Stewart (AP)(Respondent) v. Perth and Kinross Council (Appellants)(Scotland)
29. 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.
30. 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.
31. 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.
32. 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.
33. 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.
34. 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.
35. 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.
36. 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.
37. 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.
38. 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
39. 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.
40. 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.
41. 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.
42. 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.
43. 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.
44. 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.
45. 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.
46. 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.
47. 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.
48. 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:
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,
49. 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.
50. 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.
51. 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.
52. 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.