a record of the mileage reading at the time he acquired it. The obligation to keep the record applies to all second-hand dealers in the area, whether or not they are exempted from the licensing requirement by section 24(3). So, in the areas where the local authority adopt sections 24 to 27, it is an offence for a dealer to fail to keep a record which second-hand dealers in other areas are under no obligation to keep.

The contention for the respondent, Mr Stewart, was that local authorities had been given power to license second-hand dealers simply because of their potential for facilitating crime by resetting stolen goods. This could be seen from the power that was given in subsection (4) to attach conditions to the licence, requiring the keeping of records in relation to the dealer's stock. It could also be seen in subsection (3), which exempted certain businesses from licensing control - in particular, (b) a business as a wholesale dealer purchasing exclusively from licensed second-hand dealers, (c) a charitable business and (d) a business as a second-hand dealer incidentally to another business. These businesses were exempted, he said, because there was less risk of such dealers being involved in disposing of stolen goods. Since the suppression of resetting was the aim of the licensing régime, the authority had no power to attach condition 2.5(a), which had nothing to do with that aim.

My Lords, I readily accept that part of Parliament's reason for providing for the licensing of second-hand dealers was a legitimate fear that they might provide an outlet for stolen goods. That is not to say, however, that this was the limit of Parliament's concern. Section 24(5), which applies to any second-hand dealer, whether he requires a licence or not, shows that Parliament considered that local authorities should be able to take a limited step towards protecting customers from the risk of buying a car in which the odometer had been adjusted so as to show a smaller mileage than the car had actually done. Therefore, when local authorities are considering whether to resolve to adopt sections 24 to 27, they may legitimately have in mind the desirability of combating this particular kind of fraud against customers.

Mr Bovey QC submitted that, even if this were so, subsection (5) was as far as the legislation went to protect customers buying second-hand cars. In one sense, that submission is certainly correct: the only way in which sections 24 to 27, if adopted, actually regulate second-hand dealers is to be found in that subsection. Anything else that is to be done by way of regulating the activity must be done through the licensing mechanism.

For example, the authority can refuse a licence if the premises are not suitable or convenient for the conduct of the business of dealing in second-hand motor-vehicles, having regard inter alia to the safety of the public and the location, character or condition of the premises. These provisions take the licensing authority far beyond any narrow concern with the possibility of opportunities for reset. For example, where second-hand cars are involved, the possibility of road safety concerns in relation to cars going to or from the premises is obvious. But it would also be open to a licensing authority to refuse an application for a licence if the showroom or site was not suitable for selling second-hand cars because it was inadequately lit and customers would not be able to see to inspect the cars before buying them. It must follow that the authority has power under paragraph 5(1)(b) to grant a licence subject to a condition that the premises should be adequately lit for this purpose.

Indeed, once a licence has been granted, the only way that a licensing authority can regulate the manner in which any activity is carried on is by attaching appropriate conditions to the licence. So, for instance, Parliament has not enacted that second-hand dealers must keep a record of their stock. It is a matter for the licensing authority. If they want dealers to do so, they must attach conditions in terms of section 24(4). Since, however, the power to attach those conditions in section 24(4) is without prejudice to paragraph 5(1) of schedule 1, authorities must be able to use conditions that they attach in reliance on that general provision to regulate other aspects of the business.

The critical question is the extent of this power in the case of dealers carry on their business as dealers in second-hand motor vehicles. The test is not in dispute. Guidance can be found in the approach that Viscount Dilhorne summarised for conditions attached to planning permissions in Newbury District Council v Secretary of State for the Environment [1981] AC 578, 599:

That approach was approved by Lord Keith of Kinkel in Grampian Regional Council v Secretary of State and Aberdeen District Council 1984 SC (HL) 58, 66. Here, therefore, the conditions attached to the licence must be for a licensing purpose and not for any ulterior purpose. They must also fairly and reasonably relate to the business that the licence holder is permitted to carry on as a dealer in second-hand cars. In addition, they must not be so unreasonable that no reasonable licensing authority would have imposed them.

Mr Bovey did not contend that condition 2.5(a) was so unreasonable that no reasonable licensing authority would have imposed it. Since it appears that about two-thirds of the authorities that license second-hand motor vehicle dealers have imposed a similar condition, that concession was perhaps not surprising. Nor was it suggested that the licensing authority had any ulterior purpose in attaching the condition. The nub of the case is therefore whether the condition fairly and reasonably relates to Mr Stewart's business as a dealer in second-hand motor vehicles.

In Mixnam's Properties Ltd v Chertsey UDC [1965] AC 735 the council issued a licence authorising the use of land as a caravan site under the Caravan Sites and Control of Development Act 1960. The legislation allowed the council to issue the licence subject to such conditions as they might think it necessary or desirable to impose on the occupier of the land in the interests of persons dwelling thereon in caravans, or of any other class of persons, or of the public at large. The legislation then went on to list a number of possible conditions, all of which related to the situation on the site. The council imposed conditions which regulated inter alia the rent that the site owner could charge caravan occupiers and the security of the occupiers' tenure. The House held that these conditions were ultra vires. Lord Reid, who was applying the same kind of test as Viscount Dilhorne enunciated in the Newbury District Council case, summarised his decision in this way, at p 752:

Similarly, Lord Upjohn said, at p 763E - G:

He went on, at p 764A - C:

These passages suggest that paragraph 5(1) is not to be interpreted as conferring on the licensing authority an implied power to attach a condition that would interfere with the parties' freedom to settle the terms of the contract by which the dealer will sell, and the customer will buy, a car. If Parliament had intended licensing authorities to have that power, it would have said so expressly - as in the case of taxi fares under section 17.